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

Saturday, October 17, 2015

week ending Oct 17

Fed officials seem ready to deploy negative rates in next crisis -  Federal Reserve officials now seem open to deploying negative interest rates to combat the next serious recession even though they rejected that option during the darkest days of the financial crisis in 2009 and 2010. “Some of the experiences [in Europe] suggest maybe can we use negative interest rates and the costs aren’t as great as you anticipate,” said William Dudley, the president of the New York Fed, in an interview on CNBC on Friday. The Fed under former chairman Ben Bernanke considered using negative rates during the financial crisis, but rejected the idea. “We decided — even during the period where the economy was doing the poorest and we were pretty far from our objectives — not to move to negative interest rates because of some concern that the costs might outweigh the benefits,” said Dudley. Bernanke told Bloomberg Radio last week he didn’t deploy negative rates because he was “afraid” zero interest rates would have adverse effects on money markets funds -- a concern they wouldn’t be able to recover management fees -- and the federal-funds market might not work. Staff work told him the benefits were not great. But events in Europe over the past few years have changed his mind. In Europe, the European Central Bank, the Swiss National Bank and the central banks of Denmark and Sweden have deployed negative rates to some small degree. “We see now in the past few years that it has been made to work in some European countries,” he said.

Fed Officials Call For NIRP… is a Physical Cash Ban Next After That? -- More and more “experts” are calling for Negative Interest Rate Policy or NIRP. The US Federal Reserve is obsessed with market reactions to its policies. Because of this, anytime the Fed plans to announce a major change in policy, it preps the markets via numerous leaks and hints… oftentimes for months in advance. An excellent example of this concerns the Fed’s decision to taper QE back in 2013. At that time, the Fed had been engaging in two open ended-QE programs… programs that had been running for over six months. Rather than simply beginning to taper the programs, then-Fed Chairman Ben Bernanke, hinted that the Fed was contemplating a taper in June. The markets reacted sharply with bond yields rising. The Fed then spent six months allowing the market to get used to the idea of a taper, before the actual taper finally began in December 2013.  In the simplest of terms: the Fed will NEVER surprise the market. This is particularly true now that the Fed is in the political cross hairs due to ample evidence showing its policies have increased wealth inequality.  With that in mind, we need to consider the number of Fed officials who have recently been hinting at Negative Interest Rate Policy or NIRP.

  • 1.     First we find that a Fed official hinted at NIRP during the Fed’s September 2015 meeting.
  • 2.     Then, on October 9th, Fed President Bill Dudley stating that negative rates were “an option” though not a “relevant conversation” right now.
  • 3.     This statement was followed up by Minneapolis Fed President Narayana Kocherlakota stating point blank that the Fed should “consider negative rates.”

The Fed has never once hinted at or discussed NIRP during its policy meetings. Then, in the span of three weeks, we’ve not only had an anonymous Fed official state that he or she believes NIRP is coming to the US, but two highly visible Presidents have called to NIRP consideration.

Negative rates work their way on to radar for a few at the Fed - Signs the U.S. economy is feeling the drag from a slowdown overseas is raising questions about the Federal Reserve's plan to lift rates this year, and even prompting some officials to ponder what tools it may need if things get worse. Consumer prices in the world's largest economy recorded their biggest drop in eight months in September as gasoline prices slumped. Also last month, U.S. producer prices logged their biggest fall in eight years. Weak recent job growth and retail sales added to the gloom in an economy that is starting to feel the pain of a slowdown in China and other emerging markets, falling commodity prices, and a dollar that has risen for more than a year. All of that is keeping U.S. inflation well below the Fed's 2-percent goal. Two influential Fed governors this week urged a delay in tightening despite repeated messages from Chair Janet Yellen and others that "liftoff" was likely to come this year. Some Fed officials also appear to have reconsidered a stimulus tool that had been dismissed as too risky: negative interest rates. At least six current Fed policymakers over the last two weeks have publicly discussed charging banks to park funds at the central bank. Four suggested it would be worth considering if the recovery falters badly and one, Minneapolis Fed President Narayana Kocherlakota, urged an immediate cut below zero. "Once unthinkable, the fact negative rates are creeping in the public debate mean we can't dismiss them anymore,"

The Mindless Stupidity Of Negative Interest Rates - Here we are in the midst of The Great Stagnation Middle Class Elimination and some central bankers and mainstream economists are promoting negative interest rates.One economist was quoted in a Marketwatch piece by Greg Robb as saying, “…pushing rates into negative territory works in many ways just like a regular decline in interest rates that we’re all used to.”  OK. That’s false. We know exactly what negative interest rates do since Europe has made a fine case study of it. They don’t work just like a “regular decline in interest rates.” I mean not that a “regular decline in interest rates,” does what economists think it does, but that’s another story. The issue here is how negative interest rates work. Negative interest rate proponents ignore the basic tenets of double entry accounting. Because there are two sides to a bank balance sheet, negative interest rates are the mirror image of positive rates. The move to negative rates imposes new costs on the banks, unlike low positive rates or ZIRP which reduce bank costs. The greater the negative interest rate, the higher the cost imposed, which is the same as a central bank raising interest rates when they are positive. When the Fed lowers a positive interest rate, it lowers the bank’s cost. But when there are trillions in excess reserves held by the banks as deposits at the Fed and the Fed lowers the interest rate to below zero, that becomes a cost to the banking system which it cannot avoid, except by using those cash assets to pay down debt. So the banks in Europe did exactly what I said they would do in mid 2014 when the ECB announced negative deposit rates. It’s exactly what any person with common sense would do, and therefore knew the banks would do. Those with the ability to do so pay off loans, which extinguishes deposits, thereby getting rid of the added cost. As opposed to stimulating growth, the European banking system shrinks. As opposed to encouraging borrowing and spending and economic growth, the policy encouraged deleveraging. We know that it is categorically false the negative rates are working in Europe. But facts have a way of eluding mainstream economists and central bankers.

Central Bankers Urge Fed to Get On With Interest-Rate Increase - WSJ: —Talk of the Federal Reserve’s first rate increase in almost a decade tends to send many investors into a frenzy. For the world’s central bankers, it is increasingly likely to elicit sighs of resignation. Fed fatigue has enveloped emerging-market officials facing repeated bouts of volatility in their currencies and capital flows alongside mounting worries about debt. Some policy makers, gripped by the uncertainty, delivered a message to their American counterparts as officials gathered in the Peruvian capital for the International Monetary Fund’s annual meeting: Please stop dithering. “Delaying the increase would not solve the situation,” said Sukhdave Singh, deputy governor of Bank Negara Malaysia. “If it is a case that the emerging markets have taken on too much debt, there will be a day of reckoning. Delaying an interest-rate hike does not necessarily address that issue.” Once the Fed moves, investors will move money back into the U.S., depriving emerging markets of capital, which will weaken their currencies and send inflation higher. Fed fears have consumed emerging economies for the past two years after an unprecedented stretch of U.S. monetary stimulus. But many officials at the IMF meeting, which ended Sunday, said they would prefer certainty now over the prolonged agony of waiting. “This year, compared to a year ago, many emerging-market central bank governors and some others were keener that the Fed just get on with it, not because they were keen to see interest rates rise, but because they wanted to reduce uncertainty,”

Chinese finance minister says US shouldn't raise rates yet -- It's not yet a good time for the U.S. to hike its interest rates as the global economy is still sluggish, said Chinese Finance Minister Lou Jiwei over the weekend at the International Monetary Fund's annual meeting, according to a South China Morning Post report. "The U.S. should bear more global responsibility and is not yet in the condition for an interest rate hike," Jiwei said, according to the report, which said his comments indicate Beijing's unease about the impact that the move might have on the Chinese economy. Jiwei's comments differ from remarks made at the IMF meeting by other emerging-markets officials, who urged the U.S. Federal Reserve to stop dithering on rate hikes.

Fed Doubts Grow on 2015 Rate Hike - WSJ - The chances of a Federal Reserve interest-rate increase in 2015 are diminishing amid new signs of anemic economic activity, a disappointing development for central bank officials who have been hoping to move this year after a prolonged period of easy-money policies.  Lackluster readings on consumer spending, inflation and jobs have virtually eliminated the chances of a move this month. Already, two Fed governors expressed doubts this week about whether the timing will be right this year, and the recent trove of data hasn’t reassured top officials about the economic outlook.  The Commerce Department on Wednesday reported seasonally adjusted retail sales rose just 0.1% in September, and actually fell from August’s levels once car sales were stripped out. The Labor Department also reported producer prices—an indication of inflation at the wholesale level—fell 0.5% in September and were down 1.1% from a year earlier, the largest 12-month decline during this expansion.  The Fed has two scheduled policy meetings left this year, in late October and mid-December. Futures-markets traders now see almost no chance of a rate increase this month and a 1-in-3 probability of a move by year-end.  Fed officials have long said the timing of the first rate increase would be dependent on incoming economic data. Consumer price inflation has been running below the Fed’s 2% objective for more than three years, and policy makers want to be confident inflation is heading back up before they start lifting rates. Consumer spending makes up about two-thirds of total demand for goods and services produced in the U.S, and retail sales are an important indicator of the economy’s underlying vigor.

Fed Struggles With The High Water Mark - Gavyn Davies reviews the evidence on the apparent slowing of US economic activity and concludesSo is the US slowdown for real? Yes, but it is not yet very severe — and some of it is the result of the temporary inventory correction, and some to the rising dollar. Unless it grows worse in the next few weeks, it is unlikely to dislodge the Fed from the path it has now firmly chosen. This I think is broadly consistent with views on the FOMC and explains why many policymakers insist that a rate hike this year remains likely. Vice Chair Stanley Fischer was the latest to reiterate the point. Via his prepared remarks for the IMF:  In the SEP, the Summary of Economic Projections prepared by FOMC participants in advance of the September meeting, most participants, myself included, anticipated that achieving these conditions would entail an initial increase in the federal funds rate later this year. They will want look through any near term GDP volatility, and discount volatility related to inventories. Look then to real final sales rather than GDP. Avoid getting caught up in the headline numbers; watch the underlying trends instead. Still, there is a range of views on the FOMC, from Richmond Fed Jeffrey Lacker, who believes the Fed should already have raised rates, to Minneapolis Federal Reserve President Narayana Kocherlakota, who would like the Fed to consider a negative rate. And arguably even the center is not particularly committed to a particular policy path. To be sure, they like to talk tough, but every time they get ready to jump, they walk back from the edge. Why the lack of conviction? Essentially, the economy is resting on what is likely its high water mark for growth in this cycle, leaving the Fed perplexed regarding their next move. They want the economy to slow from its current pace and glide into a soft landing. But acting too early will leave their job half finished and sow the seeds of the next recession. Acting too late, however, will yield the inflationary outcome they so fear. And they don't know the exact definitions of "too early" and "too late."

Fed?!?! - DeLong - The Federal Reserve is right now at the zero lower bound. That means that if it wants to lower interest rates and so stimulate the economy, it can't. But if it wants to raise the interest rates and so cool-off the economy, it can. Suppose the Federal Reserve were to raise interest rates over the next year--and decide a year and a half from now that it had made a mistake. It then could end the additional damage from inappropriate monetary policy by returning interest rates to zero. But it could not repair the damage by pushing interest rates down any further in order to offset the needless contraction it would have forced on the economy. Suppose the Federal Reserve were to keep interest rates where they are at zero over the next year--and decide a year and a half from now that it had made a mistake. It then could end the additional damage from inappropriate monetary policy by raising interest rates. And it could repair the damage from too-low interest rates by raising interest rates faster and so neutralizing the needless stimulus it would have given to the economy. Thus as long as there is a reasonable chance that raising interest rates is the wrong policy, the Fed should not raise them. At the zero lower bound, the right policy is to be behind the curve in raising interest rates. Elementary optimal control. Elementary asymmetric risks. Whatever you call it, it is not brain surgery--or rocket science.

Fed Watch: Brainard Drops A Policy Bomb -  What if a Federal Reserve Governor drops a policy bomb in the woods and no one is there to hear it? Did it really make a noise? That's what happened today. While the bond market was closed and whatever financial journalists were left focusing their efforts on newly-minted Nobel Prize recipient Angus Deaton, Federal Reserve Governor Lael Brainard dropped a policy bomb with her speech to the National Association of Business Economists. It was nothing short of a direct challenge to Chair Janet Yellen and Vice Chair Stanley Fischer. Is was, as they say, a BFD. Consider, for example, Brainard's opening salvo: The will-they-or-won't-they drumbeat has grown louder of late. To remove the suspense, I do not intend to make any calendar-based statements here today. Rather, I would like to give you a sense of the considerations that weigh on both sides of that debate and lay out the case for watching and waiting. Wait, who is making calendar-based statements? YellenI anticipate that it will likely be appropriate to raise the target range for the federal funds rate sometime later this year and to continue boosting short-term rates at a gradual pace thereafter as the labor market improves further and inflation moves back to our 2 percent objective.  and Fischer: most participants, myself included, anticipated that achieving these conditions would entail an initial increase in the federal funds rate later this year. After essentially saying that such calendar-based guidance is beneath her, she says what she is going to do: Explain why policymakers should delay further. Note however this stands in sharp contrast with Yellen and Fischer. Their efforts have been spent on explaining why rates need to rise soon. Hers will be spent on why they do not.

Global Dovishness - Krugman -- Tim Duy points us to a striking speech by Lael Brainard, who recently joined the Fed Board of Governors, which takes a notably more dovish line than we’ve been hearing from Yellen and Fischer. Basically, Brainard comes down on the ... precautionary principle side of the debate, arguing that given uncertainty about the path of the natural rate of interest, and great asymmetry in the consequences of moving too soon versus too late, rate hikes should be put on hold until you see the whites of inflation’s eyes.Why does she sound so different from Fischer and Yellen? Duy argues that it is in part a generational thing... Maybe, but it’s also worth noting the difference in perspective that comes from having your original intellectual home in international versus domestic macroeconomics. I would say that Brainard’s experience is dominated not so much by the Great Moderation as by the Asian financial crisis and Japan’s stagnation; internationally oriented macro types were aware earlier than most that Depression-type issues never went away. And if you read Brainard’s argument carefully, she devotes a lot of it to the drag America may be facing from weakness abroad and the stronger dollar, which acts as de facto monetary tightening... So does her speech matter? She is, as I indicated, pretty much saying what some of us on the outside have been saying, although she does it very clearly and well; but does it make a difference that someone on the inside is laying down a marker warning that raising rates could be a big mistake? I guess we’ll see.

Fed's Tarullo Doesn't Favor Raising Interest Rates in 2015 | Fox Business: The Federal Reserve should wait for "tangible evidence" of a pickup in U.S. inflation and hold short-term interest rates near zero into next year, Federal Reserve Governor Daniel Tarullo said. Based on "a risk-management approach of being concerned that a premature rise might be harder to deal with than waiting a little bit longer, right now my expectation is--given where I think the economy would go--I wouldn't expect it would be appropriate to raise rates" this year, Mr. Tarullo said Tuesday during an interview on CNBC. Top Fed officials, including Chairwoman Janet Yellen and Vice Chairman Stanley Fischer, have said they expect to begin raising the benchmark federal-funds rate by the end of the year. Most private economic forecasters surveyed by The Wall Street Journal expect the Fed will stay on hold at its Oct. 27-28 policy meeting but raise rates in mid-December. Other policy makers, however, have seemed to favor waiting to tighten policy. Mr. Tarullo spoke a day after another Fed governor, Lael Brainard, said that officials "should not take the continued strength of domestic demand growth for granted. Although the outlook for domestic demand is good, global forces are weighing on net exports and inflation, and the risks from abroad appear tilted to the downside." Mr. Tarullo, separately, pushed back on the notion that new financial-sector regulations, such as higher bank capital requirements, are holding back growth.  "It is difficult to disentangle the impact of regulation" from the performance of the overall economy, said Mr. Tarullo, who has a large influence over the Fed's regulatory policy. "In a number of sectors lending does seem to be healthy," he added, pointing to autos, credit cards, and commercial and industrial loans.

Fed Governor Daniel Tarullo: "I wouldn't expect it to be appropriate to raise rates this year" -- Fed Governor Daniel Tarullo was on CNBC today: Fed's Tarullo: Not appropriate to hike rates based on current environment    The U.S. economy likely would not support an interest rate hike this year without signs inflation and wages are increasing, a top Federal Reserve official told CNBC on Tuesday. "I wouldn't expect it would be appropriate to raise rates," Fed Governor Daniel Tarullo said.  Another quote via Neil Irwin: "Probably wise to not be counting too much on past correlations, things like the Phillips Curve" This is the second Fed Governor in two days to argue it is appropriate to wait until next year, see Tim Duy's Brainard Drops A Policy Bomb.  The Fed governors almost always vote with the Fed Chair, so this either suggests a sharp disagreement, or Fed Chair Janet Yellen is changing her mind.  Either is a significant story.

Four Words That Have the Federal Reserve in a Panic: “Pushing on a String” -  Yesterday, the U.S. Treasury auctioned one-month Treasury bills at a zero percent interest rate. By late afternoon, the bills were trading in the secondary market at a negative yield of 0.0152. As the above chart shows, short term Treasury bill rates today are tracking a pattern similar to that of the Great Depression. That spike in the yield in the above chart in 1937 came as a result of the Federal Reserve increasing bank reserve requirements – a credit tightening – which sent the economy into a further leg of the downturn and more deflation. After the tightening in 1937, GDP fell by 10 percent and unemployment returned to 20 percent. The well known lesson of the 1937 folly is the major reason many Fed historians do not believe the Fed has any serious intention of raising its Federal Funds rate in the foreseeable future. Instead of deliberating when to hike rates, some Fed watchers say the U.S. central bank is highly likely to be deliberating a problem known as “pushing on a string.” Here’s an easy way to get your mind around the problem. Cut off a piece of twine about 6 inches long. Place it on a hard countertop. Use your finger at one end of the string to try to push it in a northerly direction. You will observe it bunch up a little. But you will not see it make any material moves in a northerly direction. This is where the U.S. central bank, the Federal Reserve, now finds itself in terms of attempting to move the economy north, that is, out of its 2 percent or lower GDP growth since the financial crash in 2008 and 2009 and avoid outright deflation.

The Monetary Policy Dead-End - The Federal Reserve’s September status quo proved how difficult it is for central bankers to bring an end to the emergency measures they adopted in the aftermath of the 2007 crisis. Fed chief Janet Yellen’s hesitations and the market turmoil since August seem to validate that it is impossible to stop the accommodative monetary policy, unless you accept that doing so would trigger a new global crisis.` Markets have been used to living in a protracted low rate environment, which led to a $57 trillion increase in public and private debt between 2008 and 2015. The surge of public debt represents almost half of this growth. It is the result of the fiscal stimulus and rescue measures taken to save the global banking system. In most advanced countries, household debt has also increased, except in the US where the financial situation of households has improved due to the default on real estate loans. The Fed is aware that raising interest rates too fast and too high could have the same effect as pressing the nuclear button. The whole system could collapse and it cannot be taken for granted that the central banks would be able to extinguish the fire this time. Their strike force has weakened because their balance sheets are exposed to market fluctuations and their credibility was seriously damaged because the measure they have taken have failed to strengthen the economy.

IMF: keep interest rates low or risk another crash - The International Monetary Fund concluded its annual meeting in Lima with a warning to central bankers that the world economy risks another crash unless they continue to support growth with low interest rates. The Washington-based lender of last resort said in its final communiqué that uncertainty and financial market volatility have increased, and medium-term growth prospects have weakened. “In many advanced economies, the main risk remains a decline of already low growth,” it said, and this needed to be supported with “continued accommodative monetary policies, and improved financial stability”. The IMF’s managing director, Christine Lagarde, said there were risks of “spillovers” into volatile financial markets from central banks in the US and the UK increasing the cost of credit. The IMF has also urged Japan and the eurozone to maintain their plans to stimulate their ailing economies with an increase in quantitative easing. But she urged policymakers in Japan and the eurozone to boost their economies with an expansion of lending banks and businesses via extra quantitative easing. But the policy of cheap credit and the $7 trillion of quantitative easing poured into the world economy since 2009 has become increasingly controversial. A quartet of former central bank governors responded to the IMF’s message with a warning to current policymakers that they risked sowing the seeds of the next financial crisis by prolonging the period of ultra-low interest.

Key Measures Show Inflation slightly higher in September --The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning: According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.3% (3.4% annualized rate) in September. The 16% trimmed-mean Consumer Price Index rose 0.2% (2.6% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report. Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers fell 0.2% (-1.8% annualized rate) in September. The CPI less food and energy rose 0.2% (2.6% annualized rate) on a seasonally adjusted basis. Note: The Cleveland Fed has the median CPI details for September here. Motor fuel was down sharply again in September.

Fed's Beige Book: "Modest Expansion in Economic Activity" -- Fed's Beige Book "Prepared at the Federal Reserve Bank of New York and based on information collected on or before October 5, 2015." Reports from the twelve Federal Reserve Districts point to continued modest expansion in economic activity during the reporting period from mid-August through early October. The pace of growth was characterized as modest in the New York, Philadelphia, Cleveland, Atlanta, Chicago, and St. Louis Districts, while the Minneapolis, Dallas, and San Francisco Districts described growth as moderate. Boston and Richmond reported that activity increased. Kansas City, on the other hand, noted a slight decline in economic activity. Compared with the previous report, the pace of growth is said to have slowed in the Richmond and Chicago Districts. A number of Districts cite the strong dollar as restraining manufacturing activity as well as tourism spending. Business contacts across the nation were generally optimistic about the near-term outlook.  Residential real estate activity has generally improved since the last report, with almost all Districts reporting rising prices and sales volume. One exception was the Chicago District, where prices and sales volume were generally steady. A number of Districts noted that the market for lower or moderately priced homes has outperformed the high end of the market. Commercial real estate markets have shown signs of strengthening in all twelve Districts. Most Districts noted improvement across all major segments, though New York and St. Louis noted some increased slack in the market for retail space. Commercial construction was also stronger in most Districts. Boston and St. Louis noted brisk construction in the health sector, including senior care facilities, and Cleveland also indicated strong demand for senior living structures. New York, on the other hand, noted some pullback in new commercial construction, though activity remained fairly brisk.

Strong dollar is restraining economy, Fed’s Beige Book finds -  – A key report about the U.S. economy released Wednesday offered a cautious take on the U.S. economy, further lending credence to speculation that the Federal Reserve will not raise interest rates this year. The Federal Reserve’s Beige Book indicated some slowing in the economy, with two of the 12 districts – Richmond and Chicago — reporting that the pace of growth had slowed from mid-August until early October. One district, Kansas City, noted an overall slight decline in economic activity. The nine remaining districts, if they described growth, reported it as “modest” or “moderate.” The strong dollar acted like a brake on U.S. economic activity, particularly in manufacturing, energy and tourism.  The Beige Book report comes two weeks before the Fed meets to set interest rate policy.

 Is the Engine of the Economy Flooded?: When one hears talk about the Wicksellian natural rate of interest, one hears that a real rate below the natural rate will cause inflation and economic heating. Then a a real rate above the natural rate will lead to disinflation and economic cooling.   So the logic looks simple, if we lower rates to below their natural level, the economy will heat up. That is like pushing down on the accelerator to speed up a car. OK… But does pushing down on the accelerator always speed up a car’s engine?… No.  Case in point, Flooding a Car’s Engine. “A flooded engine is an internal combustion engine that has been fed an excessively rich air-fuel mixture that cannot be ignited. . It is also possible for an engine to stall from a running state due to this condition.” (Link) When an engine is flooded, pushing more and more on the accelerator does no good. Low interest rates are an excessively rich air-fuel mixture. The Federal Reserve and most central banks around the world are trying their hardest to fuel their economies with ever lower interest rates. But the economies are not heating up. But what if economies are “flooded” with a multitude of subsidies, while wages stagnate? Businesses receive benefits from sources other than consumption by labor income, namely low interest rate costs, lower taxes and direct subsidies. I am implying that real rates can be below the Wicksellian natural real rate, and the economic environment will not ignite while labor income is so weak. So even with the rich fuel of extremely low interest rates, the economy does not respond. What would be the solution? Clear the excessively rich mixture by withholding the fuel for a sufficient period of time. Basically, take your foot off of the accelerator and wait for the engine to drain off the excess fuel. The Fed rate would have to rise a bit for some time. Then firms that can afford higher interest rate costs and higher wages will get stronger. The weaker firms will weed out. Then the Fed rate could be lowered but this time the economy would respond.

Atlanta Fed GDPNow tracking 0.9% for Q3 -- From the Atlanta Fed: Latest forecast — October 14, 2015  The GDPNow model nowcast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2015 is 0.9 percent on October 14, down from 1.0 percent on October 9. The model's nowcast for real consumer spending growth in the third quarter fell from 3.6 percent to 3.2 percent after this morning's retail sales report from the U.S. Census Bureau. This was partly offset by an 0.1 percentage point increase in the nowcast for the contribution of inventory investment to third-quarter real GDP growth following this morning's update on retail inventories from the Census Bureau. Note that consumer spending is expected to be solid (probably in the mid 3s). Sometimes GDPNow has been very close - other times they've missed (In June, GDPNow was forecasting Q2 at 1.1% and the first BEA report was 2.3% - since revised up to 3.9%).

Approval of Obama and the Economy Slipping According to New Poll - In the new poll, 42 percent of respondents described their current personal financial situation as excellent or good, while 56 percent called it only fair or poor. That was virtually unchanged since September 2013. Americans also continued to withhold enthusiasm about the state of the national economy. Just 21 percent described it as excellent or good, up slightly from May but still slightly below the 25 percent positive response last February. All of these numbers represent an improvement from the meager 11 percent positive rating in 2013.  Expectations about the economy’s future direction also remained stuck in second gear—and, in fact, lost momentum slightly. In the May survey, 47 percent said they expected their personal financial situation to improve over the next year; in the new poll, 43 percent felt optimistic. Just 10 percent, the same as before, thought their finances would deteriorate; the share that expected no change edged higher, from 42 percent to 44 percent, within the survey’s margin of error. (In the latest poll, the remaining 3 percent said they didn’t know, compared to 2 percent in May.) Article Continues After Advertisement The proportion that expects the national economy to improve over the next year also sagged to 28 percent, down from 32 percent in both surveys earlier this year. Another 27 percent thought the economy would get worse, while 39 percent expected no change Against that backdrop of tepid economic expectations, approval ratings fell on both ends of Pennsylvania Avenue. Last May, the share of Americans who approved of President Obama’s job performance matched those who disapproved (46 percent) for the first time in a Heartland Monitor Poll since mid-2013, when his approval rating slightly exceeded his disapproval rating. But in the new survey, Obama dipped back under water; 44 percent liked his performance, and 47 percent disapproved. If Obama slipped under the waves, Congress fell deeper into its own Mariana trench: Just 13 percent of those polled approved of its performance, while 78 percent disapproved.

Relax. We'll Survive China's Sales of U.S. Debt. - A lot of people I talk to are very worried about Chinese holdings of U.S. sovereign debt. The general idea is that if China decided to dump Treasuries, the U.S. economy would go into a tailspin. This is part of the overall narrative cited by Donald Trump and others that the U.S. is "losing" to China. That was a plausible story. But now that China's titanic economic boom is coming to an end, we're finding that the story wasn't right. This became clear when China recently began dumping U.S. debt. In past years, China bought a lot of Treasuries in order to keep its currency cheap, so that it could sell lots of stuff at low prices to the U.S. (whether this was a wise economic strategy is a topic of vigorous debate). But as China's economy has stalled, there has been pressure on its currency. In August, China allowed its currency, the yuan, to depreciate to some degree. But since then it has been intervening in the foreign exchange markets to keep the yuan from weakening too fast.  If you want to support your currency, you buy it. And you buy it using foreign exchange reserves -- in this case, China's $1 trillion-plus stockpile of Treasuries, which it has been building up for years. But China's sales of U.S. debt haven't sent the price of Treasuries plummeting (or thought of another way, it hasn't caused interest rates to soar). Instead, as China has stepped out of the market, other investors have stepped in. It turns out that the demand for U.S. government bonds is much wider and deeper than many had expected. So the doomsday scenario didn't come to pass. Actually, this is the second time in recent years that something like this has happened. The first was when the Federal Reserve tapered off its quantitative easing program of bond-buying in 2014. The effect on Treasury rates was basically nothing:

Global Growth Worries Whet Appetite For US Treasuries -- Rising uncertainty about the global economy continues to boost demand for US Treasuries. “It’s all a global growth fear trade,” Priya Misra, head of global rates strategy at TD Securities, tells Reuters. Expectations that China will continue to slow, coupled with forecasts of weaker growth in the US and Europe relative to recent projections, are inspiring new purchases of safe-haven Treasuries. Adding to the demand for safety and a hedge against more disinflation/deflation is the continued outlook for low inflation in the US and elsewhere. No wonder that the current climate doesn’t inspire expectations that a Fed rate hike is near. Two voting members of the FOMC have recently raised doubts about the Phillips Curve—the theory that inflation and unemployment are inversely related and so a falling jobless rate is linked with higher inflation. But that relationship appears to have broken down. Here’s Fed Gov. Lael Brainard speaking on CNBC this week: To be clear, I do not view the improvement in the labor market as a sufficient statistic for judging the outlook for inflation. A variety of econometric estimates would suggest that the classic Phillips Curve influence of resource utilization on inflation is, at best, very weak at the moment. The fact that wages have not accelerated is significant, but more so as an indicator that labor market slack is still present and that workers’ bargaining power likely remains weak. Meanwhile, Treasury yields continue to trend lower. The 2- and 10-year yields slipped yesterday, the first day of trading after the three-day holiday weekend that shuttered the US bond market on Monday. Helping juice the demand for Treasuries was Fed Governor Daniel Tarullo’s comment yesterday: “I wouldn’t expect it would be appropriate to raise rates.”

Stronger Economy Cited as U.S. Reports Lowest Budget Deficit of Obama’s Tenure - — The federal budget deficit fell this year to its lowest level since President Obama took office, his administration reported Thursday, a change propelled by an increase in tax receipts amid a strengthening economy.The deficit was $439 billion in the 2015 fiscal year, $44 billion less than last year, the Treasury Department and the Office of Management and Budget said in a report. The shortfall represents 2.5 percent of the economy, the lowest share since 2007.“Under the president’s leadership, the deficit has been cut by roughly three-quarters as a share of the economy since 2009 — the fastest sustained deficit reduction since just after World War II,” Treasury Secretary Jacob J. Lew said in a statement released with the figures. The deficit ballooned to $1.4 trillion in 2009, in part because of stimulus spending during the recession.Government receipts rose by 8 percent over the last year, the report said, which “can be attributed to a stronger economy.” Rising wages drove up collections of individual and payroll taxes, and higher corporate profits led to an increase in business income tax receipts. Also, fees and payments under the Affordable Care Act that took effect in 2015 helped increase federal collections. The administration cheered the figures as vindication of Mr. Obama’s economic policies and as proof of the resurgence he set in motion after taking office during the depths of the recession. But the good news came amid uncertainty over whether the White House would be able to strike a budget deal with Republicans to keep the government functioning beyond a December deadline.

Debt limit must be raised by Nov. 5 or US risks default, Lew says-- Congress must raise the nation's debt limit by Nov. 5 or the federal government risks running out of money to pay all its bills, Treasury Secretary Jacob J. Lew warned lawmakers Thursday. The new deadline, more specific than earlier estimates, sets up a potential showdown between congressional Republicans and the White House amid a broader debate over government spending. Congress narrowly avoided a partial federal government shutdown Wednesday, passing a spending bill that will expire Dec. 11. The debt limit likely will be part of negotiations over a longer-term spending bill that must be passed before then. Some Republicans want concessions from the Obama administration before raising the debt limit, but administration officials have said they won't negotiate over the issue because the debt limit involves borrowing for spending already approved by Congress. Failure to strike a deal would risk a first-ever federal government default and could endanger the U.S. credit rating. "Protecting the full faith and credit of the United States is the responsibility of the United States Congress," Lew wrote in a letter to House and Senate leaders. "There is no way to predict the catastrophic damage that default would have on our economy and global financial markets." The nation hit its $18.1 trillion debt limit in March. Since then, the Treasury Department has been using accounting maneuvers that it calls extraordinary measures to extend the government's borrowing ability and maximize its cash on hand.

Debt-limit anxiety is running high - Prolonged turmoil within the House GOP is driving up anxiety that Washington will have real trouble raising the debt limit by Nov. 5. People aren’t jumping out of windows yet, but those following the matter closely see plenty of reason to believe Congress could miss its deadline — raising the risk of a default. House Republicans have no ­leader following Speaker John Boehner’s (R-Ohio) decision to resign at the end of this month.  And the last-minute exit of Majority Leader Kevin McCarthy (R-Calif.) from the race to succeed Boehner complicated things further, making it difficult for any potential Speaker to embrace raising the government’s $18.1 trillion borrowing limit. Republicans control both chambers of Congress for the first time in a debt-limit standoff with President Obama. That puts more pressure on the GOP to come up with a plan, but it has not presented one so far. The White House insists Obama will not negotiate on raising the debt limit. Those looking for a road map are finding it hard to come by. “In this environment, it’s very, very difficult to get it done. The whole weight of force is behind the people who are against the debt limit,”

Questions on the U.S. Debt Ceiling - Congress and the White House are engaging in another familiar ritual: The brawl over the federal borrowing limit, known as the debt ceiling. The debt ceiling limits the amount of debt that the U.S. Treasury can issue. Before World War I, Congress approved borrowing for specific purposes, but over the next two decades, it granted more flexibility to the Treasury to issue bonds without individual, definite authorizations. By 1939, Congress effectively established an aggregate debt limit that delegated to Treasury the ability to borrow up to a certain ceiling. Last year, Congress voted to suspend the debt limit through March 15, after which the prior limit of $16.7 trillion would be reset to include any new borrowing. On March 16, the limit was reset at $18.1 trillion. Since then, the Treasury has been using extraordinary measures, such as the suspension of certain pension investments, to conserve cash. On Thursday, Treasury Secretary Jacob Lew told Congress that it would exhaust those emergency measures by Nov. 3. After that, it will fund the government only with daily cash flow if the debt limit isn’t increased. Analysts at the Bipartisan Policy Center, a Washington think-tank, estimate that the Treasury would run out of cash between Nov. 10 and Nov 19. If the government can’t borrow to pay bills that come due, it would have to suspend certain pension payments, withhold or cut the pay of soldiers and federal workers, or delay payments of interest, which would constitute default. In 2011, Standard & Poor’s stripped the U.S. of its triple-A credit rating for the first time after Treasury came within days of being unable to pay certain benefits. Could the Treasury prioritize debt payments to avoid a default? House Republicans have advanced legislation to do that, but Treasury says prioritizing certain payments isn’t feasible. If the U.S. paid some bills, such as interest payments on debt and Social Security payments to retirees, but not others, such as federal workers’ wages or contractors’ invoices, such an event could badly undermine the government’s creditworthiness, even though this might not meet the narrow definition of default on a government bond. It would be like a homeowner paying the mortgage but not all of his or her utility bills,

McConnell’s Last Stand: He Wants Medicare, Social Security Cuts to Raise Debt Limit -  In case anyone thought things couldn’t get more chaotic on Capitol Hill, Senate Majority Mitch McConnell appears ready to set them straight. McConnell, according to a report first published by CNN, plans to make several major demands of the White House, including changes to Medicare, Social Security, and EPA regulations as his price for raising the nation’s debt limit. The report from CNN’s Manu Raju complicates the already fraught debate over whether and how to increase the Treasury Department’s ability to borrow the money it needs to pay the nation’s debts. Failure to allow additional borrowing would, at some point in early November, force the United States into default. U.S. government debt is viewed as the safest in the world – the closest thing there is to a risk-free asset. Allowing the government to default on its obligations would send shock waves throughout not just the U.S., but the global economy. Related: The Debt Ceiling: What Is It And Why Should We Care?As it is, the Treasury Department hit the debt ceiling months ago, and has been relying on extraordinary measures, like delaying payments into pension funds, in order to pay the government’s bills. The changes McConnell is reportedly demanding are not minor tweaks to government programs. According to CNN, he wants to reduce the annual cost of living adjustment to the Social Security payments that millions of Americans rely on each month. He also wants to raise the eligibility age for Medicare and limit the benefits available to wealthy recipients. In addition, McConnell is looking to add policy riders to any debt limit legislation that would prevent the Environmental Protection Agency from enforcing some of its new Clean Water requirements.

Shorter Mitch McConnell: “Zero Social Security COLA Too Generous” -- Way to rally the base Turtle Neck!   NY Times: No Social Security Raises Even if Medicare SoarsThe 60 million people on Social Security will not receive any cost-of-living increase in their benefits in 2016, the government said Thursday, but because of a quirk in federal law, nearly one-third of Medicare beneficiaries could have record increases in their premiums unless Congress intervenes.  CNN: Sources: McConnell floats entitlement changes in high-stakes fiscal talks McConnell is seeking a reduction in cost-of-living adjustments to Social Security recipients and new restrictions on Medicare, including limiting benefits to the rich and raising the eligibility age, several sources said. Now it is true that Social Security policy geeks like me and maybe some other readers/contributors to Angry Bear can have an informed discussion on the pro’s and con’s of CPI-U vs CPI-W vs CPI-E vs Chained CPI-W and their respective effects on Social Security “actuarial imbalance” and “unfunded liability over the infinite future horizon”. But you have to be pretty politically brain dead to propose holding the Debt Limit hostage to demands for COLA reductions in the same damn week that SSA announced that COLA would be zero for 2016. Boy that should rally seniors to the polls to vote Republican next year.

A Budget Deal Is Likely to Slip Past the Latest Debt-Ceiling Deadline - Congressional leaders appear increasingly unlikely to reach any kind of budget deal in time to ease passage of an increase in the federal borrowing limit needed by early November. Failure to reach a budget agreement by early next month would put pressure on both Republican leaders and President Barack Obama over the terms of a debt-limit increase needed by Nov. 3. Mr. Obama has said repeatedly that he will not negotiate over raising the debt ceiling. But Republicans already reluctant to increase the debt limit will find such a vote even more difficult without any policy victories to provide some political cover. Lawmakers from both parties had hoped they might be able to reach some kind of two-year budget agreement that would raise spending levels above limits set in 2011, offset by cuts elsewhere. But GOP aides from both chambers now say a vote on any budget deal would likely be separate and come later this year. The government’s current funding does not expire until Dec. 11. That leaves lawmakers roughly two weeks once they return to Washington next week to figure out a way to increase the debt limit, which Treasury Secretary Jack Lew said Thursday must be done by Nov. 3 for the government to pay its bills on time. Now the central question is whether departing House Speaker John Boehner (R., Ohio) and Senate Majority Leader Mitch McConnell (R., Ky.) will be able to extract any policy concessions from Mr. Obama in exchange for raising the debt limit. The last time Congress raised the federal borrowing limit, in February 2014, it did so with no policy strings attached. Democrats say that’s the only way forward this time, too. “With less than three weeks before the debt ceiling deadline, there is simply not enough time to negotiate a budget agreement that also includes a debt-ceiling increase,” Senate Minority Leader Harry Reid (D., Nev.) said in a statement Thursday. “The most responsible course of action is for Speaker Boehner and Senator McConnell to promptly bring up a clean debt ceiling increase,”

There’s No Way to Avoid Default Without Raising the Debt Limit, Treasury Says 0 The U.S. Treasury Department rejected again on Friday the idea that so-called payment prioritization would provide a way for the U.S. to avoid a severe hit to its creditworthiness if Congress didn’t raise the federal borrowing limit before the Treasury runs out of cash. Treasury Secretary Jacob Lew said on Thursday that if the debt ceiling isn’t raised by Nov. 3, it will have to fund the government solely using daily cash flow, and that it could run out of cash to pay its bills soon after that. Some congressional Republicans have revived an old idea they say would avoid default that doesn’t require a full increase in the debt limit. They would allow the Treasury Department to borrow above the debt ceiling but only to pay bondholders and make payments related to Social Security benefits. It would essentially prioritize those payments ahead of others, such as salaries for federal workers, veterans’ benefits, and everything else that the government spends money on.  Treasury says again that the idea just won’t fly. It makes three main points: First, the Treasury and its fiscal agent, the Federal Reserve Bank of New York, did conclude during previous debt-limit standoffs that it would be technologically capable to pay principal and interest ahead of other government payments, though it had previously warned that such an approach “would be entirely experimental and create unacceptable risk to both domestic and global financial markets.” Second, beyond the black-and-white distinction between “bondholders” and “everyone else,” there are limitations to the Treasury’s payment processing systems that would make it very difficult to prioritize some payments over others. In that sense, a more granular type of payment prioritization isn’t technically feasible. Third, Treasury dismisses again several outlandish ideas to continue borrowing money after running out of cash-management steps to remain under the debt limit, including one that would have President Barack Obama invoke the 14th amendment to issue debt above the limit or to mint a large-denomination platinum coin to raise cash without exceeding the debt limit.

CBO: Fiscal 2015 Budget deficit decline to 2.4% of GDP  - Note: Fiscal 2015 ended on September 30, 2015. From CBO: Monthly Budget Review for September 2015 The federal government ran a budget deficit of $435 billion fiscal year 2015, the Congressional Budget Office estimates—$48 billion less than the shortfall recorded in fiscal year 2014, and the smallest deficit recorded since 2007. Relative to the size of the economy, that deficit—at an estimated 2.4 percent of gross domestic product (GDP)—was slightly below the average experienced over the past 50 years, and 2015 was the sixth consecutive year in which the deficit declined as a percentage of GDP since peaking at 9.8 percent in 2009. By CBO’s estimate, revenues were about 8 percent higher and outlays were about 5 percent higher in 2015 than they were in the previous fiscal year. And on September:  The federal government realized a surplus of $95 billion in September 2015, CBO estimates—$11 billion smaller than the surplus in September 2014. Because September 1, 2014, was the Labor Day holiday, certain payments that ordinarily would have been made in September were instead made in August. Without those shifts in the timing of payments, the surplus for September 2015 would have been $8 billion larger than last September’s. As former Fed Chairman Ben Bernanke noted in February 2013, the deficit as a percent of GDP would actually be smaller now without the "sequester":  The CBO estimates that deficit-reduction policies in current law will slow the pace of real GDP growth by about 1-1/2 percentage points this year, relative to what it would have been otherwise.

A fairer approach to fiscal reform - Douglas Elmendorf  -- Benefits for older Americans — especially through Social Security and Medicare — account for the largest part of federal spending today and for the lion’s share of the spending growth that will occur in coming decades without changes in policies. That growth is not surprising: With baby boomers moving into retirement, the number of beneficiaries of those programs is surging. Indeed, in the Congressional Budget Office’s current-law projections, all federal spending apart from Social Security, Medicare, defense and interest on the debt will amount to about the same percentage of gross domestic product 25 years from now that it did 25 years ago. At the same time, federal debt is now larger relative to the economy than at almost any point in our history and is on an upward long-term trajectory. Therefore, cuts in Social Security or Medicare benefits, or increases in the taxes used to finance those programs, will almost certainly be needed to put federal debt on a sustainable path. In deciding what benefit cuts or tax increases would make the most sense, two developments of the past few decades are especially important: First, the incomes of people across most of the income distribution have risen quite slowly, while incomes at the high end have risen rapidly. Most people in the country have seen little increase in their earnings despite gains in total output and income. Second, changes in labor markets are significantly reducing the role of traditional employer-provided retirement benefits. In particular, the number of workers with defined-benefit pension plans has fallen sharply.

How Congressional Chaos Could Make It Harder to Measure Economic Growth - A legislative delay may cause a key government economic survey to be scrapped for the quarter, depriving a half dozen agencies, including the Commerce Department and Federal Reserve, of data that they use to build some of the nation’s main economic indicators, including the gross domestic product and the nation’s flow of funds. At the heart of this potential mishap is a little known and uncontroversial program from the Census Bureau that surveys U.S. businesses. The survey required reauthorization at the end of September, but with lawmakers confronting a potential government shutdown and disarray in the House of Representatives, the required legislation to keep the survey alive floundered. “The problem here is we’re at a pretty critical juncture for the economy,” said Steve Landefeld, the former director of the Bureau of Economic Analysis, the agency charged with, among other things, producing the GDP report. “If you’re the Federal Reserve Board or any type of policy makers, the economic outlook is pretty unclear right now.” Few have ever heard of the survey, known as the Quarterly Financial Report program, because it collects data from companies, not households. And the report, though it is released by itself, is not closely followed by financial markets or the media. The report’s importance comes because it’s used to build other key reports that are widely followed: measures of gross domestic income, corporate profits and the Federal Reserve’s financial accounts of the U.S. Mr. Landefeld said that “it’s getting very late in the process” to still complete this quarter’s report, and that at some point it won’t be possible to revive the process, leaving a missing quarter in the data. That could be as early as the next week, he said. “This is a critical period for a whole quarter’s worth of data.’

Nobel Winner Prizes Data That Congress Disdains -  Angus Deaton, this year’s winner of the Nobel in economic science, was honored for his rigorous and innovative use of data — including the collection and use of new surveys on individuals’ choices and behaviors — to measure living standards and guide policy.Reliable data is essential for policy makers. But for years, Congress has cut, frozen or shortchanged the budgets of most of the nation’s 13 main statistical agencies.House Republicans, for example, have been especially scornful of the decennial census, the nation’s most important statistical tool, and the related questionnaire, the American Community Survey. They have placed prohibitive constraints on the Census Bureau, including a mandate that it spend no more on the 2020 census than it spent on the 2010 census, despite inflation, population growth and technological change. Republicans have also proposed making the community survey voluntary — a move that would diminish the survey’s value by condoning nonparticipation, which increases cost and reduces accuracy. Even if the proposals go nowhere, the noise generated by their supporters is enough to persuade some people not to participate. The census is not the only target. The budget for the Bureau of Labor Statistics has been flat or falling for several years, forcing the agency to end surveys on mass layoffs, international labor comparisons, and employment in alternative energy. It has had to curtail quarterly data collection on employment and wages. Unless the labor bureau’s budget is increased, even the American Time Use Survey — the only government survey of how Americans spend their time outside work — may be curtailed or ended. The time-use survey, which was begun in 2003, provides the type of novel data Mr. Deaton used in his research.

Congress: Reign of the Implacables by Elizabeth Drew - The House Republican Caucus is coming to resemble an animal that devours itself. (Such creatures exist.) Time after time, one highly conservative subgroup of the House Republican party is swallowed up by another more radical one. The mayhem that has ensued since the not-as-startling-as-it-seemed decision of Speaker John Boehner to resign is the illogical result of the Party’s relentless move to the right and toward an increasingly rejectionist view of the existing powers. That this bears a close resemblance to what’s happening in the Republican presidential contest is of course no coincidence. Both present the dangers of anger at the status quo run amok. It’s not difficult to understand why, on Thursday, shortly before the House Republicans were to meet to decide on Boehner’s successor, Kevin McCarthy took himself out of the race (even if no other reason is confirmed): Whoever became the new Speaker was likely to face the same forces that took down Boehner. McCarthy had seen up close the agonies that Boehner suffered at the hands of a new radical force in the House, the Freedom Caucus. But in case he hadn’t noticed the difficulties it would have presented him, the members of the Freedom Caucus made that clear by deciding Wednesday night they would oppose him en bloc and favor their own candidate, Daniel Webster of Florida, in the party meeting the next day. This alone could have blocked McCarthy from becoming Speaker.

GOP hard-liners seek more power by changing rules. That could mean more chaos. -- When the 40 or so Republican lawmakers responsible for the recent upheaval in the House talk about what it would take to quell their rebellion, they do not necessarily talk about the debt ceiling, the federal budget or any other demand of the party’s energized conservative base. They speak instead about rule changes, committee assignments and the hallowed pursuit of “regular order” — a frequently invoked, civics-textbook ideal by which legislation bubbles up through subcommittees to committees to the floor to the president’s desk and into law. “The false, lazy narrative is that we want a more conservative speaker,” Rep. Justin Amash (R-Mich.) told reporters at a forum of hard-line House members last week. “But the reality is: What we want is a process-focused speaker. . . . What we need is a speaker who follows the House rules.” Those lawmakers, most of whom have organized into the House Freedom Caucus, are at the core of the leadership crisis afflicting the House GOP, and there are few signs they will retreat in the wake of Majority Leader Kevin McCarthy’s withdrawal from the speaker’s race. They want more bills and amendments from rank-and-file members and a generally more freewheeling approach on the House floor, as well as an overhaul to internal party-management rules. And, they say, they are willing to use the same leverage they used against McCarthy (R-Calif.) to get it. The attention of the political world on Saturday remained trained on Rep. Paul Ryan (R-Wis.), who has been touted throughout the Republican Party as a consensus choice for speaker and who is reconsidering calls to run. But even Ryan wouldn’t be exempt from those demands, some hard-liners say.

Filibuster Under Fire In Senate: A special Senate task force has been appointed to examine whether or not rules surrounding the filibuster should be modified, the Hill reported Monday. This new look at the procedural hurdle is the latest sign that Republicans are putting tough pressure on Senate Majority Leader Mitch McConnell, R-Ky., to get legislation through the body and make it look like the GOP is a party capable of governing. The filibuster is often used by the minority party to stop legislation from proceeding to a vote or from proceeding to the process of adding amendments to legislation before it is considered in the Senate. Changes to the filibuster have attracted the approval of House Republicans as well as junior senators who are upset that the Republican-controlled Congress has only forced President Barack Obama to veto one bill this year. "We’re going to take a serious look at whether Senate rules ought to be changed in order to make the Senate work more effectively," Sen. Lamar Alexander, R-Tenn., said. Alexander, who is a close ally of McConnell, will take part in the task force. "A number of the new senators have come in looking around saying, ‘Why are we doing things this way and not that way.'" Alexander is joined by Sen. Roy Blunt, R-Mo., and Sen. James Lankford, R-Okla.

The Trans-Pacific Partnership Negotiations Are Finished: Here’s What You Need to Know - The TPP is a so-called “free trade agreement” that is the largest such deal since NAFTA. If ratified it will cover 12 countries, impacting over 400 million people and nearly 40% of the world’s GDP. Member nations of the TPP negotiations include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. We do know that the TPP agreement is a 30 chapter document dealing with everything from agricultural tariffs to intellectual property to wildlife conservation to customs and financial services. It will impact the auto industry, dairy farmers, pharmaceutical companies (and their patients), even people who share files online. In short, it is a comprehensive agreement. We do not know what the text actually says. We have a rough idea based on leaked drafts of previous negotiating texts and the pronouncements of various officials privy to the talks and the ridiculously vague summaries of the US Trade Representative and other official bodies, but the text itself has yet to be released for public consumption. This is a reflection of the unprecedented secrecy that has shrouded these negotiations, including restricting members of US Congress’ access to the negotiating text to classified briefings and basement readings and paramilitary security with helicopter surveillance patrolling TPP summits for would-be protesters.

The Trans-Pacific Partnership (TPP) Scenarios - In Washington, the TPP has been praised as a triumph for the Obama administration. However, it still faces a tough battle with a divided Congress, amid presidential primaries, is now opposed by leading Democratic candidate Hillary Clinton – and needs the approval of 11 other TPP members’ legislative bodies. In China, the Ministry of Commerce said China welcomes the TPP agreement and hopes it can facilitate talks on other regional free trade deals to push economic growth in the Asia-Pacific region. In 2005, the original TPP among Brunei, Chile, New Zealand and Singapore was a vision of an inclusive free trade agreement. Since 2010, Washington has led talks for an expanded, but more exclusive, “high-standard” FTA, which also includes the US and its trade allies Japan, Canada, Australia, and Mexico), plus Peru and Vietnam. The negotiators hammered a deal with nations that represent very different levels of economic development. The living standards in the US are 10 times higher than those in Vietnam. As a result, talks were conducted under extraordinary secrecy, which left environmental movements, labor unions and cyber security observers angry. The result is a preferential regional trade agreement dominated by the US dollar. At the same time, territorial and maritime friction in East and South China Seas has steadily accelerated in parallel with US’ pivot to Asia. The Pentagon is shifting the bulk of its naval assets to the region by 2020.

Wikileaks Publishes Finalized TPP Chapter Which Expands Monopoly Rights For Pharmaceutical Companies - Days after secretive negotiations on the Trans-Pacific Partnership concluded, WikiLeaks has published the complete chapter on intellectual property. The leaked text shows the TPP would expands monopoly rights for pharmaceutical companies to help protect against competition from generic drug manufacturers. According to an analysis by Public Citizen, the text also “requires TPP countries to stop generic versions of biologic medicines (‘biosimilars’) from being available to patients, even when there is no patent.” This effectively means lifesaving medicines will be more expensive and harder for sick people in TPP countries to afford and access. Twelve countries—Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam—negotiated the TPP. Although U.S. officials, like Pentagon chief Ash Carter, have made claims TPP would promote government transparency, the deal has been shrouded in secrecy. It will not be made available to the public until some time around November 7. Before President Barack Obama can sign and send the deal to Congress, he must wait 90 days after notifying Congress. A full text of the agreement has to be made public for 60 days during this period.

Wikileaks Releases Final Intellectual Property Chapter Of TPP Before Official Release  -- Last weekend, negotiators finally completed negotiations on the Trans Pacific Partnership (TPP) agreement. However, as we noted, there was no timetable for the release of the text (though some are now saying it may come out next week). Once again, it was ridiculous that the negotiating positions of the various countries was secret all along, and that the whole thing had been done behind closed doors. And to have them not be ready to release the text after completion of the negotiations was even more of a travesty. Wikileaks, however, got hold of the Intellectual Property Chapter and has released it online.  Much of what's in there is (not surprisingly) the same as the previous leaked version, which was from May of this year. The newly leaked version, of course, confirms what New Zealand's announcement had revealed earlier this week: multiple countries caved in so that TPP requires signatories to extend copyright to life plus 70 years -- even though the US itself had been exploring reducing copyright terms (that now won't be allowed). Similarly, it locks in dangerous anti-circumvention rules that have hindered innovation and freedom.  The final report shows that many of the problems we found in the May draft are still in this document. This includes the fact that while the agreement does at least make a nod to the public's rights such as fair use (which it calls "limitations and exceptions") it does so in a ridiculous way. All of the moves to make copyright stricter are mandatory in the TPP. They require signing countries to do things like extend terms and ratchet up punishment. But when it comes to fair use? Then it just says countries should explore the issue:

TPP Still Secret, Congress Vote Might Be Delayed -- The Trans-Pacific Partnership (TPP) agreement is complete, but we still are not allowed to know what is in it. AFL-CIO President Richard Trumka has called on the President to release the text of TPP to the public. The Hill has the story, in “Trumka calls for immediate release of TPP text“: AFL-CIO President Richard Trumka wrote a letter to President Obama arguing that stakeholders, lawmakers and the American public need to see the final text of the Trans-Pacific Partnership (TPP) to start what is expected to be a long process of evaluating the deal brokered by the United States and 11 other nations. House and Senate Democrats have made similar appeals since the pact was brokered a week ago during a final round of negotiations in Atlanta. There are rumors that TPP’s consideration by Congress might be delayed until after the 2016 election, in the “lame duck” session. Politico’s Morning Trade reported:   A congressional vote on the Trans-Pacific Partnership is most likely to be put on ice until after the 2016 elections, leaving it for a lame-duck session, according to two senior GOP staffers, report POLITICO’s Anna Palmer and John Bresnahan.  The message of Mike Sommers, Speaker John Boehner’s chief of staff, and Hazen Marshall, policy director for Senate Majority Leader Mitch McConnell (R-Ky.), at a Ripon Society meeting Wednesday was “TPP is dead until the lame duck,” according to one attendee. The White House is trying to work with congressional leaders on timing, Marshall said.

“TPP Critics’ Nighttime Fears Fade by Light of Day” -- The text of the TPP (Trans Pacific Partnership) that was finally agreed among trade negotiators of 12 Pacific countries on October 5 came as a triumph over long odds. The unremitting hostility to the negotiations up until now from the Left – often in protest at being kept in the dark regarding the text of the agreement — has carried two dangers. One danger was that opponents would succeed in blocking negotiations altogether. The second danger was that the Administration would be forced at the margin to move to the “Right” in order to pick up votes from Congressmen who said they would support the outcome if (and only if) it contained provisions that were sufficiently generous to American corporations. Those concerned about labor and the environment risked hurting their own cause by seeming to say that they would oppose the agreement no matter how well it did at including provisions to their liking, which could have undermined the White House incentive to pursue their issues. In this light, this month’s outcome is a pleasant surprise. In the first place, the agreement gives the pharmaceutical firms, tobacco companies, and other corporations substantially less than they had asked for — so much so that Senator Orrin Hatch (Utah) and some other Republicans now threaten to oppose ratification in the final up-or-down vote. In the second place, the agreement gives the environmentalists more than most of them had bothered to ask for. I don’t know the extent to which these outcomes were the result of hard bargaining by other trading partners such as Australia. Regardless, it is a good outcome. The domestic critics might consider now taking a fresh look with an open mind.

Free Trade’s Cheap Talk is Big Money --  One myth is that all U.S. farm and ranch profits are tied directly to free trade. The Obama White House made that connection again Oct. 5 when it noted “roughly 20 percent of all farm income in the United States,” is “provided” by “exports.” True, but farm income is not farm profit. If it were, U.S. net farm income would have risen when ag exports rose from $141 billion in 2013 to $152 billion in 2014. Instead, U.S. net farm income fell from $135 billion to $126 billion in that period. Another myth about free trade is that trade agreements are about freedom to export. In truth, most trade deals “specify who will be protected from international competition and who will not,” explains the Economic Policy Institute in its overview of the TPP. Clear evidence comes from America’s giant neighbor, Canada, whose ag minister announced his dairy and poultry farmers will be compensated for “any losses” caused by TPP before the deal was even signed. It confirms Nobel Prize-winning economist Joseph Stiglitz’s long-held belief that free trade deals are “managed trade agreements, tailored for corporate interests…” American farmers and ranchers know this in their bones but not their hearts. They are farmers and ranchers, not exporters. Big Agbiz — Cargill, JBS, Smithfield, ADM and the like — are global buyers and sellers who, when able to play both sides of any trade-leveled playing field the world over, rarely lose.  Maybe that’s why the Big Boys aren’t saying squat about the TPP; they got everything they demanded during negotiations. Now they want you to pressure Congress to pass it for them and their shareholders. In fact, they’re betting on it and, already, their bets are paying off.

Trading Away Land Rights: TPP, Investment Agreements, and the Governance of Land - In 2009, the government of Mozambique put a moratorium on large-scale land acquisitions, a belated response to a wave of protests triggered by so-called “land grabs” by foreign investors. Some of those investors were from the United States, and it is a wonder that they didn’t sue the Mozambican government for limiting their expected profits. They could have under the Bilateral Investment Treaty (BIT) between the United States and Mozambique. As U.S. trade negotiators herd their Pacific Rim counterparts toward the final text of a long-promised Trans-Pacific Partnership Agreement (TPP), the investment chapter remains a point of contention. Like the 1994 North American Free Trade Agreement (NAFTA) and most U.S. trade agreements since, the TPP text includes controversial provisions that limit the power of national governments to regulate incoming foreign investment and give investors rights to sue host governments for regulatory measures, even those taken in the public interest, that limit their expected returns. A host of BITs with a far wider range of countries, including Mozambique, contain similar provisions. The impact of such agreements on land grabs and land governance has received scant attention until recently. As new research from the International Institute for Environment and Development (IIED) and Tufts University’s Global Development and Environment Institute (GDAE) shows, the kinds of investment provisions in the TPP and in most BITs can severely limit a government’s ability to manage its land and other natural resources in the public interest. They can also interfere with the implementation of newly adopted international guidelines on land tenure.

Reality Check: What We Know About TPP Makes It The Worst Trade Deal Ever -  Doctors Without Borders came out against this stating: “TPP countries have agreed to United States government and multinational drug company demands that will raise the price of medicines for millions. . . . The big losers in TPP are patients and treatment providers in developing countries. . . . The TPP will still go down in history as the worst trade agreement for access to medicines in developing countries.” . The Electronic Freedom Foundation says that, “Despite its earlier promises that the TPP would bring ‘greater balance’ to copyright, more than any other recent trade agreement, the most recent leak of the intellectual property chapter belies their claims. The U.S. Trade Representative [Michael Froman] (USTR) has still failed to live up to its word that it would enshrine meaningful public rights to use copyrighted content in this agreement.” But what you need to know is that the worst thing about the TPP is something called the ISDS—the Investor-State Dispute Settlement. Under the ISDS, foreign corporations would be allowed to appeal legal decisions to international tribunals rather than face domestic courts.

Hillary Clinton’s Trade Switch: A Trans-Pacific Timeline -- Hillary Clinton was a full-throated supporter of the big Trans-Pacific Partnership trade deal, just sealed by President Barack Obama, when she was his secretary of state. A trade pact with Japan and 10 other countries bordering the Pacific would be a big geopolitical plus for all involved, as she saw it. Now a presidential candidate in a Democratic primary race heavy with TPP critics, Mrs. Clinton has become the trade agreement’s best-known opponent. Here is a short walk through her varying views on the subject. “We’re pursuing a regional agreement with the nations of the Trans-Pacific Partnership, and we know that that will help create new jobs and opportunities here at home,” Mrs. Clinton said at the Council on Foreign Relations. “This TPP sets the gold standard in trade agreements to open free, transparent, fair trade, the kind of environment that has the rule of law and a level playing field,” Mrs. Clinton said in remarks in Australia, a TPP country. “We also discussed the Trans-Pacific Partnership and we shared perspectives on Japan’s possible participation, because we think this holds out great economic opportunities to all participating nations,” Mrs. Clinton said in remarks with Japanese Foreign Minister Fumio Kushido. Asked if she would vote for fast-track authority, designed to expedite completion and passage of the TPP, Mrs. Clinton said: “Probably not, because that’s a process vote, and I don’t want to say that’s the same as TPP. Some people don’t like any trade agreement, and some people are willing to take any trade agreement.” “What I know about it, as of today, I am not in favor of what I have learned about it,” Mrs. Clinton said on PBS’s “NewsHour.” “Trade agreements don’t happen in a vacuum, and in order for us to have a competitive economy in the global marketplace, there are things we need to do here at home that help raise wages and the Republicans have blocked everything President Obama tried to do on that front.”

David Brooks, Hillary Clinton, and the TPP -- Dean Baker -- David Brooks is shocked, shocked to find out that political considerations might affect Hillary Clinton's stand on the Trans-Pacific Partnership (TPP)in the presidential campaign. Brooks goes through the basic story. Yes, Clinton had been a supporter of the TPP in the Obama administration, but now Brooks tells us that Clinton has changed her position because  she'll say what "she needs to say now to become Bernie Sanders in a pantsuit." Let me give a brief sidebar on the sexisim here. Yes, Hillary Clinton is a woman. Does that mean it is not possible to discuss her political positions without referring to what she wears or how she looks?  Brooks has apparently become a big humanitarian worried about the plight of people in the developing world. "Third, there’s the humanitarian issue. Clinton once supported the Pacific trade deal for good reason. According to a report from the Peterson Institute for International Economics, the deal would bolster U.S. gross domestic product growth and jobs over the next decade. It would lift Malaysian growth by 6.6 percent and Vietnamese growth by 14 percent.. If Clinton’s flip-flop ends up sinking the deal, she will have helped sentence millions of people to further poverty and destabilized the world’s most dynamic region." That sounds pretty awful. But before we worry too much about the millions of people who Secretary Clinton has sentenced to poverty in Malaysia and Vietnam, it is worth looking at these numbers a bit more closely. First, Brooks meant GDP, not growth. When the benefits of the TPP are fully realized in about a dozen years, the report projects that Malaysia's GDP will be about 6.6 percent higher and Vietnam's GDP will be about 14 percent higher. Second, the vast majority of these projected gains do not come from anything that the United States or the other TPP countries are giving Malaysia and Vietnam, they come from reducing their own tariff and other trade barriers. In the standard modeling, tariffs are distortionary taxes. If you reduce or eliminate them, your country will benefit even if no other country has made any change in their own barriers.

The Trans-Pacific Partnership May be Dead on Arrival  -  News that U.S. presidential candidate Hillary Clinton had joined the entire rest of the democratic field in opposing the Trans-Pacific Partnership may well sound the death knell for the agreement.  It also raises a few interesting possibilities about where things go next.  First though, on Clinton's "come to Jesus" moment: yes, it's politics (and primary politics to boot). And yes, we went through something similar with Obama and his promise to renegotiate NAFTA. But this is different.  The promise, or suggestion, or hint, to renegotiate NAFTA was as vague as the preceding string of nouns. There was never any hard, fixed event to force Obama's hand. With the TPP on the other hand, once it's signed the clock starts ticking and the train starts rolling down the tracks. At some point early in her term, should she be elected, Clinton will have to take some action other than procrastination.  It's going to be hard, though not impossible, for Clinton to backtrack. Something like a suddenly menacing China could provide her cover with a "Well, as recent events demonstrate, things have changed..." but there is real and substantial opposition to the agreement on the left in her own party and the far right in the GOP.   Problems finding a house speaker and democratic primary challenges are small potatoes compared to a potential TPP fight. Also, bear in mind that the Donald has yet to really get going on the TPP. The damage that Ross Perot did to NAFTA will, as with so many things with the Donald, pale in comparison.

Slave Trafficking, TPP & the 2016 Presidential Contest -- Gaius Publius -  As many readers know, I’m a fan of what the game of Go calls a “strong move” — very aggressive play when the position is favorable. The position against TPP, the argument against, is beyond favorable, and the position against Malaysia, one of the world’s worst participants in the traffic in slaves, is unassailable. In addition, for the 2016 race, progressives have three candidates who have announced their opposition.In this presidential season, I think progressives have been handed a wonderful opportunity to make a “strong move” against both TPP and slave trafficking — but only if they’re willing to take it.In this piece, I want to look at the slave trade and Malaysia, then at TPP, both pre-vote and post-vote, and last at what a truly committed Democratic candidate might say in one of the coming debates. (To jump to that speech, scroll to the bottom or click here.)

Just 158 families have provided nearly half of the early money for efforts to capture the White House - They are overwhelmingly white, rich, older and male, in a nation that is being remade by the young, by women, and by black and brown voters..., they reside in exclusive neighborhoods dotting a handful of cities and towns. And in an economy that has minted billionaires in a dizzying array of industries, most made their fortunes in just two: finance and energy. Now they are deploying their vast wealth in the political arena, providing almost half of all the seed money raised to support Democratic and Republican presidential candidates. Just 158 families, along with companies they own or control, contributed $176 million in the first phase of the campaign.  Not since before Watergate have so few people and businesses provided so much early money in a campaign, most of it through channels legalized by the Supreme Court’s Citizens United decision five years ago. ....the families investing the most in presidential politics overwhelmingly lean right ... contributing tens of millions of dollars to support Republican candidates who have pledged to pare regulations; cut taxes on income, capital gains and inheritances; and shrink entitlement programs. While such measures would help protect their own wealth, the donors describe their embrace of them more broadly, as the surest means of promoting economic growth and preserving a system that would allow others to prosper, too. ... Most of the families are clustered around just nine cities. ...

Top 0.1% Of US Households Own As Much Wealth As The Bottom 90% --If it wasn't for Ben "the Hero" Bernanke's courage to print like a drunken Keynesian madman, none of this would have been possible, and by "this" we of course mean that the net worth of the top 0.1% of Americans is about to surpass the wealth of the bottom 90% of US households.  That, and making Thomas Piketty's sequel just a matter of time. The good news is that the wealth gap is not quite as bad as it was in 1929 when the top 0.1% owned 25% of all wealth, almost double the 16% generously "trickling down" to the "poorest" 90% of the US population.

What Could Raising Taxes on the 1% Do? Surprising Amounts - When it comes to paying taxes, most Americans think the wealthy do not pay their fair share. There is a sharp divide, however, between Republicans and Democrats when it comes to taxing the rich, who provide most of the cash for political campaigns. All the Republican tax proposals, in fact, cut taxes for the wealthiest Americans. Democrats, on the other hand, are prepared to raise taxes at the top, though they have not been very specific about how they would do so.  But what could a tax-the-rich plan actually achieve? As it turns out, quite a lot, experts say. Given the gains that have flowed to those at the tip of the income pyramid in recent decades, several economists have been making the case that the government could raise large amounts of revenue exclusively from this small group, while still allowing them to take home a majority of their income. It is “absurd” to argue that most wealth at the top is already highly taxed or that there isn’t much more revenue to be had by raising taxes on the 1 percent, says the economist Joseph E. Stiglitz, winner of the Nobel in economic science, who has written extensively about inequality. ... The top 1 percent on average already pay roughly a third of their incomes to the federal government, according to a Treasury Department analysis that takes into account the entire menu of taxes — including income tax, payroll taxes that fund Medicare and Social Security, estate and gift taxes, excise and custom duties as well as investors’ share of corporate taxes. The tax bite on the top 0.1 percent is a bit higher. Most of those taxpayers insist they are already paying more than enough. By comparison, the band of taxpayers right below them, in the 95th to 99th percentile, pay on average about $1 out of every $4. Those in the bottom half pay less than $1 out of every $10.

Inequality is the great concern of our age. So why do we tolerate rapacious, unjust tax havens? - Examine democratic and budgetary crises across the world and you’ll find a running theme – tax havens. Last week, the OECD released a plan to address some of the issues raised by offshore tax havens. The plan is designed to curb the growing shifting of corporate profits to Bermuda and other zero-tax countries, such as the British Virgin Islands and Cayman Islands. This effort is insufficient, because it fails to address the core problems raised by tax havens. Our corporate tax rules have not been adapted to an age in which CEOs see it as their duty to dodge taxes and a world where a web of tax havens obliges. Taxes on corporate profits are to be paid to the country where profits are made. If Google manages to report profits in Bermuda, this income is taxable in Bermuda, where the tax rate is a modest 0%, even if no sales are made in Bermuda, if no office stands there or if no one works there. Now there are numerous ways for firms to shift the location of their profits to Bermuda artificially. This is the miracle of transfer pricing. Transfer prices are the prices at which multinational firms exchange goods and services internally. In principle, according to the League of Nations’ rules, intra-group transactions should be conducted at the market price of the good or service traded, as if the subsidiaries were unrelated. In practice, transfer prices are routinely manipulated by armies of accountants. There are billions of intra-group transactions every year and tax authorities cannot possibly monitor all of them. In addition, in many cases, there is no relevant market price, giving firms full latitude to choose the price that will minimise their tax bill. What was the “market price” of Google’s technologies when it transferred them to its Bermuda subsidiary in 2003, before it was even being listed as a public company?

Hillary’s Wall Street Plan: Worse Than Shuffling Deck Chairs on the Titanic  - To fully get your mind around Hillary Clinton’s new, toothless plan to “Prevent the Next Crash” on Wall Street, you need to know a few things right up front. Hillary hails not from the Democratic Party that genuinely cares about America’s staggering wealth and income inequality and the plight of the little guy, but from a grotesquely disfigured hybrid organization informally known as the “Wall Street Democrats.” In that hybrid organization, money trumps morals, duty to country and the public interest. It is a shrine to crony capitalism, infused with lawyers who believe “it’s legal if you can get away with it.” Just as Wall Street’s watchdogs suffer from regulatory capture, the Wall Street Democrats are afflicted with “cognitive capture,” a polite way of saying public officials covet the wealth they hang around with on Wall Street and expect equal earning power when they pass through the gold-plated revolving door. After former President Bill Clinton signed Citigroup’s dream deal in 1999 to repeal the depression era Glass-Steagall Act that separated insured banks from gambling casinos on Wall Street, then U.S. Treasury Secretary, Robert Rubin (another Wall Street Democrat) who lobbied for the repeal, quickly beat a path to Citigroup’s door where he received compensation of more than $115 million over the next decade. After Bill Clinton left the White House, Citigroup paid him hundreds of thousands of dollars in speaking fees and committed $5.5 million to the Clinton Global Initiative – a program that has become controversial over fears that corporations and foreign governments were attempting to curry favor with Hillary while she was Secretary of State by making donations to the related Clinton Foundation.

Hillary Clinton’s Take on Banks Won’t Hold Up - Matt Taibbl  - The key exchange began with a question from CNN's Anderson Cooper: "Just for viewers at home who may not be reading up on this, Glass-Steagall is the Depression-era banking law repealed in 1999 that prevented commercial banks from engaging in investment banking and insurance activities. Secretary Clinton, he raises a fundamental difference on this stage. Sen. Sanders wants to break up the big Wall Street banks. You don't. You say charge the banks more, continue to monitor them. Why is your plan better?" Cooper's question to Hillary Clinton was really about a financial system that became dangerously over-concentrated thanks to multiple laws passed during her husband's administration. Her answer: "Well, my plan is more comprehensive. And, frankly, it's tougher because of course we have to deal with the problem that the banks are still too big to fail. We can never let the American taxpayer and middle-class families ever have to bail out the kind of speculative behavior that we saw. But we also have to worry about some of the other players: AIG, a big insurance company; Lehman Brothers, an investment bank. There's this whole area called 'shadow banking.' That's where the experts tell me the next potential problem could come from." First, it's definitive now that Hillary has no intention of reinstating Glass-Steagall. Cooper gave her a prime opportunity Tuesday night to announce otherwise, stories have filtered out of her campaign that she has no plans along those lines, and she's explicitly stated that she wants to find a "different way" to reduce risk. The second and probably more important observation is about Hillary's rhetorical choices. Hillary, like her close advisor Barney Frank, has been pushing an idea that banks aren't at the root of any financial instability problem. Last night, she pointed a finger instead at "shadow banking," non-bank actors like AIG, and a dead investment bank in Lehman Brothers. (Interesting she didn't mention a still-viable investment bank like Goldman, Sachs, which has hosted her expensive speaking engagements.)

News You Might Have Missed: Hillary Clinton Opposes Reinstating Glass-Steagall Act -- Amidst the announcements by former Secretary of State Hillary Clinton that she officially opposes the northern sector of the Keystone XL pipeline and has taken a position against the Trans-Pacific Partnership, there has been little discussion of Clinton's announcement that she is opposed to the reinstatement of the Glass-Steagall act.   The infamous repeal of the Glass-Steagall Act occurred during the waning days of the Bill Clinton administration, with his full support. The law, according to Investopedia, was "an act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment banking business." As an analysis of Clinton's position by journalist Dylan Stableford of Yahoo! Politics states: The Glass-Steagall Act, passed in 1933, prohibited commercial banks from participating in the investment banking business and created the Federal Deposit Insurance Corporation (FDIC) to protect bank deposits from institutional failure. But major provisions of the law were repealed in 1999 under President Bill Clinton, a move some believe contributed to the 2008 global credit crisis because commercial banks - now free to invest in things such as real estate - were saddled with billions of dollars in losses tied to cratering U.S. home prices. Several lawmakers on both sides of the aisle have called for the reinstatement of the law to make "too-big-to-fail" banks much smaller, minimize risk and prevent such a crisis from happening again.

Structural Reform Beyond Glass-Steagall - Mike Konczal -- Glass-Steagall (GS) has become a central part of the debate over financial reform in the 2016 election. Several commentators have portrayed it as a central objective of financial reform, verging on a litmus test for those who are serious about the topic. My opinion is that reinstating GS isn’t an important goal for financial reform. I don’t think the story it tells is the one we want to tell, and the reforms it would bring aren’t particularly effective. I think in terms of structural changes, there are better aspirational objectives for the debate to focus on and better options for achieving those objectives. In particular, breaking up the banks through higher capital requirements would meet the same goals while building on the work that has been done—work that is already showing significant success and could use more of a spotlight. Since this is a live debate among financial reformers, I want to explain my thoughts on this topic.  Let’s start with the case for GS. In doing so, we should separate the role that repealing GS played leading up to the financial crisis from why reinstating GS would be a good idea now. While the repeal is important as a symbol of the deregulation of the time, it isn’t a guide for future policy. I see three broad cases to be made for GS:

The Slough of Despond -- Frances Coppola - I'm bored. Bored with this crisis. Bored with endless calls for bank reforms. Bored with never-ending stories of inadequate bank resolution and legal battles which benefit no-one but lawyers. Bored with ineffectual monetary policy and fiscal gridlock. Bored with seeing the same things proposed over and over again, even things we know don't work and will never happen. Today, Mike Konczal wrote a piece on why restoring Glass-Steagall wouldn't solve anything. He's right, of course. But it is now seven years since the crisis, and we have known for most of that time that restoring Glass-Steagall wasn't going to happen and wouldn't solve anything anyway.Why are we still discussing it now? Why can't we just accept that Glass-Steagall is dead, and move on? Today, I had to explain YET again that although banks create money when they lend, that does not mean lending doesn't need funding. Payments are deposit outflows. That applies whether the deposits concerned are created by the bank through lending or placed in the bank by customers. So no, banks can't "just lend" without any form of funding. Banks have to fund deposit outflows. If they don't, they can't allow money to be removed from deposit accounts. Look what happened in Greece when the ECB limited the funds available to Greek banks.

Glass-Steagall: It's the Politics, Stupid! - It was like eight nights of Chanukkah in one for me watching the Democratic debate last night. There was a Glass-Steagall lovefest going on. But here's the thing:  no one seems to get why Glass-Steagall was important or the connection between Glass-Steagal and the financial crisis. The importance of Glass-Steagall was not as a financial firewall between speculative investment activities and safe deposits. It was as a political Berlin Wall keeping the different sectors of the financial industry from uniting in their lobbying efforts and disturbing the peace of the nation. Until and unless we realize that the importance of Glass-Steagall was political, we're going to continue wasting our time debating insufficient half-measures of financial regulation like the Volcker Rule, which has the financial, but not the political benefits of Glass-Steagall. More critically, we're going to pass regulations like the Volcker Rule and then wonder slack-jawed why they don't work, as the financial industry undermines them through the regulatory implementation and legislative amendments. The problem we face is not technical, but political. By separating investment banking from commercial banking from insurance, Glass-Steagall (and I'm using the term broadly to include the McCarran-Fergusson Act) ensured that there would be turf battles between i-banks, commercial banks, and insurance companies every time a new product was developed.  Indeed, skillful politicians were able to play the industry sectors off against each other, as William O. Douglas in crafting the Trust Indenture Act, in which the commercial banks agreed to some compromises to support the legislation so as to keep investment banks out of the corporate trustee business. Unfortunately, very few politicians seem to understand that the problem we face in financial regulation is a political one. Get the politics right, and the right regulation will follow.

Paul Krugman and the End of Too Big to Fail Subsidies - Dean Baker - Paul Krugman used his column today to tell us that any Democrat in the White House will take a tough line on regulating Wall Street. I hope that he is right, but am a bit more skeptical given past associations. But beyond the speculation, there is one factual matter where I would differ his assessment. At one point he argues that the implicit "too big to fail" (TBTF) subsidy for large banks has mostly disappeared due to the Dodd-Frank reforms. He cites a blog post by Mike Konczal, which in turn relies on a study by the Government Accountability Office (GAO). The GAO study does seem to suggest that the TBTF subsidy has largely disappeared. It uses 42 different models to estimate the size of the subsidy year by year. While its models get highly significant results showing a large subsidy at the peak of the crisis, most find no subsidy in 2013. This can be seen as a victory. But if we look at the results more closely, we find that the study also finds little evidence of a TBTF subsidy in 2006. While 28 of the 42 studies did get significant results indicating a subsidy, compared to just 8 in 2013, the average size of the subsidy looks to be very small. From the chart it appears to be less than 10 basis points (a tenth of a percentage point). Obviously, the big banks did enjoy too big to fail protection in 2006, since only Lehman was allowed to fail in the crisis, yet the GAO analysis implies that this held very little value. The problem here is that interest rates spreads, between more and less risky assets, tend to collapse in normal times. The basic story is that fire insurance is not worth much if no one thinks there can be a fire.

Automating big-data analysis | MIT News: Big-data analysis consists of searching for buried patterns that have some kind of predictive power. But choosing which “features” of the data to analyze usually requires some human intuition. In a database containing, say, the beginning and end dates of various sales promotions and weekly profits, the crucial data may not be the dates themselves but the spans between them, or not the total profits but the averages across those spans. MIT researchers aim to take the human element out of big-data analysis, with a new system that not only searches for patterns but designs the feature set, too. To test the first prototype of their system, they enrolled it in three data science competitions, in which it competed against human teams to find predictive patterns in unfamiliar data sets. Of the 906 teams participating in the three competitions, the researchers’ “Data Science Machine” finished ahead of 615. In two of the three competitions, the predictions made by the Data Science Machine were 94 percent and 96 percent as accurate as the winning submissions. In the third, the figure was a more modest 87 percent. But where the teams of humans typically labored over their prediction algorithms for months, the Data Science Machine took somewhere between two and 12 hours to produce each of its entries.

SEC Touts Inflated Numbers to Look Way Tougher Than It Is -- David Dayen -- Faced with unrelenting criticism from financial reform groups for failing to enforce the securities laws, SEC Chair Mary Jo White has defended herself with numbers. The Securities and Exchange Commission recorded 755 different enforcement actions yielding $4.1 billion in monetary penalties in 2014, she boasted in a speech this February — “the highest number of cases in the history of the Commission.” But the numbers she cited were “deeply flawed,” according to a study that will soon be published in the Cornell Law Review. The commission’s methodology allows for double- and even triple-counting some offenders — along with counting fines ordered by other agencies, and penalties that are never collected. If you weed out the systematic over-counting and artificial boosts, the SEC’s enforcement levels have not significantly changed since 2002, despite the multitude of lawbreaking that led to the 2008 financial crisis, according to the study. Source: Urska Velikonja“Inflated statistics … suggest that the SEC is a much more serious enforcer in the financial industry than it really is,” writes Urska Velikonja, an assistant professor at Emory University School of Law and the author of the report. Velikonja said that she is scheduled to meet with SEC Enforcement Director Andrew Ceresney this week

SEC Trims Use of In-House Judges - WSJ: The Securities and Exchange Commission has quietly pulled back on its use of in-house judges, a practice that brought it criticism and legal challenges. SEC leaders defend the fairness of using agency administrative law judges even for serious, contested cases, in accordance with powers the agency gained through the 2010 Dodd-Frank financial law. When it uses its own tribunal, the SEC has historically enjoyed a home-court advantage, an analysis by The Wall Street Journal found in May of this year. The analysis showed the agency won against 90% of defendants in contested cases heard by its in-house judges from October 2010 through March 2015, versus 69% success in cases it took to federal court. The analysis helped spur a wave of legal challenges and criticism of the internal tribunal. Now, the agency is sending fewer serious contested cases to its own judges, according to a new analysis by the Journal.A review of 160 cases affecting more than 500 defendants shows that in the three months through September, the SEC sent just 11%—four of 36—of its contested cases to its administrative law judges. That was down from 40% in the like period of 2014. For the full fiscal year ended Sept. 30, the SEC used its internal tribunal for 28% of its contested cases, compared with 43% for the previous 12 months, according to the analysis and SEC data, both of which exclude settled and routine cases.

Occupy the SEC Condemns Securities Lawyers for Bullying the SEC, Demanding Preferential Treatment for Clients - Yves Smith -  A reader who has held senior roles in the investment industry was so disturbed by what he heard at a securities conference that he had attended that he sent an audio recording of most of the session to me. When I concurred with his reaction, he took it upon himself to add a video component, including a running transcript, to make it more accessible.  The event was a securities law conference that took place in May. The panel in question consisted mainly of current and former SEC officials. I’ve made the video public today on YouTube and strongly encourage you to watch it in full. There’s enough troubling material in it that we’ll discuss it today and tomorrow.  What this discussion reveals is the degree to which the very premise of the SEC’s role, and that of regulations generally, is under intense assault by the private bar. One Washington insider called it legal corruption, in that lawyers are taking issue with the very premise of the rule of law in order to advance their and their clients’ interests. And when I went to get reactions from law professors, they saw this as normal. As one wrote, “Practicing attorneys, especially those who used to work with the SEC, always kind of beat up on the current staff.”  But as you look at the video, it’s not hard to see that the posture of the attorneys in private practice is openly dismissive, even bullying, and they do far more in the way of name calling than actually making substantive complaints that have merit. But you will also observe how defensive the SEC officials are. It’s not hard to see how years of this kind of browbeating has had an effect on the staff, even before you get to the lack of support for tough enforcement at the political appointee level of the agency.

SEC reveals hedge fund managers’ failings -- Some hedge fund managers have been keeping their most profitable trades to themselves, rather than using them to benefit clients’ funds, regulators have revealed. Mary Jo White, chair of the Securities and Exchange Commission, said on Friday that the agency had found a string of compliance failures at hedge funds since taking on oversight of the $3.4tn industry in the wake of the financial crisis. In a speech that amounted to a shot across the bows of hedge fund managers, Ms White said some managers were allocating their best trades to their own personal accounts, failing to disclose conflicts of interest, and massaging performance numbers in their marketing materials. Two years of spot checks on hedge funds had found “cracks in the bulwark of investor protection”, Ms White told the Managed Funds Association, an industry lobby group. Similar inspections of private equity firms led the SEC to launch a broader crackdown on hidden fees across that industry, which has already led to fines at four firms including KKR and Blackstone — enforcement actions that Ms White has now urged hedge fund managers to read. “Examiners observed that some hedge fund advisers may not be adequately disclosing conflicts related to advisers’ proprietary funds and the personal accounts of their portfolio managers,” she said. “They saw, for example, advisers allocating profitable trades and investment opportunities to proprietary funds rather than client accounts in contravention of existing policies and procedures.” SEC staff were also concerned that some funds may have used marketing materials that included back-tested results and performance numbers from alternative funds, instead of appropriate figures, Ms White said.

Talk of Criminally Prosecuting Corporations Up, Actual Prosecutions Down - Dave Dayen - A new analysis of federal data from Syracuse University finds that the Justice Department’s criminal prosecutions of corporations fell 29 percent from 2004 to 2014, even as criminal referrals to the Justice Department from other federal agencies have risen. In fiscal year 2014, the Justice Department brought 237 cases against corporations, the lowest number since 2010, and well below the high-water mark of the decade: 398 cases in 2005. The number of convictions fell to 162, well below the Bush administration average of about 240. The data comes from the Justice Department itself, obtained by the Transactional Records Access Clearinghouse (TRAC) through a Freedom of Information Act request. TRAC also synthesizes data from the U.S. Sentencing Commission, a division of the federal courts, to arrive at its totals. TRAC’s report on criminal prosecutions mirrors the data released in August on enforcement of individual white-collar cases. That showed prosecutions at a 20-year low, down 36.8 percent from the peak.  It’s not for lack of possible cases. Despite the pullback in prosecutions, available data shows that federal agencies continue to find similar amounts of potential corporate misconduct. TRAC’s analysis shows that criminal referrals actually increased by 2.6 percent between fiscal years 2004 and 2014. The Justice Department last year received over nine times as many criminal referrals as they brought criminal cases.

$3 Trillion Corporate Credit Crunch Looms as Debtors Face Day of Reckoning - Governments and central banks risk tipping the world into a fresh financial crisis, the International Monetary Fund has warned, as it called time on a corporate debt binge in the developing world.  Emerging market companies have "over-borrowed" by $3 trillion in the last decade, reflecting a quadrupling of private sector debt between 2004 and 2014, found the IMF's Global Financial Stability Report.  This dangerous over-leveraging now threatens to unleash a wave of defaults that will imperil an already weak global economy, said stark findings from the IMF's twice yearly report. The Fund warned there was no margin for error for policymakers navigating these hazardous risks. The slightest miscalculation, they said, could collapse into a "failed normalisation" of interest rates and market conditions, wiping 3pc from the world's economic output over the next two years. But indebted corporate balance sheets were just one element of a poisonous "triad" of challenges facing the financial system.  Seven years after the financial crisis, a combination of lingering debt burdens in advanced economies, and vanishing market liquidity could result in a new credit crunch when conditions tighten.

Bond predators humbled by distressed bets --  The cleverest predators of the bond market have suffered a humbling this year, after a heap of high profile bets have gone awry. So-called distressed debt funds seek lucrative opportunities in parts of the credit market where many other investors fear to tread, snapping up the bonds or loans of borrowers either nearing or who have filed for bankruptcy. Sometimes, the bet is that a company only needs more time and money to get on an even keel or the distressed debt fund steps in and takes it over in a restructuring. Usually, it is simply that the price of a company’s debts have been pushed below their fair value — based on the expected recovery value of assets — by panicky traditional investors, who flee at the slightest whiff of danger. This somewhat dangerous way to make money is the domain of some of the most respected money managers in the finance industry. But an unhappy confluence of market-wide challenges and idiosyncratic issues has proven exceptionally painful this year. “It’s been humbling for most folks,” says Edwin Tai, a distressed debt portfolio manager at Newfleet Asset Management. “Seven years of easy money has made even the most disciplined investors stretch a little.” Distressed debt hedge funds have lost on average 4.2 per cent in the year to the end of September, according to Hedge Fund Research. So-called special situations vehicles — which also often revel in the world of dodgy debts — have on average fallen 4.4 per cent. The data provider’s weighted composite index for hedge funds has only slipped 1.3 per cent so far in 2015.

Debt Fueled Stock Buybacks Now Eating into Earnings Companies with investment-grade credit ratings – the cream-of-the-crop “high-grade” corporate borrowers – have gorged on borrowed money at super-low interest rates over the past few years, as monetary policies put investors into trance. And interest on that mountain of debt, which grew another 4% in the second quarter, is now eating their earnings like never before. These companies – according to JPMorgan analysts cited by Bloomberg – have incurred $119 billion in interest expense over the 12 months through the second quarter. The most ever.  With impeccable timing: for S&P 500 companies, revenues have been in a recession all year, and the last thing companies need now is higher expenses. Risks are piling up too: according to Bloomberg, companies’ ability pay these interest expenses, as measured by the interest coverage ratio, dropped to the lowest level since 2009. Companies also have to refinance that debt when it comes due. If they can’t, they’ll end up going through what their beaten-down brethren in the energy and mining sectors are undergoing right now: reshuffling assets and debts, some of it in bankruptcy court.

Bill Gross Seeks Revenge: Blockbuster Lawsuit Reveals Deceit, Greed, Risk-Taking, and Brutal Power Struggle at PIMCO - Wolf Street: On October 8, 2015, Glaser Weil Fink Howard Avchen & Shapiro LLP, as attorney for the now deposed “Bond King” Bill Gross, filed suit in Orange County, California. The complaint is a gripping story of a sordid scheme of deceit and greed, of younger versus older – of a power struggle and a palace revolt. The conspirators, according to the complaint, fought with all means available, including numerous leaks that the Financial Times and the Wall Street Journal published eagerly, and that other media outlets of all kinds picked up, thus turning themselves into often brutal tools for the conspirators and their agenda to destroy Bill Gross. If the Complaint is right, the media got the story very wrong. But in the end it’s all about money – hundreds of millions of dollars. We haven’t heard from the other side. We don’t know who is right and what to believe. Gross had made a career out of riding up the three-decade-long bond bull market, got immensely rich doing so, but now got knocked off his horse. The 37-page Complaint explains from Gross’s point of view how it happened. It’s a page-turner, and an eye-opener about what’s going on behind the scenes. This is how it starts out…. Driven by a lust for power, greed, and a desire to improve their own financial position and reputation at the expense of investors and decency, a cabal of Pacific Investment Management Company LLC (“PIMCO”) managing directors plotted to drive founder Bill Gross out of PIMCO in order to take, without compensation, Gross’s percentage ownership in the profitability of PIMCO. Their improper, dishonest, and unethical behavior must now be exposed.

Payday Lenders Pay Off the System So They Can Keep Ripping Off Borrowers  - The industry spent more than $13 million on lobbying and campaign contributions in the 2014 election cycle. In Washington, payday lenders are treated like a mistress you say you’ll leave your wife for – but won’t take out in public. “Some call us bottom feeders, loan sharks and parasites, but we’re a lawful business!” This was the well-worn message to attendees from various participants. It was less informative than it was an exercise in cognitive dissonance. Group therapy for those cursed with a conscience. Why are payday lenders hated? Mainly because they’ve managed to squeeze $46 billion annually out of an anemic class of underrepresented and marginalized human beings. All the world’s major religions agree on two things: The Golden Rule is right and usury is wrong. In the modern world we live (and die) on credit, but still are repulsed by predatory lending. Payday lenders offer Faustian bargains to the desperate. You’ll pay some “legitimate businessman” $400 for that $100 repair to your mid-’90s Neon. With rollover options some borrowers have paid up to 1000 percent APR. We tend to dislike people who see abject crippling poverty and think, “How can I make money off that?” Because it’s not so much a cycle of debt, which is arguably a mortgage, for the lowest on the economic scale – it’s debt by a thousand cuts. Only Congress or state legislatures can implement APR caps for loans. These lenders, who also call themselves “advancers” to skirt some state laws, have repeatedly and publicly cried out, “We can’t stay in business with a cap of 30 percent APR!” It’s literally saying that if they don’t rip people off, they will go out of business. In short, their business is ripping people off. They shriek “Persecution!” at any regulation, but tout their regulation-granted legal status as a badge of legitimacy.

Who's Afraid of a Republican CFPB? - Despite being one of the most effective agencies in the entire federal government (or perhaps because of it), the Consumer Financial Protection Bureau continues to be a favorite target for anti-regulatory lawmakers. Having failed to smother the CFPB in the cradle, the new goal is to hobble it through bureaucracy. The latest attempt at crippling the CFPB is H.R. 1266, which purports to make the agency more "accountable" by changing it from being run by a single director into a multi-member commission. But are multi-member commissions like the Federal Deposit Insurance Corp., National Credit Union Administration, and the Federal Reserve more accountable in any meaningful sense than the CFPB? The real goal of commission advocates is not to make the CFPB more accountable, but to make the agency less effective. The spurious goal of accountability is evident from the fact that the bill's sponsors have rejected suggestions to also convert the Office of the Comptroller of the Currency into a multi-member commission, even though the OCC is responsible for undertaking examinations and enforcement of CFPB regulations against national banks with less than $10 billion in assets. Apparently accountability doesn't matter for enforcement against community banks. Let's call the "accountability" meme for what it really is: an attempt to give an enormous regulatory subsidy to megabanks — those actually subject to CFPB examination and enforcement — and non-bank financial institutions. Surprisingly, some House Democrats have been supportive of the effort to undermine the CFPB, touting a new "pragmatic" argument for transforming the CFPB's structure. This argument, made with an eye toward the 2016 elections, is that with the current single director structure, a Republican CFPB director could reverse all the progress made the agency.

Big US Banks Lose Patience With the Fed  - In the years since the crisis the banks have grown used to grappling with higher costs and subdued demand for credit, while keeping plenty of cash and cash-like instruments on hand in the hope of benefiting from an uptick in short-term rates. But, after the decision from the US Federal Reserve to keep its target overnight rate on hold this month, more lenders are taking their cue from Wells Fargo, the biggest bank in the world by market capitalisation, said analysts.  Over the past year the San Francisco-based bank has run down its cash and short-term investments to buy longer-term assets, on the basis that rates will stay “lower for longer”, according to John Shrewsberry, chief financial officer. That conviction is now catching, said Jason Goldberg, an analyst at Barclays, which recently hosted representatives from about 150 banks at a conference in New York. “The consensus was: give up on the Fed,” said Mr Goldberg.  In the second quarter, noted Barclays, about half of banks under its coverage reduced their sensitivity to rate rises by converting cash to higher-yielding assets — the highest proportion for more than four years. Wells Fargo added $50bn of securities to its held-to-maturity investment portfolio over the year to June, according to public filings, with much of it going to Treasuries and bonds issued by Fannie Mae and Freddie Mac, the government-backed mortgage companies. “We’re earning today rather than maintaining all of that sensitivity for the future,” said Mr Shrewsberry, during the bank’s second-quarter results presentation. “Bankers are starting to say, we can’t run these institutions based on hope for higher rates, so let’s figure out what we can do,”

US banks build defences against downturn - Wall Street’s biggest banks are beginning to build their defences against downturns, signalling an end to the steady thinning of reserves that has helped boost profits in the past five years. Tapping into reserves set aside for bad loans has become a reliable source of income for the banks in the post-crisis environment, allowing them to offset the effects of weak demand and ultra-low interest rates. Regulators let lenders dip into reserves in this way if they can argue that an improving outlook makes losses less likely. But the practice is expected to have a limited impact on the banks’ third-quarter profits, which begin to be presented this week, because reserves have been run down about as far as they can go. While some banks with plump cushions of reserves could still make net reductions, others are at an “inflection point,” said Jennifer Thompson, an analyst at Portales Partners in New York. Lenders with big exposures to energy could see “dramatic” increases in reserves, she said, while related sectors such as materials, commodities and industrials also look vulnerable to rises. “We’ve reached a point in the cycle where credit quality can’t get much better,” said Bain Rumohr, director at Fitch Ratings in Chicago. As the boost from reserves-releases fades, analysts will get a better look at the core earnings power of big banks that have shored up their balance sheets but are still struggling to generate attractive returns to investors. Analysts expect that five of the six biggest US banks will report year-on-year falls in quarterly revenues, with only Wells Fargo producing a small gain.

JP Morgan Slimming Down Because Dodd-Frank's Capital Requirements are Working - - Mike Konczal - A remarkable thing happened: one of the largest banks slimmed down just a bit because of Dodd-Frank’s capital requirements. It’s another piece of evidence that the core parts are working, and if scaled up could make a dramatic structural change in the financial system. In July, the Federal Reserve finalized its rule on the special surcharge required of the largest banks. (Sherman and Sterling have a good rundown of the rule.) Let’s graph it out:  There’s the normal Basel III in blue. This is the regular equity plus the capital conservation buffer, which is meant to force the bank to take prompt corrective action to fix itself if its capital gets too low. The next level is the SIFI surcharge in red. This is extra equity funding required by the largest banks, because of the extra risk they pose to the economy as a whole. The surcharge will vary, because it’s calculated by a fascinating formula and process that takes into account the size of each bank as well as the riskiness of its funding. Firms get a score, and as the graphic shows, that score turns into a surcharge. Larger size and more short-term funding each means a higher score, which turns into a higher surcharge. The United States' formula is more aggressive than the European Basel version of the equation because it more aggressively targets short-term lending. But both scores are taken, and the higher one is applied. The Federal Reserve announced in July what banks had which levels, and thus what surcharge would be required. I put them in the graphic above. As you can see, JP Morgan had the highest number, and was subject to a 4.5 capital surcharge.

US Housing Rolling Over Wells Fargo Confirms, As Mortgage Applications Plunge –- Throughout the past 7 years, even as the stock market hit new all time highs, the biggest missing link of the overhyped US recovery was the failure of housing to participate. Sure, Chinese oligarchs were happy to launder their illicit funds in NYC triplexes and Wall Street Private Equity firms took advantage of zero-cost Fed money to buy distressed properties in bulk and convert them to rental units, but for the average American consumer there has simply been no recovery as the "Old Normal" housing dream is now forgotten and an entire generation is forced to rent the roof over their heads. Whether this is due to lack of demand, or far stricter mortgage supply remains a topic debate, but one thing is undisputed: after a terrible 2014, mortgage applications in early 2015 saw a modest rebound. Alas, it has since proven to be merely the latest headfake in a long series of false starts. The evidence: earlier today the largest U.S. mortgage lender Wells Fargo reported results that beat expectations by the smallest possible increment. What caught our attention, however, was the fuel that keeps Wells Fargo's engine humming: mortgage applications. Unfortunately for the housing bulls, there was no good news here because after rushing higher in early 2015 on the latest false hope of an economic recovery or due to fears rates are rising, Wells' mortgage applications and the associated pipeline have declined ever since.

Why the federal government now holds nearly 50% of all residential mortgages - Mortgage lending levels are beginning to recover from the real estate crash of the Great Recession, but a large number of potential American home buyers are still being locked out of the mortgage market.  That’s because although you may be able to get a mortgage from your bank, few outside the government want to buy it. And that makes your bank less likely to write additional loans.  When big mortgage buyers like Fannie Mae and Freddie Mac assume the risk of a loan, the bank or lender that makes the loan no longer has to carry the risk on its books, which means it can go out and make more loans. In addition, when private buyers, like investment banks and hedge funds, buy riskier loans that pay higher interest, known as private label securitization, the banks that originally sold the mortgages can continue lending to less-than-perfect borrowers.  Most Americans might not know a mortgage-backed security from a credit-default swap, but they probably know why the mortgage market helped cause the crash in the U.S. economy in 2008. Banks sold risky home loans that should never have been drawn up to Fannie Mae and Freddie Mac, the biggest backers of residential mortgages, as well as private investors like Lehman Brothers and Bear Stearns. When those mortgage loans defaulted, the collapse of Fannie, Freddie and the private investment banks soon followed.  Now, nearly 10 years after the start of the collapse, the mortgage market is on more solid footing, with foreclosures down and lending up, but the private buyers of mortgages, such as hedge funds, bond funds and investment banks, are still wary from being burned in the last crash, so they’re buying less than 10% of the mortgages they did a decade ago.

MBA: Mortgage Applications Down Sharply due to TILA-RESPA regulatory change - Last week I noted that the surge was related to applications being filed before the TILA-RESPA regulatory change, and that I expected applications to decline significant in the survey this week since demand was pulled forward. So the decline is not a surprise - just a reverse of the previous week. From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey Mortgage applications decreased 27.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 9, 2015. ..The Refinance Index decreased 23 percent from the previous week. The seasonally adjusted Purchase Index decreased 34 percent from one week earlier. The unadjusted Purchase Index decreased 34 percent compared with the previous week and was 1 percent lower than the same week one year ago.  “Application volume plummeted last week in the wake of the implementation of the new TILA-RESPA integrated disclosures, which caused lenders to significantly revamp their business processes, and as a result dramatically slowed the pace of activity. The prior week’s results evidently pulled forward much of the volume that would have more naturally taken place into this week." The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) remained unchanged at 3.99 percent, with points increasing to 0.53 from 0.46 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index. Refinance activity remains low. This week was just the reverse of last week. 2014 was the lowest year for refinance activity since year 2000, and refinance activity will probably stay low for the rest of 2015 (after the increase earlier this year). The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is 1% lower than a year ago. The surge last week was related to applications being filed before the TILA-RESPA regulatory change, and the decline this week was the inverse. The wild swings should resolve fairly quickly.

FNC: Residential Property Values increased 5.5% year-over-year in August -- FNC released their August 2015 index data today.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 0.2% from July to August (Composite 100 index, not seasonally adjusted).   The 10 city MSA increased 0.2% (NSA), the 20-MSA RPI increased 0.2%, and the 30-MSA RPI also increased 0.2% in August. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).  Notes: In addition to the composite indexes, FNC presents price indexes for 30 MSAs. FNC also provides seasonally adjusted data. The year-over-year (YoY) change was smaller in August than in July, with the 100-MSA composite up 5.5% compared to August 2014.  The index is still down 14.5% from the peak in 2006 (not inflation adjusted).This graph shows the year-over-year change based on the FNC index (four composites) through August 2015. The FNC indexes are hedonic price indexes using a blend of sold homes and real-time appraisals.  Most of the other indexes are also showing the year-over-year change in the 5% range. For example, Case-Shiller was up 4.7% in July, CoreLogic was up 6.9% in August.

Chinese all-cash buyers of U.S. homes have tripled since 2005 - Xiāoshòu. That’s how you say “For Sale” in Chinese. And if you’re selling to an all-cash buyer in a U.S. real estate deal, you may need to find a real-estate agent who speaks Mandarin. A joint analysis by Irvine, Calif.-based realty research firm RealtyTrac, and New Jersey-based multicultural marketing company Ethnic Technologies, found that 46% of Mandarin Chinese-speaking buyers who purchased U.S. homes in the 17 months ending in May 2015 paid all cash, more than triple the number paying all cash in 2005. Overall, Mandarin speakers are the second largest non-English speaking cash-paying group, totaling nearly 18% of all cash deals, second behind those buyers speaking Spanish at 43%. Among all non-English speaking groups, the share of all-cash buyers of U.S. homes increased from a 20% share in 2005 to a 33% share in the 17 months ending in May 2015.The two firms looked at 10 million publicly recorded residential property sales deeds in 2014 and 2015 compared with 2005 by ethnicity and native language spoken. The results were determined by predictive software that can determine ethnicity and language preference based on first name, last name, and address of the record, according to Lisa Radding, the director of research for Ethnic Technologies. “Cash buyers across the board are playing a much bigger role in the housing market now than they were 10 years ago, and that is particularly true for Chinese Mandarin-speaking cash buyers, who are more likely to be foreign nationals,” said Daren Blomquist, vice president at RealtyTrac. “Foreign cash buyers have helped to accelerate U.S. home price appreciation over the past few years given that these buyers are often not as constrained by income as local, traditionally financed buyers,” he said.

How Much Longer Can Our Unaffordable Housing Prices Last? (Spolier Alert: Not Much) - Eventually, prices rise to a level that is unaffordable to the majority of potential buyers, with demand coming only from the wealthy. That’s the story of housing in New York City, the San Francisco Bay Area and other desirable locales that are currently magnets for global capital. In the normal cycle of supply and demand, new more affordable housing would be built, and prices would decline. But that isn’t happening in hot real estate markets in the U.S. What’s happening is rental housing is being built to profit from rising rents and luxury housing is being built to meet the demand from wealthy overseas buyers. With limited land in desirable urban zones and high development fees, it’s not possible to build affordable housing unless the government subsidizes the costs. Meanwhile, the supply of existing homes for sale is limited by the owners’ recognition that they won’t be able to replace their own home as prices soar; it makes financial sense to stay put rather than sell and try to move up. Some homeowners are cashing in their high-priced homes and retiring to cheaper regions. But this supply is being overwhelmed by a flood of offshore cash seeking real estate in the U.S. This globalization of regional housing markets is pricing the middle class out of housing in areas that also happen to be strong job markets. Many commentators are concerned that a nation of homeowners is being transformed into a nation of renters, as housing is snapped up by hedge funds and wealthy elites fleeing China and the emerging markets. But will current conditions continue unchanged going forward? Let's start with the basics of demographic demand for housing and the price of housing.

Rich People Scared to Move into High Rent Apartments Because of Homeless Displaced by High Rents --  Although conservative media outlets conveniently discovered the city's homelessness crisis when the progressive Mayor entered office, homelessness in the city has steadily increased since the mid-2000s. Today there are close to 60,000 people sleeping in city shelters, according to the Coalition for the Homeless, and an unknown number of people sleeping on the city's streets.   And it's not a huge mystery why. Advocates for the homeless attribute the spike to two factors: Mayor Michael Bloomberg's homelessness policy, which, through an impressive feat of magic oligarch thinking, involved taking rental subsidies away from poor people. And the massively high cost of housing in the city. Rents have increased by 32 percentsince 2002 citywide -- 90 percent in some parts of town. The average rent in Brooklyn is wellover $3,000. Meanwhile, New York City's minimum wage is $8.75. Unsurprisingly, evictions are up. In what could lightly be called an ironic twist, it now looks as if wealthy residents are getting turned off from renting in parts of the city with visible homeless people -- and apartment brokers are not happy about it. DNA Info reports:  Brokers have noticed that many of their clients are increasingly reluctant to rent or buy an apartment when they spot a homeless person nearby.  A woman looking for a rental near her job in Hell's Kitchen found a studio in a walk-up that was "just right" even though her broker Talia McKinney had to politely ask the homeless person sitting on the steps to move when they entered. But on the way out, the woman was turned off when that same homeless person returned with company and a cup asking for money on the building's stoop.

Black Americans Would Have Been Better Off Renting Than Buying - “Becoming a homeowner was not a fruitful asset accumulation strategy for low- and moderate-income black families in the 2000 decade, in either the short- or medium-term,” write Sandra J. Newman and C. Scott Holupka, authors of a new study from Johns Hopkins University. To come to that conclusion they looked at data from the Panel Study of Income Dynamics (PSID), a representative survey of 5,000 American families. They find that white Americans with low net worth who bought during the boom years made out much better than black Americans who had the same timing and similar financial circumstances. Black families who bought in 2005 lost almost $20,000 of net worth by 2007, according to the paper. By 2011 those losses were more like $30,000. White homeowners didn’t have quite the same problem. Those who purchased in 2007 saw their net worth grow by $18,000 in two years, and then those gains eroded, leaving them with an increase of $13,000 by 2011. All told, the black families lost, on average, 43 percent of their wealth. That news is perhaps to be expected given the inequities that exists in the housing market, including the quality of financing people have access to and the prospects of the neighborhoods they are buying into. The researchers note that neighborhood location, predatory loan practices, and how long families were able to hold on to homes all likely played a role in how white and black families fared during the early aughts. According to the data white families who rented would have ultimately gained $6,600 between 2005 and 2011—less than they earned as homeowners, but still a nice gain. But for black families the choice to rent instead of buy could have moved them from negative to positive net worth. In two years, between 2005 and 2007, wealth would have increased to $1,300, and it would have hit $2,700 by 2011.

Construction Workers ‘Left the Business and They Didn’t Come Back’ - Home builders are facing delays and rising costs as they struggle to find enough construction workers. That’s partly a function of the housing boom and bust, which helped push industry-wide employment above 7.7 million in 2006, only to watch it come crashing down by nearly 2.3 million over the next five years. While builders are used to ups and downs, the most recent bust was extreme in magnitude and duration. “The difference this time is that a whole generation left the business and they didn’t come back,” said John Gillilan, operations manager at Bothell, Wash.-based Element Residential Inc. “So there’s a vacancy in the ranks at almost every company.” That’s bad news for builders, who can’t grow as fast as they would like amid increasing delays and rising costs—factors that could feed through to home buyers in the form of less supply and higher prices.  For experienced trade workers, that means demand for services, steady work and signs of rising compensation.But elsewhere in the labor force, the picture is mixed. The missing, for example, include industry veterans, immigrants and young would-be construction workers who came of age when the industry just wasn’t hiring. Especially for the young, it could be a lost opportunity—the construction industry offers jobs with decent pay for workers without a college degree. It also has implications for the broader economy, where labor-force participation is near a 40-year low

Update: Framing Lumber Prices down Sharply Year-over-year  - Here is another graph on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs. The price increases in early 2013 were due to a surge in demand (more housing starts) and supply constraints (framing lumber suppliers were working to bring more capacity online). Prices didn't increase as much early in 2014 (more supply, smaller "surge" in demand). In 2015, even with the pickup in U.S. housing starts, prices are down year-over-year. Note: Multifamily starts do not use as much lumber as single family starts, and there was a surge in multi-family starts. Overall the decline in prices is probably due to more supply, and less demand from China.  This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through early October 2015 (via NAHB), and 2) CME framing futures. Right now Random Lengths prices are down about 22% from a year ago, and CME futures are down around 35% year-over-year.

Most Americans have less than $1,000 in savings - Americans are living right on the edge — at least when it comes to financial planning. Approximately 62% of Americans have less than $1,000 in their savings accounts and 21% don’t even have a savings account, according to a new Survey for personal finance website “It’s worrisome that such a large percentage of Americans have so little set aside in a savings account,” says Cameron Huddleston, a personal finance analyst for the site. “They likely don’t have cash reserves to cover an emergency and will have to rely on credit, friends and family, or even their retirement accounts to cover unexpected expenses.” This is supported by a similar survey of 1,000 adults carried out earlier this year by personal finance site, which also found that 62% of Americans have no emergency savings for things such as a $1,000 emergency room visit or a $500 car repair. Faced with an emergency, they say they would raise the money by reducing spending elsewhere (26%), borrowing from family and/or friends (16%) or using credit cards (12%). And among those who had savings prior to 2008, 57% said they’d used some or all of their savings in the Great Recession, according to a U.S. Federal Reserve survey of over 4,000 adults released last year. Of course, paltry savings-account ratesdon’t encourage people to save either.

U.S. retail sales barely rise, dented by lower gasoline receipts – U.S. retail sales barely rose in September as cheaper gasoline weighed on service station receipts, but gains in purchases of automobiles and other goods pointed to solid domestic demand that could shield the economy from slowing global growth. The Commerce Department said on Wednesday retail sales edged up 0.1 percent last month after being flat in August. Economists polled by Reuters had forecast retail sales rising 0.2 percent in September after a previously reported 0.2 percent increase in August. Retail sales excluding automobiles, gasoline, building materials and food services slipped 0.1 percent after a downwardly revised 0.2 percent gain in August. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. Core retail sales previously were reported to have advanced 0.4 percent in August. Economists had forecast core retail sales rising 0.3 percent last month. The mixed report suggests underlying strength in domestic demand despite a weakening global economy and a slowdown in job growth over the past two months, which have diminished expectations of a U.S. rate hike this year.

Retail Sales increased 0.1% in September -- On a monthly basis, retail sales were up 0.1% from August to September (seasonally adjusted), and sales were up 2.4% from September 2014. From the Census Bureau report: The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for September, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $447.7 billion, an increase of 0.1 percent from the previous month, and 2.4 percent above September 2014. ... The July 2015 to August 2015 percent change was revised from +0.2 percent to virtually unchanged. This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales ex-gasoline increased 0.4%. The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.  Retail and Food service sales ex-gasoline increased by 4.8% on a YoY basis (2.4% for all retail sales including gasoline). The increase in September was at the consensus expectations of a 0.1% increase, however sales in August were revised down - gasoline sales were revised down - and retail sales for July were revised up.

Retail Sales Except for Autos Weak , Last Month Revised Lower -- Retail sales came as expected in today's release, but up only 0.1%. And last month was revised lower, from a 0.2% gain down to 0.0%. Once again autos were the strong point. Looking on the bright side, as is typically but not always the case, Bloomberg Econoday explains it like this.  Weakness at gasoline stations, where low prices are depressing sales totals, continues to exaggerate weakness in retail sales where the headline inched only 0.1 percent higher in September. Gasoline sales fell 3.2 percent in the month, excluding which the headline looks far more respectable at plus 0.4 percent. And there are plenty of tangible positives in the data including a third straight solid gain for motor vehicles, at plus 1.7 percent in September, and a second straight outsized gain of 0.9 percent for restaurants. Both of these are discretionary categories and point to underlying consumer strength. Clothing stores are also posting strong gains, up 0.9 percent despite negative price effects from lower import prices. Price weakness is not only pulling down gasoline sales but also sales at food & beverage stores which fell 0.3 percent. But there are signs of consumer retracement in the September report with the general merchandise category, which is very large, down 0.1 percent, and with health & personal care stores unchanged. Building materials fell 0.3 percent with electronics & appliance stores down 0.2 percent. Looking at adjusted year-on-year rates helps clarify the trends. Excluding gasoline stations, retail sales are up a very respectable 4.9 percent which is well above the less impressive 2.4 percent gain for total sales. Sales at gasoline stations are down a year-on-year 19.7 percent. Leading the positive side are motor vehicles, up 8.8 percent, and restaurants, up 7.9 percent -- both robust gains. Core sales, that is ex-auto ex-gas, the year-on-year rate is a moderate plus 3.8 percent for a 1 tenth decline from August.One of the very biggest positives for the consumer right now, aside from strength in labor demand, is the weakness in pump prices, which however in this report, where dollar totals are tracked and not sales volumes, turns into a negative. Still, the headline is weak and will likely lower third-quarter GDP estimates -- but for Fed policy, because the weakness is skewed due to gas prices, the results are harder to assess and may prove neutral.

Weak US Retail Sales Growth Is A Bit Weaker In September - Today’s retail sales report for September offers more evidence that consumer spending is plodding along at a sluggish pace. The appetite for consumption has clearly downshifted in recent months, but it’s not obvious that spending is falling off a cliff into a recessionary hole when we look at the annual comparison. Headline retail sales increased 0.1% in September vs. the previous month, which is in line with expectations. That’s a tepid rate and it marks the second straight month of slower growth. But reasoning from monthly comparisons is a dangerous proposition. A more reliable measure is the year-over-year trend, and by this standard growth picked up a bit. Headline retail spending advanced 2.4% in September vs. the year-earlier level—a moderate improvement over August’s 2.0% rise. Meanwhile, stripping out gasoline sales continues to paint a considerably brighter profile of the trend. Retail sales ex-gas jumped 4.9% last month vs. a year ago. That’s a decent improvement over the 4.3% year-over-year gain in sales ex-gas in August. The message is that flat to declining expenditures on gasoline sales is still weighing on the headline trend. Why? Energy prices are relatively low compared with recent history, a change that’s taking a bite out of the dollar value of sales at the pump. Spending on gasoline slumped 3.2% last month and dropped nearly 20% compared with a year ago. But retail spending otherwise is relatively steady on a year-over-year basis, albeit at a lesser pace of growth compared with last year’s strongest gains. If you’re looking for signs that consumer spending is fading fast, retail sales ex-gas isn’t helping your case.  Consumption by this yardstick continues to rise on an annual basis at a pace that’s close the highest level since February. Yes, that’s a slower rate of growth vs. last year, but for the moment it appears to be stable. That’s not great news if you’re trying to drum up a case for projecting stronger US economic growth, but it’s not a smoking gun for arguing that last month was the start of a recession.

Headline Retail Sales Marginally Grew In September 2015.: Retail sales improved marginally according to US Census headline data. Our view is that this month's data was stronger than last month, There was a decline of the rolling averages. Consider that the headline data is not inflation adjusted and prices are currently deflating making the data better than it seems. Backward data revisions were downward. Econintersect Analysis:

  • unadjusted sales rate of growth accelerated 1.1 % month-over-month, and up 2.5 % year-over-year.
  • unadjusted sales 3 month rolling year-over-year average growth decelerated 0.3 % month-over-month to 2.3 % year-over-year.
  • unadjusted sales (but inflation adjusted) up 3.6 % year-over-year
  • this is an advance report. Please see caveats below showing variations between the advance report and the "final".
  • in the seasonally adjusted data - motor vehicles, furniture, clothing, sporting goods and food services were strong, but mostly everything else was relatively weak.
  • seasonally adjusted sales up 0.1 % month-over-month, up 2.3 % year-over-year (last month was 2.2 % year-over-year).

US Retail Sales Tumble Most Since January, Signal Sustained Recessionary Environment - Retail Sales (ex Auts) dropped 0.3% in September, the 2nd drop in a row, the biggest drop since January (at the heart of the weather-driven economic weakness). For the first time since February, the 'Control Group' Retail Sales dropped (down 0.1% vs +0.3% expectations) as sales dropped in 7 of 13 categories (but notably autos rose significantly but was offset by a collapse in gas station spending). Notably 27 out of 27 'experts' agreed that the control group sales data woul dnot be negative.. wrong! Year-over-year data shows sustained stagnant growth in retail sales historically aligned with a recessionary environment.

Real retail sales show expansion past mid-cycle, but no oncoming recession -- With September inflation reported this morning, I can update one of my favorite series:  real retail sales. First of all, real retail sales rose to a new high:  The YoY% growth in real retail sales in comparison with real personal consumption expenditures are an excellent mid-cycle indicator, since reliably the former is both declining and negative the latter before recessions begin, and further the former starts to underperform the latter at about mid-cycle. Here's what they look like now: There is increasing evidence that we are past mid-cycle. Finally, let's look at real retail sales per capita. These typically peak one year or more before the onset of a recession: Although population has not been updated past July, since it has been growing at about .06% a month, and since real retail sales are up about .30% in the last two months, we have made another peak. This is evidence that the economic expansion should continue at least through the 3rd quarter of 2016.

Fed Consumer Spending Survey Plunges To Record Low -- With December rate-hike odds already plumbing record lows, today's data from The NY Fed's Consumer Expectations Survey hammers the nail home that all is not well in America. Away from inflation expectations dropping and earnings expectations tumbling, household spending growth expectations have plunged to record lows. Source: NYFed

Michigan Consumer Sentiment: Up from September Final - The University of Michigan Preliminary Consumer Sentiment for October came in at 92.1, an increase from the 87.2 Final September reading. had forecast 79.0 for the October Preliminary. Surveys of Consumers chief economist, Richard Curtin makes the following comments: The rebound in confidence signifies that consumers have concluded that the fears expressed on Wall Street did not extend to Main Street. Importantly, the renewed confidence did not simply represent a relief rally, but instead reflected renewed optimism. Personal financial expectations rose to their highest level since 2007, as did consumers' views toward purchases of durable goods. While consumers anticipate a continued economic expansion, many expected strong headwinds from falling commodity prices, weakened economies in China and elsewhere as well as continued stresses on European countries. Perhaps the most important finding is that low inflation and continued job growth have enabled consumers to adapt to a slower and more variable rate of economic growth by varying the pace of their spending without losing confidence that the expansion will continue. Overall, the data still indicate that consumption will expand at 2.9% during 2016. [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.

Walmart Stock Craters On Profit Warning - The Fatal Blindness of Greed: Walmart warned on its profit outlook for 2016 and the stock dropped about 8 percent. As the pampered princes of financial television put it: "To say that Wall Street was surprised by what Walmart had to say is an understatement.' The spin is that Walmart is 'brick and mortar' and that it is losing ground to Amazon. And amongst the worst analysis, Walmart ought not to have given its employees, who are among the lowest of the working poor, a raise in wages. Walmart merely needs to 'reinvent' itself. Maybe that is true. Or maybe it is tied into the overall retail results which we saw this morning. Walmart is at the sharp point of the failing US consumers, who are un- or under- employed with stagnant wages and shrinking benefits, pinned by rising rents and healthcare costs, possessing little discretionary income, almost no savings, and living virtually paycheck to paycheck. In the new retail models, like Walmart and Amazon, the vast bulk of the income goes directly to the top, to to a fortunate few like the Walmart family and Jeff Bezos, with a little to shareholders, and crumbs to the employees who are driven harder to be 'competitive.' There will be many more surprises for Wall Street, and for the very comfortable ruling elite.

CPI decreased 0.2% in September, Weekly Initial Unemployment Claims decreased to 255,000 - From the BLSThe Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.2 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index was essentially unchanged before seasonal adjustment.  The energy index fell 4.7 percent in September, with all major component indexes declining. The gasoline index continued to fall sharply and was again the main cause of the seasonally adjusted all items decrease. The indexes for fuel oil, electricity, and natural gas declined as well. In contrast to the energy declines, the indexes for food and for all items less food and energy both accelerated in September. The food index rose 0.4 percent, its largest increase since May 2014. The index for all items less food and energy rose 0.2 percent in September.   This was at the consensus forecast of a 0.2% decrease for CPI, and above the forecast of a 0.1% increase in core CPI. The DOL reported: In the week ending October 10, the advance figure for seasonally adjusted initial claims was 255,000, a decrease of 7,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 263,000 to 262,000. The 4-week moving average was 265,000, a decrease of 2,250 from the previous week's revised average. This is the lowest level for this average since December 15, 1973 when it was 256,750. The previous week's average was revised down by 250 from 267,500 to 267,250.  There were no special factors impacting this week's initial claims.  The previous week was revised down to 262,000.

September Consumer Price Index: Little Changed from August -  The Bureau of Labor Statistics released the September CPI data this morning. The year-over-year unadjusted Headline CPI came in at -0.04%, down from 0.20% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.89% (rounded t0 1.9%), little changed from the previous month's 1.83% (rounded to 1.8%). Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data: The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.2 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index was essentially unchanged before seasonal adjustment. The energy index fell 4.7 percent in September, with all major component indexes declining. The gasoline index continued to fall sharply and was again the main cause of the seasonally adjusted all items decrease. The indexes for fuel oil, electricity, and natural gas declined as well. In contrast to the energy declines, the indexes for food and for all items less food and energy both accelerated in September. The food index rose 0.4 percent, its largest increase since May 2014. The index for all items less food and energy rose 0.2 percent in September. The indexes for shelter, medical care, household furnishings and operations, and personal care all increased; the indexes for apparel, used cars and trucks, new vehicles, and airline fares were among those that declined. The all items index was essentially unchanged for the 12 months ending September after posting a 0.2 percent increase for the 12 months ending August. The 18.4 percent decline in the energy index over the past year offset increases in the indexes for food (up 1.6 percent) and all items less food and energy (up 1.9 percent).[More…] The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumptions Expenditures (PCE) price index.

September 2015 CPI Inflation -- Here are updates on Core CPI inflation and Shelter CPI inflation.  Trends continue.  Shelter inflation continues to increase above 3% YOY and Core minus Shelter inflation continues to move along at about 1% YOY.  Some of the drop in energy prices might have filtered into core inflation, but we can see here that Core minus Shelter inflation was only at 1.35% when oil began to drop, and Core minus Shelter inflation hadn't been above that level since early 2013.

September 2015 CPI Annual Inflation Rate Is Now ZERO.: According to the BLS, the Consumer Price Index (CPI-U) year-over-year inflation rate was ZERO - no inflation. The year-over-year core inflation (excludes energy and food) rate remained grew 0.1 % to 1.9 %, and continues to be slightly under the targets set by the Federal Reserve.As a generalization - inflation accelerates as the economy heats up, while inflation rate falling could be an indicator that the economy is cooling. However, inflation does not correlate well to the economy - and cannot be used as a economic indicator. Energy (de)inflation was the major influences on this month's CPI.  The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.2 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index was essentially unchanged before seasonal adjustment. The energy index fell 4.7 percent in September, with all major component indexes declining. The gasoline index continued to fall sharply and was again the main cause of the seasonally adjusted all items decrease. The indexes for fuel oil, electricity, and natural gas declined as well. In contrast to the energy declines, the indexes for food and for all items less food and energy both accelerated in September. The food index rose 0.4 percent, its largest increase since May 2014. The index for all items less food and energy rose 0.2 percent in September. The indexes for shelter, medical care, household furnishings and operations, and personal care all increased; the indexes for apparel, used cars and trucks, new vehicles, and airline fares were among those that declined. The all items index was essentially unchanged for the 12 months ending September after posting a 0.2 percent increase for the 12 months ending August. The 18.4 percent decline in the energy index over the past year offset increases in the indexes for food (up 1.6 percent) and all items less food and energy (up 1.9 percent).

Rents Are Soaring BLS Admits, As Core CPI Comes In Hottest In Over A Year -- While the September Consumer Price Inflation report was in line with expectations, with the headline CPI declining -0.2% in the month - the biggest monthly drop since January - and unchanged from a year ago, just as consensus predicted, it was all about the core CPI where attention was focused. On the headline print, the drop was once again due to tumbling energy prices, which declined 4.7% in September, and especially gasoline which tumbled -9.0% according to the BLS: "The  gasoline index continued to fall sharply and was again the main cause of the seasonally adjusted all items decrease. The indexes for fuel oil, electricity, and natural gas declined as well." Other contributors included Energy Services, which dipped -0.4% led by a -0.5% drop in Electricity costs and a -0.3% decline in Utility gas service. All of this was expected.Where the market was surprised, however, was in the Core CPI print (excluding food and energy), which rose 0.2% for the month, above the 0.1% expected, and is now up 1.9% Y/Y, the highest  rate of annual increase in over a year.

Business Inventories October 14, 2015: There's evidence of economic weakness coming from inventory data where inventories are being kept down but are still building relative to sales. Business inventories were unchanged for a second month in August while sales fell a sizable 0.6 percent, driving up the inventory-to-sales ratio to 1.37 from 1.36. Inventory downscaling is underway in manufacturing which is being hurt by weak exports. Manufacturing inventories fell 0.3 percent in both August and July against a major sales decline of 0.7 percent in August and a 0.2 percent dip in July. There's less inventory downscaling, at least right now, among wholesalers where inventories rose 0.1 percent but sales at wholesalers are even weaker, down 1.0 percent in the month. Retail, the third component, is not immune with sales down 0.1 percent but inventories up 0.3 percent. Inventories are looking heavy which could limit production and employment growth and could emerge as a new concern for the doves at the Fed.

August 2015 Business Sales Decline, Headline Inventories Unchanged.: Econintersect's analysis of final business sales data (retail plus wholesale plus manufacturing) shows unadjusted sales declined compared to the previous month - but there was an improvement of the rolling averages. With inflation adjustments, business sales are in contraction. The inventory-to-sales ratios remain at recessionary levels. Econintersect Analysis:

  • unadjusted sales rate of growth decelerated 0.7 % month-over-month, and down 3.4 % year-over-year
  • unadjusted sales (but inflation adjusted) down 2.3 % year-over-year
  • unadjusted sales three month rolling average compared to the rolling average 1 year ago accelerated 0.4 % month-over-month, and is down 2.1 % year-over-year.
  • unadjusted business inventories growth decelerated 0.2 % month-over-month (up 2.3 % year-over-year with the three month rolling averages unchanged), and the inventory-to-sales ratio is 1.4 which is at recessionary levels (well above average for this month). However, these ratios may be distorting the real picture as inventory values may not be properly revalued for inflation (first in, first out).

August Business Sales Fall Sizable 0.6%; Weak Business Inventories with Last Month Revised Lower - As a followup to today's weak retail sales report (see Autos and Restaurants Positive in Overall Weak Retail Sales Report; Last Month's Sales Revised Lower), today's business inventory and sales report is downright anemic, also with negative revisions.  Bloomberg Econoday offers these comments on business inventories.  There's evidence of economic weakness coming from inventory data where inventories are being kept down but are still building relative to sales. Business inventories were unchanged for a second month in August while sales fell a sizable 0.6 percent, driving up the inventory-to-sales ratio to 1.37 from 1.36. Inventory downscaling is underway in manufacturing which is being hurt by weak exports. Manufacturing inventories fell 0.3 percent in both August and July against a major sales decline of 0.7 percent in August and a 0.2 percent dip in July. There's less inventory downscaling, at least right now, among wholesalers where inventories rose 0.1 percent but sales at wholesalers are even weaker, down 1.0 percent in the month. Retail, the third component, is not immune with sales down 0.1 percent but inventories up 0.3 percent.  Inventories are looking heavy which could limit production and employment growth and could emerge as a new concern for the doves at the Fed.

Recession Looms - Business Inventories-to-Sales Surge To Cycle Highs -- Business Inventories were unchanged in August (less than the expected 0.1% rise) with manufacturers down 0.3% - bad for Q3 GDP but Business Sales tumbled 0.6% MoM (the biggest drop since January), down across the board. So clearly no inventory liquidation has started yet (so the pain is yet to come) and this has driven the inventory-to-sales ratio up to 1.37x - the highest in this cycle. The last 2 times the ratio was at this level, the US was in recession. This trend is not your friend...

September 2015 Producer Prices Year-over-Year Deflation Accelerates: The Producer Price Index year-over-year deflation accelerated. The intermediate processing continues to show a large deflation in the supply chain. The PPI represents inflation pressure (or lack thereof) that migrates into consumer price. The BLS reported that the headline Producer Price Index (PPI) finished goods prices (now called final demand prices) year-over-year inflation rate dropped to -1.1 %.  Econintersect has shown how pricing change moves from the PPI to the Consumer Price Index (CPI). This YoY change implies that the CPI, should continue to come in well below 1.0% YoY.

Producer Price Index: Ninth Consecutive Month of YoY Decline -- Today's release of the September Producer Price Index (PPI) for Final Demand came in at -0.5% month-over-month seasonally adjusted, down from 0.0% in August. It is down -1.1% year-over-year, the ninth consecutive month of YoY shrinkage. Core Final Demand (less food and energy) came in at -0.3% MoM, down from 0.3% the previous month and is up 0.8% YoY. The forecasts were for -0.2% headline and 0.1% core.  Here is the summary of the news release on Finished Goods: The Producer Price Index for final demand declined 0.5 percent in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices were unchanged in August and rose 0.2 percent in July. On an unadjusted basis, the final demand index fell 1.1 percent for the 12 months ended in September, the eighth straight 12-month decline.... In September, two-thirds of the decrease in the final demand index is attributable to prices for final demand goods, which fell 1.2 percent. The index for final demand services moved down 0.4 percentMore…  The Headline Finished Goods for September came in at -1.3% MoM and is down -4.1% YoY. Core Finished Goods were up 0.2% MoM and up 2.1% YoY. Now let's visualize the numbers with an overlay of the Headline and Core (ex food and energy) PPI for finished goods since 2000, seasonally adjusted. The plunge since mid-2014 in headline PPI is, of course, energy related -- now off its interim low set in April. Core PPI has remained relatively stable since early 2014.

US Freight Shipments Morose, Worst September since 2010 -- Shipping is a measure of the real economy. And it isn’t doing very well, apparently.September is in the early phase of the make-or-break holiday shipping season. Shipments usually increase from August to September. They did this year too. The number of shipments in September inched up 1.7% from August, according to the Cass Freight Index. But the index was down 1.5% from an already lousy September last year, when shipments had fallen from the prior month, instead of rising. And so, in terms of the number of shipments, it was the worst September since 2010. It has been crummy all year: With the exception of January and February, the shipping volume has been lower year-over-year every month! The index is broad. It tracks data from shippers, no matter what carrier they choose, whether truck, rail, or air, and includes carriers like FedEx and UPS. Evidence keeps piling up in the most unpleasant manner that something isn’t quite right in the real economy. The world is now in an inexplicable slowdown – “inexplicable” for central bankers who’ve cut interest rates to zero or below zero years ago, and who’re still dousing some economies with QE even as governments are running up big deficits. And yet, despite seven years of this huge monetary and fiscal stimulus, the global economy is deteriorating. For a historical perspective of just how crummy things have become, and how we’re made to think that they’re actually pretty good, after all the Fed’s gyrations: the number of shipments in September was down 13% from the levels in September 2004 and 2006.

LA area Port Traffic declined in September -- Note: There were some large swings in LA area port traffic earlier this year due to labor issues that were settled in late February. Port traffic surged in March as the waiting ships were unloaded (the trade deficit increased in March too), and port traffic declined in April. Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic. The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).  To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.   On a rolling 12 month basis, inbound traffic was down 0.6% compared to the rolling 12 months ending in August. Outbound traffic was down 0.6% compared to 12 months ending in August. The recent downturn in exports might be due to the strong dollar and weakness in China. For imports, August was the all time inbound record, so some of September probably arrived in August (might be related to timing of Labor Day). The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

At U.S. Ports, Exports Are Coming Up Empty - WSJ: One of the fastest-growing U.S. exports right now is air. Shipments of empty containers out of the U.S. are surging this year, highlighting the impact the economic slowdown in China is having on U.S. exporters. The U.S. imports more from China than it sends back, but certain American industries—including those that supply scrap metal and wastepaper—feed China’s industrial production. Those exporters have suffered this year as China’s economy has cooled. In September, the Port of Long Beach, Calif., part of the country’s busiest ocean-shipping gateway, handled 197,076 outbound empty boxes. They accounted for nearly a third of all containers that moved through the port last month. September was the eighth straight month in which empty containers leaving Long Beach outnumbered those loaded with exports. The empties are shipping out at a faster rate at many U.S. ports, particularly those closely tied to trade with China, while shipments of containers loaded with goods are declining as exporters find it tougher to make foreign sales. That’s at least partly because the strong dollar makes American goods more expensive. Normally, after containers filled with consumer goods are delivered to the U.S. and unloaded, they return to export hubs. There, they typically are stuffed with American agricultural products, certain high-end consumer goods and large volumes of the heavy, bulk refuse that is recycled through China’s factories into products or packaging. Last month, however, Long Beach and the Port of Oakland both reported double-digit gains in exports of empty containers. So far this year, empties at the two ports are up more than 20% from a year earlier.

September 2015 Sea Container Counts Show Trade Recession Continues: This continues to indicate weak economic conditions domestically and globally. Consider that imports final sales are added to GDP usually several months after import - while the import cost itself is subtracted from GDP in the month of import. Export final sales occur around the date of export. Container counts do not include bulk commodities such as oil or autos which are not shipped in containers.  As the data is very noisy - the best way to look at this data is the 3 month rolling averages. There is a direct linkage between imports and USA economic activity - and the change in growth in imports foretells real change in economic growth. Export growth is an indicator of competitiveness and global economic growth. The continued underperforming of exports is not a positive sign for GDP as the year progresses.   There is reasonable correlation between the container counts and the US Census trade data also being analyzed by Econintersect. But trade data lags several months after the more timely container counts. Econintersect considers import and exports significant elements in determining economic health (please see caveats below). The takeaway from the graphs below is that neither imports or exports have returned to pre-2007 recession levels.

Another argument for infrastructure repair - Larry Summers - There are many compelling arguments for increasing American infrastructure investment. Capital costs are exceptionally low. Construction labour is widely available. Materials costs are low as commodity prices have fallen. Investment is low by historic standards. Investing today relieves the burden for deferred maintenance for future generations. Here is another one. Maintaining our infrastructure directly benefits American families and businesses because with fewer potholes they have to spend less maintaining their vehicles. This effect turns out to be surprisingly large. Trip, a transportation research group, estimates that the cost to motorists of driving on roads in need of repair in 2013 was $109bn [1]. This includes only extra vehicle repair and operating costs, and not the delays caused by driving on poor roads, so is almost certainly an underestimate. On the other hand, even with proper polices some potholes would remain. To be very conservative assume that proper infrastructure investment policies would save motorists half the total, or $54bn a year. How large is this figure? It is comparable to total consumer spending of $49bn on air transportation or $53bn on personal computers [2]. As another way of seeing its magnitude, it works out to 40 cents per gallon gasoline consumed in the US [3]. So if we were able to raise the gas tax by 40 cents and repair our highways and roads, we would create no new net burden on consumers: the benefit in reduced vehicle operating costs would at the very least offset their higher gas bills. In fact since our cost estimate is conservative, the net effect on consumers would most likely be positive. And as is fair, those who drive the most would both pay the most and benefit the most from reduced repair costs.

Fed: Industrial Production decreased 0.2% in September -- From the Fed: Industrial production and Capacity Utilization Industrial production decreased 0.2 percent in September after edging down 0.1 percent in August. The decline in August is smaller than previously reported. In September, manufacturing output moved down 0.1 percent for a second consecutive monthly decrease; the index for mining fell 2.0 percent, while the index for utilities rose 1.3 percent. For the third quarter as a whole, total industrial production rose at an annual rate of 1.8 percent, and manufacturing output increased 2.5 percent. A strong gain for motor vehicles and parts contributed substantially to the quarterly increases. At 107.1 percent of its 2012 average, total industrial production in September was 0.4 percent above its year-earlier level. Capacity utilization for the industrial sector fell 0.3 percentage point in September to 77.5 percent, a rate that is 2.6 percentage points below its long-run (1972–2014) average.  This graph shows Capacity Utilization. This series is up 10.6 percentage points from the record low set in June 2009 (the series starts in 1967). Capacity utilization at 77.5% is 2.6% below the average from 1972 to 2012 and below the pre-recession level of 80.8% in December 2007. Note The second graph shows industrial production since 1967. Industrial production decreased 0.2% in September to 107.1. This is 22.8% above the recession low, and 1.8% above the pre-recession peak. This was above expectations of a 0.3% decrease and August was revised up. A decent report given the weakness in oil and the strong dollar.

US Industrial Production Continues To Decelerate In September -- Industrial output fell again last month, slumping 0.2%, the Federal Reserve reports.Output has retreated in seven of the past eight months, marking the longest run of red ink since 2008 for the monthly comparisons of the nation’s industrial activity. The numbers don’t look much better for the year-over-year trend. Production is still rising in annual terms, but at the weakest rate since Dec. 2009, when output declined relative to the year-earlier level. Today’s release reaffirms that the strong dollar, falling energy prices and softer economic activity in emerging markets continues to take a toll on the US industrial sector. “Manufacturing continues to be kind of soft,” Joshua Shapiro, chief US economist at Maria Fiorini Ramirez Inc., tells Bloomberg. “It’s a combination of weak foreign demand and inventories getting rebalanced. I’d expect another few months of flat-to-down manufacturing output.”  Yesterday’s updates of two regional manufacturing indexes via the Philly and New York Fed banks certainly point to ongoing weakness through October. Meanwhile, headline retail sales growth was soft last month, although falling energy prices may be exaggerating the weakness, as I discussed on Wednesday. Nonetheless, today’s data on industrial production is a reminder that the US macro trend is wobbly.  The Atlanta Fed’s GDPNow model (as of Oct. 14) anticipates GDP growth in the third quarter at a tepid 0.9% rate (seasonally adjusted annual terms) for the “advance” estimate that’s due later this month. That’s sharply below the 3.9% rise posted for Q2.

Industrial Production Declines Again, Down Eighth Time in Nine Months -- Industrial production declined for the eighth time in nine month, pretty much in line with Econoday Consensus estimates.  Industrial production continues to sink, down 0.2 percent in September which is slightly better than the Econoday consensus for minus 0.3 percent. The manufacturing component continues to sink, down 0.1 percent for a second straight decline and the fourth decline in five months. Industrial production was revised sharply upward for August, from an initial decline of minus 0.4 percent to only minus 0.1 percent. But the improvement is due to sharp upward revisions to the utility and mining components, less so for manufacturing where the revised decrease now stands at minus 0.4 percent for only a 1 tenth improvement from the initial reading. Motor vehicle production, which swung up and down through the summer, settled in with a 0.2 percent gain for September. Looking at the long-term trend, vehicle production is at the top of the report with a year-on-year gain of 9.4 percent in strength underscoring that demand right now is domestically based. Business equipment production, which is closely tied to exports, slipped 1 tenth in September for a year-on-year increase of only 1.8 percent. Consumer goods, which are centered for the domestic market, gained 0.2 percent for a year-on-year rate of plus 2.6 percent. Overall capacity utilization slipped 3 tenths to 77.5 percent with manufacturing utilization down 2 tenths to 75.9 percent. Note that excess capacity in the manufacturing sector is a factor that is holding down the costs of goods. Turning quickly to the other components, utility production, driven by September's unseasonable cooling needs, jumped 1.3 percent and also now 1.3 percent in August as well, up from an initial reading of plus 0.6 percent. Mining production, which has been pulled lower by commodity prices, fell 2.0 percent in the month with year-on-year contraction standing at minus 5.7 percent. Mining production in August is now revised to unchanged from an initial decline of minus 0.6 percent.

Industrial Production For Oil And Gas Well Drilling Drops To Lowest This Century -- Industrial Production growth in The US has now slowed for 10 straight months, rising just 0.4% YoY in September - the weakest growth since Dec 2009 - signaling the path to recession is clear. Manufacturing production YoY slowed to just 1.4% - the slowest since Feb 2014. For the 8th month of the last 9 IP fell MoM with a 0.2% drop in September as a modest revsion higher in autos was offset by a plunge in Oil and Gas Drilling to the lowest this century (down 4% after rising 1.7% last month).As it appears Auto Assemblies are starting to roll over (which makes sense in light of the record high inventories)... But the biggest driver was a collapse in Oil & Gas Drilling... Charts: Bloomberg

The Big Four Economic Indicators: September Industrial Production Contracts Again -  According to the Federal Reserve: Industrial production decreased 0.2 percent in September after edging down 0.1 percent in August. The decline in August is smaller than previously reported. In September, manufacturing output moved down 0.1 percent for a second consecutive monthly decrease; the index for mining fell 2.0 percent, while the index for utilities rose 1.3 percent. For the third quarter as a whole, total industrial production rose at an annual rate of 1.8 percent, and manufacturing output increased 2.5 percent. A strong gain for motor vehicles and parts contributed substantially to the quarterly increases. At 107.1 percent of its 2012 average, total industrial production in September was 0.4 percent above its year-earlier level. Capacity utilization for the industrial sector fell 0.3 percentage point in September to 77.5 percent, a rate that is 2.6 percentage points below its long-run (1972–2014) average. The full report is available here. Today's report on Industrial Production for September shows a month-over-month decline of -0.2 percent (-0.19 percent to two decimal places), which matches the consensus of a 0.2 percent decrease. This indicator has posted a monthly decline for eight of the last nine months and is up only 0.39% year-over-year. In fact, the year-over-year level is lower than at the start of nine of the ten recessions since 1950.The chart below is another way to look at Industrial Production over the long haul. It uses the Producer Price Index for All Commodities as the deflator and Census Bureau's mid-month population estimates to adjust for population growth. We've indexed the adjusted series so that 2012=100.

Empire State Manufacturing Declined for Third Consecutive Month - This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at -11.4 (-11.36 to two decimals) shows a small increase from last month's -14.7, which signals a decline in activity. These are some of the lowest levels since 2009. The forecast was for a reading of -8.0. The Empire State Manufacturing Index rates the relative level of general business conditions in New York state. A level above 0.0 indicates improving conditions, below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state. Here is the opening paragraph from the report. The October 2015 Empire State Manufacturing Survey indicates that business activity declined for a third consecutive month for New York manufacturers. The headline general business conditions index edged up three points, but remained negative at -11.4. The survey indicated that new orders, shipments, and unfilled orders all declined at a steeper pace than last month. Price indexes suggested that input prices held steady, while selling prices declined at the fastest pace since 2009. Labor market indicators pointed to a continued decline in employment levels and hours worked. Indexes for the sixmonth outlook were little changed from last month, and suggested that optimism about future conditions remained tepid. Here is a chart of the current conditions and its 3-month moving average, which helps clarify the trend for this extremely volatile indicator:

October 2015 Empire State Manufacturing Index Continues Deeply in Contraction -- The Empire State Manufacturing Survey improved but remains in contraction.

  • Expectations were for a reading between -10.0 to -5.0 (consensus -0.7) versus the -11.4 reported. Any value above zero shows expansion for the New York area manufacturers.
  • New orders and unfilled orders sub-index of the Empire State Manufacturing Survey are in contraction and worsened this month.
  • This noisy index has moved from +6.2 (October 2014), +10.2 (November), -3.6 (December), +10.0 (January 2015), +7.8 (February), +6.9 (March), -1.2 (April), +3.1 (May), -2.1 (June), 3.9 (July), -14.9 (August), -14.7 (September) - and now -11.4.

As this index is very noisy, it is hard to understand what these massive moves up or down mean - however this regional manufacturing survey is normally one of the more pessimistic. Econintersect reminds you that this is a survey (a quantification of opinion). Please see caveats at the end of this post. However, sometimes it is better not to look to deeply into the details of a noisy survey as just the overview is all you need to know. From the report:The October 2015 Empire State Manufacturing Survey indicates that business activity declined for a third consecutive month for New York manufacturers. The headline general business conditions index edged up three points, but remained negative at -11.4. The survey indicated that new orders, shipments, and unfilled orders all declined at a steeper pace than last month. Price indexes suggested that input prices held steady, while selling prices declined at the fastest pace since 2009. Labor market indicators pointed to a continued decline in employment levels and hours worked. Indexes for the six-month outlook were little changed from last month, and suggested that optimism about future conditions remained tepid.

Minus Signs Sweep Empire State Manufacturing Region, Index Contracts Third Month  --A pair of Fed regional manufacturing reports came out this morning. Both show contraction. The Empire State Index came in at -11.36, worse than any economist's estimate. The Econoday Consensus Estimate was -7 and the range was -5 to -10.  Minus signs sweep the Empire State report with the headline at minus 11.36 which is more than 1 point below Econoday's low end estimate. Looking at individual readings, new orders are in very deep trouble at minus 18.92 for a fifth straight month of contraction. And manufacturers in the region are not going to be able to turn to unfilled orders to keep busy with this reading extending a long string of contraction at minus 15.09 in September.Lack of orders is showing up in shipments, which are at minus 13.61 for a third straight contraction, and in employment which is in a second month of contraction at minus 8.49. The workweek is down and delivery times are shortening, both consistent with weakening conditions. Price data show a second month of contraction for finished goods, which is another negative signal, and a narrowing and only marginal rise for prices of raw materials. Diving into Empire State Manufacturing Report details we see "new orders, shipments, and unfilled orders all declined at a steeper pace than last month. Price indexes suggested that input prices held steady, while selling prices declined at the fastest pace since 2009. Labor market indicators pointed to a continued decline in employment levels and hours worked."

Empire Fed Misses Again As New Orders Collapse To 5 Year Lows -- After collapsing in August and unable to get up in September, October's Empire Fed bounced very modestly from -14.67 to -11.36 (but missed expectations for the 7th month of the last 8). This is the first time since 2009 that Empire Fed has printed below -10 3 months in a row putting The US firmly in recession territory, the underlying components were ugly with New orders crashing at the fastest pace since Nov 2010. Employees tumbled (as did inventories, although the plunge slowed) with prices received plumbing new cycle lows. In other words, total disaster... time to hike rates. The headline print is firmly in recession territory...

Philly Fed Business Outlook: General Activity Index Weak in October -- The Philly Fed's Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. While it focuses exclusively on business in this district, this regional survey gives a generally reliable clue as to direction of the broader Chicago Fed's National Activity Index. The latest gauge of General Activity came in at -4.5, up slightly from last month's -6.0. The 3-month moving average came in at -0.7, down from 2.7 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook was down at 36.7, versus the previous month's 44. Today's -4.5 came in below the 1.0 forecast at Here is the introduction from the Business Outlook Survey released today:  The indicator for general activity remained negative, while the new orders and shipments indexes turned negative this month. Labor market indicators also weakened. The survey’s indicators for prices of inputs and for firms’ own products suggest near-steady prices this month. Although the survey’s future indicators decreased this month, a minority of firms expect a continued downturn in business activity over the next six months. (Full Report) The first chart below gives us a look at this diffusion index since 2000, which shows us how it has behaved in proximity to the two 21st century recessions. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average, which is more useful as an indicator of coincident economic activity. We can see periods of contraction in 2011 and 2012 and a shallower contraction in 2013. The indicator is now above its post-contraction peak in September of last year.

Mid-Atlantic Manufacturing Contraction Sets In; Philadelphia Region Contracts Second Month As with the Empire State manufacturing region earlier this morning, economists got the negative sign correct, but missed on the magnitude. The Bloomberg Econoday Consensus estimate was -1.0 in a range of -4.0 to +3.0, but the headline number came in at -4.5 slightly below any economist's prediction.  Contraction is seeping into the Mid-Atlantic manufacturing sector. The Philly Fed's index for October, at minus 4.5, came in just below Econoday's low-end estimate. This is the second drop in a row but, more importantly, contraction is now appearing in many of the report's specific indexes including new orders which, at minus 10.6, fell 20.0 points from September. Unfilled orders, at minus 11.7, are extending their long contraction while shipments, at minus 6.1, are down 19.9 points from September. Employment, at minus 1.7, is now in contraction and down 11.9 points in the month. This report confirms the Empire State report released earlier this morning and points to accelerating declines for manufacturing, a sector that appears to be getting hit harder and harder by weak foreign markets.  Diving into the Philadelphia Fed Report we see ...The indexes for current new orders and shipments showed notable deterioration this month, with both indexes falling below zero, marking the first negative reading for the new orders index since May 2013. Indicators for delivery times and unfilled orders were also negative. Thirty percent of the firms reported a decline in inventories this month, and the current inventories index declined 15 points.

Philly Fed Misses Again As New Orders, Jobs, Workweek, & Inventories Crash - Philly Fed general business activity somehow managed to rise very modestly in October from -6.0 to -4.5 but missed expectations. This the second monthly decline in a row - not seen since 2013. We say "somehow" as the underlying components were a total and utter disaster. New Orders collapsed from +9.4 to -10.6, Unfilled orders crashed to -11.7, Employment plunged from 10.2 to -1.7, and workweek evaporated from +7.0 to -7.3. Even "hope" collapsed with future expectations dropping from 44.0 to 36.7 with CapEx expectations cliff diving. Headline remains weak... But the underlying components are a disaster!!!

Philly and NY Fed Manufacturing Surveys showed contraction in October --From the Philly Fed: October Manufacturing Survey  Manufacturing conditions in the region continued to weaken in October, according to firms responding to this month’s Manufacturing Business Outlook Survey. The indicator for general activity remained negative, while the new orders and shipments indexes turned negative this month. Labor market indicators also weakened.  The diffusion index for current activity remained negative for the second consecutive month, although it edged slightly higher from -6.0 in September to -4.5...The survey’s indicators for labor market conditions suggest slightly weaker employment. The percentage of firms reporting declines in employment (15 percent) was slightly greater than the percentage reporting increases (13 percent). The employment index declined nearly 12 points, from 10.2 to -1.7.  This was below the consensus forecast of a reading of -1.0 for October.  From the NY Fed: October 2015 Empire State Manufacturing Survey Business activity declined for a third consecutive month for New York manufacturers, according to the October 2015 survey. The general business conditions index edged up three points to -11.4, marking three straight months of readings below -10, the first such occurrence since 2009.  The index for number of employees fell for a fourth consecutive month, slipping two points to -8.5 in a sign that employment levels were lower. The average workweek index remained negative at -7.6, pointing to shorter workweeks. Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The yellow line is an average of the NY Fed (Empire State) and Philly Fed surveys through October. The ISM and total Fed surveys are through September.

Just Released: Regional Service Sector Resilient even as Manufacturing Slumps --  The October 2015 Business Leaders Survey of regional service firms, released today, paints a considerably more benign picture of local business conditions than the more troubling October 2015 Empire State Manufacturing Survey, released yesterday. The two surveys point to diverging trends in the regional economy: manufacturing firms report that business activity has weakened, on balance, for the third month in a row, while regional service firms, though far from euphoric, remain slightly positive, on balance, about business trends. One of the reasons for this divergence seems to be the strong dollar, which has had negative effects on far more manufacturers than service firms, according to our surveys.  The Empire State Manufacturing Survey has been giving signals of weakness for the past several months. The headline index hovered around zero—the breakeven level at which the same number of firms characterize activity as increasing as declining—from April through July, and then tumbled to below -10 from August through October. The last time the survey’s headline index remained this negative for this long was during the deepest part of the Great Recession, from the fall of 2008 to the spring of 2009. This would be a worrisome sign indeed if it were matched by comparable negativity in the service sector—as was the case in 2008 and 2009. However, over the last three months, the headline index from the service sector survey has remained at least slightly above zero, marking the most sustained divergence between the two surveys in this direction since they have both been in the field (beginning in 2005).

NFIB: Small Business Index Up 0.2 in September -  The latest issue of the NFIB Small Business Economic Trends is out today. The update for September came in at 96.1, only a 0.2 point increase from the previous month. The index remains at the 29th percentile in this series. Nevertheless, today's number came in above the forecast for a 0.3 point decline to 95.6. Here is the opening summary of the news release. "Small business optimism continues to be stagnant, which is consistent with the expected economic growth of about 2.5 percent. The percent of owners citing the difficulty of finding qualified workers as their Most Important Business Problem increased and is now third on the list behind taxes and regulations. This is the highest reading since 2007 and suggests that employers will continue to face wage pressure in order to attract and keep good employees." The first chart below highlights the 1986 baseline level of 100 and includes some labels to help us visualize that dramatic change in small-business sentiment that accompanied the Great Financial Crisis.

NFIB: Small Business Optimism Index increased in September, Solid Improvement in Hiring  --n From the National Federation of Independent Business (NFIB): NFIB Small Business Optimism Index increased only 0.2 points last month The Index of Small Business Optimism was basically unchanged in September, rising only 0.2 points, this after an August gain of only 0.5 points. ... Overall, a solid improvement in hiring activity. There was no evidence in the NFIB data that job creation slacked off sharply from June and July, each with 245,000 jobs. Reported job creation returned to its best level of the year, with owners adding a net 0.18 workers per firm in recent months, up 0.05 from August.This graph shows the small business optimism index since 1986. The index increased to 96.1 in September from 95.9 in August.

Initial Jobless Claims Plunge To 42 Year Lows, Despite Surging Job Cuts -- The yawning gap between job cuts (surging most since 2009) and initial jobless claims (hovering near 42 year lows) continues to grow as initial jobless claims collapse 7k this week to 255k - the lowest since 1973. Bear in mind, Goldman's explanation that jobless claims are useless in this part of the business cycle..."this does not signal a booming labor market." Charts: Bloomberg But as Goldman Sachs confirms... "this does not represent a booming labor market" Although payroll employment growth has slowed in recent months, initial claims for unemployment insurance benefits remain very low. The four-week moving average of initial claims has trended lower again this year—despite meaningful layoffs in energy-producing states—and is currently at the lowest level since early 2000 (Exhibit 1). Does this mean that the current rate of nonfarm payroll growth understates the strength of the labor market?  Not necessarily. As we have noted in prior research, the structural relationship between jobless claims and employment growth changes over the business cycle. Unemployment insurance claims are an observable proxy for one type of labor market flow: the number of persons laid-off each month. However, employment growth is a function of other flows as well—specifically, the number of persons hired, the number who quit voluntarily, and those who separate from employment for other reasons. These other types of labor market flows—other components of Fed Chair Yellen’s labor market “dashboard”—can affect the relationship between layoffs and employment growth over time.

A Tight Labor Market  -- Kevin Drum notes that the 4 week average ratio of new unemployment insurance claims to employment is the lowest ever recorded.  He wonders if it has anything to do with tighter standards for receiving unemployment insurance. I think it is just that the labor market is authentically tight. The Job vacancy rate is roughly tied for the highest on record (within 0.2%). The record only goes back to December 2000 but that was during the late 90s boom before the 2001 mini-recession. Other indicators aren’t so strong — there are still a lot of long term unemployed and involuntary part time workers and hiring is not back up to the all time peak. Still I think the explanation is mainly just that the labor market is tight.

How $1.3 Trillion In Student Debt Broke The "Birth/Death Adjustment" Model --One of the main reasons why the BLS has been massively overestimating job creation ever since great financial crisis, is due to the well-known birth-death adjustment, aka the CES Net Birth/Death Model, which quantitatively is shown on the chart below, has resulted in the "addition" of some 5.3 million jobs, that don't actually exist, but are merely modeled by the BLS which continues to assume the same new business creation/destruction dynamics that existed before the crisis.  The is a big problem with this core assumption, which has follow through effects not only for domestic fiscal policy, but also monetary policy (and explains why despite a 5.1% unemployment, there is zero wage growth, thus keeping the Fed pushing the ZIRP accelerator pedal years later), for the simple reason that as of this moment it is dead wrong. Here is what Gallup CEO, Jim Clifton, wrote several months ago looking at the trends in new business creation and destruction in the US. We are behind in starting new firms per capita, and this is our single most serious economic problem. Yet it seems like a secret. You never see it mentioned in the media, nor hear from a politician that, for the first time in 35 years, American business deaths now outnumber business births.  The U.S. Census Bureau reports that the total number of new business startups and business closures per year -- the birth and death rates of American companies -- have crossed for the first time since the measurement began. I am referring to employer businesses, those with one or more employees, the real engines of economic growth. Four hundred thousand new businesses are being born annually nationwide, while 470,000 per year are dying.As Clifton adds "you may not have seen this graph before" and for good reason: it destroys the most sacred assumptions held by the BLS' cubicled actuaries and various tenured economists locked up in their ivory towers: namely that the number of US business startups outnumbers the number of failures. This is no longer true!

Goldman: Expects Participation Rate to decline 0.25% per year, Unemployment Rate to below 4.5%  --A few excerpts from a research piece by Goldman Sachs economist David Mericle: What We Have Here Is a Failure to Participate [W] now expect the participation rate to fall by about 0.2-0.25pp per year. The main reasons for the forecast change are that we have flattened the slope of the upward trend in participation rates for older workers and will see a smaller boost from declines in the now-lower stock of discouraged workers in the future. This implies that a given amount of GDP growth will put more downward pressure on the unemployment rate than we previously estimated, and we now expect the rate to fall below 4½% in coming years even as growth slows toward a trend rate. Exhibit 10 shows our new forecast paths.This graph from Goldman Sachs shows their projection for the labor force participation rate on the left. Goldman expects the participation rate to decline from the current 62.4% to around 61.8% in 2018.  Most of the expected decline over the next few years will be from retirement.  Economist at the BLS expect the participation rate to continue to decline for the next couple of decades due to demographics. The right side of the graph shows Goldman's forecast for the unemployment rate (previous forecast and revision). Goldman expects the unemployment rate to decline to around 4.6% at the end of 2016, and to see further decline in 2017 and 2018.

Labor Market Turnover Changes Little in August as Job Openings Fall Slightly - The underlying churning of the U.S. labor market was little changed in August. The amount of hiring and job separation—both voluntary quitting and involuntary layoffs and firing—that underlies the U.S. labor market all were little changed. The number of job openings decreased from 5.7 million to 5.4 million. The data comes from the Labor Department’s monthly Job Openings and Labor Turnover Summary. In August the U.S. economy added 136,000 jobs on net. The Jolts survey tracks the millions of movements behind that number as people quit one job and find new work, as they get laid off or as they retire. Economists closely follow for hints that the labor market could be gathering steam or slowing down. Today’s report provides little nudge in either direction. For much of the past year, the report has presented a conundrum, which remains after today’s report. The level of job openings has surged to record highs, but actual hiring into those jobs has lagged. July’s 5.7 million job openings was the highest in the history of the report, and more than 30% higher than its prerecession level. The level of job openings, by contrast, has recovered to its prerecession level but risen no higher. Yet the unemployment and underemployment rates suggest there should be plenty of candidates to fill these jobs. “The core mystery is still why the number of openings is so high relative to the unemployment rate and, more recently, the softening in payroll growth,” Ian Shepherdson, the chief economist of Pantheon Macroeconomics, said in a note. “We are leaning increasingly towards the idea that the key problem is that companies can’t find suitably qualified staff.”

BLS: Jobs Openings decreased to 5.4 million in August -- From the BLS: Job Openings and Labor Turnover Summary The number of job openings decreased to 5.4 million on the last business day of August, the U.S. Bureau of Labor Statistics reported today. The number of hires and separations was little changed at 5.1 million and 4.8 million, respectively. Within separations, the quits rate was 1.9 percent for the fifth month in a row, and the layoffs and discharges rate was unchanged at 1.2 percent. ...  Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. ... There were 2.7 million quits in August, little changed from July. The number of quits has held between 2.7 million and 2.8 million for the past 12 months after increasing steadily since the end of the recession. The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.  The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for August, the most recent employment report was for September. Click on graph for larger image. Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover. When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs. Jobs openings decreased in August to 5.370 million from 5.668 million in July. The number of job openings (yellow) are up 9% year-over-year compared to August 2014. Quits are up 9% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits"). This is a decent report. Even though Job Openings decreased, this was from the record high in July - and Openings are still up 9% year-over-year.

More of the Same: JOLTS is Continued Evidence of a Slow Moving Economy -- Today’s Job Openings and Labor Turnover Survey (JOLTS) report shows there has been little change in the labor market for America’s workers. The rate of job openings actually decreased in August to 5.4 million. At the same time, the hires rate held steady while the quits rate remains depressed. Coupled with jobs reports so far this year, today’s report provides more evidence of a slow moving economy, with meager wage growth and employment growth that’s just keeping up with the growth in the working age population. There is still a significant gap between the number of people looking for jobs and the number of job openings. The figure below shows the levels of unemployed workers and job openings. You can see the labor market improve over the last five years, as the number of unemployed workers falls and job openings rise. In a stronger economy (like the one shown in the initial year of data), these levels would be much closer together. Today, there are still 1.5 active job seekers for every job opening. Furthermore, on top of the 8+ million unemployed workers warming the bench, there are still four million workers sitting in the stands with little hope to even get in the game.

The JOLTS report for August continues to underwhelm -- I continue to be underwhelmed by the monthly JOLTS reports. Most commentators focus only on the job openings number without paying attention to the pattern of this series during the 2002-07 expansion. Here is the overall series since its inception: As an initial matter, while this series looks extremely useful, because there is only 15 years of history, there is only one complete business cycle with which to compare. During that cycle, hiring peaked well before job openings. As shown above, the peak in hiring (and the trough in voluntary quits, not shown) was the first signal that the expansion was decelerating. Now let's zoom in on the last year: Once again, while job openings have skyrocketed, actual hires have stalled. It is only because August 2014 featured an anomalous decline in hiring that the Hires series has not turned YoY negative. This suggests to me that (1) we are past mid-cycle, as many other series also show; and (2) there is a labor market disconnect, as employers are not filling a record number of openings. As to why those openings are going unfilled, I have seen a fair amount of survey information where employers are complaining of not being able to find appropriately skilled candidates. I suspect that there are one or both of two clauses missing in those sentences, as in: "We are not able to find skilled candidates [for the wage we want to pay and/or because we refuse to pay for any on-the-job training]." Again, this is an underwhelming report, but if the underemployment rate continues to decline, I anticipate that more and more employers will capitulate on increasing wages for new hires.

Yellen's "Favorite" Labor Indicator Tumbles: Job Openings Drop Most Since 2009 -- One month ago, when the JOLTS data showed the highest number of job openings in history, rising by a near record 430,000 to 5.8 million vacant positions, most speculated that this data - considered to be Janet Yellen's favorite indicator of slack in the labor market now that the unemployment rate has become utterly unreliable due to the 94 million Americans out of the labor force - had sealed the fate of a September rate hike. It did not, as instead the Fed decided to shift to its 4th mandate (the 3rd being the stock market), namely the "global environment" as the reason not to tighten monetary conditions. But while the JOLTs data turned out to be useful to "confirm" a stronger economy, even if it was roundly rejected when it was expected to be the fulcrum catalyst for monetary policy change, we are confident it will be completely ignored this month when moments ago the BLS revealed that in August, the number of job openings tumbled back down by 298,000 to 5.37 million: far below expectations and the biggest monthly drop since the 301,000 slide in March of 2009.

Job Openings & Labor Turnover: The Latest Clues to the Business Cycle -  The latest JOLTS report (Job Openings and Labor Turnover Summary), data through August, is now available. The first chart below shows four of the headline components of the overall series, which the BLS began tracking in December 2000. The time frame is quite limited compared to the main BLS data series in the monthly employment report, many of which go back to 1948, and the enormously popular Nonfarm Employment (PAYEMS) series goes back to 1939. Nevertheless, there are some clear JOLTS correlations with the most recent business cycle trends. The chart below shows the monthly data points four of the JOLTS series. They are quite volatile, hence the inclusion of six-month moving averages to help identify the trends. For the last three months, there have been more job openings than hires as seen in the chart below. The most closely watched series is the one for Total Nonfarm Job Openings, the blue line in the chart above. The moving average peaked in mid-2007 and began rolling over to its trough a couple of months after Great Recession ended. The Hires series is roughly similar in its trend. Quits are also trending higher; they are generally thought to show an economy that supports the flexibility to leave or change jobs. In contrast, Layoffs and Discharges, the red line, were somewhat inversely correlated to the other three. The chart above is based on the actual numbers in the JOLTS report. A better way to view the numbers is as a percent of Nonfarm Employment, which essentially gives us a population-adjusted version of the data. Here is that adjustment for four of the JOLTS series. Note that the vertical axis for each is optimized for the high-low range to facilitate an understanding of the individual trends.

Tone Deaf Employers Continue To Ignore Warnings in Job Hoarding Bubble - First time claims for unemployment compensation continued their string of record lows for the same week of the year. The actual number, not subject to any seasonal hocus pocus was 220,000 (rounded). That was just 1,548 claims per million employed workers last week. That compares with 1,817 per million in the same week of 2007 just as the housing bubble was beginning to implode and 1,914 in that week of 1999 as the Internet Bubble was driving toward its orgiastic climax. Previous record low strings in initial claims were always associated with bubble peaks and peak economic activity resulting from those bubbles.  Historically, employers usually seem to be the last to get the news when bubbles start to deflate. They move in herds too.  The very fact of employers’ record long term ebullience should be warning enough, as chronicled here in these reports over the past year. Employers still haven’t wisened up. They are still in an employee hoarding bubble that has yet to burst. The real job cuts are still to come. The Department of Labor (DoL) reports the unmanipulated numbers that state unemployment offices actually count and report each week. This week it said, “The advance number of actual initial claims under state programs, unadjusted, totaled 219,591 in the week ending September 19, an increase of 20,625 (or 10.4 percent) from the previous week. The seasonal factors had expected an increase of 18,232 (or 9.2 percent) from the previous week. There were 239,780 initial claims in the comparable week in 2014.”

A Rising Tide Does Not Lift All Boats - David Cay Johnston - More Americans had good-paying jobs in 2014, but pay grew only slightly when inflation is taken into account, a government report revealed Thursday. The 2014 wage report by the Social Security Administration (SSA) provides the latest evidence that while the economy is adding jobs, the overwhelming majority of individual workers are not benefiting much from rising wages. Other data show, however, that corporate profits are soaring.  The job news is good. A record 158.2 million people had at least some paid work last year, up 2.4 million workers from 2013. America has had a record 67 months of private sector job growth under Barack Obama’s administration. However, the number of Americans working is still about 4 million jobs short of where it would be with full recovery from the Great Recession. Overall, wages per American in 2014 rose by $927, or 4.4 percent, my analysis of the new SSA data shows. Wages per capita rose because the number of jobs increased faster than the population and nearly all the added jobs paid more than $50,000, putting those workers in the top quarter of wage earners. While more jobs and better wages come as good news for highly paid workers, the picture is less rosy lower on the wage ladder. One of the best ways to measure wages is comparing the mean (average) with the median (half make more, half less). When the average grows faster than the median, that shows that the top half of workers is pulling away from the bottom half, adding to America’s extreme and worsening inequality. The median wage rose $366 in real terms last year, to $28,851. That is a 1.3 percent increase on top of inflation compared with 2013. Still, the median wage remains stuck at about the level of 1999, when it was $28,565. By contrast, the average wage grew more, up 1.9 percent, to $44,569. That surpassed the old record of $44,256 in 2007, though not by enough that most workers would feel any difference in their wallets. The increase amounts to just $6 per week before taxes. However, even that less than 1 percent real gross pay increase shows that six years after the Wall Street meltdown and bailout by the federal government, workers on average are finally ahead of 2007, the year before the Great Recession.

It’s Getting Harder To Move Beyond A Minimum-Wage Job  - Minimum-wage jobs are meant to be the first rung on a career ladder, a chance for entry-level workers to prove themselves before earning a promotion or moving on to other, better-paying jobs. But a growing number of Americans are getting stuck on that first rung for years, if they ever move up at all.During the strong labor market of the mid-1990s, only 1 in 5 minimum-wage workers was still earning minimum wage a year later.1 Today, that number is nearly 1 in 3, according to my analysis of government survey data.2 There has been a similar rise in the number of people staying in minimum-wage jobs for three years or longer. (For a more detailed explanation of how I conducted this analysis, see the footnote below.)3  Even those who do get a raise often don’t get much of one: Two-thirds of minimum-wage workers in 2013 were still earning within 10 percent of the minimum wage a year later, up from about half in the 1990s. And two-fifths of Americans earning the minimum wage in 2008 were still in near-minimum-wage jobs five years later, despite the economy steadily improving during much of that time.4

Is $15 a hour too much? Is $7.25 too little? -- Anyone who has followed the discussion about wages is already familiar with the fact that since 1979 wages have remained flat (and in many cases, have declined) — and a lot of that has to do with the decline of labor unions. The Economic Policy Institute has a collection of papers (link, link) showing that the erosion of collective bargaining has undercut wages and benefits, not only for union members, but for nonunion workers as well. This has been a major cause of middle-class income stagnation and rising inequality. Even though millions of workers desire union representation, they are not able to obtain it. And despite what many of the pundits claim, the current job market is really not that tight (not with hundreds of thousands dropping out of labor force every month) — and another reason why wages remain so dismal. With an over-saturated job market, there's no pressure to raise wages. Job ads are posted, but rarely are there real jobs behind them. Employers aren't employing because they've been doing more with less (link, link, link, link) — while others may be foolishly holding out for the mythical purple squirrels. Since the Great Recession, one debate has been about raising the minimum wage — to stimulate more economic activity by creating more consumer demand, which in turn would (theoretically) create more job growth and raise wages. Last July Senator Bernie Sanders introduced a bill for gradually raising the minimum wage to $15 an hour by 2020, saying: "In the year 2015, a job must lift workers out of poverty, not keep them in it. The current federal minimum wage of $7.25 an hour is a starvation wage and must be raised to a living wage.” More than 200 economists and labor experts (including former Labor Secretary Robert Reich) released a letter endorsing Bernie Sanders’ legislation:

The Winner of the Nobel Prize in Economics Has Deep Concerns About Income Inequality -- On Monday, Angus Deaton, a British-American economist and professor at Princeton University, won the 2015 Nobel Memorial Prize in Economics for his work on “consumption, poverty, and welfare.” As that description might suggest, Deaton’s academic interests are quite vast. His areas of research include “poverty in the world and in India,” “health status and economics,” and “household surveys.” His list of papers and publications is similarly extensive. In addition to all that, Deaton has also focused a good deal on income inequality. In his April 2014 letter, for example, Deaton pointed out how the United States appeared to have suddenly “rediscovered” income inequality following decades of stagnant median wages and dramatic wealth accumulation at the very top. “There are many unfamiliar things in a new country,” he wrote, “and one of the most immediate, for me, when I first came to America, was the lack of interest in inequality, among either academics or the general public.” And:  In politics too, income inequality had little traction. Americans, unlike the British, are not interested in or disturbed by stories of ‘fat cats’, indeed they rather approve of them. Attempts by Democratic politicians to talk about inequality or redistribution were effectively met by cries of ‘class warfare’ from the Republicans. Americans, we were told, believed in the American Dream, that everyone could get rich if they tried hard enough. It was equality of opportunity that was important, not inequality of outcomes, and America, so the story went, was the land of opportunity.

Fair hiring practices: big bang for buck and bipartisan support --Try to think of a policy idea that has the following characteristics:

  • –it costs almost nothing to implement;
  • –it has the potential to help millions of highly disadvantaged people raise their living standards;
  • –it is supported by both President Obama and the Koch brothers;
  • –the Senate Homeland Security and Governmental Affairs Committee just approved a bill advancing this policy by a bipartisan, unanimous vote.

You’re envisioning the null set, right? Wrong! The idea to which we refer is called “ban the box.” It’s a fair chance hiring idea that moves a job applicant’s background check from the beginning of the application process to the end, after the candidate has received a conditional offer of employment.Background checks are still allowed – they just come later in the process – so there’s no loss of information for employers.  All ban the box does is make sure that employers form their initial impressions about candidates based on their skills, qualifications, and interviews instead of something they might or might not have done in the past (a very high percentage of criminal records – approximately one in two, in the case of those held by the FBI – contain errors and/or inaccuracies, and that statistic doesn’t even account for incorrect arrests and convictions).By reducing—not eliminating—the potential for prejudice in the hiring process, this policy benefits both job applicants (by giving them a fairer shot at a job) and employers (by decreasing the chance that they’ll pass over strong candidates). And we’re talking about an idea that could reach a lot of people: an astoundingly high 70 million Americans currently have some sort of conviction or arrest history that could show up on a background check.

One chart that puts mass incarceration in historical context -  The US prison population has exploded over the past few decades, creating the modern era of mass incarceration. But what's less well-known is that the current incarceration rate isn't just higher than what came immediately before it — it's drastically higher than at any other time in American history. This chart is based on the number of people in state and federal prisons, per 100,000 adult US residents at the time. That's one major way the incarceration rate was measured during the early 20th century. (Unfortunately, the government wasn't as consistent in recording the jail population, so that's not included here — but rest assured that there are a lot more people in jail than ever before, as well.) Recently, the government has stopped reporting the incarceration rate this way: partly because it's better at recording how many people are in jail, on probation, or on parole as well as in prison, but partly because the incarceration rate is so damn high that it's better expressed as a percentage — X per 100 — than as X per 100,000. We calculated the prison rate in recent years by dividing the Bureau of Justice Statistics' stats for state and federal prisoners by its estimate (and the Census Bureau's) of adult US residents.

What Happens When Inmates in Solitary Confinement Blow the Whistle on Their Abuse? - Abuse in the prison had become so routine that a group of RHU inmates had recently banded together to document it for a local prisoners' rights advocacy nonprofit called the Human Rights Coalition (HRC). Sanchez and Keys were key contributors, as were three other prisoners—Andre Jacobs, Anthony Kelly, and Duane Peters. HRC, which is primarily made up of prisoners' family members and ex-prisoners, compiled the inmates' statements into a 93-page report detailing the systematic verbal and physical abuse by guards. There was medical neglect, starvation, racial slurs, denial of water, abject filth, and even a prisoner who had been driven to suicide. Prisoners who dared file grievances over these conditions were subject to constant intimidation and retaliation by guards. Worse, the grievances themselves did no good. Between January 2008 and May 2009, inmates won fewer than 2 percent of disputes filed against correctional officers. After HRC published its report, the organization mailed Jacobs a copy to his cell at SCI Dallas. Correctional officers intercepted the document and read through its allegations. Then they used the names of contributing prisoners as a checklist. Within days, the threats began. "This time, we'll break your teeth," a guard allegedly warned Kelly. On April 25, according to the inmates, guards began denying Kelly food. The group stuck together, and Sanchez demanded guards give Kelly his meal tray. Instead, they allegedly began to starve him too. On April 28, guards pepper-sprayed Sanchez, stripped him naked, and put him in a restraint chair, cinching the straps so tightly that he remembered his extremities turning blue. Sanchez later said they left him there for at least 12 hours. (Officials at both SCI Dallas and the Pennsylvania Department of Corrections did not respond to repeated requests for comment.)

Families Outraged After Illinois Fails to Pay Out $288 Million in Lottery Winnings -- Lottery winners in Illinois may have hit the jackpot - but they have not been paid. The state recently announced that it was not paying out any winnings worth more than $600 until its budget crisis is resolved - but it's still running TV ads promoting the lottery. An attorney representing some of the winners, Tom Zimmerman, has said there is a staggering $288 million in winnings waiting to be paid out. One winner, Susan Rick, told INSIDE EDITION: “We won. We finally can have a comfortable life. Suddenly you're gonna the rug out from underneath us. We had a ticket for $250,000.” A group of Chicago city employees had joined a lotto pool and won a million dollars - but they still haven’t seen a penny of it either. Rhonda Rasche, a  49-year-old hospital clerk, said that after winning $50,000 in a scratch-off lotto, officials told her she'd receive a check in the mail in four to six weeks. That was a few months ago.

Former Chicago schools head to plead guilty to fraud -  (CNN)The former head of Chicago Public Schools intends to plead guilty to 20 charges that she used her power to channel to no-bid contracts worth more than $23 million to a prior employer, a federal prosecutor told reporters Thursday. Barbara Byrd-Bennett, 66, will plead guilty to 15 counts of mail fraud and five counts of wire fraud, said Zachary T. Fardon, U.S. attorney for the Northern District of Illinois. Byrd-Bennett's attorney, Michael Scudder, said his client would do so "as part of accepting full responsibility for her conduct." Scudder said Byrd-Bennett will continue to cooperate with prosecutors and will testify if needed.

Why does Paul Waldman think only URBAN young people are interested in the issue of tuition-free college? -- I read Paul Waldman’s posts on the Washington Post Plum Line blog regularly and agree with most of what he says, but his claim today that rural young people who can’t afford college aren’t interested in attending college anyway, and those who do attend are fine with borrowing large amounts of money to do so if that is what’s necessary, strikes me as really strange. It’s surely not accurate. Bernie Sanders surely is correct that they do care. A lot. Which is the direct subject of Waldman’s post. Waldman says Sanders is wrong. Why would Waldman think that? I have no idea.

The End of Academic Freedom in America: the Case of Steven Salaita: In the twenty-one years I spent at Columbia University, there was always some professor or another coming under attack from the Israel lobby. But no matter the intensity of the witch-hunt, I was always proud to see my employer stand up for the free speech rights of the faculty.As such my attention has been riveted on the trials and tribulations of Steven Salaita who was unfortunate enough to be the victim of a combined assault by the Israel lobby and a university officialdom that was determined to make him pay for telling the truth, no matter how bitter that truth.  When I posted an excerpt from Salaita’s newly published “Uncivil Rites: Palestine and the Limits of Academic Freedom” on my blog this week, I was struck by the sharp rise in page views. Clearly, just about everybody on the left has a feeling that in this case the IWW slogan rings as true as ever: “An injury to one is an injury to all.” Everybody has a stake in the outcome of his legal action against the University of Illinois. Student activists in the BDS movement understand that his persecution was an attempt to silence a high-profile academic supporter. People on the left in general recognize that it is not just “academic freedom” that is under attack. In a period of deepening repression that includes snooping on electronic communications, a university’s firing of a tenured professor because of some controversial tweets is an omen of things to come. Finally, it is Salaita’s peers who have the greatest stake in the outcome of his legal action. If you signed a contract for a new academic position, sold your house, and resigned your prior position, what a shock it would be to receive a letter a month or so before the semester starts informing you that the contract was meaningless.

For-Profit Colleges Accused of Fraud Still Receive U.S. Funds -- When the Obama administration agreed this summer to erase the federal loan debt of some former students at Corinthian Colleges, a for-profit school that filed for bankruptcy in the face of charges of widespread fraud, education officials promised to “protect students from abusive colleges and safeguard the interests of taxpayers.” But the Education Department, despite a crackdown against what it calls “bad actors,” continues to hand over tens of millions of dollars every month to other for-profit schools that have been accused of predatory behavior, substandard practices or illegal activity by its own officials or state attorneys general across the country.  Consider the Education Management Corporation, which runs 110 schools in the United States for chefs, artists and other trades. It has been investigated or sued in recent years by prosecutors in at least 12 states. The Justice Department has accused the company of illegally using incentives to pay its recruiters. And last year, investors filed a class-action lawsuit, contending that the company engaged in deceptive enrollment practices and manipulated federal student loan and grant programs. Education Management nonetheless received more than $1.25 billion in federal money over the last school year. The career training and for-profit college industry has been accused in recent years of preying on the poor, veterans and minorities by charging exorbitant fees for degrees that mostly fail to deliver promised skills and jobs. Despite stepped-up scrutiny, hundreds of schools that have failed regulatory standards or been accused of violating legal statutes are still hauling in billions of dollars of government funds.

U.S. Government Still Aiming The Cash Faucet At Fraudulent For-Profit Colleges -- Good news for all you scammers out there running bogus for-profit colleges: the United States government is wondering whether you’ve got some extra storage room in your basement for all these surplus billions of dollars it doesn’t have. Here, just take ‘em, man. They’re yours.  The New York Times is reporting that the Department of Education is handing over “tens of millions of dollars every month” to for-profit schools that have been accused of fraudulent or predatory behavior, even when those accusations have come from federal government officials or state attorneys general.  Consider the Education Management Corporation, which has been investigated or sued in recent years by prosecutors in at least 12 states.  Education Management nonetheless received more than $1.25 billion in federal money over the last school year. Earlier this year the Department of Education released a package of aid measures for students of Corinthian Colleges, Inc., a for-profit post-secondary education company whose business completely shutdown earlier this year after a flurry of legal activities related to shady business and recruiting practices sent the company into a steep and irreversible tailspin. Because Corinthians was a relative giant in the growing field of vacuuming money from the pockets of poor saps looking for an affordable education, it was assumed that their collapse and the resulting attention of the Department of Education would hail a new day of regulatory stewardship of the industry. Not so! Despite stepped-up scrutiny, hundreds of schools that have failed regulatory standards or been accused of violating legal statutes are still hauling in billions of dollars of government funds.. Without government funds, which account for the overwhelming bulk of revenue, few of these institutions could attract students or stay in business.

The Problem Isn't Student Loans - It's Higher Education - Forgiving skyrocketing student debt won't solve the real problem, which is the soaring costs imposed by a cartel that is failing to prepare students for the economy of tomorrow. Everyone understands soaring student debt is a problem: burdened with $1.3 trillion in student loans, young people are unable to start businesses, buy homes and start families. The high cost of housing and meeting regulations to launch businesses add additional burdens, but the weight of $1.3 trillion in debt right out of the starting gate is crushing. The "solution" being pursued by the federal government is obvious: take over most of the student debt and then eventually bury it in the zombie-loan graveyard (i.e. defaults are ignored but the debt isn't officially written off), write it down via forgiveness programs, or some other mechanism to reduce the burden. If this wasn't the plan, then why has federal ownership of student loan debt skyrocketed from zero to $900 million in a few short years? This is a decades-old problem that's finally reaching critical mass: student debt has leaped from less than $500 billion in 2006 to $1.3 trillion today, a mere 9 years later: The problem isn't student loans--it's the explosive rise in the costs of higher education. This chart depicts the exponential rise of higher education costs: Apologists claim the student-loan crisis is the result of underfunding of colleges by states. While it's true that some of the cost burden has been shifted from taxpayers to students, the real problem is soaring costs of the higher education cartel, which fixes prices via the artifical scarcity of accreditation. The extraordinary rise in administrative staffing and costs and the boom in building costly temples of higher education are well-known. This chart depicts the rise of the educrat class, at the expense of teachers/professors:

Obama Administration Hits Back at Student Debtors Seeking Relief -  On a day when Democratic presidential candidates sparred in a national debate over who would do more to help indebted students, the U.S. government launched a new attack on student debtors seeking loan relief. On Tuesday, the Department of Education intervened in the case of Robert Murphy, an unemployed 65-year-old who has waged a three-year legal battle to erase his student loans in bankruptcy. Unlike almost every single form of consumer debt, student loans can be erased only in very rare circumstances. Murphy’s case, which is currently being heard in a federal court in Boston, could make things a little easier for certain borrowers. A win for Murphy would relieve him of $246,500 in debt and could loosen the standard used to determine how desperate someone needs to be to qualify for relief.  In a document submitted to the court on Tuesday, government lawyers urged the federal judges not to cede any ground to borrowers who say they are in dire financial straits. Doing so would imperil “the fiscal stability of the loan program” that has existed for half a century. The Department of Education did not immediately respond to requests for comment. Murphy doesn’t deserve a break just because he is 65 years old, department lawyers wrote. Repaying his debt loan may require “that he remain employed at or past normal retirement age,” they said, even though “his income may top out or decrease” and “further employment opportunities may be limited.” “That is part of the bargain that parents strike when they take out loans later in their work life,” the lawyers added.

Robocalls Emerge As Latest Fix For Nation's Student Loan Crisis - The Obama administration and the student loan industry reckon they know how to fix America’s student debt crisis: Bombard Americans’ cell phones with robocalls and text messages telling them to pay up. With total student debt nearing $1.3 trillion and 1 in 4 borrowers either delinquent or in default, according to the Federal Reserve and the Consumer Financial Protection Bureau, policymakers are grasping for proposals that would stop the relentless rise in late payments and distress that’s afflicting the nation’s more than 40 million student loan borrowers.  While the Great Recession and the subsequent lackluster economic recovery play a role, the CFPB and consumer groups claim that sloppy loan servicing practices have exacerbated the situation by depriving borrowers of their right to make affordable monthly payments on their federal loans. More than 90 percent of all student loans are either owned or backed by the Department of Education and the department’s loan contractors have a business incentive to cut costs and minimize the amount of time they spend on the phone with borrowers seeking help, consumer advocates have told the CFPB.  Instead of cracking down on alleged abuses, the Education Department wants to give its loan contractors more power. In doing so, the department is aiding their quest to maintain profitability -- its four largest loan servicers have generated at least $5 billion in combined income over the last three years -- at a time when consumer groups argue the loan companies need to hire more workers and better train them.

Are Millennials with Student Loans Upwardly Mobile? -- Student debt has ballooned to unprecedented levels in recent years. The growth has affected not only the total amount of debt outstanding, but also the proportion of students taking out loans and the average amount of debt taken on by individuals. From 2007 to 2015, outstanding debt rose 116 percent and now amounts to $1,190 billion. The share of people between the ages of 26 and 32 who have student loan balances increased from 23 percent to 37 percent, and their median balance rose 36 percent (adjusted for inflation) to $16,808. Moreover, the share of borrowers with balances in excess of $25,000 has more than doubled—rising from 12 percent to 34 percent. We might be concerned that debts this large would offset or delay the benefits of attending college. In this Commentary, we investigate relationships between student debt, mobility and upward social mobility. In general, we would expect student-loan borrowing to be positively correlated with measures of upward mobility, because young people who attend college or earn a degree are generally higher-skilled than those who do not. The differences in skills should lead to differences in upward mobility regardless of the amount of debt students have taken on. But perhaps there is a critical point at which the debt becomes too large. This analysis focuses on several measures of mobility and social mobility, including household formation, moving between metro areas, moving to better neighborhoods, and homeownership. The findings suggest that student debt has not become so burdensome that it is undoing the advantages of higher skills. Young people who borrowed heavily during the recent expansion of student loan debt have been more likely to move up to higher-status neighborhoods than their peers who borrowed less or borrowed nothing. While students who borrow more do delay purchasing a home, they are not substantially more likely to continue living with their parents.  Millennials with student loans are still likely to be upwardly mobile. However, if we examine the same measures for Gen-Xers, we find that student loan borrowers used to be more upwardly mobile and experience greater advantages over nonborrowers than is the case for today’s heavily indebted millennials.

Illinois To Delay Pension Payments Amid Budget Woes -- By now, Illinois' budget problems are no secret. Back in May, after the State Supreme Court struck down a pension reform bid, Moody's move to downgrade the city of Chicago thrust the state's financial woes into the national spotlight.  Since then, the situation hasn't gotten any better and despite hiring an "all star" budget guru (for $30,000 a month no less), Bruce Rauner was unable to pass a budget in a timely fashion leading directly to all types of absurdities including everything from the possibility of shortened school years to lottery winners being paid in IOUs.  Now, as Bloomberg reports, pension payments are set to be delayed. A prolonged budget impasse in Illinois will force the state to delay pension payments because of a cash shortage, state Comptroller Leslie Geissler Munger said.

State comptroller says Illinois can't make November pension payment - Likening the state to a household drowning in debt, Illinois Comptroller Leslie Munger on Wednesday announced Illinois won’t be able to make its $560 million pension payment for November. Citing the budget stalemate, Munger said the state doesn’t have enough money to make the pension payment, but said retirees will still be getting their checks. The state has been operating without a budget since July 1. But it has been abiding by 14 different court orders and consent decrees, as well as additional state mandates that require the payment of Medicare and the state’s debt.  “The monthly pension payment of $560 million is the largest consistent expenditure that we have through the year, and it is one of the few areas we have had some flexibility because it is not covered by a court order and the delay will not cause immediate hardship,” Munger said. “We will still send out retirement checks, but we will have to tap the corpus of the retirement funds to do so.” She said it’s unlikely the state will be able to make its December pension payment either, but that she hoped the funds would be available and caught up by the spring with a budget in place. Munger said the state — which had just $142 million on hand Tuesday – is now $6.9 billion in debt, and that number will grow to $8.5 billion by the end of the year. She said the state is using daily tax revenues to pay the bills it’s mandated to pay.

Wisconsin retirees receive letter on how much their pensions will be cut -- A group of Wisconsin retirees met to discuss deep cuts to their pensions after receiving a letter detailing exactly how much money they’ll lose. This is part of the Multiemployer Pension Reform Act of 2014 that underfunded pension plans The Wisconsin Committee to Protect Pensions has traveled to Washington D.C., sent letters and called legislators to stop these cuts. However, they haven't been successful yet. "We know there's a problem, but it's not our fault,” said Bob Amsden, committee member. “We didn't create this mess." Amsden’s will get a 55% cut. He'll go from almost $3,000 to a little more than $1,300. The pension cuts range from 30 to 60 percent. The letters come from Central States, the company with the multi-pensions. "Now when these letters came out, it's been a blur, non-stop phone calls, people are really worried," Amsden said. "This is real. It's not a rumor anymore. This is actually going to take effect on their lives July 1st." Bernie Anderson, 62, said he joined the committee that formed in January. "Our stress level has gone through the roof," Anderson said. “I've been retired for a little over a year now and for the last six months instead of retirement things, I've been going to Washington and trying to get people involved in the pension fight."

Retired truck drivers could see their pension checks cut in half - Retiree Bill Hendershot stands to lose $2,104 a month if his pension fund gets its way. The Central States Pension Fund is pursuing a plan that would slash pension checks in half for some former union truck drivers. The fund is on the brink of insolvency and says it needs to cut benefits for 273,000 current and future retirees in order to stay afloat. Hendershot was told earlier this month that he should brace for a 60% cut as early as July, pending approval from the Treasury Department. If that happens, his remaining check will be $1,396. “This is going to be rough. It’s quite likely that I’ll have to try to find some work. But who’s going to hire a 74-year-old?” he said. Hendershot retired after working 35 years as a truck driver. He and his wife live on his pension and their Social Security benefits. The sharp reduction in his payment from the Central States fund would wipe out more than one-third of the total monthly income they have now. Before last year, current retirees would have been protected from these cuts. But a controversial law passed last December allows multi-employer pension funds to reduce benefits if they are projected to run out of money. A lot of these funds — which cover more than 10 million workers — are in financial trouble. The Central States Pension Fund covers workers and retirees from more than 1,500 companies across a range of industries including trucking, construction and even Disneyland workers. Truck drivers once made up a majority of participants, and are now a majority of those facing cuts. A lot of their companies went bankrupt after the industry was deregulated in the 1980s, which is a big reason why the fund is in trouble now. It has five retirees for every active worker.

New York City pension fund returns plunge - The New York City retirement fund posted a dismal 3.4% return for the fiscal year ended June 30. Comptroller Scott Stringer delayed release of the figure for months. The poor returns mean the city will have to spend billions of dollars more in pension contributions. And with markets down so much this year, the city’s pension funds may soon be an increasingly severe budget problem. The fiscal 2014 investment gain of 3.4% is less than half of the city’s target of 7%, which is the rate of return the city assumes in determining how much to put aside to pay benefits. The city is expected to contribute an average of $6 billion annually over the next few years to the five pension plans that comprise the city's retirement system. The New York City pension funds do boast strong combined returns in recent years (see chart below).

U.S. public pensions little improved since recession -Fitch | Reuters: The health of state-run U.S. public pension funds has barely improved since pre-recession highs, according to a Fitch Ratings report on Thursday. The median funded ratio for state retirement systems was 71.5 percent in 2014, "nearly unchanged" from the previous year, Fitch found. The median ratio reached a high of 84.7 percent in 2007 and fell to a low of 68.9 percent in 2012. The ratio fell as severe market declines cut into the funds' asset valuations, Fitch said. "Several years of strong market gains through 2014 offset remaining market declines and steadily rising liabilities, thus lifting reported funded ratios slightly, but they remain well below prerecession highs," Fitch noted in the report. Illinois is at the bottom of the pack - not a surprise for the lowest rated U.S. state, whose pension problems are well known. Its $119 billion of unfunded pension liabilities, as calculated by Fitch, amounts to 19.4 percent of personal income, compared with a median level of 3.3 percent for all states. Fitch uses the overall personal income levels in each state to show how large a burden the liabilities are for taxpayers. Kentucky is the second worst: its more than $26 billion of unfunded liabilities are 16.2 percent of personal income.

CalPERS officers propose lower investment targets | Reuters: California Public Employees' Retirement System officials, gearing up for payouts to exceed fund contributions as baby boomers retire, are considering a proposal to lower its assumed rate of return following periods of strong performance. The change may require cities and public workers across California to pay more into the system to keep it running, according to documents the fund provided to Reuters on Monday. Calpers' board is expected to review the proposal next week, the documents said. Calpers recently announced that it had flipped to a negative cash flow as retiring baby boomers tapped into the fund and expects the deficit to last for 15 years. Nearly all public pension funds have a negative cash flow, according to the National Association of State Retirement Administrators. The plan would reduce the fund's return assumption of 7.5 percent. Calpers, the country's largest pension fund, last adjusted its investment target in 2011 when it dropped from 7.75 percent. The proposal would enable the fund, during periods of significantly high performance, to reduce its assumptions of future investment returns. For example, if investment returns exceeded expectations by 10 percent, Calpers would reduce its expected returns by 0.15 percent the following fiscal year.

Former Chief Investment Officer Slams CalPERS, CalSTRS, Other Funds for Doing Nothing When Told Blackstone Was Cheating Them - Yves Smith - We wrote last week about how the SEC gave fund management giant Blackstone a wet-noodle lashing in the form of $39 million in fines and disgorgement for private equity abuses. Not only did the SEC’s order reflect poorly on the agency, since it’s increasingly becoming clear that the SEC is dinging private equity firms on only a subset of the bad conduct in which they’ve engaged, and then only fairly easy-to-ferret-out scams.  But just as poor was the conduct of the investors in Blackstone funds. As the order indicated, Blackstone told them of one of its abuses, that it had entered into overall fee agreements with law firms that were doing work for both Blackstone and the funds Blackstone was managing, and those agreements provided that Blackstone got heftier fee discounts, even though the funds’ billings were much larger in total. North Carolina’ former chief investment officer, Andrew Silton, was so disturbed about this revelation that he felt he had to address it. I’m taking the liberty of quoting extensively from his post: This settlement isn’t a victory for investors. Rather, it points out the failure of sophisticated investors to protect their own interests. The SEC doesn’t have substantive authority over money management firms, so it can’t do much more than pursue PE firms that fail to make proper disclosure or lack adequate policies and procedures. Presumably the SEC will bring similar proceedings against other PE firms, but it won’t change the dynamics or nature of the industry…. The failure of LPs to protect their interests is highlighted in the text of the SEC’s order. The SEC reveals that Blackstone notified all of its LPs about its legal arrangements and the disparate fee structure without receiving any complaints from the investors. CalPERS, CalSTRS, Oregon, and Washington are major investors with Blackstone because they disclose the performance of their PE managers. However, none of them complained about Blackstone’s legal arrangements. I’m left to wonder why large, sophisticated investors tolerated these practices in the first place. Blackstone and other GPs have been charging all sorts of unjustified fees for years. Even if the disclosure was poor and procedures were deficient, major investors like CalPERS, CalSTRS, Oregon, and Washington knew about these practices. Incredibly they’ve tolerated them. Silton reaches comes to the same conclusion that we did in a Bloomberg op ed earlier this year: that public pension funds like CalPERS and CalSTRS have demonstrated repeatedly that they are not sophisticated enough to invest in private equity.

Cost of Living Adjustment Unchanged in 2016, Contribution Base also Unchanged  - With the release of the CPI report this morning, we now know the Cost of Living Adjustment (COLA), and the contribution base for 2016.  Currently CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). Here is a discussion from Social Security on the current calculation (no increase) and a list of previous Cost-of-Living Adjustments. Note: this is not the headline CPI-U. The contribution and benefit base will be unchanged at $118,500 in 2016. The National Average Wage Index increased to $46,481.52 in 2014, up 3.55% from $44,888.16 in 2013 (used to calculate contribution base).  However, by law, since COLA was unchanged, the contribution base will be unchanged in 2016.

Why There Will be No 2016 Social Security COLA - After the BLS releases the inflation numbers for September on Thursday, the government will be able to release the Social Security cost-of-living adjustment (COLA) for 2016. The adjustment will become effective with benefits payable for December but received by beneficiaries in January.  . Each year the COLA is calculated based on the change from the Q3 average of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the Q3 average of the previous year, rounded to one decimal place. If the average for the most recent year is below the previous high, there is no adjustment, as was the case in 2010 and 2011. Note that for 2011, the Q3 average was indeed higher than the 2010 average, but it was still below the 2009 average, hence no COLA. For the official announcement of the calculation on Social Security website, click here.  With the release of Thursday's CPI-W for September, the 2016 COLA will be established. So far we know that the year-over-year (YoY) change for July was -0.3% and the YoY change for August was -0.3%. If we simply take a linear extrapolation of the CPI-W itself for the last two months, the YoY inflation for September would -0.4%. The quarterly average would not trigger a COLA for 2016. September would have to show a 1 percent month-over-month increase in the CPI-W. A monthly increase of that magnitude has only occurred five times since the turn of the century, the last one being in March of 2011. What are the odds of another one in Thurdsay's inflation data? Absolutely zero.

Why Social Security Checks Likely Won’t See a Big Increase in 2017, Either - Falling consumer prices over the past year means Social Security payments for seniors and other recipients could be little changed in 2017 as well, even if prices for everything from food to gasoline to drugs increase at a modest clip. The Social Security Administration said Thursday that recipients will see no cost-of-living increase in January. Any increase in 2017 will be based on how 2016 prices compare to the level in the summer of 2014, not 2015. The government doesn’t lower benefit payments when prices fall. But it does take into account decreased costs in determining future increases by setting the scale based highest price level from the third quarter of any year. In other words, price increases in the next year will have to overcome the past year’s decline before benefit checks will see a bump.  To determine the annual cost-of-living adjustment, the Social Security Administration assesses how an inflation measure called the Consumer Price Index-Urban Wage Earners and Clerical Workers, or CPI-W, changes from a year earlier. CPI-W is a slightly different calculation than the more widely reported Consumer Price Index-All Urban Consumers, or CPI-U. Social Security looks at the average price level in the third quarter to calculate the change. Average CPI-W fell 0.4% this year from the third quarter of 2014.

401(k)s Are a Negligible Source of Income for Seniors --401(k)s have largely displaced traditional defined benefit pensions among private-sector workers, but they are not a major source of retirement income for seniors. New data show that in 2014, distributions from 401(k)s and similar accounts (including Individual Retirement Accounts (IRA), which are mostly rolled over from 401(k)s) came to less than $1,000 per year per person aged 65 and older. On the other hand, seniors received nearly $6,000 annually on average from traditional pensions. Pension benefits and retirement account distributions are both concentrated among upper income seniors, but far more seniors rely on pensions as a significant source of retirement income. Though 401(k) and IRA distributions will grow in importance in coming years, the amounts saved to date are inadequate and unequally distributed, and it is unlikely that distributions from these accounts will be enough to replace bygone pensions for most retirees, who will continue to rely on Social Security for the bulk of their incomes.

Insurance Dropouts Present a Challenge for Health Law - — Stephanie Douglas had suffered a stroke and needed help paying for her medicines and care. But Ms. Douglas, 50, who was working about 30 hours a week as a dollar store cashier and a services coordinator at an apartment complex for older adults, soon realized that her insurance did not fit in her tight monthly budget. She stopped paying her premiums in April and lost her coverage a few months later.“When you owe on your house, on your truck, when you’re a single parent of a college student and you have other bills,” she said, “it just doesn’t work.”  On Nov. 1, a new sign-up period for health insurance under the Affordable Care Act will begin, and insurers, health care providers and enrollment groups are ramping up campaigns to encourage 10.5 million eligible uninsured people to buy policies. But even as those efforts begin, the public insurance exchanges, also known as marketplaces, created by the law are facing another challenge: keeping the customers they already have.About 9.9 million people were enrolled in the federal and state marketplaces at the end of June, a drop of about 15 percent from the 11.7 million who the Obama administration said selected plans during the open enrollment period that ended in February. Though there is no comprehensive data on why people drop or lose their marketplace coverage, enrollment counselors, health care providers and consumers say cost is a factor. In some cases, people lost jobs or their income dropped after they enrolled. Other people signed up for coverage only to decide later that they could not afford it. Still others dropped their insurance after their federal subsidies — intended to help pay premiums — were reduced or eliminated because the government could not verify their incomes or concluded that they were earning more than they had reported on their applications.

Obamacare's Latest Casualty: Largest Health Insurer On Colorado Exchange Abruptly Collapses - This wasn't supposed to happen. With the mainstream media, at least the majority that is left of center, flooded with story after story touting Obamacare's success, the news coming this morning from Denver that Colorado's largest nonprofit health insurer and participant in that state's insurance exchange Colorado HealthOP is abruptly shutting down, forcing 80,000 Coloradans to find a new insurer for 2016, was a slap in the face for the Obama administration's crowning achievement. According to AP, the health insurer announced Friday that the state Division of Insurance has de-certified it as an eligible insurance company. That's because the cooperative relied on federal support, and federal authorities announced last month they wouldn't be able to pay most of what they owed in a program designed to help health insurance co-ops get established. Wait, wasn't the whole point behind Obamacare to subsidize health insurance for everyone, and especially the poor? Or was the whole point of the "Affordable" Care Act merely to herd as many Americans into the clutches of the few for-profits, after the non-profit cooperatives finally read the fine print and realized they have no chance of being profitable under the new regime? The plot thickens: in a statement announcing its closure Friday, Colorado HealthOP said it was "well on its way" to repaying some $72.3 million it has borrowed from the federal fund. The co-op reported a net loss of $23 million last year. In other words, the company burned through some $23 million in taxpayer funds and it didn't even get a lousy shirt to show for it.

Looming Tax On High-End Health Plans Draws Heavy Fire :  About half of all American adults get health insurance through their employer, and beginning in 2018, the government will impose heavy financial penalties on any employer-provided health plans it deems overly generous. The tax was designed to rein in health care inflation and raise tens of billions of dollars.Former Sen. Jeff Bingaman, D-N.M., a member of the working group that created what's come to be called the Cadillac tax, sees the measure as a way to motivate companies to be more demanding shoppers when picking insurers and health plans.He says if employers were more demanding, insurance companies and health care providers — including hospitals and doctors — would be more likely to curb the prices they charge."I think we saw it as a way to keep the cost of health care from continuing to grow at the rate that it had been growing," Bingaman says.Under the Affordable Care Act, any health plan for employees that is over an annual threshold will be taxed at 40 percent. As of now, amounts over $10,200 annually for an individual, or $27,500 for a family will be taxed; those caps are subject to change in coming years.All agree the rule will raise cash: The Congressional Budget Office estimates the tax will generate $87 billion by 2025. Estimates on how many employer plans will be subject to the tax vary widely. Consulting firm Towers Watson  says that as many as half of these company plans are on track to trigger the Cadillac tax in 2018.

Consensus emerging in GOP on how to replace ObamaCare - After years of trying, Republicans are coalescing around the outlines of a plan to repeal and replace ObamaCare. Jeb Bush unveiled an ObamaCare alternative on Tuesday that is similar to the proposals from Sen. Marco Rubio (R-Fla.), his presidential rival, and former 2016 hopeful Gov. Scott Walker. The Bush plan overlaps significantly with proposals from congressional Republicans.  The plans all center on a tax credit intended to help people afford health insurance, along with more limited protection for people with preexisting health conditions and a cap on federal payments to states for the low-income Medicaid program. Bush's plan "seems to reflect an emerging consensus among Republicans about what the Affordable Care Act (ACA) should be replaced with,” said Larry Levitt, senior vice president at the Kaiser Family Foundation, which conducts nonpartisan health analysis. “For folks who want to move in the direction of the patients, the options are pretty clear, I think,” said Rep. Tom Price (R-Ga.), who has authored a plan that is similar to Bush’s, Rubio’s and Walker’s. But despite the general agreement on the outlines of a plan, Republicans are a long way from getting an ObamaCare alternative enacted. For a plan to have any chance, a Republican would have to win the White House in 2016. Even then, Democrats could block a proposal in the Senate, provided that Republicans don’t do away with the filibuster.

Personalized Medicine and the FDA -- In my post A New FDA for the Age of Personalized, Molecular Medicine I wrote:  Each patient is a unique, dynamic system and at the molecular level diseases are heterogeneous even when symptoms are not. In just the last few years we have expanded breast cancer into first four and now ten different types of cancer and the subdivision is likely to continue as knowledge expands. Match heterogeneous patients against heterogeneous diseases and the result is a high dimension system that cannot be well navigated with expensive, randomized controlled trials. As a result, the FDA ends up throwing out many drugs that could do good. The Manhattan Institute has today taken out a full-page ad in the New York Times calling for a discussion about how to integrate personalized medicine with the FDA. The ad reads in part: A new era in science and medicine calls for a new approach at the federal Food and Drug Administration, which determines whether any new treatment is safe and effective.  Congress should lay the foundation for a 21st century FDA by creating an external advisory network drawing on the expertise of the scientific and patient communities to assist the FDA in setting standards for how biomarkers can be better integrated into the drug development process. This is a call for collaboration on an unprecedented scale to help the FDA chart a safe path for advancing biomarkers from discovery in a lab to your doctor’s office. We echo previous recommendations made by the President’s Council of Advisors on Science and Technology, the National Institutes of Health, a report from the National Research Council – and senior staff at the FDA itself.

Senator Wants Names of Red Cross Officials Who Didn't Cooperate With Government Inquiry -- Sen. Charles Grassley is demanding more information about the American Red Cross and its “apparent unwillingness to fully cooperate” with a government investigation into its disaster relief work. Grassley asked the head of the Government Accountability Office for a list of material the Red Cross refused to provide to investigators, as well as the names of officials who didn’t cooperate and any communications in which the charity explained why it was not cooperating. “The lack of transparency is cause for concern as the Red Cross is a federal instrumentality created by Congressional charter and receives millions of dollars every year from donors across the country,” Grassley, an Iowa Republican, wrote in a letter today to the head of the GAO.  The GAO report, released earlier this month, explored the Red Cross’ government mandated role in responding to disasters. It found that there is no regular oversight of the Red Cross despite a string of flawed disaster responses. It also recommended Congress find a way to fill that gap. In his letter, Grassley cites Red Cross CEO Gail McGovern’s attempt to kill the GAO inquiry last year. As ProPublica and NPR reported, McGovern asked Rep. Bennie Thompson (D-Miss.), who had initiated the GAO investigation, to end the inquiry and instead call her cellphone with any questions.  The head of the GAO inquiry said earlier this month that the Red Cross had not given “unfettered access” but that investigators were able to get the information they needed “to sufficiently answer our research questions.”

Editor In Chief Of World’s Best Known Medical Journal: Half Of All The Literature Is False - In the past few years more professionals have come forward to share a truth that, for many people, proves difficult to swallow. One such authority is Dr. Richard Horton, the current editor-in-chief of the Lancet – considered to be one of the most well respected peer-reviewed medical journals in the world. Dr. Horton recently published a statement declaring that a lot of published research is in fact unreliable at best, if not completely false. “The case against science is straightforward: much of the scientific literature, perhaps half, may simply be untrue. Afflicted by studies with small sample sizes, tiny effects, invalid exploratory analyses, and flagrant conflicts of interest, together with an obsession for pursuing fashionable trends of dubious importance, science has taken a turn towards darkness.” (source)   Dr. Marcia Angell, a physician and longtime Editor in Chief of the New England Medical Journal (NEMJ), which is considered to another one of the most prestigious peer-reviewed medical journals in the world, makes her view of the subject quite plain: It is simply no longer possible to believe much of the clinical research that is published, or to rely on the judgment of trusted physicians or authoritative medical guidelines. I take no pleasure in this conclusion, which I reached slowly and reluctantly over my two decades as an editor of the New England Journal of Medicine”  (source) This is quite distrubing, given the fact that all of these studies (which are industry sponsored) are used to develop drugs/vaccines to supposedly help people, train medical staff, educate medical students and more. It’s common for many to dismiss a lot of great work by experts and researchers at various institutions around the globe which isn’t “peer-reviewed” and doesn’t appear in a “credible” medical journal, but as we can see, “peer-reviewed” doesn’t really mean much anymore.

TPP Intellectual Property Chapter is “A Disaster for Global Health” -- Wikileaks leaked the final draft of the Intellectual Property chapter of the Trans-Pacific Partnership (TPP) over the weekend, which has been panned by various “experts”.  Most notable of these is La Trobe Universtity lecturer in Public Health, Dr Deborah Gleeson, who has analysed the chapter and concluded that it “represents nothing less than a disaster for global health”: Many harmful provisions still remain in the final chapter, bearing out the concerns of public health advocates. These include:

  • Patents for new uses and new methods of using existing products (Article QQ.E.1.2, p. 17);
  • A low inventiveness threshold – potentially preventing countries from tightening the criteria for granting patents (Footnote 33, p. 17);
  • Patent term extensions to compensate for delays in granting patents (Article QQ.E.12, p. 20) and delays in marketing approval (Article QQ.E.14, p. 22);
  • Data protection for small molecule drugs – at least 5 years for new pharmaceutical products plus 3 years for new indications, formulations or methods of administration (Article QQ.E.16, p. 23-24);
  • Patent linkage provisions likely to result in delays in marketing approval for generic drugs (Article QQ.E.17); and
  • Market exclusivity for biologics, provided through one of two options: at least 8 years of data protection, or at least 5 years of data protection and other measures to “deliver a comparable outcome in the market” (Article QQ.E.20, p. 25-26).

This is the first time a provision for market exclusivity for biologic products has ever appeared in a trade agreement – and this is a new obligation for many TPP countries. The outcome of this suite of obligations will be delayed competition from follow-on generics and biosimilars – which means delayed access to affordable medicines, placing them out of reach altogether for many people in developing countries.  If the TPP countries ratify the deal, Big Pharma will have succeeded in cementing intellectual property standards that will stymie access to medicines for up to 800 million people in the short term, and more if additional countries sign up in future. Furthermore, the TPP’s intellectual property chapter sets a new norm that is likely to become the template for future trade agreements: its implications are global as well as regional.

How can 'cured' Ebola patients fall sick again months after recovery?: A Scottish nurse infected with Ebola in Sierra Leone last year is now back “in a serious condition” nine months after doctors said she had made a full recovery. Although the exact nature of the condition has not been reported, Pauline Cafferkey’s doctors have detected the Ebola virus and moved her to a specialist isolation unit in London. The virus is thought to be a re-emergence of her original infection as it is extremely unlikely she was infected again while at home in the UK. Her move to containment is being treated as a cautionary procedure, she is not thought to be contagious and the risk to the public is very low. You are deemed “cured” from Ebola when doctors can no longer detect virus in your blood using a highly sensitive test yet the virus can survive elsewhere. So how could the Ebola virus return like this? Making  Although little is known about how the Ebola virus causes disease, Ebola is a systemic infection, meaning it can infect cells right across the body. Unlike seasonal flu or hepatitis, which tend to stay within specific parts of the body, Ebola has the capacity to spread to and infect many different organs and tissues.Some organs and tissues are considered “immuno-privileged”: the brain, testes, the eye. These are usually places where you would not want a strong immune response and inflammation damaging important bodily functions. If Ebola isn’t cleared from these tissue sites it may result in a long-term infection, giving the virus a long time to grow and multiply without an antiviral immune response.

Pandemic bonds have potential to be win-win-win - Larry Summers -- During the annual IMF-World Bank meetings last week in Lima, Peru, I was part of a discussion on a proposed pandemic emergency financing facility. The idea under discussion is a potentially powerful one: some public entity would issue bonds to investors which would be deemed to default in the event of an epidemic, assuring the availability of resources to respond before the epidemic takes on pandemic proportions. The facility would complement the new WHO contingency fund as well as its existing financing mechanisms. Such bonds are routinely issued to mobilize resources that will trigger in the event of hurricanes or earthquakes. So called catastrophe bonds or cat-bonds offer higher yields to investors in return for taking risks that are not correlated with the normal risks of business cycle downturns. This has the potential to be a win-win-win. The World Bank is using financial innovation to mitigate a major threat to the world, and especially the world’s poor. The vast resources of the global capital market are being tapped to provide vitally important insurance – and bring much-needed financial discipline to pandemic preparedness and response. And investors who, at this time of zero rates, are desperate for return are getting a new vehicle in which to invest. Little wonder that the session brought together health advocates, national aid agencies and leading financial firms, all of whom were very positive.

Study links dengue epidemics to high temperatures in Southeast Asia --  High temperatures are the driving factor behind massive dengue outbreaks in Southeast Asia, researchers have found. Though the infection waxes and wanes among many variables like human movement, rainfall, mosquito vector abundance and host immunity, heat emerged as the standout factor in large dengue epidemics. The World Health Organization reports that dengue infects 100 million people each year and infection rates have increased thirtyfold over the past 50 years.  Also known as breakbone fever, the illness presents with painful joints, rashes and fevers, though some infected people don't show any symptoms at all, making it frustratingly difficult to figure out how many people carry the virus. Fighting dengue is crucial for global economic development, since it extracts a huge resource cost in afflicted regions that are home to half of the world's population. And with the climate changing, health officials are concerned about naive populations encountering the disease as the mosquitoes that carry the virus move to new areas. To get a handle on dengue, an international team of researchers looked at 18 years of data, including more than 3.5 million reported dengue cases across Cambodia, Thailand, Laos, the Philippines, Vietnam, Malaysia, Singapore and Taiwan. "The most important scientific finding is the temperature really seems to drive these large dengue epidemics," . "We didn't expect to see such a clear-cut pattern between the association of dengue and temperature."

Giant, ancient viruses are thawing out in Siberia — and they’re changing everything we thought we knew about them - Melting ice in the Arctic circle has been thawing out some gigantic ancient viruses. Last month, researchers announced they were studying a 30,000-year-old giant virus called Mollivirus sibericum that they found in melted Siberian permafrost. The virus was functional and able to infect amoeba. This isn't the first time researchers have found big viruses that have challenged what we thought we knew about the tiny invaders. Mimivirus, discovered in 2003, has 1,200 genes and is twice the width of traditional viruses. But it was this most recently discovered virus which prompted several outlets to suggest that once it thawed out, it could escape and make lots of people sick.  We recently chatted with New York Times columnist and "A Planet of Viruses" author Carl Zimmer to see what he thought about the discovery. In terms of its potential risk to people, he said we don't need to be concerned. But he said the finding is fascinating for several other reasons, including what it tells us about viruses in general. "These particular viruses infect amoeba. So if you're an amoeba, yeah you should be really scared," Zimmer told Business Insider. "There are no human pathogens that have burst out of the Siberian permafrost. That's not to say that viruses won't emerge, but there are so many viruses circulating in living animals, I think we should put these frozen viruses very low on our list of concerns."

Researcher: Children's cancer linked to Fukushima radiation: (AP) — A new study says children living near the Fukushima nuclear meltdowns have been diagnosed with thyroid cancer at a rate 20 to 50 times that of children elsewhere, a difference the authors contend undermines the government's position that more cases have been discovered in the area only because of stringent monitoring. Most of the 370,000 children in Fukushima prefecture (state) have been given ultrasound checkups since the March 2011 meltdowns at the tsunami-ravaged Fukushima Dai-ichi nuclear plant. The most recent statistics, released in August, show that thyroid cancer is suspected or confirmed in 137 of those children, a number that rose by 25 from a year earlier. Elsewhere, the disease occurs in only about one or two of every million children per year by some estimates. "This is more than expected and emerging faster than expected," lead author Toshihide Tsuda told The Associated Press during a visit to Tokyo. "This is 20 times to 50 times what would be normally expected." The study was released online this week and is being published in the November issue of Epidemiology, produced by the Herndon, Virginia-based International Society for Environmental Epidemiology. The data comes from tests overseen by Fukushima Medical University.

Thyroid Cancer in Children Increases 30-Fold in Fukushima, New Study Says -- A study examining children who were 18 years and younger at the onset of the Fukushima nuclear catastrophe found an increase in thyroid cancers, as predicted by World Health Organization (WHO) initial dose assessments.  Lead researcher Toshihide Tsuda, an epidemiologist at Okayama University, says “[t]his is more than expected and emerging faster than expected … ” by either initial WHO predictions or studies of thyroid cancers after the Chernobyl nuclear explosion in 1986. Tsuda was urged by international experts and the publishing journal to publish his study as soon as possible due to its potential implications for public health.  The study, published in Epidemiology, analyzed prefecture data up to Dec. 31, 2014.  There were no precise measurements of internal or external radiation exposure, so researchers used residential addresses at the time the catastrophe began in 2011 as a surrogate for dose. The highest incidence rate ratio was among people whose districts were not evacuated, approximately 50 to 60 km (30 to 40 miles) west of the Fukushima nuclear reactors. Data show 605 thyroid cancer cases per 1 million examinees. The expected cases of thyroid cancer in children is 1-2 per year per million.

Mercury regulations kicked back to Ohio River states -- A news release from the Environmental Law & Policy Center on Thursday, says an eight-state commission that oversees pollution standards for the Ohio River announced a decision to remove the Oct. 16 effective date for a ban that would forbid companies in all states along the river from dumping high levels of toxic mercury into the waterway. Instead, the commission changed the rule to shift the responsibility to state agencies for deciding whether to allow companies to discharge larger amounts of mercury into the river, which means there will likely be no unified standard. Mercury is a known neurotoxin that causes brain and nerve damage to children and developing fetuses when they are exposed through consumption of contaminated fish. In 2003, the Ohio River Valley Water Sanitation Commission, known as ORSANCO, authorized a ban to take effect in 10 years that would prevent polluters located in all states along the Ohio River from releasing high levels of mercury directly into the water through the use of mercury dilution zones. The ban on the “mixing zones” was originally created to improve the safety of consumption of fish from the river and protect public health. After delaying the ban by two years, ORSANCO set a new effective date for Oct. 16, 2015. Instead of enforcing a specific implementation date, ORSANCO at its public meeting Thursday in Buffalo, New York announced it changed the mixing zone prohibition to “As soon as practicable,” and left final decision-making to state permitting authorities. States will now have more leeway to decide whether to grant variances to individual coal plants, factories and other industries along the Ohio River that seek exceptions to comply with the ban.

El Niño Could Threaten Millions Around The World With Starvation This Year -- As this year’s El Niño forecast becomes increasingly clear, drought-parched Californians are hopeful that the pattern will bring much needed rains to the abnormally dry region. But around the world, the looming El Niño pattern could drive extreme weather patterns and continued droughts, putting millions at risk of starvation due to low agricultural production and lack of water, according to a report released earlier this month by Oxfam.  Already, droughts along Africa’s eastern coast have left millions without food. In Ethiopia, poor rains have forced some 4.5 million residents to seek food aid, while in Malawi, floods followed by drought have cut the maize harvest by more than a quarter, threatening between two and three million with hunger. Drought has also reduced Zimbabwe’s maize harvest by more than a third, threatening some 1.5 million with hunger.  “Over the next few months the El Niño will attain maximum strength,” the Oxfam report read. “This will coincide with the coming rains in Southern Africa, due from November onwards. Meteorologists predict a high probability of below-average rains again as a result. A second successive poor rainy season across Southern Africa will bring serious food security problems next year.” Throughout Central America, two years of drought have also led to below-average harvests. According to the U.N.’s Food and Agriculture Organization, dry weather caused by El Niño is responsible for declines of 60 percent in maize and 80 percent in beans across Central America. With the forecast calling for an even stronger El Niño this year, Central America will likely face increasingly dry conditions. El Niño has also contributed to abnormally dry conditions in the southwestern Pacific island nation of Papua New Guinea, where more than two dozen people have died due to hunger and contaminated water.

Ethanol mandate fails to help the environment - A report (.pdf) this week from the University of Tennessee Institute of Agriculture argues that over-reliance on corn-based ethanol in the Renewable Fuels Standard (RFS) has caused environmental problems. The authors, Daniel G. De La Torre Ugarte and Burton C. English, found that the RFS not only fell short of goals for current-generation biofuels technology, it may also have failed to serve as a stepping stone to environmentally superior approaches. Dr. De La Torre Ugarte said: “Our analysis shows that the RFS has created more problems than solutions, particularly with regard to hampering advancements in biofuels. Corn ethanol was presented as a ‘bridge’ to advanced biofuels and a means of reducing GHG emissions. However, the reality is clear that this policy has been a bridge to nowhere.” Corn-based ethanol increases global food prices by diverting an important food source to fuel. USDA data show that ethanol for fuel now uses more than 40% of all U.S. corn production. The RFS is the topic of a new video advertisement by opponents who encourage faster progress toward more advanced biofuels technologies.

2.6 Billion Pounds of Monsanto’s Glyphosate Sprayed on U.S. Farmland in Past Two Decades -- (video)  Farmers sprayed 2.6 billion pounds of Monsanto’s glyphosate herbicide on U.S. agricultural land between 1992 and 2012, according to the U.S. Geological Survey. Glyphosate has been the go-to weed killer for use on genetically engineered, or GMO, crops since the mid-1990s, when Monsanto introduced its “Roundup Ready” corn and soybeans. Click here to watch a time-lapse video of the spread of glyphosate across America over the 20-year period.

Our Vanishing Flowers -  Ours is one of the most colorful relationships of history: We need flowers for our very survival, and in turn flowers — the plants that exist as crop cultivars or horticultural cut flowers or potted beauties — rely on us to reproduce and spread. But all is not well in this storied partnership: We who behold or nurture flowers are condemning their wild relatives to extinction at an alarming rate, and the world is quickly becoming a lesser place without them.  Flowers and fruits are the basis for many medicines, while providing cotton, flax fibers and beverages. Roses, jasmine and ylang-ylang contribute their fragrant molecules as ingredients in the world’s costliest perfumes. Cut flowers are a multibillion-dollar industry. It’s becoming ever more apparent that we need flowers to maintain our health, our food supply, and for our happiness and mental abilities. Flowers also make us smile; they lift our spirits. Psychological studies indicate that floral scents may enhance long-term memory formation. But now we are losing many flowering plants to extinction before we even knew they existed. An estimated 68 percent of the world’s flowering plants are now threatened or endangered. This staggering loss of diversity is due to anthropogenic causes, including habitat loss, degradation and invasive species.

Deceptive Tactics Used by Industry-Funded Group to Gain Support for Bill That Would Ban GMO Labeling - A group that is opposed to mandatory labeling of genetically modified food (GMOs) used deceptive tactics to mislead citizens into thinking they were supporting GMO labeling legislation when, in fact, they were supporting legislation that would block labeling.The “astroturf” campaign was conducted by the biotech industry-funded Coalition for Safe Affordable Food, to gain citizen support for national legislation, H.R. 1599 or “The Safe and Accurate Food Labeling Act of 2015,” known by opponents as the DARK Act (Deny Americans the Right to Know Act). H.R. 1599 passed the House of Representatives in July and a companion bill is expected to be introduced into the Senate this fall. The deceptive tactics were reported by Julie Freitas, a 66-year-old childbirth educator based in Southern California. One evening Freitas received a call from a man asking if she would answer a few questions for a survey about labeling genetically modified foods. Freitas said she would answer the questions, telling the man that she supported GMO labeling.He asked Julie if she would take action on GMO labeling and she said she would, thinking that H.R. 1599 would establish labeling of GMO foods across the U.S.“He indicated that people should know what’s in their food,” she said.The man asked Freitas if she would be willing to write a letter supporting labeling legislation. She said she didn’t want to write a letter so the man suggested that he write the letter and that Freitas could just sign it. She agreed.The man didn’t tell Freitas that H.R. 1599 would ban mandatory labeling of GM foods.

Genetically Modified Crops Cause Progressives to Abandon Science -- According to the World Health Organization, the American Medical Association, and countless other qualified international bodies, there is no peer-reviewed scientific evidence that genetically modified crops (GM crops) are unfit for human consumption. Despite this unanimous scientific consensus, opponents continue to generate controversy. As one example, Senator Bernie Sanders (I-VT), a Democratic presidential candidate and climate change warrior, has fought for a bill allowing states to require GM food labeling. Though he “does not believe that GMOs are necessarily bad,” his bill plays directly into the hands of GM crop alarmists.   Evoking distaste for government’s heavy, special-interest involvement in agriculture, mandatory labeling proponents charge that firms conspire to hide GM crop usage and that consumers have a right to know what is in their food. And yet, many companies already voluntarily identify their products as non-GM to attract consumers. In addition, the U.S. Department of Agriculture (USDA) labels foods “certified organic” when they meet certain standards, including a requirement they not contain GM components. Mandatory labeling could stigmatize GM crops and cost the average American family hundreds of dollars every year because non-GM foods cost more to procure. Many advocates of labeling overlook not only the cost to businesses and consumers, but also remain unaware of the substantial economic benefits of GM crops, including increased agricultural yields and enhanced environmental sustainability.

Lawsuits Mount Against Monsanto’s ‘Cancer-Causing’ Weedkiller  -- Looks like the cancer lawsuits against Monsanto are gaining country-wide momentum. Reuters reports that personal injury law firms around the U.S. are gathering numerous plaintiffs to build “mass tort actions” alleging that exposure to the company’s popular weedkiller, Roundup, causes cancer.  A new lawsuit was filed in Delaware Superior Court on Wednesday by three law firms representing three plaintiffs. According to Reuters, plaintiff Joselin Barrera, 24, a child of migrant farm workers, claims her non-Hodgkin lymphoma stemmed from exposure to glyphosate, the key ingredient in Monsanto’s used weedkiller, Roundup. The other name on the suit, former migrant farm worker and landscaper Elias de la Garza, was also diagnosed with the same disease and has similar claims about the toxicity of the herbicide. The new lawsuit is similar to Enrique Rubio v. Monsanto Company and Fitzgerald v. Monsanto Company, which were filed on the same day, Sept. 22, in Los Angeles and New York respectively. In these suits, former field worker Enrique Rubio (who has bone cancer) and horticultural assistant Judi Fitzgerald (who has leukemia) both claim that exposure to Roundup caused their diseases, and that Monsanto “falsified data” and “led a prolonged campaign of misinformation” to convince the public, farm workers and government agencies about the safety of the product. The suits come after the World Health Organization’s infamous report in March declaring that glyphosate was “probably carcinogenic to humans.” Following that, in September, California’s Environmental Protection Agency issued plans to list glyphosate as known to cause cancer.

Govt decides to ban GMO food production in Russia – A senior Russian government member told reporters the cabinet decided that any food production in the country will completely exclude any genetically-modified organisms or parts thereof. “As far as genetically-modified organisms are concerned, we have made decision not to use any GMO in food productions,” Deputy PM Arkady Dvorkovich said at an international conference on biotechnology in the Russian city of Kirov. At the same time the official emphasized that there was a very clear line between this decision and the development of science, medicine and some other branches. “This is not a simple issue, we must do very thorough work on division on these spheres and form a legal base on this foundation,” he said.  In February 2014, Russian Prime Minister Dmitry Medvedev ordered the creation of a national research base for genetically-modified organisms that would provide the authorities with expert information and allow for further legislative movements and executive decisions. Medvedev also warned against perceiving GMO products as “absolute evil,” but said that the government did not support their use in the food industry.

Europe GMO Debate Not Over: EU Votes to Allow GMO Imports Despite Opposition -- Despite a majority of the European Union officially saying “no” to growing genetically modified crops (GMOs) within their territories, the latest move from the European Parliament’s environment committee (Environment MEP) will likely leave the door open for the controversial products to continue entering the EU through imports. On Tuesday, the Environment MEPs approved by 47 votes to 3 (and 5 abstentions) to reject the European Commission’s proposal to give each member of the EU’s 28-member bloc the power to ban the imports and sales of imported GMOs if they wish. The bill was similar to to the “opt out” law passed in March that allowed individual countries to abstain from growing crops already approved by the EU. A plenary vote will take place on Oct. 28, but according to EU Observer, another rejection is expected. The committee has effectively signaled to the commission to withdraw their plan.Even though you won’t see a lot of GMO-food products in the EU, “more than 60 GM crops are approved for import into the bloc,” according to Reuters. A substantial portion of the EU’s animal feed are genetically modified crops from North and South America.“Around 30 million tons of grain are imported per year from third countries, including 13 million tons of soybeans, 22 million tons of soymeal, 2.5 million tons of maize, 2 million tons of oilseed rape and 0.1 million tons of cotton,” says EuropaBio, a lobby group that represents the GM industry. Reuters reported that the group has welcomed the vote and also wants the commission to withdraw the planned legislation.

EFSA report considers risks of eating insects - BBC News: The European Food Safety Authority has published its initial risk assessment of using insects as a source of protein for human consumption and animal feed. It concluded that risks to human and animal health depended on how the insects were reared and processed. The UN suggests that "edible insects" could provide a sustainable source of nutrition for a growing population. The findings have been sent to the European Commission, which requested the EFSA risk assessment. The report produced by a working group convened by the EFSA scientific committee, compiled a report that assessed "potential biological and chemical hazards, as well as allergenicity and environmental hazards, associated with farmed insects used in food and feed taking into account the entire chain, from farming to the final product". It concluded that for biological and chemical hazards of using farmed insects for human consumption and in animal feed, the risks were dependent upon the form of husbandry being employed. It observed: "The specific production methods, the substrate used, the stage of harvest, the insect species, as well as the methods used for further processing will all have an impact on the possible presence of biological and chemical contaminants in insect food and feed products."

Local foods good for the environment? - A couple months ago the journal Frontiers in Ecology and the Environment published a paper by Andrew Zumkehr and Elliott Campbell.  The paper was widely reported in the press.  For example the Washington Post the headline: As much as 90 percent of Americans could eat food grown within 100 miles of their home.  Another outlet: Most Americans could eat locally.   I promptly wrote a blog post asking: even if Americans could eat locally, should they?   I'm pleased to report that a couple days ago Frontiers in Ecology and the Environment published a letter by Pierre and me. We write: they suggest turning back the clock on one of Homo sapiens sapiens’ greatest evolutionary achievements: the ability to trade physical goods over increasingly longer distances, producing an attending ever-widening division of labor. ...  By spontaneously relocating food production to regions with higher biotic potential for specific types of crops and livestock in order to optimize the overall use of resources, trade and the division of labor have delivered more output at lower costs. Zumkehr and Campbell largely sidestep these benefits. They cite a few studies suggesting that (re)localized food systems would deliver environmental, economic, food security, and social benefits, but neglect to mention critiques of those claims”   In a competitive market economy, observed crop yields near urban locations are likely to represent an upper bound for the overall level of productivity in the area because only lands productive enough to outcompete other uses are currently devoted to agricultural production. The authors are also silent on the environmental consequences of removing wildlife from current idle lands to make room for domesticated plants and animals.

Appeals court issues 'stay' halting EPA's 'Waters of the U.S.' regulation - The U.S. Court of Appeals for the Sixth Circuit issued a “stay” Friday, halting the federal Environmental Protection Agency from implementing a far-reaching rule called “Waters of the United States” that would give EPA regulatory authority over small bodies of water including highway ditches and streams that only hold water once every 100 years. West Virginia Attorney General Patrick Morrisey praised the “team effort” of the coalition of “25 to 30 states” that opposed the rule in the federal courts. Thirty-one states ranging from Florida to Alaska, North Dakota to Texas and Utah to South Carolina are part of the coalition.  Morrisey has been among the national leaders in the battle against what he called “the onerous federal, overreach.” Although he did not present oral arguments during the Sixth Circuit augments, Morrisey said that he has made oral arguments against the rule in other federal appellate courts. The Sixth Circuit Court of Appeals serves the Kentucky, Michigan, Ohio and Tennessee area. The rule, known generally as the “Waters of the United States” rule, extends the EPA and Corps of Engineers’ regulatory jurisdiction to an untold number of small bodies of water, including roadside ditches and short-lived streams or any other area where the agencies believe water may flow once every 100 years. It was published in the Federal Register June 29, and the agencies began enforcing the rule Aug. 28.

Devastating Rainfall in The Bahamas and South Carolina (NASA) – A major October hurricane in the Atlantic Ocean never made landfall, yet it has wreaked havoc in the Americas. Hurricane Joaquin sat just offshore of The Bahamas for several days, pounding the island nation with category 4 winds and flooding rain. Meanwhile, in the southeastern United States, a separate, yet Joaquin-influenced weather system brought intense rainfall and both inland and coastal flooding. The map above shows satellite-based estimates of rainfall in the northwestern Atlantic Ocean from October 1–5, 2015, as compiled by NASA. These rainfall totals are regional, remotely-sensed estimates, and local totals reported by ground-based weather stations can be significantly higher or lower. The darkest blues on the map represent rainfall totals approaching 800 millimeters (31.5 inches) over the five days observed.  The rainfall data come from the Integrated Multi-Satellite Retrievals for GPM (IMERG), a product of the Global Precipitation Measurement mission. IMERG pulls together precipitation estimates from passive microwave and infrared sensors on several satellites, as well as monthly surface precipitation gauge data, to provide precipitation estimates between 60 degrees North and South latitude. GPM is a partnership between NASA and the Japan Aerospace Exploration Agency.

Time-lapse video shows Folsom Lake’s dramatic water level drop – A video posted on Facebook shows the dramatic water level drop at Folsom Lake. "I've been collecting and assembling these since March of 2015 through August 2015 showing the effects of the drought in California is having on our reservoirs," Sacramento resident Ryan Griffith said in his Facebook post.  The video is a collection of stills taken from Brown's Ravine at the Folsom Lake Marina.  Folsom Lake is now 18% full, which is the second lowest of all time for early fall. The lowest was in the drought of 1977-1976, when the lake was at about 16% full.

Global warming is shrinking California's critical snowpack: As the world warms, it leads to very obvious results such as a reduction in snowpack in various parts of the world. While this seems intuitive, there are some caveats. A warmer world is also a wetter world because there is more moisture in the air. Therefore, there is a potential for more snow. So which effect will win out? Will snow melt because of warming, or will snow grow because of more moisture? Often it depends on where you are in the world. But, regardless, changes to snowpack can have big consequences on water availability. A new study just out in Nature Climate Change look at the long term changes to snowpack in the Sierra Nevada mountains. This region is very important because these mountains act as a water storage system for California, where rain doesn’t fall during much of the year. The authors estimated the Snow Water Equivalent, which is a measure of the amount of water stored as snow. While they noted that this spring, it was only 5% of its historical average, what they really wanted to know is, how often does it get this low? They noted other low-snow years such as 1934 and 1977. Was this episode like those? Is it just a natural fluctuation? The authors found that this current episode was unsurpassed in the record and exceeded the 95% confidence interval for a 500 year period. The authors combined instrumental measurements (back to about 1930) with measurements from tree growth records. The tree records allowed them to obtain information back to 1500. The current drought exceeded their entire 500-year record.

Drought Shaming the Rich and Famous: Who Is California’s Biggest Water Guzzler? --The Center for Investigative Reporting has outed California’s biggest residential water users in The Wet Prince of Bel Air: Who Is California’s Biggest Water Guzzler? The report, published earlier this month, found 365 California households each used more than 1 million gallons of water from April 2014 to April 2015. “One million gallons is enough for eight families for a year, according to a 2011 state estimate, and many of California’s mega-users pumped far more than that,” says The Center for Investigative Reporting. “Of the total, 73 homes used more than 3 million gallons apiece, and another 14 used more than 6 million.” The biggest user used a shocking 11.8 million gallons of water. City Lab points out that’s as much water as 90 households use in an average year and enough water to fill 18 Olympic-sized swimming pools. State officials would not reveal the names or addresses of these users out of privacy concerns. They would only give their zip codes. Bel Air tops the list with four of the five biggest water users in the state. The wealthy LA neighborhoods of Beverly Hills, Brentwood and Westwood round out the top 10. “San Diego’s posh La Jolla beachfront community” and the “affluent suburbs of Contra Costa County in the Bay Area” also have a high concentration of what The Center for Investigative Reporting refers to as “mega-users.”

How Growing More Weed Can Help California Fix Its Water Problems: Last Tuesday, the Humboldt County Courthouse in Eureka, California was swarming with potheads. A pro-cannabis rally had been organized by State Assemblymember Jim Wood, who knows how to grab headlines: In July, Wood walked onto the State Capitol floor carrying a live marijuana plant and asked his colleagues to regulate the heck out of it. The very public pleas from Wood and others were finally heard: Three marijuana industry regulation bills were signed by Governor Jerry Brown on Friday. For the first time in California, there will be comprehensive rules governing the entire cannabis industry, with enough money to fund a large-scale effort at assessing and lessening the environmental impact of growing marijuana—including the way growers use water. “Cultivators are going to have to comply with the same kinds of regulations that typical farmers do. So they’ll have to comply with all the environmental laws. They’re going to have to manage and procure their water in the same way and they’ll have to deal with pesticides the same way,” Wood said. “It’s going to be treated like an agriculture product.” Advertisement Marijuana regulation is going to have a massive effect on California’s water problems, but not in the way you might think. This is the state’s unique opportunity to start a new kind of economy-stimulating water policy from the ground up that also protects the environment. It’s a chance to orient the state’s water management towards a drought-proof future. Regulating the marijuana industry will allow California to prototype new ideas for water which could trickle down to the rest of the state’s agriculture.

El Niño keeps getting stronger, raises chance of drenching rains: The National Weather Service now expects El Niño to bring wetter-than-average rains to virtually all of California, forecasters said for the first time Thursday. The new forecast is significant because it raises the chance that El Niño will send big storms not only to Southern California and the San Francisco Bay Area — as has already been forecast — but also to the mountains that feed California’s most important reservoirs, which fuel water for much of the entire state. California’s largest reservoirs, Shasta Lake and Lake Oroville, are in the northern edge of the state. If patterns from previous strong El Niños repeat, “there will be a number of significant storms that will bring heavy rains. What that brings will be floods and mudslides,” said Mike Halpert, deputy director of the National Weather Service’s Climate Prediction Center. “We’re more confident we’re going to be seeing El Niño through this winter.”  Federal officials said they expect El Niño rains to ease drought conditions in California, but they're not expected to eliminate the drought because the state is so far behind on precipitation. The chance of heavy rain is strongest in Los Angeles and San Diego, where there is a 60% chance of a wet winter, a 33% chance of an average winter and less than a 7% chance of a dry winter. In Silicon Valley, there is more than a 50% likelihood of a wet winter and less than a 17% chance of a dry winter. Farther north, there is a greater than 40% chance of a wetter-than-average rainy winter in San Francisco and Sacramento, and less than a 27% probability of a drier-than-normal winter.

NASA expert: El Niño is 'too big to fail' - -– Climatologists are predicting that this winter will be unusual across the country because of El Niño that is brewing in the Pacific Ocean.  "There's no longer a possibility that El Niño wimps out at this point. It's too big to fail," Bill Patzert, a climatologist for NASA's Jet Propulsion Laboratory, told the LA Times. "And the winter over North America is definitely not going to be normal." Scientists say El Niño is getting stronger because of rising sea-level ocean temperatures in the Pacific Ocean and a change of directions of the wind along the equator. According to LA Times, that means that winter storms that normally drop rain in central America could shift north and move them over California and the southern United States. Mike Halpert, the deputy director of the Climate Prediction Center, said this El Niño is the second strongest he's seen at this time of the year. "This could be one of the types of winters like in 1997-98," Halpert said. According to NOAA, the winter of 1997 was the second warmest and seventh wettest on record. Severe weather included flooding in the southeast and California, an ice storm in the northeast and tornadoes in Florida.  During that winter, Oklahoma had some of its warmest temperatures and wettest weather. Patzert told the LA Times that while nothing is ever guaranteed, he is almost certain this El Niño will have an impact. In fact, he says even if temperatures were to start dropping now in the ocean, it would still impact precipitation this winter.

California mudslides and chaos offer a preview of what El Niño could bring: The storm that slammed into the high desert and mountains of Southern California this week was one for the record books. Intense rain sent massive mudflows onto highways, picking up cars and pushing them into one another. Hundreds of vehicles were trapped in mud up to 20 feet deep; in some cases, motorists were stranded overnight. In one spot in the Antelope Valley, the storm dumped 1.81 inches of rain in 30 minutes on Thursday, in what the National Weather Service described as a 1,000-year rain event. "It's absolutely incredible," said Robbie Munroe, a meteorologist with the National Weather Service in Oxnard. October storms are nothing new in the high desert. But experts say the intensity of the deluge is just the latest byproduct of the record temperatures in the Pacific Ocean. The warm ocean temperatures — about 75 degrees on Thursday, at least 5 degrees above normal — produced more water evaporation and higher humidity levels. The storm system combined with the high humidity to create enough instability in the atmosphere to trigger the intense thunderstorms and torrential rainfall, Swain said.

Deforestation and Drought - LIKE California, much of Brazil is gripped by one of the worst droughts in its history. ...Drought is usually thought of as a natural disaster beyond human control. But as researchers peer deeper into the Earth’s changing bioclimate — the vastly complex global interplay between living organisms and climatic forces — they are better appreciating the crucial role that deforestation plays. Cutting down forests releases stored carbon dioxide, which traps heat and contributes to atmospheric warming. But forests also affect climate in other ways, by absorbing more solar energy than grasslands, for example, or releasing vast amounts of water vapor. Many experts believe that deforestation is taking place on such a large scale, especially in South America, that it has already significantly altered the world’s climate — even though its dynamics are not well understood. Trees take up moisture from the soil and transpire it, lifting it into the atmosphere.  The entire Amazon rain forest sends up 20 billion tons a day. The water vapor creates clouds, which are seeded with volatile gases like terpenes and isoprene, emitted by the trees naturally, to form rain. These water-rich banks of clouds travel long, wind-driven distances, a conveyor belt for the delivery of precipitation that scientists call flying rivers.  The sky-borne river over the Amazon carries more water than the Amazon River itself. It begins as moisture that builds over the Atlantic Ocean, and then flows westward over the emerald crown of the Amazon, where it picks up far more moisture. The laden clouds eventually bump up against the Andes and are steered south and then east, which means rain for Bolivia and Brazil. Large-scale deforestation is thus believed to be a major contributor to the extreme drought in Brazil.

Climate Change Will Have Big Effects On Spring And Winter -- Climate change will shorten winters by about three weeks by the beginning of next century, according to a new study.  The study, published this week in Environmental Research Letters, looked at the onset of spring and the flower blooms and leaf bursts that come along with it. Researchers found that, under a high emissions scenario (a pathway called RCP8.5, in which the planet is projected to warm 2.6 to 4.8°C by 2100) springs will arrive on average 23 days earlier in the U.S.  “Our projections show that winter will be shorter — which sounds great for those of us in Wisconsin” lead author Andrew Allstadt said. “But long distance migratory birds, for example, time their migration based on day length in their winter range. They may arrive in their breeding ground to find that the plant resources that they require are already gone.” Different species of migratory birds depend on different clues to know when to begin their spring migration — usually changes in daylight or weather. If a bird depends on changes in daylight — something that, obviously, remains constant even as climate changes — to know when to migrate, it might take off for its spring habitat at its usual time. But, as Allstadt said, if that spring habitat experienced an early spring, the bird may arrive to find that the insects it needs to survive have already hatched, and that there are fewer available than in typical years.

Déjà Vu Again: Hot September Drives 2015 To Hottest Year On Record  Once again, it’s the hottest year on record by far through last month, NASA reports. We’re running out of headlines for this repetitive monthly warm up, but with the recent death of the legendary Yogi Berra, one of his classic lines comes to mind, “It’s like deja-vu, all over again.”  This was the hottest September by far in the dataset of the Japan Meteorological Agency, and second only to 2014 for hottest September in the NASA dataset. With the long-term warming trend caused by human activity boosted by the short-term warming caused by the strongest El Niño since the big one of 1997-1998 — and with the current month, October, trending very warm — it’s now a better than 99 percent chance 2015 will be the hottest calendar year on record. But the NASA data makes clear we’ve already blown past the “hottest 12 months” on record. Here’s the 12-month moving average since 1880 (via Greg Laden):

Cropland in the US Midwest may limit extreme high temperatures - The climate clearly affects crop production; extreme temperatures and limited rainfall reduce agricultural yields. But crop production affects the climate right back, as land-use changes affect the amount of stored carbon in the soil. Planetary and evolutionary scientists at Harvard and elsewhere have now found that the relationship between agriculture and climate may be more direct. Looking at the hottest summer days in the Midwest over the past century, they found that farmland that underwent the most intense use had seen their hottest days cooled over time. During the summer, the US Midwest has the highest rate of chlorophyll fluorescence—indicating the most vigorous plant growth—on the whole planet. Moreover, it is peppered with weather stations that have been recording temperature data for the past hundred years or so. It is thus an ideal place for a longitudinal study of climate in important food growing regions. This team of researchers looked at days in the 95th temperature percentile during June, July, and August starting in 1910 and running through 2014. They excluded the 1930's—the Dust Bowl era—as well as the 1970s, 1980s, and 1990s, since this was a period of aerosol-induced cooling in the entire eastern United States. But even barring those years, the researchers noticed that the temperatures on these hottest days during the growing season have cooled and rainfall has increased. This happened despite the fact that temperatures across the US have warmed over this time period.

Indonesia urged to declare national disaster as haze worsens --Haze from fires ravaging Indonesia’s forests have ignited an environmental crisis and stoked diplomatic tensions as toxic smog cloaks much of Southeast Asia. The Indonesian government must move to put out the blazes, many of which occur on carbon-rich peatland, and step up enforcement through international assistance, local experts said. Fires rage annually in the country’s dry season, many started deliberately as vast tracts of land are cleared for palm oil plantations, sometimes illegally. But this year tinder-dry conditions and the return of El Nino have fanned the smoke, shutting down schools, airports and blurring the skylines of Singapore and Kuala Lumpur. “The government must stop pointing fingers at who started the fires and declare a national disaster,” said Bustar Maitar, global head of Greenpeace’s Indonesia forests campaign. The country, a major emitter of greenhouse gases, chiefly through deforestation in its third-largest tropical forests, has now agreed to accept international help.

Could 2015 Be The Worst Wildfire Year On Record? On Track For A Big Year, With More Than 8 Million Acres Already Burned.: One of the more difficult responsibilities for any hazard scientist is to predict what the future holds. Everyone is interested in knowing how many hurricanes will churn through the Atlantic, where the next earthquake will hit or where the next big fire will occur. Unfortunately there are no definitive answers to these questions, which forces us to rely on informed predictive research and educated assumptions. In the case of wildfire activity in the U.S., the last four years have brought about increasing concern regarding the potential for massive outbreaks of fires due to the prolonged drought that has affected the entire western half of the country. During that time we went from an understanding that wildfires tend to be somewhat seasonal to the current consensus that wildfire activity in many areas of the west, especially in California, is now a year-round threat. Increased fuel loads due to the drought and conditions that favor wildfire activity have prompted discussion that every year could be the "big" year for wildfires. Both 2011 and 2012 saw 8.7 million and 9.3 million acres burned, respectively, which was thought to fulfill the prediction at the time since both figures were greater than the 6.6 million acres that burned on average each year from 2000 through 20101. But then in 2013 and 2014 the annual burned acreage dropped to 4.3 million and 3.5 million acres, respectively, well below the previous decade's average1. At the start of 2015, the number of fires and the amount of acreage burned began to climb. Record numbers of wildfires sprang up early in the year and continued throughout the summer. The acreage total climbed as larger fires developed. To date, there are currently nine active fires in the U.S. that are over 100,000 acres in size2. Alaska usually experiences the majority of these large wildfires, but of the current nine, only one is in Alaska. The other eight are in Washington (3), Oregon (2), California (2), and Idaho (1)2.

Western Canada’s glaciers losing ice at near-record rates | Calgary Herald: Glaciers in Western Canada continue to melt at an alarming rate, with researchers recording a five-and-a-half metre ice surface loss on the Athabasca Glacier in the past year. The popular tourist attraction, part of the Columbia Icefield along Highway 93 North, is being monitored by the Changing Cold Regions Network. “We measured, up until early September, about five-and-a-half metres of ice melt this year, which is quite substantial,” said co-principal investigator John Pomeroy, who’s also the director of the Centre for Hydrology at the University of Saskatchewan. “It would certainly be one of the higher measurements recorded there.” The near-record melt comes after a similar measurement last year on the Athabasca Glacier, which flows into the Pacific, Atlantic and Arctic oceans. It’s part of a pattern around the world — a concern for future water supply.  According to a paper released in August, glacier decline in the first decade of the 21st century has reached a historical record since the start of direct observations. The study by the World Glacier Monitoring Agency, which includes glaciologist Mike Demuth from Natural Resources Canada, suggested the global phenomenon will continue even without further climate change.

Less snow in Tibet means more heatwaves in Europe -- Recent summer heatwaves in Europe and northeast Asia have caused massive water shortages and a large number of deaths. But the mechanism behind these extreme weather events is not fully understood.  Scientists at China’s Nanjing University of Information Science and Technology now say that decreasing snow cover in the Tibetan Plateau could be playing an important role.  Professor Wu Zhiwei and her team used monthly snow cover and air temperature data from the past fifty years to build a global circulation model.  Their findings show that reduced snow cover on the Tibetan Plateau triggers high pressure over southern Europe and northeast Asia, reducing cloud formation and pushing up temperatures. Warmer and drier conditions in turn further inhibit cloud formation, intensifying local heat waves, says their paper, published recently in Climate Dynamics.   With further snow loss projected in the future, “Tibetan Plateau snow cover may play an increasingly significant role in shaping the Eurasian heat waves in the next decades,” the Chinese scientists conclude. Summer snow cover on the Tibetan plateau has already decreased significantly over the past 50 years with rising levels of global greenhouse gases. The region is warming at almost three times the global average.

Melting of Antarctic Ice Shelves Could Double by 2050, Dramatically Increasing Sea Level Rise -- If countries act fast to reduce global greenhouse gas emissions, according to new research, there is still time to curtail the most cataclysmic Antarctic ice melt.  However, according to a study published Monday in the journal Nature Geoscience, if fossil fuel consumption maintains its current rate, Antarctica may experience a widespread collapse of its ice shelves, which could spur significant sea level rise. Researchers employed a combination of satellite observations of ice surface melting and climate model simulations under scenarios of intermediate and high levels of greenhouse gas emissions. Under both emissions scenarios, by 2050, the models indicate a “strong potential” for the doubling of surface melting of Antarctica’s ice shelves, which are the “floating extensions” of the continent’s ice sheets. When extended to 2100, the trajectories diverge, with the more intense scenario showing “ice sheet surface melting approaches or exceeds intensities associated with ice shelf collapse in the past” and the reduced-emissions scenario showing “relatively little increase in ice sheet melting” after 2050. “The data presented in this study clearly show that climate policy and therefore the trajectory of greenhouse gas emissions over the coming century, have an enormous control over the future fate of surface melting of Antarctic ice shelves, which we must consider when assessing their long-term stability and potential indirect contributions to sea level rise,”

Interactive Map Shows 414 U.S. Cities Already Locked Into Catastrophic Sea Level Rise -- According to a study published Monday in the journal Nature Geoscience, if fossil fuel consumption maintains its current rate, Antarctica may experience a widespread collapse of its ice shelves, which could spur significant sea level rise. Another study published Monday in the journal Proceedings of the National Academy of Sciences (PNAS), looks at how rising sea levels will affect U.S. coastal cities over time based on various carbon scenarios, from aggressive carbon cuts to unchecked pollution. Researchers found that 414 towns and cities “have already passed their lock-in date, or the point at which it’s guaranteed that more than half the city’s populated land will eventually be underwater no matter how much humans decrease carbon emissions; it’s just a matter of when,” says Huffington Post. That’s “the date where we let the genie out of the bottle, when it’s past the point of no return,” lead study author Benjamin Strauss of Climate Central told Huffington Post. The study follows a report last month which found that the Antarctic ice sheet would melt completely if all of the world’s coal, oil and gas reserves were extracted and burned. Another, put forth by former NASA Scientist James Hansen this summer, argued that glacial melting will “likely” occur this century and could cause as much as a 10-foot sea-level rise in as little as 50 years. All of these reports confirm that sea level rise would be devastating for coastal cities in the U.S. To illustrate just how destructive it would be, Climate Central, in conjunction with the PNAS study, created an interactive map showing which U.S. cities we could lose to sea level rise, in what year we will lock in enough future sea level rise to inundate each city and what percentage of the population in each city lives below the locked-in sea level rise.  Check it out:

The oceans are becoming too hot for coral, and sooner than we expected -- This week, scientists registered their concern that super-warm conditions are building to a point where corals are severely threatened across the tropical Indian, Pacific and Atlantic oceans. They did so after seeing corals lose colour across the three major ocean basins – a sign of a truly momentous global change. This is only the third global bleaching event in recorded history.  Over the past 12 months, the temperatures of the upper layers of the ocean have been running unseasonably warm. Underwater heatwaves have torn through these tropical regions over summer, and corals across large areas of reef have lost their colour as the algal partners (or symbionts) that provide much of the food for corals have left their tissues. Bereft, corals are beginning to starve, get diseased and die. The “heatwaves” that are causing the problem are characterised by extremes that are 1-3 degrees C warmer than the long-term average for summer. It doesn’t seem like much but past experience has shown us that exposure to small increases in temperatures for a couple of months is enough to kill corals in great numbers.  In the first global mass bleaching event in 1998, regions such as Okinawa, Palau and north-west Australia lost up to 90% of their corals as temperatures soared.  The key concern here is that corals are not an inconsequential part of the biology of the ocean. While geographically insignificant (less than 0.1% of the ocean), coral reefs punch well above their weight in terms of their importance to the ecology of the ocean and to humans. Over a million species are thought to live in and around coral reefs, while an estimated 500 million people derive food, livelihoods and other benefits from coral reefs throughout the tropics.

Our Deadened, Carbon-Soaked Seas -- Ocean and coastal waters around the world are beginning to tell a disturbing story. The seas, like a sponge, are absorbing increasing amounts of carbon dioxide from the atmosphere, so much so that the chemical balance of our oceans and coastal waters is changing and a growing threat to marine ecosystems. Over the past 200 years, the world’s seas have absorbed more than 150 billion metric tons of carbon from human activities. Currently, that’s a worldwide average of 15 pounds per person a week, enough to fill a coal train long enough to encircle the equator 13 times every year. We can’t see this massive amount of carbon dioxide that’s going into the ocean, but it dissolves in seawater as carbonic acid, changing the water’s chemistry at a rate faster than seen for millions of years. Known as ocean acidification, this process makes it difficult for shellfish, corals and other marine organisms to grow, reproduce and build their shells and skeletons.  Human health, too, is a major concern. In the laboratory, many harmful algal species produce more toxins and bloom faster in acidified waters. A similar response in the wild could harm people eating contaminated shellfish and sicken, even kill, fish and marine mammals such as sea lions. Increasing acidity is hitting our waters along with other stressors. The ocean is warming; in many places the oxygen critical to marine life is decreasing; pollution from plastics and other materials is pervasive; and in general we overexploit the resources of the ocean. Each stressor is a problem, but all of them affecting the oceans at one time is cause for great concern. For both the developing and developed world, the implications for food security, economies at all levels, and vital goods and services are immense.

Scuba Divers’ Haunting Photos Show Devastating Impact of Ocean Trash on Marine Life  --Many of us know about the staggering levels of ocean pollution, but not all of us have seen a giant sponge sliced through by fishing line or have tugged back armfuls of trash lurking deep underwater. Now, through a striking photo campaign, Beneath The Waves, from the Project AWARE Foundation—a global community of scuba divers who are working toward trash-free oceans—we get to see how our oceans are treated like trash dumps up close and personal, and why action must be taken immediately. For the past month, divers from around the world have been uploading photos of marine debris onto TwitterInstagram and Project AWARE’s website to bring attention and urge for solutions to this transnational issue.

These 5 Countries Account for 60% of Plastic Pollution in Oceans -- Roughly 8 million tons of plastic is dumped into the world’s oceans every year, and according to a new study, the majority of this waste comes from just five countries: China, Indonesia, the Philippines, Thailand and Vietnam.  It appears that these five countries are responsible for up to 60 percent of the marine plastic entering our oceans, according to Stemming the Tide, a study released last month by the Ocean Conservancy and McKinsey Center for Business and Environment. Why are these parts of Asia leaking so much plastic? Well, as the study suggests, these emerging countries are experiencing rapid economic growth, reduced poverty and improved quality of life. This development is, of course, fantastic. However, as these economies grow, so does the consumer use of plastic and plastic-intensive goods. The caveat of this increased plastic demand is that these countries do not yet have waste-management infrastructures that can tackle the accompanying excess waste. It’s projected that by 2025, plastic consumption in Asia will increase by an astonishing 80 percent to surpass 200 million tons. And unless steps are taken to manage this waste properly, in ten short years the ocean could contain one ton of plastic for every three tons of fish, “an unthinkable outcome,” the study says.

Methane release from melting permafrost could trigger dangerous global warming:   Unlike carbon dioxide, which is emitted primarily through burning of fossil fuels, methane has a large natural emission component. This natural emission is from warming permafrost in the northern latitudes. Permafrost is permanently frozen ground. Much of the permafrost is undisturbed by bacterial decomposition. As the Earth warms, and the Arctic warms especially fast, the permafrost melts and soil decomposition accelerates. Consequently, an initial warming leads to more emission, leading to more warming and more emission. It is a vicious cycle and there may be a tipping point where this self-reinforcing cycle takes over. Recently, a policy briefing from the world-leading Woods Hole Research Center has moved our understanding of this risk further through a clearly-written summary. The briefing cites two recent papers (here and here) that study the so-called permafrost carbon feedback.To put this in perspective, permafrost contains almost twice as much carbon as is present in the atmosphere. In the rapidly warming Arctic (warming twice as fast as the globe as a whole), the upper layers of this frozen soil begin to thaw, allowing deposited organic material to decompose. The plant material, which has accumulated over thousands of years, is concentrated in to upper layers (half of it is in the top 10 feet). There is a network of monitoring stations that are measuring ground temperatures have detected a significant heating trend over the past few decades and so has the active layer thickness.

Exxon’s Climate Concealment - MILLIONS of Americans once wanted to smoke. Then they came to understand how deadly tobacco products were. Tragically, that understanding was long delayed because the tobacco industry worked for decades to hide the truth, promoting a message of scientific uncertainty instead.  The same thing has happened with climate change, as Inside Climate News, a nonprofit news organization, has been reporting in a series of articles based on internal documents from Exxon Mobil dating from the 1970s and interviews with former company scientists and employees.  Had Exxon been upfront at the time about the dangers of the greenhouse gases we were spewing into the atmosphere, we might have begun decades ago to develop a less carbon-intensive energy path to avert the worst impacts of a changing climate. Amazingly, politicians are still debating the reality of this threat, thanks in no small part to industry disinformation.  Government and academic scientists alerted policy makers to the potential threat of human-driven climate change in the 1960s and ’70s, but at that time climate change was still a prediction. By the late 1980s it had become an observed fact. But Exxon was sending a different message, even though its own evidence contradicted its public claim that the science was highly uncertain. Exxon (which became Exxon Mobil in 1999) was a leader in these campaigns of confusion. In 1989, the company helped to create the Global Climate Coalition to question the scientific basis for concern about climate change and prevent the United States from signing on to the international Kyoto Protocol to control greenhouse gas emissions. The coalition disbanded in 2002, but the disinformation continued. Journalists and scientists have identified more than 30 different organizations funded by the company that have worked to undermine the scientific message and prevent policy action to control greenhouse gas emissions.

Obama Administration Targets Greenhouse Gases That Are Up To 10,000 Times More Potent Than CO2 - The Obama administration has announced new efforts to reduce the use of hydrofluorocarbons (HFCs), potent greenhouse gases that are used in refrigerators, air conditioners, aerosols, and foam products.  The White House announcement outlines commitments from private sector companies to reduce their use of HFCs, a class of gases that can trap 10,000 times more heat than carbon dioxide. It also includes commitments from the government, such as plans from the Department of Defense to equip its new class destroyers and amphibious transport dock ships with low-emissions refrigeration and air conditioning. The DoD also announced that it would provide $3 million for research into HFC alternatives that won’t contribute so much to climate change. The White House estimates that, over the next 10 years, the commitments from companies and government agencies will cut HFC emissions by the equivalent of 1 billion metric tons of carbon dioxide. The’s equal, according to the White House, to removing 210 million cars from the road for one year. HFCs are a type of fluoridated gas that became common in certain industries after chlorofluorocarbons, which were once used in refrigerators and air conditioning and whose use led to a hole in the ozone layer, were banned. Banning CFCs is helping the ozone repair itself, but it also opened the door for HFCs as a replacement. HFCs are potent greenhouse gases that leak into the atmosphere during maintenance of A.C. or refrigeration units, and also escape when these appliances are thrown away. Without efforts to limit their use, the White House estimates that their emissions will triple in the U.S. by 2030.

Bringing Republicans to the Climate Change Table - “We stand warned by serious and credible scientists across the world that time is short and the dangers are great,” John McCain, the Republican candidate for president, said in the spring of 2008. “Instead of idly debating the precise extent of global warming, or the precise timeline of global warming, we need to deal with the central facts of rising temperatures, rising waters and all the endless troubles that global warming will bring.” What accounts for this remarkable collective turnaround, unique among political parties around the world, even as climate scientists have accumulated greater evidence of how humanity is dangerously altering the planet? As it turned out, a well-financed push by fossil fuel interests to deny climate science dovetailed smoothly with the burst of anti-government anger that gave rise to the Tea Party from the depths of the Great Recession. This shift has made it impossible to pass any legislation in Congress to help deal with the problem. Is it possible to turn the Republican Party around? It won’t be easy. Republican leaders like Mitch McConnell of Kentucky are wedded to defending a declining coal industry and advancing the interests of oil companies, most clearly in their support for the Keystone pipeline. Many of the party’s lawmakers and presidential candidates get a lot of money from people like the Koch brothers, who have multimillion-dollar contributions for anybody who will stand against efforts to curb the use of fossil fuels. But there is more than money to the story. For the angry supporters of the Tea Party, opposed to government spending in almost any form, the prescription is anathema. “If you decide climate change is real, there must be a role for government to combat it. So the only way out is to deny it exists,”  For all these obstacles, though, it may be possible to thread a solution through the tangle of ideology and money. Recent polls find that even conservative Republicans believe the climate is changing and humans are, to some extent, to blame.Last month, 11 Republicans in the House introduced a resolution that — tortuously worded though it may have been — acknowledged the need to “address the causes and effects” of a changing climate.

World will pass crucial 2C global warming limit, experts warn - Pledges by nations to cut carbon emissions will fall far short of those needed to prevent global temperatures rising by more than the crucial 2C by the end of the century. This is the stark conclusion of climate experts who have analysed submissions in the runup to the Paris climate talks later this year. A rise of 2C is considered the most the Earth could tolerate without risking catastrophic changes to food production, sea levels, fishing, wildlife, deserts and water reserves. Even if rises are pegged at 2C, scientists say this will still destroy most coral reefs and glaciers and melt significant parts of the Greenland ice cap, bringing major rises in sea levels. “We have had a global temperature rise of almost 1C since the industrial revolution and have already seen widespread impacts that have had real consequences for people,” . “We should therefore be striving to limit warming to as far below 2C as possible. However, that will require a level of ambition that we have not yet seen.” In advance of the COP21 United Nations climate talks, every country was asked to submit proposals on cutting use of fossil fuels in order to reduce their emissions of greenhouses gases and so tackle global warming. The deadline for these pledges was 1 October. A total of 147 nations made submissions, and scientists have since been totting up how these would affect climate change. They have concluded they still fall well short of the amount needed to prevent a 2C warming by 2100, a fact that will be underlined later this week when the Grantham Research Institute releases its analysis of the COP21 submissions. This will show that the world’s carbon emissions, currently around 50bn tonnes a year, will still rise over the next 15 years, even if all the national pledges made to the UN are implemented. The institute’s figures suggest they will reach 55bn to 60bn by 2030.

Oil bosses fight for relevance before climate talks – Oil and gas industry leaders will launch a final charm offensive on Friday to highlight the sector’s relevance in the global fight against climate change before a key summit in Paris later this year. In an unprecedented public appearance, the bosses of Europe’s top oil companies, who earlier this year jointly called on governments to introduce a global carbon pricing system, will be joined by the heads of the national oil companies of Saudi Arabia and Mexico who will lend their support to the initiative. The rare show of unity at a time when companies are all struggling with a sharp drop in oil prices also highlights a deep rift with American oil companies such as Exxon Mobil and Chevron who stayed away from the initiative. The chief executives of Total, Britain’s BP and BG Group, Italy’s Eni, Norway’s Statoil , Spain’s Repsol, Saudi Aramco and Pemex will again call for a global pricing system on carbon, which they say will give an economic incentive for the private sector to use cleaner sources of energy and to develop new technologies such as carbon capture and storage (CCS). They will also again urge governments to dump coal in favor of cleaner natural gas in power plants and heavy industry. For many of the companies, this is a fight for the future of the oil and gas sector in the public debate as a rising number of organizations and politicians call to minimize the use of fossil fuels in favor of renewable energy such as wind and solar power while seeking to ostracize oil companies among investors.

Enforcing a global climate deal: speak loudly, carry no stick | Reuters: Negotiators have several terms for the way they plan to enforce any deal reached at global climate talks in Paris this December. "Peer pressure" and "cooperation" are a couple. "Race to the top" is the American buzzword. What you won’t hear mentioned is the word "sanctions". Or "punishment". For all their efforts to get 200 governments to commit to the toughest possible cuts in greenhouse gas emissions, climate negotiators have all but given up on creating a way to penalize those who fall short. The overwhelming view of member states, says Christiana Figueres, head of the U.N. Climate Change Secretariat, is that any agreement "has to be much more collaborative than punitive", if it is to happen at all. "Even if you do have a punitive system, that doesn't guarantee that it is going to be imposed or would lead to any better action," Figueres said. To critics, the absence of a legal stick to enforce compliance is a deep - if not fatal - flaw in the Paris process, especially after all countries agreed in 2011 that an agreement would have some form of "legal force". They warn that a deal already built upon sometimes vague promises from member states could end up as a toothless addition to the stack of more than 500 global and regional environmental treaties, while the rise in global temperatures mounts inexorably past a U.N. ceiling of 2 degrees Celsius (3.6 Fahrenheit), with the prospect of ever more floods, droughts and heatwaves.

India chooses electricity and economics over emissions goals: India’s formal climate pledge to the United Nations ahead of this year’s Paris summit highlights the crossroads at which the country’s electricity sector finds itself. On one hand, there is a very strong push to deliver more energy from renewable resources, as demonstrated by India’s pledge to source 40% of electricity from non-fossil sources by 2030. But while emissions reduction is important, providing electricity to the people appears to be the more pressing issue – as perhaps shown by India’s decision not to set an overall emissions-reduction target in its UN pledge. It has opted instead to set a clean energy goal and to pledge to cut the emissions intensity of its economy by a third by 2030. With India expected to surpass China’s population by 2050, one of the key issues is to deliver electricity to those people who are currently without it. That will mean expanding its existing electricity generation assets, as well replacing those that are being retired. President Narendra Modi is a huge fan of renewables. During his time as chief minister of the state of Gujarat, he oversaw India’s largest solar program. But delivering the same on a national level will be much harder.Renewable energy will also be crucial if India is to hit its other new target of reducing greenhouse emissions per unit of gross domestic product (GDP) by 33-35% by 2030 on 2005 levels. This builds on its existing target of a 20-25% reduction by 2020. That policy is already credited with encouraging coal companies to shift their thinking.

Global warming will have us ′roasted and toasted,′ says IMF chief Lagarde -- "If we collectively chicken out of this we'll all turn into chickens and we'll all be fried, grilled, toasted and roasted," International Monetary Fund (IMF) chief Christine Lagarde said, talking to officials at the IMF and the World Bank's annual meeting in Lima, Peru. As a solution, Lagarde suggested that taxing carbon emissions would be one way of raising funds to sponsor poorer countries' efforts to tackle global warming. "It is just the right moment to introduce carbon taxes," she said, adding that this could also help governments boost revenues at a time when most countries had little in the manner of "fiscal buffers" to tide them over during a bad financial phase. Revenues from carbon taxes could contribute to rich nations' funding target of $100 billion (89 billion euros) a year by 2020 to help poorer nations fight the impact of climate change, the IMF head explained. According to the Organization for Economic Cooperation and Development's (OECD) latest report, the world was still $38 billion short of that target last year. World Bank President Jim Yong Kim's suggestions to reduce global warming included eliminating energy subsidies, which would cost $5.3 trillion globally in 2015. "We have been trying to help countries remove fuel subsidies," Kim said, adding that this could mean a rise in fuel prices. "Politicians don't like it when taxi drivers and truck drivers block the streets," he said.

This conservative economist makes the case for a carbon tax - N. Gregory Mankiw is, if not a household name, a dorm-room one. His Principles of Economics textbook is the standard for most college intro-to-econ courses, with more than a million copies sold. A professor at Harvard, Mankiw teaches the university’s most popular undergraduate course, Econ. 10. He’s also well known in Republican circles. President George W. Bush named him chair of the Council of Economic Advisers in 2003, and in 2006, Mitt Romney brought on Mankiw as an economic adviser, a role the economist played throughout Romney’s 2012 presidential bid. But though he calls himself a conservative — “I want limited government,” he explains — Mankiw advocates a carbon tax, a position notably at odds with all of the current GOP presidential candidates. He articulated his reasons in a recent New York Times op-ed, “The Key Role of Conservatives in Taxing Carbon.” We called him up to get his perspective on the rift over climate change among Republicans, and his advice on how to sell a carbon tax to conservatives.

In California, Electric Cars Outpace Plugs, and Sparks Fly — Of all the states, California has set the most ambitious targets for cutting emissions in coming decades, and an important pillar of its plan to reach those goals is encouraging the spread of electric vehicles.  But the push to make the state greener is creating an unintended side effect: It is making some people meaner.  The bad moods stem from the challenges drivers face finding recharging spots for their battery-powered cars. Unlike gas stations, charging stations are not yet in great supply, and that has led to sharp-elbowed competition. Electric-vehicle owners are unplugging one another’s cars, trading insults, and creating black markets and side deals to trade spots in corporate parking lots. The too-few-outlets problem is a familiar one in crowded cafes and airports, where people want to charge their phones or laptops. But the need can be more acute with cars — will their owners have enough juice to make it home? — and manners often go out the window.

Volkswagen 2016 Models Have New Software Affecting Tests: Volkswagen has disclosed to U.S. regulators that there is additional suspect software in its 2016 diesel models that would potentially help their exhaust systems run cleaner during government tests.Volkswagen confirmed to The Associated Press that the “auxiliary emissions control device” at issue operates differently from the “defeat” device software included in the company’s 2009 to 2015 models disclosed last month. That disclosure triggered the worldwide cheating scandal engulfing the world’s largest automaker.The newly revealed software makes a pollution control catalyst heat up faster, improving performance of the device that separates smog-causing nitrogen oxide into harmless nitrogen and oxygen gases.VW spokeswoman Jeannine Ginivan said the new issue with the 2016 vehicles was first revealed last week to U.S. Environmental Protection Agency and California regulators.“Volkswagen has disclosed, in the application process for the model year 2016 2.0 TDI models, an auxiliary emissions control device,” Ginivan said. “This has the function of a warmup strategy which is subject to approval by the agencies. The agencies are currently evaluating this and Volkswagen is submitting additional information.”

U.S. Pursues Several Paths in Volkswagen Probe - WSJ: The U.S. attorney’s office in Detroit and the Justice Department’s Fraud Section joined a sweeping federal probe of Volkswagen over emissions-test cheating, said people familiar with the matter, signaling the government’s intent to cast a broad net and explore numerous paths to a possible criminal case. The number of U.S. offices now involved in the Volkswagen case suggests an investigation could target the German auto maker and its employees for alleged offenses ranging from pollution to misleading government officials to claims made to consumers. The Federal Trade Commission, which investigates fraudulent advertising, confirmed its involvement, suggesting a focus on potentially misleading claims regarding the emissions. A Volkswagen spokeswoman wouldn’t comment on developments in the probe, saying only that the auto maker is cooperating with all official inquiries. Justice Department representatives also declined to comment. The involvement of the U.S. attorney in Detroit, Barbara McQuade, signals her office may take a key role in what is expected to be a major case. Ms. McQuade has a reputation as an aggressive prosecutor, having won a corruption case against former Detroit Mayor Kwame Kilpatrick. In sprawling investigations like the Volkswagen probe, the Justice Department has a choice of which prosecutor to assign.

VW may be sorry, but 'rolling coal' diesel polluters make no apologies - While Volkswagen executives turn on a spit, apologizing for their role in the ongoing diesel emissions cheating scandal, another group of polluters isn’t sorry at all. They’re the “rolling coal” guys, who use aftermarket software programs and other devices to turn their EPA-approved diesel pickup trucks into smoke-spewing monsters. They deploy hideous clouds of black exhaust by hitting a switch, stomping on the gas and enshrouding an unsuspecting Prius — as in this video. The practice, known as “chipping,” is said to increase horsepower and torque and improve fuel efficiency — with no concern for emissions. Online retailers such as or the appropriately named sell, for several hundred dollars, kits designed to modify the emissions control systems installed by the manufacturers Ram, Ford and GMC trucks. Proprietors of those companies did not return phone calls or answer emails. But their websites offer guidance.  “Diesel computer chips change the factory timing, boost control, transmission shift points, and other parameters to extract maximum horsepower and torque from your oil burner. Diesel computer chips are designed to make the most out of designed-in power boosts — basically, diesel computer chips engineer out the compromises built in to your software.” The result? The driver is now able to expel, on command, a massive cloud of diesel smoke. Videos available on YouTube suggest that those partaking in the practice are simply interested in telling the world how they feel about environmental limits on their trucks. Some target pedestrians. Others smoke out cyclists.

China launches probe into VW emissions -- China has launched an investigation into Volkswagen as the diesel emissions scandal engulfing the German carmaker reaches the world’s biggest car market. The environmental protection ministry said on Monday that it was “highly concerned” about the issue. However, it added that an initial investigation revealed that only 1,900 imported VW cars included the so-called defeat devices designed to fool emissions tests. It said VW’s locally produced vehicles, which account for the bulk of its sales in the carmaker’s biggest single market, were not affected. VW said on Monday that it was recalling 1,950 imported diesel vehicles in China in order to “correct the engine software”. “After the internal evaluation Volkswagen is now working full speed on a technical solution,” it said, adding that “all vehicles are technically safe and roadworthy”. The German car company is in the midst of a global recall of 11m cars that were fitted with illegal software to cheat emissions tests by regulators. VW was plunged into crisis on September 18 when the Environmental Protection Agency, a US regulator, revealed that the company had installed software in diesel vehicles that was designed to understate emissions of harmful nitrogen oxides in laboratory tests. While diesel is widely used in China to power trucks, the vast majority of cars sold in the country run on petrol.

Why Shouldn’t the US Federal Government Invest $4-$6 Trillion Per Year on Climate Protection? (Part 1 of 2)Why We Should - Recently New Economic Perspectives posted a three-part provisional US Climate Platform I have put together.  The US Climate Platform outlines why and how the US federal government should invest somewhere in the area of $4 trillion to $6 trillion per year on stabilizing the global climate, in addition to preparing the United States and other nations for the upcoming effects of our 200-year long fossil fuel binge.  The climate expenditures would more than double current federal government spending over a period of ten to twenty years, where “spending” means investment in real, useful resources and people.  Quitting fossil fuels means transforming (rapidly) our energy and transportation infrastructure to enable us to use mostly or entirely renewable energy to power civilization.  Without that transformation, we are consigning present and future generations to a world of, at first, diminished quality of life, resource wars, and possible eventual self-extinction of the human species.  The US cannot rescue humanity alone by itself.  Yet global efforts will be significantly hampered by a US government that is not leading or near the front of the global effort to excise fossil fuel use from our economies as quickly as possible. So we also know, especially those who understand the Modern Money Theory school of economics, that currency-issuing governments are not constrained in their use of money by finite quantities of money in their accounts or the taxes they collect in any given time period.  There are technical economic constraints on the investing/spending power of fiat-currency issuing governments, related to the potential for higher levels of inflation or depreciation of the value of one currency versus other currencies, but there is no one-to-one correlation between the danger of very high levels of inflation and increasing government investment.

Why Shouldn’t the US Federal Government Invest $4-$6 Trillion Per Year on Climate Protection? (Part 2 of 2) (Part I) “We shouldn’t invest $4 to $6 Trillion per year more in federal dollars to save humanity because we already have carbon pricing instruments that are doing the job and are still under attack from opponents of climate action. We should stand by, applaud, and not “rock the boat” because serious climate policy makers are only talking about carbon pricing (cap and trade or carbon taxation) and not your full-scale mobilization proposal with its high price tag and dirigiste, mission-driven role for government.” There are several assumptions in this objection that need to be addressed separately for a completely open and rational discussion to take place:

  1. Are carbon pricing instruments alone effective in reducing emissions at all?
  2. Are they effective ENOUGH given the ultimate purpose of stabilizing the climate?
  3. Is it politically wise to “shut up about” an alternative even though it doesn’t support your potential allies? Are you supporting your mutual enemies, the fossil fuel industries and climate deniers, by offering a “more radical” but potentially actually effective alternative that is critical of mainstream climate action advocates?

I will try to address each of these briefly here:

New Report: Civilian Nuclear Facilities Are Just Begging to Be Hacked - Worldwide civilian nuclear infrastructure is woefully underprepared for the likelihood of a cyberattack, according to a new report from researchers at Chatham House, a London-based think-tank. As facilities become more reliant on digital systems and off-the-shelf software, and as top-level awareness of cybersecurity threats stagnates, a serious event seems foretold. "Recent high-profile cyber attacks, including the deployment of the sophisticated 2010 Stuxnet worm, have raised new concerns about the cyber security vulnerabilities of nuclear facilities," begins an executive summary of the report. "As cyber criminals, states, and terrorist groups increase their online activities, the fear of a serious cyber attack is ever present." "This is of particular concern because of the risk—even if remote—of a release of ionizing radiation as a result of such an attack," the summary continues. "Moreover, even a small-scale cyber security incident at a nuclear facility would be likely to have a disproportionate effect on public opinion and the future of the civil nuclear industry." Some part of the problem is that nuclear facilities have often delayed implementation of digital control systems, usually the result of regulatory requirements. This lateness means that nuclear facility operators have less experience when it comes to cybersecurity. For decades, they've focused on physical, real-life security, while digital defenses languished. You're probably not going to get a bomb near a reactor core, but malicious code is another story.

Another U.S Nuke Bites the Dust -- The chain reactor operator Entergy has announced it will close the Pilgrim nuke south of Boston. The shut-down will bring U.S. reactor fleet to 98, though numerous other reactors are likely to face abandonment in the coming months. But Entergy says it may not take Pilgrim down until June 1, 2019—nearly four years away. Entergy is also poised to shut the FitzPatrick reactor in New York. It promises an announcement by the end of this month. Entergy also owns Indian Point 2 and Indian Point 3 some 40 miles north of Manhattan. Unit 2’s operating license has long since lapsed. Unit 3’s will expire in December.Meanwhile California’s two reactors at Diablo Canyon are surrounded with earthquake faults. They are in violation of state and federal water quality laws and are being propped up by a corrupt Public Utilities Commission under fierce grassroots attack. With a huge renewable boom sweeping the state, Diablo’s days are numbered—and hopefully will shut before the next quake shakes them to rubble.Meanwhile, like nearly all old American nukes, both Pilgrim and FitzPatrick are losing tons of money. Entergy admits to loss projections of $40 million/year or more at Pilgrim, with parallel numbers expected at FitzPatrick. The company blames falling gas and oil prices for the shortfalls.

Decommissioning Pilgrim to cost $1B - Decommissioning a nuclear power plant like Pilgrim will cost close to $1 billion and could take a decade to complete, but is not particularly complicated, according to one expert. “It’s not dissimilar from taking care of asbestos, you need to make sure when you’re bringing down the structure you don’t disburse the potentially hazardous material,” said Jacopo Buongiorno, a nuclear science and engineering professor at the Massachusetts Institute of Technology. “It takes time and money, but it’s not a technically super challenging, untried process.” Entergy, the owner of the Plymouth nuclear plant, yesterday said it will close it by 2019. Once the plant shuts down, Pilgrim will begin moving its spent nuclear fuel into dry cask storage. Dry casks are steel containers that are often welded shut, and are designed to store spent nuclear fuel. That process could take about five years, said Bill Mohl, president of Entergy. Pilgrim will have to keep the spent fuel on site, because a plan to create permanent storage for nuclear waste underneath Yucca Mountain in Nevada has stalled in Congress, and there is nowhere else to put it. “We are very confident we can safely store that fuel on site,”

Inspired By Game Of Thrones, TEPCO Resumes Building "Ice Wall" Around Fukushima -- 14 Months after abandoning the "Game of Thrones"-esque frozen-water-wall containment plan for Fukushima, Bloomberg reports that TEPCO expects to begin freezing a soil barrier by the end of the year to stop a torrent of water entering the wrecked Fukushima nuclear facility, moving a step closer to fulfilling a promise the Japanese government made to the international community more than two years ago. Officials noted, rather uninspiringly, the frozen wall, along with other measures, "should be able to resolve the contaminated water issues before the Olympic games." When they unveiled this "Pacific-Rim-like' 1.4km long ice-wall a year ago, we snarkily wished them luck, questioning their sanity. Of course, we got a hint when TEPCO admitted that "we have yet to form an ice plug because we can’t get the temperature low enough to freeze the water." At the time, there was no Plan B - though we noted that 'wasting' JPY 32 billion on the project so far was likely helping GDP. But now Plan B appears to be the same as failed Plan A... (as Bloomberg reports) “In the last half-year we have made significant progress in water treatment,” Akira Ono, chief of the Fukushima Dai-Ichi plant, said Friday during a tour of the facility north of Tokyo. The frozen wall, along with other measures, “should be able to resolve the contaminated water issues before the Olympic games.”

Anti-fracking proposal goes to Youngstown voters for 5th time -  Vindicator -- It took a decision by the Ohio Supreme Court, but the anti-fracking Community Bill of Rights charter amendment is in front of Youngstown voters for a fifth time on the Nov. 3 ballot. The bill calls for fracking to be banned in the city, which opponents and state officials say isn’t enforceable because those decisions are made by the Ohio Department of Natural Resources. Susie Beiersdorfer, a member of Frackfree Mahoning Valley, a citizens group that backs the proposal, said, “It’s a very important issue to the people of Youngstown. It’s about local control.”  She also objects to those who say putting this on the ballot is a waste of time. “If we can’t petition our government, democracy will go down the toilet,” Beiersdorfer said. “Everything starts at the local level. If it passes, we don’t know what happens from there. If it doesn’t pass, I don’t know if we will seek a sixth time.” Mayor John A. McNally, a member of the Mahoning Valley Coalition for Job Growth and Investment, which opposes the fracking-ban proposal, said, “The residents of the city are tired of hearing about this issue.”Fracking isn’t happening in the city, but there are other businesses – such as other oil and gas drilling and those that transport fracking water – that would be hurt if this amendment is approved, McNally said. “If it passes, a company or business could file in court and it would be ruled unconstitutional, but it has the potential to drive away business from the city,” The Ohio Supreme Court wrote in a Feb. 17 decision regarding a similar matter in Munroe Falls that the state constitution’s home-rule amendment doesn’t grant local governments the power to regulate oil and gas in their limits.

Southeast Ohio Senators pass resolution supporting lift of US oil ban - A U.S. Congress bill that might increase hydraulic fracturing activity is getting a nod from the state senate, thanks in no small part to two Southeast Ohio representatives. The Ohio State Senate passed a resolution by a vote of 31-1 Wednesday urging U.S. Congress to "lift the prohibition on the export of crude oil from the United States." "This to me (benefits) the whole fracking industry," Andrea Rike, a member of the Athens County Fracking Action Network, said. "The whole premise of the ban was clean energy and energy independence for the U.S., and to me, lifting this ban lets it become a free-for-all, and the oil industry is given the right (to put) communities at risk." The statehouse resolution coincides with a U.S. House of Representatives resolution passed Friday that, if passed by the U.S. Senate, would end the 1975 ban on oil exports."This resolution lifts the ban on U.S. exports, in turn driving down prices, creating jobs and making domestic producers more competitive," State Sen. Troy Balderson, R-Zanesville, who introduced the bill, said in an email. "Lifting the ban would be good for the U.S., good for Ohio and good for Athens County."  That resolution, which is already under threat of a Presidential veto, would help encourage manufacturing jobs in Southeast Ohio, according to State Sen. Lou Gentile, D-Steubenville, who represents a part of Athens. "The lion's share of oil and gas production in this state is taking place in (my) district," he said. "The new production means that the key components that go into that need to be manufactured. Those goods and services will be provided by (Southeast Ohio workers)."

Gulfport Energy, Rice Energy forming new joint venture in Ohio's Utica Shale -  Oklahoma-based Gulfport Energy Corp. and a subsidiary of Pennsylvania-based Rice Energy Inc. have agreed to develop natural gas-gathering pipelines and water services to support Gulfport’s drilling for natural gas in eastern Belmont and Monroe counties. Gulfport and Rice announced Thursday that they plan to invest approximately $520 million to develop gathering and compreRicssion assets and $120 million for water assets over the next six years. Each partner will fund its proportionate share of the total capital investments. Initial construction of the system is expected to begin immediately and first deliveries are planned for the middle of 2016. Gulfport will own 25 percent of the joint venture. Rice will own the remaining 75 percent. The joint venture will be supported by long-term, fee-based service agreements with Gulfport. Rice will be responsible for constructing and operating the joint venture’s assets. That includes 165 miles of natural gas pipelines, 50,000 horsepower of compression to deliver natural gas to nearby interstate pipelines and a water system to provide water for hydraulic fracturing or fracking. Gulfport will dedicate about 77,000 acres to the joint venture. That includes recent acquisitions from Paloma Partners III LLCF and American Energy-Utica LLC. In addition, Gulfport will also contribute to the venture an existing 11-mile gas-gathering pipeline and an existing connection to an interstate pipeline, both of which are in Monroe County.

Horizontal drilling comes to Central Ohio with Morrow County well - Morrow County is getting its first horizontal oil well. Houston-based EOR Technology LLC plans to drill the well about 45 miles north of Columbus, the Galion Inquirer reports. EOR typically stands for enhanced oil recovery, which includes techniques to extract oil after much of it has already been drained.  Central Ohio has always been home to drilling, but with traditional vertically drilled wells. Part of the reason the Utica shale in eastern Ohio is coveted by drilling companies is because it's now economically accessible to get the oil and gas in it via horizontal drilling and hydraulically fracturing, or fracking. Now that practice is coming to Central Ohio, in Canaan Township, about 150 miles from most Utica shale drilling activity in the state. The drilling permit is for 3,200 feet, a depth too shallow to tap the Utica shale, as Marcellus Drilling News points out. Instead, it's the Trempealeau formation, state records show, whose oil was coveted in the 1960s. The Morrow County well is under construction.

Central Ohio set for earthquake drill - Columbus Dispatch -- Just follow the news for a few minutes and you’ll find plenty to worry about: terrorism, flooding, gun violence.   Earthquakes, by comparison, don’t top many worry lists, unless you’re from California.  In fact, Franklin County’s Emergency Management and Homeland Security Agency ranks quakes at the bottom of its risk assessment list, behind extreme heat, drought and invasive species. Topping the list are tornadoes, dam failure and flooding.  Still, a statewide drill on Thursday will warn people about geologic dangers and how to prepare for them.  “They occur in other places. We have felt them here. But there has been no damage,” said Kelly McGuire, spokeswoman for the agency promoting the Drop, Cover, and Hold drill Thursday morning.  At 10:15 a.m., participants will listen to a digital recording simulating an actual earthquake along with instructions about how to seek cover under furniture and stay there until the shaking stops. “We're not required to participate in the event,” spokeswoman Jacqueline Bryant, said of the brief drill. “Our schools are not participating.”  Folks in northeastern Ohio, however, might want to take the drill seriously.  In the study, published in the Bulletin of the Seismological Society of America, three Miami University geologists reported that nearly 80 earthquakes in the Youngstown area were caused by oil and gas drilling by fracking into shale deposits in March 2014.

Putting The Marcellus / Utica Into Perspective --- Part VI - Some numbers to give some perspective on the Marcellus/Utica supply situation:

  • At the moment there are 8,000 producing unconventional wells in Pennsylvania and Ohio.
  • There are over 3,000 wells that are already drilled (some frac'd) that are not yet online (producing).
  • At the recent rate of three (3) wells per day being brought online, it would take over 1,000 days - over 2 1/2 years to bring these wells into production.
  • A leading operator, Antero, recently said that they have less than a quarter of their leased acreage held by production (HBP).
  • The 'wildcatting' of the dry gas Utica has barely started and is already showing off the charts production.  .

One of the arguments for intermittent energy (wind/solar) is that once the farms are brought on-line, the energy source is free (wind is free; solar is free). Proponents of intermittent energy will say, that, yes, the upfront cost of building an intermittent energy farm is two, three, or several times more expensive than building a natural gas plant, but the cost of energy going forward will offset that initial upfront cost (and that's with huge government tax subsidies). But with natural gas so inexpensive and so plentiful, the argument that wind/solar is free while natural gas will still incur a cost does not hold up. The on-going cost of natural gas is so inexpensive it is a minor piece of the full utility bill. The major part of the utility bill (coal, natural gas, solar, wind) is administrative costs, profits, regulatory inefficiencies, transmission costs, hidden fees, taxes, net metering, etc. Just like buying a bag of potato chips: a $4.99 bag of chips with 20 cents worth of potatoes.

Ohio and Pennsylvania activity report, October 5-12 -- The Pennsylvania Department of Environmental Protection’s Oil and Gas Management department issued 17 oil and gas permits last week, October 5-12. This total may seem underwhelming compared to the previous week’s eruption of 64 oil and gas permits, but researchers at Johns Hopkins University Bloomberg School of Public Health might see a permit cutback as a good thing. The university issued a study suggesting pregnant women who live closer to active natural gas well have a greater risk of high-risk pregnancies or preterm births. The state’s Department of Environmental Protection and Department of Conservation and Natural Resources are partnering with Pennsylvania State University to improve seismic monitoring. Though earthquakes rarely occur in Pennsylvania, scientists believe the study will help track valuable information about the area’s environment. The US Geological Survey reports earthquakes linked to man-made causes like oil and gas development rarely prompt safety concerns, but an earthquake in 1954 believed to be linked to a sinking coal mine caused about $1 million in damages to a neighborhood in Wilkes-Barre. In the latest reports for Ohio, the state issued one horizontal permit for its Marcellus shale from September 27 to October 3. The singular permit, granted to CNX Gas Company LLC, is set for Switzerland in Monroe County. The Utica formation, however, gained 18 horizontal permits for that same time frame, most of which are concentrated in Monroe and Belmont Counties.

Ohio, W.Va., Pennsylvania combine efforts on gas drilling — Ohio, West Virginia and Pennsylvania have agreed to cooperate — rather than compete — in attracting shale-gas development and jobs to their region over the next three years. The states signed an agreement Tuesday during the Tri-State Shale Summit in Morgantown, West Virginia. They agreed to coordinate marketing efforts, workforce development, investment strategies and academic research as they capitalize on Utica and Marcellus shale development “in an environmentally sound manner.” Shale gas has become available through the horizontal drilling practice commonly known as fracking. Ohio Lt. Gov. Mary Taylor said challenges and opportunities surrounding the industry “do not recognize state lines,” so collaboration is essential. The U.S. Energy Information Administration reports the three states have had 85 percent of the increase in U.S. natural gas production since January 2012.

West Virginia, Pennsylvania and Ohio leaders pledge to help build area's shale industry — Community members, leaders and government officials from three states gathered Tuesday to collaborate on ideas in regards to the shale industry. The 2015 Tri-State Shale Summit, which took place in Morgantown at the Waterfront Hotel, featured speakers and guest panelists from West Virginia, Pennsylvania and Ohio. The purpose of the event was to provide a discussion on the future of Marcellus shale and Utica shale in the region. Among those in attendance were U.S. Sen. Joe Manchin, D-W.Va., Gov. Earl Ray Tomblin and Ohio’s Lt. Gov. Mary Taylor. The governor of Pennsylvania, Tom Wolf, provided a video message. During the event, Tomblin, Taylor and Wolf signed an agreement that pledged support and cooperation in the tri-state area for development of the natural gas industry in the Appalachian Basin. “The Allegheny Conference on Community Development, Team NorthEast Ohio and Vision Shared in West Virginia congratulate Gov. Tomblin, Gov. Wolf and Lt. Gov. Taylor on signing this unprecedented memorandum of understanding,” the groups said in a joint statement. “This is a critical step toward demonstrating that our tri-state region is ready, willing and able to make downstream-related business investment a win-win for the region and for the firms — large and small — that have operations in the new global petrochemical center that is the Appalachian Basin.” Manchin said he was glad he had the opportunity to attend this event and hear from others in this industry.

Leaders from 3 states sign historic shale collaboration in Morgantown - – West Virginia, Pennsylvania and Ohio join forces to strengthen the Marcellus and Utica shale industry. At the Tri-State Shale Summit in Morgantown Tuesday, Governor Earl Ray Tomblin said through collaboration, the northeastern region of the country could become the petro chemical capitol of the world and home to billions of dollars in economic development. “As much as we don’t hear about Texas, Louisiana, Mississippi and Alabama individually we hear about the gulf coast being a petro chemical hot bed,” Tomblin stressed. “We must work to promote the Appalachian basin.” Projects like a 500 mile Atlantic coast pipeline through the state reaching North Carolina and a 300 mile mountain valley pipeline from Wetzel County to Virginia could attract drilling and gas companies to West Virginia. Independent state programs lowering taxes to entice industry growth and legislation on horizontal shale can create interest in W.Va. alone. But, Ohio Lt. Governor Mary Taylor, also speaking at the summit, said through collaboration each state could maximize its workforce to maximize interest in the region from companies worldwide. According to Taylor, 13, 863 jobs have already been created by Marcellus and Utica drilling. She noted a SafeNet program helping create qualified natural gas industry workers. “It’s a training program that is very specific to this industry and it’s currently offered at 3 schools in Ohio. I know workforce development will continue to be a key component of this agreement,” she explained.

Editorial: We know the drill: Plan for worst - New cases of common sense never cease to surprise us. Still, despite the shock at the agreement reached Tuesday at the Tri-State Shale Summit in Morgantown, no one should be in awe, yet. The shared action plan we refer to — signed by Ohio, Pennsylvania and West Virginia — provides for cooperation, rather than competition, among these states to attract shale gas development and jobs to this region for the next three years. The plan calls for coordinating marketing efforts, workforce training, investment policies and academic research, while capitalizing on Marcellus and Utica shale development. But most importantly, this agreement calls for achieving this development “in an environmentally sound manner.” First off, this agreement makes sense from many perspectives. Obviously, this region’s track record in natural gas production is staggering. According to the U.S. Energy Information Administration, these three states alone are responsible for 85 percent of the increase in U.S. natural gas production since January 2012. Their potential for production of natural gas in the future many suspect will be far more impressive as pipeline grids expand, liquified natural gas facilities at major ports go on line and prices rebound. This agreement minces no words about these developments, calling this three-state area “an emerging world-class energy center.” Even shale gas drilling’s byproducts are accounted for in this plan that seeks to bring major petrochemical manufacturers to this tri-state region.

Ohio, Pennsylvania, West Virginia likely to get three or four ethane cracker plants to produce ethylenes for plastics — Ohio, western Pennsylvania and West Virginia are likely to see three or four multi-billion dollar plants built to turn ethane from the Utica Shale into ethylene, a key ingredient for making plastics. That analysis came from Tom Gellrich of TopLine Analytics, a Philadelphia company that closely follows ethane markets, at Tuesday’s Utica Summit III that drew 125 people to Kent State University’s Stark Campus. Gellrich said he is confident that three or four of the so-called cracker plants will be proceeding forward in the Appalachian Basin by 2020. Royal Dutch Shell may be the company farthest along in developing a chemical plant to turn liquid ethane from the Utica Shale into ethylene, he said. That plant, with a $4 billion price tag, would be west of Pittsburgh on the Ohio River in Beaver County.   Shell likely will make its final decision in the next 24 months, he said, and the plant could be running within five years or so. A Thai company, PTT Global Chemical, is looking at building a similar $5.7 billion cracker plant in Ohio’s Belmont County. Braskem/Odebrecht, two Brazilian companies, are looking at a site near Parkersburg, W.Va., although that proposal has run into problems. A Texas-based company, Appalachian Resins, had been looking at a small cracker plant in Ohio’s Monroe County, but those plans are now on hold.

US Gov't Support for Fracking Reveals Oil, Gas Industry Desperation - The use of public resources by the US government to protect domestic oil and gas interests reflects the desperation of those industries, Center for Biological Diversity Climate Media Director Patrick Sullivan told Sputnik.  Sullivan was speaking two days after three US states — Ohio, West Virginia and Pennsylvania — announced on Tuesday that they were joining forces to advance the fracking industry in their territories. "This use of public resources to defend fracking is a sign of how desperate the oil and gas industry and its political allies are becoming," Sullivan said on Thursday. "The grass roots movement to rein in this threat to our health and environment is too strong to be thwarted by pandering politicians." Fracking is a technique of extracting shale gas and oil by injecting pressurized toxic liquid into the ground. Experts warn that the process endangers the environment through leakage of poisonous liquid materials into ground water. "People understand that fracking pollutes our air and water and endangers our climate, and they want this toxic technique stopped before more damage is done," Sullivan said.

Study Finds More Premature Births In Areas Of Heavy Fracking: Expectant mothers have a lot to be concerned about, but those living near fracking sites have even more to fear, an expanding body of evidence shows. Most recently, a data review of more than 10,000 pregnancies has linked living in heavily fracked areas with a higher risk of premature births. In the study, published Sept. 30 in the journal Epidemiology, scientists at Johns Hopkins University, Brown University and the University of California, Berkeley and San Francisco, analyzed data from the 10,496 pregnancies of 9,384 mothers in nearly 700 communities in Pennsylvania from 2009 to 2013. At the same time, they tracked shale gas drilling, fracturing and production in a 12.4-mile radius of each woman. What they found was that mothers who had higher exposure to these operations and infrastructure -- in essence, those who had more drilling and fracking sites in the vicinity of their homes -- were 40 percent more likely to give birth to premature babies. They were also 30 percent more likely to have high-risk pregnancies, the researchers found. "Any form of energy extraction that harms the well-being of infants and pregnant women has no place in society," Sandra Steingraber, a biologist with the organization Americans Against Fracking, who was not involved in the study, said in response to the new findings. "These data show that a ban on fracking is good prenatal care."

Fracking wells linked to high-risk pregnancies -  New research from the Johns Hopkins Bloomberg School of Public Health has revealed that women living near fracking wells are at an increased risk of experiencing high-risk pregnancies and giving birth prematurely.  The study, published in the journal Epidemiology, analysed data from 40 counties in north and central Pennsylvania, where extensive fracking has taken place over recent years. It looked at the records of 9,384 mothers who gave birth to 10,946 babies between January 2009 and January 2013, and correlated it with data on local fracking operations. Women living in the most active areas of fracking were 40 per cent more likely to give birth pre-term, and 30 per cent more likely to have their pregnancy classed as high-risk by an obstetrician.“The growth in the fracking industry has gotten way out ahead of our ability to assess what the environmental and, just as importantly, public health impacts are,” said lead author Brian S. Schwartz, a professor in the Department of Environmental Health Sciences at the Bloomberg School. “More than 8,000 unconventional gas wells have been drilled in Pennsylvania alone and we’re allowing this while knowing almost nothing about what it can do to health. Our research adds evidence to the very few studies that have been done in showing adverse health outcomes associated with the fracking industry.” While the study does not reveal why women near the most active wells are more likely to give birth prematurely, the researchers know that fracking activity results in increased noise, road traffic and other changes that can increase maternal stress levels. Questions have also been raised around the environmental impact of fracking, and its effects on air and water quality.

Fracking chemicals lower sperm count in mice when they reach adulthood, says new research  - Chemicals used in fracking lowered the sperm count in mice when they reached adulthood, according to new research which could have fertility implications for people living in shale gas zones in the United States. American scientists tested 24 chemicals used in the oil and natural gas drilling technique and discovered that all bar one of them were endocrine-disrupting chemicals, or EDCs. EDCs mimic, block or otherwise interfere with hormones, the body’s chemical messengers that act through receptors to regulate the activity of cells and biological processes such as metabolism, reproduction, growth, and digestion. Tests were carried out on the chemicals from Colorado, either on their own or as part of a mixture, for their ability to activate or inhibit action of the oestrogen, androgen, progesterone, glucocorticoid and thyroid receptors using a human cell-based assay.lthough shale gas now accounts for around 50 per cent of US domestic gas production, fracking has failed to make similar inroads in the UK. Among the 23 EDCs the scientists identified, more than 90 per cent of the chemicals disrupted the functions of oestrogens and androgens, male sex hormones such as testosterone. In addition, more than 40 per cent could interfere with progestogens, another type of reproductive hormone, and glucocorticoids, which are involved in metabolism and stress. Thirty per cent of the chemicals disrupted thyroid hormone signalling. “It is clear EDCs used in fracking can act alone or in combination with other chemicals to interfere with the body’s hormone function. These mixture interactions are complex and challenging to predict. More research is needed to assess the many other chemicals used for fracking and to determine how they may be contributing to health outcomes.”

Fracking chemicals proven to reduce sperm count -- A comprehensive study of the chemicals that are actually used in fracking operations in several parts of the United States has found that at least 40 percent of the chemicals can lower sperm count in males, increase testicle size, and increase the testosterone levels in the blood. Dr. Susan C. Nagel of the University of Missouri in Columbia reported the findings in the Oct. 13, 2015, edition of the journal Endocrinology. The levels of the chemicals called endocrine-disrupting chemicals were found to be present in sufficient quantities to have an effect on humans. The study examined exposure of female mice to the chemicals and the resultant impact on the levels of estrogen, androgen, progesterone, glucocorticoid, and thyroid hormones in their offspring.  . The female mice were exposed to 23 chemicals used in fracking for a period of 11 days before the mice gave birth. The exposure levels were equivalent to known levels found in waste water from fracking operations. The study compared the effect of fracking chemicals on the endocrine system of the exposed mice to a group of mice that were not exposed to any of the chemicals. The male mice showed lower sperm counts as adults, larger testes, and higher levels of testosterone in the blood. The researchers compared the level of birth defects, reproductive disorders, cancer, diabetes, obesity, and neurodevelopmental issues that could be attributed to prenatal exposure to fracking chemicals in humans and found a consistent correlation with the mouse study. The potential for endocrine system disruption in humans by fracking chemicals is considered conclusive by the study.

Study: Elevated organic compounds in Pennsylvania drinking water from hydraulic fracturing surface operations, not gas wells: In the largest study of its kind, a Yale-led investigation found no evidence that trace contamination of organic compounds in drinking water wells near the Marcellus Shale in northeastern Pennsylvania came from deep hydraulic fracturing shale horizons, underground storage tanks, well casing failures, or surface waste containment ponds. The presence of organic compounds in groundwater aquifers overlying the Marcellus Shale is likely the result of surface releases from hydraulic fracturing operations and not migration from gas wells or deep shale layers, according to researchers in the lab of Desiree L. Plata, assistant professor of chemical and environmental engineering at Yale. The results of the study were published in the journal Proceedings of the National Academy of Sciences. Brian Drollette, a Ph.D. student in Plata’s lab, is the lead author. Due to its vast reserves of natural gas, the Marcellus Shale has become an active site for hydraulic fracturing. During a period of rapid natural gas well expansion, the researchers regularly visited the northeastern region of Pennsylvania, covering about 7,400 square kilometers, over three years and obtained 64 samples from the drinking water wells of residential properties. Using a suite of chemical analyses, the researchers found that a subset of the groundwater samples contained low levels of organic compounds in areas close to natural gas wells. The analyses also indicated that these compounds most likely entered the groundwater supply from gas extraction operations above the ground surface — and not subsurface migration.

U S Chamber of Commerce : Yale Study: Hydraulic Fracturing Doesn’t Contaminate Drinking Water - Environmental activists who oppose hydraulic fracturing -and the oil and natural gas it produces-have more science to ignore. The latest study is in the Proceedings of the National Academy of Sciences. A team, led by a Yale University researcher, looked at 64 natural gas wells in Pennsylvania three to five years after drilling and found:  There was no evidence of association with deeper brines or long-range migration of these compounds to the shallow aquifers.  In laymen's terms, the act of drilling thousands of feet below the surface (far below drinking water supplies) and hydraulically fracturing natural gas wells does not contaminate drinking water.  Another way of putting it is: Josh Fox doesn't know what he's talking about.  Add this study to the growing list of research confirming that hydraulic fracturing is a safe way to develop energy:  It's no wonder that Secretary of Energy (and physicist) Ernest Moniz said, 'To my knowledge, I still have not seen any evidence of fracking per se contaminating groundwater.'  This reminds us that states are successfully regulating hydraulic fracturing. Duplicative federal regulations aren't needed. Also, states and local governments should rethink their bans on the technology.  When done properly hydraulic fracturing produces abundant energy that powers the American economy, creates jobs, and saves consumers money.

Low prices don't stop investments in state's oil, natural gas - The sales price for a unit of natural gas is down dramatically, but industry leaders say interest and investment in West Virginia’s natural gas industry continues to climb. It’s true some West Virginia drillers have parked their rigs because of plunging oil and natural gas prices. And last week, Gov. Earl Ray Tomblin cited lower prices for natural gas sales — sales that are up 30 percent over last year — when explaining the unprecedented drops in the state’s severance tax collections and announcing an across-the-board budget cut of 4 percent for most West Virginia government agencies.But top executives of several companies developing the Marcellus and Utica shales in northern West Virginia, Ohio and Pennsylvania recently outlined the ongoing investments in West Virginia.  Al Schopp, chief administrative officer, regional vice president and treasurer of Antero Resources Corp., said there’s also been a lot of talk in West Virginia over the past five years about a lack of local trained labor but “we’ve trained the local resource. “We’re the most active driller in West Virginia because we feel committed to keep those resources so we don’t go back to where we were five years ago in this area,” he said. “We need those local resources, to be productive.”

Sooner or Later? – The Search For Signs of A Natural Gas Production Slowdown – Part 2 -- On Tuesday of this week the Energy Information Administration released its latest Drilling Productivity Report, projecting declines in US natural gas production volumes. Meanwhile, daily pipeline flow data shows gas production hitting record highs and gas storage fill could also be heading toward maximum levels.  The CME/NYMEX Henry Hub natural gas price for the November 2015 is responding to these burgeoning supplies, settling yesterday at $2.518/MMBtu, near all-time lows for this time of year. Today we continue our look at the various sources of natural gas production data and what they tell us. In the first part of “Sooner or Later,” we looked at the natural gas production data in EIA’s historical monthly report – the Natural Gas Monthly (NGM) – as well as two of its forward-looking monthly reports – the Short-Term Energy Outlook (STEO) and the Drilling Productivity Report (DPR). The September ending NGM published actual gas production volumes for July 2015 for the first time and showed that gas production rose to a record high in July, exceeding June production and also trumping prior expectations for July in the STEO and DPR data, both of which last month had predicted that July 2015 volumes would decline month-on-month. What’s more, the September 2015 STEO also raised its projections for August through December 2015 by about 100 MMcf/d. The latest DPR released earlier this week (Oct. 13) revised its July 2015 gas production estimates up by a total of about 400 MMcf/d across all seven shale basins, and, further, it lifted its projections for August through October 2015 as well. Upward revisions were largest in the Utica and Permian basins. Unlike the STEO and NGM, however, the latest DPR continues to predict that the combined volumes from all basins declined between June and July and will continue to decline month-over-month through at least November.

Pipeline firm: Landowners OK'd surveys for 55 percent of local route - The Tennessee Gas Pipeline Co. said in a filing with federal regulators Thursday it has acquired survey permission to 55 percent of the parcels along its so-called supply route — a section of the project that includes a stretch across Delaware, Schoharie and Chenango counties. The company behind the proposed 412-mile Northeast Energy Direct pipeline also advised the Federal Energy Regulatory Commission that it has been making changes to the proposed route in order to accommodate “construction constraints and requests from landowners, towns and applicable regulatory agencies.” The company, affiliated with energy giant Kinder Morgan, also reported that it is evaluating proposed major river crossings where it is considering using horizontal directional drilling. As of Sept. 30, Tennessee Gas said it has completed biological surveys on 104 miles of its supply path, or 61 percent of that section of the line, and for 93.5 miles of its market path, or 37 percent of that component of the route. The company said it is also evaluating potential access roads, contractor yards and other areas that would be used during construction. An updated listing of those sites will be included in the company’s request for a federal certificate to operate a pipeline.

In the Heart of Texas Oil Patch, It's Gas That's Taking Off  -- The oiliest county in Texas has seen its new natural gas production capacity more than double as drillers hone in on their most profitable acreage. The peak output rate from new gas wells in Karnes County has surged 134 percent since January, estimates from Drillinginfo show. The only other county in Texas’s Eagle Ford shale patch where new gas capacity’s gaining is Live Oak, about 50 miles (80 kilometers) southwest of Karnes, the Austin-based energy data provider said. Gas producers are focusing on the most prolific parts of their plays as they grapple with the worst price collapse since 2008, and Karnes County has long been a sweet spot in Texas’s Eagle Ford shale. The 20,000-square-mile shale formation supplies about one-sixth of the nation’s crude. Karnes County, southeast of San Antonio, is home to “top- tier acreage," Chris Smith, senior research analyst at Drillinginfo, said in a telephone interview Wednesday. "In this pricing environment, a lot of the rigs still active would be moving toward that core area." The retreat to core fields, known as high-grading, is occurring in oil and gas fields across the U.S. Drillers are eager to cut costs amid low prices and focus their rigs on sweet spots that produce the most, Smith said. Natural gas prices have fallen about 36 percent over the past year to $2.420 per million British thermal units in New York. U.S. crude prices have plunged 44 percent over the same period.  Rigs actively drilling wells in Karnes County total 24 this month, the highest among the 11 Eagle Ford shale counties for which complete data was available, according Drillinginfo. That’s up from 19 in June.

South Texas pipeline blast leads to evacuations, no injuries — A fiery natural gas pipeline explosion in South Texas has forced dozens of people from their homes and canceled classes at a nearby school. Nobody was hurt in the accident before dawn Friday near Encinal (EN’-suh-nahl), 25 miles north of Laredo. Authorities are seeking the cause of the blast. City Manager Velma Davila (DAH’-vee-lah) says 30 to 40 people who live near the pipeline evacuated to Encinal City Hall, as a precaution. Davila says classes were canceled Friday at Encinal Elementary School, about 500 yards from the pipeline. She says gas to the line has been cut and the fire was being allowed to burn itself out. The pipeline operator, San Antonio-based Lewis Energy Group, says the fire happened around 4:15 a.m. CDT Friday. Emergency personnel monitored the situation.

Oklahoma records eighth moderate earthquake for the week - A duo of moderate earthquakes shook northern Oklahoma Saturday, bringing the total of quakes registering a 3.0 magnitude or greater across the state to eight on the week. A 4.4 magnitude quake was recorded by the U.S. Geological Survey at 4:20 a.m. about 18 miles southwest of Medford and about 100 miles northwest of Cushing. Cushing is where the world’s most important crude oil storage hub is located and it is used to settle futures contracts traded on the New York Mercantile Exchange. Bob Noltensmeyer, Cushing Emergency Manager, said he had not received reports of significant damage although there were “shattered nerves.” “This one was pretty strong,” he said. “The whole house shook.” It was one of the stronger temblors the earthquake-prone state has had this year according to U.S. Geological Survey seismologist George Choy. Choy told The Guardian it had all the hallmarks of an induced quake, indicating that it was triggered by the injection of drilling wastewater underground. A 4.5 magnitude quake was recorded at 5:03 p.m. Saturday about one mile northwest of Cushing.

4.5 Oklahoma earthquake comes after rule changes for fracking wells: An earthquake with a magnitude of 4.5 that struck near the U.S. crude oil hub of Cushing, Oklahoma on Saturday occurred just days after regulators imposed new rules meant to prevent temblors in the area and said more changes were possible. The Oklahoma Corporation Commission (OCC), which regulates the state’s oil and gas industry, ordered companies on Sept. 18 to shut or reduce usage of five saltwater disposal wells around the north-central Oklahoma city of Cushing. Saltwater, a normal byproduct of oil and gas work, is put into deep disposal wells that scientists say have contributed to a rash of small and medium-sized earthquakes in Oklahoma since 2009. At the time of its latest directive, the OCC said its “plan may be altered as more data is made available”. On Sunday, some people on social media, fearing a quake could cause a fire or explosion in Cushing in the future, were already calling for tougher rules. “This needs to stop,” read a comment at NPR’s StateImpact. “The injection wells & fracking are wrecking Cushing.”

Oklahoma Earthquakes 2015: Tremors Rise As Oklahoma Officials Struggle To Stem Fracking Wastewater Flow --- The ground shook throughout Oklahoma in recent days, including near the crucial Cushing oil storage hub. A 4.5-magnitude earthquake struck Oct. 10 just miles from the fields of white round tanks that hold the largest share of U.S. crude stockpiles, sparking fears among residents of potential explosions. A separate tremor in north-central Oklahoma sent homes and buildings gently swaying on the opposite side of the state, as far south as Norman and Oklahoma City.  Such shaking has become routine in parts of Oklahoma, where oil and gas companies are injecting unprecedented volumes of wastewater into the ground and inducing earthquakes, scientists have confirmed. Oklahoma surpassed California last year as the earthquake capital of the lower 48 states and will likely beat the Golden State in 2015. Nearly 700 earthquakes of magnitude 3.0 or greater have rocked Oklahoma this year, a more than 300-fold leap from the start of the drilling boom in 2008. Insurance claims are rising as foundations crack and bricks crumble, while geologists are warning of the unknown long-term effects of continuously rattling an entire state and pumping it full of wastewater. Oklahoma officials say they are still struggling to devise a strategy to reduce seismic activity without strangling the energy industry, the state’s largest employer. The government has resisted calls from environmental groups to place a temporary ban on new wastewater injections while agencies and companies study the phenomenon. The Oklahoma Corporation Commission, which regulates the oil and gas sector, has taken some steps to reduce earthquakes, including limiting permits for new wells in “areas of interest” and requiring certain disposal wells to temporarily shutter or reduce water intake if shaking occurs nearby. But scientists in the state say those measures haven't been enough to drive a sharp decline in earthquakes.

Protesters flood IUB with objections over Bakken Pipeline - Chants of “No oil in our soil” could be heard outside of the Iowa Utilities Board offices in Des Moines Thursday as protesters, including a woman from Huxley, gathered to deliver more than 1,000 objections concerning the proposed Bakken Oil Pipeline. The near-80 protesters, organized by Iowa Citizens for Community Improvement, the Bakken Pipeline Resistance Coalition and the Food Sovereignty Alliance, stood on the sidewalks outside the IUB building expressing their concerns about the IUB rushing the proposal from Texas-based Dakota Access LLC forward in spite of overwhelming public opposition, as well as concerns over eminent domain abuse and safety issues. Brenda Brink, of Huxley, was among the people who attended Thursday’s rally in an attempt to stop the construction of the pipeline that would travel through 18 counties in Iowa, including Story. During the rally, Brink took part in a skit where she wore a giant pig mask and a business suit to portray an executive from the company attempting to construct the pipeline. Brink lives less than a mile away from the pipeline’s proposed path and said she finds the risk for local residents unacceptable. “I’m here because we need to stop this right now. There’s a precedent getting ready to be set in Iowa,” Brink said. “It’s in my backyard and I don’t want to see it anymore.”

Local witnesses enter testimony for Bakken Pipeline hearings - Nine witnesses, including several from Story County, filed formal testimony with the Iowa Utilities Board Monday on behalf of the Iowa chapter of the Sierra Club in preparation for a formal hearing on the Bakken Pipeline scheduled for November in Boone. According to a press release, the testimony is part on an ongoing effort by the Sierra Club to oppose the construction of the pipeline proposed by Texas-based Dakota Access LLC. If built, the pipeline would extend 1,100 miles from western North Dakota to Patoka, Ill., with 343 miles of the pipeline traveling through 18 counties in Iowa, including Story. The pipeline would initially carry 320,000 barrels each day but could reach up to 450,000 barrels per day. “The Iowa Chapter is concerned that the IUB is rushing the process to comply with Dakota Access’s construction timeline and not requiring Dakota Access to adequately evaluate the impacts of this project,” said Pam Mackey-Taylor, Iowa chapter of the Sierra Club conservation chair, in a press release. “These nine witnesses have provided valuable testimony on why the IUB should not allow the pipeline to move forward.”

ND regulators approve 100K barrel-per-day oil pipeline --- North Dakota regulators have approved a pipeline that would move up to 100,000 barrels of oil a day from the state’s oil patch. The Bismarck Tribune reports the state Public Service Commission approved the NST Express Pipeline on Wednesday. The pipeline is part of Texas-based NorthStar Midstream. The 23-mile-long pipeline is designed to move crude from a hub near Alexander to a terminal in East Fairview where it will interconnect to other pipelines that supply oil to refineries across the country. The project cost is pegged at more than $60 million and is expected to be completed late next year.

Study: Grassland birds losing ground to ND oil drilling -— A new federal study says many grassland birds are being displaced by drilling activity in western North Dakota’s oil patch. The three-year study completed in 2014 was done by scientists with the U.S. Geological Survey and the federal Fish and Wildlife Service. Researchers studied several oil well sites and nearby gravel roads and found some grassland birds avoided those areas by more than a quarter mile. The study says at least two species of grassland birds “were tolerant of oil-related infrastructure.” The study says combining numerous wells in a single area and putting them near existing roads could help minimize the impact on the birds. North Dakota Petroleum Council Vice President Kari Cutting says the state already requires that to be done.

Oil official: Federal rules threaten North Dakota's output — Forget slumping crude prices — it’s a “suite” of proposed regulations by the Obama administration that most threaten North Dakota’s oil production, a top industry official said Wednesday. “Jurisdictional overreach appears to be the norm in the federal agency rulemaking process,” North Dakota Petroleum Council Vice President Kari Cutting told a state legislative committee on energy development. North Dakota sweet crude was fetching about $38 a barrel Wednesday, which is about half of what it sold for a year ago. The number of drilling rigs has plummeted in North Dakota by nearly two-thirds to 66 due to low prices but production remains at near-record levels as drillers concentrate rigs in high-volume areas. Cutting, whose group represents more than 550 companies working in the oil patch, said the industry has increased efficiencies to keep production steady at about 1.1 million barrels daily, second only to Texas. But the industry will have a tougher time adapting to what she calls a “jurisdictional grab” by the federal government. New federal rules proposed by the Environmental Protection Agency and the state Bureau of Land Management range from increased air quality standards to additional animals being listed as endangered species, Cutting said. North Dakota’s oil industry is most concerned about the possibility of the federal government regulating the burning of natural gas as a byproduct of oil production, Cutting said.

Over 33K gallons of saltwater spill in western North Dakota — The state Department of Health says more than 33,000 gallons of saltwater has spilled in western North Dakota. The department says the spill is at a site operated by Hillstone Environmental Partners LLC in McKenzie County. The department says it doesn’t appear surface waters have been impacted. The site of the spill, reported Wednesday, is still being investigated to see if groundwater is affected. Brine is an unwanted byproduct of oil production and is considered an environmental hazard by the state. It is many times saltier than sea water and can easily kill vegetation exposed to it. Department of Health and North Dakota Oil and Gas Division officials are at the site. The Health Department is monitoring the investigation. The firm didn’t immediately respond to a request for comment.

North Dakota oil output slips again as outlook for industry gets bleaker - North Dakota oil production fell 1.7 percent in August, slipping below 1.2 million barrels per day in the fifth monthly decline since the state’s output peaked last December. The nearly 21,000 barrel-per-day drop from July represented the first time in 12 years that the state’s oil output fell in August, a month when the industry historically has a growth spurt thanks to favorable conditions, the state Department of Mineral Resources reported. “Production is down, and significantly down,” Lynn Helms, the head of the department, said Tuesday in his monthly update on the industry. The decline for August “is definitely not normal,” he added. “This is a reflection of what’s happening in the industry.” World oil prices sank to a six-year low in August despite an increase in demand, but the growth in demand is expected to end in 2016, the International Energy Agency said Tuesday. U.S. shale producers, like North Dakota’s, face a big challenge because new shale wells rapidly fall off in production — an 82 percent decline in the first two years — forcing continuous investment in new wells to sustain production, the IEA said. U.S. oil production growth could be stopped in its tracks, IEA said. North Dakota oil, which sells at a discount to the benchmark crude, fell almost $10 per barrel from July to August, but has since recovered slightly to $35 per barrel.

Williston moves toward closing the last of the crew camps - In the early hours of the morning, the oilfield crew is finishing its shift sat down for a quick bite. Finishing a plate of eggs and fruit, hydraulic fracker, Jay Huntz, sits alone in front of the cafeteria TV. “Man camps are nice,” Huntz said as he sipped on his coffee. “We work 16 to 18 hour days. We can come in, get something to eat, throw your dishes in the sink and get yourself a little bit of sleep. It makes life a little bit easier.” Developers, hoteliers, crew camp operators, and city officials have held separate meetings to discuss the future of crew camps in Williston. Mayor Howard Klug said developers may have had closed meetings if they chose to do so, but some developers have sat in on meetings meant for the crew camp operators. Due to the nomadic lifestyle of oil workers, they can be at a rig site one week and relocated to another the following week. Few workers say they are looking to make that kind of commitment to an area due to the uncertainty of where the work comes from. “From our perspective, we don’t believe they will flock into town to stay in an apartment,” said Target Logistics Regional Vice President Travis Kelley. “They are very temporary in nature.”

L.A. officials set oil drilling terms but fail to enforce them - When oil companies wanted to drill wells at a South Los Angeles site decades ago, city planners set out a long list of requirements intended to ensure that oil production was “strictly controlled to eliminate any possible odor, noise” and other hazards. Nearly a half-century later, neighbors complained about a foul stench, headaches and nosebleeds. Hundreds of complaints were filed with regional air quality regulators. Years after concerns first erupted, following a public outcry, the current operator of the site voluntarily suspended production. And the city attorney sued to prevent the firm, AllenCo Energy Inc., from resuming drilling, arguing it had created a “public nuisance.” But what the city didn’t do as the problems arose was investigate whether AllenCo was complying with the requirements originally imposed by the city. Los Angeles’ apparent lack of follow-through on its operating conditions, which The Times found in files in a government archive, points to broader weaknesses in city oversight of roughly 1,000 active wells across the city, many of them nestled near homes and schools. In the past, city planners crafted rules on a case-by-case basis that were meant to minimize problems at each drilling site. But Los Angeles has no systematic way to ensure those requirements are being followed.

California’s Big Fracking Hoax -- In December 2013, we gave the world a much-needed reality check on the Monterey Shale, proving unequivocally that the assumptions about recoverable oil in this California region were wildly optimistic. Five months later, the U.S. Energy Information Administration (EIA) issued a 96% downgrade of its Monterey Shale oil estimates, and last week, the USGS slashed estimates beyond the original EIA projections by nearly 99%, proving the merit of our analysis.  Effectively, California’s Monterey Shale can only yield enough tight oil to power the U.S. for just 26 hours. Compare that with the EIA’s original estimate of over 2 years! Listening now? Good. We have more news for you. The EIA recently released its Annual Energy Outlook 2015, and we decided to put its data to the test with David Hughes, who also authored groundbreaking independent analysis of U.S. shale gas and tight oil production. Using real production data, a very different story emerged than what the EIA would lead you to believe.  Three recently released updates show how the newest government projections and assumptions on U.S. shale gas and tight oil don’t hold up to scrutiny. If you care at all about the future of the U.S. energy picture, you’re going to want to pay attention. We’ve got a proven track record for getting these things right.

Alaska Governor: To Pay For Climate Change Programs, The State Needs More Drilling -- Climate change is already hitting Alaska hard — the state has warmed twice as fast as the rest of the country, and those warming temperatures are driving a loss of sea ice, melting of permafrost, and worsening fire season. Already, the majority of Alaska’s native villages are threatened by erosion and flooding, and a handful have made serious plans to relocate.  We have villages that are washing away because of changes in the climate.  But adapting to the impacts of climate change isn’t cheap — in addition to part of the $1 billion National Disaster Resilience Competition fund that Alaska is hoping to tap into, the state is also requesting $162.4 million in relief for villages vulnerable to climate change.   To help finance its adaptation to climate change — including programs to relocate native villages — Alaska’s governor Bill Walker (I) told BBC News that the state needs to “urgently” drill in the Arctic National Wildlife Refuge.  “We are in a significant fiscal challenge. We have villages that are washing away because of changes in the climate,” Walker told BBC News.

Cutting Staff Pay to Keep Workers - WSJ: As layoffs become the energy industry’s main response to low oil prices, a handful of producers are aiming to trim personnel costs without pink slips by spreading the pain among their employees. Companies including Occidental Petroleum and Canadian Natural Resources are employing hiring freezes, caps on bonuses, and even across-the-board wage cuts to preserve jobs. They and others that already have reduced payrolls—including many drilling and well servicing firms—are reluctant to slash further, say energy-industry experts. In part, they’re trying to avoid the type of skilled worker shortages that followed mass job cuts in prior downturns. But it’s also because their businesses can’t succeed without sufficient staff, especially if the downturn in oil prices reverses course.   More than a year after oil prices began their descent to under $50 a barrel from over $100, the number of energy-company layoffs world-wide has topped 200,000, says Graves & Co., a Houston consulting firm. More cuts are expected because crude shows little sign of rebounding soon.Occidental Petroleum has avoided mass layoffs so far. The Houston-based company told its employees last month it will cap bonus payments this year and freeze salaries into early 2016, The last time Occidental disclosed large staff layoffs was in 1998, when it shed hundreds of jobs and cut its head-office workforce by half. That was during another period of mass layoffs in the oil industry stemming from low crude prices and consolidation. Those cutbacks led to a dwindling number of petroleum engineers followed by what some described as a “lost generation” that left the energy industry exposed to shortages of high-skilled professionals a decade later.

"There's No More Fat To Be Cut:" Desperate Oil Producers Cut Salaries To Save Mission Critical Jobs --- Early last month, Citi “exposed” what it said was shale’s “dirty little secret.”  In a nutshell, the entire business model is uneconomic and thus the only reason a lot more drillers aren’t bankrupt is because capital markets are still wide open. “Capital markets plugged shale’s ‘funding gap’ from 2009 through the first half of 2015, but they are now tightening, reducing access to liquidity for some producers and shaping their ability to drill,” Citi said, adding that “with eight bankruptcies already announced this year, weaker producers may live or die by the whims of capital providers.” Well, yes. When free cash flow is negative, you’ve dug yourself a hole (no pun intended) and it has to be filled somehow, so you turn to capital markets. It’s just that simple.  Of course the perpetually low prices that this dynamic engenders affect the entire space, which is why you’ve seen capex cuts and layoffs even among the industry’s stronger players. Now, it would appear that all of the proverbial fat that can be trimmed, has been trimmed which means that, as WSJ reports, further cost cuts will now have to come from salary cuts because going forward, cutting jobs altogether would imperil companies’ ability to operate.  Here’s more: As layoffs become the energy industry’s main response to low oil prices, a handful of producers are aiming to trim personnel costs without pink slips by spreading the pain among their employees.  Companies including Occidental Petroleum Corp. and Canadian Natural Resources Ltd.are employing hiring freezes, caps on bonuses, and even across-the-board wage cuts to preserve jobs. They and others that already have reduced payrolls—including many drilling and well servicing firms—are reluctant to slash further, say energy-industry experts.In part, they’re trying to avoid the type of skilled worker shortages that followed mass job cuts in prior downturns. But it’s also because their businesses can’t succeed without sufficient staff, especially if the downturn in oil prices reverses course.

Schlumberger to cut more jobs, sees recovery pushed to 2017 - Schlumberger Ltd, the world’s No.1 oilfield services provider, said it would cut more jobs and consolidate its manufacturing and distribution network as it did not expect a recovery in demand before 2017. The company’s shares fell as much as 4.6 percent to $72.63 in late-morning trading. Rivals Halliburton Inc and Baker Hughes Inc were also down about 4 percent. “The likely timing gap between the oil price recovery and the subsequent increase in oilfield services activity in combination with a more conservative spending outlook from our customers is causing us to now take further action,” said Chief Executive Paal Kibsgaard said on a conference call on Friday. Exploration and production spending is expected to fall for a second consecutive year in 2016, a first since the 1986 downturn, Kibsgaard said. However, the OPEC members’ current spare capacity is less than 2 million barrels per day, compared with more than 10 million bpd in 1986. Schlumberger, whose comments are closely watched for a glimpse into industry trends, said the first quarter of 2016 would be weaker than the current quarter as customers tighten purse strings further, hurting the usual year-end sales of software, products and multi-client licenses. The company said it would take a charge to cover severance costs for additional headcount reductions in the fourth quarter.

There Will Be (More) Fracking Blood to Come -- As the petrodollar debt bubble continues to implode. Dragging domestic and foreign frackers down.  Quantitative Easing (QE), the Fed’s free money policy, facilitated the production of shale oil and gas where the production decision was no longer being tied to profitability. For instance, shale producers could borrow cheaply, produce at a loss and debt investors would simply look the other way because of the attractive yields that were offered on the debt. The overriding theme of these pieces was that the eventual crack-up in the energy sector would precipitate a crisis that was much larger than the great subprime crisis of last decade as waves of shale defaults would serve as the catalyst for investors to stop reaching for yield and once again try to understand what exactly they owned. Fast forward 9 months from the last piece and most of these shale producers are mere shells of themselves. Amazingly, these companies can still find creative ways to tap the debt markets, stay alive and flood the market with oil. Eventually, most won’t make it and I believe that the ultimate global debt write-off is in the hundreds of billions of dollars—maybe even a trillion depending on which larger players stumble. That doesn’t even include the service companies or the employees who have their own consumer and mortgage debt.I believe that shale producers are the “sub-prime” of this decade. As they vaporize hundreds of billions in investor capital, thus far, there has been a collective shrug as everyone ignores the obvious – until suddenly it begins to matter. By way of timelines, I think we are now getting to the early summer of 2008 – suddenly the smart people are beginning to realize that something is wrong. Credit spreads are the life-line of the global financial world. They’re screaming danger.

Fracking Junk Bonds -- Where did the frackers get their money ? From junk bonds. Source: U.S. Energy Information Administration, based on Evaluate Energy.  Results from second-quarter 2015 financial statements of a number of U.S. companies with onshore oil operationssuggest continued financial strain for some companies.  Low oil prices have significantly reduced cash flow for U.S. oil producers, and to adjust to lower cash flows, companies have reduced capital expenditures and raised more cash from debt and equity. Because of the large amount of debt accumulated from past years, a higher percentage of operating cash flow is being devoted to servicing debt.  Debt service payments consist of principal repayment to creditors and typically are fixed in both amount and frequency, agreed upon before a company receives a bank loan or issues a bond. Some companies have been able to refinance their debt — that is, paying off old debt and taking on new debt, perhaps with a different interest rate or longer maturity.  This option has increasingly become more expensive, because interest rates for energy company debt issuance have risen as crude oil prices declined, and rates are now higher than for any other business sector.  The spread for energy company bond yields with a credit rating below investment grade averaged 11 percentage points above the risk-free rate since August, indicating higher interest rates for energy companies.

Can The Oil Industry Really Handle This Much Debt? --As the crude industry has been wrestling with low oil prices that declined by over 50 percent since its highest close at $107 a barrel in 2014, many exploration and production companies worldwide and in the U.S., in particular, have faced large shortfalls in revenue and cash flow deficits forcing them to cut down on capital expenditures, drilling and forego investments in new development projects. High debt levels taken on by the U.S. oil producers in the past to increase production while oil prices soared, have come back to haunt oil and gas companies, as some of the debt is due to mature by the end of this year, and in 2016. Times are tough for U.S. shale oil producers: Some may not make it, especially given that this month, lenders are to reassess E&P companies’ loans conditions based on their assets value in relation to the incurred debt. Throughout the oil price upturn that lasted until the middle of 2014, companies sold shares and assets and borrowed cash to increase production and add to their reserves. According to the data compiled by FactSet, shared with the Financial Times, the aggregate net debt of U.S. oil and gas production companies more than doubled from $81 billion at the end of 2010 to $169 billion by this June In the first half of 2015, U.S. shale producers reported a cash shortfall of more than $30 billion. The U.S. independent oil and gas producers’ capital expenditures exceeded their cash from operations by a deficit of over $37 billion for 2014. As The Wall Street Journal reported in August, Exxon Mobil Corp. and Chevron Corp. stated they were cutting stock-buyback programs, while Linn Energy LLC announced it would stop paying dividends to its shareholders. Meanwhile, several small U.S. oil and gas producers have filed for chapter 11 bankruptcy protection this year. Companies with persistently negative free cash flow fall into the trap of borrowing, as they have to incur more debt to repay what they have already borrowed before.

Wall Street firms that bankrolled oil boom are hurting - Oct. 14, 2015: Cheap oil is creating headaches for the Wall Street firms that bankrolled America's oil boom. That's because the crash in oil prices is putting energy companies under financial stress. Oil revenue has dried up, yet these companies are still saddled with tons of debt. America's largest banks are now raising red flags about the health of those loans. For the second-straight quarter, the banks have warned investors about an uptick in troubled energy loans. Banks "are going to lose money on the loans they've made. That's pretty evident -- whether oil prices go to $30 or $80 a barrel," said Dick Bove, an analysts who covers banks at Rafferty Capital. The American energy boom of the past decade was fueled by a wave of cheap credit from big banks. But now cracks have begun to emerge in that boom because oil prices have plunged from around $100 last year to below $50 today.  Wells Fargo on Wednesday said it was forced to set aside more cash to cushion against potential commercial defaults due to the "deterioration in the energy sector."  Bank of America reported it may need to set aside an additional 15% to deal with troubled commercial loans, specifically in its oil and gas portfolio.  JPMorgan Chase too boosted its oil and gas loan-loss reserves by about $160 million last quarter. The increase was driven by the sentiment that "oil prices will remain low for longer," Marianne Lake, JPMorgan's chief financial officer, told reporters during a conference call.

Oil slide means ‘almost everything’ for sale as deals accelerate - At Large: More than $200 billion worth of oil and natural gas assets are for sale globally as companies come under renewed financial pressure from the prolonged commodity price rout, according to IHS Inc. There are about 400 buying opportunities as of September, IHS Chief Upstream Strategist Bob Fryklund said in an interview. Deals will accelerate later this year and into 2016 as companies sell assets to meet debt requirements, he said. West Texas Intermediate crude has averaged about $51 a barrel this year, more than 40 percent below the five-year mean. Low prices have slashed profits and as of the second quarter about one-sixth of North American major independent crude and gas producers faced debt payments that are more than 20 percent of their revenue. Companies have announced $181.1 billion of oil and gas acquisitions this year, the most in more than a decade, compared with $167.1 billion the same period in 2014, data compiled by Bloomberg show. “Basically almost everything is for sale,” Fryklund said Oct. 8 in Tokyo. “Low cycles are when a lot of these companies can rebalance their portfolios. In theory, this is when you upgrade your existing portfolio.” Companies with strong balance sheets are seeking buying opportunities, said Fryklund, citing Perth, Australia-based Woodside Petroleum Ltd.’s $8 billion offer for explorer Oil Search Ltd. and Suncor Energy Ltd.’s $3.3 billion bid for Canadian Oil Sands Ltd. Both targets rejected initial offers. As of August, one out of every eight junk-rated oil companies was in danger of defaulting, according to Moody’s Corp. WTI plunged below $40 a barrel in August, to the lowest price in six years.  Next year the U.S. benchmark may trade around $55, said Fryklund. It will take several years for supply and demand to rebalance and prices may rise to about $70 a barrel by 2018, he said.

Schlumberger: This Is "The Most Severe Downturn For Decades", "The Recovery Now Appears To Be Delayed" -- Moments ago energy infrastructure giant Schulmberger reported third quarter earnings. We won't waste much time on the numbers (EPS of $0.78 beat consensus estimates by 1 cent due to $545 million in buybacks, and a drop in the effective tax rate, which was nonetheless a 48% plunge Y/Y, on revenue of $8.5bn which missed, and tumbled 33% Y/Y) and instead we will focus on the wording in the press release which, just like Fastenal's from a few days ago, admitted the recession has arrived.  Here it is, with the punchlines highlighted: Schlumberger Chairman and CEO Paal Kibsgaard commented, “Schlumberger third-quarter revenue decreased 6% sequentially driven by a continuing decline in rig activity and persistent pricing pressure throughout our global operations. North America revenue fell 4% sequentially as we focused on balancing margins and market share, while International revenue dropped 7% due to customer budget cuts, activity disruptions, and service pricing erosion. “The business environment deteriorated further in the third quarter.However, the cost reduction actions we took in previous quarters and the acceleration of our transformation program enabled us to protect our financial performance in what is shaping up to be the most severe downturn in the industry for decades. As a result of our actions, we have been able to deliver pretax operating margins well above those seen in any previous downturn and we have continued to generate significant liquidity with free cash flow of $1.7 billion in the third quarter, representing 170% of earnings.

Lifting of 40-year oil ban heads to Senate - Oil industry officials hailed yesterday’s U.S. House of Representatives vote to lift the 40-year-old ban on crude exports as an opportunity to save consumers money and create new jobs, but environmentalists said it would worsen global warming and heighten the risk of harmful spills. American Petroleum Institute President and CEO Jack Gerard said the 261-159 vote on the measure, which now heads to the Senate, where its prospects are uncertain, “starts us down the path to a new era of energy security, saving consumers billions and creating jobs across the country.” “American producers would be able to compete on a level playing field with countries like Iran and Russia, providing security to our allies and accelerating the energy revolution that has revitalized our economy,” Gerard said in a statement. “… As the U.S. Energy Information Administration reported, lifting the ban could increase the value of U.S. crude and incentivize domestic production, which puts downward pressure on global oil prices and the prices that consumers pay for fuel.”

Energy Sector Divided on Measure to Lift Export Ban on US Crude Oil - U.S. oil producers claim that they're at a competitive disadvantage because they're restricted to selling their oil domestically at a time when they desperately need new markets to sell their expanding inventories. Congress is now debating whether or not to lift the 1970's era ban on crude oil exports that was established in the name of protecting national energy security. Legislation to lift the ban has passed in the U.S. House Committee on Energy and Commerce. Now the Senate Banking Committee is attempting to craft its version.  The debate is hardly black and white: Some of the major players in the American energy sector oppose the idea. The debate has implications for both employment in the energy industry and for national security. To set the stage, imagine that you refine crude oil in this country. You buy the oil at a price known as WTI, West Texas Intermediate.That’s the benchmark price for U.S. crude. WTI is less, sometimes a lot less, than Brent crude, the world’s benchmark price.  So you buy the discounted U.S. oil, refine it and sell the finished product to the highest bidder. “Right now because we don’t export crude oil, there is what some view as a disproportionate amount of profits going to refiners," "Because they can take in cheaper crude oil in the U.S. and export refined products at a global price for gasoline and diesel," he said. Refiners have a decidedly different take. They’ve spent billions of dollars over the last two decades to be better refiners of heavy, sulphur-laden oil known as sour crude because that’s what traditional drilling pulled up.  But fracking, which has triggered a shale revolution in this country, is pulling up a higher quality grade of oil with much less sulphur called light, sweet crude. U.S. refiners are adapting to process an abundance of light, sweet crude oil, but not nearly fast enough to accommodate many U.S. producers. Four U.S. refiners have formed a lobby called Consumers and Refiners United for Domestic Energy, or CRUDE, to fight against the lifting of the export ban. “Refining is critical to American energy independence," said CRUDE’s spokesman Jay Hauck.

Dirty energy plutocrats are trying to buy the presidential election - The New York Times combed through Federal Election Commission reports for the presidential race through June 30 and looked at every donor who gave more than $250,000 — 158 families in total. Altogether, that group and the corporations they control gave more than $176 million. Add in the 200 families that gave between $100,000 and $250,000, and those 358 families have given well more than half of all the campaign funds thus far. Of the 158 mega-donors, the most common industry in which they have made their money is finance and the second biggest is energy, mostly oil and gas. The donors are disproportionately old, white, and male, concentrated in a handful of very rich, non-diverse neighborhoods. Most importantly, their politics are not representative of the country at all: 138 of the 158, or 87 percent, are Republicans. Contrary to the popular image of moderate pro-business Park Avenue bankers, some of these donors hail from the GOP’s anti-government right wing. “More than a dozen donors or members of their families have been involved with the twice-yearly seminars hosted by the Kochs,” the Times notes. What they and the establishment donors have in common: They are investing in their own financial self-interest. Donating a few million dollars to a candidate who goes on to win and cuts a billionaire oil magnate’s taxes, or stymies regulations of his industry, will more than pay for itself. If you’ve been wondering why public opinion in favor of higher taxes on the rich, increased Social Security benefits, or tighter regulation of carbon pollution doesn’t lead to passage of those policies, this is a big reason.

US puts a plug on Arctic oil exploration - The US government has put a final block on the prospect of oil exploration in the country’s Arctic in the foreseeable future, cancelling plans to sell more drilling leases in the region, and refusing to extend leases previously sold to Royal Dutch Shell and Statoil. The decision was welcomed as a victory by environmental campaigners, and attacked by the industry and politicians in Alaska as a blow to US energy security. The possibility that any oil companies would want to explore in the Arctic seas off the north coast of Alaska was already remote following Shell’s announcement that it was ending its drilling campaign in the region having found only traces of oil with its first well this summer. The decisions by President Barack Obama’s administration set the seal on that position, and could block further development in the Arctic for decades. Lisa Murkowski, a Republican senator for Alaska, described the administration’s move as “stunning”, saying it betrayed the interests of US energy security. She added that it was the latest move in “a destructive pattern of hostility towards energy production in our state that began the first day this administration took office, and continued ever since”. The US Department of the Interior had planned two sales of offshore Arctic drilling leases, in 2016 and 2017, but the slump in oil prices and the resulting pressure on oil companies’ finances meant they might not have attracted much interest anyway.

Mexico to import 9 Bcf/d of natural gas from US under five-year plan: ministry - Mexico aims to import 9 Bcf/d of natural gas from the US under a five-year plan to build gas pipelines and infrastructure, Mexico's Energy Ministry said Wednesday. Currently, Mexico imports about 1.5 Bcf/d from the US. The five-year plan, to run from 2015-2019, includes a new compression station in the northern state of Chihuahua and 13 other projects, many of which are already being tendered or under construction. Investment was calculated by Energy Minister Pedro Joaquin Coldwell at $11 billion through 2019.So far all the tenders are being organized by the two state companies of the sector, the Federal Electricity Commission and the oil company Pemex. The recently founded Cenagas will organize them beginning from next year. Cenagas is the autonomous state regulator for natural gas, under the terms of last year's energy reform. The Ramones pipeline, already under construction by Pemex from the US border to the north Mexican state of Nuevo Leon, is to be extended by 855 km to the southern Gulf state of Veracruz, Joaquin Coldwell said at an event to present the five-year plan.

Oil Sands Boom Dries Up in Alberta, Taking Thousands of Jobs With it -  At a camp for oil workers here, a collection of 16 three-story buildings that once housed 2,000 workers sits empty. A parking lot at a neighboring camp is now dotted with abandoned cars. With oil prices falling precipitously, capital-intensive projects rooted in the heavy crude mined from Alberta’s oil sands are losing money, contributing to the loss of about 35,000 energy industry jobs across the province.Yet Alberta Highway 63, the major artery connecting Northern Alberta’s oil sands with the rest of the country, still buzzes with traffic. Tractor-trailers hauling loads that resemble rolling petrochemical plants parade past fleets of buses used to shuttle workers. Most vehicles carry “buggy whips” — bright orange pennants attached to tall spring-loaded wands — to help prevent them from being run over by the 1.6-million-pound dump trucks used in the oil sands mines. Despite a severe economic downturn in a region whose growth once seemed limitless, many energy companies have too much invested in the oil sands to slow down or turn off the taps. In addition to the continued operation of existing plants, construction persists on projects that began before the price fell, largely because billions of dollars have already been spent on them. Oil sands projects are based on 40-year investment time frames, so their owners are being forced to wait out slumps.

No quick relief in sight for Canada’s oil field service industry - North America is awash in cheap oil, which means it’s also awash in idle drilling rigs, hydraulic fracturing spreads and waste disposal crews. Low crude prices have hammered the entire Canadian energy sector. But the oil field service industry has been hit particularly hard, with no quick relief in sight. The sector is further down the food chain than exploration and production companies, and has gone – in less than 18 months – from being awash in work to having to fight for every scrap that remains in a low-oil-price environment. The companies that do much of the on-the-ground work for oil companies now face intense pressure to avoid the curse of unproductive equipment and crews, and the months ahead are likely to see more declining revenues and the continuation of a particularly painful period of restructuring.  “With the downturn in activity, there’s overcapacity in virtually every sector,” he said. “You’re basically doing this for practice, not for profit.” For oil and gas service companies, share prices have dropped and dividends have been slashed. North American rig counts are down at least 50 per cent from a year ago. Contracts with customers have been renegotiated at lower prices. White-collar layoffs at major oil companies in downtown Calgary grab the headlines, but the Canadian Association of Petroleum Producers reports that of the at least 35,000 jobs that have been lost in the oil patch this year, 25,000 are from the oil field services side

Exclusive - Canada railroads cut crude freight rates to lure shipments – Canadian rail companies are slashing rates for shipping crude in their first serious effort to revive an industry rocked by the rout in global oil prices, according to shippers and terminal operators who are seeing discounts of as much as 25 percent. The move highlights how railroads are struggling to compete with pipelines for a share of shrinking crude shipments across North America, particularly in Canada, where a long hoped-for boom in oil sands traffic has fizzled with the oil bust. Canadian National Railway and Canadian Pacific Railway, which together account for the vast majority of crude-by-rail cargoes shipped across the country, are dropping prices, four people familiar with the cuts told Reuters. The size of the cuts varied among sources, leading one source to suggest that railroads may be working with individual shippers to give some bigger discounts than others. Canadian National said it does not publicly discuss its freight rates. Canadian Pacific said it does not comment on individual customer relationships. Canadian Pacific has offered discounts of around 15-25 percent, but in exchange wants shippers to commit to firm volumes, for example one 70,000 barrel unit train, made up entirely of oil tanks cars, per month for three months, said one source with a Calgary-based midstream company. Another shipper said his company had been offered a single digit discount giving them a “small amount of relief”. Shipments from Canada to the United States have plunged by more than a third this year to 112,000 barrels per day in July, according to the latest U.S. data, undermining industry forecasts made before the oil price crash that total Canadian crude by rail volumes could hit 700,000 bpd by end-2016.

Support for fracking continues to drop: A new survey shows that public support for the extraction and use of shale gas has dropped significantly over the last year with concerns about the potential impact on the environment beginning to outweigh the possible economic benefits. The University of Nottingham Shale Gas Survey has been tracking the public perception of shale gas extraction in the UK since March 2012. The survey has tracked changes in awareness of shale gas, and what the public believe to be the environmental impact of its extraction and use, as well as its acceptability as an energy source. The 11th survey, with over 6,700 respondents, was conducted between the 23 and 28 September 2015. This latest survey found that there had been a significant drop in the level of support for shale gas extraction in the UK over the last year. The difference between those who support extraction and those who don't now stands at just +10.4 per cent, compared with +21 per cent in September 2014 and +39.5 per cent in July 2013. Some of the key concerns highlighted during the Balcombe protests, such as the risk of water contamination, continue to be a major issue for the UK public. In September 2015, the survey found that the number of people who associated shale gas with water contamination had risen to 48 per cent – the highest level since the survey began. However, it is still clear, 11 surveys on, that the UK public believes that shale gas will bring economic benefits to the country, and that a large number of people see shale gas as a 'cheap' form of energy.

Fracking could decimate habitats - The government’s so-called dash for gas is beginning to become very real, with the recent announcement about new licences for fracking companies. We at the Wildlife Trust have serious concerns about fracking’s many local and wider impacts upon wildlife.As well as the building of a rig and surrounding infrastructure at the drill site itself, the constant supply of materials often means new roads need to be built and an increased amount of industrial traffic. The physical disruption, noise, and light pollution disturbs local wildlife and could fragment or even decimate sensitive habitats. The government acknowledged these visual impacts when ruling out fracking in National Parks and Areas of Outstanding Natural Beauty a few months ago, but failed to recognise that wildlife-rich sites like Sites of Special Scientific Interest (SSSIs) would be impacted too. The fracking process also risks a wider range of environmental impacts – it often demands enormous amounts of water at a time when our freshwater rivers and wildlife are already struggling to cope with abstraction for public use. Fracking in other parts of the UK has led to minor earthquakes – which could compound the land instability that parts of the Isle of Wight already face from erosion, and the potential loss of sensitive habitats.

Friends of the Earth on Fracking Debate at SNP Conference: Reacting to the very lively debate at the Scottish National Party (SNP) conference over fracking and unconventional fossil fuels today, Dr Richard Dixon, Director of Friends of the Earth Scotland said: “SNP members have voted overwhelmingly in favour of reigning in Underground Coal Gasification, a risky and experimental technique of burning coal under the ground, with a very clear message to the Party leadership that what they really want is a full ban policy straight away. Underground Coal Gasification has a disastrous track-record from around the world of environmental pollution with recent test projects in Australia resulting in major contamination. “Speaker after speaker welcomed the new moratorium from the Scottish Government but called for the party to take back a full ban on both fracking and underground coal gasification ahead of next year’s election. No-one spoke in favour of fracking or unconventional fossil fuels. “Today’s debate highlights how strongly the SNP grassroots feel about Scotland’s energy future. We heard a clear message that Scotland should be investing in clean, green technologies and exploiting its abundance of wind, wave and tidal potential, instead of investing in the fossil fuel industry that further exacerbates the climate change crisis. Scotland is on track to transition to a low-carbon economy and meet its climate change targets only if it says no to the unconventional fossil fuel industry before it gets its foot in the door.”

SNP narrowly votes against all-out fracking ban - The Scotsman: A bid to persuade the SNP to support an all-out ban on fracking was narrowly defeated at the party conference. Anti-fracking delegates challenged the SNP’s policy for a moratorium on the controversial gas extraction technique, arguing that conference should go further and outlaw it. Energy Minister Fergus Ewing has announced the moratorium to allow the Scottish Government to hold a public consultation and commission a health assessment on the impact of fracking.Ineos, the operator of the Grangemouth petrochemical plant run by the industrialist Jim Ratcliffe, is attempting to win support for fracking in the Forth Valley. During a highly charged debate, delegates voiced their opposition to fracking but eventually toed the party line. With the vote going to a count, 550 delegates supported a moratorium compared with 427 who wanted the party to strengthen its opposition to a full ban. One delegate who supported a ban told conference: “I am sick to death of Green Party members telling me that the SNP supports fracking. It does not. Jim Ratcliffe, I have a message for you - 1,400 jobs at Grangemouth will not be held hostage to you blowing our country to pieces.”

OilPrice Intelligence Report: Current Oil Price Rally Hasn’t Convinced Everyone Yet - The rally in oil prices – jumping by around 10 percent in a week – took a breather at the start of this week, as the markets began to digest what happens next. WTI dropped back to $47 per barrel from $50, and Brent traded just below $50 per barrel, down from about $52 last week. . Now that oil has bounced off of its recent lows, there is quite a bit of disagreement over the sustainability of the rally. For oil bulls, U.S. oil production will continue to contract at the same time that demand continues to rise.  Still, bearish calls for oil prices persist. Deutsche Bank warns that the rally in energy stocks could be overdone. Citigroup’s Ed Morse says the bust in oil markets isn’t over yet. To muddy the picture further, the IEA released its monthly report for October, which didn’t include much of a change from the previous month. The Paris-based energy agency still expects oil markets to be oversupplied in 2016 as demand growth slows from a five-year high of 1.8 million barrels per day in 2015 to a more pedestrian 1.2 million barrels per day in 2016. At the same time, it appears increasingly likely that Iran will be able to bring new supplies online next year. For its part, OPEC published its monthly report on October 12, which showed gains in production from the cartel of about 109,000 barrels per day in September compared to August. The gains came mainly from Iraq, which added 80,000 barrels per day in output. Nigeria, Angola, and the UAE also added production, while Saudi Arabia pared back production by 48,000 barrels per day. The data illustrates how each member is working hard to increase its own output in order to make up for the shortfall in revenues from low oil prices. The data also put a damper on oil prices, as OPEC production is acting as a counterweight to the contraction in North America.

U.S. shale firms snap up $50 oil hedges, risking rally reversal - This past week, as oil prices barreled over 9 percent higher to break out of a weeks-long trading range, U.S. shale producers jumped at the chance to lock in $50-plus crude for the first time in months, making up for lost time after holding off hedging during the market’s late-summer slump. U.S. crude oil futures for December 2016 delivery, a favored contract for hedgers, saw trading volume spike to a weekly record high of nearly 190 million barrels, twice as much as the average for the previous four weeks, in what market sources and industry executives said was the biggest wave of hedging since a fleeting rush in late August. The price premium for the Dec 2016 contract against the same month in 2015 has shrunk to just $4 a barrel, down from more than $7 a barrel two months ago, due partly to forward selling. Oil producers’ rapid response to the latest move upward comes in contrast to the second quarter, when a moderate price recovery was met with only modest hedging interest as many executives bet – wrongly – that the worst was already behind them. It also highlights the far more precarious financial position for many shale firms facing rapidly tightening credit conditions, expiring legacy hedges and a deepening fear that prices may stay much lower for much longer than they thought. For some, hedging is now less an insurance policy than a lifeline as those who have scrimped on protection watched with despair oil prices shuffling between $43 and $48 for six weeks. Yet their activity also threatens to undermine one of the fundamental reasons for oil’s gains: falling U.S. output.

Why Oil Is Tumbling: Oil Hedges Were Just Rolled Over - One year ago, when oil prices first cracked and tumbled from $100 to a level some 60% lower, it took the US oil industry about 9 months to fully feel the pain and proceed with cash-saving production cuts as a result of extensive oil-price hedges that had been put on at the historical price, cushioning the blow from the price collapse driven by a drop in global oil demand coupled with a surge in Saudi oil production. The impact of these hedges was largely muted by the summer of 2015 when we first saw a notable decline in US oil production which had recently hit record levels.  And with oil volatility surging in recent months, oil producers needed to take advantage of a rally, technical or otherwise, and an oil vol lull to reestablish hedges, even if it meant at far lower prices than recent benchmarks.  This is precisely what happened in the past week following one of the most torrid surges in the price of oil seen in recent years. So ahead of looming re-determinations, crude oil producers which piled into this decidely technical-driven rally to hedge aggressively in order to show a more stable asset base for creditors, but more importantly, to offload further price decline risks to their counterparties. Today's reversal off $50 along with a surge in oil volatility suggests hedging activity has been aggressive, as further confirmed by Reuters..

Oil Stumbles Below $49 As Goldman Warns "Lower For Even Longer" -- Despite its dubious track record, oil prices are stumbling after Goldman Sachs releases a report calling for oil prices to remain lower for even longer, calling for a drop to $50 within the next 6 months. Via Goldman Sachs,  Crude Oil: Lower for even longer.  Ex SPR US crude stocks built 3.6mb in Sep vs. a seasonal draw of 2 mb. Cushing on the other hand drew 3.9 mb vs. a seasonal draw of 2 mb though we are heading into peak refinery maintenance period. Fundamentals remain weak and we view the market to be strongly oversupplied. Sep crude, gasoline, distillate, jet, fuel oil and unfinished oil inventories have built 8.9 mb vs. a seasonal build of 1.5mb. The market now requires non-OPEC production to shift from growth to large declines in 2016. The uncertainty on how and where that adjustment will take place has increased significantly.mThe potential access to capital in the US means that elevated financial stress needs to be maintained to eventually attain these adjustments. There is also the potential for prices to collapse to production costs if the oversupply breaches logistical and storage capacity. We estimate 2015 oil demand growth at 1.62 mb/d and we forecast 2016 global demand growth to be 1.28 mb/d which leaves the market 400 kb/d oversupplied. Prices have declined sharply over the past month to our previous $45/bbl forecast. Part of this was precipitated by macroeconomic concerns but in our view, it was also warranted by weak fundamentals. In line with our oversupplied outlook, we have changed our 3, 6 and 12-month WTI forecasts to $42/bbl, $40/bbl and $45/bbl.: Time spreads should remain in contango as the market needs to incentivize storage since there is insufficient demand to absorb supply.

U.S. shale oil output to fall by most on record in November: EIA – U.S. shale production is expected to fall the most on record in November, extending a nationwide output decline into its seventh consecutive month, according to a forecast on Tuesday from the U.S. Energy Information Administration. Total output is set to fall by more than 93,000 barrels per day (bpd) to 5.12 million bpd, according to the EIA’s monthly drilling productivity report. That’s the largest monthly cut forecast since data was available in 2007. Oil production from the Eagle Ford play in South Texas was expected to fall 71,000 bpd to 1.37 million bpd. Bakken oil output in North Dakota was expected to slide 23,000 bpd to 1.16 million bpd. Oil production from the Permian Basin of West Texas, which continues to buck the trend, was projected to rise 21,000 bpd to 2.03 million bpd. New well oil production per rig remained unchanged for the Bakken and Eagle Ford. It rose 2 bpd in the Permian, data show. Natural gas production in the major shale plays was expected to fall 294 million cubic feet per day (mmcfd) to 44.9 billion cubic feet per day (bcfd) in November from October. That would be the fifth expected monthly decline in a row for gas production from shale fields and would be the biggest decline since March 2014, according to EIA data. Despite the expected decline in November, overall production would still be up from the 42.8 bcfd shale output in November 2014.

U.S. crude oil falls for 5th day on glut concerns | Reuters: U.S. crude futures fell for a fifth consecutive day on Thursday, hit by concerns over a growing global glut of oil and after data showing a higher-than-expected U.S. inventory build last week. U.S. crude lost 42 cents or 0.90 percent at $46.22 a barrel as of 0008 GMT, after it settled down 2 cents at $46.64 on the previous session. * Global crude benchmark Brent also declined by 14 cents, or 0.28 percent, at $49.01 a barrel after it ended down 9 cents at $49.15 previously. * Data from industry group the American Petroleum Institute showed on Wednesday that U.S. crude inventories rose by 9.4 million barrels in the week to Oct. 9 to 465.96 million, compared with analysts' expectations for an increase of 2.8 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 1.4 million barrels, API said.

WTI Crude Plunges Back To $45 Handle After API Reports Biggest Inventory Build In 6 Months --For the first time in 5 months, API has reported a third weekly inventory build in crude oil in a row. API reported a stunning 9.3 milion barrel build (against expectations of a 1.8 mm build) with Cushing rising 1.4mm barrels! The result of the biggest inventory build since April, WTI is getting hammered...And the result...WTI back to a $45 handle Charts: Bloomberg

DOE Confirms Biggest Crude Inventory Build In Over 6 Months As Production Drops To 11-Month Lows -- While less than API's huge 9.3mm barrel build reported last night, DOE reported a 7.56mm barrel inventory build - the largest in over 6 months. This is the highest crude stock level seasonally on record. Crude prices dipped on the news but rallied back to pre-data levels - though are notably holding on to the losses from the API print... even as production dropped notably week-over-week. Biggest crude build in 6 months... remaining at the seasonally highest level of stocks on record... And crude is holding losses... Even as production drops to new 11 month lows... Charts: Bloomberg

Oil down about 2 percent after large U.S. crude build  – Oil prices fell about 2 percent or more on Thursday after the U.S. government reported a larger-than-expected crude stockpile build, although a big drawdown in gasoline helped limit some of the market’s downside. The Energy Information Administration (EIA) said crude inventories rose by 7.6 million barrels for the week ended Oct 9. [EIA/S] That was more than double the build of 2.9 million barrels expected by analysts in a Reuters poll, although lower than the 9.3 million barrels indicated by industry group American Petroleum Institute (API) in a report on Wednesday. [API/S] The crude build comes amid lower processing of oil in the United States as refiners shut for seasonal maintenance after the peak summer driving season. The EIA said gasoline stockpiles fell by 2.6 million barrels as less of the motor fuel was turned out last week. That helped cushion some of the bearish impact on crude prices, said analysts.

U.S. Oil-Rig Count Drops by 10 in Latest Week - WSJ: The U.S. oil-rig count dropped by 10 to 595 in the latest week, the seventh consecutive week of declines, according to Baker Hughes Inc.  The number of U.S. oil-drilling rigs, which is viewed as a proxy for activity in the oil industry, has fallen sharply since oil prices started falling last year. After a streak of modest growth, the rig count has now declined for seven consecutive weeks. U.S. oil prices recently were up 1.9% to $47.25.   There are now about 63% fewer rigs from a peak of 1,609 last October. According to Baker Hughes, the number of gas rigs rose by three to 192. The U.S. offshore rig count was 33 in the latest week, up one from last week and down 24 from a year ago. For all rigs, including natural gas, the week’s total declined by eight to 787.

U.S. oil drillers cut rigs for 7th week - Baker Hughes - U.S. energy companies cut oil rigs this week for a seventh week in a row, the longest streak of reductions since June, data showed on Friday, a sign low prices continued to keep drillers away from the well pad. Drillers removed 10 oil rigs in the week ended Oct. 16, bringing the total rig count down to 595, the least since July 2010. Over the prior six weeks, drillers had cut 70 rigs, oil services company Baker Hughes Inc said in its closely followed report. That total was less than half the 1,590 oil rigs in the prior year. Since hitting an all-time high of 1,609 in October last year, weekly rig count reductions have averaged about 20. While the total U.S. oil and gas rigs fell to another 13-year low, natural gas rigs were up three to 192. With that increase, gas rigs were just over the lowest level in at least 28 years, according to Baker Hughes data going back to 1987. Traders look to the rig count as an indicator of whether production may rise or fall over the next several months. The reductions over the past several weeks have erased the 47 oil rigs energy firms added over the summer when several drillers followed through on plans to add rigs announced in May and June when U.S. crude futures averaged $60 a barrel. U.S. oil futures this week averaged $47 a barrel, down from an average of $48 last week, in choppy trade driven up and down by mostly technical buying and selling.

Oil ticks up as rig count falls for 7th straight week: U.S. crude oil prices closed higher on Friday after oilfield services firm Baker Hughes released weekly data showing the U.S. oil rig count fell for a seventh consecutive week. The number of rigs in the nation's oilfields fell by 10 to a total of 595 in the week ended Oct. 16. At this time last year, oil and gas producers were operating 1,590 rigs. The rig counts have seen the longest streak of weekly declines since June, data showed Friday, a sign low prices continued to keep drillers away from the well pad. Over the prior six weeks, drillers had cut 70 rigs.  U.S. crude settled up 88 cents, or 1.9 percent, at $47.26 a barrel. Brent's new front-month December contract traded up 70 cents at $50.40 a barrel. Crude oil prices had inched higher in choppy trade prior to the report, as short covering fueled a small rally after four days of sharp losses, though gains were limited as prices failed to break through key technical levels.

Chance of oil falling below $20 is under 50 percent - Goldman Sachs  – Goldman Sachs head of commodities research and commodities bear Jeff Currie said on Thursday that he does not see the price of oil breaking above $50 a barrel in the next year, but the chances of it dropping to $20 are below 50 percent. Persistent oversupply, along with slowing demand from China and other emerging-markets as well as a stronger dollar, will create enough of a headwind to keep the price of oil below $50 a barrel through the coming 12 months. Goldman is forecasting growth in oil demand of 1.62 million barrels a day this year and 1.28 million bpd next year, creating a surplus of some 400,000 bpd that will have to clear before the price can recover much beyond current levels. “A substantially oversupplied market makes it that much more difficult in terms of trying to complete the adjustment process going forward, but also reinforces our view that of a chance that we trade down to $20, that’s where we reach storage capacity constraints,” Currie said at a news briefing. That said, not all the world’s spare capacity is readily available to come back online at the first sign of a significant pickup in the price, he said. “I put the likelihood (of a drop to $20) at below 50 percent,” he said. “We estimate there are 370 million barrels still available (in storage globally).”

OPEC sees more demand for its crude in 2016 as cheap oil hits rivals -– OPEC forecast on Monday that demand for its oil in 2016 would be much higher than previously thought as its strategy of letting prices fall hits U.S. shale oil and other rival supplies, reducing a global surplus. In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) forecast the world would need 30.82 million barrels per day (bpd) from the group next year, up 510,000 bpd from the previous prediction. OPEC’s forecast, if realized, would be a further indication its strategy is working. The group last year refused to prop up prices and instead raised output, seeking to recover market share taken by higher-cost rival production. Oil is trading just below $53, half its price of June 2014. Supply outside OPEC is expected to decline by 130,000 bpd in 2016, the report said, as output falls in the United States, the former Soviet Union, Africa, the Middle East and much of Europe. Last month, OPEC predicted growth of 160,000 bpd. “This should reduce the excess supply in the market and lead to higher demand for OPEC crude,” OPEC said in the report, “resulting in more balanced oil market fundamentals”.

Oil market glut will persist through 2016, says IEA - --Higher oil output from Opec and a slowdown in world economic growth means the crude oil glut will persist through next year, the world’s leading energy forecaster said on Tuesday. The International Energy Agency said it expected a “marked slowdown” in oil demand growth as the stimulus from lower prices faded and as economic activity weakened in countries dependent on commodity revenues. “Oil at $50 a barrel is a powerful driver in rebalancing the global oil market,” the IEA said in its closely watched monthly report. “But a projected marked slowdown in demand growth next year and the anticipated arrival of additional Iranian barrels . . . are likely to keep the market oversupplied through 2016.” An increase in production from Opec member Iran once sanctions are lifted is expected to overshadow the first drop in US oil output since 2008, the IEA added. The collapse in oil prices has supported the strongest oil demand growth in almost a decade, with low prices helping boost demand by 1.8m barrels a day to 94.5m b/d. Gasoline demand has been particularly strong, suggesting motorists have been encouraged to drive more by lower prices. But the IEA forecasts that effect will fade, with demand growth set to slow to 1.2m b/d next year. The IEA, which uses the International Monetary Fund’s growth assumptions for its oil demand estimates, said the global economic outlook was “more pessimistic”. The fund said earlier this month the world economy would grow for 2015 at its slowest pace since the global financial crisis. Weaker economic growth in oil-dependent economies such as Canada, Brazil, Venezuela, Russia and Saudi Arabia will also have an impact on demand growth. “Lower commodity prices, with all else held equal, eventually equate to lower public spending and a potential dampening in consumer expenditure in many of these countries,” the IEA said.

Exclusive - Nigeria revamps oil exploration firms in first step to reform -  Nigerian President Muhammadu Buhari has taken his first steps towards overhauling the country’s troubled state oil firm by giving its exploration joint ventures control over their own budgets as a way to overcome chronic cash shortages. Corruption and mismanagement at the Nigerian National Petroleum Corporation have hampered an industry that provides 70 percent of state income. NNPC has been accused of failing to account for tens of billions of dollars, while no new exploration blocks have been sold since 2007. Buhari, who took office on May 29, wants to make reform of the sprawling NNPC a priority at a time when a slump in oil prices is hammering the economy. The former military ruler has fired the NNPC board and plans to break up the company, whose opaque structures have allowed corruption and oil theft to flourish. To speed up an often glacial decision making process at NNPC, Buhari has given the green light to revamping several joint ventures involving its poorly managed production and exploration arm, according to a letter by NNPC head Emmanuel Kachikwu signed by Buhari, a copy of which was reviewed by Reuters. Nigeria produces about 2.2 million barrels per day of oil with foreign and local companies through production sharing contracts and joint ventures (JVs). But projects have been held up because NNPC needs parliamentary and regulatory approval to spend anything. Officials and lawmakers are often six months late in giving their nod, making proposals irrelevant as costs exceed the original budgets. As a result, unpaid bills have been piling up.

Indonesia rejoining OPEC despite being a net importer of petroleum - Today in Energy - (EIA) The Organization of the Petroleum Exporting Countries (OPEC) notified Indonesia that it plans to accept the country's request to reactivate its membership at the next OPEC meeting in December. Once it rejoins, Indonesia will regain its status as the only Asian member of OPEC and the only member that is a net importer of petroleum and other liquids.   . Indonesia originally joined OPEC in 1962 but suspended its membership at the beginning of 2009. OPEC does allow for associate membership, but currently all 12 members are full members.  Indonesia's decision to suspend its OPEC membership was prompted by growing internal demand for energy, declining crude oil and condensate production in mature fields, and limited investment to increase production capacity. Indonesia had become a net importer of petroleum and other liquids by 2004 after domestic demand exceeded production, as Indonesia's production of petroleum and other liquids has been on a general decline since the mid-1990s. Indonesia produced about 790,000 barrels per day (b/d) of crude oil and condensates in 2014, the third-lowest level among OPEC countries. Although Indonesia is a net oil importer, the country continues to export crude oil and condensates. Because Indonesia is an archipelago, geographic distances between its domestic oil production and demand centers encourage both imports and exports. Despite its growing oil demand, Indonesia's oil and natural gas sectors continue to be an important part of the country's economy. Indonesia imports oil products, particularly gasoline, as a result of insufficient refining capacity to meet the growing demand for oil products.

OPEC Wins against the US: Crude Oil Market's Bloodbath Continues - On Monday, October 12, 2015, OPEC (Organization of the Petroleum Exporting Countries) released its MOMR (Monthly Oil Market Report). The monthly report highlighted that OPEC’s crude oil production rose by 109,000 bpd (barrels a day) to 31.6 MMbpd (million barrels per day) in September 2015 compared to August 2015.   OPEC operates as a cartel. It controls over 40% of the global crude oil production. On June 5, 2015, OPEC decided to continue with its collective production target of 30 MMbpd for the next six months in order to defend its market share. So, OPEC has been producing 1–2 MMbbls more crude oil than its output quota. The record production is leading to a surplus. It’s negatively impacting oil prices. The group’s crude oil exporting giants like Saudi Arabia, Iran, and Iraq continue to produce crude oil at record levels. Saudi Arabia has even discounted crude oil prices to its Asian and US importers. As a result, it’s trying to increase its market share and outplay the high-cost US shale producers. Crude oil prices’ long-term downward trend has led to the fall in the US production. OPEC also expects that US production will continue to fall in 2016. OPEC beat the US energy players in the market share battle. Meanwhile, market surveys estimate that the energy sector’s 3Q15 earnings in the S&P 500 are expected to fall by 64% compared to 3Q14.

Kuwait sees no call for policy change as OPEC eyes balanced market – Kuwait said on Monday there were no calls within OPEC to change the oil group’s production policy and that lower output from high-cost producers could support prices in 2016, adding to signs OPEC will keep its strategy of defending market share. Meanwhile, OPEC forecast in a monthly report that demand for its oil in 2016 would be much higher than previously thought as lower prices curb U.S. shale oil and other rival supply sources, reducing a global surplus. OPEC last November decided against propping up prices by cutting output, seeking to recover market share taken by higher-cost rival production. While oil is hurting OPEC revenues by trading below $53 a barrel, half its price of June 2014, there are signs lower prices are taming non-OPEC supply. “Today there are no ideas or demands from the member states to make any big change in OPEC’s decision,” Kuwait Oil Minister Ali al-Omair told reporters, referring to OPEC’s move of November 2014. “Today there are indications that a lot of high-cost oil production is starting to get out of the market and this will help improve prices.” The Organization of the Petroleum Exporting Countries meets to review its output policy on Dec. 4 and the comments add to signs the group is unlikely to be diverted from its strategy.

Oil-dependent Saudi, Norway sovereign funds selling European shares - report – The three biggest sovereign wealth funds of oil-producing countries have been selling European equity holdings since May, a study showed on Monday, another sign of petrodollars being withdrawn from world markets. Asian funds have meanwhile continued to add European equities, according to the data from Nasdaq Advisory Services, which provides analysis on shareholder and investor activity. Since May, the Saudi Arabian Monetary Authority has sold $1.2 billion worth of equities across Nasdaq’s European client base. That accounts for 13 percent of its $9.2 billion holdings in the European companies tracked by Nasdaq. Norway’s Norges Bank Investment Management has sold $1.1 billion — around 2 percent of the $57.5 billion market value of its holdings, while the Abu Dhabi Investment Authority has cut some $300 million worth of shares from its $3.6 billion holding. “Over 2015, the three largest oil-dependent SWFs have all been reducing their equity holdings in the region, with this trend accelerating over the second quarter and into the third quarter of the year,” said Alexander Free, an analyst with Nasdaq’s Advisory Services. The data is based on a sample of 159 European companies, with a market value of $1.87 trillion, Nasdaq says. They range from retail and telecoms shares to financials and utilities.

Naimi: Saudi Arabia To Keep Up Energy Spending Despite Oil Drop - Rigzone: (Reuters) - Saudi Arabia is continuing with its investments in the oil and gas industry as well as solar energy despite the current drop in oil prices, the kingdom's oil minister was quoted as saying on Friday. Ali al-Naimi was speaking at the G20 Energy Ministers' meeting in Istanbul, according to state news agency SPA. "Since the 1970s this industry has been experiencing sharp fluctuations in prices - up and down - which have impacted investments in the field of oil and energy, and its continuity," Naimi said. "This volatile situation is not in the interest of the producing and consuming countries, and the G20 countries can contribute to the stability of the market." Oil fell on Friday, reversing earlier gains after U.S. non-farm payrolls data came in weaker than expected which clouded the demand outlook from the world's largest oil consumer. Oil prices have almost halved in the past year because of excess supply, although analysts see signs that OPEC's strategy of allowing prices to fall to put a squeeze on growth in high-cost production areas is having some impact. International oil companies have significantly lowered spending this year due to persistently low oil prices, cutting budgets and thousands of jobs. Global oil investments this year are expected to drop by 20 percent marking their biggest decline in history, Fatih Birol, head of the International Energy Agency, said on Friday.

Saudi state claws back unspent money as finances tighten  (Reuters) - Saudi Arabia's finance ministry, seeking to cut waste as state revenues shrink because of low oil prices, is telling government bodies to return unspent money which they were allocated in this year's budget, sources familiar with the policy told Reuters. Over the past several years of sky-high oil, government bodies in the world's top oil exporting nation were given considerable freedom to transfer money from one project to another as they wished. That led to a bonanza of ad-hoc spending on bonuses, travel allowances and the like. Now, ministries are being told that if money is not fully spent on the projects for which it was originally allocated, the remainder must be sent back to the Treasury, the sources said. The ministry did not respond to a request for comment. The tighter policy underlines a sober mood taking hold in Riyadh because of the halving of oil prices since mid-2014. The International Monetary Fund and private analysts calculate Saudi Arabia may run a record budget deficit of $120 billion or more this year; to pay its bills, the government has sold over $80 billion of foreign assets since August last year. Around the kingdom, bureaucrats, businessmen and ordinary Saudis are preparing for a period of relative austerity as the finance ministry asserts more control over the purse strings. "Saudi Arabia has started to focus on efficient spending, which means tighter financial supervision,"

Saudi Arabia Interprets Anti-ISIL Campaign in Syria as Russia-Iran Alliance: — The Saudi foreign minister said after a meeting with his Russian counterpart Sergei Lavrov that Riyadh interpreted Russia's operation in Syria as an alliance between Iran and Russia. "Regarding the military operation carried out by Russia on the territory of Syria, we expressed our concerns that this operation could be interpreted as an alliance between Iran and Russia. But during the conversation, our Russian friends explained that the main objective was to fight Islamic State." Meanwhile, Sergei Lavrov said that Russia was ready for military cooperation with Saudi Arabia in Syria to erase any doubts regarding its aims in Syria. "From our side we expressed readiness, which found a counter-response from Saudi Crown Prince [Mohammad bin Naif], for the closest cooperation between our military and special services, so there would be no doubt that the targets of Russian aviation are the Islamic State, the Nusra Front and other terrorist groups."

Russia’s Move In Syria Threatens Energy Deals With Turkey -- Putin has long valued Turkey as a territorial and ideological play against NATO and the EU.  Cross border trade exceeded $31 billion – good for sixth among Russia’s major trading partners – and U.S. and EU sanctions have expanded the horizons for further trade between the two nations. Natural gas in particular forms the backbone of this growing trade relationship. In 2014, Gazprom delivered 27.3 billion cubic meters (bcm) of gas to Turkey via its Blue Stream and Trans-Balkan pipelines. Gas exports from Russia are up some 34 percent since 2010, and Turkey – now Russia’s second largest market after Germany – is only getting hungrier. By 2030, gas demand in Turkey is expected to expand 30 percent, reaching 70 bcm per year. With European demand projected to grow by just over 1 bcm per year in the same period, Russia’s South Stream pipeline proposal was as misguided as it was non-compliant with the EU’s Third Energy Package. Routed through Turkey however, Russia’s newest pipeline, TurkStream, promised to add greater utility. Turkey gets its gas and partly fulfills its transit aspirations; Russia bypasses Ukraine while opening windows to Europe and the Middle East; and Europe, if it wants it, will have gas on demand. It sounds good – okay, at least – but as so often happens in Russia, the tale has taken a turn for the worse. TurkStream has stumbled out of the gates and larger happenings in Syria look to significantly damage Russia-Turkey relations.Originally intended as a four-pipe 63-bcm project, TurkStream will now top out at 32 bcm, if it gets off the ground at all. As it stands, the parties have agreed to draft the text of an intergovernmental agreement, with a targeted signing date of early next year, following Turkey’s general election. And that’s it.

Iranian parliament passes bill approving nuclear deal -- Iran’s conservative-dominated parliament has endorsed the landmark nuclear agreement struck earlier this year, clearing the last hurdle before both sides begin work to implement it next week. The Iranian parliament, the Majlis, on Tuesday passed a motion to approve the nuclear deal after heated discussions and sharp exchanges between MPs and the moderate administration of Hassan Rouhani, whose credibility was on the line had parliamentarians voted down the accord. It passed with 161 yes votes, 59 no votes and 13 abstentions among the 250 MPs present at the session. Under the agreement, Iran is expected to start work on rolling back its nuclear programme from 18 October – labelled as adoption day – which includes taking out thousands of centrifuges at its enrichment facilities and pulling out its heavy-water reactor and filling it with concrete. The EU will in return adopt a regulation for the lifting of sanctions and the US president, Barack Obama, will issue waivers for sanctions relief. However, these measures will not take effect until what has become known as implementation day, when the UN nuclear watchdog, the International Atomic Energy Agency, will verify that Tehran has taken the necessary steps as outlined under the deal.

Iran Could Trigger A Resource War On Several Fronts Other Than Oil -- As has already been discussed at length, once the economic sanctions imposed by the U.S. and the European Union on Iran begin to be lifted next year, there is going to be a surge in the already oversupplied global crude oil markets. The current world crude oil output is around 96.6 million barrels per day and with Iran’s addition, this output could further increase by around 500,000 barrels per day. Although the surge in crude oil markets could further worsen the global supply/demand gap, Iran could present a new source of competition on other crucial fronts too, especially in the gas markets. Let us look at Qatar first. Although Qatar is one of the smallest contributing members of OPEC, the small nation is the world’s biggest exporter of Liquefied Natural Gas (LNG). With close to890 trillion cubic feet of proved natural gas reserves, Qatar is the third largest natural gas producer in the world. Almost all of Qatar’s natural gas is located in its North Field which, along with Iran’s South Pars, holds more than 885 trillion cubic feet (TCF) of natural gas and is the largest natural gas formation in the world.India has also expressed its interest in investing close to $15 billion in new projects in Iran. Even South Africa is planning to invest in future LNG projects in Iran. With rising interest from Europe, Asia and Africa, Iran is now gearing up to increase its gas production from South Pars field and it is expected that the Islamic Republic could start exporting gas to Europe and other regions by as early as 2020. With this, the moratorium on newer projects that is currently in place in Qatar’s North Field might soon come to an end and we might witness a race to compete for LNG exports between the two Middle Eastern nations.

Where Are Commodity Exporters Headed? Output Growth In The Aftermath Of The Commodity Boom. IMF - Commodity prices have declined sharply over the past three years, and output growth has slowed considerably among those emerging market and developing economies that are net exporters of commodities. A critical question for policymakers in these countries is whether commodity windfall gains and losses influence potential output or merely trigger transient fluctuations of actual output around an unchanged trend for potential output. The analysis in this chapter suggests that both actual and potential output move together with the commodity terms of trade but that actual output comoves twice as strongly as potential output. The weak commodity price outlook is estimated to subtract almost 1 percentage point annually from the average rate of economic growth in commodity exporters over 2015 - 17 as compared with 2012 - 14. In exporters of energy commodities, the drag is estimated to be larger - about 2¼ percentage points on average over the same period. The projected drag on the growth of potential output is about one-third of that for actual output. After rising dramatically for almost a decade, the prices of many commodities, especially those of energy and metals, have dropped sharply since 2011 (Figure 2.1). Many analysts have attributed the upswing in commodity prices to sustained strong growth in emerging market economies, in particular those in east Asia, and the downswing to softening growth in these economies and a greater supply of commodities.1 Commodity prices are notoriously diffi cult to predict, but there is general agreement among analysts that they will likely remain low, given ample supplies and weak prospects for global economic growth. Commodity futures prices also suggest that, depending on the commodity, future spot prices will remain low or rebound only moderately over the next five years.

It's Glencore Versus Goldman in Metals as Miners Cut Production - Whether a turnaround is imminent or more gloom lies ahead will dominate conversation at the LME Week in London, the annual gathering of miners, traders and buyers that starts on Monday. Glencore Plc last week became the flag-bearer for a revival, promising to cut zinc production by a third and sparking one of the biggest rallies in metals this year. Pessimists such as Goldman Sachs Group Inc. say the gains will be fleeting as the economy in China, the largest buyer, shifts away from a metals-intensive, investment-led growth model. "China is the central issue," "However, it is noteworthy that the current conditions in the copper market are actually considerably better than most market commentary. Demand has been disappointing, but supply has also been worse than expected.” The uncertain state of the metals markets can be seen in the manic share-price swings at Glencore, a company that mines and trades metals including zinc, copper and aluminum. Its stock crashed 29 percent on Sept. 28 to a record low on concern weak prices threatened its ability to repay debt. In the two weeks since, the shares have almost doubled.

Glencore Production Cuts Backfire After World's Second Largest Miner Vows To Fill The Glencore Void -- First Glencore cut its coal production. Then a month ago as part of its "doomsday" delevearging plan, the troulbed Swiss miner-cum-trader announced drastic production cuts and major layoffs in its copper mining business, which would be reduced by 400,000 tons as a result of mine closures in Zambia and DR Congo. Then late last week the company surprised many when it once again slashed its zinc production by a third (while laying off 1,600 workers in Australia), in the process reducing global zinc output by 500,000 metric tons. The logic, in theory, behind the move was simple enough. As DB summarized it, "$1650 for zinc is fundamentally too low and some of the capacity makes no cash at these levels - Solution: Shut it down until the price normalizes. While most market observers see the zinc market already in deficit, the dwindling price says otherwise and Glencore's move should bring forward the crunch point with a resulting positive impact on the metal price." Additionally, DB provided a beautiful model of how said zinc production cut for Glencore - expected to be completed over the next 6 months - would look like, as well as the ensuing production ramp-up in 2017 "as the zinc price recovers."

China imports slump as growth expected to slide below target -- China’s imports slid for the 11th straight month, adding to economists’ growing bearishness — now at a post global financial crisis low — as policymakers seek to arrest an economic slowdown. September’s 17.7 per cent year-on-year drop in imports, in renminbi terms, further underlines the challenges of China’s long-standing bid to pivot the economy away from investment-led growth and cheap exports towards domestic consumption. Slower growth in China, which ripples around the globe via depressed demand for everything from commodities to luxury goods, has roiled global stock markets in recent months. Analysts expect gross domestic product figures due out next Monday to show real growth at 6.7 per cent for the third quarter, lower than the official full-year target of “around 7 per cent”, according to a Bloomberg survey of 25 economists. Official data showed real growth at 7 per cent in both the first and second quarters this year. UBS China economist Harrison Hu is looking for growth of 6.6 per cent given “continued property destocking, stumbling industrial activity, shrinking stock market turnover and weak exports”. The latest survey marks the biggest gap between forecast and target since the first quarter of 2009, when the Chinese economy grew at 6.2 per cent, far below the full-year target of 8 per cent. However, China’s huge economic stimulus programme unveiled in late 2008 succeeded in raising full-year growth to 9.2 per cent. The number of economists who responded to Bloomberg’s third-quarter survey, at 26, is sharply below the 39 respondents in the second quarter and 54 in the third quarter of 2014. The decline raises the prospect that some economists may not want to be publicly associated with bearish forecasts.

China’s Central Bank Expands New-Style Easing - WSJ: China’s central bank is expanding an unconventional easing program to boost bank lending, stepping up its repertoire of monetary-stimulus measures to arrest the country’s economic slowdown, but also taking on more risk itself. In the latest in a series of new easing tools that analysts liken to Western so-called quantitative easing, the People’s Bank of China will let more commercial lenders use loans as collateral to borrow cheap funds from the central bank. The banks are then supposed to use the money to steer loans to parts of the economy deemed crucial for China’s growth, such as small and private businesses. The move comes amid an increase in bad loans that has made Chinese banks more stingy with lending to businesses viewed as risky, often the same ones that are supposed to drive China’s transition to a new growth model. But as the central bank steps in to assist the banks, the rise in bad loans also means it is increasing its own exposure to risk. Zhu Chaoping, China economist at a Singapore-based investment bank, called the move “a potential tool for the PBOC to conduct Chinese-style quantitative easing,” but said one challenge for the central bank is how to ensure the quality of the collateral so that it won’t end up holding bad loans on its own balance sheet.

Economic Growth - Paul Romer -- People are reasonably good at estimating how things add up, but for compounding, which involved repeated multiplication, we fail to appreciate how quickly things grow. A rough guide to the doubling time for any rate of growth is to divide it into 70. For example, if something grows at 7% per year, you can infer that it doubles every 10 years because 70 / 7 = 10. If it grows at 3.5% per year, it takes 20 years to double. Taking twice as long to double may not sound so bad, but remember the difference between using just the white squares or all the squares on the chessboard. Or consider what happens over the course of a century. A doubling time of 20 years means doubling 5 times in a century, which produces an increase by a factor of 32. Doubling 10 times produces an increase by a factor of 1024. Is growth at 7% per year even possible? For a country that starts at a low level of income, we now know that growth this fast can be sustained for decades. Figure 1 shows GDP per capita in Shenzhen, a new city that the national government in China started as a reform zone where it could pilot controversial new policies such as letting foreign firms enter and hire Chinese workers. When a graph has a ratio scale on the vertical axis, as this figure does, the slope of a plotted line is equal to the growth rate. The steeper slope from 1980 to 1985 shows that growth was higher then. In this exceptional initial period, it grew at an exponential rate of 23% per year. In the subsequent interval from 1985 to 2011, it grew at more than 7% per year. Growth at this pace lifted GDP per capita (measured in the purchasing power of a dollar in 2005) from about $2500 in 1985 to about $17,000 in 2011.

China Consumer Inflation Eases, Pressuring Beijing for More Stimulus - WSJ: —China’s consumer inflation decelerated in September as food prices eased, reflecting continued weak domestic demand and putting pressure on Beijing for more steps to rekindle the economy. According to National Bureau of Statistics data released Wednesday, China’s consumer-price index rose 1.6% in September from a year earlier, slower than a 2.0% rise in August. This was less than the median 1.8% gain forecast by 13 economists in a Wall Street Journal survey. More fiscal and monetary stimulus is needed for China to reach its growth target of about 7% this year, economists said, a task made easier when policy makers don’t have to worry about sharply accelerating inflation. “Disinflation has continued in China for a long time. They definitely need to increase their easing efforts and not just on the monetary side,” said BBVA Research economist Xia Le. “They need to increase fiscal spending too.” A high-base comparison with year-earlier figures and nearly flat pork prices after a series of sharp monthly increases over the summer helped reduce consumer inflation, official data showed.

China auto sales expand at slowest pace in 3 years: -- Light-vehicle sales in China expanded at the slowest pace since 2012 so far this year, underlining the slump in demand that prompted the government to cut a tax on car purchases to revive demand in the world’s biggest auto market. Retail deliveries of cars, SUVs and multipurpose vehicles increased 5.8 percent to 14.4 million units in the January-September period, according to the China Passenger Car Association, the slowest pace in three years. Sales in September rose 2.5 percent, the second consecutive month of gains after declining in June and July. China announced stimulus measures at the end of September by halving the purchase tax on an estimated 64 percent of passenger cars, after lobbying by the state-backed auto association amid weak economic growth. The Shanghai Composite Index has rebounded 11 percent from an August low as speculation policy makers will introduce more measures to spur growth and stabilize mainland markets gained ground. “We will see major sales growth in the October numbers as the impact of tax cut kicks in," said Yale Zhang, a managing director at Autoforesight Shanghai Co. “Car buyers are recovering from a stock rout psychologically and starting to buy if they do need a car.” China cut the purchase tax on vehicles with engines 1.6 liters or smaller by half to 5 percent effective Oct. 1 through the end of next year.

China economic growth seen slowing despite policy easing  - China's economic growth is expected to slow to 6.5 percent in 2016 from an expected 6.8 percent in 2015, even as the central bank eases policy further to ward off a sharper slowdown, a Reuters poll showed. A 25-basis-point reduction in benchmark interest rates and another 50 basis points of cuts in banks' reserve requirement ratio (RRR) are expected by year-end, analysts surveyed by Reuters said. In a bid to stoke activity, the central bank already has cut lending rates five times since November to 4.60 percent, and lowered the amount of cash that the biggest banks must hold as reserves to 18.0 percent. But some analysts believe such policy moves have not been as effective as in the past when the economy was more tightly controlled and debt levels were much lower. The central bank is expected to cut reserve requirements by a further 150 bps in 2016 but keep interest rates unchanged, the poll showed. The world's second-largest economy is forecast to grow 6.8 percent this year, cooling from 7.3 percent in 2014 and the slowest pace in a quarter of a century, according to the median forecast of 62 analysts. Growth is expected to slow further to 6.5 percent in 2016.

Murky Housing Inventory Data Plagues Chinese Economy -  Economists worry that the empty properties ringing many of China’s cities are a major drag on the economy at a time when Beijing is looking for ways to rekindle growth. Those empty properties keep a lid on prices and discourage developers from buying land and breaking ground on new projects. How bad is the problem? It could be much bigger than either national or local figures show, as Esther Fung explains: Chinese national figures include only homes that are completed and ready for sale. “In other words, if developers stop working, then the number is correct,” said Li Gan, a professor at China’s Southwestern University of Finance and Economics. Local figures generally include structures that are still under construction but have attained local regulatory clearance to be sold. In China, developers often sell homes before they are completed, giving them needed cash to finish projects. As a result, homes that are partially completed or not yet for sale can go uncounted. “The real inventory situation could be bigger than the data we are seeing,” said Yang Kewei, research head of data provider China Real Estate Information Corp., or CRIC, which tracks inventories.

China approves 218 projects worth $285 billion in January-September | Reuters: China's economic planner said it approved 218 fixed-asset projects worth 1.81 trillion yuan ($285.3 billion) in the first nine months of the year, as Beijing looks to drive infrastructure investment to support slowing economic growth. The highest number of approvals were in the transportation and infrastructure sector, which saw 84 projects worth 990.6 billion yuan, the National Development and Reform Commission (NDRC) said at a briefing in Beijing on Thursday. It also gave the greenlight to 398.2 billion yuan worth of irrigation and water conservancy projects, as well as to 236.6 billion yuan of energy projects. "As these projects are developed and implemented, they can support steady investment growth, beef up development and provide strong foundations for long-term economic development," NDRC spokesman Li Pumin said. China has increased efforts to support the economy in recent months, ranging from fast-tracking infrastructure investment to cutting down payments for some first-time home buyers and pushing ahead with financial reforms. Li said a bond fund spearheaded by the State Council and NDRC, involving policy lenders Agricultural Development Bank and the China Development Bank, had invested its first tranche of funds into projects and was now investing its second round. Reuters reported in July that China planned to raise $160 billion in bonds to fund infrastructure projects over the next few years.

S. Korea's household debts continue surging trend on low rates | Shanghai Daily: (Xinhua) -- Household debts in South Korea continued its monthly surging trend in August due to the record- low borrowing costs, central bank data showed Tuesday. Debts owed by households to deposit-taking institutions, including banks and non-bank deposit takers, increased 9.8 trillion won (8.5 billion U.S. dollars) in August from a month earlier, according to the Bank of Korea, the country's central bank. It was only the second largest monthly increase to the record high of a 10.1 trillion expansion in April this year. The surging trend came as the central bank lowered the benchmark interest rate to an all-time low of 1.5 percent in June after cutting it by a percentage point in March. Some predicted a further rate cut as early as November as exports, which take up about half of the economy, fell for nine straight months through September. Lower borrowing costs usually make the South Korean currency weaker to the U.S. dollar, helping boost exports. But, lower rates can cause lots of side effects like fast growth in household debts. Household debts extended by deposit-takers reached a record high of 773.1 trillion won as of end-August.

Retailers warn of dismal spending; sales tax hike seen stifling demand - Do not believe in official statistics, Japanese retailers seem to be saying, as they cut earnings forecasts and warn of lackluster consumer spending, a key growth engine for Japan at a time when exports and factory output are stalling. If you go by the larger-than-expected 2.9 percent gain in household spending in August — the first year-on-year rise in three months — then consumption looks like it is finally alive and well again, after a sales tax hike last year stifled the economy. But profits of retailers suggest the spending data, which have a small sample size, have not captured the full picture. Restrained household consumption raises the stakes for a central bank policy meeting on Oct. 30, and for the government’s plan to flesh out new economic policies before the year-end. “Consumer spending has ground to a halt,” said Noritoshi Murata, president of Seven & I Holdings. “There are a lot of concerns about the global economy and not many positives for consumption. Weak spending could continue into the second half of the fiscal year.”

Japan producer prices fall most in almost 6 years ---Japanese producer prices fell at the sharpest rate in nearly six years in September, further undermining the Bank of Japan's mission to generate stable 2% inflation. The prices of domestically produced goods traded among Japanese companies dropped 3.9% from a year earlier in September, the worst showing since a 5.0% fall in November 2009, according to data released Wednesday by the central bank. The prices declined 3.6% in August. "We think the decline in corporate goods prices is not only attributable to falling commodity prices, but also reflects the weakness of domestic demand itself," said Goldman Sachs economist Yuriko Tanaka. The trends at factory gates could eventually feed into the price tags on store shelves, putting an even greater distance between the central bank and its inflation goal. Ms. Tanaka expects core consumer prices, which exclude fresh food costs, will "remain in negative territory in the near term." Core prices fell 0.1% in August, the first drop in over two years. A slump in global commodities markets has driven down producer prices across the world. Raw material prices in Japan fell 31.3% in September, sharper than the previous month's 25.2% decline. The deflationary pressure seems to be gradually spreading throughout the production chain in the absence of strong demand. Intermediate goods prices slipped 5.5%, faster than in August. Final goods prices posted what was their first flat reading since February.

Japan's factory output slumps, hints at recession - - The Japanese government said Thursday that industrial output fell more sharply than first estimated in August, putting the economy at a greater risk of recession. Output dropped 1.2% from the previous month, more than double the preliminary 0.5% decrease, the trade ministry said. Japanese manufacturers cut production of autos, electronic machinery and computer memory as worries over sputtering Chinese growth rocked the global stock market and chilled corporate sentiment across the world. The revised figure is striking in that the preliminary reading was already a major disappointment to investors when it was announced two weeks ago. Economists had originally forecast an increase in production. "There is now a greater possibility" of Japan's gross domestic product shrinking for a second consecutive quarter in the July-September quarter, said Meiji Yasuda Life Insurance chief economist Yuichi Kodama. GDP and industrial output often move in the same direction, and Mr. Kodama now expects a 0.9% GDP shrinkage following the previous quarter's 1.2% decrease. A sharpening slowdown in China--Japan's second-largest export market--has taken a toll on Japanese manufacturers. Export volumes to the mainland fell 9.2% from a year earlier in August, dropping for a seventh straight month. Machinery orders sank 5.7% in August in tandem with signs of flagging sentiment among manufacturers. Sentiment among non-manufacturers has held up, but they aren't necessarily making up for lost industrial output. The tertiary industry index--a measure of service-sector activities--rose only 0.1% from the previous month to 103.3 in August, according to other data released Thursday.

Japan to exempt some food from sales tax hike, sparks worries about debt -- Japanese Prime Minister Shinzo Abe ordered his ruling party on Wednesday to devise a plan to exempt some food items from a sales tax hike in 2017, which could hamper the government's efforts to lower its gigantic pile of public debt. The government will raise the nationwide sales tax to 10 percent from 8 percent in April 2017 to pay for rising welfare spending, but politicians are worried about the economic impact after a sales tax hike last year helped trigger a recession. Low-income households have been cutting back on spending, so reduced tax rates would be a big relief. However, the lost tax revenue could undercut moves to lower Japan's debt burden, which is the worst among advanced economies. Daiju Aoki, economist at UBS Securities, said that given the costs small businesses would face from having to deal with different tax rates, the negatives from introducing such a system "outweigh the positives over the long term". Also, he said, "revenue from the sales tax tends to be very stable, but when you introduce exemptions this makes revenue more volatile."

Japan govt cuts economic assessment as output sags: Japan's government lowered its assessment of the economy on Wednesday as output sags, in a worrying sign that recovery is stalling as overseas demand weakens. The government also downgraded its view of industrial production as factory activity contracts and inventories rise. The gloomy overall assessment raises the stakes for the Bank of Japan's monetary policy meeting at the end of the month and places Prime Minister Shinzo Abe's economic policies under even greater scrutiny. "The economy is in a gradual recovery trend, but there are some pockets of weakness," the Cabinet Office said in its monthly economic report. "Recently, industrial output has weakened." Last month, the government said the economy was recovering but in some parts the recovery has dwindled.  An unexpected fall in August industrial production prompted some economists to suggest Japan's economy could contract in July-September, which would put it in a technical recession after the previous quarter's contraction.

EM slowdown weighs on Bank of Japan outlook - The Bank of Japan has jumped on the bandwagon of blaming its own slowdown on the downturn in emerging markets. Minutes from the BoJ's September 14-15 meeting see it singling out emerging markets as a reason for a shift in the domestic economy's performance. In fact, a simple count sees the number of times "emerging" was used in the minutes jump to 34 in September from 16 at the August meeting. In discussing developments in Japan's economy, the central bank said exports had "recently been more or less flat", having said in August they had been "picking up, albeit with some fluctuations". Another area that had flattened out, having been picking up previously, was industrial production. However, the Bank still retained its optimistic slant that it was likely to increase moderately. This month, the BoJ held off on increasing its monetary stimulus programme, heightening expectations the central bank would pull the trigger at its upcoming October 30 meeting and expand its effort to boost the economy. However, governor Haruhiko Kuroda said yesterday at an IMF-World Bank pow-wow in Peru that he saw little need for new stimulus. If he changes course, expect EM markets to take the blame.

India's Wholesale Prices Decline for 11 Straight Months -- India’s wholesale prices fell for the 11th straight month as central bank Governor Raghuram Rajan kept monetary policy accommodative. The wholesale price index dropped 4.54 percent in September from a year earlier, the Commerce Ministry said in a statement on Wednesday, more than the 4.42 percent decline predicted by the median estimate in a Bloomberg survey of 36 economists. The gauge had fallen 4.95 percent in August. Rajan cut interest rates by a steeper-than-expected 50 basis points last month and said policy must stay accommodative to the extent possible. Consumer prices gained 4.4 percent in September, faster than August’s 3.7 percent, yet below the central bank’s 6 percent inflation target for the 13th month. The Reserve Bank of India will now shift focus to its 5 percent CPI target for March 2017, Rajan had said.

India agreed to pay savers less after central bank nudge -sources | Reuters: India's politically thorny decision last month to cut interest rates offered to millions of small savers in a $137-billion federal deposit scheme was prompted at least partly by urging from the central bank, two government sources said. Finance Minister Arun Jaitley was among the officials who publicly pressed Reserve Bank of India Governor Raghuram Rajan to cut the benchmark rate, in a bid to help revive consumer and investor sentiment in a sluggish economy. After making a larger-than-expected cut of 50 basis points on Sept. 29, Rajan urged the federal government to do its bit to accelerate growth through structural reforms. Soon after, Jaitley said he would cut the generous rates, of more than a full percentage point above bank rates, paid by the federal scheme, which is run from post offices across India. Those rates are normally set every March, but Jaitley said he would review them "soon".

The Latest Evidence That Global Trade Has Collapsed: India's Exports/Imports Plunge By 25% - Late last month, India surprised 51 out of 52 economists when the RBI cut rates by 50bps.  Although economists have a reputation for being terrible when it comes to making predictions (getting it wrong perpetually is almost a job requirement), it’s difficult to understand how 51 of them failed to see a cut of that magnitude in the cards. After all, it was just a little over a month earlier when the Indian government’s chief economic advisor Arvind Subramanian told ET Now television that India may need to "respond" to China’s monetary policy stance. He also hinted at further export weakness to come. Here’s what the REER picture and the export picture looked like going into the RBI meeting: So that's what the picture looked like going into Thursday’s export data and unsurprisingly, the numbers definitively show that global trade is in freefall. Here’s ReutersIndia's exports of goods shrank by nearly a quarter in September from a year ago, falling for a 10th straight month and threatening Prime Minister Narendra Modi's goal of boosting economic growth through manufacturing. India's economy, Asia's third largest, is mostly driven by domestic demand, but the country has still felt the effects of China's slowdown. Exports have dropped and consumer and industrial demand for imports has weakened. Imports fell 25.42 percent in September from a year earlier to $32.32 billion. Exports stood at $21.84 billion, according to data released by the Ministry of Commerce and Industry on Thursday.

Indonesia launches 4th batch of economic stimulus steps -  (Xinhua) -- The Indonesian government on Thursday unveiled its 4th batch of economic stimulus measures to give certainty to employers over worker payment system, avoid further massive layoff and boost exports. The steps included a clear payment system that is expected to be favor to the labor and employers, and providing of banking credits with low interest for small and medium businesses, ministers disclosed here. "The purpose of these policies are to ensure that the opportunity for working expands, create new work vacancies as much as possible... business climate will be conducive," Labor Minister Hanif Dhakiri said at the State Palace. Labors' payment has to be hiked every year by considering the current payment, minimum basic needs that is adjusted every 5 years, inflation and GDP growth, Mr. Dhakiri said. Going forward, employers are subject to consider the workers' period of work of work, competency, education, achievement and others as point on pay hike, he said. Administrative sanction will be given by ministries for those violating the rules, Mr.Dhakiri said. On government side, it will take measures to ease day-to-day spending of workers by issuing social policies, education support, social security, housing support, and ensuring the dialogue between employers and labors, he said.

Malaysia & the ECM Turning Point & Goldman Sachs -- Malaysia is becoming the poster-child for the crisis in emerging markets. The rising tensions between the people and government are clearly demonstrated by this story developing within the emerging markets. In Malaysia, we hear the central bank is recommending criminal prosecution in connection with the controversial investment fund 1MDB, the BBC reported. 1MDB was a sovereign wealth fund that was set up by Malaysian Prime Minister Najib Razak. The fund invested nearly $1.83bn abroad without using proper procedures. The investment bank Goldman Sachs is at the center of the criminal investigation in Malaysia since it organized 1MDB to raise U.S. dollar debt to finance acquisitions of power plants. Goldman Sachs also did the currency swap from dollars.  Goldman Sachs’ role has been highly criticized in the Malaysian media and political circles after it emerged that 1MDB paid hundreds of millions of dollars to the bank for helping it raise $6.5 billion in three bond deals in 2012 and 2013. Goldman Sachs earned around $590 million in fees plus commissions and expenses from underwriting the bonds, according to Reuters. The reported fees are highly excessive, nearing 10%, when such fees are typically only 1% in bond underwriting. The Wall Street Journal reported last July that investigators looking into 1MDB had discovered nearly $700 million transferred to Najib’s bank accounts. Malaysian Prime Minister Najib Razak also acts as finance minister in Malaysia and on top of that chairs 1MDB’s advisory board. Malaysia’s anti-corruption commission said the funds deposited in Najib’s accounts were from a donation, not from 1MDB. However, they declined to reveal who the donor was and for what reason they donated.

Goldman Sachs under FBI, DOJ scrutiny over 1MDB probe: WSJ | Reuters: The Federal Bureau of Investigation and the U.S. Department of Justice are examining Goldman Sachs Group Inc's role in allegations of corruption and money laundering at Malaysian state investor 1Malaysia Development Bhd (1MDB), the Wall Street Journal reported on Wednesday. The U.S. inquiries are at the information-gathering stage, and there is no suggestion of wrongdoing by Goldman Sachs, the paper reported, citing people familiar with the matter. (  Investigators "have yet to determine if the matter will become a focus of any investigations into the 1MDB scandal," the Journal quoted a spokeswoman for the FBI as saying. Goldman Sachs Singapore office did not immediately respond to a request seeking comment. The FBI and DOJ were not available for comment outside U.S. business hours. In July, Malaysian anti-corruption officials investigating the allegations visited the local office of Goldman Sachs seeking documents relating to 1MDB, Reuters reported earlier, citing sources. Investigators in Malaysia have been probing 1MDB's management, including allegations that nearly $700 million was channeled from the fund to Prime Minister Najib Razak's bank accounts.

Uzbek farmers told to glue cotton back on bushes for official visit - When word came that the Uzbek prime minister would be driving past their village, local officials wanted to impress him with roads lined by snowy white fields of cotton. The only problem was that the cotton had already been picked. So, locals say, farmers were told to glue cotton balls back on the bushes to give an impression of a bountiful harvest of the country’s most important crop. Ahead of the expected visit by the prime minister, Shavkat Mirziyaev, at the end of September, some 400 men and women in the village of Shaharteppa in Ferghana province were reportedly pressed into service along the main road where the official convoy was expected to pass. “Some of them were applying glue inside the bolls and others were putting cotton on the bolls, while another group was attaching cotton capsules onto stalks in the front rows of the cotton field,” a resident, who spoke on condition of anonymity, told RFE/RL’s Uzbek Service. “When I asked them why they were gluing cotton, they told me, ‘Apparently the prime minister is coming and we’re told everything should look good here,’” the resident said. Meanwhile, hundreds of others swept the area along the main road to keep it clean for the prime minister. A farmer appeared to confirm the claim. “People were put through so much trouble,” he said. “More than 500 people had to leave their work and come and glue cotton here. They said it was being done at the provincial governor’s order.”

Brazil retail sales drop more than expected in August (Reuters) - Retail sales in Brazil fell more than expected in August, the seventh straight month of decline as a severe recession kept consumers worried about their jobs and debts. Retail sales volumes in Brazil excluding automobiles and building materials fell 0.9 percent in August from July , statistics agency IBGE said on Wednesday, more than a Reuters poll estimate for a decline of 0.55 percent. Including autos and building materials, sales fell 2.0 percent in August from July, IBGE said. High inflation, rising unemployment and double-digit interest rates have ended a decade-long boom for Brazilian retailers. The economy, hampered by a political crisis and a string of tax hikes, is expected to start a modest recovery only in 2017, according to most economists. Sales have already fallen nearly 10 percent from a record-high in November last year, IBGE said, and may have worsened further in September as consumer confidence hit an all-time low for a third straight month, according to a recent survey. Sales declined in six of the eight categories of the IBGE index from July. Home appliance and furniture sales, big-ticket items that are more directly affected by rising interest rates, fell 2.0 percent. August retail sales dropped 6.9 percent from the year-earlier period, more than the median estimate of a 5.6 percent drop in the Reuters poll.

Brazil's deepening recession worries bankers, fuels job cuts - The labor market in Brazil, one of the BRICS (Brazil, Russia, India, China and South Africa) nations, is fast worsening owing to intensifying recession in the domestic economy. The unemployment rate rose to 7.6 percent from the record low of 4.3 percent at the end of 2014. Many industrial estates in Brazil are running down signaling next big crisis for the economy. Decades-old several steel, automobile, auto parts factories are forced to cut down production levels resulting in more job cuts. The worsening situation in Brazil's economy has become a cause of concern for bankers, who fear such huge job loss will be detrimental to the GDP growth. Itau Unibanco Holding forecasts Brazil's economy would further slip three percent in 2015 and unemployment rate spiral up to 10 percent in 2016. It's estimated that Sao Paulo City is alone witnessing over 20,000 jobs cuts every month. Sao Paulo, a home to global industrial majors such as Ford Motor Co and Volkswagen, is registered the worst phase of economy growth since the financial crisis in 2008. Some economists call it the worst since 1990s. A majority of citizens accuse of President Dilma Rousseff and situation of policy paralysis in the capital city of Brasilia.

Fitch Downgrades Brazil to 'BBB-'; Outlook Negative - The rating downgrade reflects Brazil's rising government debt burden, increased challenges to fiscal consolidation and a worsening economic growth backdrop. The difficult political environment is hampering progress on the government's legislative agenda and creating a negative feedback loop for the broader economy. The Negative Outlook reflects Fitch's view that economic and fiscal underperformance is likely to persist while political uncertainty could continue weighing on broader confidence, delay a turnaround in investment and growth, and increase risks for the medium term fiscal consolidation needed for debt stabilization. The greater than anticipated impact of economic recession on government revenues, difficulty in implementing offsetting measures and a complicated political backdrop have undermined the government's fiscal consolidation strategy. Consequently, in July the government lowered the primary surplus targets materially for 2015 and beyond. In another setback to fiscal credibility, the government submitted a 2016 budget with an even weaker fiscal goal. Although the government is working on certain tax and spending proposals to regain the fiscal path embedded in the July projections, considerable uncertainty remains on implementation especially in the context of the current political gridlock. Curbing mandatory spending is gaining importance in light of an already high tax burden and budgetary rigidities, limits to further cuts in discretionary spending and a shallow economic recovery. However, such measures will require broader political consensus and support, which may be difficult to obtain.

Canada's Alberta reaches out to industry for economic advice - Alberta’s left-leaning New Democratic Party (NDP) government said on Wednesday it was reaching out to prominent energy and other industry executives for advice to revamp the western Canadian province’s struggling economy. Alberta, home to Canada’s oil sands and the largest source of U.S. crude imports, has been hammered by tumbling global oil prices over the past 12 months that have led energy companies to lay off thousands of local workers. The NDP, elected in May, has faced opposition from the oil and gas industry, which has expressed concerns about ongoing reviews of the province’s climate change policies and royalty rates paid by energy companies. But Premier Rachel Notley said some industry executives would be part of a 10-person panel that would meet about four times a year, giving her advice on how to diversify Alberta’s economy. “They will advise us on identifying, promoting and developing a means of growth beyond energy, because the consequences of relying too much on just oil have become painfully clear,” she told a news conference in Edmonton.

Unpaid Care Work, Women, and GDP - The "economy" measures what is bought and sold. Thus, it is standard in introductory economics classes to point out that if my neighbor and I both mow our own lawns, it's not part of GDP. But if we hire each other to mow each other's lawns, GDP is then higher--even though exactly the same amount of lawn-mowing output was produced. In a broader sense, what's would be the economic value of nonmarket family services if they were valued instead in monetary terms? The McKinsey Global Institute provides some background on this issue in the September 2015 report: The Power of Parity: How Advancing Women's Equality Can Add $12 Trillion to Global Growth." The report offers some calculations that if women participated in the paid labor force at the same level as the leading country in their region (thus, not holding those in Latin America, Africa, or the Middle East to the standard of northern Europeans), it would add $12 trillion to GDP. However, the report also notes that these women who are not in the paid labor force are of course already working and producing at least $10 trillion in nonmarket output.

Egypt weakens pound as forex crisis looms (Reuters) - Egypt's central bank allowed the Egyptian pound to weaken on Thursday to 7.83 per dollar from 7.73, the first official depreciation since July and a move economists say is needed to ease a foreign currency crisis and support dwindling reserves. The Egyptian central bank sold $39.6 million at a cut-off price of 7.8301 pounds per dollar at its Thursday auction, a 0.10 pound increase from its Tuesday auction. The pound also weakened on the parallel market, with two traders quoting 8.22/25 pounds to the dollar, weaker than the 8.15/18 quoted on Tuesday. Egypt is grappling with a foreign currency shortage that has crippled the ability of businesses to import. Economists say the crisis has been exacerbated by an overvalued pound, the maintenance of which has cost the country billions in currency reserves since the 2011 uprising. Foreign currency reserves, which stood at about $36 billion before the uprising, were $16.335 billion at the end of September despite billions of dollars in Gulf Arab aid since mid-2013. Economists say easing the forex crisis requires restoring tourism, a pillar of the economy largely frozen since the 2011 uprising, and lowering the energy import bill, which drains about $700 million to $1 billion of hard currency every month.

RPT-Deep-pocketed institutional funds scaling back emerging markets - (Reuters) - Big pension, insurance and sovereign funds may be scaling back investments in emerging markets amid disappointing returns and a darkening outlook for the sector. These deep-pocketed funds -- global pension assets alone are worth over $35 trillion -- are relatively recent entrants to emerging markets, driven by the collapse in Western bond yields and the need for diversification. Because they are focused on the long term, their presence has been a powerful counterweight to skittish retail and hedge fund money. Such investors have pumped at least $50 billion into emerging stock and bond markets since 2013, according to the world's most closely watched monitor of capital flows to emerging markets, the Institute of International Finance. But signs of a protracted growth slowdown and the prospect of years of lacklustre returns may be causing some to rethink their strategy. The IIF -- which predicts the first net capital outflow from the developing world since 1988 this year -- estimates that institutional sellers accounted for 75 percent of the $40 billion that has fled emerging markets since late June. (

When is a global recession not a recession? - After several years of moderate but sustained worldwide GDP growth, the spectre of a global recession in 2016 can no longer be completely discounted. Brazil and Russia are already suffering from eviscerating economic down-turns and the growth rates of many other emerging economies, including China, have subsided to well below trend. Although the advanced economies are still growing roughly at trend, the world economy in aggregate is now slowing and the IMF is among many towarn about a sharp increase in downside risks. The good news is that global recessions are very rare. On the IMF’s preferred definition (ie negative growth in global GDP per capita – the blue line in the graph), there have only been four such events in the entire post war period, in 1975, 1982, 1991 and 2009. The bad news, though, is that when they do occur, they are catastrophic for financial markets and unemployment. As Lawrence Summers has pointed out, economists are not good at predicting recessions a year in advance.  Recessions happen suddenly, sometimes out of a clear blue sky, and forecasters hardly ever build a severe recession into a “main case” forecast more than a quarter or two in advance. Willem Buiter, Chief Economist at Citi, has partially bucked the normal rule by writing recently that a global recession is the most likely scenario in the next 2 years. As a result of the China slow-down, he believes that a major emerging market shock is 55 percent likely to cause a “moderate global recession” within two years. Martin Wolf agrees that this is “plausible”. However, Willem’s definition of “recession” is much milder than that of many economists [1]. He says that a recession occurs whenever GDP growth falls below trend for a meaningful period, even if the absolute level of GDP does not decline. On that definition, we have probably already entered a global “growth recession”.

Global economic slowdown in real danger of persisting | Reuters: The global economic slowdown shows a clear risk of extending into next year, along with an even more prolonged period of disinflation, according to the overwhelming majority of nearly 300 economists polled by Reuters around the world. That threat, flagged by analysts who generally have been too optimistic about prospects for recovery since the global financial crisis, comes despite ultra-easy monetary policy from most major central banks for the last half decade. Following the U.S. Federal Reserve's decision last month against raising interest rates from zero, citing worries about the global economy, and particularly China, a historic era of stimulative monetary policy is set to last even longer. The poll also suggests that those few economies which have perked up this year, particularly the United States, the euro zone and Britain, are increasingly exposed to waning global demand and may not be able to maintain their momentum. "Worryingly, for the regions that have shown the most resilience — the U.S. and Europe — the outlook seems to become more clouded," wrote Christian Keller, head of economics research at Barclays, in a note called "Enter the doldrums." The concern coincides with a growing sense of unease in financial markets, where market experts polled by Reuters have also taken a knife to all sorts of asset forecasts, from global stock indexes to sovereign bond yields, oil prices and emerging market foreign exchange rates.

Citi's Buiter: World faces recession next year: The global economy faces a period of contraction and declining trade next year as emerging nations struggle with tightening monetary policy, according to Citigroup's Chief Economist Willem Buiter. Buiter reiterated his gloomy prediction at the Milken Institute London Summit on Tuesday, telling CNBC that China, Brazil and Russia are edging towards an economic downturn. "(The slowdown) is not confined to China by any means," he said. "The policy arsenal in the advanced economies is unfortunately very depleted, debt is still higher in the non-financial sector than it was in 2007. So we are really sitting in the sea watching the tide go out and not really able to respond effectively to the way we should."  Buiter predicts that global growth, at the market exchange rate, will fall below 2 percent and will lead to rising unemployment in many of the emerging markets, as well as a number of the advanced economies.

Is the world heading for its third global financial crisis? - It's another grey day in Lima.  While storms almost never materialise, the weather during the International Monetary Fund’s latest annual meeting captures the gloomy mood.  This week, the fund said global growth this year would be the slowest since the Great Recession. A separate report by the fund warned that the world faced a “triad” of challenges that meant policy missteps could wipe a massive 3pc off global growth.  Corporate borrowers in emerging markets could default en masse when the US raised interest rates, it said. A new credit crunch, a fresh financial crisis: these were the risks facing the global economy.  For Andy Haldane, the Bank of England’s chief economist, recent market ructions and concerns about the health of the Chinese economy could be the beginning of the latest chapter in a three-part “crisis trilogy”.  As China’s three-decade growth miracle comes to an end, the “Anglo-Saxon” crisis of 2008, which was followed by the eurozone’s meltdown in 2011, now threatens to metastasise in emerging markets.  But while it’s clear that China’s double-digit growth rates have come to an end, how low can growth go? And who will be the biggest losers from the end of the commodity boom?

GDP growth is not exogenous - Ken Rogoff in the Financial Times argues that the world economy is suffering from a debt hangover rather than deficient demand. The argument and the evidence are partly there: financial crises tend to be more persistent. However, there is still an open question whether this is the fundamental reason why growth has been so anemic and whether other potential reasons (deficient demand, secular stagnation,…) matter as much or even more.  In the article, Rogoff dismisses calls for policies to stimulate demand as the wrong actions to deal with debt, the ultimate cause of the crisis.  But there is a perspective that is missing in that logic. The ratio of debt or government spending to GDP depends on GDP and GDP growth cannot be considered as exogenous. ... In a recent paper Olivier Blanchard, Eugenio Cerutti and Larry Summers show that persistence and long-term effects on GDP is a feature of any crisis, regardless of the cause. Even crises that were initiated by tight monetary policy leave permanent effects on trend GDP. Their paper concludes that under this scenario, monetary and fiscal policy need to be more aggressive given the permanent costs of recessions  Using the same logic, in an ongoing project with Larry Summers we have explored the extent to which fiscal policy consolidations can be responsible for the persistence and permanent effects on GDP during the Great Recession. Our empirical evidence very much supports this hypothesis: countries that implemented the largest fiscal consolidating have seen a large permanent decrease in GDP. [And this is true taking into account the possibility of reverse causality (i.e. governments that believed that the trend was falling the most could have applied stronger contractionary policy).

The world economic order is collapsing and this time there seems no way out - Europe has seen nothing like this for 70 years – the visible expression of a world where order is collapsing. The millions of refugees fleeing from ceaseless Middle Eastern war and barbarism are voting with their feet, despairing of their futures. The catalyst for their despair – the shredding of state structures and grip of Islamic fundamentalism on young Muslim minds – shows no sign of disappearing.  Yet there is a parallel collapse in the economic order that is less conspicuous: the hundreds of billions of dollars fleeing emerging economies, from Brazil to China, don’t come with images of women and children on capsizing boats. Nor do banks that have lent trillions that will never be repaid post gruesome videos. However, this collapse threatens our liberal universe as much as certain responses to the refugees. Capital flight and bank fragility are profound dysfunctions in the way the global economy is now organised that will surface as real-world economic dislocation. The IMF is profoundly concerned, warning at last week’s annual meeting in Peru of $3tn (£1.95tn) of excess credit globally and weakening global economic growth. But while it knows there needs to be an international co-ordinated response, no progress is likely. The grip of libertarian, anti-state philosophies on the dominant Anglo-Saxon political right in the US and UK makes such intervention as probable as a Middle East settlement. Order is crumbling all around and the forces that might save it are politically weak and intellectually ineffective. The heart of the economic disorder is a world financial system that has gone rogue. Global banks now make profits to a extraordinary degree from doing business with each other. As a result, banking’s power to create money out of nothing has been taken to a whole new level.

"The Biggest Protest This Country Has Seen In Years" - Quarter Million Germans Protest Obama "Free Trade" Deal --When it comes to official and media opinion on Obama's crowning trade "achievements", the Trans-Pacific Partnership (TPP) and the Transatlantic Trade And Investment Partnership (TTIP), the party line is united. As previously noted, Barack Obama has assured the population that this treaty is going to be wonderful for everyone: “If we can get this agreement to my desk, then we can help our businesses sell more Made in America goods and services around the world, and we can help more American workers compete and win,” Obama said. The mainstream media's chorus of support for these trade deal is likewise deafening:  And while the US population, which is far more perturbed by what Caitlyn Jenner will wear tomorrow than D.C.'s plans on the future of world trade, has been mute in its response to the passage of the first part of the trade treaty, the TPP - after all the MSM isn't there to tell it how to feel about it, aside to assure it that everything will be great even as millions of highly-paid jobs mysteriously become line cooks - other countries are standing up against globalist trade interests meant to serve a handful of corporations. Case in point Germany, where today hundreds of thousands of people marched in Berlin in protest against the planned "free trade" deal between Europe and the United States which they say is anti-democratic and will lower food safety, labor and environmental standards. TTIP critics fear that it would lead to worse safeguards in Europe, bringing down standards for consumer safety, food and health or labor rights down to those in America. European nations have stricter regulations for things like genetically modified foods or workers benefits than the US does. There is also discontent with the secretive nature of the negotiations, which prompts skeptics to assume the worst about the document they would eventually produce. The organizers - an alliance of environmental groups, charities and opposition parties -claimed that 250,000 people were taking part in the rally against free trade deals with both the United States and Canada, far more than they had anticipated.

I didn’t think TTIP could get any scarier, but then I spoke to the EU official in charge of it --I was recently granted a rare glimpse behind the official façade of the EU when I met with its Trade Commissioner in her Brussels office. I was there to discuss the Transatlantic Trade and Investment Partnership (TTIP), the controversial treaty currently under negotiation between the EU and the USA. As Trade Commissioner, Cecilia Malmström occupies a powerful position in the apparatus of the EU. She heads up the trade directorate of the European Commission, the post previously given to Peter Mandelson when he was forced to quit front line politics in the UK. This puts her in charge of trade and investment policy for all 28 EU member states, and it is her officials that are currently trying to finalise the TTIP deal with the USA. In our meeting, I challenged Malmström over the huge opposition to TTIP across Europe. In the last year, a record three and a quarter million European citizens have signed the petition against it. Thousands of meetings and protests have been held across all 28 EU member states, including a spectacular 250,000-strong demonstration in Berlin this weekend. When put to her, Malmström acknowledged that a trade deal has never inspired such passionate and widespread opposition. Yet when I asked the trade commissioner how she could continue her persistent promotion of the deal in the face of such massive public opposition, her response came back icy cold: “I do not take my mandate from the European people.”

Trade talks could force European regimes to lower standards: A major trade deal between the US and the EU could leave European negotiators with the choice of lowering food standards, or being priced out of the market. Dominic Watkins, head of law firm DWF's food group, told a conference that a liberalization of trade without regulatory convergence would leave the EU facing higher compliance costs than the US, leaving it hard to compete with US products. "If trade liberalized without regulatory convergence EU would face higher costs of complying with EU law," said Mr Watkins.  Negotiations are ongoing for the Transatlantic Trade and Investment Partnership (TTIP). The deal is designed to encourage trade between the EU and the US, the world's richest and second richest political entities respectively. The US is the EU's largest agricultural market, and its second largest source of food imports. Only 8% of the EU's agricultural and food imports come from the US, while 13% of its outputs go there, and the EU had a trade surplus to the US of E6bn in 2012. Mr Watkins said that a 25% decrease in trade barriers would boost trade between the countries by about 40%, noting that the US stood to benefit most by the move.

Public services under attack through TTIP and CETA -- A new report released today [12/10] by an international group of NGOs and trade unions ("Public services under attack") sheds some light on the secretive collusion between big business and trade negotiators in the making of the EU’s international trade deals.  It shows the aggressive agenda of services corporations with regards to TTIP and CETA, pushing for far-reaching market opening in areas such as health, cultural and postal services, and water, which would allow them to enter and dominate the markets. And it shows how those in charge of EU trade negotiations are rolling out the red carpet for the services industry, with both the consolidated CETA agreement published in September 2014, as well as drafts of TTIP chapters and internal negotiation documents that reflect the wishlists of corporate lobbyists. Key findings:

  • TTIP and CETA show clear hallmarks of being influenced by the same corporate lobby groups working in the area of services that have been built over the past decades during previous trade talks, such as the EU’s most powerful corporate lobby group BusinessEurope and the European Services Forum.
  • The relationship between industry and the European Commission is bi-directional, with the Commission actively stimulating business lob- bying around its trade negotiations. This has been characterised as ‘reverse lobbying’, ie “the public authority lobbies business to lobby itself”. Pierre Defraigne, former Deputy Director-General of the European Commission’s trade department, speaks of a “systemic collusion between the Commission and business circles”.
  • Probably the biggest threat to public services comes from the far-reaching investment protection provisions enshrined in CETA and also foreseen for TTIP. Under a system called investor-state dispute settlement (ISDS), thousands of US and Canadian corporations (as well as EU-headquartered multinationals structuring their investments through subsidiaries on the other side of the Atlantic) could sue the EU and its member states over regulatory changes in the services sector diminishing corporate profits, potentially leading to multi-billion euro payouts in compensation.

Did the European Court of Justice Just Torpedo the Mother of All US Trade Agreements?  - Don Quijones -- Europe’s already rocky trading relationship with the U.S. just got a whole lot worse. Thanks to one young man’s battle against one of the world’s biggest tech companies, data traffic underpinning the world’s largest trading relationship has been thrown into jeopardy.  As the Wall Street Journal warns, hanging in the balance could be billions of dollars of trade in the online advertising business, as well as more quotidian tasks such as storing human-resources documents about European colleagues. When, in 2013, the Austrian law graduate Max Schrems filed a data-privacy-infringement lawsuit against Facebook after Edward Snowden had revealed the full extent of the company’s collusion with the NSA, little could he have imagined the impact he would end up having. Now, two years later, the European Court of Justice has ruled that the Safe Harbor Agreement that has governed EU data flows across the Atlantic for some 15 years is no longer valid. As Tech Crunch notes, the new ruling will affect all companies that outsource data processing of E.U. users’ data to the U.S: The Safe Harbor executive decision allows companies to self certify to provide “adequate protection” for the data of European users to comply with the European data protection directive, and with fundamental European rights such as the right to privacy (under Article 8 of the European Convention for the Protection of Human Rights).In response to the ruling, Schrems said it “draws a clear line” by clarifying that mass surveillance “violates our fundamental rights.” The ruling will also directly affect the operations of some 4,500 European and international companies, including U.S. tech giants Alphabet (Google’s newborn parent company), Amazon, Facebook, and Microsoft.

Refugee crisis is a boon to Vienna′s far-right party - The refugee crisis that has overwhelmed Europe this year is loosening the Social Democratic Party's 70-year grip on power in Vienna and bolstering the far-right Freedom Party as voters in the Austrian capital head to the polls Sunday. The Social Democrats have won every election since World War II, and the city's current mayor, Michael Häupl, has been in office since 1994. But while rising numbers of migrants from the Middle East arriving en masse may be speeding up the demise of Red Vienna, the party's grip on the city has been loosening for years, with voters now frustrated over skyrocketing rents, rising unemployment, stagnant wages and a record municipal debt. "City debt is higher than it's ever been," says Heinz-Christian Strache, leader of the Freedom Party, as he ticks off the social ills plaguing Vienna. "Highest tax burden, highest unemployment and now the refugees. That is the result of 20 years of Häupl." Now, as Vienna becomes a focal point for refugees, voters are divided. Some, mostly young, continue to tirelessly welcome, feed and clothe the migrants at Vienna's two train stations. They donate time, clothing, SIM cards and money. Others have become anxious about how the city will cope, about what will happen to schools, to housing prices and to social benefits. Both train stations are packed day and night with thousands of migrants as they transit to Germany, making travel difficult for Austrians. The capital expects to take in 12,000 asylum seekers this year.

Migrant crisis: EU leaders meet with focus on Turkey - European leaders are to discuss measures to ease the region's migration crisis, with Turkey the focus of their efforts in Brussels. Nearly 600,000 migrants have reached the EU by sea so far this year. Turkey is hosting some two million migrants, most of them fleeing the war in neighbouring Syria. Ahead of the summit, German Chancellor Angela Merkel stressed the need for a joint EU effort to tackle the crisis and said Turkey played a "key role". "Most war refugees that come to Europe travel via Turkey. We won't be able to order and stem the refugee movement without working together with Turkey," she told the German parliament on Thursday morning. BBC Europe correspondent Chris Morris says most EU leaders are convinced that efforts to contain the migration crisis will not succeed without closer co-operation with the Turkish government. But, he adds, Ankara wants plenty in return - more financial aid to ease the strain of hosting refugees, as well as visa liberalisation and progress on Turkey's stalled application for EU membership.

European leaders offer Turkey 'action plan' on migration crisis - Europe launched a push late on Thursday at the fourth EU summit this year on the refugee crisis to obtain Turkey’s co-operation in stemming the flow of hundreds of thousands of refugees and migrants, while also agreeing a package of repressive measures aimed at securing the union’s porous external border and curbing new arrivals. EU leaders agreed to give “political support” for an action plan for Turkey said to offer Ankara up to €3bn (£2.2bn), visa-free travel to Europe for 75 million Turks, the resumption of frozen negotiations on Turkey’s EU membership bid, and other sweeteners in what appeared to be a desperate attempt to gain Turkish cooperation. Jean-Claude Juncker, the president of the European commission, said that the aim of the proposed pact was to keep more than two million Syrian refugees in Turkey where they were and prevent them attempting to get to Europe. Diplomats said the €3bn were not available, however, and that there was much resistance among national leaders to fast-tracking visa waivers for the Turks. Discussions in Ankara will continue in coming days. The European Council president, Donald Tusk, said “an agreement with Turkey makes sense only if it effectively contains the flow of refugees.” The chances of a meaningful pact with Ankara are slim in the short term and would probably entail Europe agreeing to take many of the Syrians from among more than two million hosted by Turkey.

The Crisis Europe Needs - Barry Eichengreen  – It’s hard to be optimistic about Europe. Last summer, a political cage match between Germany and Greece threatened to tear the European Union apart. In country after country, extremist political parties are gaining ground. And Russian President Vladimir Putin’s incursion into Ukraine, in the EU’s backyard, has turned the common European foreign and security policy into a punch line. Now comes the refugee crisis. The EU’s 28 member states are quibbling over how to distribute 120,000 refugees, when more than three times that number crossed the Mediterranean in the first nine months of 2015 alone. Refugees are coming by land as well as sea. Germany alone expects as many as a million asylum-seekers this year. It is risible to think that European governments will be able to deport, or “repatriate” in diplomacy-speak, any substantial fraction of these arrivals.  Nor is there agreement on how to handle this flood of humanity. German Chancellor Angela Merkel first declared that her country had a historical obligation to absorb refugees, before backing down in the face of political criticism. Hungary opened its borders, hoping that the human tide would flow onward, but then erected a razor-wire fence when it turned out that there were too few welcoming destinations. . Besides raising doubts about European leaders’ competence and solidarity, this crisis jeopardizes the EU’s signal achievement, the single market, which ensures freedom of movement for goods, services, capital, and people. The irony is that this is precisely the type of crisis that the EU was created to address. Solving the border-security problem requires European countries to work together. Individual countries like Greece have limited incentive to invest in controls insofar as refugees are only passing through. At the same time, unilateral action by countries, like Hungary, that are unprepared to countenance even transiting migrants, merely ends up diverting the flow.

The Case for Getting Rid of Borders - Completely - Barbed-wire, concrete walls, and gun-toting guards confine people to the nation-state of their birth. But why? The argument for open borders is both economic and moral. All people should be free to move about the earth, uncaged by the arbitrary lines known as borders. Not every place in the world is equally well-suited to mass economic activity. Nature’s bounty is divided unevenly. Variations in wealth and income created by these differences are magnified by governments that suppress entrepreneurship and promote religious intolerance, gender discrimination, or other bigotry. Closed borders compound these injustices, cementing inequality into place and sentencing their victims to a life of penury. The overwhelming majority of would-be immigrants want little more than to make a better life for themselves and their families by moving to economic opportunity and participating in peaceful, voluntary trade. But lawmakers and heads of state quash these dreams with state-sanctioned violence—forced repatriation, involuntary detention, or worse—often while paying lip service to “huddled masses yearning to breathe free.” Wage differences are a revealing metric of border discrimination. When a worker from a poorer country moves to a richer one, her wages might double, triple, or rise even tenfold. These extreme wage differences reflect restrictions as stifling as the laws that separated white and black South Africans at the height of Apartheid. Geographical differences in wages also signal opportunity—for financially empowering the migrants, of course, but also for increasing total world output. On the other side of discrimination lies untapped potential. Economists have estimated that a world of open borders would double world GDP.

Euro drops on hopes of more QE after ECB admits it is missing its inflation target - The European Central Bank is missing its inflation target and will have to ramp up stimulus measures, according to the chief of Austria's central bank. Ewald Nowotny, who sits on the board of the ECB, said it was "quite obvious" that monetary policymakers would now embark on further measures to lift inflation less than a year after the start of its unprecedented quantitative easing (QE) programme. The comments, from the usually hawkish Mr Nowotny, mark the first time one of Europe's senior central bankers has all but confirmed more QE is coming. The remarks saw the single currency fall by as much as 0.6pc against the dollar to $1.142 in early morning trading. The "ECB is using the monetary policy instruments available - but it is quite obvious that in the current macroeconomic situations, additional sets of instruments are necessary", said Mr Nowotny at a conference in Warsaw. He said these tools should include the need for governments to carry out structural reforms to boost competitiveness. "The severe crisis we experienced has reminded policymakers of the pitfalls of an incomplete monetary union," he added.  Inflation is only forecast to hit 0.1pc in the eurozone this year, and 1.1pc in 2016 - undershooting its 2pc target rate, despite the ECB's decision to buy €1.1 trillion of bonds in March this year.  Along with this disappointing headline number, Mr Nowotny said core inflation - which strips out volatile elements such as energy - was also "clearly below target".

Here comes more QE in Europe as ECB combats deflation - The European Central Bank’s aggressive quantitative-easing program hasn’t even been around to mark its first birthday and already pressure is mounting on the policy makers to announce more stimulus. With the closely watched ECB meeting coming up next week, investors are now speculating about when the central bank will make a further stimulus move, rather than if such a move could happen. That notion was hammered home this week when data confirmed the eurozone has slipped back into negative inflation, which is bad news for both the ECB and the region’s growth prospects. The central bank’s primary mandate is to ensure price stability throughout the currency bloc and that means targeting inflation rate of close to, but below 2%. We haven’t been there since January 2013. Inflation presently stands at negative 0.1%. “Renewed eurozone deflation in September heaps pressure on the ECB to step up its stimulative action at its 22 October policy meeting,” “Further ECB action would be most likely to be through increasing and/or extending of its quantitative-easing program. [ECB President] Mario Draghi has repeatedly stated that interest rates have reached their lower bound,” he added.

Germany's Schaeuble warns against addiction to low interest rates  (Reuters) - German Finance Minister Wolfgang Schaeuble said on Tuesday he was unhappy with the low interest rate environment and called for rates to rise "sooner rather than later". His call comes amid a vigorous debate at the U.S. Federal Reserve over whether to push ahead with an interest rate hike this year or hold off until the risks associated with a slowdown in China and other global headwinds become clearer. Although it was not the first time Schaeuble has voiced support for a "normalisation" of rates, it also comes at a time when the German economy faces new threats from weakness in emerging markets and a diesel emissions scandal that has damaged its top carmaker Volkswagen. Speaking at an engineering conference in Berlin, Schaeuble described interest rates as "too low" and said this was causing problems, particularly with regard to pension provisions. The European Central Bank has pushed its benchmark interest rate down to a record low of 0.05 percent and is also printing money to lift the euro zone economy and push up low inflation. Schaeuble said the monetary policy being pursued by central banks meant that there was sufficient liquidity on the markets around the world but he added: "I don't want us to get used to it remaining as it is."

Germany, EU Deny Report On European Solidarity Tax: (Reuters) - German and EU officials on Saturday denied a media report that Berlin and Brussels were in informal talks about a type of European solidarity tax to help cover the costs of stemming a record-breaking influx of asylum seekers. "The fact remains: we don't want tax increases in Germany or to introduce an EU tax," government spokesman Steffen Seibert said in a statement. A spokesman for the European Commission also dismissed the report. "There is no such proposal currently on the table or under preparation," he said, adding the Commission never comments on rumors in the press. Advertisement Earlier, the Sueddeutsche Zeitung had reported the German government and European Commission were mulling a levy that could be raised through a surcharge on petroleum tax or by increasing Value Added Tax (VAT). The Munich paper said additional funds from a solidarity tax would be used to help EU member states, such as Spain, Italy, Greece and Bulgaria, secure their borders, as well as to help improve living condition in the home countries of asylum seekers to encourage their citizens to remain there. The Sueddeutsche's report cited no sources, and was datelined Lima, Peru, where Finance Minister Wolfgang Schaeuble was attending an International Monetary Fund meeting.

Mark Blyth: “Austerity Cures Nothing”  - This is a bracing, no-nonsene talk from economist Mark Blyth of Brown University, who is the author of Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century and Austerity: The History of a Dangerous Idea. Unlike many on the left, he harbors few illusions about how and why the public at large has not done much to contest a clear deterioration in their standard of living (stagnant wage levels, less job stability, cuts in benefits, longer hours and more employer incursions onto what used to be private time). And not to suffer from confirmation bias, but as reader Gabriel U, who flagged this video, pointed out:  Much that’s good in interview, but one bit I think the NC team will like is he agrees virtually to the letter with view that, without having a Plan B from the outset, the original Tsipiras-Varoufakis government was “criminally irresponsible” in its negotiation strategy (this is a little after the 22:00 mark).

Greek State Debt to Individuals Rises to €5.1 Billion - The debts of the Greek State to suppliers, service providers, security funds and individuals continue to mount and they have reached 5.1 billion euros, according to the finance ministry. The budget implementation figures given by the ministry show a debt of 5.1 billion euros at the end of August. State debt was 4.955 billion euros at the end of July. The increase in debt is mainly due to pending expenditures of the National Health System and public hospitals. In addition to the 5.1 billion, there is an additional debt of 809 million euros for tax returns by the end of August. Tax returns amounted to 781 million euros in July. On a General Government level, there is a substantial primary surplus in the budget, but this is due to under-execution of the budget, with expenditure restrain counterbalancing revenue shortfall. Primary surplus in the first eight months of 2015 was 2.613 billion euros, compared to 2.432 billion in the same period last year. On a Central Government level, the surplus is much higher, at 2.97 billion euros when it was only 1.2 billion in 2014. However, on the Local Government level there is a primary deficit of 598 million euros, compared to 206 million at the same period in 2014.

Fiscal union will never fix a dysfunctional eurozone, warns ex-IMF chief Blanchard - The euro will be consigned to a permanent state of malaise as deeper integration will bring no prosperity to the crisis-hit bloc, according to the former chief economist of the International Monetary Fund. In a stark warning, Olivier Blanchard - who spent eight years firefighting the worst global financial crisis in history - said transferring sovereignty from member states to Brussels would be no “panacea” for the ills of the euro.The comments - from one of the foremost western economists of the last decade - pour cold water on grandiose visions for an “EU superstate” being hailed as the next step towards integration in the currency bloc. Following this summer's turmoil in Greece, leaders from France's Francois Hollande, the European Commission's Jean-Claude Juncker, and European Central Bank chief Mario Draghi, have spearheaded the drive to create new supra-national institutions such as a eurozone treasury and parliament. The plans are seen as essential in finally "completing" economic and monetary union 15 years after its inception.

Ireland, Accused of Giving Tax Breaks to Multinationals, Plans an Even Lower Rate - The Irish government, long criticized by other European countries and the United States for its friendly tax treatment of multinational giants like Apple and Google, on Tuesday announced a move that seemed likely to further incense its critics.Ireland, whose corporate tax rate of 12.5 percent is already one of the lowest in the developed world, said it would cut that rate in half for a new tax category — one covering revenue pegged to companies’ patents and other intellectual property. Companies that could be poised to benefit include Apple, Google, Facebook and Microsoft — all of which have significant operations in Ireland and have troves of intellectual property that might be eligible for the new tax treatment. Google and Facebook declined to comment on Tuesday, and Apple and Microsoft did not immediately respond to requests for comment. The new 6.25 percent rate would apply to a tax category that Ireland announced last year, which it calls a “knowledge development box,” and would be put into effect early next year. The category is meant to provide tax breaks for revenue and royalties derived from intellectual property held in a specific country. Other countries, including Britain, Luxembourg and the Netherlands, have created similar tax categories for intellectual property, often in the hope of enticing overseas companies to set up shop in their territories. But critics contend that the royalties paid on intellectual property under such arrangements often do not adequately reflect where the inventions were made or where the innovations generate the most revenue.

People's QE Has Been Tried Before and Failed -- I am seeing more and more people get excited about "People's QE", the brainchild of UK labor party leader Jeremy Corbyn. For example, Roger Farmer sees it as similar in spirit to his own preferred approach, Ambrose Evans-Pritchard says "it is exactly what the world may soon need" and Matthew C. Klein argues "the core idea is sound and has an impressive intellectual pedigree." With endorsements from such thoughtful people, this QE must be something special. So what exactly is it? The People's QE is a program where the Bank of England (BoE) would engage in large scale asset purchases of debt used to finance investment spending in infrastructure. The issuers of the debt would not be the central government, but local governments and other agencies in the UK that fund investment spending. One advantage of this approach, according to its advocates, is that it would be politically easier to implement since it would not explicitly create bigger budget deficits (even though implicitly it would be doing so). More importantly, supporters argue this form of QE would send the newly created money directly to people and institutions that actually spend the money. More bang for your  buck! So what could go wrong? A lot, actually. For this approach is nothing more than a monetization of debt--a helicopter drop. It is widely recognized that helicopter drops will have no effect on aggregated demand if the monetary injections are perceived as temporary. And monetary injections will always be perceived as temporary without a credible commitment from the government to reflate the economy. In practical terms, this means a helicopter drop needs to be accompanied by a higher inflation target or a price (or NGDP) level target high enough to create some reflation. Otherwise, the helicopter drop will be all for naught. But don't take my word for it, ask Paul Krugman or the list of notable economists found here. People's QE has been tried before and failed miserably. Between 2001 and 2006 Japan conducted the original QE program while running large deficits, as can be seen in the figures below.

Britain's biggest banks to be forced to separate retail banks from investment arms -  Britain's biggest banks will have to run their retail banking operations as independent banks, almost entirely separate from their investment banking and overseas operations, as the Bank of England made it clear that  there will be no relaxation of the incoming ring-fencing rules. . As a result, regulators hope the high street lenders will be able to continue running the retail arms with no difficulties even if their investment banking arms get into trouble. Basic services such as payments and bank account access should be able to continue even if the parent group collapses. Those ring-fenced units must hold bigger capital buffers to protect themselves against a downturn, and have their own independent IT, human resources, processing and risk teams.  However, in one minor concession, the retail banks will be able to pay dividends to their parents, as long as they tell the regulator first and show the payouts will not harm their resilience and stability.  The ring-fence rules apply to HSBC, Barclays, Royal Bank of Scotland, Lloyds Banking Group, Santander UK and the Co-operative Bank, as they all had a balance sheet of more than £25bn when this process began. Challenger banks which expect to grow to that size by 2019 also need to consider preparing for the changes.

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