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

Saturday, October 24, 2015

week ending Oct 24

Is there a rebellion at the Federal Reserve?  - That, at least, was the message last week when two Federal Reserve governors said they didn't think they should raise rates this year. For a consensus-driven institution like the Fed, that could be enough to put its plans to do so on hold. And yes, that was the plan. Just last month, Fed Chair Janet L. Yellen said that she thought they should start increasing interest rates by December, because it wouldn't be long before inflation started rising toward its 2 percent target. Fed Vice Chair Stanley Fischer agreed. But the doves, who want to wait a little longer, have asked a simple question: Why should they be confident that inflation actually will go up when it shows no sign of doing so? Now, it might sound strange to worry about inflation being too low, but it's not. When prices don't go up enough, it's harder for the economy to bounce back from a bust. Why? Well, anytime a shock hits the economy, three things happen. First, companies that aren't as profitable as they thought they'd be need to cut costs — that is, wages — by laying people off. (Bosses prefer to preserve whatever morale they can by giving some people a pink slip rather than everyone a pay cut). Second, households and businesses that borrowed a lot need to cut their spending on other things to pay back what they owe. And third, the Fed has to cut interest rates to try to keep this from turning into a vicious circle where higher unemployment makes people spend less, which, in turn, makes unemployment worse.

The Fed Board is now seriously split - This week has seen speculation about a mutiny from two members of the Federal Reserve’s Board of Governors against the leadership of Janet Yellen and Stanley Fischer, both of whom continue to say that they “expect” US rates to rise before the end of the year. Although “mutiny” is a strong term to describe differences of opinion in the contemplative corridors of the Federal Reserve, there is little doubt that the institution is now seriously split on the direction of monetary policy.  Furthermore, these splits could extend well beyond the date of the first rate hike to the entire path for rates in the next few years. Janet Yellen faces an unenviable task in finding a compromise path that both sides of the FOMC can support.  This week’s “rebellion” within the Board was led by Lael Brainard, a rookie Governor who was previously an Undersecretary at the US Treasury, working on international economics. During the euro crisis, her frequent trips across the Atlantic won her respect, and marked her out as a clear thinking Keynesian who wanted emergency action from the ECB long before Mario Draghi came to that view.  It is therefore no surprise to see her emerging as the “uber dove” on the Board of Governors. In a speech notable for its clarity, she directly opposed several of the main planks in the Yellen/Fischer orthodoxy (see Tim Duy and Paul Krugman.) For example, she said that the Phillips Curve is an unreliable guide to future inflation rates; that the predicted rise in the equilibrium real interest rate might never happen; and that the appropriate management of inflation and recession risks clearly pointed towards long term dovishness.

Now, there is little chance of a Federal Reserve rate hike in 2015 - Already razor-thin prospects of the Federal Reserve pulling the trigger on a rate increase this year likely got a lot thinner. Blame it on central bankers around the globe, who are talking about, or rolling out, easy-money policies on a seemingly daily basis. On Friday, the People’s Bank of China joined the party. Beijing cut its one-year deposit rate by 25 basis points to 1.5%, lowering one-year lending rate by 25 basis points to 4.35%, as the world’s No. 2 economy attempts to breathe fresh live into its lumbering economy. China’s economy slowed to 6.9%, below its 7% target and analysts have expressed concerns that the country’s slowdown could be more severe than is being reported. China's sixth rate cut since November comes just a day after European Central Banker Mario Draghi took a decidedly dovish posture, saying that the ECB would “re-examine” its stimulus program in December in the face of sluggish global growth. Draghi’s comments sparked a major rally in global markets.  Perhaps more important, Draghi’s remarks sent the euro plunging to its lowest level in three weeks, to $1.1109 late Thursday from $1.1339 late Wednesday. Goldman Sachs is predicting that the euro could fall to around $1.05 by the end of 2016.

What if rates never rise? -- Readers might recall that it is barely a month since the FT devoted a week to a series called “When Rates Rise”. Things have moved on since then. The Federal Reserve decided not to raise rates, as once widely expected, last month. And after pronouncements from various Fed governors in the past week, the markets are asking a new question. Maybe our next series needs to be titled: “What If Rates Never Rise?” Janet Yellen, the Fed’s chair, has been saying that a rate rise remains a viable alternative for the December meeting. So this week’s decision by two separate governors to say publicly they had reservations about doing so, and thought it better to wait for clear evidence of a pick-up in inflation before moving, had a big impact on market sentiment. By midweek, Fed Funds futures — used to place bets on future moves in rates — suggested there was a less than 50 per cent chance that rates would even have risen above zero after the meeting in March next year. As of the beginning of this year, this had been deemed a 99 per cent certainty. The chatter among the cognoscenti is shifting from trying to guess the date of a rate rise to working out what new monetary measures might be available to the Fed to apply more stimulus. Would this be a “QE4” bond purchase programme, or some other way to print money?

Get Used to It. Low Rates Are Here to Stay. - Noah Smith - Why are interest rates so low? For macroeconomists, this is one of the Big Questions in the world today.  Government bond rates are at or near record lows all around the world. So are corporate bond rates, including junk bonds. Even the cost of equity capital is at or near an all-time low for most businesses. Whether you’re a government, a big corporation or a tiny startup, it has never been cheaper to obtain capital.   Interest rates of all kinds have been in decline since the early 1980s. For a while, that looked like a simple regression to the mean.  But the decline that we’ve seen during the past 15 years or so -- and especially since the financial crisis -- goes way beyond a simple normalization. Something unusual is happening.   Since the financial crisis, savings rates have risen in the U.S. as well -- households are squirreling away more of their paychecks, and corporations are famously hoarding cash. The savings glut might have gone global.  Households in the U.S. and other countries that suffered a big housing bust have large overhangs of debt, and the crash showed them that debt was more dangerous than they had realized. Companies in Europe are clearly reluctant to borrow to invest, given the running political uncertainty surrounding the euro and the sovereign debts of countries such as Greece. That probably applies to Japan as well. In addition, these rich countries have steeply declining populations, and shrinking domestic markets discourage companies from expanding.  As for U.S. companies, they may be holding back investment because of fears of weakness in export markets. China is slowing, and with it many other developing countries. Another factor may be the recent wave of technological disruptions that make it harder for companies to plan ahead. Big investments require big bets, and in an era of massive disruption, no one knows which bets to place. And even as disruption is increasing, overall productivity is slowing.  So what will stem the tide of low interest rates? I wouldn't count on central banks to do the job. As long as private markets keep pushing rates down, central bankers are not going to risk causing recessions by attempting to raise them. Nor are companies going to suddenly become brave and bold around the world.

Trump Says Yellen Keeping Rates Low To Protect Obama -- Make no mistake, what you saw with the Fed’s September meeting and subsequent (in)decision was an FOMC that simply froze like a deer in headlights. As we’ve documented exhaustively, there are no right answers and Janet Yellen only made it worse by, in Deutsche Bank’s words, “removing the fourth wall” and admitting that the committee is reflexive.  The Fed cannot hike for fear that a soaring dollar will accelerate EM outflows and plunge the world’s most important emerging economies into chaos. But remaining on hold risks precipitating the very same outcome because by missing the window for liftoff, the FOMC has fostered an environment in which all EMs are constantly on their toes with no idea when or even if the “symbolic” 25bps hike will ever come. The attendant uncertainty engenders the very same capital outflows as a hike might.  So this is the impossible scenario the Fed finds itself in and it’s all complicated by the fact that we are heading into an election year. For his part, Donald Trump believes Yellen is deliberately delaying liftoff not because she is simply confused as to what to do, but because she’s trying to help the Obama adinistration. Here’s more via Bloomberg: According to Donald Trump, Janet Yellen's decision to delay hiking interest rates is motivated by politics.  This is a political thing, keeping these interest rates at this level,” Trump, the billionaire Republican presidential candidate, said in a Wednesday interview with Bloomberg Television's Stephanie Ruhle. “Janet Yellen for political reasons is keeping interest rates so low that the next guy or person who takes over as president could have a real problem.” “Yellen is doing this with the blessing of the President because he doesn’t want to have a recession - or worse- in his administration.” “I’m a developer, I’m not complaining from my own standpoint, I’m just saying that at some point, you have to raise interest rates, you pay nothing. They are trying to put the recession - and it could be a beauty into the next administration.”

Monetary Conspiracy Theories - Paul Krugman -- According to Pollster, there is still no sign of a turn back to establishment Republicans. In fact, the triumvirate of crazy — Trump/Carson/Cruz — has about three times as much support as the combination of Bush, Rubio, and Kasich. It’s amazing. But why don’t GOP voters realize that these are crazy people? Maybe because the things they say aren’t all that different from what supposedly reasonable Republicans say.  A case in point: The Donald has just come out with a monetary conspiracy theory: the reason the Fed hasn’t raised rates has nothing to do with low inflation and global headwinds, Janet Yellen is just doing Obama a political favor. Crazy, right? But how different is this, really, from Paul Ryan and John Taylor claiming that quantitative easing wasn’t a good-faith effort to support a weak economy, but an attempt to “bail out fiscal policy”, preventing the fiscal crisis Obama’s policies were supposed to produce? The difference between establishment Republicans and the likes of Trump, in other words, isn’t so much the substance of what they say as the tone; we’re supposed to consider Jeb Bush, Marco Rubio, or Paul Ryan moderate because they insinuate their conspiracy theories rather than bellowing them and talk voodoo economics with a straight face. But why should we be surprised if the GOP base doesn’t see why this makes them more plausible?

Goldman Sachs Expects "Fed Liftoff" in December -- A few excerpts from a research piece by Goldman Sachs chief economist Jan Hatzius: Q&A on Fed Liftoff  We still expect a rate hike at the December FOMC meeting. The leadership has signaled that such a move is likely if the economy and markets evolve broadly as expected, and our forecast is similar to theirs. However, we are only about 60% confident. Most of the uncertainty relates to the possibility that the economic and market environment—or in a broad sense, “the data”—will be worse than the FOMC’s (and our) expectations...The low market-implied probability of a December hike of only 30%-40% probably reflects a mixture of concerns about the data (which we find reasonable) and a belief among some market participants that the FOMC will find an “excuse” to stay on hold even if the economy does fine (which we find unreasonable). ... Our own view is that it might make sense to start normalizing in December if we were perfectly confident in our baseline forecast for the economy. But uncertainty around that forecast still argues for waiting longer. The main reason is risk management.

Goldman Mocks "Constitutionally Dovish" Fed, Sees December Rate Hike Odds At 60% To Offset "Credibility Problem" - One month ago, in the aftermath of the FOMC decision which stunned all WSJ-polled economists who were certain a rate hike was imminent by not hiking, instead blaming its on Chinese and global weakness, and when both the market and the credibility of the Fed were about to crack, Goldman did its part to restore the "BTFD" bid when it called, as we previously reported, that no Fed hike would come until at least mid-2016. A few short days later, as always happens when Goldman makes a contrarian call, this quickly became the new Wall Street mantra, and stocks soared as even more terrible economic news were unveiled. Then overnight, Goldman's chief economist Jan Hatzius, who realizes that the only variable that matters for the Fed's binary decision is where the S&P 500 is trading, and now that the S&P500 is solidly back above 2000 and is fast approaching its all time highs (not to mention is 30 points above Goldman's year end price target of 2000) says that the possibility of a December rate hike is a substantial 60%, nearly double the Fed Funds futures implied rate of 30-40%, and suggests that yet another volatility risk flaring is in the immediate future, especially if there is even one economic data point in the coming weeks that is not an absolutely disaster. Of course, if Goldman is wrong, and the economy slips recession and goes straight into depression, then the S&P will not only open limit up, but hit new all time highs before one can say "global thermonuclear war is the best possible news stock bulls can get."

ECB Putting Federal Reserve in a Bad Spot - I was watching a little of the ECB policy press conference this morning and there were a lot of thoughts that came out of that event which I may write about at a later date. However after the ultra-dovish ECB decision to signal to financial markets that they are going to add more stimulus in December with more bond buying in order to weaken the Euro currency, the US Dollar is back up to the 96.30 area on the DX, and financial markets haven`t really thought about the implications of this move by the US Dollar. Believe it or not: The Fed actually wants to raise rates now just to save face!  Reading between the lines the Fed wants to raise rates in December to get back the ounce of credibility they once had as they have reiterated their intention of raising rates this year, and with the financial market once again ‘healed’ they are going to sneak in a 25 basis point rate hike, (maybe a lame 10 basis point rate hike if they completely wimp out on the rate hike) just to keep their original word of raising rates in 2015. Thanks A lot ECB, You just made the Fed`s job twice as hard.  The problem is with the ECB slamming the Euro trying to purposefully weaken the currency the US Dollar is already back to levels that were causing emerging markets to freak out, and the Fed to lose their nerve to raise rates in September which they had done a good job building in market expectations for a rate hike.The Fed is going to ‘rectify their wrong’ of the last meeting and raise rates and lose twice with regard to disappointing market expectations, and the US Dollar Index will jump back above 98, and I expect a sizable market selloff as the Dollar continues to strengthen as the Forex markets get hit with a double whammy of a Dovish ECB Meeting and a Hawkish Federal Reserve Meeting this December. And given year end positioning the Federal Reserve couldn’t pick a worse time to raise rates. Hopefully they will just make another stupid excuse, and avoid raising rates - the lesser of the two evils. But given they have become a complete joke with their forecasts regarding hiking rates, saving face is probably more important for them right now. Therefore, Wall Street and financial markets are probably going to get screwed on this one, and end up taking one for the team!

No, the Fed Did Not Enable Large Budget Deficits--You Did! – Beckworth - As a follow up to my last post, I want to repeat a point I have made before. Not only is the Fed not responsible for the low interest rates during the past seven years, but it is also not responsible for enabling the large budget deficits that occurred during this time.1   But how can this be? Was not the Fed involved in massive asset purchase programs of government debt? For some it is obvious that through these programs the Fed was the 'great enabler' of the run up in government debt since 2008. Here, for example, are two former Fed officials making this claim a few years ago at a conference:  Mr Warsh and Mr Poole (who was filling in for Allan Meltzer) made a sharp distinction between the “legitimate” efforts to fight the crisis and the subsequent easing actions that were, allegedly, unjustified by the economic fundamentals. According to them, the interventions of 2007-2009 were required to ensure that “the markets could clear”, as Mr Warsh put it, while the second round of easing was done to satisfy “political masters” by monetising the debt. In fact, Mr Warsh said that the Fed was being actively unhelpful by “crowding in” Congress’s supposedly poor policy choices.  Yes, the Fed did engage in several rounds of 'quantitative easing' (QE) where it bought up a large number of treasury and agency securities. The amounts, however, were not that large relative to the total amount of securities outstanding. The Fed, therefore really was not much more than a bit player in the market for these securities. To see this, take a look  at the absolute dollar amount of the Fed's treasury and agency assets relative to total for 2015:Q2. Of the approximately $12.67 trillion in marketable treasuries, the Fed owned $2.46 trillion. Similarly, of the roughly $8.71 trillion in mortgage-related securities the Fed owned $1.72 trillion. In both cases that amounts to about 19% of the total.  That is not quite the image of a 'great enabler' now is it?

Strangely selective criticisms of monetary policy  --David Beckworth has a nice piece today pushing back against the idea that Fed open market operations monetize the national debt.  Here's one graph from that post that should push us even further against so many common ideas about recent monetary policy:  If this graph is the only thing I showed you about a country's economy, and I asked you, "At what point would you guess that this country had a liquidity crisis, a banking panic, and a subsequent deep negative shock in nominal incomes?"  would there be any doubt about what date you would pick?  Shouldn't that be the easiest argument you could imagine?  If you then found out that this particular country did have a large economic dislocation at exactly the point where the central bank's share of securities suddenly dropped by half, wouldn't you assume that a sharp deflationary monetary policy was at the center of the crisis?  Wouldn't you discount any other explanation unless it was backed by a large body of indisputable facts?

Chicago Fed: US Economic Growth Weakened In September --  US economic growth was softer than expected in September, according to this morning’s update of the Chicago Fed National Activity Index’s three-month moving average (CFNAI-MA3). Last month’s reading dipped to -0.09, the lowest since this past May. Despite the latest slide, this benchmark of economic activity remains well above its -0.70 tipping point that marks the start of recessions, according to Chicago Fed guidelines. But while the US avoided a downturn last month, it’s clear that growth is still sluggish and will probably remain so for the near term. Indeed, the Atlanta Fed’s current nowcast (as of Oct. 20) for third-quarter GDP is a weak 0.9% (seasonally adjusted annualized rate), well below Q2’s strong 3.9% rise. As for CFNAI-MA3, the modestly below-zero reading for September “suggests that growth in national economic activity was slightly below its historical trend,” the Chicago Fed said in a statement. “The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.” The monthly data is even weaker. The index before averaging slumped to -0.37 in September, slightly above the previous month’s upwardly revised figure but otherwise marking the lowest point since February. The monthly numbers are noisy, however, which is why the Chicago Fed recommends focusing on the three-month average for monitoring the business cycle. By that standard, the economy is still trending positive, albeit at a relatively subdued pace. CFNAI-MA3’s current -0.09 level is fractionally below the zero mark that equates with growth at the historical trend rate.

Chicago Fed: Economic Growth Below Average in September -- "Index shows economic growth below average in September." This is the headline for today's release of the Chicago Fed's National Activity Index, and here are the opening paragraphs from the report: The Chicago Fed National Activity Index (CFNAI) ticked down to –0.37 in September from –0.39 in August. Two of the four broad categories of indicators that make up the index decreased from August, and all four categories made nonpositive contributions to the index in September.  The index’s three-month moving average, CFNAI-MA3, decreased to –0.09 in September from +0.01 in August. September’s CFNAI-MA3 suggests that growth in national economic activity was slightly below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.The CFNAI Diffusion Index, which is also a three-month moving average, decreased to –0.17 in September from –0.04 in August. Twenty-six of the 85 individual indicators made positive contributions to the CFNAI in September, while 59 made negative contributions. Forty-two indicators improved from August to September, while 42 indicators deteriorated and one was unchanged. Of the indicators that improved, 25 made negative contributions. [Download PDF News Release]  The previous month's CFNAI was revised upward from -0.41 to -0.39. The Chicago Fed's National Activity Index (CFNAI) is a monthly indicator designed to gauge overall economic activity and related inflationary pressure. It is a composite of 85 monthly indicators as explained in this background PDF file on the Chicago Fed's website. The index is constructed so a zero value for the index indicates that the national economy is expanding at its historical trend rate of growth. Negative values indicate below-average growth, and positive values indicate above-average growth.The first chart below shows the recent behavior of the index since 2007. The red dots show the indicator itself, which is quite noisy, together with the 3-month moving average (CFNAI-MA3), which is more useful as an indicator of the actual trend for coincident economic activity.

Census Restarts Stalled Survey that Feeds into GDP Report - The Census Bureau resumed work today on a survey that feeds into the nation’s reports on gross domestic product, corporate profits and the flow of funds, after congressional delay imperiled a quarter’s worth of data. The White House announced Thursday evening that  President Barack Obama signed the law reauthorizing the Census Bureau to conduct the work. The obscure survey, known as the Quarterly Financial Report, receives little attention as it’s not a major report in its own right, even though it’s used to build some of the most prominent U.S. economic reports. During the congressional upheaval of the past month, the authorization lapsed, despite no opposition in Congress to the report. Work on the survey was halted on Oct. 1. After several weeks of delay and scheduling problems, the House sent the measure to the president yesterday. Had the report not been reauthorized this week, the Census Bureau may have had to cancel the survey entirely, losing a quarter’s worth of data. Even with a pause of more than three weeks, the quality of the surveys will likely be at least somewhat damaged. The census said in an e-mailed statement only that “impacts on the data are being assessed.” The inability to conduct surveys delayed and damaged the quality of a range of economic reports in October of 2013, when the government shut down for a little over two weeks. Surveys are only as valuable as the responses they receive. In 2013 the Census Bureau’s biggest survey, the American Community Survey, for example, saw the rate of nonresponse triple from around 3% in 2012 to above 10% in 2013—the worst ever for the survey—due to the government shutdown.

Forecasting Q3 GDP: Gazing Into the Crystal Ball -- The big economic number next week will be the Q3 Advance Estimate for GDP on Wednesday the 28th at 8:30 AM ET. With the volatile first two quarters behind us with their real annualized rates of 0.6% in Q1 and 3.9% in Q2, what do economists see in their collective crystal ball for Q3 of 2015? Let's take a look at the latest GDP forecasts from the latest Wall Street Journal survey of economists conducted earlier this month.  Here's a snapshot of the full array of WSJ opinions about Q3 GDP with highlighted values for the median (middle), mean (average) and mode (most frequent). In the latest forecast, interestingly enough, all three are identical at 2.0% forecast by 13 of the 63 respondents -- that's twenty percent of them.  Next week's release of the Advance Estimate for Q3 GDP is, of course, a rear-view mirror look at the economy. The WSJ survey also asks the participants to forecast year-end annual GDP 2015. Here is a snapshot of that forecast range along with the latest Federal Reserve GDP projections. Also of interest is the Atlanta Feds' GDPNow™ forecasting model, which currently puts Q3 GDP at 0.9% as of October 20th.  As for the WSJ forecasts for 2015 annual GDP, here is the latest. Q1 was a temporary contraction; that is certainly the view of the WSJ survey participants. Even the most pessimistic of the lot sees 1.8% for the 2015 year-end print, and the median and mean are forecasting 2.4%, the same as the 2014 rate.

Merrill on Q3 GDP and Headwinds -- The advance estimate for Q3 GDP will be released Thursday October 29th. Here is Merrill Lynch's forecast:  The economy has faced some strong headwinds this year, including a sharp rise in the dollar, weaker-than-expected global growth and sharp cuts in oil sector investment. Further, the economy is in the middle of an inventory correction. Weaker data, particularly for inventories, has contributed to lower GDP tracking, and we are now incorporating that weakness into our official forecast, cutting 3Q real GDP growth by 0.8pp to 1.2%. This lowers 2014 annual GDP growth to 2.4% from 2.5%. Looking past trade and inventories, domestic demand is expected to remain strong, rising by 3.5% in 3Q 2015, and by 3.0% in 2015 as a whole.  And on headwinds for the U.S. economy:  First, while the economy faces new global headwinds, the fundamental backdrop for the domestic economy has improved significantly. Post-crisis deleveraging has largely run its course. The housing and banking sectors are back on their feet. And Washington is no longer a major source of austerity and confidence shocks: Federal and state and local fiscal policy has shifted from a 1% or higher GDP headwind to a small tailwind and Americans have learned to largely ignore the budget battles in Washington. In our view, the new global headwinds—a strong dollar, weak growth in emerging markets and weak commodity prices—have less impact on US growth than the fading domestic headwinds –deleveraging, crippled banking and housing sectors and fiscal shocks.  Second, it is important to get the timing of the various shocks right. In our view, most of the hit to growth from global developments has already happened. The strong dollar is an ongoing drag on growth, but model simulations suggest a hump-shape pattern, with small effects last year, a peak drag on growth this summer and diminishing drag in the quarters ahead.

September 2015 Leading Economic Index Rate of Growth Declined: The Conference Board Leading Economic Index (LEI) for the U.S. marginally declined this month - but the authors believe the outllook "still suggests economic expansion will continue". This index is designed to forecast the economy six months in advance. The market (from Bloomberg) expected this index's month-over-month change at -0.2 % to 0.2 % (consensus 0.0%) versus the -0.2 % reported. ECRI's Weekly Leading Index (WLI) is forecasting very slow or possible negative growth over the next six months. Additional comments from the economists at The Conference Board add context to the index's behavior. The Conference Board Leading Economic Index® (LEI) for the U.S. declined 0.2 percent in September to 123.3 (2010 = 100). The Index was unchanged in August and July. "Despite September's decline, the U.S. LEI still suggests economic expansion will continue, although at a moderate pace," said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. "The recent weakness in stock markets, the manufacturing sector and housing permits was offset by gains in financial indicators, and to a lesser extent improvements in consumer expectations and initial claims for unemployment insurance. The U.S. economy is on track for moderate growth of about 2.5 percent in the coming quarters, despite the mixed global economic landscape." The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.2 percent in September to 112.8 (2010 = 100), following a 0.1 percent increase in August, and a 0.3 percent increase in July.

US Leading Economic Indicators Tumbles Most In 30 Months - Missing expectations for the 3rd month in a row, US Leading Economic Indicators (LEI) dropped 0.2% MoM. There has not been a bigger monthly drop since March 2013. Ironmically, initial jobless claims (which we have recently explained is now useless) was the largest positive contributor (after the yield curve steepness) but stock prices, average workweek, and building permits weighed heaviest.  Charts: Bloomberg

ECRI's WLI Growth Index Declines Again and Remains In Contraction: ECRI's WLI Growth Index which forecasts economic growth six months forward - declined and remains in negative territory. This index had spent 28 weeks in negative territory, then 15 weeks in positive territory - and now is in its tenth week in negative territory. Also discussed below is the coincident and lagging index which is in decline.Here is this week's update on ECRI's Weekly Leading Index (note - a positive number indicates growth): U.S. Weekly Leading Index Increases The U.S. Weekly Leading Index increases to 130.0 from 128.7. The growth rate slips to -2.7% from -2.2%. To put the state of the economy in perspective click here to watch Lakshman Achuthan in a recent interview on Bloomberg. For a closer look at recent moves in the U.S. Weekly Leading Index, please see the chart below: ECRI produces a monthly issued Coincident index. The September update (reported in October) shows the rate of economic growth is slower.  ECRI produces a monthly inflation index - a positive number shows increasing inflation pressure.

China’s Selling Tons of U.S. Debt. Americans Couldn’t Care Less. -- For all the dire warnings over China’s retreat from U.S. government debt, there’s one simple fact that is being overlooked: American demand is as robust as ever. Not only are domestic mutual funds buying record amounts of Treasuries at auctions this year, U.S. investors are also increasing their share of the $12.9 trillion market for the first time since 2012, data compiled by Bloomberg show. The buying has been crucial in keeping a lid on America’s financing costs as China -- the largest foreign creditor with about $1.4 trillion of U.S. government debt -- pares its stake for the first time since at least 2001. Yields on benchmark Treasuries have surprised almost everyone by falling this year, dipping below 2 percent last week. It’s not the scenario that doomsayers predicted would leave the U.S. vulnerable to China’s whims. But the fact that Americans are pouring into Treasuries may point to a deeper concern: the world’s largest economy, plagued by lackluster wage growth and almost no inflation, just isn’t strong enough for the Federal Reserve to raise interest rates.

Ornithology: What is a "deficit hawk"? - Nick Timiraos wrote yesterday in the WSJ: Debt, Growth Concerns Rain on Deficit Parade The U.S. budget deficit is lower than before the 2008 financial crisis. But the good news is tempered by concerns on two fronts, one about the nation’s debt load and the other about the economy. Deficit hawks are concerned that the improvement will lead both parties to overlook the red ink set to rise later this decade from a surge in spending on health care and retirement benefits for the baby-boom generation.. I'd like to see the definition of a "deficit hawk"!  I'd think a true deficit hawk would be truly concerned about, uh, the deficit.  So they'd support both tax increases1 and spending cuts to reduce the deficit.    They'd oppose policies that increase the deficit (like the Bush tax cuts, and the war in Iraq).  They'd also be concerned about policies that led to the financial crisis and a deep recession - since the deficit increases during a recession. Maybe I'm talking my own position since I opposed the Bush tax cuts (that created a structural deficit).  I opposed the Iraq war.  I frequently talked to regulators about lax lending in real estate (and posted some of those discussion on this blog in 2005) that led directly to the financial crisis and large deficits.  And I support both intelligent tax increases and spending cuts. Unfortunately, my experience is that most people who claims to be "deficit hawks", are really pushing a different agenda.  I wish Timiraos would provide a few examples of deficit hawks! Also the "red ink set to rise later this decade" is expected in increase the deficit from 2.5% of GDP to about 3.1% in 2020.

The $6 Trillion Men - Paul Krugman  -- So it now appears that Paul Ryan will end up as Speaker of the House; he will continue to furrow his brow and talk very seriously about the need to reduce deficits, while wowing the press with his ability to use PowerPoint. But I have a proposal for any journalists who interview him: ask for his assessment of the tax proposals from Republican presidential candidates. As Howard Gleckman points out, all of the candidates are proposing to hand out “free stuff” – unfunded tax cuts for the wealthy – on a truly impressive scale. The average budget cost is $6 trillion over the next decade; as it happens, Marco Rubio, who seems to be the most likely survivor of the demolition derby, comes in slightly above that average, at $6.5 trillion.  This is pretty amazing, or would be if you took all that deficit hawkery from 2011 and 2012 seriously. Why, it’s almost as if Republicans never cared about deficits, and were just using the issue to attack Obama and pave the way for cuts in social insurance programs.

USA Debt Limit Will Be Reached In Early November: - Congressional Budget Office -- If the debt limit remains unchanged, CBO projects, the Treasury's cash balance will be entirely depleted sometime in the first half of November, at which time the government would be unable to fully pay its obligations. The debt limit - commonly referred to as the debt ceiling - is the maximum amount of debt that the Department of the Treasury can issue to the public and to other federal agencies. That amount is set by law and has been increased over the years in order to finance the government's operations. In March, the debt ceiling was reached, and the Secretary of the Treasury announced a "debt issuance suspension period." During such a period, existing statutes allow the Treasury to take a number of "extraordinary measures" to borrow additional funds without breaching the debt ceiling. CBO projects that if the debt limit remains unchanged, the Treasury will begin running a very low cash balance in early November, and the extraordinary measures will be exhausted and the cash balance entirely depleted sometime during the first half of November. At such time, the government would be unable to fully pay its obligations, a development that would lead to delays of payments for government activities, a default on the government's debt obligations, or both. CBO previously projected that those developments would occur between mid-November and early December. The agency revised the date primarily because the Treasury's cash balance at the beginning of October was smaller than expected, the result of a larger-than-expected deficit and other variations in cash flows.

Lew: I worry there could be a debt limit accident that could be terrible: Treasury Secretary Jack Lew said Monday he worries that waiting until the last minute to raise the nation's borrowing authority could result in an accident "that would be terrible." Last week, Lew said the U.S. debt ceiling will be exhausted Nov. 3, two days before previously estimated. In a letter to congressional leaders, he added that a remaining cash balance of less than $30 billion would swiftly deplete. "Our best estimate is November 3rd is when we'll exhaust what we call extraordinary measures; those are things we can do to manage things. I will run out of things that I can manage on November 3rd," Lew told CNBC's "Squawk Box." The federal government is scraping by just under its $18 trillion legal borrowing limit. Not increasing the debt limit would be "ridiculous," Lew said. He stressed that the risk of not acting is real. "There are people who think we have the ability to choose what day this is. We do our very best to count the numbers ... [and] give Congress the best information we have."  Disarray among Republicans over Rep. John Boehner's successor as House speaker is complicating negotiations. According to an aide, Boehner may try to pass a debt-limit increase before he retires from Congress, which had been scheduled for the end of the month.

Traders Are Panic-Selling T-Bills After Jack Lew Warns Of "Terrible" Debt Limit Accident The one-month-ish Treasury Bills that mature November 18th are collapsing. Following comments this morning by Treasury Secretary Jack Lew that the US will run out of cash on November 3rd and his warning of a "terrible" debt limit accident, the 11/18/15 T-Bills have seen yields explode from -1bp to 7bps - an unprecedented 8bps spike as investors panic-sell beyond the deadline. WI 1month bills are over 11bps! "Our best estimate is November 3rd is when we'll exhaust what we call extraordinary measures; those are things we can do to manage things. I will run out of things that I can manage on November 3rd," Lew told CNBC's "Squawk Box." Lew insisted that a hike is not a commitment to new spending but an ability to pay the bills on money already spent. Conservatives have in the past targeted the borrowing limit as leverage in budget negotiations. Lew dismissed the idea that the government could prioritize what bills to pay."Once you no longer consider all of your obligations rock solid, you're no longer the full faith and credit of the United States." "It's also not possible to pick and choose. We have about 80 million transactions a month. Our system wasn't set up not to pay," he added. So that leaves less then 2 weeks for the dysfunctional GOP to agree to a debt ceiling increase... is it any wonder that traders are dumping anything beyond Nov 3rd en masse...

Treasury-Bill Yields Hit 2-Year High on Debt-Ceiling Concerns - WSJ: Growing concerns over a political impasse to lift the U.S.’s borrowing limit rattled short-term government debt Monday, with yields on some bills maturing next month hitting a two-year high. Investors had lightened up on holdings of a couple of bills maturing in November on Friday. The selling pressure on Monday spread to all the bills maturing during the course of next month. The yield on the bill maturing on Nov. 12 jumped to as high as 0.178% on Monday, according to Tradeweb. It marks the highest intraday level since October 2013 when the bills market was hit by fear of a debt-ceiling standoff. In late-afternoon trading, the selling pressure eased and the yield settled at 0.601%. That still represents the highest closing level since February 2014 and climbed from 0.036% on Friday and around zero on Thursday. Bond yields rise as their prices fall.

House GOP Hatches Harebrained Debt Ceiling Fix Having exhausted the extraordinary measures that have allowed the government to keep paying its bill despite having reached its debt limit seven months ago, the U.S. Treasury is just weeks away from a major fiscal crisis. If the debt ceiling is not raised by early November, the U.S. government will not have enough money on hand to pay the millions of bills and other obligations that come due every day. In response, House Republicans have a plan. It isn’t a plan to raise the debt ceiling, though, even though that is currently the only viable option for avoiding default. It is, instead, a scheme to allow the government to claim – in the narrowest possible technical sense – that when it stops making payments to some of its creditors that it hasn’t actually “defaulted.” The plan, which could come to the House floor next week, relies on making a distinction between a “debt default” and more generalized default. The so-called Default Prevention Act makes it possible for the Treasury Department to borrow additional money “solely” for the purpose of making principle and interest payments on the nation’s publicly-held debt and debt held by the Social Security trust funds. The measure basically prioritizes bondholders and Social Security recipients over everyone else the government owes money to – veterans, contractors, government employees, and more.

As Debt Ceiling "Accident" Looms, Ron Paul Jabs Congress: "Don't Mention Warfare/Welfare State!" -- With less than two weeks until a possible debt ceiling "accident" and with investors dumping T-Bills at near record pace, Ron Paul rages that any delay in, or opposition to, raising the debt ceiling will inevitably be met with hand-wringing over Congress’ alleged irresponsibility. But the real irresponsible act would be for Congress to raise the debt ceiling.  Cutting up its credit card is the only way to make Congress reduce spending.Anyone who doubts this should listen to the bipartisan whining over how sequestration has so drastically reduced spending that there is literally nothing left to cut. But, according to the Heritage Foundation, sequestration has only reduced spending from $3.6 trillion to $3.5 trillion. Only in DC would a less than one percent spending reduction be considered a draconian cut. Defense hawks have found a way around sequestration by shoving billions of dollars into the Overseas Contingency Operations (OCO) account. OCO spending is classified as “emergency” spending so it does not count against the spending limits, even when OCO is used for items that do not fit any reasonable definition of emergency. During the majority of my time in Congress, debt ceiling increases were routinely approved. In fact, congressional rules once allowed the House of Representatives to increase the debt ceiling without a vote or even a debate! Congress’ need to appear to respond to growing concerns over federal spending has forced it to end the practice of rubber-stamping debt ceiling increases. Continuously increasing spending will lead to rising inflation as the Federal Reserve tries to monetize the ever-increasing debt. This will eventually lead to a serious economic crisis. When the crisis occurs, Congress will have no choice but to cut spending. The question is not if, but when and under what circumstances, spending will be cut.

Don’t even fool around with the debt ceiling -- Over at the WaPo. The idea here is that because we are unlikely to actually default on the federal govt’s obligations, I worry that some people are tuning out the debt ceiling debate. But there are good reasons not to do so. First, see the figure in the piece–even flirting with the debt limit distorts markets. Second, time spent squabbling over this is time not spent on solving real problems. And third, such dysfunctional isn’t an accident; it’s a strategy.  Oh, and pre-empting comments re the “platinum coin” solution, the reason I don’t go there in the piece, along with space constraints, is that Treasury and White House officials have been unequivocal in rejecting that approach as they do not believe they have such authority to mint such a coin.  I don’t know if that’s legally accurate but I’ve seen enough scholarly arguments on the other side (arguing the Treasury does have such authority) that if it really came to default, I’d mint the coin in a New-York minute. Yes, the opposition would take legal action, but believe me, the White House is plenty lawyered up.

Lawmakers Wrangle Over Plans to Avert, Manage or Embrace Default - With the potential for an unprecedented federal default two weeks away, House Republicans on Wednesday plan to pass legislation not to avert disaster, but rather to manage it, channeling daily tax collections to the nation’s creditors and Social Security recipients if the government’s borrowing limit is not lifted. The Obama administration and nonpartisan authorities say the plan is unworkable, but efficacy may be beside the point: Republican leaders appear to be buying time to find enough members of their own party to join Democrats in supporting an increase or suspension of the statutory debt limit by the Nov. 3 deadline so the nation can borrow to pay its bills — all of them — without a market-shaking crisis. The challenge is daunting. The risk of the nation’s first default has increased along with the numbers of Tea Party Republicans who have entered Congress, many of them pledged to oppose any debt-limit increase. Standoffs over the issue in 2013 and 2011 caused measurable economic damage, including setbacks for Americans’ retirement accounts. If that story line has the ring of “boy cries wolf,” one financial analyst wrote in his newsletter to market investors this week, “At the end of the book, the wolf eats the boy.”The legislative math has only grown more difficult. When Congress last voted in February 2014 to suspend the debt limit, 28 House Republicans joined nearly all Democrats in support; 199 Republicans were opposed. Now there are fewer Democrats in the House and if all 188 of them voted for an increase, Republican leaders would need 30 votes from their side for a 218-vote majority — two more than last year.

GOP conservatives unveil debt ceiling hike that comes with steep price - A group of conservative House Republicans on Tuesday unveiled a proposal to raise the debt limit through March 2017 that also calls for mandatory spending cuts. The Republican Study Committee's "Terms of Credit Act" would raise the debt ceiling by roughly $1.5 trillion -- to a total of $19.6 trillion -- through March 2017.  But the committee is setting a steep price for the debt limit increase. The bill would require congressional committees to produce legislation within 90 days that would cut more than $3.8 trillion in mandatory funding over the next decade. Mandatory funding covers programs like Medicare, Social Security and food stamps. They also have a condition to impose on their colleagues in the Senate: the measure would eliminate the filibuster for an initial procedural vote on spending bills any time after Oct. 1. The legislation would also freeze all regulations until July 1, 2017, several months into the next presidential administration.  Congress has only two weeks left before the Nov. 3 deadline to raise the debt ceiling before the nation's borrowing authority runs out. Speaker John Boehner, R-Ohio, is expected to bring up a "clean" debt ceiling increase before he leaves Congress.  President Obama wants Congress to pass a "clean" bill, which has no conditions, but many conservatives don't want to raise it without passing significant spending reforms.

U.S. Treasury postpones debt auction due to borrowing limit (Reuters) - A grinding political battle in Congress over America's national debt led the U.S. Treasury on Thursday to postpone a regular auction of government debt, a reminder that the country once again is just weeks away from a potential default. The Obama administration warned last week the federal government would have to stop borrowing money no later than Nov. 3 if the country's politicians do not raise the legal limit on federal debt. Many conservative Republicans balk at raising the debt limit without a plan for long-term deficit reduction. On Thursday, the Treasury Department said in a statement it would not hold an auction for 2-year notes originally scheduled for Oct. 27 because it might not be legally able to borrow money when the auction settles on Nov. 2. It also called on lawmakers to stop treating the debt ceiling as a political issue. "The creditworthiness of the United States is not a bargaining chip, and Congress should address this matter without controversy," the department said.

US's Weiss: Tsys Rare Liq'ty Problems Overshadowed by Debt Lim - As U.S. financial system regulators gather in New York to study possible solutions to rare liquidity glitches in the Treasuries market, the Treasury Department's expert on the issue has warned, the biggest liquidity event of all would be the threatened breach of the nation's debt limit. "If Treasuries are to remain the gold standard, regular and prolonged debates in Congress over whether to raise the debt limit - whether to pay our bills - must become a thing of the past," said Antonio Weiss, the Treasury Department's point man on some of its thorniest issues. He spoke at the beginning of an unprecedented gathering of representatives of every U.S. government authority on the markets and top market firm executives in the private sector, brought together by the Treasury Department and the New York Federal Reserve Bank. "The role Treasuries play in the global economy, and the benefits they have for the U.S. economy, rest on the bedrock foundation of the full faith and credit of the United States," Weiss continued. "As we approach the deadline for Congress to raise the debt limit, we become acutely aware that this foundation cannot be taken for granted." The Treasury has set the "drop dead" date, for when it will be unable to pay all its bills, in 15 days and so far the disarray in the House of Representative's leadership ranks has made it impossible to predict just how Congress will deal with the deadline. "It is imperative that Congress act soon," Weiss said, "and avoid gambling with our full faith and credit."

The Platinum Coin Returns | naked capitalism: Joe Firestone - Upon my oath, I didn’t intend to bring back the coin proposal until much later in the re-newed process of Republican hostage-taking over the debt ceiling. After all, there’s not much chance that the President would ever use the platinum coin option, because his budget policy direction of getting ever closer to a budget surplus, is best served by a “forced” compromise with the Republicans, that results in another few hundred billion in spending cuts for 2016, while allowing him to place the blame on them for that outcome. Using the platinum coin option would not have that result, because it would deliver a clear victory to him. Of course, he doesn’t want a default due to Republican brinksmanship either, so if the Republicans do drag everyone too close to the cliff, then he may decide to take some extraordinary measures and the coin is one that is available, so it’s conceivable that he might choose this undoubtedly, from his point of view, distasteful option. It is for this reason, I suppose, that the Brookings Institution is warning him off the coin to weight his choice towards some more conventional approach.  The warning was delivered in the form of a paper by Philip A. Wallach, in which after devoting a good deal of attention to the historical and current political context of the coming probable crisis over the Treasury breaching the debt ceiling law he asserts the “enormity of the threat posed by a failed debt ceiling negotiation.” But nevertheless he also asserts that any of the solutions proposed by those advocating for a way around such a crisis would not work because:. . . the political dynamics of the debt ceiling standoffs make it so that any deus ex machina capable of extracting us from our current fights will strike people as deeply illegitimate, heighten political tensions, and potentially accelerate the constitutional crisis it is meant to ward off.  This is not really an argument, but a conjecture, and one that is a matter of opinion, certainly not backed by any empirical evidence, and not blindingly obvious to many people, including myself.

Fiscal Myths of Campaign 2016 - Joe Firestone - Most of the world, and most notably the United States, is in the grip of fiscal myths fostered by the ideology of neoliberalism. There is virtual unanimity across the major political parties in the United States in accepting the viewpoint of neoliberalism, and the fiscal myths associated with it.  This book is about these myths, the arguments showing that they are, indeed, myths, and the truths that can counter them. It is about Campaign 2016, and some of its issues, because the fiscal myths will certainly be used in the Campaign; since, for the first time in a very long time, there is a major party candidate running, who, because he advocates for a very broad agenda and for fighting inequality, will, sooner or later, find that some, and perhaps a large number, of fiscal myths are being directed at him by his opponents and their supporters, who want to persuade voters that his agenda is “fiscally irresponsible.”  The process of using fiscal myths to undermine Senator Sanders’s message has already begun with an attack by Laura Meckler of the Wall Street Journal on key elements of his program. The attack was easily turned aside by progressive supporters, such as Gerald Friedman, who showed that the fiscal proposals being criticized as “fiscally irresponsible” were sure to net save at least $5 Trillion, rather than cost $18 Trillion over a decade, as the WSJ was claiming, because they would replace current expensive programs, and deliver huge out of pocket savings for Americans. His views were particularly effective because the WSJ had relied on his study for the data informing its critique. Apart from Friedman’s decisive critique of Meckler’s article other notable instances of progressive pushback came quickly from James Kwak, Robert Reich, Joshua Holland, Matthew Yglesias, John T. Harvey, (who alone brought a Modern Money Theory (MMT) perspective to the debate), and John Geyman.

House tees up conservative plans to raise debt limit - The House is expected as early as Friday to vote on a conservative debt-limit proposal even though chances are slim that the plan can pass the Senate. Speaker John Boehner (R-Ohio) told the GOP conference on Wednesday that he is expecting a vote on the Republican Study Committee (RSC) plan that would raise the debt limit to $19.6 trillion from $18.1 trillion and would run through March 2017. RSC plan, introduced on Tuesday, is still circulating among the group’s 170 party conservatives. RSC Chairman Bill Flores (R-Texas) said that from what leadership said, he is expecting a vote on Friday. The proposal would require a House vote on a balanced-budget amendment by Dec. 31, would implement a short-term freeze on federal regulations through July 1, 2017, and would compel the House to remain in session without a break if spending bills aren't done by Sept. 1. Last . With only two weeks to go, the pressure is on the House to pass a measure that raises the nation’s $18 trillion debt ceiling amid a search for the next Speaker. Rep. Paul Ryan (R-Wis.), chairman of the Ways and Means Committee, reluctantly stepped forward on Tuesday night with a list of five conditions plus the requirement that the majority of the fractured Republican conference support his bid to lead the House GOP. Despite the chaos surrounding the Speaker search, the House is expected to pass a debt-limit measure by Rep. Tom McClintock (R-Calif.) later Wednesday. Republicans argue that the legislation, which was approved by the House Ways and Means Committee last month, takes default off the table, requiring the Treasury Department to continue paying the nation’s bills — the principal and interest due on the debt and all obligations to the Social Security trust funds — even if the ceiling is eclipsed.

Presenting America's New Debt Ceiling: $19,600,000,000,000 -- Even as the bond market has been rather concerned about another possible debt ceiling showdown as we showed before, and which earlier today prompted the Treasury to announce the purposefully dramatic step of postponing the auction of 2 Year Notes next week, the reality is that one way or another, with an equity-driven wake up call for the GOP or without, the debt ceiling will be raised. The only question is how much. As a reminder, the reason why the total US debt held by the public hasn't budged from $18.1 trillion since March 16, 2015 is because that is when the last debt ceiling limit was hit. In the seven month since, the US Treasury has been cruising along on emergency cash measures, even as the total debt - if only for reporting purposes - has not budged (in reality it has grown by about half a trillion). And as The Hill reported, when one gets beyond the traditional posturing, the outcome will be the following: The House is expected as early as Friday to vote on a conservative debt-limit proposal even though chances are slim that the plan can pass the Senate.  Speaker John Boehner (R-Ohio) told the GOP conference on Wednesday that he is expecting a vote on the Republican Study Committee (RSC) plan that would raise the debt limit to $19.6 trillion from $18.1 trillion and would run through March 2017. Yes, the republicans will pretend to demand concessions, such as a balanced budget and other "sound money" conditions.... but they won't get them because the corporations pulling the strings of every D.C. politicians are the biggest beneficiaries from US debt-funded largesse, especially if one throws in the occasional contained or not so contained war. This means another victory for the Demorats who have required a "clean" debt raise. This is precisely what they will get, and why it will have to take place under John Boehner as Paul Ryan would surely tarnish his reputation with the Freedom Caucus if his first act is one seen as submission to the left. Which means that the only certain outcome from the melodramatic debt ceiling fight over the next several days, is the following: the US is about to have a brand spanking new debt ceiling, one that should last it until March of 2017: $19,600,000,000,000.

US Budget Week: Will Boehner Unveil Debt Plan Early Next Week - If House Speaker John Boehner has a debt ceiling strategy, he has only a handful of days to sketch it out and begin to move legislation through Congress. Boehner is scheduled to leave Congress in a week and Treasury has said that it will exhaust it's extraordinary measures on November 3. There has been some expectation all week on Capitol Hill that Boehner would begin to move debt ceiling legislation by Friday - or at least prepare the ground for its consideration next week. The House did pass this week a Republican-drafted debt prioritization bill drafted by Rep. Tom McClintock of California. The bill, which was approved on a 235-to-194 party-line vote, directs Treasury to prioritize certain payments if the debt ceiling is breached. The bill is not likely to be considered by the Senate. House Republicans considered allowing a group of very conservative Republicans to offer a debt ceiling package that includes nearly $4 trillion in spending cuts - a bill that would almost certainly never get a vote in the Senate and would be rejected by President Barack Obama. The package assembled by the Republican Study Committee would hike the debt ceiling until 2017 - but would link this increase to major changes in regulatory policy, compel the Senate to change some of its basic operating rules, and mandate $3.8 trillion in spending cuts. However, House GOP leaders apparently concluded that defeat of such a package in the House would do the party more harm than good.

House Republicans vote to repeal Obamacare for the 61st time: epublicans in the U.S. House of Representatives approved legislation on Friday targeting President Barack Obama’s Affordable Care Act that, like 60 other attempts before it, stands little chance of becoming law. The measure uses special budget rules that give it a greater chance of passing the Senate and reaching Obama’s desk than previous efforts, but Obama has said he plans to veto it. The bill, which also would cut off federal funding for women’s healthcare group Planned Parenthood, was approved by a vote of 240 to 189, largely along party lines. Under a budget rule known as “reconciliation,” Republicans can pass the bill through the Senate with a simple 51-vote majority, rather than the 60-vote threshold that has stymied other attempts. Even so, the bill may fail in the Senate. Three Republican senators, including presidential candidates Ted Cruz and Marco Rubio, have said they will vote against it because it only repeals some aspects of Obamacare. Republicans cannot afford to lose any more votes in that chamber. Republicans said it was important to force Obama to veto the bill, which contains two of their top priorities.

Paul Ryan tells House Republicans he’s willing to run, if conditions are met -- Rep. Paul Ryan (Wis.) moved closer to the House speakership Tuesday, telling fellow Republicans that he would consider taking the job if he could be assured that the caucus would unite behind him. Ryan faced his colleagues — and his political future — at a private evening meeting of House Republicans in the Capitol basement. He said he would be willing to step into the speaker’s role, ending weeks of GOP leadership turmoil, as long as disparate factions moved in the coming days to support him. “I hope it doesn’t sound conditional — but it is,” he said, according to members inside the room. He paused after saying the word “conditional,” they said, for effect. Ryan, the 45-year-old chairman of the House Ways and Means Committee and a 2012 vice-presidential nominee, has for years resisted pressure to assume a higher-profile role in party leadership. And he signaled Tuesday that his decision to serve was far from final. Much depends on what assurances of support he can win from Republican hard-liners. Before entering the evening meeting, Ryan met privately with leaders of the House Freedom Caucus, a hard-right group that helped push Speaker John A. Boehner out of his post and derailed Majority Leader Kevin McCarthy’s bid to succeed him. That meeting ended without specific commitments, according to members present, and at the subsequent GOP conference meeting, Ryan made clear he would need firm support from key groups by week’s end to move forward. The Freedom Caucus was explicitly mentioned, members said, as well as the conservative Republican Study Committee and the moderate Tuesday Group.

GOP to elect Speaker next week; conservatives skeptical of Ryan -- Rep. Paul Ryan (R-Wis.) is getting a cool reception from House conservatives, whom he said must endorse him before he’ll agree to run for Speaker. Leaders of the House Freedom Caucus and their conservative allies said Wednesday they’re turned off by the list of conditions Ryan said must be met before he launches a bid for the top post.  In addition to backing from three major GOP caucuses, Ryan wants assurances he could cut back on fundraising trips so he can spend more time with his family and promises that conservatives won’t try to oust him from power. “It’s like interviewing a maid for a job and she says, ‘I don’t clean windows, I don’t do floors, I don’t do beds, these are the hours I’ll work.’ It’s rubbing a lot of people the wrong way,” Rep. Matt Salmon (R-Ariz.), a co-founder of the Freedom Caucus, told The Hill. Ryan, the chairman of the powerful tax-writing Ways and Means Committee, is expected to meet Wednesday with both the Freedom Caucus and the 170-member Republican Study Committee (RSC). He’s also expected to meet with the centrist Tuesday Group at 10 a.m. Thursday. Rep. John Fleming (R-La.), a Freedom Caucus member, said Ryan was asked during the RSC meeting about changing the rules for a motion to vacate the chair. That motion forces a referendum vote on the Speaker. Ryan did not offer specifics, according to Fleming, but indicated he wouldn't do away with the motion entirely. "He just said he would like to see the threshold changed," Fleming said.

Paul Ryan secures enough votes to become House speaker - Paul Ryan is on the verge of becoming the next speaker of the House of Representatives after a majority of an ultra-conservative Republican bloc agreed to vote for him. After lengthy talks on Wednesday, 70% of Freedom Caucus members agreed to vote for Ryan – but that was not sufficient for a full endorsement, which requires the approval of four-fifths. Instead the group’s previous endorsement of Florida Republican Dan Webster stands and the Freedom Caucus said it was simply supporting Ryan. Michigan Republican Justin Amash said: “We haven’t rescinded any endorsement. We had a vote today simply on whether we support Paul Ryan to be speaker and that was the subject matter.” Ryan, the 2012 Republican vice-presidential nominee, had put himself forward conditionally as a compromise candidate to replace John Boehner. A policy wonk who had achieved his dream job as chair of the House ways and means committee, Ryan had long been reluctant to stand for speaker. The Wisconsin Republican decided to run after it became clear he was the only candidate with a chance of uniting the fractious House Republican conference and avoiding a leadership battle on the floor of Congress. But he said he would require the endorsement of the Tea Party-affiliated Freedom Caucus in addition to the conservative Republican Study Committee and the moderate Tuesday Group. “I’m grateful for the support of a supermajority of the Freedom Caucus,” Ryan said on Wednesday night. “I look forward to hearing from the two other caucuses by the end of the week but I believe this is a positive step towards a unified Republican team.”

Paul Ryan’s request for family leave has critics crying hypocrite - Paul Ryan's request for family time as a condition for his campaign for House Speaker has drawn criticism from those who see the Wisconsin congressman's demands as hypocritical.  In addition to requiring unified support from House Republicans before announcing his candidacy, Ryan said during a GOP meeting Tuesday that he would tailor the job's travel and fundraising requirements around raising his three young children with wife Janna Ryan.  "I cannot and will not give up my family time," Ryan said. "I may not be able to be on the road as much as previous speakers, but I pledged to make up for it with more time communicating our vision, our message." While acknowledging Ryan's request as reasonable, critics, including fellow politicians, have been quick to point out that it conflicts with his established opposition of paid family leave measures.  In 2009, Ryan voted against the Federal Employees Paid Parental Leave Act, which would have let federal employees substitute four weeks of paid leave for family leave. As the current chairman of the House Ways and Means Committee, Ryan has also delayed action on the proposed Family and Medical Insurance Leave Act. Additionally, Ryan's congressional office was not among those listed in a January Huffington Post article as offering paid maternity or paternity leave for staffers.

Paul Ryan Wants to Shut Down the Government, Permanently - Dean Baker -  Everyone has seen the news stories about how Representative Paul Ryan, the leading candidate to be the next Speaker of the House, is a budget wonk. That should make everyone feel good, since we would all like to think a person in this position understands the ins and outs of the federal budget. But instead of telling us about how much Ryan knows about the budget (an issue on which reporters actually don't have insight), how about telling us what Ryan says about the budget? It is possible to say things about what Ryan says, since he has said a lot on this topic and some of it is very clear. In addition to wanting to privatize both Social Security and Medicare, Ryan has indicated that he essentially wants to shut down the federal government in the sense of taking away all of the money for the non-military portion of the budget. This fact is one that is easy to find if a reporter is willing to do five minutes of research. Ryan directed the Congressional Budget Office to score his budget plans back in 2012.  The score of his plan showed the non-Social Security, non-Medicare portion of the federal budget shrinking to 3.5 percent of GDP by 2050 (page 16). This number is roughly equal to current spending on the military. Ryan has indicated that he does not want to see the military budget cut to any substantial degree. That leaves no money for the Food and Drug Administration, the National Institutes of Health, The Justice Department, infrastructure spending or anything else. Following Ryan's plan, in 35 years we would have nothing left over after paying for the military.

Americans want to end the country's longest war. Why won't Congress listen? | Congresswoman Barbara Lee - America’s longest war continues to drag on with no end in sight. More than 14 years since the invasion of Afghanistan, our highly capable men and women in uniform have gone above and beyond the call of duty. They have done enough; it’s past time to bring them home. On 15 October we saw the ramifications of Congress’s blank check for endless war when President Obama announced that thousands of US troops would remain in Afghanistan through the end of his term and into 2017. This war has already cost our nation so much: 2,350 of our brave servicemen and women have made the ultimate sacrifice, more than 20,000 have been wounded and thousands more bear invisible scars. This war has also taken the lives of thousands of Afghans and soldiers from our coalition partners and Nato allies. Continuing this war has not made us any safer. Our protracted engagement in Afghanistan undermines our national security by sparking global resentment against the US and spurring unsustainable Pentagon spending. At present, the war’s price tag totals more than $716bn, which continues to prevent much needed investments in critical domestic priorities. It’s past time to bring our armed forces home to their families and keep our nation’s sacred promise to care for them. The American people agree: a December Washington Post-ABC News poll found that a 56% majority of Americans believe this war has not been worth fighting, a trend that dates back to 2010. Yet despite the strong objections of the American people, this war continues with no end in sight.

The Lofty Promise and Humble Reality of International Trade -- How should we feel about international trade? Should we applaud it for its ability to lift the world’s poor out of poverty, lower the price of goods, and increase the variety of products we can consume? Or should we be concerned about the effects it has on employment, inequality, and the availability of decent jobs within the US? As we shall see, this is not an easy question to answer. But before turning to the consequences of trade for the US and other nations, it will be helpful to explain how economists approach these questions.  If a policy such as opening our borders to more international trade has both positive and negative effects, but the positive effects exceed the negative, then it would be possible to distribute the benefits in a way that makes everyone at least as well off as they were before the policy change. So if billions are helped and just a few are hurt, we can redistribute some of the gains to more than compensate the losers. It doesn’t matter if the redistribution actually happens, so long as it’s theoretically possible the policy can be endorsed.The second way around the problem of a policy creating winners and losers is to separate the short-run from the long run. While increased trade may cause difficult adjustment costs in the short-run, in the long run, according to this argument, trade “lifts all boats” such that the overall benefits are positive.   Although there is disagreement about the magnitude, estimates on the impacts of trade find that it is a net positive for the US as a whole. Thus, in theory, we ought to be able to more than compensate the losers from trade so that everyone is better off. But in reality this rarely if ever happens due to the accumulation of political and economic power in the hands of those who would have to give up some of their benefits to compensate those who have been hurt.

Failure of Globalization and the Fourth Estate  - “Free Trade,” the banner of Globalization, has not only wrecked the world’s economy, it has left Western Democracy in shambles. Europe edges ever closer to deflation.  The Fed dare not increase interest rates, now poised at barely above zero.  As China’s stock market threatened collapse, China poured billions to prop it up. It’s export machine is collapsing. Not once, but twice, it recently manipulated its currency to makes its goods cheaper on the world market. What is happening? The following two graphs tell most of the story. First, an overview of Free Trade.  Capital fled from developed countries to undeveloped countries with slave-cheap labor, countries with no environmental standards, countries with no support for collective bargaining. Corporations, like Apple, set up shop in China and other undeveloped countries. Some, like China, manipulated its currency to make exported goods to the West even cheaper. Some, like China, gave preferential tax treatment to Western firm over indigenous firms.  Economists cheered as corporate efficiency unsurprisingly rose.  U.S. citizens became mere consumers. Thanks to Bill Clinton and the Financial Modernization Act, banks, now unconstrained, could peddle rigged financial services, offer insurance on its own investment products–in short, banks were free to play with everyone’s money–and simply too big to fail.   Credit was easy and breezy.  If nasty Arabs bombed the Trade Center, why the solution was simple: Go to the shopping mall–and buy. That remarkable piece of advice is just what freedom has been all about.

The CBO Thinks Repealing Obamacare Mandates Would Lower the Deficit. Here’s Why. -- The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) together worked on a cost estimate released this week for H.R. 3762, a bill that would repeal many provisions of the Affordable Care Act (ACA). It would preserve the largest spending program in the ACA (the subsidies) and it would repeal some of the most contentious taxes in the law (like the mandates, the medical device tax, and the Cadillac tax.) Nonetheless, despite cutting taxes and preserving many kinds of spending, it would lower the deficit, according to the CBO’s cost estimate. This seems puzzling; how could a bill that mostly consists of tax cuts end up reducing the deficit? A closer look at the provisions involved and what they do makes this clear. The critical insight here mostly centers around the individual mandate. This provision is designed more to influence behavior than to increase revenue. This provision, a penalty assessed on your form 1040 if you fail to acquire health insurance coverage, is mostly designed to encourage people to sign up. Repealing this piece of the ACA—as H.R. 3762 does—has an effect on people’s behavior: namely, the people who are pushed into health coverage by the mandates will be less likely to sign up.The next step in the line of reasoning is that many kinds of health insurance are subsidized, especially for lower-income Americans (who are more likely to be uninsured.) The increased enrollment, then, has costs to the government in terms of outlays for things like Medicaid and the ACA exchanges. As the report explains, these increased costs are actually larger than the loss of revenue from the lost mandate penalties:

Public R&D austerity spending cuts undermine our grandchildren’s future – Billy Mitchell - Growth in material living standards, which is just one measure of overall (average) prosperity and contestable at that, depends on productivity growth. How national income is distributed, real wages growth in relation to productivity growth, and the employment rates also impact on how this average is reflected in the fortunes of individuals. Strong productivity growth is only a necessary condition for improved material living standards. In this period of fiscal austerity with suppressed overall growth rates and labour market deregulation that undermines working conditions and reduces the incentives to invest in best-practice technology labour productivity is falling – as will living standards in the coming years. The world is locked into an idiotic race-to-the-bottom. It is a curious period really. The hypocrisy of governments, aided and abetted by the right-wing think tanks, who claim they are cutting into public spending to reduce the drain on living standards of our children and grandchildren, is clear to see. What they are really doing is undermining the future prosperity of the next several generations at the same time that they push millions into unemployment and poverty now. Why are we so stupid that we tolerate this nonsense? Mainstream economists can even justify public spending on R&D using the ‘market failure’ argument.  The inventor always has a difficulty capturing the benefits of major discoveries. This becomes more so when there are low-cost methods available to reproduce the technology. In situations like this, the private market will under-invest even though the social returns (the benefits that accrue to society in general) might be considerable.

Holder Defends Record of Not Prosecuting Financial Fraud -- I was primarily interested in hearing whether Holder regretted whiffing on torture prosecutions during his tenure (see story: Holder, Too Late, Calls for Transparency on DOJ Torture Investigation), I also asked him about whiffing on financial fraud prosecutions. Specifically, I noted his failure to hold accountable the people responsible for the wide-scale financial fraud that led to the massive economic recession of 2007-9. And I noted that after he stepped down from his post in April, he went back to his job at Covington & Burling, the gigantic D.C. law firm whose clients have included many of the big banks which Holder chose not to prosecute. Holder bristled at my suggestion that there might be a connection between his current employer and his conduct at Justice,  saying that many top prosecutors at Justice had pursued cases as best they could. “We were simply unable to do it under the existing statutes that we had, and given the ways the decision-making worked at those institutions,” he said. However, Holder had all the statutory authority he needed to prosecute straightforward crimes such as robosigning fraud, perjury in front of Congress by Goldman Sachs executives, or for that matter, HSBC’s money laundering for Mexican drug cartels. He simply chose not to. (In response to another questioner, he denied that any of his decisions not to prosecute were based on the massive legal teams that were fielded against the government.) Moreover, he actively waved off offers of additional help such as the suggestion from Sen. Sherrod Brown, D-Ohio, that Congress give him more staff for his Residential Mortgage-Backed Securities Working Group, or extend the statute of limitations on some crimes.

Hedge Funds are Bringing Back Everyone’s Least Favorite Toxic Investment -- Joshua Siegel is bringing back a version of one of the most toxic financial vehicles ever devised and arguing that this time it’s going to be different. His StoneCastle Financial is among the funds that are reviving the collateralized debt obligation, or CDO. CDOs stuffed with mortgages and their derivatives caused billions in losses around the world during the 2008 crisis. The CDO that StoneCastle put together is another kind. It’s backed by subordinated debt issued by about 35 community banks, some of them so small they don’t have credit ratings. Subordinated debt is paid off last in a bankruptcy, so issuers typically compensate buyers with higher yields than on other borrowings. Citigroup Inc., which completed the $250 million deal for New York-based StoneCastle this month, calls it a collateralized loan obligation, but it’s a structured security that walks and talks like a CDO. Moody’s Investors Service plans to give it a rating of A3, six grades below Aaa, according to people with knowledge of the deal. Bank bonds rated A typically yield 2.5 percent. Through the wonders of financial engineering, StoneCastle’s Community Funding CLO yields 5.75 percent. “A CDO is just another word for financing,” Siegel said in an e-mail. “What matters are what assets are being financed.”

SEC’s hedge fund reviews show advisors keeping trades for themselves - Francine McKenna -- Securities and Exchange Commission Chairwoman Mary Jo White told an audience of hedge fund managers and investors on Friday that the regulator’s intense scrutiny of the private funds industry is paying off.  Recent examinations of hedge funds and private equity funds revealed advisers allocating profitable trades and investment opportunities to proprietary funds rather than client accounts and multiple instances of improper fees and fee allocations to investors, White said. Some of these issues are still being reviewed for possible enforcement action. But many of the inspectors’ findings show up in the details of recent SEC enforcement actions. Those prosecutions cite violations regarding poor disclosures and conflicts of interest, including misallocation of expenses to funds, using client funds to pay their operating expenses without authorization and disclosure, and failing to disclose fees and discounts from service providers to investors.  On Friday the SEC published its first “Private Funds Statistics” report, based on data aggregated from a new required form, PF, that collects information about the industry.  Some highly contentious practices are also illuminated. High frequency trading, criticized by some for its potential creation of an uneven playing field for smaller investors, is not as common as some have portrayed. The SEC’s report says fewer than 100 reporting hedge funds, representing less than $70 billion in combined net assets, manage some portion of their funds using high-frequency trading strategies.  The use of derivatives has fallen, with notional value equal to 221% of net asset value at the end of 2014 from 256% at the beginning of 2013.

Exclusive: Are the SEC’s Mary Jo White and Her Husband Teaming Up to Gut Corporate Disclosure and Make It Harder to Fight Fraud? --  David Dayen -- The heart of the SEC’s mission is disclosure, which means providing enough information to investors so they can make sound choices when they buy stocks and bonds. Without disclosure you don’t really have an SEC, and you put investors – and potentially the whole economy – at risk. Weak securities disclosure enables financial fraud.  It’s highly likely that this effort reaches all the way to the office of SEC Chair Mary Jo White. At issue is the standard of “materiality,” whether or not information is germane enough to be disclosed in financial statements. The SEC designates responsibility for setting this standard to the Financial Accounting Standards Board (FASB), a private-sector organization created in 1973 to establish and update the nation’s Generally Accepted Accounting Principles (GAAP).  But a few weeks ago, on September 24, FASB published two drafts for public comment, one to update FASB’s Conceptual Framework, and the other an Accounting Standards Update to clarify it for corporate management. FASB said the updates would “improve the effectiveness of disclosures in notes to financial statements.” It’s important to recognize that notes in financial statements are absolutely critical to understanding a 10-K or any other report.    FASB wants us to believe that this is a mere technical fix to alleviate confusion. But what it really would do is change the definition of materiality. This is from FASB Chairman Russell Golden: Stakeholders indicated that the current discussion of materiality in our Conceptual Framework is inconsistent with the legal concept of materiality as established by the U.S. Supreme Court… The Supreme Court’s materiality standard is applied under SEC Rule 10b-5, a rule that targets securities fraud. It comes from a 1988 case, Basic v. Levinson, which determines materiality as whether a reasonable investor would have viewed whatever was undisclosed as something that would have altered the “total mix” of information about the company.

Investor advocates protest proposals limiting disclosure - Francine McKenna - Investors  The Securities and Exchange Commission was the site of a heated exchange at the Investor Advisory Committee meeting between members and SEC staff presenting a new FASB standard that critics say would reduce disclosures. At an SEC Investor Advisory Committee meeting last week, several members voiced vehement objections to a controversial proposal from the Financial Accounting Standards Board on materiality that will affect financial disclosures. FASB’s proposal changes the definition of materiality that company accountants and external auditors would use when reviewing which financial statement disclosures make it to the quarterly and annual reports. The proposal consists of two drafts, now open for public comment. One proposal aims to clarify the concept of materiality and the other says how to apply discretion when determining what disclosures make it into financial statements. FASB said the updates were intended to “improve the effectiveness of disclosures in notes to financial statements.” The FASB proposals are significant, say legal and accounting experts, because they redefine materiality as a legal concept to be interpreted by the courts, rather than an accounting concept. The proposals, in particular, aim to bring the accounting standards in line with the Supreme Court’s definition of materiality for lawsuits involving the securities laws, according to the FASB. They eliminate a detailed discussion of materiality in the accounting standards and replace it with a general description of the Supreme Court’s definition of materiality.

Reformers Stymie Obama a Second Time on Wall Street Cronies: Progressive Pick Lisa Fairfax Nominated for SEC --The way to change institutions is to change the people in positions of influence within them. Even with an obviously pro-corporate Mary Jo White at the head of the SEC, Democratic commissioners Kara Stein and the outgoing Luis Aguilar have been able to curtail some of the agency’s particularly dubious established policies, like giving financial services industry recidivists waivers from sanctions that were mandated by law when they settled for violations of securities laws. So it was an important precedent early this year when pro-bank reform Senators, led by Elizabeth Warren, made so much of a stink over Obama’s nomination of Lazard international mergers & acquisitions banker Antonio Weiss to a senior Treasury post for which he was not qualified that he withdrew. Obama planned to end Kara Stein’s effectiveness as a reformer by getting a pro-bank replacement for Aguilar in place (Aguilar’s term ended earlier this year, but he can continue to serve until the end of 2015 if his replacement has not been approved by the Senate). The trial balloon floated was for Kier Gumbs, a Covington & Burling corporate attorney.  From David Dayen at the Intercept: Gumbs, a former SEC staffer, allegedly gave CEOs tutorials on how to avoid disclosing their corporate political spending while at Covington. He also represented the American Petroleum Institute before the SEC. He was seen as a corporate-friendly ally for Chair Mary Jo White, who would help marginalize the more reform-minded Democrat on the panel, Kara Stein.  But Rootstrikers, Public Citizen, and other progressives immediately raised a hue and cry about Gumbs, and that took place in concert with ongoing, and well-deserved criticism of Mary Jo White’s dereliction of duty by Credo and other activists. That forced Obama to table a nomination for Aguilar’s slot considerably to the left of where he wanted to go in nominating Lisa Fairfax.  And Dayen stresses that this nomination is likely to go through because Obama has paired it with the nomination of a former staffer oF Richard Shelby, the chairman of the Committee on Banking, Housing, and Urban Affairs. So while it’s never over until the fat lady sings, this looks like a real win for financial services reformers, and a sign the tide is indeed turning. 

Goldman Sachs Fires Analysts For Cheating On "Compliance" Tests- If you know anything about Wall Street you know that the culture is one of honesty, integrity, and transparency. That’s important because after all, in a world that has become almost entirely financialized (to the point that pushing around numbers on a screen and trading paper that references other paper is more important than creating tangible assets), the failure to maintain an appropriate level of moral discipline among the institutions entrusted to create, market, and manage financial products could lead to disaster and the destruction of wealth on a massive scale. But just because no one has ever manipulated, fixed, or otherwise rigged any markets yet, doesn’t mean they won’t try, which why it’s nice to know that honest firms like Goldman are on the job when it comes to watching for any kind of nefarious shenanigans. Like analysts cheating on training and compliance tests. Here’s Bloomberg: Goldman Sachs Group Inc. is dismissing about 20 analysts globally in offices including London and New York after discovering they had breached rules on internal training tests, said people familiar with the matter. The analysts, who had been working in the investment bank’s securities division, have either already been dismissed or are in the process of leaving the bank,

Has It Become Impossible to Prosecute White-Collar Crime? -- For close watchers of the interactions between the Justice Department and the financial industry, the mistrial in the Dewey & LeBoeuf case was about more than just the fact that a handful of jurors were too overwhelmed by the evidence presented to reach a verdict. The mistrial, after a four months in court and 22 days of deliberations, hints at a much deeper problem: Perhaps most financial crime has reached a level of such complexity that it's beyond the reach of the law. Since the financial crisis sent the economy into a spiral, leading to millions of lost jobs and foreclosed homes, there have been public cries to see bankers responsible for the frauds underpinning the crisis put in jail. This would have fit with the pattern of how things have gone since the beginning of time: Booms and bubbles led to market collapses and crises, followed by the tightening of regulations and criminal prosecutions. In the case of 2008, however, the crackdown never really came. Only one high-level banker went to prison, and the Justice Department pursued enormous multi-billion-dollar civil penalties against big banks, rather than charges against individuals.  There's nothing wrong with bringing an ambitious case to trial and losing. But the pattern suggests that law enforcement may have lost the ability to choose the right cases, or that it lacks the expertise to try them in a courtroom in a way that makes sense to jurors, many drawn from the ranks of working people who must struggle to understand the vast, mind-boggling modern financial system.

How humans can wrest control of the markets back from computers - Gillian Tett -- Investors have had plenty of reasons to worry about oil prices this year. Now there is another: Timothy Massad, chairman of the US Commodity Futures Trading Commission, revealed on Wednesday that there have been 35 bizarre “flash crashes” in American oil markets this year. Yes, you read that right: according to CFTC researchers, on three dozen occasions prices for West Texas Intermediate crude have gyrated so dramatically that they have been defined as flash crashes. This means prices swung 200 basis points in less than an hour, before recovering at least 75 basis points. Even if the definition is a little arbitrary, these swings are clearly becoming far more frequent — and not just in oil markets. Investors were shocked this year when a flash crash in US equities caused the price of some exchange traded funds to plummet for a brief period. Almost exactly a year ago, similar convulsions erupted in the Treasuries market. However, the CFTC research shows the problem extends well beyond these eye-catching episodes: flash crashes are now affecting even hitherto dull commodities sectors, such as corn. Why? Ask a banker, and they will be tempted to blame regulation. The argument is that reforms introduced after the 2008 crisis have made banks so risk averse that they are reluctant to act as market makers, standing ready to buy or sell when investors want to trade — which means liquidity vanishes in a crisis, making prices swing. But Mr Massad points to another culprit: algorithms such as those used by high-frequency traders. This is the vital piece of the puzzle. In the past few years, use of automated computer programs has expanded so fast that the CFTC says they are now involved in 50 per cent of all trades for metals and energy futures, and 67 per cent of Treasury futures.

US regulator signals bid to curb high-speed trading - A major U.S. financial regulator has signaled the first serious effort to curb high-speed automated trading in the futures market, which increasingly influences benchmark assets such as equities, commodities and government bonds. The plans detailed by Timothy Massad, chairman of the Commodity Futures Trading Commission, come with concern growing among regulators over the sudden large price movements that have plagued a number of markets in recent years. Such so-called "flash events" have become linked with the growing popularity of high-speed, computerized trading, which has been criticized by institutional investors for fueling volatility. Mr Massad made his comments on Wednesday at a conference examining the market for US Treasury bonds, a bedrock of the financial system which last October swung wildly in a 12-minute span, unnerving investors and regulators. A July report by the U.S. Treasury and regulators into the so-called "flash event" found the growth of rapid electronic trading had played a central role in the abrupt price and yield swings. Automated traders account for about 67 percent of 10-year Treasury futures listed on the Chicago Board of Trade, Mr Massad said. They are on at least one side of half the trades in metals and energy futures, he added.

Bank Regulator’s Speech Shows the Extent of Financial Reform Failure - One of the common complaints heard about the U.S. financial regulatory system is that it’s so fragmented that one hand doesn’t know what the other is doing. For example, both the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board of Governors (Fed) regulate the largest banks – including the biggest banks on Wall Street. But neither of these regulators has any clarity on the securities trading risks that these banks holding trillions in insured deposits are taking. Neither does the FDIC that insures the deposits with backstopping from the taxpayer. That’s the Securities and Exchange Commission’s job. The same banks are also taking big risks in commodities and futures trading – but that’s left to the oversight of the Commodity Futures Trading Commission (CFTC). And on and on it goes.  A speech given yesterday by Thomas J. Curry, Comptroller of the Currency, underscores the dangers of this fragmented system, which effectively allows Wall Street to run wild by hiding systemic risks in the abundant cracks of this system: A system Wall Street itself designed through lobby pressure on Congress and regulators and a gold-plated revolving door.  Curry told his audience at an Exchequer Club luncheon in Washington, D.C. that “we are clearly reaching the point in the cycle where credit risk is moving to the forefront.” Curry’s laundry list of potentially problematic areas included leveraged loans, home equity lines of credit, subprime auto loans, and commercial real estate. What Curry didn’t mention are the real elephants in the room – the casino room on Wall Street: the $180.29 trillion of derivatives held at the insured banking units of just four banks: JPMorgan Chase, Bank of America, Citibank (part of Citigroup) and Goldman Sachs. Just those four banks hold 91.1 percent of all derivatives held at the thousands of banks in the U.S. If that’s not concentrated risk, we don’t know what is.

Negative Real Rates Signify a Broken Financial System - naked capitalism - Yves here. This article by Carolyn Sissoko, who has long been providing savvy commentary about derivatives and complex financial products, does an impressive job in a new post, in a clear, non-technical manner, of addressing an issue that the financial press has seldom presented properly: that of the moaning among dealers and investors about the scarcity of “safe assets” meaning Treasuries and other high quality bonds. You’d think the demand came from end investors, like widows and orphans or their functional equivalents, such as foundations and endowments. In reality, as we’ve discussed earlier, the demand in fact came from the need to secure derivative positions. As we wrote in 2012: This massive fail results from the refusal to deal with the derivatives problem head on. For some peculiar reason, economists and regulators have bought the idea that financial “innovation” is always and ever good and should therefore be given free rein. Even though the crisis would seem to have proven decisively otherwise, no one seems willing to question the value to anyone other than banksters of the continuing growth of over-the-counter derivatives markets. And the ever rising “need” for more collateral is the direct result of the explosive growth of the derivatives market. This chart from ECONNED is somewhat dated but gives you an idea:   Sissoko not only gives a brief treatment of this syndrome, but more important, explains the implications for the banking system as a whole. And they are not pretty.

Bond-Market Blues: Where Did My Income Go? - WSJ: If there is one area where low interest rates have propelled growth, it has been in the fixed-income market. But increasingly, income is the one thing that is hard to find. For investors, that marks a further transformation in the fundamental characteristics of bonds, away from steady income to vehicles for capital gains. What investors should remember: this can also lead to capital losses. The bond market has boomed in the wake of the financial crisis. Governments led the way, borrowing as budget deficits yawned wide; companies followed, first switching away from fickle bank financing and then lured by historically low rates to add debt to balance sheets. The Barclays Global Aggregate, a broad investment-grade bond index, now contains over 16,900 securities with a face value of $39.8 trillion, up from $25.3 trillion at the end of 2007. But low rates mean bonds aren’t throwing off as much cash. Take the Global Treasury index of government bonds. In December 2007, it contained $11.9 trillion of securities, and in the year had generated $447 billion in coupons, according to Barclays data. By September 2015, its size had nearly doubled to $21 trillion of bonds, but coupons paid out in the past 12 months had crawled to only $535 billion. Low rates are providing a subsidy of hundreds of billions of dollars from lenders to borrowers.

Investors pile into high-yield junk bonds - Investors are racing into higher-yielding junk bond funds at the fastest pace in four years, following a broad rally in equity and fixed income markets as concern that the US Federal Reserve will tighten policy this year is fading. US mutual and exchange traded funds that are invested in speculative bonds — those rated double B plus or lower by Standard & Poor’s or Fitch — counted $3.3bn of inflows in the week to Wednesday, the largest single weekly take since October 2011 and the second largest on record since 1992, according to fund tracker Lipper. The new money, buoyed by ETF buying, lifted year-to-date flows into positive territory after months in the red. Fixed income and equity markets have bounced since a summer sell-off pushed global benchmark stock indices into correction. Junk bond funds are poised this October to record their best single month since the start of 2012 after three consecutive weeks of inflows, gaining 2.64 per cent so far, according to Barclays Indices. The recent climb has partially reversed a sharp summer slump, exacerbated by a jump in new junk bond issuance at the start of the year and weakening economic activity in China, which nearly shut the primary high-yield market. Expectations that the US central bank will this year lift interest rates for the first time since the financial crisis have receded since late September, with the market now pricing in a first move in 2016. However, investors remain skittish since the summer sell-off, with many pointing to steadily rising debt burdens, slowing revenue growth and a jump in deals as a sign that the current credit cycle is drawing to a close.

NY Times’ Gretchen Morgenson Discusses More Layers of Private Equity Fee Chicanery -- I suspect that reporters who’ve been digging into private equity have similar reactions to mine: every time you turn over a rock, more creepy-crawlies emerge.  Gretchen Morgenson, in her Sunday New York Times column, returns to the lack of transparency in private equity fees and costs and provides some troubling new examples of how investors are kept in the dark, or just as bad, have information presented to them in such as way as to well-nigh insure that they won’t appreciate the significance of what they are saying. This is important because, as is widely recognized in the investment management industry, fees and costs eat into investment returns. That’s the rationale behind passive strategies, aka index funds, because it’s well-nigh impossible to find an “active” manager who can consistently produce enough in excess returns (alpha) to justify his higher fees. In keeping, a recent study by the Maryland Policy Institute confirmed its earlier findings, that high-fee strategies like private equity cost public pension funds billions of dollars compared to cheaper options.  And the overarching issue is that investors in private equity like public pension funds have no idea how much they are paying in total costs and fees. The lack of transparency not only means they are ignorant of the total drag, but it also means they can’t negotiate effectively to reduce costs, particularly since many private equity charges are cleverly structured so that if you squeeze the balloon one place, the private equity managers can recoup much or all of the apparent fee reduction somewhere else.

Citi warns of negative sentiment, contagion in credit markets - The last recession wasn't also called the global financial crisis for nothing. Delinquencies, defaults, and trading losses put huge strains on the banks, which in turn had less money to lend. The money they did lend came at extraordinarily high interest rates. High levels of leverage had made the banks vulnerable, and elevated value-at-risk (VAR) profiles across Wall Street trading desks strained portfolios. This slammed even the most creditworthy consumers and businesses. Things spiraled. Could such a credit crisis happen again? Perhaps, but differently. In a note to clients, Citi credit analyst Stephen Antczak examines sources of contagion risk in the bond market. "Conventional sources of contagion risk seem unlikely to be catalysts for spreading fundamental risk at this stage," Antczak wrote. By "conventional," Antczak is referring to the banks. "[T]he financial sector, which often plays a key role in transmitting weakness across assets, is in a much less vulnerable place now than in the recent past." Indeed, since the financial crisis, both regulators and investors have demanded banks to be less risky. As a result, leverage and VARs have come down everywhere. "But investor sentiment is another, albeit less conventional, factor that can cause fundamental risks to spread, and in the current environment this catalyst may be a bigger problem than usual," Antczak added.

Four Ways of Looking at TBTF Subsidy - - Mike Konczal - The discussion over a Too Big To Fail (TBTF) subsidy, where the largest banks are able to borrow more cheaply as the result of potential future bailouts, is back in the discussion. Paul Krugman referenced it with a link to my review of two studies arguing the subsidy has largely declined since the crisis. Dean Baker has responded with critical thoughts on the studies.  My point isn’t to say that the subsidy is completely over. Nor, as I’ll explain in a bit, is it to say that TBTF is over. Instead, understanding this decline lets us know we should push forward with what we are doing. It debunks conservative narratives about Dodd-Frank being fundamentally a protective permanent bailout for the largest firms that we should scrap, and provides evidence against repealing it. And ideally it gets us to understand this subsidy as just one part of the more general TBTF problem that needs to be solved. I'll first respond to Dean Baker. Then I'll map out four different ways of understanding what we mean by a TBTF subsidy, and what is and isn’t fixed, because that might clarify other responses I’ve been getting.

Reframing the Debate about Payday Lending - NY Fed - Except for the ten to twelve million people who use them every year, just about everybody hates payday loans. Their detractors include many law professors, consumer advocates, members of the clergy, journalists, policymakers, and even the President! But is all the enmity justified? We show that many elements of the payday lending critique—their “unconscionable” and “spiraling” fees and their “targeting” of minorities—don’t hold up under scrutiny and the weight of evidence. After dispensing with those wrong reasons to object to payday lenders, we focus on a possible right reason: the tendency for some borrowers to roll over loans repeatedly. The key question here is whether the borrowers prone to rollovers are systematically overoptimistic about how quickly they will repay their loan. After reviewing the limited and mixed evidence on that point, we conclude that more research on the causes and consequences of rollovers should come before any wholesale reforms of payday credit.

Right-Wing Think Tank Shills for Payday Lenders on New York Fed Website - David Dayen -- The New York Federal Reserve Board, charged with overseeing Wall Street banks, turned over its normally staid official blog this week to a highly contentious argument in defense of high-cost payday lenders, who are partially funded by the same big firms the Fed is supposed to be regulating. Michael Strain, a resident scholar at the ultra-conservative American Enterprise Institute think tank, co-authored the piece. While posts at the New York Fed’s Liberty Street Economics blog always caution that the views expressed do not reflect the position of the regional bank, it is highly unusual to have anyone from an ideological think tank write an article there. A review of the last three months of Liberty Street Economics posts shows no other instance of this happening. The article, “Reframing the Debate About Payday Lending,” begins by almost taunting the many critics of payday lenders, who charge low-income borrowers upwards of 400 percent interest for short-term loans (typically due within two weeks, or the next “payday”).   Payday lenders thrive the most where banks have the fewest locations, according to a 2013 Milken Institute report. In fact, it’s a two-step process: banks abandon low- and moderate-income communities, ceding the field to payday lenders who they fund. Mega-firms like Wells Fargo Bank of America, US Bank, JPMorgan Chase and PNC Bank provided $1.5 billion in financing to the payday loan industry, as of 2011. The New York Federal Reserve regulates many of the activities of these big banks, which profit from the continued success of payday lenders. Hosting arguments defending payday lending, featuring work from a leading conservative think tank, undermines any semblance of independent oversight.

Banks Turn Down Deposits As Stealth NIRP Takes Hold -- Back in February, we noted that NIRP had officially (albeit technically) arrived in the US as JP Morgan announced it was preparing to charge some large institutional customers for deposits.  Between the squeeze ZIRP has put on NIM and regulations around so-called “hot money,” banks quite simply do not want certain types of deposits and when trying to talk customers out of putting their money in the bank didn’t work, some financial institutions simply resorted to charging fees.   If you needed still more evidence that what one might call “stealth NIRP” has taken hold in America, consider the following from WSJU.S. banks are going to new lengths to ward off a surprising threat to their financial health: big cash deposits. State Street Corp., the Boston bank that manages assets for institutional investors, for the first time has begun charging some customers for large dollar deposits, people familiar with the matter said. J.P. Morgan Chase & Co., the nation’s largest bank by assets, has cut unwanted deposits by more than $150 billion this year, in part by charging fees.  The developments underscore a deepening conflict over cash. Many businesses have large sums on hand and opportunities to profitably invest it appear scarce. But banks don’t want certain kinds of cash either, judging it costly to keep, and some are imposing fees after jawboning customers to move it. The banks’ actions are driven by profit-crunching low interest rates and regulations adopted since the financial crisis to gird banks against funding disruptions. The latest fees center on large sums deemed risky by regulators, sometimes dubbed hot-money deposits thought likely to flee during times of crises. Finalized last September and overseen by the Federal Reserve and other regulators, the rule involving the liquidity coverage ratio forces banks to hold high-quality liquid assets, such as central bank reserves and government debt, to cover projected deposit losses over 30 days. Banks must hold reserves of as much as 40% against certain corporate deposits and as much as 100% against some deposits from hedge funds.

Bank’s severance deal requires IT workers to be on call for two years - SunTrust Banks in Atlanta is laying off about 100 IT workers as it moves work offshore. But this layoff is unusual for what it is asking of the soon-to-be displaced workers: The bank's severance agreement requires terminated employees to remain available for two years to provide help if needed, including in-person assistance, and to do so without compensation. Many of the affected IT employees, who are now training their replacements, have years of experience and provide the highest levels of technical support. The proof of their ability may be in the severance requirement, which gives the bank a way to tap their expertise long after their departure.  The bank's severance includes a "continuing cooperation" clause for a period of two years, where the employee agrees to "make myself reasonably available" to SunTrust "regarding matters in which I have been involved in the course of my employment with SunTrust and/or about which I have knowledge as a result of my employment at SunTrust." The employees were informed of their layoff at the end of September, and the last day of work for some is on Nov. 1. This is according to several of the affected employees, who requested anonymity for fear of retaliation.

Blackstone makes $5.3bn bet on NY rentals -- Blackstone and Ivanhoé Cambridge have agreed a $5.3bn takeover of Stuyvesant Town, a historic Manhattan apartment complex and emblem of the housing bubble, in the latest sign of strength in the booming US rental market. As part of the deal Blackstone and Ivanhoé, a Canadian real estate investor and developer, agreed to keep 5,000 of the 11,241 units “affordable” for the next 20 years in exchange for tax breaks, a boon to New York mayor Bill de Blasio’s push for low-income housing. Jon Gray, global head of real estate for Blackstone, said the company intended to own the development “for many years to come”. The transaction marks another bet on the red-hot rental market. Mr Gray earlier this month said he was bullish on apartment rentals in Manhattan and Miami because many residents were now priced out of buying. Blackstone bought a multifamily building in Manhattan for $690m in September. Apartments have been one of the fastest-growing sectors of this property boom, as the home ownership rate in the US has dropped to a near 50-year low and demand for rentals continues to rise, particularly from millennials. Average vacancies across the country are below 7 per cent — their lowest level since the 1980s — while the valuations of apartments nationally are 30 per cent above their 2007 peak levels, according to Green Street Advisors. “Stuy Town”, a sprawling 1940s-era residential complex, symbolised the boom and bust of New York’s commercial property market. Tishman Speyer and BlackRock bought the property for $5.4bn at the top of the market in 2006, hoping to upgrade it and raise rents. But their plans were thwarted by both a recession and a judge’s ruling that they were illegally raising rents. After the market crashed, the property’s value plummeted to less than $2bn, spurring them to default on its $4.5bn mortgage and hand it over to creditors.

AIA: Strong Rebound for Architecture Billings Index in September  -  This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.  From the AIA: Strong Rebound for Architecture Billings Index The Architecture Billings Index (ABI) returned to positive territory after a slight dip in August, and has seen growth in six of the nine months of the year so far. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the September ABI score was 53.7, up from a mark of 49.1 in August. This score reflects an increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 61.0, down from a reading of 61.8 the previous month. “Aside from uneven demand for design services in the Northeast, all regions are project sectors are in good shape,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “Areas of concern are shifting to supply issues for the industry, including volatility in building materials costs, a lack of a deep enough talent pool to keep up with demand, as well as a lack of contractors to execute design work.”
• Regional averages: South (54.5), Midwest (54.2), West (51.7) Northeast (43.7)
• Sector index breakdown: mixed practice (52.6), institutional (51.5), commercial / industrial (50.9) multi-family residential (49.5)
This graph shows the Architecture Billings Index since 1996. The index was at 53.7 in September, up from 49.1 in August. Anything above 50 indicates expansion in demand for architects' services.

Black Knight's First Look at September Mortgage Data - From Black Knight: Black Knight Financial Services' First Look at September Mortgage Data: Delinquency Rate Rises for Second Consecutive Month, Now 4.9 Percent According to Black Knight's First Look report for September, the percent of loans delinquent increased 1.7% in September compared to August, and declined 13.9% year-over-year. The percent of loans in the foreclosure process declined 1.5% in September and were down 23% over the last year.  Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 4.87% in September. The percent of loans in the foreclosure process declined in September to 1.46%
The number of delinquent properties, but not in foreclosure, is down 392,000 properties year-over-year, and the number of properties in the foreclosure process is down 214,000 properties year-over-year. Black Knight will release the complete mortgage monitor for September in early November.

Lawler: Preliminary Table of Distressed Sales and Cash buyers for Selected Cities in September -- Economist Tom Lawler sent me a preliminary table below of short sales, foreclosures and cash buyers for a few selected cities in September.  On distressed: Total "distressed" share is down in most of these markets.  Distressed sales are up in the Baltimore due to an increase in foreclosures.  Short sales are down in all of these areas. The All Cash Share (last two columns) is declining year-over-year. As investors pull back, the share of all cash buyers will probably continue to decline.

Freddie Mac Hopes To Lure Millennial Home Buyers With New "Three Percent Down" Mortgages -- On Friday we noticed a disturbing glitch in the matrix, when in a deja vu from the peak days of the last housing bubble, we showed that in the Las Vegas market, builders such as Lennar, are rushing to dump new construction to potential purchasers with the "unbeatable" offer of zero money down. One key reason for this sudden panic in the housing market is that the Fed's rate hike gambit backfired: with economists far and wide expecting rate hikes, the expectation was that potential home buyers would rush to buy homes ahead of rising rates. ... but now mortgage rates are sliding back to 2015 lows, removing any sense of urgency from the demand side of the pricing equation.  So what is the alternative? Pushing the supply into overdrive, of course, and doing more of precisely what got the US financial system (and the bailed out GSEs) in trouble in the first place: handing out virtually free housing, and since the purchase price has to be funded somehow, today Freddie Mac, together with Quicken Loans, announced a new lending program, one which would enable "eligible borrowers" and focusing on millennials, to finance a house with a "down payment of as little as three percent." From the release: Freddie Mac (OTCQB: FMCC) and Quicken Loans, the nation's second largest mortgage lender, today announced a partnership to pilot several new initiatives aimed at helping provide more Americans the opportunity to achieve homeownership, while also building a smarter American mortgage finance system. The program will feature unique, co-developed products to meet the needs of emerging markets, including millennials, first-time homebuyers and middle-class borrowers. It will explore numerous modifications and expansions to Freddie Mac's current Home Possible mortgage products, and will also include continued homebuyer education. Home Possible enables eligible borrowers to finance a house with a down payment of as little as three percent.

MBA: Mortgage Applications Increase in Latest Weekly Survey, Purchase Applications up 9% YoY - This index has had some wild swings recently due to the TILA-RESPA regulatory change that led to a surge in activity as borrowers filed applications before the change, and then a sharp decline in the survey released last week.  From the MBA: Government Applications Drive Increase in Latest MBA Weekly Survey Mortgage applications increased 11.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 16, 2015. This week’s results include an adjustment to account for the Columbus Day holiday. ... The Refinance Index increased 9 percent from the previous week. The seasonally adjusted Purchase Index increased 16 percent from one week earlier. The unadjusted Purchase Index increased 5 percent compared with the previous week and was 9 percent higher than the same week one year ago. “On an adjusted basis, application volume increased last week, led by a sharp rebound in government volume. We expect that application volume will remain volatile over the next few weeks as the industry continues to implement TILA-RESPA integrated disclosures,”   The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.95 percent, the lowest level since May 2015, from 3.99 percent, with points decreasing to 0.43 from 0.53 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index. Refinance activity remains low. 2014 was the lowest year for refinance activity since year 2000, and refinance activity will probably stay low for the rest of 2015. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is 9% higher than a year ago. The wild swings should resolve fairly quickly.

Mortgage Rates Quietly Holding Near Lows -  It wouldn't have taken much for mortgage rates to outdo themselves in terms of volatility when compared to the past few business days.  Last Thursday and Friday were particularly uneventful.  Yet somehow, today managed to be even more so.   Mortgage rates may be higher or lower than the previous day right at the outset or they may move higher or lower in the middle of the day if the underlying bond market moves enough in either direction.  Today, the opening levels were just where they needed to be to ensure no change.  While bond markets did move a bit, we never saw anything quite strong or weak enough to result in lenders changing rate sheets. Most lenders continue to quote conventional 30yr fixed rates in the 3.75% to 3.875% range.  Any changes from yesterday would be seen in the form of microscopic adjustments to the upfront cost/credit (as opposed to the "note rate" itself).  Apart from October 2nd, today's rates sheets are right in line with the recent run of 5-month lows.

Existing Home Sales in September: 5.55 million SAAR  -- From the NAR: Existing-Home Sales Regain Momentum in September Total existing–home sales, which are completed transactions that include single–family homes, townhomes, condominiums and co–ops, increased 4.7 percent to a seasonally adjusted annual rate of 5.55 million in September from a slightly downwardly revised 5.30 million in August, and are now 8.8 percent above a year ago (5.10 million). ...  Total housing inventory at the end of September decreased 2.6 percent to 2.21 million existing homes available for sale, and is now 3.1 percent lower than a year ago (2.28 million). Unsold inventory is at a 4.8–month supply at the current sales pace, down from 5.1 months in August. This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993. Sales in September (5.55 million SAAR) were 4.7% higher than last month, and were 8.8% above the September 2014 rate. The second graph shows nationwide inventory for existing homes. According to the NAR, inventory decreased to 2.21 million in September from 2.27 million in August. Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer. The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Existing-Home Sales Rebounded in September - This morning's release of the September Existing-Home Sales shows an increase after last month's decline to a seasonally adjusted annual rate of 5.55 million units from a slight downward revision of 5.30 million in August (previously 5.31 million). The consensus was for 5.38 million. The latest number represents a 4.5% increase from the previous month and an 8.8% increase year-over-year. Here is an excerpt from today's report from the National Association of Realtors. Lawrence Yun, NAR chief economist, says a slight moderation in home prices in some markets and mortgage rates remaining below 4 percent gave more households the confidence to close on a home last month. "September home sales bounced back solidly after slowing in August and are now at their second highest pace since February 2007 (5.79 million)," he said. "While current price growth around 6 percent is still roughly double the pace of wages, affordability has slightly improved since the spring and is helping to keep demand at a strong and sustained pace." [Full Report] For a longer-term perspective, here is a snapshot of the data series, which comes from the National Association of Realtors. The data since January 1999 is available in the St. Louis Fed's FRED repository here.

Existing Home Sales Up 4.7% Following Last Month's 5% Decline; Home Price Weakness - Existing home sales bounced this month, coming in just above the high end of Econoday Economists' EstimatesExisting home sales bounced back very strongly in September, up 4.7 percent to nearly reverse the prior month's revised decline of 5.0 percent, a decline that now looks like an outlier. The month's annual sales rate, at 5.55 million, is just beyond Econoday's top-end forecast and the second best reading of the recovery. The year-on-year percentage gain, at plus 8.8 percent, is back where it was during the sales gains of the spring. The gain is centered entirely in the single-family component which rose 5.3 percent to a 4.93 million rate to underscore the strength of demand. Sales of condos, which cost less, were unchanged at a 620,000 rate. But the report's price data, in an echo of this morning's FHFA report, are on the soft side, down 2.9 percent for the median to $221,900. Year-on-year, the median is just over 6 percent, at 6.1 percent.Prices may have to firm further to pull more homes into the market where supply is very thin, at 4.8 months vs 5.1 months in August and 5.4 months a year ago. Six months of supply is generally considered the balancing point for supply and demand. In actual numbers, there were 2.21 million existing homes up for sale in the month for a 2.6 monthly decline and a 3.1 percent year-on-year decline. Regional sales data are remarkably even with the Northeast showing an outsized monthly gain of 8.6 percent for an 11.8 percent year-on-year rise. The Midwest is out in front in year-on-year terms, at plus 12.0 percent, with the South, which is by far the largest housing region, lagging at the back with a 5.7 percent year-on-year gain. All regions posted gains in the month.

September 2015 Existing Home Sales Headlines Say Sales Up.: The headlines for existing home sales say "while current price growth around 6 percent is still roughly double the pace of wages, affordability has slightly improved since the spring and is helping to keep demand at a strong and sustained pace". Our analysis of the unadjusted data shows that home sales improved - but that the rolling averages declined. Econintersect Analysis:

  • Unadjusted sales rate of growth accelerated 2.8 % month-over-month, up 8.0% year-over-year - sales growth rate trend declined using the 3 month moving average.
  • Unadjusted price rate of growth accelerated 1.0 % month-over-month, up 3.9 % year-over-year - price growth rate trend is modestly slowing using the 3 month moving average.
  • The homes for sale inventory significantly declined this month, remains historically low for Septembers, and is down 3.1 % from inventory levels one year ago).

NAR reported:

  • Sales up 4.7 % month-over-month, up 8.8 % year-over-year.
  • Prices up 6.1 % year-over-year

Existing Home Sales Surge In September (Thanks To Massive Seasonal Adjustment) -- September Existing Home Sales fell 6.5% from August, but you will not see that in the headlines as after adjustments for seasonals, existing home sales actually rose in September by 4.7%, bouncing back from a 5.0% revised lower drop in August (and beating expectatations of a mere 1.5% rise). 2015 has seen unprecedented volatility in the NAR's reported data, but a they note, "Unfortunately, first–time buyers are still failing to generate any meaningful traction this year." Something has changed in 2015 - look at the relative volatility of the swings in existing home sales...As NAR notes, "Despite persistent inventory shortages, the housing market has made great strides this year, backed by an increasing share of pent–up sellers realizing the increased equity they've gained from rising  home prices and using it towards trading up or moving into a smaller home," says Yun. "Unfortunately, first–time buyers are still failing to generate any meaningful traction this year."Which is no surprise, given home prices are accelerating again...

A Few Random Comments on September Existing Home Sales  --Even though sales were up in September, I expect that the seasonally adjusted pace for existing home sales will slow in coming months due to limited inventory and higher prices.  However, if sales do slow, it is important to remember that new home sales are more important for jobs and the economy than existing home sales. Since existing sales are existing stock, the only direct contribution to GDP is the broker's commission. There is usually some additional spending with an existing home purchase - new furniture, etc - but overall the economic impact is small compared to a new home sale.  So some slowing for existing home sales (if it happens) will not be a big deal for the economy.  Also, I've been expecting some increase in inventory this year, but it hasn't happened yet.  Inventory is still very low (down 3.1% year-over-year in September). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases. Also, the NAR reported distressed sales declined a little further year-over-year: Distressed sales — foreclosures and short sales — remained at 7 percent in September for the third consecutive month; they were 10 percent a year ago. Six percent of September sales were foreclosures and 1 percent (lowest since NAR began tracking in October 2008) were short sales.   The following graph shows existing home sales Not Seasonally Adjusted (NSA). Sales NSA in September (red column) were the highest for September since 2006 (NSA).

Green financing has hobbled home sales in California | Reuters: An innovative, government-sponsored program aimed at funding energy-saving home improvements has drawn praise from powerful supporters, including President Obama. But complaints from a growing number of homeowners, lenders and realtors in California suggest the financing is making homes more difficult to sell and disrupting the mortgage market. More than 50,000 California households have signed up for Property Assessed Clean Energy (PACE) financing since state legislators passed a law in 2008 allowing residents to borrow money for such things as solar panels and energy-efficient windows. The financing method, authorized by cities and counties, and funded by venture capital-backed startups like Renovate America Inc, Renew Financial LLC and Ygrene Energy Fund Inc, is then paid off through special assessments on property tax bills. Because the improvements stay with the home, and subsequent owners will reap the benefits of them, the assessments are intended to remain with the property in the event of a sale. But some homeowners trying to sell their houses have found potential buyers scared off by the higher tax assessments. And now realtors in the state are organizing against PACE, saying it makes getting new mortgages much tougher and can leave sellers stuck in their homes.

FHFA House Price Index Up 0.3% in August - The Federal Housing Finance Agency (FHFA) has released the U.S. House Price Index (HPI) for the most recent month. Here is the opening of the report. U.S. house prices rose in August, up 0.3 percent on a seasonally adjusted basis from the previous month, according to the Federal Housing Finance Agency (FHFA) monthly House Price Index (HPI). The previously reported 0.6 percent increase in July was revised downward to reflect a 0.5 percent increase. The FHFA HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. From August 2014 to August 2015, house prices were up 5.5 percent. The U.S. index is 0.9 percent below its March 2007 peak and is roughly the same as the December 2006 index level. [Link to had forecast a 0.4 percent increase. The chart below illustrates the HPI series, which is not adjusted for inflation, along with a real (inflation-adjusted) series using the Consumer Price Index: All Items Less Shelter. In the chart above we see that the nominal HPI index is rapidly approaching its pre-recession peak of what's generally regarded to have been a housing bubble. Adjusted for inflation, the index remains well off its historic high. The next chart shows the growth of the nominal and real index since the turn of the century.

Condo And Co-Op Lending In An Upswing. Originations Up 31 Percent With California Markets Leading The Growth.: Condominium and housing cooperative (co-op) mortgage originations nationwide rose 31 percent to $39 billion in the second quarter of 2015 compared with $29.7 billion in the same quarter of the previous year (Figure 1). The growth was driven mainly by a 65-percent increase in the dollar volume of refinance loans. However, purchase money and closed end/home equity line of credit (HELOC) loans also showed 13 percent and 29 percent increases, respectively1. Purchase money originations of $19.6 billion were at the highest levels since the end of 2007 when it was at $21.3 billion. Condo and co-op lending has historically been concentrated in higher-density, urban markets across the U.S. Figure 2 shows a pie chart of markets with the biggest share of condo and co-op lending. Over 50 percent of the nation's open condo and co-op mortgages are located in eight Core Based Statistical Areas (CBSAs). In terms of recent lending, Figure 3 shows the top 25 condo and co-op counties by dollar volume of loans originated in the 12 months ending June 2015. Out of the top 25, nine counties were from California with Los Angeles ranking first in new loan originations of $12.2 billion, or 9 percent of nationwide lending on condo and co-op homes. Cook County, IL followed second with $7.4 billion in originations. Seven counties on this list experienced over 25 percent year-over-year growth and all were from California. New York and Kings Counties, NY, as well as Broward County, FL, experienced 12 percent, 4 percent, and 1 percent declines, respectively.

NMHC: Apartment Market Conditions Slightly Tighter in October Survey --  From the National Multi Housing Council (NMHC): NMHC Quarterly Survey of Apartment Conditions October 2015 The Market Tightness Index decreased by 8 points from last quarter (and increased by 1 point from a year earlier) to 53. Thirty-one percent of respondents reported tighter conditions than three months ago. This is the seventh consecutive quarter where the index indicates tighter conditions.  And the index indicated tighter conditions in 21 of the 23 quarters.This graph shows the quarterly Apartment Tightness Index. Any reading above 50 indicates tighter conditions from the previous quarter. This indicates market conditions were tighter over the last quarter. As I've mentioned before, this index helped me call the bottom for effective rents (and the top for the vacancy rate) early in 2010.

Housing Starts increased to 1.206 Million Annual Rate in September --  From the Census Bureau: Permits, Starts and Completions Privately-owned housing starts in September were at a seasonally adjusted annual rate of 1,206,000. This is 6.5 percent above the revised August estimate of 1,132,000 and is 17.5 percent above the September 2014 rate of 1,026,000.  Single-family housing starts in September were at a rate of 740,000; this is 0.3 percent above the revised August figure of 738,000. The September rate for units in buildings with five units or more was 454,000.  Privately-owned housing units authorized by building permits in September were at a seasonally adjusted annual rate of 1,103,000. This is 5.0 percent below the revised August rate of 1,161,000, but is 4.7 percent above the September 2014 estimate of 1,053,000. Single-family authorizations in September were at a rate of 697,000; this is 0.3 percent below the revised August figure of 699,000. Authorizations of units in buildings with five units or more were at a rate of 369,000 in September. The first graph shows single and multi-family housing starts for the last several years. Multi-family starts (red, 2+ units) increased in September. Multi-family starts were up sharply year-over-year. Single-family starts (blue) increased in September and are up about 12% year-over-year. The second graph shows total and single unit starts since 1968. The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low), Total housing starts in September were above expectations, and starts were mostly unchanged for July and August.

Housing Starts -  Housing starts rebounded to a higher-than-expected level of 1.206 million units annualized in September, led by a jump in multi-family starts. In fact, both starts and permits were essentially flat for single-family homes last month (at 740K and 697K respectively). The traditionally less volatile single-family sector has been on a solid uptrend for quite a while. After a spike in July, single-family starts settled in August and September. Still, the quarterly averages over the past year are: 700K in Q4 of 2014, a weather-related dip to 643K in Q1, a rebound to 706K in Q2, and a further rise to 746K in Q3, a 14% gain over the Q3 average a year ago. In short, even with a “mere” flattish reading in September, single-family starts remain on a pretty steep upward track. Meanwhile, the multi-family figures did in September what they do best: gyrate. Multi-unit starts surged by 18% to 466K, not entirely surprising given that multi-unit permits had been 450K or higher in both July and August. At the same time, multi-unit permits sank last month to 406K, suggesting that a pullback in multi-unit starts in October is extremely likely. As always, there is a lot of noise in these data, but the underlying story is that housing demand is quite strong, and builders are slowly but surely ramping up their groundbreaking to meet the need. Realtors regularly complain about shortages of inventories of both new and existing homes in many markets, acute shortages in some places. Builders are stepping up to meet that demand but doing so cautiously. The number of units completed in September was the highest since 2008, as was the number of units under construction. So, for beleaguered buyers who can’t find what they are looking for because of a dearth of listings, there is a bit of help on the way.

Housing Starts Surprise to Upside Led by Multi-Family, Permits Surprise to Downside -- There's something for bulls and bears alike to cheer about in today's housing starts report. Starts were ever-so-slightly above the top Econoday Estimate but permits were well below the lowest economist's estimate. Starts, driven by a spike in multi-family units, came in much stronger than expected in September, news offset however by a significant decline in permits. Starts jumped 6.5 percent to a 1.206 million annual rate which is just outside Econoday's high estimate. Multi-family starts surged 18.3 percent to 466,000 which follows large spikes in related permits in May and June. Single-family starts rose very slightly, up 0.3 percent to 740,000.  But it's the permit side of the report that's weak, down 5.0 percent to only 1.103 million which is well below Econoday's low estimate. And it's the multi-family component that's especially weak, down 12.1 percent to 406,000 which is the lowest reading since March. Permits of single-family units are flat, down 0.3 percent to a 697,000 rate. Taking the ups and downs all together, this report is probably in trend, pointing to an extended upward trend for construction though the abrupt downturn in permits does hint at slowing in the months ahead. Year-on-year, starts are up a very striking 17.5 percent with permits, however, up only 4.7 percent. Those charts add quite a bit of needed perspective on the housing "recovery".  Single family construction is most important stat because it leads more directly to family formation.  With permits down and single-family units stagnating, one has to question the huge surge in optimism from builders. Not only are sales weak, but traffic is down.

Housing's positive trend still intact: Right now housing and cars are carrying the US economy, in the face of a shallow industrial recession partly in the Oil patch, and partly about the strong US$. Yesterday's housing report didn't exactly make the situation clearer. Here is the longer term look at housing permits (blue) and starts (red) dating back to the beginning of 2008. Remember that starts tend to lag permits by a month or so, and starts are about twice as volatile as permits: Sure enough, the spike in permits from May and June has fed through to higher starts. Now let's decompose permits into single family vs. multi-unit permits: The tax credit program of 2009 stands out, as does the recent May - June spike in multi-unit permits brought about the expiration of a program in New York City. We can also see that multi-unit permits are much more volatile. Now here is the close-up of the last 12 months: The first thing to note is that single family permits have continued to increase, with September down by just 2,000 from August's 6+ year high. Secondly, the rush to beat the expiration of the NYC program has really played havoc with the multi-unit stats, including YoY stats. But almost certainly a significant percentage of the surge in May and June were permits that would have otherwise been issued in July and August. If we add just 20% of the May-June surge to July and August, then multi-unit permits (ex-surge) still made new post-recession highs. (Recall that we hadn't had 400,000+ multi-unit starts since the late 1980s). The bottom line is that, while September was a decline from August, the longer term trend of rising housing investment is almost certainly intact.

Comments on September Housing Starts -- Total housing starts in September were above expectations, mostly due to an increase in the volatile multi-family sector.  However permits were down in September for multi-family (and down slightly year-over-year). This first graph shows the month to month comparison between 2014 (blue) and 2015 (red). Total starts are running 12.0% ahead of 2014 through September. Single family starts are running 11.0% ahead of 2014 through September, and single family starts were up 12.0% year-over-year in September. Starts for 5+ units are up 14.8% for the first nine months compared to last year. Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment). These graphs use a 12 month rolling total for NSA starts and completions. The blue line is for multifamily starts and the red line is for multifamily completions. The rolling 12 month total for starts (blue line) increased steadily over the last few years, and completions (red line) have lagged behind - but completions have been catching up (more deliveries), and will continue to follow starts up (completions lag starts by about 12 months). Multi-family completions are increasing sharply and are up 25% year-over-year.The second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions. Note the exceptionally low level of single family starts and completions.  The "wide bottom" was what I was forecasting several years ago, and now I expect several years of increasing single family starts and completions.

September 2015 Residential Building Sector Permits Data Continues to Soften: Be careful in analyzing this data set with a microscope as the potential error ranges and backward revisions are significant. Also the nature of this industry variations from month to month so the rolling averages are the best way to view this series - and still the data remains in the range we have seen over the last 3 years.

  • Building permits growth decelerated 3.2 % month-over-month, and is up 4.4 % year-over-year.
  • Single family building permits grew 6.6 % year-over-year.
  • Construction completions accelerated 0.4 % month-over-month, up 6.0 % year-over-year.
  • building permits down 5.0 % month-over-month, up 4.7 % year-over-year
  • construction completions up 7.5 % month-over-month, up 8.4 % year-over-year.

Housing Permits Plunge To 7-Month Lows Despite Decade-High Homebuilder Sentiment -  Having missed for the last 2 months, Housing Starts bounced 6.5% in September back to cycle highs (which previously occurred right before the last recession). The South and West regions both saw housing completions drop notably (as The Midwest soared as housing starts slid in that region). However, the more forward-looking Building Permits remains well off the June pre-reg change spike highs. Despite soaring homebuilder sentiment, permits plunged to 1.103mm SAAR - the lowest in 7 months - thanks to a collapse in multi-family permits to the lowest since 2014. Starts bounce to near cycle peak highs...

Housing - There's No Way Out -- The Fed has created permanent housing crisis from which there is no escape. Total US housing starts peaked in 1972. This chart shows actual (not seasonally manipulated) total starts, multifamily starts, and single family starts for each September since then. I have 3 observations.

  1. The recovery in total starts since 2010 has regained less than the post 1972 average.
  2. Multifamily starts are near the peak levels of the 1978-87 decade, which is to say, nearing “as good as it gets,” and unlikely to be additionally accretive for the US economy.
  3. There is no single family housing market. It has recovered only to 1982 recession levels. Prior to the 2008-2012 housing depression, that was the worst housing market in the US since single family starts reporting began in 1959. The single family housing industry in the US is still in a depression.

This can only leave us to wonder what would happen if mortgage rates were to actually materially rise. You can bet that the Fed is wondering the same thing.  If rates did start rising, the housing industry might be stimulated a little at first as buyers and multifamily developers who were on the fence jump into the market to beat rising rates. But once that reluctant pool of fence sitters is exhausted, there would be no more buyers. The next step would be collapse. The Fed’s only option would then seem to be more QE. We know that economies develop a greater and greater tolerance that drug over time. Japan and Europe are perfect cases in point. They are the walking dead. By keeping rates at zero the Fed has left itself, and us, no way out.

NAHB: Builder Confidence at 64 in October, Highest in 10 Years -- The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 64 in October, up from 61 in September. Any number above 50 indicates that more builders view sales conditions as good than poor. From the NAHB: Builder Confidence Rises Three Points in October Builder confidence in the market for newly constructed single-family homes rose three points in October to a level of 64 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This month’s reading is a return to HMI levels seen at the end of the housing boom in late 2005.  “With firm job creation, economic growth and the release of pent-up demand, we expect housing to keep moving forward as we start to close out 2015.”...Two of the three HMI components posted gains in October. The index measuring sales expectations in the next six months rose seven points to 75, and the component gauging current sales conditions increased three points to 70. Meanwhile, the index charting buyer traffic held steady at 47. Looking at the three-month moving averages for regional HMI scores, all four regions posted gains. The West registered a five-point uptick to 69 while the Northeast, Midwest and South each rose one point to 47, 60 and 65, respectively. This graph show the NAHB index since Jan 1985. This was above the consensus forecast of 62.

Homebuilder Confidence Soars to Highest Level in 10 Years Despite Falling Traffic; Unwarranted Optimism?  -- Yahoo Finance says Whoa! Homebuilders Feeling Happiest in 10 Years.   I am not sure they are the "happiest" in 10 years, but they are the most confident.  Sentiment jumped 3 points in October to a level of 64 on the National Association of Home Builders/Wells Fargo Housing Market Index. Anything above 50 is considered positive sentiment. The index stood at 54 last October.  "The fact that builder confidence has held in the 60s since June is proof that the single-family housing market is making lasting gains as more serious buyers come forward," said NAHB Chairman Tom Woods, a homebuilder from Blue Springs, Missouri.  Of the index's three components, two saw gains in October. Sales expectations in the next six months rose 7 points to 75, while current sales conditions rose 3 points to 70. Buyer traffic, however, didn't move, sitting at 47— the only component still in negative territory. As with manufacturing six-month look-ahead expectations that have been ridiculously overoptimistic for at least a year, I suspect the same thing applies to home builders.   The one stat that matters most, prospective buyer traffic, is actually negative. So why the optimism? Perhaps builders are simply trying to hype up the price of their stocks.

Labor Shortages Trip Up Big Home Builders -  Construction-labor shortages are starting to dent the results of large home builders. PulteGroup Inc., the third-largest U.S. builder by homes delivered, on Thursday blamed its 6% decline in finalized sales in its third quarter primarily on a dearth of workers needed to finish homes on time. Analysts had expected Pulte to register a gain in deliveries in comparison to its year-earlier result. Also on Thursday, M/I Homes Inc., which operates in seven states, posted a 1% gain in deliveries when analysts expected a much more robust gain. “In general, labor is the primary culprit of our lower conversion” of sales to closed deals, PulteGroup chief executive Richard Dugas said Thursday on a conference call with investors. “It’s clearly impacting our production. In general, we have to pay more for labor.” While construction-labor shortages have dogged the home-building industry for much of the industry’s recovery, those deficits are becoming more acute this year as home buyers emboldened by a stronger economy are ordering more homes. Orders for new homes are up 21% in the first eight months of this year from the same period a year ago, notching the largest volumes since 2008. Analysts and builders fret that the shortages will make it difficult for many builders to complete by the end of this year the homes that buyers ordered during the robust spring selling season. Builders typically book much of their profit in the fourth quarter when they complete construction of most of their homes and take payment.

Here’s Where All the Construction Workers Went -- The Wall Street Journal has chronicled builders’ complaints about a shortage of construction workers and wondered why the labor pool appears so shallow when employment levels are still well below those of the boom years. Indeed, industry-wide employment cratered from 2006 to 2011, losing nearly 2.3 million jobs. It’s gotten well less than half of those back. Where did they all go? Well, the Census Bureau’s job-to-job flows program tracks workers as they move in and out of industries. The data isn’t that easy to use and underlying microdata isn’t public, but agency economists Hubert Janicki and Erika McEntarfer dove in recently and came up with some interesting findings. Among construction workers who became unemployed for more than three months between 2006 and 2009:

  • About 40% stayed in construction, either returning to their former employer or landing with a new one.
  • About one-third switched to another industry, but only after sitting on the sidelines for more than a year. Typical destinations included work as general laborers, landscapers and truck drivers.
  • Contrary to conventional wisdom, few headed off to the booming oil and gas industry. The mining sector–which includes oil and gas extraction–accounted for less than 5% of new jobs for former construction workers heading back into the labor market.
  • And about one-quarter of displaced construction workers were still out of work five to seven years after they lost their jobs. “These individuals presumably have left the labor market, although they could be working informally or be self-employed,”

September Median Household Income Slightly Off Last Month's Post-Recession High - The Sentier Research monthly median household income data series is now available for September. The nominal median household income was down -$131 month-over-month but up $2,297 year-over-year. That's a decrease of -0.2% MoM but a 4.3% YoY increase. Adjusted for inflation, the latest income was down -$45 MoM but up $2,311 YoY. The real numbers equate to -0.1% MoM and a 4.3% YoY increase. In real dollar terms, the median annual income is 2.4% lower (-$1,387) than its interim high in January 2008 but well off its low in August 2011. Background on Sentier Research The traditional source of household income data is the Census Bureau, which publishes annual household income data in mid-September for the previous year. Sentier Research, an organization that focuses on income and demographics, offers a more up-to-date glimpse of household incomes by accessing the Census Bureau data and publishing monthly updates. Sentier Research has now released its most recent update, data through November (available here).  The first chart below is an overlay of the nominal values and real monthly values chained in the dollar value as of the latest month. The red line illustrates the history of nominal median household, and the blue line shows the real (inflation-adjusted value). Callouts show specific nominal and real monthly values for the January 2000 start date and the peak and post-peak troughs.

Retail: October Seasonal Hiring vs. Holiday Retail Sales -- Every year I track seasonal retail hiring for hints about holiday retail sales.  At the bottom of this post is a graph showing the correlation between October seasonal hiring and holiday retail sales.  First, here is the NRF forecast for this year: National Retail Federation Forecasts Holiday Sales to Increase 3.7%  [T]he National Retail Federation ... expects sales in November and December (excluding autos, gas and restaurant sales) to increase a solid 3.7 percent to $630.5 billion — significantly higher than the 10-year average of 2.5 percent. Holiday sales in 2015 are expected to represent approximately 19 percent of the retail industry’s annual sales of $3.2 trillion. Additionally, NRF is forecasting online sales to increase between 6 and 8 percent to as much as $105 billion. According to NRF, retailers are expected to hire between 700,000 and 750,000 seasonal workers this holiday season, in line with last year’s 714,000 new holiday positions.  Note: NRF defines retail sales as including discounters, department stores, grocery stores, and specialty stores, and exclude sales at automotive dealers, gas stations, and restaurants. Here is a graph of retail hiring for previous years based on the BLS employment report:  This graph shows the historical net retail jobs added for October, November and December by year. Retailers hired about 755 thousand seasonal workers last year (using BLS data, Not Seasonally Adjusted), and 186 thousand seasonal workers last October.

Amazon Hiring More than Penney's, Walmart Combined -  Leaving one widely watched holiday hiring forecast in the dust, Amazon (AMZN) said Tuesday that it will add 25 percent more seasonal workers this year, outpacing many of its bricks-and-mortar competitors who plan to keep hiring flat. Last month, outplacement firm Challenger, Gray & Christmas said it expects retailers to add roughly 755,000 seasonal hires to their payrolls in the final three months of the year. That level would be flat with last year, when holiday hiring fell short of predictions. "Once again, most analysts are anticipating healthy holiday sales this year," CEO John Challenger said in a statement. "However, there are several factors that may prevent these strong sales expectations from translating into increased hiring." "When retailers do add holiday workers, fewer of those jobs are in traditional spots, such as sales clerk or cashier." In 2014, Challenger predicted retailers would hire more than 800,000 seasonal workers from October through December, which would have been the first time they hit this number since 1999. Instead, they ended up adding 755,000 jobs, a decline of 4 percent from 2013.

Matching Walmart’s Raises Could Cost Top Retailers $4 Billion -- The fight for quality store workers could become extremely costly for retailers. Walmart will spend about $1.5 billion next year to raise its minimum wage to $10 an hour, its second hike in two years. That, in turn, will pressure competing retailers to do the same, at a time when associates are being asked to do more and more to keep stores clean and improve customer service. Hay Group, a compensation research firm, analyzed data from 120 retailers, with the smallest employing 2,000 workers, and determined that those top stores would collectively have to shell out $4 billion more than what they paid last year to match Walmart’s $10 an hour pay. Adding to retailers’ anxiety, staff turnover is edging up from recession lows, as workers grow more confident that they can find a better, or better paying job, if they aren’t happy. Annual turnover at retailers is currently at about 65% for store workers, according to the Hay Group, up from 50% during the recession. (Pre-recession, it was 90%.) “That tells you it’s getting harder to hire people,” Craig Rowley, vice president of the retail sector at Hay, told Fortune. “The pool of talent is shrinking and that is putting pressure on wages.” Hay looked at retailers, ranging from department stores and drugstores, to specialty apparel stores and warehouse clubs, analyzing average pay and hours, to come up with the $4 billion figure. The 100 chains also include big names like Target, Macy’s, Safeway and Rite Aid .

 Users who post 'fake' Amazon reviews could end up in court - Telegraph: Internet users who post false online reviews of books, restaurants or holidays are being warned they could end up in court as internet giants launch a fightback against fakery. Amazon, the world’s largest online marketplace, announced it had filed papers in the United States against more than 1,000 people it claims offered to write glowing reviews of titles to help boost sales on behalf of unscrupulous authors or sellers. The online retail giant said in the lawsuit that its brand reputation is being tarnished by "false, misleading and inauthentic" reviews. Amazon claims the 1,114 defendants, termed "John Does" as the company said it is unaware of their real names, offer their false review service for as little as £3.25 ($5). Most defendants promise five-star reviews for a seller's products.

When Gas Becomes Cheaper, Americans Buy More Expensive Gas -  When gas prices fall, Americans reliably do two things that don’t make much sense.  They spend more of the windfall on gasoline than they would if the money came from somewhere else.  And they don’t just buy more gasoline. They switch from regular gas to high-octane.  A new report by the JPMorgan Chase Institute, looking at the impact of lower gas prices on consumer spending, finds the same pattern as earlier studies. The average American would have saved about $41 a month last winter by buying the same gallons and grades. Instead, Americans took home roughly $22 a month. People, in other words, used almost half of the windfall to buy more and fancier gas.  This is not rational behavior. Americans spent about 4 percent of pretax income on gas in 2014. One might expect them to spend about the same share of any windfall at the pump — maybe a little more because gas got cheaper. Instead they spent almost half.  The JPMorgan study compares gas spending between December 2013 and February 2014, when prices averaged $3.31 a gallon, with gas spending by the same people in the same period one year later, when average prices were one dollar lower. The study found that the average American spent $136 per month on gas during the high-price period and $114 per month on gas during the low-price period. While the price of gas fell by roughly 30 percent, spending on gas declined by only 16 percent.

All Your Cars Are Belong Us  -- Did you know that most cars do nothing for 23 hours a day?   What a terrible waste of assets. We should ensure that all these cars are DRIVEN. All the time.  But there is a reason why all these cars are idle. Their owners are busy doing something else. Many people who drive to work, or to the station, do jobs that they love, that they have the skills to do, and that earn them a good living. Should these people give up their jobs and embark on new careers ferrying people around for money, just so their cars don't stay idle for large parts of the day? Really?  No-one in their right mind would give up a job that was sufficiently well-paid for a quality car to be affordable, in order to drive for Uber (or any other "car sharing" business, for that matter). The remuneration just isn't that good. So presumably we are talking about people car sharing for money in addition to their day jobs. But this is not a free lunch. If the car owner's productivity in his day job falls because he is tired from moonlighting as an Uber driver, then making more productive use of his car comes at a cost - a cost that may lead to him losing his better-paid job. This is not clever. Better that the car remains idle for 23 hours a day, surely?

Rail Car Orders Experience Huge Drop: North American railcar orders plummeted the most in at least 27 years as railroads shipped less oil and sand used for drilling, adding to concern over a U.S. industrial production slowdown. Third-quarter orders for new freight cars plunged 83 percent from a year earlier to 7,374, according to the Railway Supply Institute. That’s the biggest decline since at least 1988 and the lowest number for a quarter since 2010. A “healthy” three-month number is 10,000 to 15,000, Allison Poliniak-Cusic, a Wells Fargo & Co. analyst, said in a note Tuesday. Railcar makers including Trinity Industries Inc. and Greenbrier Cos. could be hurt by “a moderating U.S. industrial environment that could restrain freight traffic and new car demand,” Poliniak-Cusic said. The companies may also be affected by “ongoing tank car regulation issues, and potential pressure on lease rates and subsequent new railcar prices,” she said. Weak railcar orders contribute evidence of a possible slowdown as oil industry spending has faltered along with crude prices and production of metals and other export goods suffers from a strong dollar. U.S. industrial output declined in both August and September. U.S. rail carloads dropped 1.6 percent in the quarter on lower demand for coal, crude oil and metals. Coal, which makes up 19 percent of U.S. rail traffic, has been hurt as utilities switch to lower-priced and cleaner-burning natural gas. Railcar makers still have plenty of work with a backlog of 122,591 units. That’s down from a record of 142,837 at the end of last year, about five times as many as at the end of 2010 before the crude-by-rail boom began

Rail Week Ending 17 October 2015: Contraction Continues: Week 41 of 2015 shows same week total rail traffic (from same week one year ago) and monthly total rail traffic (from same month one year ago) declined according to the Association of American Railroads (AAR) traffic data. Intermodal traffic modestly expanded year-over-year, which accounts for approximately half of movements. but weekly railcar counts continued in contraction. This analysis is looking for clues in the rail data to show the direction of economic activity - and is not necessarily looking for clues of profitability of the railroads. The weekly data is fairly noisy, and the best way to view it is to look at the rolling averages (carloads and intermodal combined). A summary of the data from the AAR:  For this week, total U.S. weekly rail traffic was 554,696 carloads and intermodal units, down 2.6 percent compared with the same week last year. Total carloads for the week ending Oct. 17 were 279,547 carloads, down 5.9 percent compared with the same week in 2014, while U.S. weekly intermodal volume was 275,149 containers and trailers, up 1 percent compared to 2014. Five of the 10 carload commodity groups posted an increase compared with the same week in 2014. They include: grain, up 16.7 percent to 25,372 carloads; miscellaneous carloads, up 15.1 percent to 9,223; and motor vehicles and parts, up 13.2 percent to 18,894. Commodity groups that posted decreases compared with the same week in 2014 included: metallic ores and metals, down 20.9 percent to 21,486 carloads; petroleum and petroleum products, down 14 percent to 13,772 carloads; and coal, down 13.4 percent to 95,822 carloads.

Very Strange Goings On In Exports and Imports - Historically, trade not only tells the story of the health of the global economy - but also shows the health of the individual economies when one looks at the imports into and exports from that economy. The graph below shows the imports (blue line) and exports (red line) for the USA - all indexed against GDP. Here are the takeaways from this graph:

  • Although a lot of folks badmouth trade agreements (including this pundit in the past) - the export red line shows since 2000 USA exports have grown faster than imports (in fact almost twice as fast). It does appear that free trade agreements have helped the USA economy but there is no control element to understand if this is true. It could be that exports would have grown more without the free trade agreements?
  • On a real (inflation adjusted) basis, since 2000 GDP is up over 30%, imports up over 20%, and imports up over 10%.
  • Exports and imports are becoming less and less important to the USA economy (based on contribution to GDP).
  • For over a year both imports and exports have fallen dramatically. This is a historical flag for a recession. Imports tell a story of the health of the consuming class, and exports are related to the strength of the global economy.
  • Yet, despite the dramatic decline of exports and imports, there is no other indicator of a recession in the data I review. The dollar has strengthened, which would affect exports (as they would be more dear) - but on the other hand it should be a tailwind to imports (as they become cheaper).  Yet both imports and exports are in decline.  If the economy continues to muddle along even with this dramatic decline of exports and imports, this could further the evidence of the decline role of trade in the economy.

Still, all portions of the economy do not act in concert. One element can have an obvious recession while other elements are growing. In the event of a recognized recession, one element almost always seems to indicate first. Could this be the first indication?

The TPP and Nonsense on Trade - Dean Baker - The early signals from the Obama administration are that the nonsense will be flowing fast and thick in its effort to push the Trans-Pacific Partnership (TPP). We got an indication of the level of the nonsense factor in a CNN article reporting on the administration's efforts to promote the still secret agreement. CNN cites a column that President Obama had in a New Hampshire newspaper that told readers: "trade is a substantial driver of New Hampshire's economy. Over 20,000 American jobs are currently supported by goods exports from New Hampshire, with 32 percent of Made in New Hampshire goods exports shipped to TPP partners." What exactly does it mean for over 20,000 New Hampshire jobs to be supported by exports? Suppose the exports are car parts that are sent to Mexico to be assembled into a car that is shipped back to the United States. Are the workers in New Hampshire suppose to celebrate because their parts are being exported to Mexico (a TPP partner) rather than being shipped to be assembled in Ohio? This is obviously a ridiculous thing to say and certainly President Obama knows it. He repeats the line because it has been focus group tested and he can apparently count on reporters not pointing out its absurdity. If we are talking about jobs in terms of demand for workers, then the relevant issue is net exports, which is exports minus imports. President Obama and all his economists know this, but they would rather not discuss this story because we have a large and growing trade deficit, meaning that trade is subtracting from total employment.

Kansas City Fed: Regional Manufacturing Activity "Steadied" in October -- From the Kansas City Fed: Tenth District Manufacturing Activity Steadied  According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity steadied somewhat and was expected to remain largely unchanged heading forward. “Following six months of composite index readings of worse than -6, this month’s reading of -1 was somewhat encouraging,” said Wilkerson. “Modest increases in new orders and production nearly offset declines in employment, supplier delivery time, and inventory indexes.”...Tenth District manufacturing activity steadied somewhat, and expectations for future activity were largely flat following last month’s more negative reading. Most price indexes edged higher for the first time in several months.The month-over-month composite index was -1 in October, up from -8 in September and -9 in August ...  The earlier decline in the Kansas City region manufacturing was probably mostly due to lower oil prices, although respondents are also blame weaker exports on the strong dollar.

Kansas City Fed Survey: Manufacturing Steadies in October --The Kansas City Fed Manufacturing Survey business conditions indicator measures activity in the following states: Colorado, Kansas, Nebraska, Oklahoma, Wyoming, western Missouri, and northern New Mexico  Quarterly data for this indicator dates back to 1995, but monthly data is only available from 2001. Here is an excerpt from the latest report: The Federal Reserve Bank of Kansas City released the October Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity steadied somewhat and was expected to remain largely unchanged heading forward. "Following six months of composite index readings of worse than -6, this month’s reading of -1 was somewhat encouraging," said Wilkerson. "Modest increases in new orders and production nearly offset declines in employment, supplier delivery time, and inventory indexes." [Full release here]Here is a snapshot of the complete Kansas City Fed Manufacturing Survey. The three-month moving average, which helps us visualize trends, is at its lowest level since mid-2009.

Kansas City Fed Manufacturing Improves to Barely in Contraction in October 2015: Of the three regional manufacturing surveys released to date for October, all are in contraction. There were no market expectations reported from Bloomberg - and the reported value was -1. Any value below zero is contraction. Tenth District manufacturing activity steadied somewhat, and expectations for future activity were largely flat following last month's more negative reading. Most price indexes edged higher for the first time in several months. The month-over-month composite index was -1 in October, up from -8 in September and -9 in August (Tables 1 & 2, Chart). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Most of the improvement came from nondurable goods activity, with the exception of plastics products which continued to fall. Some durable goods also showed improvement in October, particularly machinery and primary metals, but other products such as fabricated metals, electronic equipment, and aircraft remained weak. The majority of other month-over-month indexes edged higher but still remained sluggish. The production index increased from 1 to 4, and the shipments, employment, and order backlog indexes also improved somewhat but stayed negative. The new orders index jumped from -8 to 7, its highest level in 10 months. The new orders for exports index fell further from -3 to -10, and both inventory indexes remained negative.

A Global Chill in Commodity Demand Hits America’s Heartland - — A thousand miles south of this gritty steel town on the Mississippi River, West Texas oil rigs have shuddered to a halt. Seven hundred miles north, mines in the Iron Range of Minnesota have been stilled.The drilling rigs, with their deep underground pipes, once consumed much of the steel that Granite City’s blast furnaces could produce, while the mines supplied the raw material. So now, more than 2,000 workers at the mammoth United States Steel plant not far from St. Louis are waiting to see if they will be next. This month, the company warned them it might be forced to idle the plant. Layoffs could begin around Christmas. Granite City may be waiting, but a chill in economic activity is already evident across a broad swath of the nation’s heartland stretching from the Gulf of Mexico to the Canadian border, as prices of commodities sink.Whether it is roustabouts and other oil field workers in Texas and North Dakota, miners in Minnesota, farmers in Iowa, or heavy equipment makers and sellers in Illinois, the reason for the fear is the same: a sudden plunge in demand for commodities.The fall in prices for a variety of products, including crude oil, iron ore and agricultural crops like corn and soybeans is reminiscent of the collapse of the technology boom in 2000 or the bursting of the housing bubble nearly a decade ago. And behind the pain and anxiety are headwinds blowing from China and other emerging markets, where growth is slowing and demand for the raw materials that drive the global economy has dried up.

PMI Manufacturing Index Flash October 23, 2015: In a surprise upturn boosted by domestic demand, the manufacturing PMI is signaling monthly strength, coming in at 54.0 for the October flash for the best showing since May. The result is exactly 1 point over both the Econoday consensus and the September flash and 9 tenths over the final reading for September. New orders are at a seven-month high and are described as strong despite only a modest contribution from export orders. Production this month is also at a seven-month high. Hiring is up from September's 27-month low. Manufacturers in Markit's sample remain cautious about inventories which decreased for a third straight month. Input costs are down due to the strong dollar and falling raw material prices especially for steel. Finished prices are steady at a 37-month low. This report conflicts with the regional manufacturing reports which so far are pointing to another weak month for October. And this report typically runs hot compared not only to other reports but most importantly to government data which, unlike this report, have been in contraction for the last year.

US Manufacturing PMI Rebounds To 5-Month High In October - Has the recent slowdown in US manufacturing run its course? That’s the implication in today’s flash estimate of Markit’s purchasing managers’ index (PMI), which increased by to 54.0 in October from 53.1 in the previous month—a five-month high that puts more distance between current activity and the neutral 50.0 mark. It’s still too early to break out the champagne or assume that the US economy is set to roar in the months ahead. But today’s release suggests that the manufacturing sector in the world’s biggest economy will continue to post moderate growth after a bout of deceleration. Markit noted that today’s PMI numbers reflect the “sharpest improvement in business conditions since May” for US manufacturing. Commenting on the update, Markit’s chief economist, Chris Williamson, said that “October’s flash PMI survey brought welcome signs of stronger manufacturing growth at the start of the fourth quarter.” The positive report  “suggests the economy may be picking up speed again after slowing in the third quarter, for which the PMI surveys pointed to annualized GDP growth of 2.2%.” One data point should be viewed cautiously, of course. Nonetheless, the October macro profile is off to an encouraging start. There’s a long road ahead before declaring that the US macro trend will stabilize, much less accelerate. Indeed, next week’s third-quarter GDP report is expected to show a hefty deceleration in growth, according to the Atlanta Fed’s current nowcast. Meantime, today’s PMI release tells us that the US macro trend isn’t deteriorating at the kickoff to the fourth quarter. That’s also the message in the October projection of the US Economic Trend Index, which held steady in this month’s estimate, as shown in the chart below.

Should We Be Concerned about Declines in Labor Force Growth? --Atlanta Fed's macroblog -- For the second month in a row, the October jobs report from the U.S. Bureau of Labor Statistics (BLS) has revealed a decline in the labor force. From August to September, the labor force lost a seasonally adjusted 350,000 participants. And the August number of participants was a seasonally adjusted 41,000 below July's level. Although two months don't necessarily make a trend, observers have noticed the declines in the labor force (here and here, for example), and they deserve some attention.  Economists might be concerned about these labor force declines for two reasons. First, these losses might indicate that the current unemployment rate doesn't accurately reflect a strong labor market. Second, our economy needs labor to make things, perform services, and continue to grow. Let's take a look at the evidence supporting these two concerns. Two pieces of evidence suggest that the declines in the labor force don't indicate a weak labor market: employment growth and the reasons people cite for being out of the labor force. Employment growth is robust. According to the Atlanta Fed's Jobs Calculator, the labor market needs to create an average of only 112,000 jobs per month to maintain its relatively low unemployment rate of 5.1 percent. During 2015, the economy has created, on average, 198,000 jobs per month. But we might be concerned if the workers leaving the labor market were entering into the no-man's land of the marginally attached, a term describing those who want a job, are available to work, have looked for work in the previous year, but recently have stopped looking. Some of these people have stopped looking explicitly because they think jobs prospects are poor (called "discouraged workers"). Others have stopped looking for other reasons such as attending school or taking care of family members. If these categories of nonparticipants were absorbing a large share of those leaving the labor force, we could be concerned that they would, at any moment, reenter the labor market and push that unemployment rate right back up again. The chart below tells us that this possibility is unlikely.

What We Know About the 92 Million Americans Who Aren’t in the Labor Force - This sounds like a shocking statistic: 92 million Americans don’t work but also aren’t considered unemployed by the Labor Department. The Labor Department only classifies people as unemployed if they are actively looking for work. All those who don’t have a job and aren’t looking are lumped together under the fishy-sounding classification “not in the labor force.” The share of Americans not in the labor force has been climbing for nearly 15 years, a development that even many economists and demographers failed to anticipate. It may sound like a giant mystery: What are these 92 million Americans doing? Actually, we do have some idea. Usually, employment statistics focus on the gray part of this chart—the people in the labor force.  But perhaps more attention ought to be paid to the colorful parts of the chart—the reasons people give for not participating in the labor force. Big pieces of this chart are no mystery at all. About 41 million Americans don’t work because they’re retired. These retirees are overwhelmingly actually of retirement age. It makes perfect sense to consider them outside the labor force (another way of saying it makes little sense to consider them unemployed). An additional 15 million say they’re not in the labor force because they’re in school.  But is there great mystery in the so-called prime working-age years—from the mid-20s to mid-50s? A recent article from the Financial Times was titled U.S. statisticians are in the dark over the 20 million working-age Americans who don’t want a job.” But in fact, most of these people have a fairly straightforward reason attached to their absence from the labor force, too.

Weekly Initial Unemployment Claims increased to 259,000, 4-Week Average Lowest since 1973 -  The DOL reported: In the week ending October 17, the advance figure for seasonally adjusted initial claims was 259,000, an increase of 3,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 255,000 to 256,000. The 4-week moving average was 263,250, a decrease of 2,000 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 up by 250 from 265,000 to 265,250.  There were no special factors impacting this week's initial claims.  The previous week was revised up to 256,000. The following graph shows the 4-week moving average of weekly claims since 1971.

Initial Jobless Claims Hover At 42 Year Lows - So Who Is Lying? -- Having hit new 42-year  lows last week, initial jobless claims once again beat expectations but rose very modestly from a revised 256k to 259k this week. This continues to diverge drastically from Challenger job cuts data, from weakening payrolls data, and from collapsing ISM survey employment indicators... so who is lying?  As a reminder, here is Goldman explaining why Initial Jobless Claims are useless at this point in the cycle...  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.

BLS: Thirty-seven States had Unemployment Rate Decreases in September  -- From the BLS: Regional and State Employment and Unemployment Summary: Regional and state unemployment rates were little changed in September. Thirty-seven states and the District of Columbia had unemployment rate decreases from August, six states had increases, and seven states had no change, the U.S. Bureau of Labor Statistics reported today. ... North Dakota had the lowest jobless rate in September, 2.8 percent, followed by Nebraska, 2.9 percent. West Virginia had the highest rate, 7.3 percent. . This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession. The size of the blue bar indicates the amount of improvement. The yellow squares are the lowest unemployment rate per state since 1976. The states are ranked by the highest current unemployment rate. West Virginia, at 7.3%, had the highest state unemployment rate. The second graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 10 states with an unemployment rate at or above 11% (red). Currently no state has an unemployment rate at or above 8% (purple); Only one state (West Virginia) was at or above 7% (light blue), and ten states are at or above 6% (dark blue).

Heading into Fall, Job Growth Cools in Most States -- The State Employment and Unemployment Report released today by the Bureau of Labor Statistics showed that job growth in most states has slowed over the past year. Although the majority of states continued to add jobs, the pace of job growth over the past three months was slower in 35 states and the District of Columbia than over the same period last year. Today’s report also confirms a trend from last month: the labor force in many states is noticeably shrinking. From June to September, 35 states added jobs, with South Carolina (+0.9 percent), West Virginia (+0.9 percent), Arizona (+0.8 percent), California (+0.8 percent), and Wisconsin (+0.8 percent) experiencing the largest gains. Meanwhile, 15 states and the District of Columbia lost jobs, with notable declines in North Dakota (-1.0 percent), Vermont (-0.9 percent), and Alaska (-0.6 percent). For comparison, over these same months last year, 46 states and the District of Columbia added jobs and the average percentage change among states that added jobs was an increase of 0.6 percent, compared with an average of 0.4 percent this year. The unemployment rate fell in 38 states and the District of Columbia from June to September. South Carolina (-0.9 percentage points), Ohio (-0.7 percentage points), Hawaii (-0.6 percentage points), and Virginia (-0.6 percentage points) had the largest declines in unemployment. Unemployment rose over the same period in nine states, with Oregon (+0.7 percentage points), New Mexico (+0.4 percentage points), and Nebraska (+0.3 percentage points) showing the largest increases. As of September, the unemployment rate has fallen to where it was at the start of the Great Recession in 23 states, and many others are not far away. However, labor force declines continue to cast a shadow over these improvements. From June to September, the labor force shrank in 40 states—with particularly large declines in Kentucky (-2.5 percent), Louisiana (-2.1 percent), Massachusetts (-1.8 percent), and Tennessee (-1.7 percent)—raising the possibility that some of the improvement in unemployment rates were the result of job seekers giving up the job search, rather than finding work.

North Dakota’s Jobless Rate Falls as its Workforce Shrinks - Unemployment in energy-rich North Dakota fell to 2.8% in September,  the lowest jobless rate in the country, the Labor Department reported on Tuesday. The fall comes after a sharp and sustained drop in oil prices had sent the unemployment rate above 3% over the summer. Much of the decline had to do with a shrinking workforce, as pools of workers who were less attached to the labor market dropped out, such as people who were near retirement, students who may have had a part-time job, and the disabled, said Michael Ziesch, manager of the Labor Market Information Center at Job Service North Dakota. The number of people in North Dakota’s workforce fell to a seasonally adjusted 409,883 in September, down from 416,434 in June, when the unemployment rate rose to 3.1%. Mr. Ziesch said that firms that had been desperate for workers are now scaling back, and are no longer going out of their way for certain groups of potential employees. “When things were really, really hot in the state, businesses were making extra special accommodation for those pools,” he said. The western region of North Dakota, home to most of the state’s energy production, is still healthy, said Cindy Sanford, office manager at the Williston office of Job Service North Dakota. In the four years she has worked there, unemployment has never risen above 2.2%. Production jobs are still there, although drilling jobs have dried up. Still, she noted, there are many jobs outside of the energy sector, in areas like food service and retail.

The September Jobs Report Was Even Worse: U.S. States Lost A Total Of 22,000 Jobs -- Remember that September jobs report when the US supposedly only added 142,000 jobs, which was so bad it sent stocks soaring the most in years? As it turns out the sum was far greater than the parts, because according to today's BLS breakdown of jobs by state, not only did more than half, or 28, states lose jobs in September,but the total number of jobs losses, at 120,000, was about 20% more than the cumulative job gains of 99,000.  How that -21,000 total job loss when summing across all states compares to the alleged gain of 143,000 jobs at the consolidated level reported two weeks ago, we'll leave to the reader to decide, suffice to say that any and all data coming out of the BLS and not making sense, has become the norm. Also not making any sense, is the state with the most purported job gains, because while firing tens of thousands of oil patch workers, Texas mysteriously - according to the BLS - added 26,600 jobs. The gains occurred in a range of industries, including retail, shipping, education, health care, and hotels and restaurants. Or even more low-paying jobs used a "plug" filler by the BLS to offset the real collapse of America's high-paying manufacturing jobs. New York added the second-most, with 12,000, which is also curious considering all banks but Goldman reported they have continued to layoff tens of thousands of workers.

Does the Sum of the Parts Equal the Whole? Not if You are the BLS; Is the BLS to Blame?  - In a curious event, ZeroHedge reports The September Jobs Report Was Even Worse: U.S. States Lost A Total of 22,000 Jobs.  Zero Hedge posted this chart.  Those numbers match my totals. And as ZeroHedge reports, 28 states lost jobs while 22 gained. But it's not that simple. From the same data, here is a table of nonfarm payrolls for the last three months.Yes, month over month, states lost jobs. But also notice that state totals overall beat national totals.  I have been aware of this discrepancy for a long time and have been working on this data with the Michael Lucci and Connor White at Illinois Policy Institute since July. Here is an email we received from Tyler Downing at the BLS on July 22.  CES independently develops national and state and area employment, hours, and earnings series. Both sets of estimates are based on the same establishment reports; however, CES uses the full establishment survey sample to produce monthly national employment estimates, while CES uses only the state-specific portion of the sample to develop state employment estimates.  State and area estimates use smaller amounts of sample by industry than the national industry estimates. This increases the error component associated with state and metropolitan level estimates. For this reason, aggregating state data to the national level will also sum this error component, resulting in different estimates of U.S. employment, hours, and earnings. Summed state level CES estimates should not be compared to national CES estimates.  Estimates for states and areas are produced using two methods. The majority of state and area estimates are produced using direct sample-based estimation. However, published area and industry combinations (domains) that do not have a large enough sample to support estimation using only sample responses have been estimated using modeling techniques. Please note the current state summation actually exceeds the national total, even though the latest monthly state-to-state total is negative. Michael Lucci and I went through the process of downloading year's worth of history but the results appeared random.   When I first went through this exercise many months ago, I thought there was a serious issue but concluded there wasn't.

Philly Fed: State Coincident Indexes increased in 41 states in September -- From the Philly FedThe Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for September 2015. In the past month, the indexes increased in 41 states, decreased in six, and remained stable in three, for a one-month diffusion index of 70. Over the past three months, the indexes increased in 43 states, decreased in six, and remained stable in one, for a three-month diffusion index of 74. Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:  The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.This is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged). In September, 42 states had increasing activity (including minor increases). The worst performing states over the last 6 months are West Virginia (coal), North Dakota (oil), Alaska (oil), Wyoming, and Oklahoma (oil).

Wal-Mart puts the squeeze on suppliers to share its pain as earnings sag - Suppliers of everything from groceries to sports equipment are already being squeezed for price cuts and cost sharing by Wal-Mart Stores. Now they are bracing for the pressure to ratchet up even more after a shock earnings warning from the retailer last week. The discount store behemoth has always had a reputation for demanding lower prices from vendors but Reuters has learned from interviews with suppliers and consultants, as well as reviewing some contracts, that even by its standards Wal-Mart has been turning up the heat on them this year. "The ground is shaking here," said Cameron Smith, head of Cameron Smith & Associates, a major recruiting firm for suppliers located close to Wal-Mart's headquarters in Bentonville, Arkansas. "Suppliers are going to have to help Wal-Mart get back on track." For the vendors, dealing with Wal-Mart has always been tough because of its size – despite recent troubles it still generates more than $340 billion of annual sales in the U.S. That accounts for more than 10 percent of the American retail market, excluding auto and restaurant sales, and the company increasingly sells a lot overseas too. To risk having brands kicked off Wal-Mart’s shelves because of a dispute over pricing can badly hurt a supplier.

WalMart Suppliers Brace For The Coming Storm: "Now We Know Why They Have Been Pushing So Hard" -- When Wal-Mart moved to hike wages for its lowest paid employees earlier this year, we werequick to note that the fallout would end up rippling through the supply chain. Here’s what we said in April:  The irony is that while WMT (or MCD or GAP or Target) boosts the living standards of its employees by the smallest of fractions, it cripples the cost and wage structure of the entire ecosystem of vendors that feed into it, and what takes place is a veritable avalanche effect where a few cent increase for the lowest paid megacorp employees results in a tidal wave of layoffs for said megacorp's vendors. Subsequently, the retailer embarked on a series of efforts to extract every last penny of savings from suppliers including i) an effort to compel vendors to forgo marketing expenditures, ii)adding storage fees and manipulating payment schedules, and iii) demanding that suppliers pass along any savings from China’s yuan devaluation.   As we’ve been at pains to explain, this was absolutely inevitable. When “everyday low prices” is the corporate religion, you can’t pass along rising labor costs to consumers. Add it the fact that WalMart’s customers largely belong to the same tax bracket as the company’s meagerly compensated hourly employees and raising prices simply is not an option.  That means either suppliers suffer, hours are cut, people get laid off, or all of the above.  At Wal-Mart, it’s been all of the above, as workers at some stores report reductions in hours and the Bentonville office looks to cut hundreds of management level positions.

WalMart Lied: Must Remove "Made In USA" Logos From Products Made In China, Thailand - When it comes to amusing (albeit predictable) twists of fate, Wal-Mart has been the gift that keeps on giving this year.  In the wake of the giant retailer’s move to hike wages for its lowest-paid employees, the entire world has received a lesson in undergrad economics as $1.5 billion in extra labor costs has led directly to i) pressure on the supply chain, ii) reduced shifts and hours, and iii) layoffs in Bentonville.   When WalMart wasn’t in the news for “plumbing” and/or strongarming the supply chain over the summer it was making headlines for its stance on confederate flag merchandise in the wake of the tragic shooting at a church in downtown Charleston that left 9 African American worshippers dead. In the wake of the racially-motivated massacre, WalMart moved to remove all confederate flag merchandise from the shelves, on the way to insisting that the company “never wants to offend anyone with the products [it] offers."  On Wednesday we learn that WalMart is once again at the center of controversy surrounding the “American heritage” of its products. Here’s FT: Walmart has withdrawn claims that some products it was selling were made in America after being pushed into an embarrassing climbdown by a US regulator. The Federal Trade Commission said on Tuesday that Walmart had taken voluntary steps “to prevent consumer deception” related to “Made in USA” logos that appeared on its products and website. In the face of persistent criticism over its business practices, Walmart has made a commitment to buy an extra $50bn of US-made products over 10 years a central part of efforts to improve its reputation.

The Gender Pay Gap Widens as Men’s Earnings Grow Twice as Fast as Women’s - The gender pay gap is widening again because men’s earnings are growing this year at twice the rate of women’s. The median weekly earnings for full-time male workers was $889 in the third quarter, the Labor Department said Tuesday. That’s a 2.2% increase from a year earlier. Meanwhile, full-time female workers’ earnings were $721, up 0.8% from a year earlier. The latest data marks the third straight quarter that the increase in male earnings was at least double that of female workers. As a result, women who work full time earned 81.1 cents for every dollar a man earned from July through September. That’s down more than a penny from a year earlier. The trend suggests the narrowing of the pay gap may have at least temporarily stalled this year. Median weekly earnings of full-time female workers were 83.5% of equivalent male earnings in the second quarter of 2014, the narrowest pay gap on record back to 1979, according to that measure. Until this year, the gap had narrowed during most of the current economic expansion. But that was largely because male earnings were weak—declining in five quarters between 2010 and 2014—and women mostly saw modest gains.

An Enduring Mystery of the ‘Gig Economy’: Why Are So Few People Self-Employed? -  The Pew Research Center has a new report today that looks at self-employment in the U.S. and its role in creating jobs. But the data in the report exposes one of the more perplexing mysteries about the modern economy: Despite all the discussion that the U.S. is transforming into a gig economy, the share of people who say they’re self-employed is declining. This trend, especially among unincorporated, self-employed workers, has been in place for some time. We noted over the summer that it’s hard to find high-quality statistics backing up the idea that the gig economy has grown enormously. In fact, it appears that the overall economy is getting slightly less “giggy” over time. The Pew report provides a detailed breakdown of the demographics of the self-employed and how many of the self-employed have employees of their own. But the report doesn’t attempt to answer why the supposedly widespread gig economy is so elusive. One theory is that the data comes out with a lag and the rise of the gig economy will soon become apparent. But Pew’s preliminary estimate of last year’s self-employment finds another slight decrease. What are possible explanations for this? One possibility is that while some very high-profile companies are using the gig model, it’s actually not very common when you look across the entire 157 million-person U.S. labor force.

Greater Inequality of Returns Across US Firms - The returns to investing in US firms have become more unequal over time--a fact which might help to explain the rise in income inequality.  Here's an example of the growing inequality of returns across firms based on stock market returns. The blue line shows the distribution of stock market returns across the Standard & Poor's 500 in 1996; the red line shows the distribution in 2014.   Notice that in 2014, there are fewer firms in the middle of the distribution, and more that are out on the right-hand side with comparatively high levels of returns. As another measure, here's a related but different calculation. Here, the approach is to look at the "return on invested capital" for publicly-traded nonfinancial firms. The big takeaway here is that if you look at firms at the 90th percentile of return on invested capital and compare them to firms at, say, the median (or 50th percentile), the relationship doesn't change too much from 1965 through the 1980s. But after that point, the firms with a 90th percentile rate of return start doing comparatively much better.  The growth of these high-flying firms is part of the explanation for the rise in income inequality during the last quarter-century. What happens is that pay is higher for those who work at highly profitable firms. The overall growth in income inequality arises not because people inside a given firm are seeing more inequality, but because the between-firm level of inequality is rising. As evidence on this point, Furman and Orszag discuss a 2014 study by Barth, et al, "It’s Where You Work: Increases in Earnings Dispersion across Establishments and Individuals in the U.S."

The Morality of a $15 Minimum - Robert Reich - Have you noticed how often conservatives who disagree with a policy proposal call it a “job killer?” They’re especially incensed about proposals to raise the federal minimum wage. They claim it will force employers to lay off workers worth hiring at the current federal minimum of $7.25 an hour but not at a higher minimum.  But as Princeton University economist Alan Krueger pointed out recently in the New York Times, “research suggests that a minimum wage set as high as $12 an hour will do more good than harm for low-wage workers.” That’s because a higher minimum puts more money into the pockets of people who will spend it, mostly in the local economy. That spending encourages businesses to hire more workers. Which is why many economists, like Krueger, support raising the federal minimum to $12 an hour. What about $15 an hour?  Across America, workers at fast-food and big-box retail establishments are striking for $15. Some cities are already moving toward this goal. Bernie Sanders is advocating it. A national movement is growing for a $15 an hour minimum. Yet economists are nervous. Krueger says a $15 an hour minimum would “put us in uncharted waters, and risk undesirable and unintended consequences” of job loss. Yet maybe some jobs are worth risking if a strong moral case can be made for a $15 minimum. That moral case is that no one should be working full time and still remain in poverty. People who work full time are fulfilling their most basic social responsibility. As such, they should earn enough to live on. A full-time worker with two kids needs at least $30,135 this year to be safely out of poverty. That’s $15 an hour for a forty-hour workweek.  Any amount below this usually requires government make up the shortfall – using tax payments from the rest of us to finance food stamps, Medicaid, housing assistance, and other kinds of help.

Was Poverty Reduction in the Developing World Worth the Hit to U.S. Workers? -- Dean Baker -- That's the question that has been raging across the Internet following a piece in the NYT by Paul Theroux. Theroux decried the poverty in the South in the United States and bemoaned the fact that it was partly attributable to the outsourcing of jobs to the developing world. This prompted commentary by Annie Lowrey and Branko Milanovic and others, asking whether the gains for the poor in the developing world were worth whatever losses might have been incurred by the working class and poor in the United States.  That might be an interesting philosophical question, but it has nothing to do with the reality at hand. It assumes, without any obvious justification, that job loss and wage stagnation was a necessary price for the improvement of living standards in the developing world. Clearly, there has been an association between the two, as the manufacturing jobs lost in rich countries meant hundreds of millions of relatively good paying jobs for people in poor countries, but that doesn't mean this was the only path to growth for the developing countries. There are fundamental questions of both the size and composition of trade flows that this assumption ignores.On the size front, there is no obvious reason that developing country growth had to be associated with the massive trade surpluses they ran in the last decade. In the 1990s, many developing countries had extremely rapid growth accompanied by large trade deficits. For example, from 1990 to 1997 GDP annual growth averaged 7.1 percent in Indonesia, its trade deficit averaged 2.1 percent of GDP. In Malaysia growth averaged 9.2 percent, while its trade deficit averaged 5.6 percent of GDP. In Thailand growth averaged 7.4 percent, while the trade deficit averaged 6.4 percent of GDP.

Not There Yet on Equal Opportunity - WSJ: Today, the real median income of black households stands at only $35,400, down more than 13% from its peak. To be sure, the past 15 years have been good only for those at the top. Still, median income for white households has declined by only 4% during this period, less than one-third the rate for African-Americans. And the housing collapse that triggered the Great Recession hit black households hard. The black-white wealth gap, which narrowed modestly during the 1990s, is now higher than it was in 1989.Against this backdrop, recent findings about black-white differences in social mobility across generations are especially troubling. Bhashkar Mazumder, a senior economist and researcher at the Federal Reserve Board of Chicago, found in a 2014 study that among children born into white middle-income families, about 41% attain incomes at or near the top of the income scale, while 36% will fall below middle-income status. (The others will end up at their parents’ relative standing.) Among children born into African-American middle-income families, by contrast, only 27% will rise above middle-income status, while 55% will fall beneath it.  Worse, while 74% of white children in the lowest-income families rise above that level and 47% end up in the middle class or higher, only 49% of black children born at the bottom escape that status as adults, and only 29% rise to the middle class or higher. Black children born at the top are almost as likely to end up at the bottom as to remain where they began. By contrast, 38% of whites born at the top will stay there, and only 11% will fall to the bottom. The social implications of these findings are profound. As Mr. Mazumder sums up, “if future generations of white and black Americans experience the same rates of intergenerational mobility as these cohorts, we should expect to see that blacks on average would not make any relative progress,” and there will be “no racial convergence.” These results, he adds, stand in marked contrast with earlier periods in which African-Americans made steady progress in reducing racial gaps.

Goodbye Middle Class: 51% Of All American Workers Make Less Than $30,000 A Year - We just got more evidence that the middle class in America is dying.  According to brand new numbers that were just released by the Social Security Administration, 51 percent of all workers in the United States make less than $30,000 a year.  Let that number sink in for a moment.  You can’t support a middle class family in America today on just $2,500 a month – especially after taxes are taken out.  And yet more than half of all workers in this country make less than that each month.  In order to have a thriving middle class, you have got to have an economy that produces lots of middle class jobs, and that simply is not happening in America today. You can find the report that the Social Security Administration just released right here.  The following are some of the numbers that really stood out for me…

  • -38 percent of all American workers made less than $20,000 last year.
  • -51 percent of all American workers made less than $30,000 last year.
  • -62 percent of all American workers made less than $40,000 last year.
  • -71 percent of all American workers made less than $50,000 last year.

That first number is truly staggering.  The federal poverty level for a family of five is $28,410, and yet almost 40 percent of all American workers do not even bring in $20,000 a year.If you worked a full-time job at $10 an hour all year long with two weeks off, you would make approximately $20,000.  This should tell you something about the quality of the jobs that our economy is producing at this point.  And of course the numbers above are only for those that are actually working.  As I discussed just recently, there are 7.9 million working age Americans that are “officially unemployed” right now and another 94.7 million working age Americans that are considered to be “not in the labor force”.  When you add those two numbers together, you get a grand total of 102.6 million working age Americans that do not have a job right now.

With Just $10 "You're Wealthier Than 25% Of Americans" -- Last week Credit Suisse released its annual Global Wealth Report. The big headline grabber was their analysis showing that the top 1% of people now own 50% of the world’s wealth. That is true and rather astonishing. However, the report had another finding that was even more astonishing and largely overlooked. What they found was that, as a percentage of the world’s population, there are now more poor people in the United States and Europe than there are in China. Shown here, along the left side of the graph you can see that 10% and 20% of the world’s poorest are in North America and Europe. Here, they aren’t talking about income. They define poor as lacking ‘wealth’, i.e. taking into account assets and liabilities like cash and debt. Credit Suisse estimates that half of the world has a net worth less than $3,210. And a large chunk of Americans and Europeans can’t make that cut because their net worth is negative. That’s especially the case for young people these days, who graduate from university with an incredibly expensive degree and an average of $35,000 in student debt. Of course, plenty of people are in debt up to their eyeballs in the Land of the Free, and not just student debt. Debt has become the American Way. People go deeply into debt that they can’t afford to buy stuff they don’t need to impress people they don’t know, simply because everyone is doing it.

Does Clinton think that some workers are lazy and shouldn’t be entitled to, say, family and medical leave or affordable daycare? That sure is what she seems to suggest. Again and Again. -- Beverly Mann - Hillary Clinton never, ever says the word “families” without prefacing it with the adjective “hardworking.”  It’s downright Pavlovian.  And every time I hear her say “families”—which is often—and therefore “hardworking” in reference to families, I wonder whether she’s dividing workers into hardworking ones and ones who slough off their work onto their colleagues, or something. It’s right up there with children’s right to fulfill their God-given potential.  Thank God. Joking aside, this is the kind of thing that reminds people of Clinton’s worst attribute as a candidate: that she seems never to say anything that has not been vetted or suggested by one or another of her many very-highly-paid consultants. Every adjective, every phrase, is straight from some list of consultant-suggested words or phrases.  These two, “hardworking” and “God-given”, date—surprise!—to the ‘90s.  She’s too programmed—too clueless, really—to recognize that this stuff gets in the way of her actually communicating about her policy proposals. If she’s talking about policies that would apply only to working families, then she should say “working families.”  If she’s talking about families generally, then she should just say “families”.  She’ll sound less like a Chatty Cathy doll. But that would require the mental agility to recognize the nature of the political moment we’re in, not the one we were in 20 years ago.  Or even eight years ago.  It also probably would require her to ditch most of the consultants.  And think all by herself. I’ve just given her some very good advice.  I’ll send her a bill.

Opting out: Inside corporate America’s push to ditch workman's comp -- Bill Minick doesn’t seem like anyone’s idea of a bomb thrower. But backed by some of the biggest names in corporate America, this mild-mannered son of an evangelist is plotting a revolution in how companies take care of injured workers. His idea: Let them opt out of state workers’ compensation laws — and write their own rules. “We’re talking about reengineering one of the pillars of social justice that has not seen significant innovation in 100 years,” Minick said. Minick’s quest sounds implausible, but he’s already scored significant victories.   Many of the nation’s biggest retail, trucking, health care and food companies have already opted out in Texas, where Minick pioneered the concept as a young lawyer. Oklahoma recently passed a law co-written by Minick allowing companies to opt out there. Tennessee and South Carolina are seriously considering similar measures. And with a coalition led by executives from Walmart, Nordstrom and Lowe’s, Minick has launched a campaign to get laws passed in as many as a dozen states within the next decade. But as Minick’s opt-out movement marches across the country, there has been little scrutiny of what it means for workers.   ProPublica and NPR obtained the injury benefit plans of nearly 120 companies who have opted out in Texas or Oklahoma — many of them written by Minick’s firm — to conduct the first independent analysis of how these plans compare to state workers’ comp. The investigation found the plans almost universally have lower benefits, more restrictions and virtually no independent oversight.

The Myth of Welfare’s Corrupting Influence on the Poor --- Few ideas are so deeply ingrained in the American popular imagination as the belief that government aid for poor people will just encourage bad behavior. The proposition is particularly cherished on the conservative end of the spectrum, articulated with verve by Charles Murray of the American Enterprise Institute, who blamed welfare for everything from higher youth unemployment to increases in “illegitimacy.”  But even Franklin Delano Roosevelt, the father of the New Deal, called welfare “a narcotic, a subtle destroyer of the human spirit.” And it was President Bill Clinton, a Democrat, who put an end to “welfare as we know it.” And yet, to a significant degree, it is wrong. Actual experience, from the richest country in the world to some of the poorest places on the planet, suggests that cash assistance can be of enormous help for the poor. And freeing them from what President Ronald Reagan memorably termed the “spider’s web of dependency” — also known as forcing the poor to swim or sink — is not the cure-all....Abhijit Banerjee released a paper with three colleagues last week that carefully assessed the effects of seven cash-transfer programs in Mexico, Morocco, Honduras, Nicaragua, the Philippines and Indonesia. It found “no systematic evidence that cash transfer programs discourage work.” ... Still, Professor Banerjee observed, in many countries, “we encounter the idea that handouts will make people lazy.” Professor Banerjee suggests the spread of welfare aversion around the world might be an American confection. “Many governments have economic advisers with degrees from the United States who share the same ideology,” he said. “Ideology is much more pervasive than the facts.”

Police Killings of Blacks: Here Is What the Data Say - - Tamir Rice. Eric Garner. Walter Scott. Michael Brown. Each killing raises a disturbing question: Would any of these people have been killed by police officers if they had been white?Answering this question in any single situation can be difficult and divisive. As an economist who has studied racial discrimination, I’ve begun to look at these deaths from a different angle. There is ample statistical evidence of large and persistent racial bias in other areas — from labor markets to online retail markets. So I expected that police prejudice would be a major factor in accounting for the killings of African-Americans. But when I looked at the numbers, that’s not exactly what I found.  According to the F.B.I.’s Supplementary Homicide Report, 31.8 percent of people shot by the police were African-American, a proportion more than two and a half times the 13.2 percent of African-Americans in the general population. While this data may be imperfect, other sources in individual states or cities, such as in California or New York City, show very similar patterns.  The data is unequivocal. Police killings are a race problem: African-Americans are being killed disproportionately and by a wide margin. And police bias may be responsible. But this data does not prove that biased police officers are more likely to shoot blacks in any given encounter. Instead, there is another possibility: It is simply that — for reasons that may well include police bias — African-Americans have a very large number of encounters with police officers. Every police encounter contains a risk: The officer might be poorly trained, might act with malice or simply make a mistake, and civilians might do something that is perceived as a threat. The omnipresence of guns exaggerates all these risks.

U.S. Treasury supports broad bankruptcy protection for Puerto Rico (Reuters) - The U.S. Treasury on Wednesday urged Congress to help debt-stricken Puerto Rico, saying the U.S. commonwealth needs the ability to file for bankruptcy protection, changes to Medicaid funding and access to the Earned Income Tax Credit. "Only Congress has the authority to provide Puerto Rico with the necessary tools to address its near-term challenges and promote long-term growth," Treasury said in a statement. Puerto Rico, a U.S. territory home to 3.5 million, is buckling under $72 billion in debt and a 45 percent poverty rate. With financial creditors resisting reductions to debt payments and political gridlock threatening proposed spending reforms, some Puerto Rican leaders have called on the U.S. government to step in. A bailout by the United States is seen as unlikely, but Wednesday's statement from Treasury is the strongest indication yet that President Barack Obama's administration supports some form of federal assistance for the island. A key element of Treasury's proposal is its endorsement of extending bankruptcy protections not only to Puerto Rico's public agencies, but to the island itself - a notion championed by some Puerto Rican leaders but seen as too radical to be politically practical

Puerto Rico: A Flash of Federal Ambition - After months of fielding criticism for standing idly by while Puerto Rico sank under a $72 billion debt heap, the Obama Administration is getting creative. On October 21, the U.S. Treasury, the Department of Health and Human Services, and the National Economic Council released a joint proposal for federal bankruptcy legislation to restructure all of Puerto Rico’s debts. Debt relief would come in exchange for fairly intrusive federal oversight, combined with Medicaid reform and federal tax relief to help mend the island’s fraying social safety net. The scheme was floated ahead of congressional hearings on October 22, just as Puerto Rico announced it was suspending talks with bondholders while still holding out the hope of a comprehensive negotiated debt restructuring before a December payment deadline. Any such deal would now be struck in the shadow of the legislative prospects (if any) for the Administration’s proposal. Meanwhile, Puerto Rico is all out of cash, getting by on "emergency measures" moving money from one domestic pocket to another. Its deficit is projected to be $14 billion over the next five years, even assuming successful implementation of drastic economic reforms (aka austerity).The most novel and far-reaching part of the federal scheme is the bankruptcy law. The “roadmap” just released is thin on details, but the key features of the debt restructuring framework are fairly straightforward.

U.S. Treasury Pushes Unprecedented Bankruptcy Plan for Puerto Rico - -- At today's Senate Energy and Natural Resources Committee hearing, Puerto Rican Governor Alejandro Garcia Padilla and Antonio Weiss of the U.S. Treasury Department asked Congress for unprecedented bankruptcy measures for Puerto Rico, including allowing Puerto Rico to walk away from its Constitutional debt. As the New York Timesreported yesterday, no state has the ability to restructure Constitutional, or full faith and credit debt, and that if Puerto Rico were granted this, other states like Illinois might soon follow. "Super Chapter 9", if enacted, is expected to roil municipal debt markets and raise the costs of borrowing for states and municipalities across the country. Henry Chanin, a Puerto Rican bondholder, retired educator, and member of the Main Street Bondholder coalition said, "By giving Puerto Rico the authority to completely disregard the rule of law and void Constitutional guarantees to bondholders, Congress would be establishing a precedent that would destroy the municipal market. This would put the retirement savings of millions across the country at risk."

Budget crisis impacting Illinois residents with disabilities: The Illinois state budget is stripping away the independence of Illinois residents with disabilities. Tomorrow the state is holding a special hearing to review a monthly allowance for people with disabilities. The outcome will affect 300 people in Rock Island County. “Havin that independence and that choice seems to make them feel like they’re apart of everything too,” said Cindy Ferguson. Ferguson’s sister Kim has Down’s Syndrome, and has lived in a group home in Moline for the past 20 years. Ferguson said her sister’s disability does not make her much different than anyone else. “She loves to get her hair done, and she also likes to do her nails,” Ferguson said. “Those kinds of items come out from that funding.” Money the state will be putting under a microscope tomorrow afternoon. “Cutting the personal needs allowance is really picking on the lowest person on the totem pole,” said Executive Director of The Arc Quad Cities Area, Kyle Rick. For 20 years the monthly allowance was set between 30 and 50 dollars, depending on the type of home a person lived in.

Chicagoans' Cost to Exit Swap Agreements Approaches $300 Million - Chicago’s attempt to clean up a legacy of wrong-way bets on interest rates is costing taxpayers at least $270 million since Moody’s Investors Service cut its rating to junk in May, city documents show. The payouts to Wall Street banks, which come as the Windy City considers a record tax increase to cover pension costs, are more than the city spends a year to collect garbage at 613,000 homes, and could cover the cost of hiring more than 2,000 police officers. The pain isn’t over yet as officials plan another round of debt restructuring that could cost $110 million to unwind derivatives on its water debt early next year. “I don’t think the public should be gambling with its funds,” said Richard Ciccarone, Chicago-based chief executive officer of Merritt Research Services, who has been analyzing municipal finance since the 1970s. “Save the speculation for people who risk their own money, not for taxpayers.” The city was forced to restructure obligations after decades of failing to address its rising pensions and borrowing to cover debt service, a legacy that began under former Mayor Richard M. Daley and continued until this year under Mayor Rahm Emanuel. Moody’s downgrade of Chicago’s general-obligation debt in May forced the city to begin a debt restructuring the mayor was already planning. Chicago and other municipal borrowers in the past decade made bets on the future direction of interest rates through agreements with banks to swap interest payments. But when rates fell under the Federal Reserve’s attempt to stimulate the economy after the financial crisis, many issuers ended up on the wrong side of the bets.

Homan Square revealed: how Chicago police 'disappeared' 7,000 people -- Police “disappeared” more than 7,000 people at an off-the-books interrogation warehouse in Chicago, nearly twice as many detentions as previously disclosed, the Guardian can now reveal.  From August 2004 to June 2015, nearly 6,000 of those held at the facility were black, which represents more than twice the proportion of the city’s population. But only 68 of those held were allowed access to attorneys or a public notice of their whereabouts, internal police records show. The new disclosures, the result of an ongoing Guardian transparency lawsuit and investigation, provide the most detailed, full-scale portrait yet of the truth about Homan Square, a secretive facility that Chicago police have described as little more than a low-level narcotics crime outpost where the mayor has said police “follow all the rules”. The police portrayals contrast sharply with those of Homan Square detainees and their lawyers, who insist that “if this could happen to someone, it could happen to anyone”. A 30-year-old man named Jose, for example, was one of the few detainees with an attorney present when he surrendered to police. He said officers at the warehouse questioned him even after his lawyer specifically told them he would not speak.

Social media making millennials less social: Study: It's something everyone suspected, but now it's official: The under-30 crowd is addicted to their cell phones. Those are the findings of a new survey, which showed that as millennials spend more time engaged on social media platforms, it's causing them to be less social in real life. The study, conducted by Flashgap, a photo-sharing application with more than 150,000 users, found that 87 percent of millennials admitted to missing out on a conversation because they were distracted by their phone. Meanwhile, 54 percent said they experience a fear of missing out if not checking social networks. Nearly 3,000 participants were asked about how they felt about social media in social settings, and found that the guiltiest culprits are often females. The study found 76 percent of females check social media platforms at least 10 times when out with friends, compared with 54 percent of males. The most commonly used apps mentioned in social settings among millennials were Snapchat, Tinder, Facebook, Messenger and Instagram.

US doctors advised to screen child patients for signs of hunger: The American Academy of Pediatrics issued unprecedented guidelines on how to determine child’s food security and provide resources for struggling families Doctors should screen all their child patients for hunger, a national association of US pediatricians advised on Friday. This is the first time the American Academy of Pediatrics has made such a recommendation, and the US secretary of agriculture Tom Vilsack is expected to tout the new policy on Monday. About 16 million children in the US live in households that struggle to put food on the table consistently, the AAP found in an examination of data from 2014. The US Department of Agriculture released data in September showing that the number of children getting enough food to stay healthy was at its highest since 2007. Numbers dipped drastically during the recession years, particularly in 2011, said Sarah Schwarzenberg, one of the policy statement’s lead authors. But “it could be much higher”, Schwarzenberg said, referring to the number of children who receive an adequate amount of food. Hunger and food insecurity in children can lead to several health problems in adulthood, including diabetes, hyperlipidemia, cardiovascular disease, and mental and emotional distress. Other issues include iron deficiency and lower bone density in preadolescent boys. Children who go without an adequate amount of healthy food might not be able to concentrate or perform well in school.

Montana governor rips GOPers: They ‘hate 4-year-olds’ enough to block federal pre-school funds: Montana Gov. Steve Bullock (D) recently took on Republican lawmakers who he said “might hate 4 year olds” after they called to block $40 million in federal pre-school grants because they said it was unfair to private schools. Bullock, who has been pushing to take Montana off of the list of six states which do not invest in pre-schools, told teachers at a conference last week that he had been discouraged after receiving a letter opposing public pre-schools from about 50 Republican lawmakers in August, according to the Billings Gazette. After Republicans killed a plan to add $37 million in pre-school funding in April, Bullock recalled thinking that Republicans hated him, not 4 year olds. But he said that he changed his mind after the most recent letter. “I start to worry that some of them might hate 4 year olds too,” he admitted. In the letter, GOP legislators argue that the “creation of government-provided ‘free’ preschools will most certainly drive existing private preschools from the market.” The Republican lawmakers also lashed out at the “federal intrusion” into state education policies, calling the federal standards “insulting to the private providers who currently, and admirably, provide this service to willing parents.”

Snyder: Unpaid bills could tip DPS into financial chaos: — As Gov. Rick Snyder steps up his push for the Legislature to bail out the debt-ridden Detroit Public Schools, his administration is bracing for unpaid vendors to seek court orders that could trigger what he describes as a “chaotic” financial free-fall for Michigan’s largest school system. Snyder and his strategy director acknowledged Monday that Michigan’s school employee pension system is one such vendor — owed nearly $100 million — that could ask a judge to order the district or state to pay up. Such a move could lead to higher taxes for Detroit property owners or the need for an emergency payment by the Legislature. The governor said the state could be on the hook for DPS’ $1.5 billion unfunded pension liability if lawmakers don’t stabilize the district’s finances by assuming a projected $515 million in operating debt payments that were mostly racked up by state-appointed emergency managers. “That’s an unfunded liability that would get spread to the other districts if DPS wasn’t making payments,” Snyder said in an interview with The Detroit News Editorial Board. “There’s a lot of extra money that would have to go out if this doesn’t get done.”

Governor Snyder: It'll Take $715 Million to Bail Out Detroit Schools - Governor Snyder said that a package currently in the Legislature aimed at reversing longstanding problems in Detroit Public Schools isn’t a quick fix, but admitted that the state would have to provide 715 million dollars over 10 years to pay off the district’s over half-billion-dollar operating debt while ensuring that schools stay open for 47 thousand Motor City students. Meanwhile, state DEQ Director Dan Wynant admitted his staffers mishandled the city of Flint’s lead-contaminated drinking water situation, a matter that the Governor now wants an independent third party to review.

Pennsylvania's budget gridlock hits schools, seniors (Reuters) - Pennsylvania's largest service provider to senior citizens is running out of money and time, as the state's new Democratic governor and Republican-led legislature still cannot agree on a budget. "I'm saving the little bit of money we have to pay staff and food. I can do that probably for a couple more months," said Holly Lange, Chief Executive Officer of Philadelphia Corporation for Aging (PCA). Pennsylvania, whose 2016 budget was due 113 days ago, has the dubious distinction of being only one of two U.S. states, along with Illinois, without a current budget. But even Illinois - the worst-rated state in the nation - is at least paying out education funding to schools. "We feel completely isolated," said Joseph Gorham, superintendent of the Carbondale Area School District, of Pennsylvania's political stalemate. "It just doesn't seem at this point that they understand quite how desperate we've become." The Pennsylvania logjam puts the state's most vulnerable - school kids, seniors, disabled, and the homeless - in the firing line, as some of their care relies on state funds that have not been released. "Everyone has been feeling the pinch in some way, and it's going to get worse the longer the situation goes without a budget,"

How Texas teaches history -- A TEXAS high school student and his mother recently called attention to a curious line in a geography textbook: a description of the Atlantic slave trade as bringing “millions of workers” to plantations in the American South. McGraw-Hill’s chief executive promised to revise the textbook so that its digital version as well as its next edition would more accurately describe the forced migration and enslavement of Africans. In the meantime, the company is also offering to send stickers to cover the passage. But it will take more than that to fix the way slavery is taught in Texas textbooks. In 2010, the Texas Board of Education approved a social studies curriculum that promotes capitalism and Republican political philosophies. The curriculum guidelines prompted many concerns, including that new textbooks would downplay slavery as the cause of the Civil War. This fall, five million public school students in Texas began using the textbooks based on the new guidelines. And some of these books distort history not through word choices but through a tool we often think of as apolitical: grammar.Bobby Finger of the website Jezebel obtained and published some excerpts from the new books, showing much of what is objectionable about their content. The books play down the horror of slavery and even seem to claim that it had an upside. But it is not only the substance of the passages that is a problem. It is also their form. The writers’ decisions about how to construct sentences, about what the subject of the sentence will be, about whether the verb will be active or passive, shape the message that slavery was not all that bad.

‘Clock Kid’ Ahmed Mohamed Moving to Qatar -- Ahmed Mohamed, the kid arrested for bringing a homemade clock that authorities thought looked like a bomb to his school in Texas, is finishing up a whirlwind tour that ended with the chance to meet President Obama at the White House on Monday night. On Tuesday, however, the 14-year-old's family announced that they would be leaving the U.S. next week — with no intention of returning in the near future. “After careful consideration of all the generous offers received," the Mohamed family announced in a press release, "we would like to announce that we have accepted a kind offer from Qatar Foundation for Education, Science and Community Development for Ahmed to join the prestigious QF Young Innovators Program."  Ahmed's sister told the Dallas Morning News, “Looking at all the great offers we’ve had, it’s the best decision. They even have Texas A&M at Qatar … It’s basically like America.” She added to the Washington Post,  “Qatar is in the Arab world, but it also feels like Texas. It’s like Texas in Qatar.” The press release also featured a comment from Ahmed, who received shout-outs from several big tech companies and universities in the U.S. after his story went viral. “I loved the city of Doha because it’s so modern," he said. "I saw so many amazing schools there, many of them campuses of famous American universities. The teachers were great. I think I will learn a lot and have fun too.”

Teacher Retirement System Taps Title 1 -- Public schools that serve a significant number of low-income students receive federal Title 1 grants, earmarked for initiatives to close the achievement gap. If a school uses those funds to hire certified teachers -- reading or math specialists, for example -- the school has to pay into that teacher’s retirement account. As the state’s unfunded pension liability has grown, the rate that schools have to pay has ballooned from 7 percent of the teacher’s salary in 2006 to more than 36 percent today. For regular teachers, not paid out of Title 1 money, schools pay less than 1 percent. Jessica Handy, government affairs director with Stand for Children Illinois, says this tactic cost Springfield schools more than 1.7 million dollars last year. "It’s like poor school districts are a piggy bank, and we’re breaking it open to pay the pension debt,” Handy says. “And the school district that loses the most, across the state, is Springfield School District 186.” Public school districts in Rockford, East St. Louis, and Peoria also lost more than a million dollars.

As Campus Fears Rise, So Do Efforts to Enact School Gun Laws - — When Gov. Jerry Brown of California signed legislation this month banning concealed weapons on school campuses, the nation was in the midst of one of the worst spasms of gun violence at colleges in recent years. There were three such shootings, including one in Oregon that left 10 people dead, as the bill sat on Mr. Brown’s desk.But the new California law went against the grain of what lawmakers in many other states have sought to do. Over the past two years, nearly 15 states have debated legislation to make it easier for teachers, students and administrators to carry concealed weapons on campus. Supporters say the best way to subdue a campus assailant is ensuring that certain people on the scene can mount an armed response before the police arrive.. Similar measures are being debated in Florida, Michigan and Ohio. Last week, Wisconsin Republicans, who control the Legislature, introduced a bill that would ease restrictions on guns on campuses; two days later, Democrats countered with legislation that would ban guns on campus.The issue has resonated on college campuses: At the University of Texas at Austin, students and faculty members have staged a variety of protests about the notion of guns on campus, and a professor announced he would resign, saying he would not feel safe in his classroom. In Florida, the state chapter of Students for Concealed Carry has been awarding free holsters to people who posted their support for that state’s proposed legislation on Facebook. On some campuses, the argument has been made that arming students can help prevent sexual assaults.

Free college tuition for everyone? - Tyler Cowen -- A few of you have written in to ask what I think of the Clinton plan (NYT link) to dramatically reduce tuition for a four-year college education.  The focal point of the plan is this:  Under the plan, which was outlined by Clinton advisers on Sunday, about $175 billion in grants would go to states that guarantee that students would not have to take out loans to cover tuition at four-year public colleges and universities. In return for the money, states would have to end budget cuts to increase spending over time on higher education, while also working to slow the growth of tuition, though the plan does not require states to cap it. By the way, here is a more extreme Bernie Sanders plan, closer to free tuition period, though in both cases a variety of details remain murky.  A more pressing issue is that community college is already close to de facto free for lower-income individuals, if they piece grants and aid together.  Yet the completion rate at these colleges is at best approaching thirty-eight percent.  The real problems come before college, and encouraging more people to attend four-year colleges is unlikely to do much good.  In any case, here is further evidence that higher subsidies to community college attendance very often do not lead to more actual education.  The same or worse is likely to hold for state universities. The end result of the plan would be price controls on tuition, even though the plan itself does not stipulate that.  There simply isn’t the political constituency to support an extra federal $350 billion for higher education (over ten years), plus the state kick-ins which are supposed to follow.  The federal money will sooner or later dwindle, while the tuition restrictions will stick.  In the longer run, this isn’t even a net subsidy to higher education.  In the short run higher ed quality will go down, and in the longer run the move away from tuition support will imply more fiscal starvation for these institutions rather than less.

Why cheap oil is a headache for some colleges - CBS News: - It's easy to see what oil money means to the University of Texas. Tuition hasn't budged in three years because of gushing wells in the Permian Basin. More than a few buildings, including the football team headquarters, are named after wildcatters, and a pump jack stands outside the 100,000-seat stadium to commemorate the 1920s oil boom. But the latest bust and tumbling crude prices are now pinching off the largesse that helps this university and others in oil-rich states afford what they want when state budgets are straitened, which is especially the case now. Already, the consequences are becoming obvious. Campus construction projects are being stretched out or put in limbo, scholarship funds are taking a hit and across the Southwest, donors are asking for more time to make good on big pledges. "When the price of oil was $100 a barrel we had a lot more gifts. They had the ability to make more gifts," said Bob Walker, who raised hundreds of millions of dollars for Texas A&M University for three decades before retiring last year. The University of Oklahoma has scaled back a planned $370 million renovation to its football stadium. Tuition hikes are back on the table at Texas universities. At Louisiana State University, energy sector gifts have fallen from a quarter of all fundraising to a tenth, which is being felt as the school tries to offer students a new minor in energy.

America's crushing student debt has bred a disturbing new phenomenon - At age 40, Andres Aguirre still diverts $512 a month to loans and owes $20,000. The expense requires his family to rent an apartment in Campbell, California, because buying a home in a decent school district would cost too much. His daughter has excelled in high school, but Aguirre has urged her to attend community college to avoid the debt that ensnared him.  America's crushing surge of student debt, now at $1.2 trillion, has bred a disturbing new phenomenon: School loans that span multiple generations within families. Weighed down by their own loans, many parents lack the means to fund their children's educations without sinking even deeper into debt. Data analyzed exclusively by The Associated Press, along with surveys about families and rising student debt loads, show that:

  • School loans increasingly belong to Americans over 40. This group accounts for 35 percent of education debt, up from 25 percent in 2004, according to the New York Federal Reserve.
  • Generation X adults — those from 35 to 50 years old — owe about as much as people fresh out of college do. Student loan balances average $20,000 for Generation X. Millennials, who are 34 and younger, have roughly the same average debt, according to a report by Pew Charitable Trusts.
  • Gen-X parents who carry student debt and have teenage children have struggled to save for their children's educations. The average they have in college savings plans is just $4,000, compared with a $20,000 average for teenagers' parents who aren't still repaying their own school loans, Pew found. A result is that many of their children will need to borrow heavily for college, thereby perpetuating a cycle of family debt.
  • Student debt is surpassing groceries as a primary expense, with the gap widening most for younger families. The average college-educated head of household under 40 owes $404 a month in student debt payments, according to an AP analysis of Fed data. That's slightly more than what the government says the average college-educated family spends at the supermarket.

John Boehner’s Student Loan Legacy  -- When I first started researching the student loan issue over a decade ago, it quickly became obvious that there was one congressman the student lending industry loved more than anyone else: John Boehner. Sallie Mae (the nation’s largest student loan company), through its PAC, gave Rep. Boehner (R-Ohio) more money than anyone else. Boehner enjoyed trips to Boca Raton and other vacation spots aboard Sallie Mae’s private jet.   Looking at legislation passed while Boehner was chairman of the House Committee on Education and the Workforce, it becomes clear why the student loan companies were so generous to him. He was instrumental in killing the ability of borrowers to refinance their loans with competitors of Sallie Mae at lower interest rates. He fought hard to preserve hugely generous subsidies to lenders who assumed zero risk for the loans they made to students. Most significantly, however, Boehner was instrumental in removing bankruptcy protections from private student loans in 2005. This shocking move was couched in promises from the banks that removing bankruptcy protections would allow them to lend to more needy students and at better rates. After Boehner and friends successfully pushed this through Congress, the banks not only broke these promises, they actually began demanding cosigners (with assets to come after) for over 90 percent of the private loans they made. This crushed many people financially and tore apart untold thousands (probably hundreds of thousands) of families.

Obama Administration Urges No Bankruptcy Relief for Student Debt: he Obama administration moved to block a bankruptcy court from erasing federal student loan debt, saying such an allowance would jeopardize the fiscal stability of the loan program. U.S. Department of Education attorneys, intervening in the case of a 65-year-old man seeking to erase his student loans in bankruptcy, filed a motion urging the court to stand firm with borrowers who claim they are in a dire financial situation. Attorneys argued that Robert Murphy of Massachusetts, unemployed and of retirement age, has plenty of chances to go back to work or hit the jackpot. No student debtors should get a break unless there is a "certainty of hopelessness" with circumstances that have a "total incapacity" to change, court documents said said. "An individual's economic circumstances may change over time," attorneys said. "Improvements in the national economy may offer new employment prospects, changes in family circumstances may reduce the number of the debtor's dependents, a spouse may enter or reenter the workforce, or the debtor may benefit from an inheritance or other windfall."

NJ lawmakers run from $194 billion liability for employee benefits - With an election for New Jersey Assembly two weeks away, the numbers don’t look good for the fiscal reform urgently needed in Trenton. The staggering $194 billion liability for public employee pension and health benefits is seldom debated in campaigns for the 80 Assembly seats up for grabs on Nov. 3. The status quo is a 47-32 advantage for Democrats over Republicans with one seat vacant – a balance not likely to change much. The incumbents have outspent challengers $10 million to $2.2 million, according to a report by a New Jersey election commission. Even more lopsided, incumbents enjoyed a 10-to-1 cash-on-hand advantage – $5.2 million to $496,000 – over their opponents, as of Oct. 2. That big edge in campaign finances helps them run for re-election while running away from their failure to solve New Jersey’s fiscal dilemma. The Assembly has been in recess since June – a spell approaching four months. “The situation is not only getting worse, but is fast approaching a point at which it will be beyond remedy,” warned Gov. Chris Christie’s bipartisan, blue-ribbon Pension and Health Benefit Study Commission in a report released in February. Keeping benefits at their current level would require a 29 percent hike in state income taxes or increasing the sales tax to 10 percent, the study estimated.

Colorado PERA pension plan to miss full-funding target by 14 years - Colorado’s pension plan is on track to be fully funded by 2055 — 14 years after the 2041 target date set by the Colorado Legislature in 2010. Now, lawmakers will need to decide if they want to stick to the 2041 target date, or agree that it will take longer than they planned for the Colorado Public Employees’ Retirement Association to have the money to pay for the promised benefits to PERA’s 529,000. Enlarge The probability of the financial projections, as well as other variables, were discussed today with members of the Colorado Legislative Audit Committee, who heard the results of a mandated “Sensitivity Analysis”– a report meant to play out scenarios based on changes in the variables, including the number of people enrolled in PERA, the amount of contributions, the amount of benefits and the return on investment. Projections show that although it may take longer to reach being fully funded, there is a 51 percent likelihood of the state division of PERA being 100 percent funded by 2055 if the investment returns are from 7.4 percent to 8.6 percent or more. There are five divisions — state, school, local government, judicial and Denver Public Schools. Of those, only local government is projected to meet the 2041 target to be fully funded. If the goal is to keep PERA program from insolvency, does it matter if it is fully funded by 2041 or 2055, asked William Fornia, with Pension Trustee Advisors – the third party firm hired to complete the sensitivity analysis. In 2014, lawmakers required the sensitivity analysis to look at the actuarial assumptions.

U.S. public pension funds slowly wake up to risk | Reuters: U.S. public pension funds are cutting investment return assumptions because of years of zero interest rate policies and changing how they manage risk to avoid a repeat of the damage caused by the financial crisis. The growing recognition that short-term volatility can have a devastating impact on mature pension plans in the $4 trillion sector could herald a sea change in the way public funds invest in the future. Since the 2008 financial crisis about two-thirds of the 126 funds tracked by the National Association of State Retirement Administrators have lowered their expected return targets. The average expected return now stands at 7.68 percent versus 8 percent in 2008. The financial crisis left a hole in public pension funds. The average state pension fund has only around 80 percent of the assets it needs to meet its liabilities, according to a 2015 survey by Wilshire Consulting, down from 95 percent in 2007. Perhaps the biggest confirmation of the move to cut back on risk within U.S. public pension sector may come from the California Public Employees' Retirement System, the largest public pension fund with $300 billion in assets under management. Calpers is considering cutting its expected rate of return in years following strong investment gains and adjusting its portfolio to reflect those lower return assumptions. The move would essentially cut back on exposure to higher-yielding but riskier assets as the plan improves its funding levels. It is similar to the liability-driven investing glide path models used by corporate plans. Its use is all but unheard of in the U.S. public pension sector.

Taxpayers may have to ante up more because CalPERS may risk less  -- The California Public Employees' Retirement System will discuss a plan Tuesday that is expected to increase the already fast-rising amounts that taxpayers contribute for government retirements. Under the plan, CalPERS would gradually move more of its $300-billion portfolio to safer investments that earn lower returns. As a result, investments would provide less money for public pensions, and taxpayers may have to kick in substantially more to cover the difference.  A CalPERS committee will consider the plan Tuesday. If approved by the committee, it must still go before the pension fund's full board. The new plan would require the nation’s largest pension fund to reduce its expected annual rate of investment return – an estimate at the heart of determining just how expensive government pensions are for taxpayers. Government watchdogs have been warning for years that public pension plans across the country are overestimating how much they can earn on their investments. Currently, CalPERS expects to earn 7.5% annually. This year, after several years of double-digit returns, the fund earned just 2.4%. CalPERS provides benefits to 1.7 million employees and retirees of the state, cities and other local agencies. Even now, those governments are cutting services to pay escalating amounts to CalPERS.

Private Equity Firms with Traded Stock Disclose Info that Calls into Question CalSTRS’ Foot Dragging on Disclosure -- Yves Smith - UK-based independent private equity researcher has prepared a short but very instructive analysis which we’ve embedded at the end of this post. One of the ongoing struggles in the effort to penetrate the private equity regime of unwarranted secrecy is that, as we’ve discussed, investors have for decades entered into contracts that unlike virtually ever other legal agreement that state agencies have entered into, have been kept shrouded in secrecy. Worse, as the SEC’s former examination chief Andrew Bowden described in May 2014, these contracts are surprisingly one sided by virtue of begin vague on key terms and allowing for weak ongoing oversight. And the SEC also described how the private equity firms are not merely exploiting the ambiguity they created, but went further by taking fees to which they were not entitled, which in any other line of work would be considered stealing and result in a customer never using that vendor again, as well as other serious compliance abuses. Yet the private equity limited partners continue to remain in deep denial about what the depth and extent of this misconduct says about what their supposed partners, as if that meant for more than the mere type of legal vehicle used.

New York City and Missouri Pensions Follow California Treasurer Chiang on Private Equity Transparency…..Sort Of  -  Yves Smith - On the one hand, it’s encouraging to see other public pension funds taking up the call by California Treasure John Chiang for full transparency on private equity fees, as well as disclosure of related party transactions. As we’ve stressed, the latter part of Chiang’s proposal for a legislative requirement that public pension fund investments be limited to private equity funds that agreed to those disclosures, is essential to curb private equity grifting. As major investigative stories by the Wall Street Journal and New York Times, as well as some of our posts, have exposed, and the SEC has confirmed, a considerable amount of chicanery takes place via transactions entered into between the companies that the private equity funds buy, and affiliates or firms and individuals close to the general partner. The only way to have any hope of curbing this rent extraction is to force it into the open. While CalPERS has not formally endorsed Chiang’s plan, in an unorthodox move, CalPERS’ staff has usurped the role of the board in setting legislative policy by telling one of the major private equity publications that it supports Chiang’s proposed legislations. Since CalPERS’ board is unduly deferential to staff, and there separately hard to make a credible case for opposing Chiang’s proposal, it’s close to certain that the California giant will officially back Chiang’s initiative.

Companies to Workers: Start Saving More—Or We’ll Do It for You -- More American companies are turning to a new way of convincing employees to save more for retirement: make them do it. Companies from Apache Corp. to Google Inc. to Credit Suisse Group have boosted the percentage of worker paychecks automatically diverted to 401(k) plans well above the long-held standard of 3%. Some are setting aside as much as 10% of their workers’ money or automatically increasing the amounts by 1% a year unless employees opt out. But not all are matching the increased savings with company contributions. Millions of Americans aren’t putting enough money aside for retirement, despite reforms designed to bulk up nest eggs and encourage employees to sock away more.  There are incentives for companies to urge more-aggressive savings. They want to ensure they can make room for younger employees and aren't left with an aging workforce that doesn’t have enough money “to retire and move on,” said Douglas Fisher, Fidelity Investments’ head of policy development on workplace retirement.

Falling gas prices mean no Social Security COLA — and higher Medicare costs - Last Thursday the Social Security Administration announced next year’s cost of living adjustment for retiree benefits, and the news is not good. Thanks largely to falling gasoline prices, the index used by Social Security to adjust beneficiary payments for inflation is below what it was a year ago. That means no increase in seniors’ monthly Social Security checks. At the same time, millions of seniors will have to pay much higher Medicare premiums. On top of that, every beneficiary will have to pay more up front before Medicare covers their doctors’ bills. Although a political solution would block the increase, the problem will not be solved without structural reforms. Most of the 51 million people enrolled in Medicare Part B, which covers physician and other outpatient services, are protected by a “hold harmless” provision that ensures no reduction in their Social Security check when the Part B premium increases. The 35 million Medicare beneficiaries who are protected will continue to pay $104.90, the monthly premium that has been standard since 2013. But over 16 million seniors who are not protected by this provision will have to pay premiums that are 52 percent higher next year. The spike in Medicare Part B premiums results from shifting a large increase in program cost from those protected by hold harmless to the smaller group of enrollees who are not protected. All of the revenue loss caused by hold harmless is completely recovered in the same year from the unprotected seniors. This action allows the U.S. Treasury to hold itself harmless from any revenue loss incurred as a result of helping seniors better afford Medicare.

Federal Workers get a Raise, Retirees get Screwed  - Health care costs and prescription drug prices almost always go up. Rents have gone up. Food prices have also gone up, even though the price of oil has gone down. But the federal government is saying those on Social Security do not need a cost-of-living increase in 2016. Core inflation (CPI) with all food and energy items removed from the index, has increased 1.8% for the last year. But because gasoline is cheaper, the government is saying inflation was near zero — and so therefore, no COLA. But what about the elderly or disabled that don't drive a car and benefit from lower gas prices? Tough luck grandma! There will also be no COLAs for federal retirees, those on Supplemental Security Income (SSI) and our veterans. But USA Today reports that federal employees — both civilian and military who are still working — could see a 1.3% raise next year (Why, if there was no inflation?) Meanwhile, the Service Employees International Union (which represents almost 2 million state government workers) reports their renewed contract will give them a 1.48% cost-of-living raise on December 1, 2015 — and the year after, a 2.75 percent cost-of-living raise on December 1, 2016 (as they should, as everybody else should, to halt the long decline in incomes since 1979). To protect older Americans, federal law stipulates that, in most cases, the increase in a person’s Medicare premium cannot exceed the increase in the person’s Social Security benefit. The purpose of this “hold harmless” provision is to prevent a reduction in Social Security benefits. But by shielding 70 percent of beneficiaries from premium increases, that same law exposes the other 30 percent to price hikes. Medicare actuaries predicted in July that the standard premium for those beneficiaries would rise next year to $159 a month, from a little less than $105 a month for most beneficiaries, the same as in 2013 and 2014.

Red States Spent $2 Billion in 2015 to Screw the Poor - Medicaid funding is shared by the states and the federal government. Between 2000 and 2013—the most recent year reported by the CMS actuaries—the share of Medicaid spending shouldered by the states increased by an average of 6.1 percent per year. This is not total spending. It's just the portion the states themselves paid for.  In 2015, according to a survey by the Kaiser Foundation, spending by states that refused to expand Medicaid grew by 6.9 percent. That's pretty close to the historical average. However, spending by states that accepted Medicaid expansion grew by only 3.4 percent. Obamacare may have increased total Medicaid enrollment and spending, but the feds picked up most of the tab. At the state level, it actually reined in the rate of growth. In other words, the states that have refused the expansion are cutting off their noses to spite their faces. They're actually willing to shell out money just to demonstrate their implacable hatred of Obamacare. How much money? Well, the expansion-refusing states spent $61 billion of their own money on Medicaid in 2014. If that had grown at 3.4 percent instead of 6.9 percent, they would have saved about $2 billion this year.  Here's what this means: the states that refuse to expand Medicaid are denying health care to the needy and paying about $2 billion for the privilege. Try to comprehend the kind of people who do this.

Ohio Politics Now: Kasich administration still looking at ways to keep Medicaid money from Planned Parenthood - Earlier this week, the Ohio Senate approved a bill that would defund Planned Parenthood in Ohio. But that bill affects about $1.3 million that the organization gets from the state. The total in the last fiscal year was $3.7 million because of Medicaid reimbursements. While on the campaign trail in New Hampshire Thursday, Ohio Gov. John Kasich, who is running for the GOP presidential nomination said he supports the Senate’s bill but “his administration hasn’t yet come up with a legal course of action to take the few million in Medicaid money the organization gets through Ohio,” Dispatch Public Affairs Editor Darrel Rowland writes. If you recall: Ohio Right to Life began pushing for Kasich and the state to cancel Medicaid contracts with Planned Parenthood after controversial videos appeared this summer. Those videos put into question what Planned Parenthood does with aborted fetuses. Planned Parenthood officials said the videos were heavily edited and that they donate the fetuses, with a woman’s consent and where legal, for medical research.  Canceling the state contracts with Planned Parenthood might not be so easy. “Under federal law, Medicaid programs are prohibited from excluding qualified health care providers from providing services under the program on the grounds that they separately provide abortion services as part of their scope of practice,” Sam Rossi, spokesman for Ohio Medicaid, told the Dispatch in August.

Medicare spending for hepatitis C cures surges - Medicare’s prescription drug program spent nearly $4.6 billion in the first half of this year on expensive new cures for the liver disease hepatitis C — almost as much as it paid for all of 2014. Rebates from pharmaceutical companies — the amounts of which are confidential — will reduce Medicare’s final tab for the drugs, by up to half. Even so, the program’s spending will likely continue to rise, in part because of strong demand. Medicare’s stunning outlays, spelled out in data requested from the government by ProPublica, raise troubling questions about how the taxpayer-funded program can afford not only these pricey medications but a slew of others coming on the market.Medicare’s drug program, known as Part D, already spent an eye-popping $4.8 billion for hepatitis C drugs in 2014, not including rebates. The high amount partly reflected the medications’ breakthrough nature. Before the new drugs, treatments for hepatitis C had lower cure rates and came with undesirable side effects. But the cure comes at enormous cost: A 12-week course of treatment with the most popular drug has a list price of about $95,000, or $1,100 a day. Pharmacies filled more than 183,000 prescriptions for hepatitis C drugs from January to June and were on track for all of 2015 to far outpace the nearly 288,000 prescriptions filled in 2014, the data shows.

21 Million Were Supposed to Be Enrolled in Obamacare: Nearly two years into its implementation, the Obama administration is projecting 10 million fewer Obamacare enrollees in 2016 than were originally expected.Last week, the Department of Health and Human Services announced that it expects roughly 10.4 million Americans to have health insurance coverage in 2016 through Obamacare. The estimate is a modest increase from the 9.1 million the Department of Health and Human Services projects will have signed up during this year’s open enrollment period.Americans can begin purchasing insurance on either state-run exchanges or the federal exchange,, beginning Nov. 1. The open enrollment period ends Jan. 31, 2016.The White House’s projected enrollment for 2016 differs greatly from that of the nonpartisan Congressional Budget Office. In March, the agency said that an estimated 21 million would have coverage under Obamacare in 2016. In 2017, the Congressional Budget Office said 24 million would gain coverage under the health care law. Early projections for marketplace sign-ups envisioned a significant migration from employer-sponsored coverage,” Sylvia Mathews Burwell, secretary of the Department of Health and Human Services, told reporters last week. “That shift has not occurred.”

Who Obamacare Is Really Hurting the Most - In our previous installment, we made the following claim:  On average, the amount by which the typical American's health insurance premiums went up in 2014 over the previous year was $604, with the largest percentage increases being paid by the households led by the youngest Americans - the ones who could afford it the leastWe were wrong. After we dug deeper into the demographics of age and income, we found that the youngest Americans are only the second-most harmed group that has been negatively impacted by the implementation of President Obama's Affordable Care Act. In reality, the Americans most materially harmed by Obamacare are the oldest.  Our table below works through the math that backs up that finding. If you're accessing this article through a site that republishes our RSS news feed, but which doesn't maintain our CSS formatting, you may want to click through to our site to view the table in the format in which we published it):  Americans Age 75 and older were most negatively affected by the implementation of the Affordable Care Act in 2014, as the increase in their average annual expenditures for health insurance increased by an amount equal to 2.16% of their average annual total money income.  And so we find that Americans Age 75 and older, a demographic group that predominantly consists of elderly widows whose primary source of income is provided by Social Security's survivor's insurance benefits, are the Americans most harmed by the increases in health insurance costs driven by the implementation of Obamacare.

A health law fine on the uninsured will more than double -- The math is harsh: The federal penalty for having no health insurance is set to jump to $695, and the Obama administration is being urged to highlight that cold fact in its new pitch for health law sign-ups. That means the 2016 sign-up season starting Nov. 1 could see penalties become a bigger focus for millions of people who have remained eligible for coverage, but uninsured. They’re said to be squeezed for money, and skeptical about spending what they have on health insurance. Until now, health overhaul supporters have stressed the benefits: taxpayer subsidies that pay roughly 70 percent of the monthly premium, financial protection against sudden illness or an accident, and access to regular preventive and follow-up medical care. But in 2016, the penalty for being uninsured will rise to the greater of either $695 or 2.5 percent of taxable income. That’s for someone without coverage for a full 12 months. This year the comparable numbers are $325 or 2 percent of income.

Mediterranean diet ‘may slow the ageing process by five years’ - Eating a Mediterranean diet rich in fish and vegetables may help prevent your brain shrinking for as long as five years, new research suggests. People who follow such a diet, which also involves consuming less meat and dairy products than average, end up with bigger brains and slow down the ageing process, according to the US study. “These results are exciting, as they raise the possibility that people may potentially prevent brain shrinking and the effects of ageing on the brain simply by following a healthy diet,” said the lead author, Yian Gu, of Columbia University in New York. Researchers looked at 674 people with an average age of 80 who lived in northern Manhattan and did not have dementia. They found that the total brain volume of those who had closely followed a Mediterranean-style diet was on average 13.11 millilitres greater than that of those who had not done so. Their grey matter volume was 5 millilitres greater, and their white matter 6.4 millilitres greater, than those who had not stuck to Mediterranean foods. The difference between the two groups is equivalent to about five years of ageing, the authors said. “The magnitude of the association with brain measures was relatively small. But when you consider that eating at least five of the recommended Mediterranean diet components has an association comparable to five years of age, that is substantial,” said Gu.

San Diego company slaps ‘Pharma Bro’ down by offering same cancer drug for $1 a pill: A San Diego-based company announced on Thursday that it would compete with Martin Shkreli’s Turing Pharmaceuticals by offering the same drug used to help AIDS and cancer patients for $1 a pill, the San Diego Union-Tribune reported. Imprimis Pharmaceuticals, a compounding-drug firm, said it would begin selling its own version of the generic drug pyrimethamine, which Turing was marketing under the name Daraprim. Shkreli was roundly criticized last month after his company raised the price for the drug from $13.50 a pill to $750 a pill after acquiring the patent. The version Imprimis will be selling includes pyrimethamine and another generic drug, leucovorin, which is typically used to help cancer patients going through chemotherapy. The two drugs are the active ingredients in Daraprim. Mark Baum, Imprimis’ CEO, said his company plans to offer similar compounded drugs soon. “We are looking at all of these cases where the sole-source generic companies are jacking the price way up,” he told the Associated Press. “There’ll be many more of these.”

Wasted Drugs and the Creation of Superbugs -- This week, British Prime Minister David Cameron and Chinese President Xi Jinping announced a new fund to support research aimed at tackling the problem of so-called superbugs: disease-causing microbes that have become resistant to conventional drugs. . The announcement complements a meeting in Berlin earlier this month at which the health ministers of the G-7 countries – Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States – sought solutions to the most pressing global health issues.  But they can be effective only if most of the world works toward them simultaneously; after all, drug resistance, like microbes, does not stop for border checks.  To achieve the objectives identified by the G-7, an especially promising target is drug wastage. By lowering the exposure of bacteria to drugs, we can slow the rise of drug resistance and keep our current medicines useful for longer, thereby reducing the urgency and cost of discovering new ones. As it stands, huge amounts of antibiotics are wasted each year – even in countries with highly sophisticated health-care systems. Indeed, in the US, 27 million courses of antibiotics are essentially wasted every year on patients who visit the doctor with respiratory complaints that do not actually merit the use of antimicrobial drugs. Such waste occurs largely because the vast majority of antibiotic prescriptions are made without the use of any diagnostic tool. Instead, doctors, often under pressure from uninformed patients, typically use so-called “empirical” diagnosis, applying their expertise, intuition, and professional judgment essentially to guess whether an infection is present, its likely cause, and the most appropriate treatment. In countries where patients can purchase antibiotics over the counter, the problem is even worse.

Antioxidants May Lead to A Faster Growth of the Cancer Cells - Since the term “antioxidants” made the leap from the realm of biochemistry labs and into the public consciousness in the 1990s, Americans have come to believe that more is better when it comes to consuming the substance that comes in things like acai berries, green tea and leafy veggies. A provocative new study published Wednesday in the journal Nature raises important questions about that assumption. Antioxidants — which include vitamins C and E and beta-carotene, and are contained in thousands of foods — are thought to protect cells from damage by acting as defenders against something called “free radicals” which the body produces as a part of metabolism or that can enter through the environment. That’s all great for normal cells. But what researchers at the University of Texas Southwestern Medical Center found is that antioxidants can work their magic on cancerous cells, too — turbo-charging the process by which they grow and spread. Researcher Sean Morrison and his colleagues conducted experiments on mice that had been transplanted with skin cancer cells (melanoma) from human patients. They gave nothing to one group. To the other they gave doses of N-acetylcysteine (NAC) which is a common antioxidant that’s used in nutritional and bodybuilding supplements and has been used as a treatment for patients with HIV/AIDS and in some children with certain genetic disorders. The results were alarming: Those in the second group had markedly higher levels of cancer cells in their blood, grew more tumors and the tumors were larger and more widespread than in the second.

Antioxidants May Make Cancer Worse - Scientific American: Antioxidants are supposed to keep your cells healthy. That is why millions of people gobble supplements like vitamin E and beta-carotene each year. Today, however, a new study adds to a growing body of research suggesting these supplements actually have a harmful effect in one serious disease: cancer. The work, conducted in mice, shows that antioxidants can change cells in ways that fuel the spread of malignant melanoma—the most serious skin cancer—to different parts of the body. The progression makes the disease even more deadly. Earlier studies of antioxidant supplement use by people have also hinted at a cancer-promoting effect. A large trial reported in 1994 (pdf) that daily megadoses of the antioxidant beta-carotene increased the risk of lung cancer in male smokers by 18 percent and a 1996 trial was stopped early after researchers discovered that high-dose beta-carotene and retinol, another form of vitamin A, increased lung cancer risk by 28 percent in smokers and workers exposed to asbestos. More recently, a 2011 trial involving more than 35,500 men over 50 found that large doses of vitamin E increased the risk of prostate cancer by 17 percent. These findings had puzzled researchers because the conventional wisdom is that antioxidants should lower cancer risk by neutralizing cell-damaging, cancer-causing free radicals. But scientists now think that antioxidants, at high enough levels, also protect cancer cells from these same free radicals. “There now exists a sizable quantity of data suggesting that antioxidants can help cancer cells much like they help normal cells,”

Stop Giving Cancer Patients Toxic Cosmetics to ‘Look Good, Feel Better’  -- It’s outrageous that the products that each of us use every day as part of our hygiene, self-care and beauty regimens are full of harmful chemicals, linked to a range of health problems including breast cancer. You would hope that when the country’s largest cancer charity gives products to cancer patients as part of a psychosocial support program, it would uphold the highest safety standards. Unfortunately, that’s not the case. At least that’s not the way the Look Good, Feel Better program works. Look Good, Feel Better is a nationwide program for cancer patients administered by the American Cancer Society. The free workshops offer tips for cancer patients who are looking for advice on how to handle some of the physical changes that come with treatment. In addition to these tips, the program provides free cosmetic kits, donated by corporations that are members of the largest national trade group for the cosmetics industry, the Personal Care Products Council. It’s time the American Cancer Society and Personal Care Products Council stand together to protect cancer patients and prevent cancer in the first place. They need to ban companies from participating in the Look Good, Feel Better program if the chemicals used in their products are linked to increased breast cancer risk or interfere with breast cancer treatments.

Duke Researchers Find Nail Polish Chemical in Women’s Bodies -- A new study co-authored by researchers at Duke University and Environmental Working Group (EWG) has detected evidence of a common nail polish chemical called triphenyl phosphate (TPHP) in the bodies of every woman who volunteered to paint her nails for the study. The results represent compelling evidence that TPHP, a suspected endocrine-disrupting chemical also used in plastics manufacturing and as a fire retardant in foam furniture, enters the human body via nail polish. These results are troubling because a growing body of scientific data from other studies indicates that TPHP causes endocrine disruption, meaning that it interferes with normal hormone functioning. In animal studies, it has caused reproductive and developmental irregularities. (Some studies use the acronym TPP for this chemical).  TPHP is listed on the ingredient labels of a wide array of nail polishes now on the market. Forty-nine percent of more than 3,000 nail polishes and treatments compiled in EWG’s Skin Deep database disclose that they contain TPHP. Even worse, some polishes contain it but don’t disclose it. The Duke-EWG study, published Oct. 19, in Environment International, tested 10 nail polishes in all for TPHP and found it in eight of them.Importantly, two of the eight polishes that tested positive for TPHP did not disclose its presence on product labels.

Agency says exposure to diacetyl from roasting, grinding raises lung damage concerns -- The U.S. Centers for Disease Control and Prevention has posted a warning to people who work in the coffee processing business: Their occupations could be exposing them to dangerous levels of chemicals known to cause lung damage. The notice is directed at workers in facilities that roast, grind or flavor coffee, cautioning that two compounds tied to serious lung disease —diacetyl and 2,3-pentanedione — are formed naturally through roasting unflavored coffee and are released during roasting and grinding. It also informs employers of the need to test the air and, depending on results, take measures to mitigate exposure. The federal agency added the coffee processing industry to its list of occupations that put workers at risk for flavor-related lung disease, calling the information "of interest and importance" to those in the coffee business. The notice comes amid the Milwaukee Journal Sentinel's ongoing "Gasping for Action" investigation, which has brought to light serious lung damage to workers grinding and roasting flavored coffee. It has also uncovered, through groundbreaking testing, that workers are being exposed to high levels of the chemicals in roasting facilities that don't use added flavors. Workers who had been exposed to similar levels in microwave popcorn plants suffered serious lung disease.

Chemical exposure linked to rising diabetes, obesity risk: Emerging evidence ties endocrine-disrupting chemical exposure to two of the biggest public health threats facing society - diabetes and obesity, according to the executive summary of an upcoming Scientific Statement issued today by the Endocrine Society.  The statement builds upon the Society's groundbreaking 2009 report, which examined the state of scientific evidence on endocrine-disrupting chemicals (EDCs) and the risks posed to human health. In the ensuing years, additional research has found that exposure is associated with increased risk of developing diabetes and obesity. Mounting evidence also indicates EDC exposure is connected to infertility, hormone-related cancers, neurological issues and other disorders. EDCs contribute to health problems by mimicking, blocking or otherwise interfering with the body's natural hormones. By hijacking the body's chemical messengers, EDCs can alter the way cells develop and grow.  Known EDCs include bisphenol A (BPA) found in food can linings and cash register receipts, phthalates found in plastics and cosmetics, flame retardants and pesticides. The chemicals are so common that nearly every person on Earth has been exposed to one or more. An economic analysis published in The Journal of Clinical Endocrinology and Metabolism in March estimated that EDC exposure likely costs the European Union €157 billion ($209 billion) a year in actual health care expenses and lost earning potential. The threat is particularly great when unborn children are exposed to EDCs. Animal studies found that exposure to even tiny amounts of EDCs during the prenatal period can trigger obesity later in life. Similarly, animal studies found that some EDCs directly target beta and alpha cells in the pancreas, fat cells, and liver cells. This can lead to insulin resistance and an overabundance of the hormone insulin in the body - risk factors for Type 2 diabetes.

Endocrine-Disrupting Chemicals Are Making Us Fat and Giving Us Diabetes -- We documented in 2012 that that toxic chemicals in our food, water and air our causing an epidemic of obesity … even in 6 month old infants. No matter how lazy and gluttonous adults may have become recently, 6-month-olds can’t be lazy … they can’t even walk, let alone go to the gym.   And 6-month-olds can’t “binge” … Gerber doesn’t make corn dogs or milk chocolate truffles fried in beer batter.  And we documented in 2012 that the same thing is being observed in animals … hardly your stereotypical couch potatoes. A study published last month in the journal Obesity Research & Clinical Practice found that it’s harder for adults today to maintain the same weight – even at the same levels of food intake and exercise – as adults in the 1980s. (As reported by the Atlantic and the Independent.) And last month, the prestigious Endocrine Society reinforced the argument that endocrine-disrupting chemicals are making us fat. As Medical Xpress reports: Emerging evidence ties endocrine-disrupting chemical exposure to two of the biggest public health threats facing society – diabetes and obesity, according to the executive summary of an upcoming Scientific Statement issued today by the Endocrine Society.  The chemicals are so common that nearly every person on Earth has been exposed to one or more. An economic analysis published in The Journal of Clinical Endocrinology and Metabolism in March estimated that EDC exposure likely costs the European Union €157 billion ($209 billion) a year in actual health care expenses and lost earning potential.  “The evidence is more definitive than ever before – EDCs disrupt hormones in a manner that harms human health,” “Hundreds of studies are pointing to the same conclusion, whether they are long-term epidemiological studies in human, basic research in animals and cells, or research into groups of people with known occupational exposure to specific chemicals.”

A Mysterious Epidemic Plaguing Central America May Be Linked To Climate Change: A mysterious disease has been sweeping through the sugar cane fields of Central America, with more than 20,000 laborers dying from it over the past decade. As of 2012, it had killed the husbands of more than 100 women of the 250 families living on one island in Nicaragua, giving rise to the grim nickname “Island of the Widows.” Some studying the epidemic have wondered if toxins like pesticides or heavy metals may be making the workers sick, but Richard Johnson, a kidney specialist at the University of Colorado Anschutz Medical Campus, had a different theory. About four years ago, when Johnson first heard about the deaths in Central America, he wondered if chronic dehydration might be a factor. Laboring in the sugar fields is hard, hot work, and there's been increasing evidence that dehydration may cause kidney damage. During the harvest season, sugar cane workers toil in extreme heat for long hours, and they don’t necessarily have access to fresh water. The research Johnson and his team conducted in Nicaragua and El Salvador, published last week, confirmed at least part of his theory. They found that the laborers suffered serious dehydration on a daily basis, and routinely worked in conditions exceeding the recommended heat standards of the U.S. Occupational Safety and Health Administration. This research could also help answer another question Johnson has been pondering: Could the 20,000 people who died in Central America be victims of the first epidemic caused by global warming?

TPP would allow milk from cows receiving hormones into Canada - As dairy imports from the United States appear set to increase under the terms of the Trans-Pacific Partnership trade deal, Canadian consumers concerned about drinking milk from cows receiving hormones will need to read their labels more carefully. In the agreement in principle reached Oct. 5, Canada conceded an additional 3.25 per cent of its dairy market to imports from the 11 other Pacific Rim countries signing on, most notably the U.S., New Zealand and Australia.  That amount may not seem significant, but until recently, Canada's supply-managed dairy sector offered only the stingiest of tariff-free market access to its trading partners, on specific terms — such as the cheese deal struck with the European Union in 2013. . The ultimate impact of the TPP on the dairy industry might depend on details not yet available on what kinds of products — and in what amounts — make up that 3.25 per cent. Unique to the TPP is the prospect of fluid milk crossing the border from the U.S. The terms of the agreement made public earlier this month specify that 85 per cent of fluid milk imports must be processed in Canada before hitting store shelves. At the initial briefing offered to journalists, TPP negotiators said Canadian health and safety regulations would apply. "The TPP fully protects Canada's right to maintain and implement measures to ensure food safety for consumers, as well as to protect animal or plant life or health," a trade department spokesman wrote CBC News. But further clarification recently revealed that doesn't mean dairy producers outside Canada have to follow the same rules Canadian farms do. Most notably, it's illegal in Canada to administer bovine growth hormone (rBST) to boost milk production in dairy cattle. But there's no such restriction in the U.S.

Prospect of TTIP already undermining EU food standards, say campaigners - EU negotiators will resume controversial trade talks with the US on Monday amid claims that multinational companies have jumped the gun in advance of any agreement to import goods that are currently banned – including genetically modified crops and chemically washed beef – into European markets. A campaign group says that a report in a US journal concerning the Transatlantic Trade and Investment Partnership (TTIP) talks show that Europe is already capitulating to huge pressure from the US to allow imports of previously banned goods before an agreement is reached. The accusation comes as the European commission faces intense pressure to abandon the controversial talks, which critics say will undermine food safety, environmental standards and job security. More than three million people in Europe have signed a petition against the deal while  an estimated 250,000 people marched in Berlin last weekend against the proposals. John McDonnell, the shadow chancellor, has described TTIP as “toxic” and resulting in a huge transfer of powers to Brussels and corporate interests that will bring about a form of “modern-day serfdom”. The EU commission wants to sign a trade accord before next spring with the US to lower trade barriers and boost growth. EU leaders argue that a TTIP deal would create a free trade zone covering 800 million people and act as a counterweight to China’s growing economic power. Brussels has predicted it would add $92bn to the EU’s $18.46tn GDP.

How Monsanto Solicited Academics to Bolster Their Pro-GMO Propaganda — Using Taxpayer Dollars -- The Monsanto public relations machine has done a stellar job in recent years of reducing the GMO debate to one that pits “pro-science advocates” against “anti-science climate-denier types” — with Monsanto portrayed as being squarely planted in the pro-science camp. But that well-oiled machine may be starting to sputter.  Turns out that Monsanto executive solicited pro-GMO articles from university researchers, and passed the “research” off as independent science which the biotech giant then used to prop up its image and further its agenda. We know this, thanks to thousands of pages of emails obtained by U.S. Right to Know (USRTK) under the Freedom of Information Act (FOIA). And because a host of news outlets—including the New York Times, the Boston Globe, Bloomberg, the StarPhoenix and others — are now running with the story. For anyone who has paid attention, this latest scandal should come as no surprise. As Steven Druker writes in his book Altered Genes, Twisted Truth, “For more than 30 years, hundreds (if not thousands) of biotech advocates within scientific institutions, government bureaus, and corporate offices throughout the world have systematically compromised science and contorted the facts to foster the growth of genetic engineering, and get the foods it produces, onto our dinner plates.” Will Druker’s book (published this year), and this new wave of bad press be enough to finally expose Monsanto’s “science” for what it i is — nothing more than an expensive, sustained and highly orchestrated public relations campaign?

U.S. court overrules EPA on bee-killing pesticide -- American bees have been dropping like flies lately, which is bad news for the crops they pollinate and ecosystems they support. It's a complex crisis with a wide range of suspects, but research suggests pesticides are at least part of the problem — namely a class of insecticides known as neonicotinoids.  With that in mind, three U.S. judges decided this week to overrule the EPA and remove a particular bee-killing pesticide from the market. The Ninth Circuit Court of Appeals ruled in favor of several beekeeping and environmental groups, who sued the EPA last year to challenge its 2013 approval of sulfoxaflor. "Bees are essential to pollinate important crops and in recent years have been dying at alarming rates," Judge Mary M. Schroeder wrote in an opinion. "Because the EPA's decision to unconditionally register sulfoxaflor was based on flawed and limited data, we conclude that the unconditional approval was not supported by substantial evidence. We therefore vacate the EPA's registration of sulfoxaflor and remand." Made by Dow AgroSciences, sulfoxaflor is designed to kill aphids and other pests on a variety of crops including canola, citrus, cotton, strawberries, soybeans and wheat. But as the EPA itself has acknowledged, the insecticide is also "acutely toxic to bees."

River flows drop as carbon dioxide creates thirstier plants -- Rising carbon dioxide concentrations are causing vegetation across large parts of Australia to grow more quickly, in turn consuming more water and reducing flows into river basins. Our research, published today in Nature Climate Change, shows that river flows have decreased by 24-28% in a large part of Australia due to increasing CO₂ levels, which have risen by 14% since the early 1980s. This could exacerbate water scarcity in several populated and agriculturally important regions. It was previously unclear whether the increasing CO₂in the atmosphere has led to detectable changes in streamflow in Australian rivers. This is partly because increasing CO₂can have two opposing effects on water resources. CO₂ is the key ingredient for photosynthesis, and higher concentrations allow plants to grow more vigorously. This fertilisation effect could be expected to lead to denser vegetation that needs more water to grow, in turn reducing the amount of rainwater that can run off into rivers. Acting directly against this is the fact that increased CO₂ concentrations allow plants to use water more sparingly. . This could be expected to leave more rainwater available to become river runoff.  In our study, we used a new method that combines satellite measurements of vegetation cover with river flow data collected for over 30 years. Using statistical methods we factored out other influences that affect river flows, such as variations in rainfall. Our results suggest that the net effect of increased CO₂ has been declining runoff across the subhumid and semi-arid parts of Australia, and that this can be attributed to the increased vegetation.

Is freshwater supply more dependent on good governance than geography?: Is freshwater supply more dependent on good governance than geography? Scientists have analysed 19 different characteristics critical to water supply management in 119 low per capita income countries and found that vulnerability is pervasive and commonly arises from relatively weak institutional controls. The study, conducted by researchers based at Washington State University (WSU), USA, and Stanford University, USA, sought to identify freshwater supply vulnerabilities using four broad categories; endowment (availability of source water), demand, infrastructure and institutions (e.g. government regulations). The results are published today, Oct. 23, 2015, in the journal Environmental Research Letters. The researchers used publicly available data to create unique vulnerability 'fingerprints' for 119 lower per capita income countries (less than $10,725 per person GDP) based on 19 different endogenous and exogenous characteristics affecting water supply vulnerability. Their results showed that institutional vulnerability is common—occurring in 44 of the countries—and that 23 countries showed vulnerabilities in all four categories. Surprisingly, many geographically disparate nations have similar water supply vulnerability 'fingerprints', suggesting that sharing experiences could be useful for shaping actual water supply management strategies within and across nations.

Seaweed taking over beaches as tourism bigs look away - A slimy, brown monster, after slithering free of the Bermuda Triangle, is devouring beaches from Florida to Texas and the Caribbean. It’s not the plot of a bad science fiction movie, although it involves a whole lot of bad science — just zero fiction. It’s big, it’s unstoppable, it sometimes disappears only to return. And the powers that be want to keep this threat under wraps. It’s called Sargassum seaweed and it’s growing out of control, so tourism officials from the best beach towns in the world know that if you knew, you’d stay away. Instead, they’re sticking their heads in the sand and hoping you’ll do the same. Remember “Jaws?” Don’t tell the truth or the tourists will stay home. Unlike the great white shark, the great brown monster is a rotting, stinking beast wreaking global havoc: From South Florida to Mexico to Barbados, Trinidad, Tobago, the Dominican Republic, Texas, the Iberian Peninsula, the British Isles, Puerto Rico, Brazil, Morocco and Sierra Leone. No matter what the tourist boards claim, it’s happening. They can’t make it go away. And they for sure can’t hide it anymore. It’s spreading so frighteningly fast throughout the North Atlantic, the Caribbean and the Gulf of Mexico that it’s … well, unfathomable. Sargassum appears in gigantic mats of free-floating seaweed — it doesn’t attach to the bottom of the sea, but grows atop the water. It can change the makeup of our oceans, yet no one knows how to stop it. It’s always been around in small summer quantities on beaches, but now it’s washing ashore in the thousands of tons.

Number of dolphin deaths leveling off after oil spill - — Scientists say the number of dead dolphins washing shore is declining five years after the Deepwater Horizon Spill in the Gulf of Mexico. According to the National Marine Fisheries Service, the number of dolphins and whales killed by exposure to the oil was 1,433. About 87 percent were bottlenose dolphins. Some washed ashore dead, other were stillborn or born prematurely. “The number of mortalities in the region has declined since the peak years of 2010 to 2014,” said Jenny Litz, a research biologist with the organization. Scientists say some had a bacterial infection caused by the oil suppressing the dolphins’ immune system. The marine mammals may have been exposed to the oil in various ways, including inhaling the vapors on the surface, absorbing it through their skin, ingesting it from the water or from the sediment while feeding, or from eating the oil-contaminated fish. BP declined to comment on the dolphin die-off.

Warming Oceans May Threaten Krill, a Cornerstone of the Antarctic Ecosystem - Krill, typically about the size of a pinkie and similar in appearance to shrimp, are one of the most abundant animal species on earth, and a cornerstone of the Antarctic ecosystem. They form schools that can be miles long and miles deep, with thousands of crustaceans packed into each cubic foot.Commercial trawlers revisit known breeding grounds, where they can vacuum up thousands of tons of krill over a fishing season. Most of the catch is used to feed farmed fish. But extraction of krill oil for human consumption is more profitable, Steve Nicol, an adjunct professor at the University of Tasmania, said.In the Southern Ocean, most marine life is a direct predator of krill or just one step removed. Diminishing krill stocks can mean less food for squid, whales, seals, fish, penguins and sea birds.“Higher levels of carbon dioxide in the water mean greater levels of ocean acidification,” said Dr. Kawaguchi, whose laboratory holds the only research tanks in the world used to breed and study krill. “This interrupts the physiology of krill. It stops the eggs hatching, or the larvae developing.”   “If we continue with business as usual, and we don’t act on reducing carbon emissions, in that case, there could be a 20 to 70 percent reduction in Antarctic krill by 2100,” Dr. Kawaguchi said. “By 2300, the Southern Ocean might not be suitable for krill reproduction.”

Bubble plumes off Washington, Oregon suggest warmer ocean may be releasing frozen methane -- Warming ocean temperatures a third of a mile below the surface, in a dark ocean in areas with little marine life, might attract scant attention. But this is precisely the depth where frozen pockets of methane 'ice' transition from a dormant solid to a powerful greenhouse gas. New University of Washington research suggests that subsurface warming could be causing more methane gas to bubble up off the Washington and Oregon coast. The study, to appear in the journal Geochemistry, Geophysics, Geosystems, shows that of 168 bubble plumes observed within the past decade, a disproportionate number were seen at a critical depth for the stability of methane hydrates. "We see an unusually high number of bubble plumes at the depth where methane hydrate would decompose if seawater has warmed," . "So it is not likely to be just emitted from the sediments; this appears to be coming from the decomposition of methane that has been frozen for thousands of years." Methane has contributed to sudden swings in Earth's climate in the past. It is unknown what role it might contribute to contemporary climate change, although recent studies have reported warming-related methane emissions in Arctic permafrost and off the Atlantic coast.  If methane bubbles rise all the way to the surface, they enter the atmosphere and act as a powerful greenhouse gas. But most of the deep-sea methane seems to get consumed during the journey up. Marine microbes convert the methane into carbon dioxide, producing lower-oxygen, more-acidic conditions in the deeper offshore water, which eventually wells up along the coast and surges into coastal waterways. Another potential consequence, he said, is the destabilization of seafloor slopes where frozen methane acts as the glue that holds the steep sediment slopes in place.

Under water? New sea rise study paints doomsday scenario for Charleston, other low-lying cities - Charleston, New Orleans, Miami and other low-lying cities will be mostly under water by the end of this century unless global carbon emissions are dramatically reduced soon, a new study says.  Published Monday in the Proceedings of the National Academy of Sciences, the study found that carbon emissions already have locked in at least 5 feet of sea rise by 2100. But without drastic cuts in emissions, seas could eventually rise by 20 feet or more, the study found. Such an increase would affect at least 20 million coastal residents. Coastal South Carolina, Florida and Louisiana would be particularly hard hit. “Our analysis indicates that if business-as-usual carbon emissions continue, Charleston and Mount Pleasant could fall completely below future sea levels,” said Benjamin Strauss, the study’s lead author. With rapid and steep cuts, about half of this area could be spared, he said. As part of the study, Strauss’ group,  Climate Central, created an interactive map forecasting what Charleston and other areas will look like with and without cuts in carbon emissions.  Without cuts, sea levels cover much of West Ashley and areas of North Charleston, including the area around the Boeing plant and Charleston Air Force Base.

Why the Earth’s past has scientists so worried about the Atlantic Ocean’s circulation -- In the last month, there’s been much attention to a cool patch in the North Atlantic Ocean, where record cold temperatures over the past eight months present a stark contrast to a globe that is experiencing record warmth. And although there is certainly no consensus on the matter yet, some scientists think this pattern may be a sign of one long-feared consequence of climate change — a slowing of North Atlantic ocean circulation, due to a freshening of surface waters. The cause, goes the thinking, would be the rapidly melting Greenland ice sheet, whose large freshwater flows may weaken ocean “overturning” by reducing the density of cold surface waters (colder, salty water is denser). If cold, salty waters don’t sink in the North Atlantic and flow back southward toward Antarctica at depth, then warm surface waters won’t flow northward to take their place. The result could be a significant change to northern hemisphere climate, as less ocean-borne heat reaches higher latitudes. Now, two new studies just out in Nature Geoscience help to underscore why scientists have a good reason to think this sort of thing can happen — namely, because it appears to have happened in the Earth’s distant past. And not just once but on multiple occasions. These periods are not, you see, uniformly cold. Rather, they show an alternation between so-called stadials — long periods featuring quite cold temperatures — and interstadials, which are relatively rapidly occurring warmer periods during glacials. So what causes this oscillation in glacial temperatures? A leading theory is that this all has something to do with changes in the circulation of the oceans. The idea is that large flows of ice into the ocean in the North Atlantic cause freshening at the surface. This could then weaken Atlantic ocean circulation, lessen northward heat transport, and ultimately cause a cold period — another stadial.

Earth just had its warmest September on record — by a long shot: It's virtually certain that in January 2016, the planet will set a new record for the warmest calendar year on record. A key data set that tracks global average surface temperatures, which comes from the Japan Meteorological Agency, shows a huge jump in temperatures in September as compared to average. Related data compiled by NASA and analyzed using different methods shows that September was most likely the second warmest such month on record, and that there is at least a 93% likelihood of setting the record for the warmest year this year.  The data from the Japan Meteorological Agency is striking, since it shows that September 2015 blew the previous record for the warmest such month out of the water by 0.15 degrees Celsius (0.27 degrees Fahrenheit). September had a temperature anomaly of 0.50 degrees Celsius (0.9 degrees Fahrenheit), compared to the 1981-2010 average.The previous record-holder for the warmest September since such data began in 1891 was last year, September 2014. This may seem like quibbling over very small differences, but consider that the discrepancy between the planet we know today and a planet with virtually zero ice cover in Greenland and Antarctica is about 10 degrees Fahrenheit, for a global average. In short, big changes can occur as a result of relatively small differences in global average temperatures.

Patricia Becomes Strongest Hurricane Ever Recorded; Catastrophic Landfall Expected in Mexico Friday - Weather Channel: Mexico's Pacific coast is in the crosshairs of Hurricane Patricia, which became the most powerful tropical cyclone ever measured in the Western Hemisphere on Friday morning as its maximum sustained winds reached an unprecedented 200 mph (320 kph). The hurricane is forecast to make landfall in the Mexican state of Jalisco Friday evening as a catastrophic Category 5 hurricane capable of causing widespread destruction. Residents and authorities in Mexico are rushing to prepare for what will likely be the strongest hurricane to ever make landfall on that country's Pacific coastline.   At 4 a.m. CDT, the eye of Hurricane Patricia was about 145 miles (255 kilometers) southwest of Manzanillo, Mexico, and was moving north-northwest at 12 mph (19 kph). In addition to its unprecedented 200-mph (320-kph) sustained winds, Hurricane Patricia now holds the record for lowest pressure in any hurricane on record. With a minimum central pressure of 880 millibars (25.99 inches of mercury) at the 4 a.m. CDT advisory, Patricia broke the record of 882 millibars set by Wilma almost exactly 10 years ago. Data from an Air Force Hurricane Hunter airborne reconnaissance mission late Thursday night provided critical data demonstrating the extreme intensification of Hurricane Patricia in near-real time.

Hurricane Patricia makes landfall on Mexico's Pacific coast as Category 5 storm | Fox News: Patricia-- packing 165 mile per hour winds and the strongest hurricane ever recorded in the Western hemisphere-- made landfall early Friday evening on Mexico’s Pacific coast. The storm made landfall around 6:30 p.m. local time along the coast of southwestern Mexico near Cuixmala, 55 miles west-northwest of port city of Manzanillo, according to the U.S. National Hurricane Center in Miami. Mexican authorities received reports Friday evening of some flooding and landslides after the powerful storm came ashore in a relatively unpopulated stretch of Pacific coast. Mexican Transportation Secretary Gerardo Ruiz Esparza told the Associated Press that officials have been bracing for the worst and are "not declaring victory" just yet. Patricia's center made landfall in an area with few population centers. The nearest big city, Manzanillo, was outside the extent of the storm's hurricane-force winds.

Hurricane Patricia to Intensify Heavy Rains in Texas, 10M Under Flood Watch - NBC News:  Heavy rains that brought a flood threat to North and Central Texas are expected to spread into South Texas over the weekend, as a stalled cold front causing the downpours is reinforced by remnants of Hurricane Patricia, which struck Mexico Friday evening.  Much of the Texas heartland was under a flash flood watch early Saturday as the National Weather Service expected the Austin-San Antonio area to receive up to a foot of rain while already inundated sections of North Texas were expected to experience up to 7 more inches of rain.  More than 13 inches of rain fell in Corsicana, south of Dallas, from midnight Friday through early Saturday, the National Weather Service said.  "We're telling anybody who manages to get off the highway and into Corsicana to find a parking lot and spend the night in their car. Nobody needs to be out there in the rain at night," Navarro County Judge H.M. Davenport told The Associated Press. advertisement "It's one of those things where all the ingredients come together," Lamont Bain, a meteorologist in the National Weather Service's Fort Worth office, said. Over 10 million people in the south-central U.S. face potential flash flooding as a slow-moving storm dumps heavy rain through the weekend.  Up to a foot of rain could hit Galveston County by Sunday afternoon, and officials on Friday considered a voluntary evacuation of Bolivar Peninsula but will reevaluate the situation Saturday.

El Nino 2015 starting to look like 'super El Nino' in 1997-98 -  New maps show how the 2015 El Nino is shaping up to look a lot like a strong event that occurred in 1997-98 that was dubbed a "super El Nino". The latest analysis from NASA and the National Oceanic and Atmospheric Administration comes from altimeter readings of sea surface heights in the Pacific Ocean. Water expands when it heats up and contracts when it cools down, causing changes in sea surface heights.The two strongest El Ninos that we know of occurred in 1982-83 and 1997-98. Both events had significant global impacts including droughts, floods and cyclones. The 2015 data shows surface waters cooling off in the Western Pacific and warming significantly in the tropical Eastern Pacific. Average sea surface temperatures were 1.5 degrees Celsius above normal from July to September, ranking third behind 1982's 1.6 degrees Celsius and 1997's 1.7 degrees Celsius readings. The El Nino is being further strengthened by weakening easterly trade winds allowing stronger westerlies to push warmer air from the western and central Pacific towards the east. The Australian Bureau of Meteorology said the El Nino should peak in late December before declining in the first quarter of 2016. El Nino usually brings below-average spring rainfall across eastern Australia, and increased spring and summer temperatures across southern Australia. The Bureau of Meteorology is predicting that the drying pattern in south-eastern Australia will be exacerbated by the warming of the western Indian Ocean. This pattern, known as a positive Indian Ocean Dipole, is now at levels not seen since 2006. Their video below, based on NOAA data, shows how the El Nino and Indian Ocean Dipole developed between January and August.

The Strongest El Nino in Decades Is Going to Mess With Everything - It has choked Singapore with smoke, triggered Pacific typhoons and left Vietnamese coffee growers staring nervously at dwindling reservoirs. In Africa, cocoa farmers are blaming it for bad harvests, and in the Americas, it has Argentines bracing for lower milk production and Californians believing that rain will finally, mercifully fall. El Nino is back and in a big way. Its effects are just beginning in much of the world -- for the most part, it hasn’t really reached North America -- and yet it’s already shaping up potentially as one of the three strongest El Nino patterns since record-keeping began in 1950. It will dominate weather’s many twists and turns through the end of this year and well into next. And it’s causing gyrations in everything from the price of Colombian coffee to the fate of cold-water fish. Expect “major disruptions, widespread droughts and floods,” Kevin Trenberth, distinguished senior scientist at the National Center for Atmospheric Research in Boulder, Colorado. In principle, with advance warning, El Nino can be managed and prepared for, “but without that knowledge, all kinds of mayhem will let loose.” In the simplest terms, an El Nino pattern is a warming of the equatorial Pacific caused by a weakening of the trade winds that normally push sun-warmed waters to the west. This triggers a reaction from the atmosphere above. The last time there was an El Nino of similar magnitude to the current one, the record-setting event of 1997-1998, floods, fires, droughts and other calamities killed at least 30,000 people and caused $100 billion in damage, Trenberth estimates. Another powerful El Nino, in 1918-19, sank India into a brutal drought and probably contributed to the global flu pandemic, according to a study by the Climate Program Office of the National Oceanic and Atmospheric Administration.

The rainforests hold the key to taming El Niño's destruction -- This year’s El Niño, the ocean-traveling climate cycle notorious for throwing the weather off kilter, is nicknamed “Godzilla”. While it is projected to deliver plenty of rain to some parts of the world, including drought-parched California, it is already causing dangerously dry conditions in the tropics. Papua New Guinea, for example, is experiencing its worst drought in decades, which spells doom for coffee and food crops. The last time El Niño was this intense, in 1997, five million hectares of rainforest went up in smoke in Indonesia at a time when rain usually falls in sheets. The forest fires generated gigatonnes of carbon dioxide, equivalent to 13-40% of the world’s fossil fuel emissions at the time. The resulting haze, which spanned an area from northern Australia to the Philippines to Sri Lanka, caused widespread health problems and grounded airplanes. With six of Indonesia’s provinces on high alert and fires raging, this year could be just as bad. Already, over 25 million Indonesians have suffered from the fires. Standing, healthy forests, the Earth’s “sweat glands”, pump moisture into the atmosphere, providing the globe with its greatest defense against droughts, forest fires and other weather-related disasters. Without this buffer, we’re more exposed and vulnerable to the whims of extreme weather. To maintain an effective buffer, it is imperative that global efforts to protect forests are accelerated. Tropical forests are important climate bulwarks, and the impact of cutting them down packs a wallop beyond the release of the vast stores of carbon they hold. Tearing down forests also changes the earth’s surface, triggering major shifts in rainfall and increases in temperature worldwide that can be just as disruptive to the climate and weather as those caused by carbon pollution.

Drought Causes 450-Year-Old Church to Re-Emerge  - A Mexican church that has been submerged by a dam since 1966 has re-emerged due to a drought, according to the Independent. The church, known as the Temple of Santiago or the Temple of Quechula, is located in the Nezahualcóyotl reservoir in Chiapas, Mexico. Water levels in the Grijalba river, which feeds the reservoir, have dropped so low recently that the church is re-emerging for only the second time since the dam was built five decades ago.  The reservoir level has dropped 82 feet because of the drought, exposing the 450-year old church, which measures 183 feet long and 42 feet wide and has 10 feet-high walls, according to The Guardian. The church, which is believed to have been built by Spanish colonists in 1564, was constructed to account for a growing population in the area, but was soon abandoned because plague struck the area. “The church was abandoned between 1773 to 1776 due to massive plagues sweeping the area,” architect Carlos Navarete, who worked on a report about the structure, told the AP. “Epidemics were common in the Americas from the late fifteenth century, when explorers, settlers and traders introduced bacteria and viruses to the New World,” says IFLScience.

Canada's frozen north feels financial burn of global warming: Climate change is taking a heavy economic toll on Canada's far north, with buildings collapsing as melting permafrost destroys foundations, rivers running low and wildfires all a drain on the region's limited finances, senior government officials said. A sprawling area spanning the Arctic Circle with a population of less than 50,000, Canada's Northwest Territories has spent more than $140 million in the last two years responding to problems linked to global warming, the territory's finance minister said. "Our budgets are getting squeezed dramatically from climate change," Finance and Environment Minister J. Michael Miltenberger told the Thomson Reuters Foundation. "The roads are constantly moving as the permafrost is melting... massive shore erosion is putting buildings at risk. We have spent hundreds of millions of dollars in the past few years and the tie to climate change is more and more evident." In this windswept territory, which already relies on central government subsidies, responding to global warming is crucial for its financial survival. A major U.N. conference in Paris in December will aim to create a new global deal to curb climate change to take effect from 2020. Scientists want to keep international temperature rises below 2 degrees compared with pre-industrial levels, while providing poor countries with money for adaptation. But in parts of the Northwest Territories, average temperatures have already risen more than three degrees Celsius from pre-industrial levels, government officials said.

Dalai Lama: Climate Change Is Destroying Tibet’s ‘Roof of the World’  -- The Dalai Lama urged strong climate action today “to limit global warming and to protect fragile environments, including the Himalayan glaciers and Tibetan plateau,” reports the AP. As world leaders prepare to meet in Paris for the COP21 UN Climate Change Summit, the Dalai Lama created a video message for the world. “This is not a question of one nation or two nations. This is a question of humanity. Our world is our home,” the Dalai Lama told AP. “There’s no other planet where we may move or shift.” “Temperatures for Tibet’s high-altitude plateau—referred to as the Roof of the World—are rising about three times faster than the global average, and are 1.3 degrees Celsius higher than they were 50 years ago,” reports AP. The Tibetan plateau is also referred to as the Third Pole because it has the largest store of ice outside of the North and South poles, according to Reuters. The importance of the Tibetan plateau cannot be understated, “with some 40 percent of the world’s freshwater locked into the frozen Himalayan glaciers and feeding seven major rivers that run through China, Nepal, India, Pakistan and Bangladesh,” says AP. The Dalai Lama told Reuters that “two-thirds of the glaciers in their mountain homeland may disappear by 2050.”  Furthermore, “Up to 70 percent of the plateau is covered in permafrost, with large reserves of both carbon dioxide and methane trapped within the ice,” says AP. If that permafrost melts, the trapped carbon dioxide and methane—which is 25 times more potent than carbon dioxide—could drastically increase greenhouse gas emissions. The Tibetan government estimates 12,300 million tons of carbon dioxide alone could be released if the permafrost thaws. Watch the Dalai Lama’s message here:

Vast Alpine glacier will almost vanish by 2100 due to warming (Reuters) – One of Europe's biggest glaciers, the Great Aletsch, coils 23 km (14 miles) through the Swiss Alps - and yet this mighty river of ice could almost vanish in the lifetimes of people born today because of climate change. The glacier, 900 meters (2,950 feet) thick at one point, has retreated about 3 km (1.9 miles) since 1870 and that pace is quickening, as with many other glaciers around the globe. That is feeding more water into the oceans and raising world sea levels. It was only after I got down onto the ice, with spikes on my boots for grip and often roped to my guide for safety, that I appreciated the full scale of the glacier, on the south side of the Jungfraujoch railway station. We could walk for an hour and not seem to advance across the vast field of ice, which snakes its way downhill striped by debris and rocks, scarred by crevasses and hemmed in by towering mountain peaks.  And yet even the Great Aletsch glacier, the biggest in the Alps and visible from space, is under threat from the build-up of greenhouse gases in the atmosphere from factories, power plants and cars that are blamed for global warming.  Andreas Vieli, a professor who heads the University of Zurich's group of glaciology experts, said the Aletsch may lose 90 percent of its ice volume by 2100, with the lower reaches melting away.  "My kids are going to see a very different scenery in the Alps," he said.

Gov. Brown's link between climate change and wildfires is unsupported, fire experts say - The ash of the Rocky fire was still hot when Gov. Jerry Brown strode to a bank of television cameras beside a blackened ridge and, flanked by firefighters, delivered a battle cry against climate change. The wilderness fire was "a real wake-up call" to reduce the carbon pollution "that is in many respects driving all of this," he said. "The fires are changing.... The way this fire performed, it's not the way it usually has been. Going in lots of directions, moving fast, even without hot winds." "It's a new normal," he said in August. "California is burning." Brown had political reasons for his declaration. He had just challenged Republican presidential candidates to state their agendas on global warming. He was embroiled in a fight with the oil industry over legislation to slash gasoline use in California. And he is seeking to make a mark on international negotiations on climate change that culminate in Paris in December. But scientists who study climate change and fire behavior say their work does not show a link between this year's wildfires and global warming, or support Brown's assertion that fires are now unpredictable and unprecedented. There is not enough evidence, they say.

How Indonesia’s staggering fires are making global warming worse -- Experts say that along with dramatic global coral bleaching, thousands of fires across Indonesia represents the next sign of an intensifying global El Niño event. And the consequences, in this case, could affect the entire globe’s atmosphere. That’s because a large number of Indonesia’s currently raging fires are consuming ancient stores of carbon-rich peat, which is found in wetlands featuring organic layers full of dead and partially decomposed plant life. This year, the very smoky peat burning has been simply massive — the fires are estimated to have caused $ 14 billion in damage so far, and are causing hazardous air conditions in much of the area, including nearby Singapore. Millions of people have been affected, and 120,000 have sought medical treatment for respiratory illnesses, according to Weather Underground’s Jeff Masters. Indeed, the 2015 Indonesian fire season has so far featured a stunning 94,192 fires. That’s more Indonesian fires than at the same time in 2006, a banner year both for fires and also for their carbon emissions to the atmosphere. Those emissions are more than large enough to have global consequences. Indeed, according to recent calculations by Guido van der Werf, a researcher at VU University Amsterdam in the Netherlands who keeps a database that tracks the global emissions from wildfires, this year’s Indonesian fires had given off an estimated 995 million metric tons of carbon dioxide equivalent emissions as of Oct. 14. That’s just shy of a billion metric tons, or a gigaton.

Downplaying Climate Risk -- With each passing year it becomes more and more clear that the scientific consensus on climate change has underestimated future risks. Penn State's Michael Mann has been particularly forthright about this trend (and see the video at the end). What are we to make of this? It is clear that understating risks is due in part to uncertainty and ignorance. We can model how various Earth systems will respond to greenhouse gas forcing, but those models may be wrong. The models are then subject to revision as events unfold.  On the other hand, this rational view of human risk assessment can not explain the general tendency to underestimate climate risk. To explain that, I came up with my Flatland model of human cognition, which says that understating climate risks falls under existential threat filtering, which itself is rooted in instinctual optimism bias.  Humans filter threats in a variety of ways, with seemingly endless subtle variations, all of which are ultimately inconsequential. One common way to filter threats is to push them off into the far future, and keep doing so as time goes on. Thus the threat in question never actually arrives

More Americans believe in climate change, UT poll shows - A majority of Americans now believe climate change is occurring, with growing support for environmental protection in several areas among Democrats and millennials, according to a new poll conducted by the University of Texas at Austin. More than 3 out of 4 Americans believe in climate change, up from 68 percent a year ago, the nationwide UT Energy Poll reported Tuesday. The poll, which is in its fifth year, surveyed 2,019 residents from Sept. 1-15 and has a margin of error of 3.1 percentage points. The poll also revealed sharp political divisions on several energy issues. Among Democrats, 90 percent say climate change is occurring, with only 3 percent saying nothing is changing. On the other side, 59 percent of Republicans believe in climate change — up from 47 percent six months ago — with 29 percent saying nothing is happening to the environment. “Political ideology continues to be the single greatest determinant of Americans’ views on climate change,” said UT Energy Poll Director Sheril Kirshenbaum. “Party affiliation also colors other controversial energy topics, including efforts to reduce coal-fired power and levy a tax on carbon.”

Brown Admits Nobody Knows How To Solve Climate Change - Gov. Jerry Brown warned at  a recent climate change workshop that trillions of dollars, the transformation of our way of life and a worldwide mobilization on the scale of war will be required to stave off climate change’s “existential threat” to mankind. Brown also said the problem is so complex that it’s likely no one knows how to solve it. Emissions Targeted The governor conveyed his warning at the California Air Resources Board’s Oct. 1 workshop, “California Climate Change Scoping Plan: 2030 Target.” The 2030 target reduces California’s greenhouse gas emissions to 40 percent below 1990 levels in the next 15 years. Brown also designated a 2050 target: emission reduction to 80 percent below the 1990 level. The 2030 target is “the most aggressive benchmark enacted by any government in North America to reduce dangerous carbon emissions over the next decade and a half,” said Brown in an April 29 statement. “I come today because this is a topic that is not easy to grasp,” he said. “It’s complicated. The more you dig into controlling air pollution or measuring greenhouse gas emissions or attempting to understand the [climate] models that examine and attempt to predict how world climate patterns will change over time, it definitely is a very complicated science that we mere lay people just get little glimpses of.”

Could cloud brightening be Earth’s last chance?: Geoengineering is a dirty word in most scientific circles. The consensus is that deliberate intervention in the Earth’s climatic system, for whatever reason, is a slippery slope that would most likely lead to even worse environmental conditions. A group of retired Silicon Valley engineers and scientists thinks otherwise. The The Marine Cloud Brightening Project is based in Sunnyvale, California. The members of the group range in age from 60 to 79 years, and includes tech pioneers such as Armand Neukermans, who helped develop the earliest inkjet printers at Xerox Labs, pharmaceutical chemist Gary Cooper, and instrument designer Lee Galbraith. Meeting once a week for the last seven years the group members all work pro bono. Now they hope to raise the funds to test a device that can shoot tiny seawater droplets into the atmosphere to “boost the brightness of clouds”. This would reflect rays of sunlight back into space and, theoretically, cool the planet. It has never been done. Well, not deliberately anyway. Cloud brightening is already an unintended side effect of some industry practices. “Shipping emissions already pump particles into clouds that produce a cooling effect, somewhere between one and four degrees Fahrenheit,” says Kelly Wanser, chief executive of the project. “Clouds are one of the least understood parts of meteorology. Scientists can observe how some industrial practices affect cloud formation. But that’s precisely the problem: all they can do is observe. We are not in a position to control a cloud brightening experiment scientifically.”

Kerry urges 'ambitious' climate deal, warns on food security | Reuters: U.S. Secretary of State John Kerry urged global leaders on Saturday to agree an "ambitious" deal at a climate conference in Paris in December, saying global warming was the biggest threat to global food security. "We need every country on the same page, pushing an ambitious, durable and inclusive agreement that will finally put us on the path toward a global clean-energy future," Kerry told an audience at the Milan Expo, where the focus is on "Feeding the planet" and new approaches to sustainable food. He said extreme weather patterns - with 19 of the 20 warmest years on record occurring in the past two decades - meant the world must act now, in a coordinated way. A climate deal would boost the confidence of businesses to invest in low-carbon, clean energy alternatives, and "hopefully move the private sector to be one of the great agents of action in addressing the climate challenge," he said. Kerry said the migrant crisis in Europe, caused by Syrians and Africans fleeing conflict, would pale in comparison to the mass migration that intense drought, rising sea levels and other impacts of climate change were likely to bring.

New UN climate deal text: what’s in, what’s out: The UN has released the latest draft of the text that will eventually be hammered into an international climate change agreement in Paris this December. The text, written by co-chairs Dan Reifsnyder from the US and Ahmed Djoghlaf from Algeria, bears many of the hallmarks of its two previous incarnations. There is the same flurry of square brackets (231, to be precise, indicating that there at least 231 points still up for negotiation) and deluge of acronyms — and the same core issues running throughout the document. But, in many ways, the text is a skeleton of previous versions. At 20 pages, it is about a quarter of the length of the 76-page document released in July, and the 86 pages from February. In other words, it is the first time that the co-chairs have made substantive reductions to the Paris text. At UN sessions taking place throughout this year, countries have expressed concern at the slow pace of the negotiations. The text responds to a call for a “step change in the pace of negotiation”, say the co-chairs in a note accompanying the text. Behind the scenes, diplomats have been engaging in intense discussions to speed along the process. The hope is that countries will start to converge around what should go in — and stay out of — the final deal. Nonetheless, slimming down the contents of the document remains a politically sensitive task, with nations often reluctant to say let go of their favoured positions.

These World Leaders Agree: We Need A Price On Carbon -- The cost of carbon is having a moment, with economists, environmentalists, and even the pope supporting a price on carbon emissions.   And on Monday, the World Bank announced a high-level group, the Carbon Pricing Panel, which brings together heads of state, local leaders, and business executives. The luminaries, including German Chancellor Angela Merkel, Philippines President Benigno Aquino III, and California Gov. Jerry Brown, are calling on policymakers and negotiators to use carbon pricing mechanisms, setting the stage for strengthening emissions reduction plans expected at the United Nations conference in December.  “There has never been a global movement to put a price on carbon at this level and with this degree of unison,” World Bank Group President Jim Yong Kim said in a statement.  The only approach that would work is an across-the-board rising carbon fee covering every fossil fuel at the source.  Putting a price on carbon uses a standard economic tool and is broadly favored by economists as an efficient and effective way of reducing emissions. How it will be implemented worldwide remains to be seen. Some climate activists worry that some programs will push emissions down far too slowly to prevent the most catastrophic effects of climate change.

Big Oil companies back agreement to prevent climate change: -- Ten major energy companies declared their support for a global deal to prevent climate change, but stopped short of offering unanimous backing for carbon pricing. Producers including BP Plc, Saudi Arabian Oil Co. and Petroleos Mexicanos -- who together account for almost 20% of the world’s oil and gas output -- said in a statement that they will back policies consistent with the goal of keeping the increase in average global temperatures to within 2°C (3.6°F). The joint conference in Paris Friday follows a June letter from BP, Eni SpA, Royal Dutch Shell Plc, Total SA, Statoil ASA and BG Group Plc urging governments to agree to carbon pricing at the UN's so-called COP21 climate change summit starting in the French capital next month. While the new Oil and Gas Climate Initiative added the support of companies from Saudi Arabia, Mexico and India, the broader group didn’t agree a common position on whether companies should pay a price to emit greenhouse gases. “The OGCI doesn’t have a position on CO2 pricing, not a common one,” Helge Lund, CEO of BG Group, told Bloomberg News at the conference in Paris. “The European companies have written a letter to the UN where we strongly support it,” Lund said, without naming the companies that didn’t back carbon pricing.

Why Are Major US Companies Pledging to Reduce their Carbon Emissions? -- President Obama has talked several U.S companies into pledging to reduce their respective greenhouse gas emissions.  Why have these companies signed these pledges? "The companies that have made the pledge include such iconic American brands as Levi Strauss & Company, McDonald’s, I.B.M. and Procter & Gamble." Permit me to propose some different hypotheses;
1. Talk is cheap and these companies won't follow through with their promises.
2. These companies believe that they have earned "good will" with President Obama that will yield regulatory leniency in the future and thus this pledge will pay for itself.  Tom Lyon and John Maxwell have been the leading scholars discussing this point. Read their paper.
3. There is a principal-agent problem that the CEOs of these firms are buddies of the President and want to feel his warmth but the shareholders of the company will ultimately bear the costs of higher energy prices but since the CEO isn't a major shareholder he/she avoids bearing these costs.
4. These firms already are energy efficient so it is easy for them to sign a pledge that doesn't require any marginal new costly actions.
5.  These firms anticipate that energy prices are rising (perhaps because of future democrats introducing a carbon tax); anticipating higher energy prices they are already investing in energy efficiency (to lower their future energy bills) and thus it is easy for them to announce that they will take the pledge because it doesn't require any actions that they weren't already planning to take.
Note that the list of "iconic" companies listed above are not in energy intensive industries. Their main GHG production occurs from transportation of workers to work and shipping product.  What transportation pledges will these companies make to reduce their GHG emissions?

Environmental Agencies Voice Concerns of Ambiguous Provisions in Trans-Pacific Partnership: The Trans-Pacific Partnership (TPP) has been put under scrutiny by many environmental protection agencies who do not believe the agreement does enough to protect the oceans and illegal trafficking of endangered species. On Oct. 5, 2015, 12 Pacific-Rim nations, including the United States and Japan, agreed on the terms of the Trans-Pacific Partnership after over five years of negotiations. Some environmental agencies including Sierra Club and Friends of the Earth argue that the language behind its environmental chapter is too ambiguous and does not do enough to protect oceans and wildlife. While the trade agreement has promised to benefit all nations involved, its reception has not been all positive. In the U.S., democrats and republicans alike have opposed the agreement, insisting that it will not benefit domestic industries and labor force."There is a wild disparity between the promises that are being made about this trade agreement and the reality of the words on the paper and the history of free trade agreements," said the Director of the Responsible Trade program for Sierra Club Ilana Solomon. She has been with the trade program for over three years. According to Solomon, the TPP favors international corporations and limits the power of governments within the agreement to implement clean energy legislation.

TTIP: EU negotiators appear to break environmental pledge in leaked draft -- The EU appears to have broken a promise to reinforce environmental protections in a leaked draft negotiating text submitted in the latest round of TTIP talks in Miami.. In January, the bloc promised to safeguard green laws, defend international standards and protect the EU’s right to set high levels of environmental protection, in a haggle with the US over terms for a free trade deal.  But a confidential text seen by the Guardian and filed in the sustainable development chapter of negotiations earlier this week contains only vaguely phrased and non-binding commitments to environmental safeguards. No obligations to ratify international environmental conventions are proposed, and ways of enforcing goals on biodiversity, chemicals and the illegal wildlife trade are similarly absent. The document does recognise a “right of each party to determine its sustainable development policies and priorities”. But lawyers say this will have far weaker standing than provisions allowing investors to sue states that pass laws breaching legitimate expectations of profit. “The safeguards provided to sustainable development are virtually non-existent compared to those provided to investors and the difference is rather stark,” said Tim Grabiel, a Paris-based environmental attorney. “The sustainable development chapter comprises a series of aspirational statements and loosely worded commitments with an unclear dispute settlement mechanism. It has little if any legal force.”

Pulp Fiction | Climate Central Special Report: As the world tries to shift away from fossil fuels, the energy industry is turning to what seems to be an endless supply of renewable energy: wood. In England and across Europe, wood has become the renewable of choice, with forests — many of them in the U.S. — being razed to help feed surging demand. But as this five-month Climate Central investigation reveals, renewable energy doesn’t necessarily mean clean energy. Burning trees as fuel in power plants is heating the atmosphere more quickly than coal. Climate Central reporter John Upton traveled to England and through the U.S. Southeast to investigate both ends of the global trade in wood pellets, interviewing scientists, politicians, policy makers, activists, workers and industry leaders. Europe has long been viewed as the wellspring of climate action. But the loophole that’s promoting wood burning is so overlooked, he discovered, that it’s unlikely to even be raised during global climate treaty negotiations in Paris this December.  The U.S. Environmental Protection Agency will walk a fine line between promoting the use of wood energy that could accelerate deforestation and global warming, and defining the limited sources of wood fuel that could help ease those problems. The European Union makes no such distinction. Through a loophole in its clean energy regulations, all wood energy is treated as if it releases no carbon dioxide. That accounting trick is allowing European national governments and their energy sectors to pump tens of millions of tons of greenhouse gases into the air every year — without accounting for it. That helps them keep that pollution off their books, but not out of the atmosphere.

Worse Than Fossil Fuels? Why Bioenergy Is Not Green -- Bioenergy’s role in the global economy is growing as governments promote renewable biofuels and biomass electricity to replace fossil fuels. But in recent years, mounting scientific evidence has shown that bioenergy is not, in fact, carbon-neutral: hidden emissions from land-use change actually make it worse than traditional fossil fuels. Given increasing competition for land and the need to reduce carbon emissions, Princeton Research Scholar Tim Searchinger argues that bioenergy is the wrong path.
-- The fundamental idea behind bioenergy is that it’s carbon-neutral because it releases the carbon that plants absorb when they grow, and thus does not add carbon to the air. Why is this wrong?
-- It’s a common misunderstanding. Burning biomass of course emits carbon, just like burning fossil fuels. The assumption is that the plant growth to produce that biomass offsets the emissions. But the first requirement for a valid offset, whether for carbon or anything else, is that it is additional. If your employer wants to offset your overtime with vacation, they have to give you additional vacation, not just count the vacation you’ve already earned. Similarly, you can’t count plant growth as an offset if it was occurring anyway. Plant growth can only offset energy emissions if it is additional. Counting plants that would grow anyway is a form of double-counting. Your paycheck provides a good analogy. Say you get paid every two weeks. You spend your paycheck, and the good news is you’ll get your next paycheck in another two weeks. Ok, so what if I say, “Give me your paycheck. It’s not going to cost you anything because you’ll get another paycheck in two weeks.” Of course, unless you are pretty foolish, you are not going to give me your paycheck because you’re using your paycheck to pay rent, buy food, and perhaps store some money in the bank. Giving me your check therefore comes at a high cost. It’s the same with plant growth and the carbon it absorbs.

Calling on universities and professional associations to greatly reduce flying -- For several years now, some academic friends and I have been reflecting on frequent flying in university communities during a time of climate change. This is not about any particular colleague's personal flying behavior, but instead about collective action to improve the climate profile of our academic communities.   We finally have gotten organized for action and are releasing a new petition campaign to encourage universities and professional associations to greatly reduce flying. We realize that we cannot ask academics to change their own behavior in isolation, because so much depends on the professional world we live in, including expectations to attend meetings and conferences. So, we deliberately address the petition to universities and professional associations at the same time. Please support this petition through this link at and see our petition project web page at  In addition, supporters who are academics should email us at to have their name added to our public List of Academic Signatories. We have a great list of more than 50 initial supporters, from diverse disciplines, in countries all around the world.

Carbon pollution: the good, the bad, the ugly, and the denial -- The anti-climate policy ‘fact blurring’ advocacy group Global Warming Policy Foundation (GWPF) recently published a report on ‘the good news’ about rising carbon dioxide, written by Indur Goklany. Goklany has a background in electrical engineering and has been a US delegate to the IPCC. He has also in the pastreceived $1,000 per month from the Heartland Institute and had two books published by the Cato Institute, among other affiliations with fossil fuel-funded think tanks.  Goklany’s affiliation with and funding from these think tanks is relevant due to the nature of the GWPF report, which essentially argues that carbon pollution is the best thing since sliced bread.   Professor Colin Prentice, expert in climate change impacts on the biosphere at Imperial College London, put together a nice summary of what the report gets right and wrong. While the GWPF report is correct that there are some benefits from rising carbon dioxide levels, as Prentice notes,  The good news should not blind us to the negative implications of continued unabated climate change, and the multidecadal lead times required for policies to have any discernible effect on CO2 and climate. These are the reasons propelling international pressure for long-term carbon neutrality, and nothing that Goklany says in his report invalidates them.  In short, the report selectively considers only the evidence that supports its argument that carbon pollution is terrific. The report also argues against a strawman, portraying its opponents as claiming that there are no benefits associated with global warming. In reality, climate scientists and economists consider all climate change impacts, both good and bad, in their overall assessments. Unfortunately the bad consequences far outweigh the good, as even the GWPF’s own economic advisor Richard Tol has concluded

Can $20 Million Help Turn Carbon Pollution Into Something Useful?  - Carbon pollution from power plants is a big problem — when power plants burn fossil fuels, they increase the concentration of carbon dioxide in the atmosphere, in turn driving global climate change. And while new domestic policies and international negotiations are doing their best to curb the amount of carbon emitted from coal and natural gas-fired power plants, global energy demands are expected to grow 37 percent by 2040, with three quarters of that demand supplied by oil, gas, and coal. In short, the problem of carbon pollution from power plants isn’t set to disappear anytime soon. Some might look at that problem and feel discouraged. XPrize Foundation, a nonprofit dedicated to bringing about breakthroughs that benefit humanity, looked at the problem of carbon solution and saw an opportunity. To solve the problem of carbon pollution, XPrize is teaming up with two big players from the energy industry — the U.S.-based NRG and Canada’s Oil Sands Industry Alliance (COSIA) — to fund a competition aimed at incentivizing the creation of technology that turns carbon emissions into a useable product, be it building materials, cement, plastic, or some other manifestation. The competition, which is open to expert scientists and novices alike, will last four and a half years and offer participants two tracks — one that makes the most of CO2 pollution from coal plants, and the other from gas plants. In the end, the winning teams will be awarded $10 million each — a $20 million total that Bunje hopes will inspire meaningful change in the world.

Only 15% of California's Big Solar Projects Are on the Right Kind of Land - IEEE Spectrum: The real estate agent’s mantra is well known: location, location, location. But location is important, too, when considering where to site utility-scale solar projects, and most of California's projects or planned projects are in less-than-ideal spots, according to a new study. As a result, these projects may have negative impacts on the environment and will not be as cost-effective or as carbon neutral as they could be. Researchers from Stanford University and the University of California’s Riverside and Berkeley campuses identified 161 planned or proposed large-scale utility solar and applied an algorithm to determine how compatible they are with their location. The results, which were published today in the Proceedings of the National Academy of Sciences, found that only 15 percent of sites were on compatible land. The vast majority of projects were slated for a type of habitat called shrubland or scrubland. These are habitats dominated by sagebrushes and small plants that are common in Mediterranean climates. In California, they are "biodiversity hotspots," but have already lost around 70 percent of their original extent.  About 48 percent of the land sited for photovoltaic projects and 43 percent of the land for concentrating solar power (CSP) projects were on shrub or scrublands. The second most common area for utility-scale solar was on agricultural land.  The study "shines a light on a lack of knowledge about land cover change,"  "We're not thinking as holistically as maybe we should be in terms of all the environmental impacts that siting decisions can make."

VW made several defeat devices to cheat emissions tests: sources - Reuters: Volkswagen made several versions of its "defeat device" software to rig diesel emissions tests, three people familiar with the matter told Reuters, potentially suggesting a complex deception by the German carmaker. During seven years of self-confessed cheating, Volkswagen altered its illegal software for four engine types, said the sources, who include a VW manager with knowledge of the matter and a U.S. official close to an investigation into the company. Spokespersons for VW in Europe and the United States declined to comment on whether it developed multiple defeat devices, citing ongoing investigations by the company and authorities in both regions. Asked about the number of people who might have known about the cheating, a spokesman at company headquarters in Wolfsburg, Germany, said: "We are working intensely to investigate who knew what and when, but it's far too early to tell." Some industry experts and analysts said several versions of the defeat device raised the possibility that a range of employees were involved. Software technicians would have needed regular funding and knowledge of engine programs, they said. The number of people involved is a key issue for investors because it could affect the size of potential fines and the extent of management change at the company,

Essential Part of the Volkswagen Diesel Repair Is the Owner -  Even as Volkswagen embarks on the task of fixing the emissions systems it disabled on almost 500,000 of its diesel vehicles in the United States, the automaker faces another hurdle: persuading owners to make the repair at all.  That’s because the software that allowed Volkswagen to fool federal emissions tests also lowered the car’s performance and fuel economy while the device was turned on. So for owners, the prospect of having a car’s emissions cleaned up, only to have the car perform worse — whatever the pollution — is not sitting well.“If we take a 10 percent hit in our gas mileage, I can live with that, but I won’t be happy,” .“If it is 25 percent or more and the performance is degraded to the point where the car has a lot less torque and pickup, that is going to make me very unhappy,” . “That is going to make me consider not getting the fix.” It was well known among owners of Volkswagen diesels that the cars’ advertised fuel economy — as shown on the window sticker — was almost always lower than their real-world performance. Volkswagen could have saved fuel or improved performance by allowing more pollutants to pass through its cars’ exhaust systems, researchers said. Michael Horn, head of Volkswagen’s American unit, told a congressional panel this month that the repairs he outlined — which will take years and require significant new equipment — might result in a slightly lower top speed in the cars. But he was careful to say that the cars’ fuel economy would not be lower than the rating on the window sticker.

Volkswagen faces €40bn lawsuit from investors - Volkswagen is set to be pushed deeper into crisis after it emerged that the carmaker is facing a record-breaking €40bn (£30bn) legal attack spearheaded by one of the world’s top law firms. Quinn Emanuel, which has won almost $50bn (£32bn) for clients and represented Google, Sony and Fifa, has been retained by claim funding group Bentham to prepare a case for VW shareholders over the diesel emissions scandal, The Sunday Telegraph can reveal. Bentham has recently backed an action by Tesco shareholders over the retailer’s overstating of profits. The pair are attempting to assemble a huge class action following what they call “fundamental dishonesty” at the German auto giant, which plunged the carmaker into crisis after it admitted using “defeat devices” to cheat pollution tests. The admission has been hugely costly for shareholders after it wiped more than €25bn off VW’s stock market value. Recalls and fines worth tens of billions of euros more are also expected.Now Quinn Emanuel and Bentham are contacting VW’s biggest investors – which include sovereign wealth funds of Qatar and Norway – to ask them to join the claim. VW has admitted that it fitted “defeat devices” to 11m cars that allowed them to fraudulently pass pollution controls, though the company’s senior management has insisted it was unaware of the practices.

VW’s Dieselgate Scandal Could Cost Up To $87 Billion In Total -- The Volkswagen emission scandal (commonly known as Dieselgate) has shocked the entire world. It all began on September 18, 2015 when the German carmaker was charged for violating the Clean Air Act by the United States Environment Protection Agency (EPA). Volkswagen’s turbodiesel models were found to be programmed with a ‘defeat device’ that would block the emission controls during the actual driving and would turn them on only during the emission testing phase itself. The amount of NOx emitted during the day-to-day driving was almost 40 times higher than the prescribed limits. With 11 million Volkswagen diesel vehicles being fitted with this ‘defeat device,’ there is little doubt that the VW Dieselgate could be one of the biggest scandals of all time. "The market does not appear to be discounting negative knock-on effects. The outcome for recall costs and fines is unclear and largely depends on the engine performance post repair," Estimates from Credit Suisse peg the costs of Dieselgate at a worst-case scenarios of $87 billion. This would make the VW scandal almost 60 percent more costly than the BP Deepwater Horizon spill. Although the German car maker has allocated around $7.3 billion for dealing with the scandal, it could end up paying more than ten times the allocated amount. Furthermore, the potential $87 billion in losses would be almost 7 times the German automaker’s net profit for 2014. The $87 billion figure from Credit Suisse includes costs related to owner re-imbursements, civil-criminal cases and fixing the emission problem. However, according to Credit Suisse, the biggest cost for VW would be to compensate for the ‘loss of value’ to the owners of the affected diesel cars, and this could be as high as $37 billion.

Takata and Honda Kept Quiet on Study That Questioned Airbag Propellant - The problem had haunted Honda for years: Why were airbags made by Takata exploding in its cars, sending metal fragments flying into the passenger cabin? By 2010, Honda had recalled more than 800,000 cars to fix the airbags after at least one death. It turned out to be the early stages of what is now one of the largest automotive recalls in American history, involving 12 automakers and at least 19 million vehicles. Honda assured regulators that the airbags’ design was not to blame, echoing an explanation from Takata, one of the biggest makers of airbags worldwide, that pointed to isolated manufacturing problems. But behind the scenes, officials from Honda and Takata were exploring another possibility, according to employees of both companies. They wanted to determine whether the propellant used to inflate the airbags might be at the root of the explosions. Without alerting regulators or the general public, Takata commissioned one of the nation’s most respected pyrotechnics labs, the High Pressure Combustion Laboratory at Pennsylvania State University, to study the compound, ammonium nitrate. As a condition of the study, the Penn State lab was not permitted to publicly link the research to Takata or Honda, according to accounts that were confirmed by Takata. And when the findings were published in a scientific journal, the lab was forbidden to disclose that Takata had paid for the study. Those omissions violated the journal’s statement of ethics. And when the study’s conclusion in 2012 cast doubt on the use of ammonium nitrate, suggesting it was sensitive to changes in pressure, Takata disputed the methodology, dismissed the conclusion and waited more than two years before sharing the research with regulators, according to accounts confirmed by Takata.

Governments are more likely than businesses to break pollution regulations - For the study, Konisky and Teodoro examined records from 2000 to 2011 for power plants and hospitals regulated under the Clean Air Act and from 2010 to 2013 for water utilities regulated under the Safe Drinking Water Act. The study included over 3,000 power plants, over 1,000 hospitals and over 4,200 water utilities — some privately owned and others owned by public agencies.

    • For power plants and hospitals, public facilities were on average 9 percent more likely to be out of compliance with Clean Air Act regulations and 20 percent more likely to have committed high-priority violations.
    • For water utilities, public facilities had on average 14 percent more Safe Drinking Water Act health violations and were 29 percent more likely to commit monitoring violations.
    • Public power plants and hospitals that violated the Clean Air Act were 1 percent less likely than private-sector violators to receive a punitive sanction and 20 percent less likely to be fined.
    • Public water utilities that violated Safe Drinking Water Act standards were 3 percent less likely than investor-owned utilities to receive formal enforcement actions.

Konisky said the findings are significant but not surprising. Government entities have higher costs of complying with regulations because they often must go through political processes to raise the money needed to improve their facilities. And they may face pushback from customers or taxpayers who object to higher rates and have the political power to block them. Public entities also face lower costs for violating the regulations, the authors argue. There is evidence from other studies that they are able to delay or avoid paying fines when penalties are assessed. And officials with regulatory agencies may be sympathetic to violations by public entities, because they understand the difficulty of securing resources in the public sector.

Contaminated water from Colorado mines an ongoing problem -   More than 3 million of gallons of wastewater from the Gold King Mine spilled into the nearby Animas River, turning it an alarming mustard hue. The photos of the yellow-orange river were widely shared and have brought attention to a longstanding challenge that many were unaware of: how to regulate, treat and pay for the upkeep of abandoned and dormant mines in Colorado and across the country. Here are some key points to understanding the issue: How many mines exist in the United States that are similar to the Gold King Mine? The Gold King Mine hasn't operated since 1923. The EPA has been overseeing abandoned mine lands -- which can include bodies of water and surrounding watershed -- for many years.  Earthworks wrote a report in 1993 which said that there were more than half a million abandoned hardrock mines in 32 states. Those half a million mines, Earthworks says, have produced 50 billion tons of untreated, unreclaimed mining wastes on public and private land. The report notes that wastes can include arsenic, asbestos, cadmium, copper, cyanide, iron, lead, mercury and sulfur, among other material, and produce airborne pollutants. In Colorado this week, leading toxicologists say there could be health effects for many years from heavy metals such as mercury and lead that spilled into the water of the Animas River. Exposure to high levels of these metals can cause many health problems, including cancer and kidney disease, and also lead to developmental problems in children. The amount of lead in the Animas River was nearly 12,000 times higher than the acceptable level set by the EPA.

US NRC says action on TVA nuclear power unit license 'couple of weeks' away - The US Nuclear Regulatory Commission has completed a series of measures needed before issuing an operating license to Tennessee Valley Authority for its 1,150-MW Watts Bar-2 unit, and could decide on the license in a "couple of weeks," the agency said Thursday. In a letter to TVA, NRC's Region II in Atlanta said Watts Bar-2 has been substantially completed, complies with the permits and applications filed by TVA, and is likely to be operated properly. That letter was the final NRC step before agency headquarters can issue the operating license, which is required before TVA can load nuclear fuel in the reactor. The decision on whether to issue the operating license "is expected within the next couple of weeks," NRC said in a statement Thursday. If issued, it would be the first operating license for a US power reactor since February of 1996, when NRC approved the operations of Watts Bar-1.

TVA Cleared to Start First New U.S. Nuclear Power Plant in Nearly 20 Years - WSJ: For the first time in almost 20 years, federal regulators have given a new nuclear power plant a license to begin generating electricity. The Nuclear Regulatory Commission gave the go-ahead to the Tennessee Valley Authority on Thursday to load uranium fuel into the Watts Bar Unit 2 reactor in Spring City, Tenn., about 50 miles southwest of Knoxville. The government-run power agency can put the plant into commercial operation once it successfully completes a series of tests and inspections. The regulatory move ends one of the lengthiest construction sagas in the history of the nuclear-power industry. The TVA began building the Watts Bar Unit 2 reactor in the early 1970s but broke off work in 1985 in part because of a construction scandal at the agency. It revived the project in 2007. That tangled history helps explain why experts aren't predicting a big wave of new nuclear power projects, which today produce about 19% of the electricity in the U.S. Two other utilities in the Southeast— Southern Co. and Scana Corp. % —are building four reactors in Georgia and South Carolina that are expected to enter service by the end of the decade. But few utilities are likely to follow suit because of the steep investments nuclear plants require and the difficulty they are having competing with low-cost natural-gas plants. Several energy companies have announced plans to close down existing reactors, which are costly to operate. Just last week, Entergy Corp. ETR -2.01 % said it would shut the aging Pilgrim plant in Massachusetts by mid-2019.

Tests begin after fire put out at radioactive waste site  - Several state agencies that responded to a fire at a radioactive waste site in rural southern Nevada were testing air quality and checking for any other problems Monday after the flames were extinguished. No injuries have been reported since the fire ignited Sunday afternoon in an industrial area near Beatty, Nevada, about 115 miles northwest of Las Vegas, said Bud Marshall, southern Nevada regional supervisor for the state Division of Emergency Management and Homeland Security. It is not clear how the fire started at the shuttered disposal site, which is about 8 miles from populated areas. Authorities say the site accepted low-level radioactive waste for 30 years, which can include tools, protective clothing, machine parts from nuclear plants and other items.

Fire that shut down US 95 called hot, powerful -- Whatever caught fire Sunday in the state-owned radioactive waste dump at the US Ecology site near Beatty packed a powerful punch, Nevada's chief fire marshal said Tuesday. "We don't know exactly what caught fire. We're not exactly sure what was burning in that pit," Fire Marshal Chief Peter Mulvihill said in a conference call with reporters. He said in the early stages of the fire "there was some energetic burning" that blew a hole in the cover soil that caps trench No. 14, where low-level radioactive materials were buried in unlined, clay terrain in the 1970s. Mulvihill added that investigators who were converging to begin their probe at the site Tuesday, about 10 miles south of Beatty and about 108 miles northwest of Las Vegas, don't know yet if an explosion occurred before the fire was reported to the Nevada Department of Public Safety and Emergency Management about 2:30 p.m. Sunday. "There was something that definitely burned very hot," he said. The state's public safety team decided to allow the fire to burn itself out instead of trying to douse it because they didn't want put water on any material that might be reactive to water else they could potentially exacerbate the problem. "That was a prudent and reasonable approach for local officials to take," Mulvihill said, adding that the fire was no longer visible in the early morning hours Monday. The fire prompted authorities to shut down a 140-mile stretch of U.S. Highway 95 for nearly 24 hours. It happened as Nye County's first responders were grappling with flash flooding from heavy rains Sunday.

Holding the Department of Energy accountable in Idaho -  Cecil D. Andrus -- I have been involved in government at the state and federal level for a long time and have had my share of political and legal run-ins with government agencies, but rarely in more than 50 years in politics have I encountered a government agency more committed to secrecy—perhaps even deception—than the US Department of Energy. Most citizens of my state know that, since last January, former Republican Governor Phil Batt and I have been raising questions about a plan by the US Department of Energy to bring additional shipments of commercial spent nuclear fuel to the Idaho National Laboratory in eastern Idaho for “research.” Our opposition to these shipments involves a variety of concerns including, most important, that the proposed Energy Department action violates an historic agreement Governor Batt negotiated with the federal government in 1995 that specifically prohibits commercial spent nuclear fuel from coming to Idaho. We also object to the fact that the Energy Department still has no permanent disposal site for this material, which effectively means that once it is in Idaho it will stay here for a very long time. The fact that the Energy Department has also missed key milestones to treat existing highly radioactive liquid waste at the Idaho National Laboratory further complicates the picture.

U.K., China Poised for Deal on World’s Costliest Nuclear Plant -- The U.K. and China are set to announce an accord that will give the Asian nation a stake in Electricite de France SA’s Hinkley Point project, Britain’s first nuclear plant in three decades and the most expensive atomic energy station ever. The proposed deal is likely to be announced during a state visit to Britain by President Xi Jinping this week and follows protracted talks between EDF and its Chinese partners. The two nations will publish investments and deals worth a “huge” amount of money, including on nuclear power, Zhang Ji, assistant minister of commerce, said last week in Beijing. EDF will still have to make a final investment decision. The U.K. government says new nuclear plants are a crucial part of the energy mix as Britain plans to cut carbon emissions while securing predictable electricity supplies. With construction costs estimated at 24.5 billion pounds ($37.9 billion) by the European Commission and bolstered by U.K. subsidies at twice the current wholesale power price, opponents have described Hinkley as “the most expensive object on earth.” “It is a very, very, very, very expensive piece of kit even in the context of nuclear power, and therefore it’s hard to see that it’s value for money,” . “The economics don’t work for the private sector and the state always underpins the economics of nuclear power throughout the world.”  EDF, the world’s biggest operator of reactors, and the U.K. agreed two years ago that Hinkley will get 92.50 pounds per megawatt-hour of power for as long as 35 years. That’s competitive with new-build gas and renewable projects, and will give it a rate of return of 10 percent, according to the company.

Errors revealed at Chinese nuclear firm seeking to invest in UK plants - One of the Chinese nuclear power firms pushing for a stake in the UK’s energy industry left out hundreds of critical steel rods when building its first reactor near Hong Kong in 1987 because workers misread the blueprint. The missing parts were added in a higher layer of the foundation, with extra steel to reinforce them, after the extraordinary mistake was discovered. The plant has now been operating safely for more than two decades. But the nature and scale of the error raises serious questions about the rigour of Chinese nuclear firms and the country’s oversight regime, experts say. “[This a prospective] partner who, when they built the first nuclear power station in China, forgot to put in a large percentage of the protective steel,” said Professor Steve Tsang, senior fellow of the China Policy Institute at Nottingham University. “Potentially we are putting ourselves in a very difficult situation.” China General Nuclear Corp built and runs Daya Bay nuclear plant in Shenzhen. It is one of two Chinese power firms expected to invest in the UK’s Hinkley Point power station and potentially build and operate a future nuclear plant, along with China National Nuclear Corporation and French firm EDF.

Japan Confirms Fukushima Worker Diagnosed With Cancer From Radiation Exposure - There’s terrible news from Japan today: Japan’s health ministry announced that a worker involved in the clean-up of the destroyed nuclear reactors at Fukushima has been diagnosed with “acute” leukemia due to his exposure to radiation. According to the Washington Post, the man, who worked at the Fukushima Daiichi nuclear disaster site between 2012 and 2013, has “acute myelogenous leukaemia—a cancer of the blood and bone marrow.” His condition is a direct result of him working at Fukushima. Our thoughts are with him and his family and we hope he is receiving the very best medical treatment Japan has to offer. In the light of this sad news, many people have questions to answer. Fukushima’s owner and operator TEPCO has made firm commitments to the safety of its workers. “[T]he safety of the workers and employees who are involved in the decommissioning operation is the highest priority,” says the company’s website. The company now has to acknowledge its measures have been proven to be inadequate.  Japan’s President Abe also needs to examine his conscience. President Abe has made repeated assurances that the situation at Fukushima is “under control.” His government is in the process of lifting restrictions in contaminated areas and forcing evacuees to return. We now see how empty those assurances were. Lifting of restrictions need to be halted immediately.

North Dakota and Minnesota face off over coal power in federal appeals court --The states of North Dakota and Minnesota on Wednesday took their legal battle over coal-generated electricity to a federal appeals court in St. Paul and faced tough questions from the three-judge panel. The case pits Minnesota regulators against the state of North Dakota and its utility and coal interests over a 2007 Minnesota law restricting new power generation from coal. North Dakota successfully argued in federal district court that the law illegally regulates out-of-state utilities in violation of the U.S. Constitution’s Commerce Clause. Now, the Eighth U.S. Circuit Court of Appeals is reviewing an April district court ruling that enjoined Minnesota from enforcing key sections of the law. North Dakota interests say it hampers their ability to find buyers for power from existing coal-fired generating plants or to plan for new ones. “We think the statute as it is enacted is unconstitutional — a violation of the Commerce Clause,” said North Dakota Attorney General Wayne Stenehjem, who attended the oral arguments, although another attorney addressed the court on behalf of his state. The Commerce Clause is meant to bar states from interfering in interstate commerce.

State delays coal terminal environmental study to 2016: A draft environmental study for the $643 million Longview coal terminal that had been due in November has been postponed until 2016, the state Department of Ecology announced Thursday. Coal terminal opponents welcomed the news, while supporters called it “deeply disappointing” and blamed the delay on politics. A schedule that Gov. Jay Inslee’s office agreed to a year ago had Ecology and other lead agencies, along with a consultant, completing the study next month. Ecology only said Thursday morning that it and its partners are discussing a new completion date for the study. Later in the day it clarified that the EIS would be available “as early as possible in 2016.” “The previous target date for releasing the draft environmental impact statement was based on an ambitious schedule – more than a year ahead of the current average length of time for a federal environmental review,” Ecology said in a joint announcement with the two other co-leads on the study, Cowlitz County and the U.S. Army Corps of Engineers. Late data submittals and the need for accuracy prompted the agency to delay the release date, the statement said. The projected EIS is massive in its scope and goes well beyond impacts at the terminal site itself, the former Reynolds Metals Co. aluminum plant west of Longview. For example, it is supposed to measure the impact of burning the coal in Asia on global climate change.

Kasich details energy plan - Toledo Blade — Presidential contender John Kasich last week proposed an “all of the above” approach to energy production that includes renewables and conservation measures along with stepped-up fossil fuel production. But Gov. John Kasich’s first test may come next year with his position that a proposed, indefinite halt to Ohio’s mandate that utilities get more power from renewable sources like wind, solar and new technology is “unacceptable.” “We’ll make sure we produce more energy from oil and gas; from nuclear; from coal that we dig, clean, and burn; alternatives and renewables, and anything else that we can find, and we’ll do it responsibly,” Mr. Kasich said in New Hampshire as he spelled out his plan for the first 100 days of a President Kasich administration. “We need it all, and it should come from right here,” he said. He proposed working with Canada and Mexico to ensure that North America can meet its own energy needs, and part of that plan would be approval of the Keystone XL Pipeline, a position that puts him at direct odds with Democratic presidential front-runner Hillary Clinton. The pipeline would run through the central United States from Canada to Mexico. “Energy freedom is a matter of national security,” Mr. Kasich said. “We don’t want wars when it’s all about energy when we can do what we need to do in America to be energy independent.” He called for opening more federal lands to oil and natural gas exploration; research into cleaner coal, smart grid, battery, and other technologies; and letting states regulate hydraulic fracturing, or “fracking,” operations at home. He said he would end the ban on exporting domestic oil and gas and would end President Obama’s proposed, stricter regulations on carbon emissions from coal and other fossil fuel power plants.

Kasich: 'All the above' energy approach - — Presidential contender John Kasich last week proposed an “all of the above” approach to energy production that includes renewables and conservation measures along with stepped-up fossil fuel production. But Gov. John Kasich’s first test may come next year with his position that a proposed, indefinite halt to Ohio’s mandate that utilities get more power from renewable sources like wind, solar and new technology is “unacceptable.” “We’ll make sure we produce more energy from oil and gas; from nuclear; from coal that we dig, clean, and burn; alternatives and renewables, and anything else that we can find, and we’ll do it responsibly,” Mr. Kasich said in New Hampshire as he spelled out his plan for the first 100 days of a President Kasich administration. “We need it all, and it should come from right here,” he said. He proposed working with Canada and Mexico to ensure that North America can meet its own energy needs, and part of that plan would be approval of the Keystone XL Pipeline, a position that puts him at direct odds with Democratic presidential front-runner Hillary Clinton. “Energy freedom is a matter of national security,” Mr. Kasich said. “We don’t want wars when it’s all about energy when we can do what we need to do in America to be energy independent.” He called for opening more federal lands to oil and natural gas exploration; research into cleaner coal, smart grid, battery, and other technologies; and letting states regulate hydraulic fracturing, or “fracking,” operations at home. He said he would end the ban on exporting domestic oil and gas and would end President Obama’s proposed, stricter regulations on carbon emissions from coal and other fossil fuel power plants.

Mahoning County Dem Party endorses No vote on fracking amendment: The Mahoning County Democratic Party today announced that it has endorsed a "No" vote on the Youngstown city charter amendment banning fracking. The vote was unanimous. “The members of the executive committee were unanimous in opposition to amending the charter banning fracking. The group knows full well this is a total waste of the taxpayers' precious funds,” chairman David Betras stated after the vote. He urged all city residents to vote “no” on this "job-killing amendment." "The charter amendment is yet another attempt to ban fracking in the city of Youngstown. This is the fifth bite at the apple. The anti -fracking group has stated it doesn’t care that the Ohio Supreme court has taken away local control and knows full well the charter amendment is not constitutional," Betras said in a news release.

Anti-fracking proposal must be firmly rejected - Youngstown Vindicator -- There isn’t a newspaper in the country – ours included – that would criticize a citizen for petitioning his or her government. Indeed, government accessibility and transparency are the foundation of democracy and the mainstay of a free press. That said, we wonder how many newspapers would sit idly by while a citizens group petitions government – through the ballot box – not once, not twice, but five times. Not many, we suspect.  Thus, we have no qualms about telling the bunch of self-righteous, self- important individuals who are pushing an anti-fracking charter amendment in the city of Youngstown to please go away.  No one is trying to silence the advocates of the Community Bill of Rights or deprive them of their right to put the issue before the voters of Youngstown. But most reasonable people would admit defeat after four rejections. In our view, the “three strikes and you’re out” rule is applicable.  But, Susie and Ray Beiersdorfer, the masterminds of the anti-fracking campaign in Youngstown, have no shame when it comes to being snubbed by the residents of the city.

Battle over $2 billion Nexus Pipeline continues to simmer in Medina, Summit counties -- The battle over the Nexus Pipeline continues to simmer in Medina and Summit counties — with a report of one Medina landowner threatening a surveyor and a survey crew being ordered off private property. Surveyor Frank Batson filed an affidavit, saying he was threatened Oct. 10 by landowner Donald Borling, 72, of York Township, the Medina County Gazette reported. Borling reportedly said he had a shotgun shell filled with salt ready for Batson. The Medina County Sheriff’s Department investigated, and no charges were filed, officials said. On Monday morning, a surveying crew for the $2 billion natural gas pipeline was refused access to a property in Guilford Township because an appeal has been filed with the 9th District Court of Appeals and Medina County Common Pleas Judge Christopher Collier issued a stay blocking survey access until the appeal is heard. That, at least temporarily, blocks Collier’s Oct. 6 ruling that gave the Texas-based company access to private property for surveying. Guilford resident Jonathan Strong said he got an email from a neighbor about 8:45 a.m., saying a surveying crew was assembling at nearby church. “There were about 10 vehicles and a small army of people,” he said.  He then found them on the property of a neighbor who was at work. He confronted them, asking if they had permission from the landowner. They said no, he said. He then called the Medina County Sheriff’s Department. A deputy was dispatched to the site east of Seville. The deputy conferred by telephone with the Medina County Prosecutor’s office and access was denied because of Collier’s stay. The company was told permission is needed before its crew can access private property at this time.

Fracking tax: Earlier this month, the Legislature finally got around to imposing long-overdue reform of the state’s charter schools. But lawmakers are still dragging their feet on another issue that should be a priority, adjusting the state’s severance tax on oil and gas produced through fracking. A “hard deadline” of Oct. 1 was set in June by Senate President Keith Faber for a task force to issue recommendations on how much the tax should be increased. But now there appears little chance the matter will get resolved this year. That’s unacceptable, considering lawmakers have been looking at the matter for three years. Ohio’s severance tax, established 40 years ago, is paid when drillers remove oil, gas or other natural resources from the state. While oil production is up 200 percent and natural gas production 350 percent since 2012, Ohioans have little to show for it. Gov. John Kasich has proposed a modest tax increase on oil and gas produced via fracking in past budget-related bills, but each time Republican lawmakers have stripped the language from the legislation. Kasich has said an increase of 4.5 percent for natural gas and liquids, and 6.5 percent for oil, would still keep Ohio’s rates lower than other shale-drilling states. Making the tax market-based would raise an estimated $260 million in the next two years. That could be used to cut income tax rates, as Kasich proposed in the last budget, or provide funding for infrastructure and other projects in communities, especially those near eastern Ohio’s shale oilfields. Opposition has come from the oil and gas lobbyists, who claim that increasing taxes will discourage drilling, although there is no evidence that would happen.

Panel slated to address Ohio fracking tax hike kicks off (AP) — A study panel charged with addressing Gov. John Kasich’s (KAY’-siks) proposed tax hike on oil and gas drillers has scheduled its first formal meeting. The 2020 Tax Policy Commission was established in the last two-year state operating budget to review Ohio’s tax code for a potential overhaul. When Kasich’s proposal for the tax hike on hydraulic fracturing — or fracking — activity stalled, Senate President Keith Faber (FAY’-bur) and House Speaker Cliff Rosenberger said it would be put on the commission’s agenda and worked out by Oct. 1. After that date came and went, they said that changes in oil and gas markets were playing a part in the delay. Faber said Wednesday that the wording of a final report was still being worked out with the House.

Lawmakers studying frack tax meet for first time - Columbus Dispatch - State lawmakers now have a report that confirms what Gov. John Kasich has been arguing for three years — Ohio’s severance tax on fracking is low compared to other states. But based on the recommendations from an informal legislative group, there will be no move to increase Ohio’s tax on oil and gas companies anytime soon.   The 2020 Tax Policy Study Commission met this morning for the first time, 21 days after its deadline to produce a recommendation to the House and Senate on a new severance tax for shale fracking  The commission was given a report today from a three-member group that spent time over the summer trying to craft suggestions on how and when to increase the tax as drilling continues to expand in parts of eastern Ohio.  “Ohio’s total tax burden on the oil and gas industry is lower than or as low as every other state with a severance tax,” the report said. The Kasich administration has been making a similar argument for years, as GOP legislative leaders, prodded by the oil and gas industry, have repeatedly rejected his proposals to increase the tax.  The report compared Ohio’s current severance tax rate, which Kasich has called a “total and complete rip-off to the people of this state,” to a number of other states.

Ohio tax panel: Go slow with oil and gas industry — The oil and gas market remains too volatile to consider an immediate tax hike on an industry that Gov. John Kasich has repeatedly said was getting a great deal in Ohio, an informal legislative panel said Thursday. The panel, part of the broader 2020 Tax Policy Study Commission, had been working behind closed doors with the industry. The report had been promised by legislative leaders more than three weeks ago. Instead of proposing any rate increases, the informal group’s report suggested setting unspecified triggers at which point increases might be implemented or a slow phase-in of any increase. Any change should also look at the broader impact of other taxes on the industry as well as the potentially higher cost of extracting oil and gas from Ohio shale. The panel did agree with Mr. Kasich on one thing: “Ohio’s total tax burden on the oil and gas industry is lower than or as low as every other state with a severance tax,” the report reads. Currently, oil is taxed at the rate of 20 cents per barrel and natural gas at 2.5 cents per 1,000 cubic feet. The state collected $26.9 million from the tax in the last fiscal year.

State panel suggests more study of tax rates on oil and gas drilling --- A lawmaker panel recommended further studies of Ohio's tax rates on oil and gas produced via horizontal hydraulic fracturing, citing volatile commodity prices among the reasons for delayed action on a rate increase. The informal working group of a new tax policy study commission also said any future increase in taxes on fuels produced via fracking should include triggers to account for dropping commodity prices. "We are in a historical economic situation with the industry because of what's going on in Saudi Arabia...," said Rep. Jeff McClain (R-Upper Sandusky), co-chairman of the new 2020 Tax Policy Study Commission, who was also involved in the development of the severance tax report. "We want to be cautious. We want to make sure we take care of Ohio, but we want to make sure that we don't kill the industry." Sen. Bob Peterson (R-Sabina), the other co-chairman of the group, added, "The industry's in severe distress economically. Now is probably not a good time to increase the tax...." McClain and Peterson released the severance tax report Oct. 22 during the initial meeting of the tax policy commission, which was formed as part of the biennial budget bill earlier this year to undertake a longer-term study of Ohio's tax laws. Implementation of a flat income tax rate is among the issues that will be considered.  Republican legislative leaders said in June that a report outlining a potential severance agreement would be issued on Oct. 1; the report released Oct. 22, however, recommends further consideration of the issue.

Lawmakers kick Kasich's frack tax down road - again: - Maybe you've heard this one before? Ohio's tax on oil and gas drilling remains among the lowest in the nation, but lawmakers don't want to raise it. That's what a new report on taxing oil and gas drilling found Thursday. It's also what conservative lawmakers have said for months even as Gov. John Kasich pushes for a higher rate. "The industry's in severe distress economically. Now's probably not a good time to increase a tax on them," said Sen. Bob Peterson, R-Sabina, one of several lawmakers, oil and gas company officials and Gov. John Kasich's staff to provide input for the report. For example, Chesapeake Energy Corp., a major player in Ohio, announced in February that it would cut 2015 spending because of low crude oil prices. Ohio taxes the industry at 20 cents per barrel of oil and 3 cents per thousand cubic feet on natural gas — one of the lowest rates in the country. Oil and gas taxes made up 0.4 percent of Ohio's total tax collections in 2014. In comparison, 53.8 percent of North Dakota's tax money and 10.9 percent of Texas' collections came from oil and gas drilling, according to the new report. "As we did our analysis, Ohio's total tax burden on the oil and gas industry is as low or lower than any other states that have a severance tax. So, we're low," Peterson said.

Ohio, Pennsylvania, West Virginia sign pact to develop shale resources -- Governors of Ohio, Pennsylvania and West Virginia have a new agreement to work together to make the most of shale-energy resources that run beneath parts of all three states. The five-page document says that officials in the states will cooperate to promote the region’s shared energy interests. “The issues and opportunities facing our growing oil and gas industry do not recognize state lines, making it essential that we work together to help ensure the continued growth we expect to see,” Ohio Lt. Gov. Mary Taylor said in a statement. “We are seeing tremendous and continued growth in this industry, and we know that can be strengthened by partnering on key areas.” Taylor signed the agreement last week on behalf of Ohio Gov. John Kasich. The other signatories were Govs. Tom Wolf of Pennsylvania and Earl Ray Tomblin of West Virginia. Each state would pay for its share of the programs, with no dollar figures listed. The deal runs through 2018

Marcellus and Utica oil and gas permit report, October 11-17 -- The Pennsylvania Department of Environmental Protection’s Office of Oil and Gas Management issued 76 new well permits from October 11 to 17—more than three times the permits reported for the previous week. Meanwhile, Ohio Department of Natural Resources reported the approval of 21 permits throughout the state. West Virginia’s Department of Environmental Protection reported issuing 15 permits during the same duration. Governors from the three states signed an agreement at the 2015 Tri-State Shale Summit last week that aims to solidify one another’s support and cooperation to further the region’s shale industry. The five-page document outlines four areas of cooperation among the states: marketing and promotion of local businesses, energy job training for residents, oil and gas transportation infrastructure including roads and pipelines, and state-sponsored academic research to benefit the industry. A joint statement from Pennsylvania Gov. Tom Wolf, West Virginia Gov. Earl Ray Tomblin and Ohio Lt. Gov. Mary Taylor said the move is “critical step toward demonstrating that out 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.”

Study reveals proximity of schools, hospitals to fracking activity =- Thousands of Pennsylvania residents attend school or receive health care within one mile of a permitted natural gas fracking well site, according to a report released Tuesday. The report from the Penn Environment Research & Policy Center, titled “Dangerous and Close” revealed there are 166 schools, 165 child care providers, 21 nursing care providers and six hospitals within that radius. “Children should not live near and play in the shadow of dangerous fracking,” Zoë Cina-Sklar, PennEnvironment campaign organizer, said at the press conference in Scranton. PennEnvironment, an environmental advocacy organization based in Philadelphia, held the press conference on the sidewalk outside the Commonwealth Medical College, but the school has no affiliation with the group or the study. Findings included:

  • –53,000 Pennsylvania children under the age of 10, and 41,000 seniors 75 years of age and older live within one mile of a permitted fracking well site.
  • –More than 220 violations of environmental and public health regulations have occurred at wells within one mile of a school, while 180 violations have occurred within one mile of a childcare provider.

Pa. regulators caught unprepared for natural gas 'mother lode' - In 2005, Pennsylvania issued 19 permits for shale drilling. By 2010, that number reached 3,400 — a nearly 18,000 percent increase. "I don't think many people were aware that it existed at all," said Scott Perry, who currently leads the Department of Environmental Protection's Office of Oil and Gas Management. Before joining the agency in 2000, Perry admitted that he thought the green tanks holding extracted gas at well sites supplied water for cows. The shale boom left regulators scrambling to fulfill the demand for permits and oversight of an industry that had been largely invisible a few short years prior. "It wasn't until 2008 when we first became aware as an agency," Perry said. "I'm sure some of our inspectors knew what was going on, but that information hadn't really filtered its way up." Gov. Ed Rendell said the technology that enabled unconventional drilling seemed to "burst on the scene." There was a sense that the state had hit the mother lode amid a nationwide recession. And it had.  But Pennsylvania stumbled through those early days. As director of the DEP's Southwest Regional Office in Pittsburgh, George Jugovic sat in on early meetings with drillers. Those companies, many of them with long track records in the oil and gas fields of Texas, assured the DEP that the technology was time-tested and would require no more regulation than what was already in place. "The line you heard from the industry was: 'Oh we've used fracking in conventional wells. It's not really a significant difference'," said Jugovic, an environmental attorney who had first joined the department in 1984.

The regulator in the Range hat: How politicians, DEP became cozy with shale drillers --  Mike Krancer announced he was stepping down as Pennsylvania's environmental secretary in March 2013, having led a reorganization that accelerated the permitting process for drillers. Krancer already had his next job lined up. After two years at the Department of Environmental Protection, he would return to Blank Rome, a Philadelphia law firm that, among other activities, represents Marcellus Shale interests and energy companies. .  But Krancer wasn't the first regulator to make that transition.  Six of the eight environmental secretaries since 1995, in addition to governors, advisers and countless rank-and-file employees, have gone on to work for the industry. The influence of the Marcellus Shale industry is apparent at every level of Pennsylvania's bureaucracy, from politicians who collect millions in campaign contributions each election cycle to low-level well site inspectors who've accepted hats and shirts and thermoses emblazoned with the logos of Chesapeake, Range and other operators.  George Jugovic, who led the DEP's Pittsburgh office under Rendell and Tom Corbett, said inspectors tend to work in the field, visiting the same sites repeatedly and building relationships with the people who work there. The oil and gas inspectors, in particular, became a "close-knit group" that developed a friendly rapport with the people they regulated. Jugovic struggled not only to stop inspectors from accepting gifts emblazoned with gas company logos but to prevent them from wearing those items while on the job. "They're DEP inspectors and they're inspecting a Range Resources site wearing a Range Resources hat,"

EQT focusing more on Utica shale - EQT — Corp. plans to put more emphasis on exploring the deep Utica shale as continued low gas prices push the Downtown producer to focus on only the best spots for drilling and pipeline development. “The focus in 2016 will be on this more narrowly drawn notion of what the core Marcellus would be assuming the deep Utica play works,” CEO David Porges told analysts Thursday while discussing third quarter financial results that were hurt by a 42 percent drop in realized prices from a year ago. The state’s fifth-largest shale gas producer will likely cut capital spending next year — a move nearly all of its competitors made in 2015 as prices dropped and drilling slowed — and will suspend drilling in non-core areas such as Central Pennsylvania, Porges said. He declined to speculate on the spending cut, other than to say it will be “a fair bit lower” than this year’s capital budget. He predicted modest production growth of 15 to 20 percent next year. The core area for EQT’s drilling program — including 10 to 15 wells in the Utica — and expanding midstream systems is a territory stretching from Allegheny County south to Marion County, W.Va., and west to Wetzel County in the Northern Panhandle. EQT has leases for both the Marcellus and the Utica below it in that area.

Fracking Demand Creates Rural Water Lines: Natural gas companies, which require massive amounts of water for fracking, are trying to make friends in the water sector. These alliances may hold benefits for water customers. “Some gas companies working in the Marcellus and Utica shales are paying to extend public water lines into rural areas to provide the millions of gallons needed for hydraulic fracturing, or fracking, of their wells, and in some cases building treatment plants as well,” the Pittsburgh Tribune-Review reported. Southwestern Pennsylvania Water Authority is one example. The authority partnered with Vantage Energy this year on a $30 million project constructing water mains and expanding a water treatment facility. Jack Golding, a manager for Southwestern, explained the arrangement. “It's a win-win-win,” he said, per the report. “For us, this is a good deal. We get lines extended that would probably never get extended, and it gives us the ability to keep residential rates low.” Pennsylvania American Water has also explored partnerships with the energy industry. Senior Vice President Kathy Pape explained that such pairings initially raised questions. “There were concerns that the bad reputations of shale gas drillers would rub off on us. We're very protective of our reputation,” she said.

Pennsylvania panel to examine drilling impacts on poor communities - Pennsylvania’s Office of Environmental Justice, all but moribund during the administration of then-Gov. Tom Corbett, gets new life this week with the appointment of a director and a mandate to review, for the first time, shale gas facilities that could increase the health and environmental risks in poor and minority communities. Whether those expanded reviews will reduce those risks in so-called environmental justice communities, where almost 500 wells have already been drilled, is much less certain. Environmental justice communities are defined as those where at least 20 percent of the population is living below the poverty line or 30 percent are non-white. The DEP’s 2014 state environmental justice map identifies 851 communities or municipalities that meet that criteria, including many in Cambria, Fayette, Forest, Greene, Potter and Washington counties, where numerous shale gas drilling and development sites exist. John Quigley, secretary of the state Department of Environmental Protection, said last week that the Office of Environmental Justice’s mission will be “rebuilt from the ground up,” including the addition of shale gas development permit applications to a “trigger list” the office has used to determine when to provide such communities with enhanced notification, information and public participation opportunities. “Shale gas was removed from the trigger permit list and that was not a defensible action” Mr. Quigley said. “That’s going to be changed. Whether it’s a gas well or compressor station permit application, it will trigger an appropriate review.”

Johns Hopkins Study Links Fracking to Premature Births, High-Risk Pregnancies -- The health issues associated with fracking just keep piling up. The unconventional gas drilling method damages the environment by injecting toxic chemicals into the ground, which in turn poisons groundwater, interrupts natural water cycles, releases radon gas and causes earthquakes. But it can also damage our health, as fracking has been linked to numerous health conditions, including asthma, headaches, high blood pressure, anemia, neurological illness, heart attacks and cancer.  But perhaps most heartbreaking is the effect that fracking may have on babies. Studies have linked fracking to increased infant mortality and low birth weight babies. Now researchers at the Johns Hopkins Bloomberg School of Public Health have found that expectant mothers who reside near active fracking sites in Pennsylvania are more susceptible to giving birth prematurely and having high-risk pregnancies.  The retrospective cohort study, which was published online on September 30 in the journal Epidemiology, analyzed electronic health record data on 9,384 mothers living in northern and central Pennsylvania linked to 10,946 neonates from January 2009 to January 2013. The researchers found that expectant mothers living in the most active fracking areas were 40 percent more likely to give birth prematurely, i.e., within a gestational period of less than 37 weeks. In addition, those pregnant women were 30 percent more likely to have a high-risk pregnancy, a term that accounts for a variety of factors, including excessive weight gain and high blood pressure.

Fracking Chemicals May Cause Male Hormonal Changes, Reduced Fertility: Study - New research suggests that the chemicals used during the controversial gas-extraction process known as hydraulic fracturing, or fracking, may reduce fertility and sperm count for men residing in the area.  In a study published last week in the medical journal Endocrinology, researchers from the University of Missouri indicate that testing on mice found that prenatal exposure to fracking chemicals resulted in lower sperm counts in male mice when they reached adulthood. While the oil and gas industry has been highly secretive about the chemical mixtures used during the fracking process, researchers were able to isolate and test 24 chemicals used in fracking. They determined that 23 of them were endocrine-disrupting chemicals (EDCs) which can block or mimic human hormones, potentially affecting the biological processes of the body. Researchers found that 90% of the chemicals disrupted the functions of estrogens and androgens, like testosterone. More than 40% of the chemicals could interfere with progestins, and 30% affected thyroid hormones, they determined.  In addition, the researchers also found that mice exposed to the highest levels tended to be fatter and had changes to the structure of the heart. “This study is the first to demonstrate that EDCs commonly used in fracking, at levels realistic for human and animal exposure in these regions, can have an adverse effect on the reproductive health of mice,” the study’s senior author, Dr. Susan C. Nagel, said in an Endocrine Society press release. “In addition to reduced sperm counts, the male mice exposed to the mixture of chemicals had elevated levels of testosterone in their blood and larger testicles. These findings may have implications for the fertility of men living in regions with dense oil and/or natural gas production.”

Nurses Sound the Alarm: Fracking Oil Trains are Hazardous to Your Health | Reuters: — Members of the New York State Nurses Association along with local and state officials will stage a rally and die-in at the Saratoga Springs Amtrak station, where approximately 240 train cars containing oil from fracking pass each day. The speakout will dramatize the danger to public health posed by oil trains, commemorate the people who have lost their lives in oil train disasters, and bring together advocates who have been working on solutions to protect communities throughout the state from potential derailments and explosions. Hundreds of RNs from around New York State will attend the event in conjunction with their union's convention that is currently underway at the Saratoga Springs Hilton

Methane from fracking sites can flow to abandoned wells, new study shows: As debate roils over EPA regulations proposed this month limiting the release of the potent greenhouse gas methane during fracking operations, a new University of Vermont study funded by the National Science Foundation shows that abandoned oil and gas wells near fracking sites can be conduits for methane escape not currently being measured. The study, to be published in Water Resources Research on October 20, demonstrates that fractures in surrounding rock produced by the hydraulic fracturing process are able to connect to preexisting, abandoned oil and gas wells, common in fracking areas, which can provide a pathway to the surface for methane. A recent paper published in the Proceedings of the National Academy of Science showed that methane release measured at abandoned wells near fracking sites can be significant but did not investigate how the process occurs. "The debate over the new EPA rules needs to take into account the system that fracking operations are frequently part of, which includes a network of abandoned wells that can effectively pipeline methane to the surface,"

Fracking can cause nearby abandoned wells to leak methane: study - (Reuters) - Hydraulic fracturing can cause nearby abandoned oil wells to leak methane, according to a study published on Tuesday in the peer-reviewed Water Resources Research journal, marking a potentially large source of unrecorded greenhouse gas emissions. Researchers at the University of Vermont examined a part of New York state overlying the Marcellus shale gas reservoir to determine the chances that a newly fracked well there would intersect one of the state's thousands of existing wellbores. "Average probability estimates for the entire region of New York underlain by the Marcellus Shale range from 0.00 percent to 3.45 percent," according to the study, which suggested the results held broader national implications. It said oil and gas companies could reduce the probability of triggering methane leaks by seeking to identify the locations of abandoned wells before any new fracking, a potentially daunting task given the large number of unmarked abandoned wells across the country.

Fracking stirs debate in Michigan - For Michigan, from its Great Lakes’ shorelines to the inland lakes that speckle the lower peninsula, freshwater is one of its most valuable resources. Some believe that the process of hydraulic oil fracking is detrimental to the environment, and to the freshwater more specifically; the state has recently been facing a battle about whether or not this is true. The concern has even reached the campus of Washtenaw Community College.This year, on May 22, the Committee to Ban Fracking in Michigan launched a ballot initiative. The committee is not a non-profit organization but a political campaign – meaning it’s a Ballot Question Committee registered with the state of Michigan Bureau of Elections. This grassroots movement is commonly called, Let’s Ban Fracking.The legislative ballot initiative hopes to collect 252,523 valid signatures by Nov. 11, 2015. If it were to pass, the law would change state statute and ban horizontal fracking and frack wastes. The law would also remove some of the wording in the Natural Resources and Environmental Protection Act.

Fracking, a help in the climate fight, deserves respect from greens | Editorial | The leading reason the United States is reducing climate emissions is that power plants across the country, including in New Jersey, are switching from coal to natural gas, a move that cuts climate emissions in half. But because that success is based on the boom in fracking, which carries its own risks, many environmentalists are resisting this conversion. In New Jersey 40 concerned groups, from labor unions to the Sierra Club, have formed a coalition to promote green energy, and one of its priorities is to block natural gas pipelines in the state. Last week, the Union of Concerned Scientists issued a report warning of dependence on natural gas, and ranking New Jersey as one of 16 states at "high risk" of price swings due to overreliance on natural gas. What is going on here? Has the environmental movement lost its collective mind? Yes, fracking presents risks. The chemicals used to crack rock formations could leak into underground aquifers. And the process can release methane, undercutting some of the potential gains. But those risks can be managed. The Environmental Protection Agency concluded in June, a decade into the fracking frenzy, that incidents of water contamination were rare and minor. Methane emissions, meanwhile, are declining and the EPA proposed regulations in August to reduce them by another 40 to 45 percent. So how about some perspective? Any sensible energy policy must weigh one risk against another. This is not a close call.

Proposed West Virginia-Virginia natural gas pipeline files (AP) — Energy companies have formally filed with federal regulators to build a 300-mile natural gas pipeline from West Virginia through southern Virginia. Mountain Valley Pipeline announced Friday it applied to the Federal Energy Regulatory Commission to build the pipeline from Wetzel County, West Virginia, to Pittsylvania County, located in Southside Virginia. The pipeline would deliver natural gas from so-called fracked drilling fields in the rich Marcellus and Utica shale deposits. The joint venture between EQT Midstream Partners and other energy companies is proposing a 2016 construction start with the pipeline delivering energy by late 2018. The pipeline has encountered resistance along is proposed route. Dominion Resources has already filed with FERC to build a proposed pipeline that would also run from West Virginia to Virginia.

Editorial: Oil, gas, pipelines and trains - It’s been a year and a half since a CSX crude oil train, its 107 tanker cars filled with tens of thousands of gallons of Bakken crude oil on its way from the Dakotas to a storage depot in Yorktown, derailed in downtown Lynchburg. Three cars were punctured, with one catching fire and an undetermined amount of oil spilling in the James River. Just a few days ago, in the early morning hours of Oct. 4, another CSX train, partially laden with empty tanker cars, jumped the tracks when the locomotive struck debris on the tracks from weekend storms. Also this month, in a federal courtroom in Charlottesville, Judge Elizabeth K. Dillon dismissed two lawsuits filed by landowners in Augusta and Nelson counties, seeking to block surveyors working for Dominion Power from entering private property to do preliminary surveys for the proposed Atlantic Coast Pipeline.  Opponents contend the 42-inch pipeline, which would transport natural gas from the fracking operations in the Marcellus Shale regions of the Ohio River Valley to the East Coast, poses grave safety and environmental risks and are seeking to block its construction.   Into the pipeline fray has jumped RAIL Solution, a nonprofit advocacy group that promotes the environmental, energy and economic advantages of rail transportation of goods. David Foster, the group’s executive director, has argued that the rail industry is better poised and more capable of transporting the natural gas: Building plants at the point of extraction for “liquefying” the natural gas and then pumping it into special tanker cars for transport to ships on the coast makes more sense than digging a 564-mile long pipeline.  When you boil down the arguments in favor or against either mode of transportation, it’s clear both are risky, just risky in different ways. That’s when choices, based on objective cost-benefit analysis, must be made, with winners and losers on both sides. It’s what a modern economy is all about.

4th worker died after pipeline explosion  — The Terrebonne Parish coroner’s office says a fourth man has died of injuries from an explosion at the Transcontinental Gas Pipeline Co. facility in Gibson. Three men died immediately Oct. 8, and two were critically injured. Chief investigator Danny Theriot (TER-ee-oh) tells The Courier that 56-year-old Michael Hill of Paris, Tennessee, died Oct. 12. He says Theriot worked for Furmanite Corp., a technical services firm headquartered in Houston. Theriot identifies a Furmanite contractor who died Oct. 8 as 37-year-old Jason Phillippe of Rocky Mount, North Carolina. Furmanite did not immediately answer a query Thursday about the second critically injured man. Service company Danos LLC identified two dead contractors earlier. Spokeswoman Renee Piper said Thursday that the explosion is still being investigated. She said neither critically injured man worked for Danos.

How One Federal Agency Rubber Stamps All Pipelines - The Federal Energy Regulatory Commission (FERC), a national agency with wide jurisdiction over gas industry projects, used to be one of those unseen government organizations that go quietly about their business, creating no headlines and flying under the public radar. But mounting citizen alarm about the high-volume hydraulic fracturing industry has changed all that, and FERC’s opponents have publicly accused the agency of being a spearhead for fossil fuel corporate domination of the United States and its resources. Early opposition to shale drilling was restricted to protests against what is commonly called fracking – blasting chemical-laden water into subterranean rock to fracture it, forcing it to yield the methane (natural gas) it contains. But for the past several years there has been increased opposition to the major, ever-expanding fracking infrastructures over which FERC has jurisdiction – pipelines and the compressor stations that pack down fracked gas for its pipeline journeys.  FERC was founded in 1977 as an independent agency, its status updated nearly 11 years ago by the 2005 Bush-Cheney Energy Act to include jurisdiction over interstate electricity sales, wholesale electric rates, hydroelectric licensing, natural gas pricing and oil pipeline rates. FERC also reviews and authorizes liquefied natural gas terminals, interstate natural gas pipelines and non-federal hydropower projects. Only one gas pipeline out of hundreds has been outright rejected by FERC in the past 10 years.

Majority of Texans support local control of fracking, UT poll shows - A majority of Texans believe cities should be able to ban hydraulic fracturing even if state law otherwise permits it, according to a recent poll conducted by the University of Texas at Austin. In Texas, 57 percent of those surveyed agree that cities should be able to block hydraulic fracturing, or “fracking,” and nationally 58 percent support giving cities that authority, according to the UT Energy Poll released Tuesday. Continued support for local control comes after Gov. Greg Abbott signed House Bill 40 earlier this year reasserting the state’s control over oil and gas drilling and limiting a city’s regulatory powers. Lawmakers passed the bill after Denton became the first city in Texas to ban hydraulic fracturing. Tammy Vajda, an activist who opposed drilling in Flower Mound, was not surprised by the poll’s results. She said earlier that state lawmakers threw cities “in front of a freight train and let oil and gas run over us.” “I think every city should be able to address gas drilling however they want within their borders,” Vajda said. “I think it is a crime that they have taken that authority away from us.” Ed Ireland, executive director of the Barnett Shale Energy Education Council, an industry group, blamed negative press coverage for coloring people’s opinions about hydraulic fracturing. He said that when it is explained that it’s the only way to extract some oil and gas and keep prices down, public opinion changes. “I think the question is not being asked properly,” Ireland said. “A lot of these polls are skewed to the negative side.”

Injection Wells: The Poison Beneath Us - ProPublica: Over the past several decades, U.S. industries have injected more than 30 trillion gallons of toxic liquid deep into the earth, using broad expanses of the nation's geology as an invisible dumping ground. No company would be allowed to pour such dangerous chemicals into the rivers or onto the soil. But until recently, scientists and environmental officials have assumed that deep layers of rock beneath the earth would safely entomb the waste for millennia.There are growing signs they were mistaken. Records from disparate corners of the United States show that wells drilled to bury this waste deep beneath the ground have repeatedly leaked, sending dangerous chemicals and waste gurgling to the surface or, on occasion, seeping into shallow aquifers that store a significant portion of the nation's drinking water. In 2010, contaminants from such a well bubbled up in a west Los Angeles dog park. Within the past three years, similar fountains of oil and gas drilling waste have appeared in Oklahoma and Louisiana. In South Florida, 20 of the nation's most stringently regulated disposal wells failed in the early 1990s, releasing partly treated sewage into aquifers that may one day be needed to supply Miami's drinking water. There are more than 680,000 underground waste and injection wells nationwide, more than 150,000 of which shoot industrial fluids thousands of feet below the surface. Scientists and federal regulators acknowledge they do not know how many of the sites are leaking.

Earthquakes Not Caused by Fracking but Are Man-Made, Says Oklahoma Geological Survey --Since the fracking boom started, the state of Oklahoma has had numerous earthquakes, in increasing frequency. It has experienced more than 700 earthquakes so far this year, more than all of 2014. In the last seven days, up to Oct. 19, the state has experienced more than 40 earthquakes with a magnitude of 2 or greater within 200 miles, according to Oklahoma’s website.  Jeremy Boak, director of the Oklahoma Geological Survey, said on Oct. 16 in a quick appearance on MSNBC’s “The Rachel Maddow Show” that the increased frequency of earthquakes in Oklahoma is caused by oil and gas operations. But he said it’s not due to water and chemicals being injected in the ground. He explained that naturally occurring water already located in the formations for tens of thousands of years is what is really causing earthquakes. “That’s the water that we’re disposing of,” he said. “We’re taking it out of formations, separating the oil and gas, and then we’ve got this stuff that has to be disposed of.” The disposed water is placed in a deep formation called the Arbuckle Group, he said. Arbuckle is a 7,000-foot sedimentary formation under Oklahoma, which sits on top of the crystalline basement (rocks concealed below the sedimentary formation). This water has been injected into the same rock formation for “many, many years … a long way away from groundwater,” according to Boak, and the stress state deep in the rock is changing and causing some small faults to move. He said these are the ones that are oriented “just right” within the stress field in Oklahoma.  Boak says there have been more than 700 magnitude 3+ earthquakes already this year. Not only that, but the state maintains the largest oil storage facility in the world in Cushing, Oklahoma. The facility holds 82 million barrels of oil, and it has been designated as a critical national infrastructure by the U.S. government. It’s located in an area covering about 15 percent of the state that’s had this spate of magnitude 4 earthquakes, and Boak is worried that the next one may be bigger.

Shaking Out the Lies Surrounding Earthquakes and Hydraulic Fracturing  -- Unless you have a child in a participating school, the “Ready Campaign” may have passed without your awareness. I grew up in Southern California, where earthquakes were so routine, we paid them no mind; we didn’t have earthquake drills. But that was then. Now, the Great ShakeOut is a global campaign. Now, Oklahoma has more earthquakes than California—and students in Oklahoma participated on 10/15 at 10:15. As if choreographed, Oklahomans had a reminder 4.5 earthquake just days before the drill. The anti-fossil crowd has declared the cause. Headlines claim: “Confirmed: Oklahoma Earthquakes Caused By Fracking” and “New study links Oklahoma earthquakes to fracking.” MSNBC’s Rachel Maddow gleefully teased the earthquakes in Oklahoma as “the story that might keep you up at night.” On her October 16 show, she stated that Oklahoma’s earthquakes are: “The terrible and unintended consequence of the way we get oil and gas out of the ground. …from fracking operations.” Yet, when her guest, Jeremy Boak, Oklahoma Geological Survey Director, corrected her, “it’s not actually frackwater,” she didn’t change her tune. Despite the fact that the science doesn’t support the thesis, opponents of oil-and-gas extraction, like Maddow, have long claimed that the process of hydraulic fracturing is the cause of the earthquakes. Earthworks calls them “frackquakes” because the quakes, the organization says, are “fracking triggered earthquakes.” The anti-crowd doesn’t want to hear otherwise.

Seismic activity in Oklahoma tied to oil production, USGS finds - (UPI) -- An increase in seismic activity in Oklahoma since 2009 may be in part related to activity associated with oil production, the U.S. Geological Survey finds. "In Oklahoma, seismicity rates since 2009 far surpass previously observed rates at any time during the 20th century," Susan Hough, a USGS seismologist, said in a statement. "Several lines of evidence further suggest that most of the significant earthquakes in Oklahoma during the 20th century may also have been induced by oil production activities."Oklahoma is the No. 5 oil producer in the nation. Wood Mackenzie said energy investments in the region should top $4 billion for 2015. The USGS found many of the larger earthquakes reported in the emerging shale state are tied to industrial activity. A magnitude 5.7 earthquake in 2011 was the last major seismic event reported in Oklahoma. The largest before that was a 5.7-magnitude quake in 1952, which USGS seismologists concluded was tied to oil production in the state. USGS said the disposal of wastewater in deep underground wells is potentially leading to more earthquakes. "Deep injection of waste water, now recognized to potentially induce earthquakes, in fact began in the state in the 1930s," Hough said.

Study: Fracking Causing Strong Oklahoma Quakes: A sharp rise in earthquakes in Oklahoma in the past 100 years is likely the result of industrial activities in the energy-rich state, such as oil and natural gas production, a new study suggests. The paper by the U.S. Geological Survey, which singled out the state of Oklahoma, was released online this week and will be published in December's Bulletin of the Seismological Society of America. It concludes that injection of massive amounts of the byproduct of oil and gas production — chemical-laced wastewater — deep into the earth has induced the quakes. The paper dates wastewater injection methods to the 1920s in Oklahoma. The modern-day process that produces the byproduct wastewater is known as fracking, or forcing millions of gallons of water, sand and other additives deep into the ground to free up pockets of natural gas. Both the energy industry and scientists agree that fracking doesn't directly cause significant earthquakes. Where they part ways is what role injection of the byproduct wastewater back into the deep ground plays in inducing the quakes. "That's sort of been a red herring: 'does fracking cause earthquakes?'" said U.S. Geological Survey seismologist Susan Hough, the lead author of the study. "But that's not the point you want to argue. They were producing wastewater before (modern-day fracking)." The research shows that between 1880 and 2008, there were about 25 quakes of 3.5-magnitude or greater in Oklahoma. From 2008-2014, there were roughly 154 of the same strength. That includes the largest recorded earthquake in state history, a 5.6 earthquake centered near the town of Prague in 2011.

Eminent domain sought for one-third of Iowa land on Bakken pipeline - Bill Alexander gets emotional walking out to the farm fields where the proposed 1,134-mile, 30-inch-in-diameter Bakken crude oil pipeline would run down the middle of the property. Alexander fears oil spills, long-term damage to nutrient-rich soil and turning his back on the livelihood that’s supported four generations of his wife Pam’s family, future generations and their retirement. The Alexanders said they rejected easement bids that scaled from $5,900 an acre to $16,000. They won’t negotiate. They aren’t selling. But they might not have a choice. Resistance has been vocal to the pipeline that would cross 343 miles through 18 Iowa counties — much of it fertile farm ground — but official filings suggest most landowners already are on board. On Thursday, protesters presented 1,000 new letters to state regulators from landowners, environmentalists, personal property activists and others.  Letters of opposition outnumber support four-to-one. And supporters, such as trade unions and business groups, are questioned for being from out of state or having a financial gain in the estimated $3.78 billion project, including $1.1 billion in Iowa. Despite the outcry, between 63 and 69 percent of landowners have signed easements — an agreement to cross their land — with pipeline developer Dakota Access, the subsidiary of Texas-based Energy Transfer Partners, according to information from the company and the Iowa Utilities Board. The board must decide whether the hazardous liquid pipeline will promote public convenience and if it is a necessity.

Communities Pushing For Legal Rights To Regain Power Over Fracking Companies -- A Colorado group with concerns about the environmental impacts of fracking are pushing for a fundamental change to the state’s legal system to give communities greater power over corporations. Coloradans for Community Rights has set its sights on dismantling the legal system where state laws take precedence over local rules. This system where local authorities must fall back on state law instead of forming their own makes it nearly impossible to raise minimum wages, set environmental protections, or even strengthen tenant rights and set rent controls. In August, CCR launched a statewide initiative: The Colorado Community Rights Amendment. The group plans to gather the necessary 99,000 signatures necessary to place the community rights amendment on the 2016 ballot. In 2014, a similar initiative was proposed but not enough signatures were collected to qualify for the ballot. By bringing together a broad coalition of environmental, economic and social justice fighters, the CCR is optimistic its model will be successful in bringing about political and legal change.The moves come as the Colorado Supreme Court has agreed to adjudicate in battles between community groups and fracking companies.

Colorado oil and gas spill report for Oct. 19 - The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks.

  • Kerr McGee Oil and Gas Onshore LP, reported on Oct. 5 that a storage tank overflowed because of an improper valve alignment while transferring liquids during drilling operations near Hudson. Between five and 100 barrels of drilling fluid spilled.
  • Kerr McGee Oil and Gas Onshore LP, reported on Oct. 6 that petroleum hydrocarbon impacted groundwater was encountered during plus and abandonment near Platteville. An unknown amount of oil, condensate and produced water spilled.
  • Noble Energy Inc., reported on Oct. 7 that a produced water vault showed signs of a leak during a draw-down test. The water vault was removed, and impacted soil was discovered neat Keenesburg. Between one and five barrels of produced waster spilled.
  • Extraction Oil and Gas LLC, reported Oct. 7 that stained soils were observed during removal of a tank near Frederick. An unknown amount of oil and condensate spilled.
  • Kerr McGee Oil and Gas Onshore LP, reported on Oct. 7 that historical petroleum hydrocarbon impacts were encountered near Fort Lupton. Between five and 100 barrels of oil spilled.
  • Kerr McGee Oil and Gas Onshore LP, reported on Oct. 8 that shallow groundwater impacts were discovered near Frederick. An unknown amount of condensate spilled.
  • Synergy Resources Corp., reported on Oct. 8 that historical soil hydrocarbon impacts were observed near Erie. Between one and five barrels of produced water spilled.

With Abandoned Gas Wells, States Are Left With The Cleanup Bill : NPR: When energy booms go bust, the public is often left responsible for the cleanup. That's because while most states and the federal government make companies put up at least some money in advance to pay for any mess they leave behind, it's often not enough.After the methane industry collapse, there were almost 4,000 wells in Wyoming that the company responsible walked away from. Now, the state has to pay the price.Driving around the Powder River Basin in northeast Wyoming with Jeff Campbell and Jeff Gillum, both of whom work for the Wyoming Oil and Gas Conservation Commission, is like playing an extended game of "Where's Waldo?"Gillum and Campbell are in charge of making sure the abandoned wells get cleaned up and plugged. But first, Gillum says, they have to find them as they did recently near the town of Gillette."Finding Waldo is easier!" Gillum says.That's because Gillette, like many other U.S. cities from Los Angeles to Denver, grew up around the wells. They're in people's front yards and at the end of the driving range at the golf course. They're everywhere.Workers begin the plugging process with bentonite, a kind of super absorbent clay that gets poured down the well to seal it. Once the bottom of the well is filled with bentonite, a cement crew comes in and then, a pipe cutting crew."It's a lot more work than a lot of people realize," he says. And it also takes a lot of money.

Governor criticizes BNSF for rerouting oil trains into downtown Minneapolis --  Gov. Mark Dayton has told BNSF Railway’s top executive that he is “deeply concerned” about the recent increase in Bakken oil trains on western suburban tracks into downtown Minneapolis, saying it puts an additional 99,000 people at risk. In a letter to BNSF CEO Carl Ice released Wednesday, the governor asked the railroad not to operate oil trains on the line that passes Target Field when events are underway at the stadium, to extend first-responder training to all communities along the route and assess it for a worst-case accident. BNSF, the major crude oil hauler out of North Dakota, recently disclosed in a mandatory report to the state that 11 to 23 crude oil trains per week are using the route from Willmar, Minn., through suburbs such as Wayzata and St. Louis Park into Minneapolis and across the Mississippi River at Nicollet Island. Dayton said he was concerned that BNSF did not inform him or his staff about the route change. BNSF spokeswoman Amy McBeth said in an e-mail that BNSF will be talking directly with the governor about his concerns. She did not say whether BNSF will consider halting oil trains during Target Field events, but noted that crude oil has been shipped along the corridor at lower volumes.  State Rep. Frank Hornstein, DFL-Minneapolis, said that during a game late in the Twins’ season he saw three trains carrying either oil or ethanol pass Target Field over the course of six innings.

Minn. governor orders swifter inspections of oil rail routes — Minnesota Gov. Mark Dayton asked state railroad inspectors Thursday to speed up safety inspections of tracks where more oil cars are moving through, a response to marked changes in what routes trains take as they haul millions of gallons of crude across the state. Dayton said those inspections will occur almost a month ahead of schedule on routes in and around the Twin Cities, checking to ensure the tracks can handle an unprecedented amount of crude oil traffic. The inspection swap comes as BNSF Railway has substantially increased the number of trains coming from North Dakota’s oilfields and going through downtown Minneapolis, including a pass under Target Field. BNSF said in a statement that it shifted routes because of a major track expansion project north of the Twin Cities. Dayton said he spoke with the railway’s top executive by phone and demanded that the company notify him directly when it makes such re-routing changes. “There’s a recognition that these are potentially dangerous materials,” the Democratic governor said. “There’s no reason for them not to be in communication with us about what they’re transporting through our state and through our cities.”

Geothermal Energy Could Soon Stage A Coup In Oil And Gas -  Geothermal energy is one of the most widely available green energy sources in the world today. In spite of its availability, its consumption is almost miniscule when compared to wind and solar energy mainly due to high drilling costs that are associated with it. Geothermal energy can actually help reduce the cost of conventional fuel, reduce rising greenhouse gases, help combat climate change and reduce the dependence on conventional fossil fuels. Researchers at the University of North Dakota even believe that geothermal energy has the potential to be one of the biggest contributors to the U.S. energy portfolio. So, how is it possible to economically tap this massive source of clean energy that is been trapped beneath the Earth? Oil and gas drillers can play an important part in developing geothermal energy Every single barrel of oil also brings out close to seven barrels of boiling hot water which can be utilized to generate electricity through geothermal turbines. "Oil- and gas-producing sedimentary basins in Colorado, Illinois, Michigan, and North Dakota contain formation waters of a temperature that is adequate for geothermal power production," said researchers Anna Crowell and Will Gosnold in a paper that appeared in Journal Geosphere.

Well blowout spills oil and brine in Mountrail County - Oil and brine spilled at a well site in Mountrail County has impacted the White Earth River, reports the North Dakota Department of Health. The spill occurred at an Oasis Petroleum operated well at around 11 p.m. on Saturday. Located approximately 15 miles south of White Earth, the personnel on site lost control of the well. Oasis is currently working to regain control, but as of Monday at 8 a.m., the well had not yet been shut in. The North Dakota Oil and Gas Division told the Bismarck Tribune that roughly 8,200 barrels were spilled, but the actual amount hasn’t been verified.  A light sheen could be seen on the surface of the White Earth River roughly 850 feet north of the well pad. Booms were placed across the river to help keep the spilled material from migrating downstream to the lake. It empties into Lake Sakakawea, which is part of the Missouri River and is the primary drinking water source for southwest North Dakota. Brine water, also referred to as saltwater, is a byproduct of the oil and gas drilling process. The Environmental Protection Agency states that this water is usually extremely toxic to the environment and contains radioactive material and heavy metals. The water is many times saltier than sea water, and the toxic substances can be extremely damaging to the environment and public health if released onto the surface.

North Dakota Oil Well Still Spilling ‘Out of Control’  --Oil and saltwater are still spilling at an “out of control” rate from a North Dakota oil well owned by Oasis Petroleum Inc. that blew out over the weekend, UPI reports. So far, more than 67,000 gallons of crude and roughly 84,000 gallons of saltwater-brine (a toxic byproduct from the oil and gas drilling process) have leaked, according to Reuters. Despite the company’s weekend-long efforts to regain control, the well has still not been capped since the 11 p.m. blowout on Saturday. The well site is located in Mountrail County, approximately 15 miles south of the city of White Earth. The North Dakota Department of Health said that the spill has impacted a nearby river. “Oasis is working to regain control of the well, but as of 8 a.m. Monday, Oct. 19, the well had not been shut in,” the department said. “A light sheen was observed on the White Earth River approximately 850 feet north of the well pad.” Booms have been placed to stem the flow of the spill material from migrating downward.  North Dakota’s dirty energy production and Oasis Petroleum were put under the microscope on a recent episode of Last Week Tonight with host John Oliver. The oil company in question owned a well that killed two contractors in 2011 due to a blowout. While the exact cause of the latest Oasis well blowout is still unknown, state officials suggested that it may be linked to hydraulic fracturing, aka fracking, of a nearby well.  The Bismark Tribune reported: “The incident was caused when Oasis hydraulically fractured another nearby well, apparently causing this one to blow, even though it had been shut in to safeguard against exactly that outcome, according to Oil and Gas Division spokeswoman Alison Ritter.

Oasis Petroleum says killed North Dakota oil well that blew -- Oasis Petroleum Inc said on Tuesday it successfully killed a North Dakota well that had leaked oil, saltwater and natural gas since a blowout last weekend. Oasis crews pumped more than 33,000 gallons of a bentonite clay and water mixture down the well and plugged it. The well is now permanently shuttered. More than 67,000 gallons of oil had leaked from the well. In response to the spill, law enforcement and federal regulators closed several roads on Monday evening around the site due to concerns about the effects of leaking gas. Pumps again began injecting the clay and water mixture into the well, located near a tributary of the Missouri River, at about 8 a.m. local time (1300 GMT). Crews had halted operations overnight out of safety concerns. The well is located about 15 miles south of White Earth, in Mountrail County, one of the more prolific oil-producing regions in North Dakota. The Houston-based company was first notified that the well had blown out late on Saturday night when a driver passing the site heard a loud noise and called the company’s public emergency response phone line.

North Dakota regulators relax natural gas flaring mandate — Oil companies that exceed goals meant to curb the wasteful burning of natural gas will be given credits that can be traded to offset times when targets are unmet, North Dakota regulators decided Thursday. North Dakota’s Industrial Commission, a three-member Republican panel headed by Gov. Jack Dalrymple, approved the plan at a meeting in Watford City, which is in the heart of the state’s oil patch. It marked the second time in a month that the commission has relaxed self-imposed industry rules aimed at reducing the amount of natural gas that’s burned off as a byproduct of oil production. In September, the panel, which also includes Attorney General Wayne Stenehjem and Agriculture Commissioner Doug Goehring, gave the oil industry an additional 10 months next year to cut down on the reduction of flaring but also implemented a stiffer long-term benchmark. “Again, they’re making it much easier for oil companies to continue flaring,” said Wayde Schafer, a spokesman for the North Dakota chapter of the Sierra Club. State Mineral Resources Director Lynn Helms has called the flaring credits a “reward system for people who are going above and beyond.” The credits, which may only be used under certain circumstances such as gas pipeline maintenance cannot be sold or transferred to another company. They also only can be banked for three months.

NDIC Gives Operators An Extra Year To Bring Their DUCs On-Line --  It is "funny" (as in coincidental) how things turn out ... just the other day I mentioned the "one-year-rule" for bringing North Dakota wells on line. And here we are today, it's just announced that North Dakota will extend the deadline by a year. From Seeking Alpha:

  • North Dakota regulators approve a plan to give oil producers an extra year to bring a new well online, Reuters reports, in an attempt to give the energy industry breathing room during the oil price downturn.
  • Companies will now have up to two years to frack drilled but uncompleted wells under changes approved by the North Dakota Industrial Commission, which means the oil industry will not be forced to spend billions of dollars to frack an estimated 1,000 DUCs, most of which will hit their previous one-year deadlines in December.

For me this is the big story: again, operators and the state are working together during a very, very tough time.

Bakken water supply: Program allowing irrigation water for fracking ends - Infrastructure in western North Dakota is finally catching up with demand, evident in the state engineer’s office discontinuation of a program which allowed farmers to sell irrigation water for use in the oil and gas industry. As reported by the Forum News Service (FNS), in 2011, the engineer’s office created the Industrial Water Use in Lieu of Irrigation Policy in an emergency effort to meet the industry’s demand for water. The program allowed farmers who hold water permits to pause agricultural irrigation for a season in favor of using the water for the hydraulic fracturing process. In the early days of the boom, water distribution and availability were lacking so thousands of trucks were required to haul water long distances to well sites. The increased traffic lead to road damage and more traffic accidents. Now, however, roads have been improved and expanded, more water pipelines and depots are in place and demand is down. Director of Water Appropriations Jon Patch told the FNS, “We’re seeing a big drop in activity. We’re not seeing the amount of truck traffic, which is what created the emergency in the first place.” Due to the slowdown, the engineer’s office decided that the program is no longer necessary.

Is Fracking Drinking Up More Water Than Anyone Thought: Fracking is more water-intensive than anyone realized, according to National Geographic. "It's well known that water has been key to the shale oil and gas rush in the United States. But in one center of the hydraulic fracturing boom—North Dakota—authorities are finding that the initial blast of water to frack the wells is only the beginning," the magazine reported. That's because the wells require something called "maintenance water" to ensure the oil keeps flowing, the report said. "While the water first pumped down the hole to crack rock formations and release the underground oil and natural gas typically totals 2 million gallons (7.5 million liters) per well, each of North Dakota's wells is daily drinking down an average of more than 600 gallons (2,300 liters) in maintenance water, according to recent calculations by North Dakota's Department of Mineral Resources," the report said. Maintenance water is required to prevent salt from building up and blocking the flow of oil. It is not a small amount of water. "Over the life of the well, which authorities presume will be 30 to 40 years, maintenance water needs could add up to 6.6 million to 8.8 million gallons (25 to 33.3 million liters)—or more than three to four times the water required for the initial fracking," the report said.

Thinking factually about fracking: Recently, the Los Angeles Times ran an article alleging energy producers sell fracking wastewater to farmers, who then use the wastewater to irrigate organic fruits and vegetables. This prompted outrage by “fractivists,” who seized on the report as ammo for their ongoing war on energy production and even resulted in proposed legislation. The only problem was the report was false, and the L.A. Times has since issued multiple corrections related to the story. In fact, the disposal of fracking wastewater, which is pumped into injection wells, is governed by strict regulations and its sale for agricultural use is already prohibited. What seems to have confused the Times and the fractivists is the difference between “wastewater” and “produced water.” Produced water is generated in the course of the oil-production process. This water can be sold to farmers but it is first treated under strict supervision by the Regional Water Resources Control Board and is regularly tested. What drove the misleading report and ensuing panic was a failure to research the matter objectively. When people allow their emotions alone to dictate their behavior they tend to make poor decisions, whether that be taking selfies with bears or fearing a safe technology that contributes to California’s economy and energy security.

Natural Gas Sinks to Three-Year Low - WSJ: --Natural gas futures fell to fresh three-year lows Thursday as expectations of continued weak demand outweighed a smaller-than-expected inventory build. Futures for November delivery settled down 1.8 cents, or 0.7%, at $2.386 a million British thermal units on the New York Mercantile Exchange, the lowest settlement since June 13, 2012. Natural gas inventories typically rise at this time of year as producers stock up the heating fuel ahead of the winter, when consumption rises. The so-called injection season typically ends at the end of October, and consumers then draw natural gas out of storage to use for indoor heating through the end of March. This year, forecasts for warmer-than-normal weather in the coming weeks have traders concerned that stockpiles will continue to build longer than normal this year, pushing the already-oversupplied market into a deeper glut. The U.S. Energy Information Administration said Thursday that natural-gas inventories grew by 81 billion cubic feet last week, less than the 87-bcf build that analysts surveyed by The Wall Street Journal had expected. Even so, the market remains oversupplied, as stockpiles remain 4.5% above the five-year average for this time of year.

U.S. signs off on gas exports to non free-trade countries - (UPI) -- The U.S. Energy Department said it approved the export of compressed natural gas from a port in Florida to countries without a U.S. free-trade agreement. Canadian-based energy company Emera submitted a request to the U.S. government in late 2013 to export the gas equivalent of 9.13 billion cubic feet per day to countries that don't have a free-trade agreement with the United States. "Among other factors, the department considered the economic, energy security, and environmental impacts and determined that exports at a rate of up to 0.008 billion cubic feet per day for a period of 20 years was not inconsistent with the public interest," the Energy Department said in a statement. Emera under the terms of the consent agreement will export compressed natural gas from a proposed facility at the Port of Palm Beach, Fla. There was no public statement from Emera on the DOE approval or export considerations. The Energy Department said port facilities could be established for exports by the end of the year. While Emera has consent to export gas, the company's application says the bulk of the gas would be used to provide fuel to its affiliate, Grand Bahama Power Co. U.S. energy advocates say more exports of oil or natural gas could provide a source of economic stimulus and increase U.S. leverage overseas. For a liquefied form of natural gas, the U.S. Energy Information Administration found the "effects on overall economic growth were positive but modest."

U.S. Natural Gas Exports To Mexico - Hype Vs. History – Summary:

  • Natural Gas Pipeline Exports to Mexico may Underwhelm Expectations.
  • Mexican Demand has Grown at 5.6% since 2000.
  • Majority of Pipeline Expansions Created to Improve Grid Reliability.

Recently, we have had an uptick in questions about our view on US natural gas exports to Mexico driven by new export pipeline announcements. Pipeline development from the US to Mexico has seen recent new capacity with an additional 6 Bcf/d permitted or planned projects through 2020. These announcements, combined with existing and recently completed projects, would give the US market the ability to export nearly 12 Bcf/d of supply to Mexico compared to just 2.0 Bcf/d of flows to Mexico in 2014. After recently speaking at several conferences, we've had a chance to review a plethora of export forecasts with the most bullish forecasts calling for exports in excess of 7.0 Bcf/d by 2020. While exports to Mexico play an important role in our forward view of the market in terms of tightening the supply and demand balance for the US, 5 Bcf/d of incremental Mexico exports by 2020 would require exceptional things to happen south of the border. First, the Mexican gas demand market in 2014 was, on average, a 8.3 Bcf/d market in total met by 5.6 Bcf/d of domestic production, 0.9 Bcf/d of LNG, and 2.0 Bcf/d of imports from the US (totals do not match due to independent rounding). Another 5 Bcf/d of US exports by 2020 would imply huge declines in Mexican production or massive growth in Mexican demand and complete replacement of LNG. Granted, a $45 WTI price may have some impact on Mexican gas production, but if we look solely at the demand side, demand would need to exceed 12.6 Bcf/d by 2020 and 100% of LNG would need to be displaced back on the water at a time when global LNG markets are already awash with gas. This jump in demand would represent a 52% increase in Mexican demand by 2020, or 7% annual growth rate, and if LNG cannot be displaced, demand would need to grow by nearly 9% per year. Is there historical precedent for this to occur?

California’s gasoline imports increase 10-fold after major refinery outage - (EIA): Over a five-month period following an explosion at a California oil refinery in February 2015, imports of gasoline into California increased to more than 10 times their typical level, drawing from sources that include India, the United Kingdom, and Russia. Imported gasoline has been arriving from all over the world (see graph above) at rates of 28,000–68,000 barrels per day (b/d) for March through July (the latest data available). These levels compare with an average of 5,000 b/d in 2013-14. California gasoline markets continue to adjust to the February 18 explosion and fire at the ExxonMobil refinery in Torrance, California, located southwest of Los Angeles. The ExxonMobil refinery is the third-largest refinery in Southern California. The refinery unit affected by the explosion, the fluid catalytic cracker (FCC), is essential to making gasoline. Torrance's FCC represents 22% of the region's total FCC capacity, making it a key source of gasoline and distillate fuels that meet California's very stringent fuel specifications. On September 30, ExxonMobil announced the sale of the refinery to PBF Energy, which will be PBF Energy's first refinery on the West Coast once the sale is complete.  Because of its unique product specifications and long distance from international gasoline markets, California specifically, and the West Coast in general, does not typically import much gasoline. As a result, the sudden loss of supply from the Torrance refinery resulted in immediate supply shortfalls and higher wholesale and retail prices. The higher wholesale prices covered the costs of importing more gasoline from distant markets into California to make up for the supply shortfalls.

Halliburton cuts more jobs as fracking hit worst in oil downturn — Halliburton cut another 2,000 jobs in the past month as the worst oil market slump in decades saps demand for work at the world’s largest provider of fracking services. The Houston-based company said the first quarter of next year may represent the lowest point for its North American profit margin as customers start fresh with new spending budgets for 2016 and tap Halliburton’s pressure-pumping expertise to start new wells. The comments came after the company reported a third-quarter loss of $54 million. “The pumping business in North American is clearly the most stressed segment of the market today, but it’s also the market we know the best,” President Jeff Miller told analysts and investors Monday on a conference call. “This is the segment that we expect to rebound the most sharply.” Oil has swung between a bear and a bull market in North America this year as the drilling rig count slid. Explorers have cut more than $100 billion from global spending plans for the year after crude prices fell by more than half since June 2014. Halliburton had a loss of 6 cents a share in the third quarter compared with net income of $1.2 billion, or $1.41, a year earlier, according to a statement Monday. Excluding certain items, the per-share result was 4 cents more than the 27-cent average of 34 analysts’ estimates compiled by Bloomberg. Sales dropped 36 percent to $5.6 billion.The company has now cut its workforce by 18,000, or about 21 percent, since its peak last year, Emily Mir, a spokeswoman, said Monday in an e-mail.

Weatherford Plans 3,000 Additional Job Cuts  - Weatherford International plc plans on cutting an additional 3,000 jobs, the company revealed Wednesday. The oilfield services provider successfully completed its previously announced headcount reduction of 11,000, according to its 3Q report. Weatherford stated it has now increased its workforce reduction target to 14,000, “with an increased focus on support positions to be completed by year end.” In addition to the job cuts, Weatherford has also closed five of its seven planned manufacturing and service facilities. The company said it will close one additional office by the end of the year and the remaining closure will occur in 2016. Weatherford has closed more than 70 operating facilities in North America through Sept. 30, with plans to close 90 by the end of 2015. Weatherford believes these efforts will “mitigate the effects of the downturn,” but noted that a challenging market may continue and that the company plans to further reduce its cost structure to reflect the current environment. The company stated cost-cutting strategies in 2014 and 2015 will have generated savings of $2 billion by the end of the year. “Market conditions will experience further near-term activity reductions in the U.S., Latin America and Sub-Sahara Africa,”

EQT Corporation Reports Loss in Q3; Revenues Beat Estimates - Integrated energy player, EQT Corporation’s reported third-quarter 2015 adjusted loss per share of 33 cents. The Zacks Consensus Estimate was of a loss of 22 cents. The reported figure also plummeted from earnings of 51 cents recorded in the year-earlier quarter.Net operating revenue in the quarter came in at $577 million, which beat the Zacks Consensus Estimate of $437.0 million. The top line, however, decreased from $578.7 million in the year-ago quarter. EQT Production's third-quarter operating revenues were $188.5 million, 43% lower than the year-ago quarter. Nonetheless, the company clocked sales volume of 156.3 billion cubic feet equivalent (Bcfe) in the third quarter, 26.7% higher than the year-ago period. Adjusted operating loss for the third quarter was $72 million, which compared unfavourably with adjusted operating income of $107.9 million in the year-ago period.

Baker Hughes expects less drilling in 4th qtr - Oilfield services provider Baker Hughes Inc said it expects less drilling in the current quarter due to reduced customer spending but said it was seeing “stronger interest” in services that help increase oil and gas production. Baker Hughes, which is being acquired by larger rival Halliburton Inc, reported a net loss attributable to the company of $159 million, or 36 cents per share, in the third quarter ended Sept. 30, compared with a profit of $375 million, or 86 cents per share, a year earlier. Revenue fell 39.4 percent to $3.79 billion.

OPEC has stalled the shale revolution -- The resilience of U.S. shale producers has surpassed all expectations as they have wrung extra efficiencies out of their operations and pulled rigs back to the most prolific sections of existing plays. The shale sector’s ability to cut costs and sustain their output in the face of plunging prices has been extraordinary and testament to the entrepreneurial spirit and technical skill of the independent producers. Shale producers are justifiably proud of their ability to survive the perfect storm that has hit their industry since the middle of 2014. But it should not disguise the fact that the collapse in oil prices has paused the shale revolution, with the sector’s focus shifting from growth to survival. The revolution cannot be reversed. Techniques once mastered will not be unlearned. And adversity has forced shale drillers to become more efficient. If and when prices rise, shale output is very likely to start increasing again, and from an even lower cost base. For the time being, however, lower prices have stunted shale’s growth in the United States and slowed its spread around the rest of the world.

U.S. oil output slide looms as shale firms hit productivity wall – Stagnating rig productivity shows U.S. shale oil producers are running out of tricks to pump more with less in the face of crashing prices and points to a slide in output that should help rebalance global markets. Over the 16 months of the crude price rout, production from new wells drilled by each rig has risen about 30 percent as companies refined their techniques, idled slower rigs and shifted crews and high-speed rigs to “sweet spots” with the most oil. Such “high-grading” helped shale oil firms push U.S. output to the loftiest levels in decades even as oil tumbled by half to less than $50 a barrel and firms slashed rig fleets by 60 percent. But recent government and private data show output per rig is now flatlining as the industry reaches the limits of what existing tools, technology and strategies can accomplish. “We believe that the majority of the uplift from high-grading is beginning to wane,” said Ted Harper, fund manager and senior research analyst at Frost Investment Advisors in Houston. “As a result, we expect North American production volumes to post accelerating declines through year-end.”

US shale producers have $150bn in debt – Rosneft CEO -- The breakeven price for difficult to extract shale oil is $85-$98 a barrel, according to Rosneft CEO Igor Sechin, which is putting US producers deep in debt. "The total debt of only 25 companies engaged in the extraction of shale oil is about $150 billion," said Sechin speaking at the Eurasian Forum in Verona, Italy, TASS reports. According Sechin it’s the United States not to OPEC that controls the global oil market. "OPEC is no longer the regulator, its meeting on October 21 [with non-OPEC members] did not bring any decisions," according to Sechin.Last week, the head of Russia's biggest oil company said Riyadh has been actively dumping and cutting prices to secure its share of the market and gain new ones. Some European countries are now buying Saudi oil for the first time. Speaking about trends in the global energy market, Sechin said that Europe's share of world energy consumption will decrease from 19 percent in 2015 to 16 percent in 2030. Russian Energy Minister Aleksandr Novak said shale oil is losing its influence on the world market, and there has been a steady decline in its production in the recent months. According to the minister, dropping prices cause investment outflow. Subsequently, the number of drilling rigs in the United States is also reducing: a year before there were 1600 rigs with about 600 now.

U.S. Shale Drillers Running Out Of Options, Fast - Much has been made about the impressive gains in efficiency and productivity in the shale patch, as new drilling techniques squeeze ever more oil and gas out of new wells. But the limits to such an approach are becoming increasingly visible. The U.S. shale revolution is running out of steam. The collapse of oil prices has forced drillers to become more efficient, adding more wells per well pad, drilling longer laterals, adding more sand per frac job, etc. That allowed companies to continue to post gains in output despite using fewer and fewer rigs. However, the efficiency gains may have been illusory, or at best, incremental progress instead of revolutionary change. Rather than huge innovations in drilling performance, companies were likely just trimming down on staff, squeezing suppliers, and drilling in the best spots – perhaps all sensible stuff for companies dealing with shrinking revenues, but nothing to suggest that drilling has leaped to a new level of efficiency. Reuters outlined this phenomenon in detail in a great October 21 article. For evidence that the productivity gains have run their course, take a look at the latest Drilling Productivity Report from the EIA. Production gains from new rigs – which have increased steadily over the past three years – have run into a wall in the major U.S. shale basins. Drillers are starting to run out of ways to squeeze more oil out of wells from their rigs. Take a look at the below charts, which show drilling productivity flat lining in the Bakken, the Eagle Ford, and the Permian.  For oil companies to add new production at this point it would require hiring new workers and new rigs and simply expanding the drilling footprint. That is something that few companies are doing because of low prices. In fact, most exploration companies are doing the opposite – rig counts continue to decline and the layoffs continue to mount.

OPEC Is About to Crush the U.S. Oil Boom -- After a year suffering the economic consequences of the oil price slump, OPEC is finally on the cusp of choking off growth in U.S. crude output. The nation’s production is almost back down to the level pumped in November 2014, when the Organization of Petroleum Exporting Countries switched its strategy to focus on battering competitors and reclaiming market share. As the U.S. wilts, demand for OPEC’s crude will grow in 2015, ending two years of retreat, the International Energy Agency estimates. While cratering prices and historic cutbacks in drilling have taken their toll on the U.S., OPEC members have also paid a heavy price. A year of plunging government revenues, growing budget deficits and slumping currencies has left several members grappling with severe economic problems. The fact that the U.S. oil boom kept going for about six months after the group’s November decision also means OPEC has so far succeeded only in bringing the market back to where it started. “It’s taken a hell of a long time and it will continue to take a long time -- U.S. oil production has been more resilient than people thought,” . “The bottom line is the re-balancing has begun.”

Who on Wall Street is Now Eating the Oil & Gas Losses? - Banks, when reporting earnings, are saying a few choice things about their oil-and-gas loans, which boil down to this: it’s bloody out there in the oil patch, but we made our money and rolled off the risks to others who’re now eating most of the losses.  On Monday, it was Zions Bancorp. Its oil-and-gas loans deteriorated further, it reported.  There’d be even more credit downgrades. By the end of September, 15.7% of them were considered “classified loans,” with clear signs of stress, up from 11.3% in the prior quarter. These classified energy loans pushed the total classified loans to $1.32 billion. Wells Fargo announced that it set aside more cash to absorb defaults from the “deterioration in the energy sector.” Bank of America figured it would have to set aside an additional 15% of its energy portfolio, which makes up only a small portion of its total loan book. JPMorgan added $160 million – a minuscule amount for a giant bank – to its loan-loss reserves last quarter, based on the now standard expectation that “oil prices will remain low for longer.”  Banks have been sloughing off the risk: They lent money to scrappy junk-rated companies that powered the shale revolution. These loans were backed by oil and gas reserves. Once a borrower reached the limit of the revolving line of credit, the bank pushed the company to issue bonds to pay off the line of credit. The company could then draw again on its line of credit. When it reached the limit, it would issue more bonds and pay off its line of credit…. They made money from interest income and fees, including underwriting fees for the bond offerings. It performed miracles for years. It funded the permanently cash-flow negative shale revolution. It loaded up oil-and-gas companies with debt. While bank loans were secured, many of the bonds were unsecured. Thus, banks elegantly rolled off the risks to bondholders, and made money doing so. And when it all blew up, the shrapnel slashed bondholders to the bone. Banks are only getting scratched.

Obama Administration Cancels Oil Drilling Lease Sales In Arctic Ocean  -- The Interior Department has scrapped two lease sales for oil drilling in the Arctic Ocean, a move that comes as a win for environmentalists who have fought to prevent oil development in the remote region. The lease sales had been scheduled tentatively for 2016 and 2017 in the Beaufort and Chukchi Seas. The Interior Department’s Friday announcement comes a few weeks after Royal Dutch Shell announced that it would be stopping its oil exploration in the Arctic “for the foreseeable future,” due to a “challenging and unpredictable” regulatory environment and insufficient oil and gas discoveries. The Interior Department referenced Shell’s decision in its reasoning behind canceling the two lease sales.  “In light of Shell’s announcement, the amount of acreage already under lease and current market conditions, it does not make sense to prepare for lease sales in the Arctic in the next year and a half,” Secretary of the Interior Sally Jewell said in a statement.  Also on Friday, the Interior Department rejected attempts by oil companies Shell and Statoil to get more time to explore for oil under their existing leases in the Arctic, saying that neither company properly illustrated how it would take advantage of the extra exploration time.

Interior Department curbs future Arctic offshore drilling (AP) — The Interior Department announced Friday it is canceling future lease sales and will not extend current leases in Arctic waters off Alaska’s northern coast, a decision that significantly reduces the chances for future Arctic offshore drilling. The news follows a Sept. 28 announcement by Royal Dutch Shell that it would cease exploration in the Chukchi and Beaufort seas after spending upward of $7 billion on Arctic exploration. The company cited disappointing results from a well drilled in the Chukchi and the unpredictable federal regulatory environment. Interior Secretary Sally Jewell said the federal government is canceling federal petroleum lease sales in U.S. Arctic waters that were scheduled for 2016 and 2017. “In light of Shell’s announcement, the amount of acreage already under lease and current market conditions, it does not make sense to prepare for lease sales in the Arctic in the next year and a half,” she said.

Is Russia The King Of Arctic Oil By Default? - To be king implies preeminence, or lasting rule. In the Arctic, such oil and gas supremacy is still little more than a dream. That dream remains alive in Russia however, and the nation –through an unmatched stubbornness and a decidedly timid field of competitors – is making a strong bid for the throne. A cursory search of ‘Arctic’ and ‘oil’ elicits little in the way of positivity. Certainly, Shell’s failure in the Chukchi Sea is notable. Combined with the Obama administration’s waffling distaste for future offshore Arctic development, it marks what should be a period of relative dormancy in U.S. waters. Still, it’s not indicative of the sector globally, which is seeing progress, albeit at a glacial pace. The shining example of such development to date is Gazprom Neft’s Prirazlomnaya platform. Located nearly 40 miles offshore in the Pechora Sea, the rig is the world’s first Arctic oil project involving a stationary platform – though the general concept itself has been employed before (see: BP’s Northstar Island). Gazprom Neft began production at the Prirazlomnoye field in 2013 and reached commercial figures last year, with a total output of roughly 5,000 barrels per day (bpd). With production well number two (of 19) now online, output should reach somewhere between 10,000-15,000 bpd by year’s end. To be fair, several important tests lie ahead for Prirazlomnaya and Russia’s Arctic shelf development in general. Chief among them is rapidly addressing its import dependence – one of the primary targets of U.S. and EU sanctions. No more than 10 percent of the equipment applied at the Prirazlomnaya installation is believed to be Russian-made, and this level of disparity is commonplace at both Russia’s onshore and offshore fields. Attention, domestic and international, has been given to the courting of China, India, and other backers – both financial and technological – but all eyes should be on the Russian solution, which will seek to demonstrate its efficacy by 2020.

Enbridge Montreal Line Reversal Offers Complex Journey For Bakken Crude -- After a year’s delay due to permit issues, Enbridge now expects the expanded and reversed 300 Mb/d Line 9B pipeline to Montreal will come online next month (November 2015). The pipeline is an important cog in Enbridge’s Eastern Access and Light Oil Market Access expansion projects and will supply mostly light crude to two refineries in Quebec. As we explain today, the payload will travel a winding route to get to Montreal.  In previous blogs (see Take A Pipe On The East Side) we reviewed the huge Enbridge Mainline system (made up of multiple pipelines) which delivers up to 2.5 MMb/d of hydrocarbon liquids (mainly heavy crude from Western Canada) to the US border in Minnesota where the system name changes to Lakehead (see the map in Figure #1). At Clearbrook, MN Enbridge Lakehead receives incoming light sweet Bakken crude from the Enbridge North Dakota system (purple arrows on the map). Once it reaches the Great Lakes at Superior, WI, the Lakehead system winds its way around Lake Michigan in two directions - flowing light crude north on Line 5 direct to Sarnia, Ontario while the majority of its payload travels south along two routes – one through Chicago that mostly feeds refineries in the Windy City and the other further west to Flanagan, IL. The Flanagan terminal in Pontiac, IL is the central pivot point in the Enbridge US system with crude flowing from there either northeast through Illinois to Griffith, IN and then back into Canada at Sarnia or southwest to Cushing, OK (in the future crude will also flow south from Flanagan to Patoka, IL). Crude that will end up in Montreal once Line 9B is reversed all has to pass through Sarnia – either southeast from Superior on Line 5 or northeast from Flanagan to Griffith and then east on Line 6B.

TransCanada to cut more management jobs -– Pipeline company TransCanada Corp has announced new job cuts, eliminating about 20 percent of its directors as slumping oil prices continue to take their toll on its customers, a spokesman said on Wednesday. The company, which is proposing the Keystone XL and Energy East pipeline projects, said the latest cuts affect about 30 directors. This follows an announcement in September to eliminate 20 percent of its senior management positions at the vice-president level and above. TransCanada laid off 185 people from its major projects division in June, joining several other Calgary-based energy companies, including Suncor Energy Inc and Penn West Petroleum Ltd, that had trimmed staffing levels in order to survive the oil price slump. Delays in a decision on whether to approve the Keystone XL project and other proposals have also caused uncertainty for TransCanada and the energy industry. TransCanada spokesman James Millar said the company was undergoing “significant” restructuring to become more nimble in its natural gas pipelines, liquids pipelines and energy units. He said the restructuring would allow TransCanada to pursue about C$46 billion in commercially secured projects underway for completion by the end of the decade.

Keystone XL opponents continue push to overturn pipeline law — Nebraska landowners who oppose the Keystone XL pipeline are still trying to overturn a state law that allowed the governor to approve the project route, even though pipeline developer TransCanada is no longer relying on it. Pipeline opponents said Monday they’re concerned that companies could use the law in the future to avoid a five-member state commission that regulates pipelines, opting instead for a governor’s review and blessing. Their comments came after a court hearing in O’Neill over a lawsuit filed by landowners, seeking to dismantle the law. A judge could rule on the case as early as next month. Attorneys for TransCanada are trying to get the lawsuit dismissed after the company announced that it was withdrawing its eminent domain claims against landowners and reapplying to the regulatory Nebraska Public Service Commission. “Our focus is entirely on moving forward with the (commission) process and building the Keystone XL route in Nebraska in the most timely way possible,” TransCanada spokesman Mark Cooper said in an email after the hearing. Former Gov. Dave Heineman approved a Nebraska route for the Keystone XL in 2013 after a review by the state Department of Environmental Quality. But the 2012 law that gave him the power to do so has been mired in court, preventing the project from moving forward and contributing to delays from Washington. The pipeline plan also requires presidential as well as state approval because it crosses an international border.

Oil prices and politics blur future of Keystone XL pipeline  Remember the Keystone XL pipeline? It began as a proposed piece of energy infrastructure — a pipeline shortcut that would transport more than 800,000 barrels of crude oil a day from the tar sands of Alberta, Canada, across the U.S. border, through the upper Great Plains and south to refineries in Texas. But Keystone XL quickly became a symbol, a political litmus test and a line in the sand. Opponents said rejecting it would also reject the fossil-fueled past and present in favor of a renewable-energy future. Supporters said it would generate thousands of jobs and help provide national energy security at a time of international turmoil. The truth was more complicated, but neither side gave ground. The Obama administration, which has ultimate authority because the pipeline would cross an international boundary, was expected to approve or disapprove it at any moment. Of course, that was long ago — back when oil prices were soaring, Hillary Rodham Clinton was secretary of State, the company that wants to build the pipeline had not yet realized the strength of the opposition from some Nebraska landowners, and President Obama was worrying more about reelection than reaching a global climate agreement during upcoming talks in Paris. Years later, Obama still has not made a decision on Keystone XL. He could do so any day — or he could leave the issue to whoever wins the presidency in 2016.

Keystone & TPP under question as Canada elects Liberal PM --  The Liberal party’s victory in the Canadian general election is raising questions about the new government’s commitment to the Trans-Pacific Partnership and the Keystone XL pipeline, projects of interest to the US championed by the outgoing cabinet. Monday’s poll saw the Liberals, led by Justin Trudeau, win 184 seats in the Canadian parliament – more than enough to form a majority government. Stephen Harper’s Conservatives came in second with just 99 seats. The outgoing PM was enthusiastic about the Trans-Pacific Partnership (TPP), a recently negotiated free-trade pact between 12 Pacific Rim nations, excluding China. The White House has repeatedly presented the TPP as a way to prevent China from “writing the rules of the global economy,” in the words of President Barack Obama. The Liberals’ leader has criticized the secrecy surrounding the pact and said he would have to read the text of the agreement before making up his mind. His party, however, endorsed the TPP on principle when it was announced October 5, saying it “strongly supports free trade.”

Edmonton-area fracking boom brings new life, new issues to old oilfields - Deep horizontal “fracking” wells could be a “game changer” for Alberta producers as they attempt to reverse the decline in production from old oilfields, according to an expert with the Alberta Energy Regulator. Bob Willard, AER expert on fracking, says the new types of wells go much deeper and use hydraulic fracturing — fluid injected under pressure — along horizontal wells to crack the rock and release the so-called “tight oil,” which can’t be reached by old vertical wells and pumpjacks. So far, there are just a couple of dozen wells, but they are breathing new life into the oilfield near Devon, not far from the site of the province’s first big gusher in 1947. What’s new in Devon area wells are the lengthy horizontal channels — up to 1,500 metres long — that use “multistage fracturing.” That means the rock is cracked at different intervals along the well bore. This allows the “tight oil” to flow to the surface.As early as 2011, the federal government predicted a big impact for fracking in opening new supplies: “Tight oil has the potential to add significant light crude oil production that had not been anticipated just five years ago,” reads a federal report. “And that’s exactly what’s happening,” says Willard. Fracking has grown so quickly there’s now more oil coming from horizontal wells than old-style vertical wells topped with the pumpjacks that dot the rural landscape southwest of Edmonton.

Death by Fracking - Chris Hedges -- The maniacal drive by the human species to extinguish itself includes a variety of lethal pursuits. One of the most efficient is fracking. One day, courtesy of corporations such as Halliburton, BP and ExxonMobil, a gallon of water will cost more than a gallon of gasoline. Fracking, which involves putting chemicals into potable water and then injecting millions of gallons of the solution into the earth at high pressure to extract oil and gas, has become one of the primary engines, along with the animal agriculture industry, for accelerating global warming and climate change. The Wall Street bankers and hedge fund managers who are profiting from this cycle of destruction will -- once clean water is scarce and crop yields decline, once temperatures soar and cities disappear under the sea, once droughts and famines ripple across the globe, once mass migrations begin -- surely profit from the next round of destruction. Collective suicide is a good business, at least until it is complete. It is a pity most of us will not be around to see the power elite go down.  The activists are waging a war against a corporate state that is deaf and blind to the rights of its citizens and the imperative to protect the ecosystem. The corporate state, largely to pacify citizens being frog-marched to their own execution, passes environmental laws and regulations that, at best, slow the ongoing environmental destruction.  Corporations, which routinely ignore even these tepid restrictions, largely write the laws and legislation designed to regulate their activity. They rewrite them or overturn them as the focus of their exploitation changes. They turn public hearings on local environmental issues into choreographed charades or shut them down if activists succeed in muscling their way into the room to demand a voice. They dominate the national message through a pliable and bankrupt corporate media and slick public relations.  Elected officials are little more than corporate employees, dependent on industry money to stay in office and, when they retire from "public service," salivating for jobs in the industry. Environmental reform has become a joke on the public. And the Big Green environmental groups are complicit because they rely on donors, at times from the fossil fuel and animal agriculture industries; they are silent about the reality of corporate power, largely ineffectual, and part of the fiction of the democratic process.

Women 'don't understand' fracking, leading scientist claims - Telegraph: Women are opposed to fracking because they "don't understand" and follow their gut instinct rather than the facts, according to a leading female scientist. Averil Macdonald, the chairwoman of UK Onshore Oil and Gas, said that many women are concerned about fracking, yet often lack a scientific understand of the topic. "Not only do [women] show more of a concern about fracking, they also know that they don't know and they don't understand," Prof Macdonald, who is emeritus professor of science engagement at the University of Reading, told The Times."They are concerned because they don't want to be taking [something] on trust. And that's actually entirely reasonable. "Frequently the women haven't had very much in the way of a science education because they may well have dropped science at 16. That is just a fact." Prof Macdonald is leading a campaign to persuade women that the process is safe and will benefit Britain’s economy as well as help to meet climate change targets.

Women are too emotional to understand fracking, says female scientist - Many women who are opposed to fracking are too emotional and just 'don't understand' it, one of Britain's leading female scientists has said.  Averil Macdonald, who is the new chair of UK Onshore Oil and Gas, believes women against the process, which includes Vivien Westwood, just go with their gut instincts and ignore the science.More men will consider the facts but women who make up their minds 'will not be persuaded', the academic said.  A recent study by the University of Nottingham has revealed that only 31.5 per cent of women believe fracking should be allowed in the UK, compared to 58 per cent of men.Professor Macdonald, who was handed an OBE this year for services to women in science, says a major problem is too few women study it after the age of 16 so lack the knowledge to 'trust' that fracking would be good for Britain.She told The Times: 'Frequently the women haven't had very much in the way of a science education because they may well have dropped science at 16. That is just a fact.'Not only do [they] show more of a concern about fracking, they also know that they don't know and they don't understand.

Women can't understand scientific facts. Are you fracking kidding me? - Ladies, put down your needlework and pay attention. I’m about to deliver some facts and I know it’s going to be very hard for you all to wrap your pretty little heads around them. I’m talking about fracking. No, that’s not the sounds your manicured fingertips make when the nail polish starts to fracture. It’s actually a method of drilling into rock and blasting it with high pressure jets of water and chemicals to obtain shale gas. Still with me, sweethearts? Until now, fracking has only been considered controversial thanks to environmental concerns around the potential for increased global warming, pollution and earthquakes. Now, it’s become a battle of the sexes.   Recent research has shown that men are nearly twice as likely to support fracking. The survey by the University of Nottingham also revealed that women are less likely than men to know which fossil fuel is produced by fracking. Shale gas was correctly identified by 85 per cent of men but only 65 per cent of women.  And now Averil Macdonald, 57, chairwoman of UK Onshore Oil and Gas, has helpfully explained that women are more likely to be anti-fracking because they ‘don’t understand’ it.  Macdonald told the Times that, while women are concerned about the process, they lack the ability to understand and instead rely on ‘gut reaction’ in their opposition to it.  "Not only do [women] show more of a concern about fracking, they also know that they don't know and they don't understand,” she said.  She went on to say that merely showing women the facts wasn’t enough to change their minds, as they fail to grasp them and are more likely to form opinions based on ‘feel’.

Leading banks and financial institutions will meet to discuss the future of Project Financing in the Oil and Gas Sector --- Project Financing in Oil and Gas 2015 will give the latest updates in the Project Financing markets. Different scenarios regarding the oil and gas commodity prices and the resulting effect on Project Financing will be discussed, as well as understanding the complexities around financing your own oil and gas project.  A wide range of complex topics will be explored. From understanding how different oil and gas price scenarios may affect project financing to appreciating the risks relating to each stream and how they can be mitigated. Leading experts will also cover how political risk can impact project financing in the Oil and Gas industry. This exclusive content will be delivered through 2 Opening Addresses, 13 Hand-Picked Case Study Based Presentations and an Exclusive Interactive "An Oil & Gas Project Finance Workshop.”   For the full agenda please visit   Speaker line-up 2015 includes top decision makers from: Deutsche Bank, Société Générale, Scotiabank, Niger Omega Group, UK Export Credit Agency, Macquarie Bank, Commonwealth Bank of Australia, Sumitomo Mitsui Banking Corporation Europe, Standard Chartered Bank, Rand Merchant Bank, Banca Imi S.p.A and many more.

The tangle of loose lending to tight oil - Gillian Tett, FT - A few weeks ago, a big hedge fund manager in New York asked a major Wall Street bank what was happening to energy sector loans. The answer was sobering. “They said that the covenants on 72 out of the 74 loans to the oil and gas sector had recently been modified,” this investor reports. Or to put this into plain English, this bank now realises that most of its energy sector borrowers are struggling — so it is quietly relaxing the borrowing conditions, to avoid the embarrassment of seeing loans it has made go into default. It is impossible to tell precisely how typical this is; bankers are pathologically secretive about loan modifications. But judging from the tone of US quarterly bank earning calls this week, I suspect the pattern is widespread — and points to an issue that investors need to watch closely this coming winter. Over the past year, the oil price has slid by more than 40 per cent, to trade below $50 a barrel. At that level many energy companies are almost unviable — particularly those small and midsized US explorers and producers that have ridden the shale boom. Yet this slump has caused remarkably few ripples in the wider financial world. True, the price of most energy sector bonds has tumbled, with many junk bonds now trading below par. But there have been few outright bond defaults and banks themselves have not been calling loans in; instead, it seems most have been “modifying” those covenants — and praying for an oil price rebound. But this could soon change. One reason is that bankers are starting to accept that oil prices below $50 a barrel might be the new norm. Earlier this month, for example, the International Energy Agency warned that the current pattern of excess supply and weak demand will continue throughout 2016. And banks such as Goldman Sachs are now telling clients to brace for a world where prices could even touch $20 a barrel. A second factor is the stance of the authorities. Until quite recently, regulators in the US and Europe seemed willing to let banks engage in forbearance. But now they are keen to show they have learnt the right lessons from last decade’s crisis — by getting ahead of the curve and forcing banks to be tough.

Geographic Dispersion of Economic Shocks: Evidence from the Fracking Revolution (Working Paper - abstract) The combining of horizontal drilling and hydrofracturing unleashed a boom in oil and natural gas production in the US. This technological shift interacts with local geology to create an exogenous shock to county income and employment. We measure the effects of these shocks within the county where production occurs and track their geographic propagation. Every million dollars of oil and gas extracted produces $66,000 in wage income, $61,000 in royalty payments, and 0.78 jobs within the county. Outside the immediate county but within the region, the economic impacts are over three times larger. Within 100 miles of the new production, one million dollars generates $243,000 in wages, $117,000 in royalties, and 2.49 jobs. Thus, over a third of the fracking revenue stays within the regional economy. Our results suggest new oil and gas extraction led to an increase in aggregate US employment of 725,000 and a 0.5 percent decrease in the unemployment rate during the Great Recession.

Cuba says to drill in deep water despite low prices |- Cuba plans to drill exploratory deepwater wells in the Gulf of Mexico by the end of 2016 or beginning of 2017 despite current low oil prices, officials from the state oil monopoly said. Cuba-Petroleo (Cupet) will drill exploratory wells as deep as 7,000 meters (223,000 ft) in waters of up to 3,000 meters in production sharing contracts with Venezuelan state oil company PDVSA and Angola’s Sonangol. “We will initiate a drilling campaign at the end of 2016 or the start of 2017,” Osvaldo Lopez, Cupet’s head of exploration, told Reuters on Wednesday. “The essential goal of the new drilling campaign is at least two deep wells. There could be three. If there is a discovery there certainly will be more than two,” Lopez said on a tour of oil wells with international industry representatives. Experts believe billions of barrels worth of oil lie beneath the waters off Cuba’s northwest coast, but a host of companies that have drilled over the years have come up dry. Exploration has long been impeded by the U.S. trade embargo and is further complicated at times of low oil prices such as the present.

Thailand seen to invest $19 billion on energy in next three to five years - Thailand’s private and public sectors are estimated to spend 690 billion baht ($19.4 billion) over the next three to five years on expanding capacity of petroleum, electricity and renewables to secure energy supplies, a senior official at energy ministry said on Thursday. About 342 billion baht will be used for petroleum development, including expanding natural gas pipelines, building the second receiving terminal of liquefied natural gas (LNG) and others, Praphon Wongtharua, the ministry’s deputy permanent secretary, told an industry seminar. Some 121 billion baht will be spent on the electricity sector, with 102 billion baht for renewable energy and 126 billion baht for energy saving measures, Praphon said. The projection was based on Thailand’s new energy plan, which aimed to boost the proportion of renewables to 20 percent of total fuel mix by 2036 from 8 percent in 2014, he said. Thailand, which uses natural gas for almost 70 percent of its power generation, is under pressure to secure long-term energy supply as its own is expected to run out in six to seven years. About a fifth of supplies are piped from Myanmar but imports from this neighboring country are likely to fall as it is expected to use more of its natural gas resources for its own development. The ministry aims to encourage more exploration and production activities at home in order to reduce the declining rate of domestic resources to 2 percent a year from 11 percent, Prophan said.

Oil down 3 percent; tumbling gasoline adds to China, Iran worries – Crude oil fell 3 percent on Monday as tumbling gasoline prices deepened a selloff sparked by China’s slowing growth and signs that a nuclear deal waiving sanctions on Iranian oil will be implemented this year. A stronger dollar and weaker stock prices on Wall Street added to weight on the petroleum complex, traders said.  “The products markets seem to be taking a hit over concerns the refinery maintenance season has peaked, and there could only be inventory builds from here,” said Pete Donovan, broker at New York’s Liquidity Energy. The front-month in Brent , the global crude benchmark, was down $1.55, or 3 percent, at $48.91 a barrel by 10:38 a.m. EDT. U.S. crude was off $1, or 2 percent, at $46.26, in lighter volume trades ahead of Tuesday’s expiry for the November contract as front-month. Gasoline tumbled 5 percent. The refining profit for the fuel, known as the gasoline crack , hit a 9-month low. China’s economy grew at the slowest pace in six years in the third quarter, according to official data released on Monday, making it increasingly likely that Beijing will cut interest rates to spur activity. Data also showed that Chinese oil demand fell slightly in September.

Crude Tumbles As API Reports Another Huge Inventory Build -- For the 4th week in a row, US Crude inventories rose according to API. With a larger than expected 7.1 million barrel build (3.5mm exp.), which follows DOE's reported 7.56 mm build last week, it is clear that stocks are piling up considerably faster than expected. The reaction was an immediate algo slam to the lows of the day... 4th weekly inventory build in a row...The reaction was weakness, slamming WTI to the day's lows.. Charts: Bloomberg

Crude Slammed To $44 Handle After Inventory Surges Most In 7 Months -  The DOE just reported an 8.028mm barrel inventory build in crude stocks, even larger than the API reported data. This is the highest weekly build since April 3rd and is dramatically higher than expected. Crude prices are pressing on lower, with the new Dec contract now trading with a $44 handle. To make matters worse, US crude production was unchanged. Biggest inventory build in over 6 months... Sparks more selling in crude… Charts: Bloomberg

Oil slides 2 percent to three-week low on U.S. crude build | Reuters: Oil prices fell about 2 percent to three-week lows on Wednesday as the U.S. government reported a bigger build than expected in crude stockpiles, although significant drawdowns in gasoline and distillates prevented a steeper slide in crude futures. U.S. crude oil inventories rose 8 million barrels last week, the government-run Energy Information Administration (EIA) said. The build was more than double the 3.9 million barrels forecast by analysts in a Reuters poll. It was also above the 7.1 million build reported by industry group American Petroleum Institute. Oil prices extended losses briefly on the build, but came off their lows on a drop of 1.5 million barrels in gasoline stocks also reported by the EIA. Stocks of distillates, which include diesel, fell by 2.6 million barrels. The drop in gasoline and distillate stocks came despite a pickup in refinery runs, which should have translated to more products. The Reuters poll had forecast an inventory decline of 900,000 barrels for gasoline and 1.3 million for distillates.

Kemp's Weekly Fossil Fuel Tweets -- October 21, 2015; Fascinating Observations

Residual fuel oil stocks trending higher; at highest seasonal level since 2006.
  Propane stocks appear to be peaking but still at record; + 20 million bbls above prior-eyar level.
  US distillate stocks draw hard (-2.6 million bbls) eroding surplus over 2014 9(+19.3 million bbls) and 10-year average (+14.9 million bbls).
  US gasoline stocks only slightly higher than last year once adjusted for increased consumption.
  US gasoline stocks fell -1.5 million bbls; second consecutive decline, as refineries work down excess inventories.
  US gasoline consumption averaged 9.1 million bopd over last four weeks, which is +272,000 bopd above prior year level. Saudi got us hooked on gasoline again.
  US refinery throughput edged up +78,000 bopd as refiners reach the mid-point of maintenance season.
  US crude oil imports are running high during maintenance season with surplus going into refinery/merchant storage.
  Rise in crude oil stock was driving by continued strong flow of import s (7.5 milion bopd) despite refinery maintenance.
  US commercial crude oil stocks jumped by another 8.0 million bopd last week, taking foru-week gain to +22.6 million bbls. The refiners like that inexpensive foreign oil.

Oil Prices Still Not Low Enough To Fix The Markets - Arthur Berman -   Current oil prices are simply not low enough to stop over-production. Unless external investment capital is curtailed and producers learn to live within cash flow, a production surplus and low oil prices will persist for years. GDP (gross domestic product) correlates empirically with oil prices (Figure 1). GDP increases when oil prices are low or falling; GDP is flat when oil prices are high or rising (GDP and oil prices in the figure are in August 2015 dollars). This is because global economic output is highly sensitive to the cost and availability of energy resources (it is also sensitive to debt). Liquid fuels–gasoline, diesel and jet fuel–power most worldwide transport of materials, and electricity from coal and natural gas powers most manufacturing. When energy prices are high, profit margins are lower and economic output and growth slows, and vice versa. Because oil prices were high in the 4 years before September 2014 and the subsequent oil-price collapse, GDP was flat and economic growth was slow. That, along with high government, corporate and household debt loads, is the main reason why the post-2008 recession has been so persistent and difficult to correct through monetary policy. Brent oil prices exceeded $90 per barrel (August 2015 dollars) for 46 months from November 2010 until September 2014 (Figure 2). This was the longest period of high oil prices in history. Prolonged high prices made tight oil, ultra-deep water oil and oil-sand development feasible. Over-investment and subsequent over-production of expensive oil contributed to the global liquids surplus that caused oil prices to collapse beginning in September 2014. Oil prices were high during the 4 years before prices collapsed because world liquids production deficits dominated the oil markets. This was due mostly to ongoing politically-driven supply interruptions in Libya, Iran, and Sudan beginning in 2011.  The global production surplus has persisted for 21 months and supply is still 1.2 million barrels per day more than consumption. This is the main cause of low oil prices that began in mid-2014.

Goldilocks and the three prices of oil  -- Like a corporate version of Goldilocks, the oil industry has been wandering into the world marketplace in recent years often finding an oil price that is either too high such as in 2008 and therefore puts the brakes on economic growth undermining demand and ultimately crashing the price as it did in 2009. Or it finds the price too low as it is today therefore making it impossible to earn profits necessary for exploiting the high-cost oil that remains to be extracted from the Earth's crust. Oil that hovered around $100 per barrel from 2011 through much of 2014 seemed to be just right. But those prices are now long gone. Violent swings in the price of oil in the last decade have made it difficult for the industry to plan long term to produce consistent supplies at moderate prices. This has important implications for future supplies which I will discuss later. The great political power of the oil industry has led many to conclude erroneously that the industry must also somehow control the price of oil. If the industry has such power, it is doing a really lousy job of using it. It is true that in times of robust demand, OPEC can maintain high prices by limiting oil production in member countries. But when demand softens, OPEC rarely exhibits the necessary discipline as a group to cut production. Typically, Saudi Arabia shoulders most of the burden of reduced production under such circumstances. Which is why it was so shocking when, during this most recent swoon in the oil price, the desert kingdom responded with an emphatic "no." No, Saudi Arabia will not curtail its production. And, since all the other OPEC members are unable to challenge Saudi Arabia's power--which consists of the ability to add production to counter cuts by others--the price of oil has stayed low.

The Real Price of Oil - IEEE Spectrum: Average prices of WTI rose roughly 52-fold between 1970 and 2014, in current dollars—an enormous jump. How could the economies of oil-importing countries have kept on growing? The answer is simple: That 52-fold multiple is based on a doubly misleading metric. Though prices did soar in the 1970s, their fluctuations have been relatively restrained since then. The first adjustment we must make—for inflation—is trivially obvious, because currency values do not remain constant. Low inflation rates of recent years (and actual deflation in some countries) have resulted in only minor annual devaluations (or even in marginally higher value) of currencies, while back in the 1970s and 1980s, inflation rates were in the double digits. In 1970, a dollar was worth about $6 in today’s money; in 1980, it was worth $2.87 and in 2000, $1.37. Expressed in today’s dollars, average oil prices rose more than eightfold, from $10.90 in 1970 to $92.10 in 2014, virtually all of which took place between 1974 and 1980. In 1980, oil averaged $108.20 per barrel in 2015 monies, and its value has fluctuated ever since. The next adjustment is more subtle and thus often neglected. We must account for crude oil’s declining importance in all Western economies. This measure, usually called the oil intensity of the economy, traces oil used per unit of gross domestic product, and it is calculated by dividing the total national oil consumption by GDP expressed in constant monies. Before the first oil price rise of 1973–74, oil intensity had been diminishing rather slowly; afterward, its decline accelerated.

US rig count steady this week at 787 --  Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. this week remained unchanged at 787. Houston’s Baker Hughes said Friday that 594 rigs were seeking oil and 193 explored for natural gas. A year ago, with oil prices about double the prices now, 1,595 rigs were active. Among major oil- and gas-producing states, Louisiana gained five rigs, Ohio was up two and Alaska and Oklahoma each rose by one. Texas declined by five rigs and Kansas and Pennsylvania were down by two each. New Mexico and West Virginia dropped one apiece. Arkansas, California, Colorado, North Dakota, Utah and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999.

U.S. oil drillers cut rigs for 8th week on low crude prices - Baker Hughes -  U.S. energy firms cut oil rigs for an eighth week in a row this week, the longest losing streak since June, data showed on Friday, a sign low prices continued to keep drillers away from the well pad. Drillers removed one oil rig in the week ended Oct. 23, bringing the total rig count down to 594, the least since July 2010, after cutting a total of 80 rigs over the prior seven weeks, oil services company Baker Hughes Inc said in its closely followed report. That total was less than half the 1,595 oil rigs in the same week a year ago. Since hitting an all-time high of 1,609 in October last year, weekly rig count reductions have averaged 19. U.S. oil futures this week have lost about 5 percent, sliding for a second straight week, on continuing oversupply concerns even as China’s latest interest rate cut raised hopes for stronger demand from the world’s top energy consumer. The rig count is one of several indicators traders look at in trying to figure out whether production will rise or fall over the next several months. Other factors include how fast energy firms complete previously drilled but unfinished wells and rising well efficiency and productivity. “The current rig count implies that U.S. production would drop by 40,000 barrels a day in 2016,” analysts at Goldman Sachs said. Despite drilling cutbacks, U.S. oil production edged up to 9.4 million barrels per day (bpd) in July from 9.3 million bpd in June, according to the latest U.S. Energy Information Administration’s (EIA) 914 production report.

OilPrice Intelligence Report: A New Era For Canadian Oil And Gas, For Better Or Worse: Canadian voters kicked out the conservative government in the October 19 election, a party that had been in power for a decade. Polls had predicted a slight lead for the Liberal Party, but in a surprise result, the Liberals actually won a majority of seats in parliament and will form a majority government. Most analysts had expected the Liberal Party would have had to form a coalition government, but many voters appeared to strategically vote for the frontrunner in order to ensure a loss for the conservatives. The new government of Prime Minister-designate Justin Trudeau will almost certainly be much less friendly to the oil and gas industry in Canada, though to what extent remains uncertain. Trudeau opposes Enbridge’s Northern Gateway Pipeline, but also backs TransCanada’s Keystone XL Pipeline – the latter of which could be blocked by the U.S. government. More will be known in the coming weeks. However, one clear promise from Trudeau was his plan to engage in deficit spending to goose the economy through higher investments in infrastructure.The U.S. Department of Interior cancelled two lease sales for the Arctic, effectively ruling out new drilling for several years. The agency said that there was almost no interest from potential buyers for acreage in the Chukchi and Beaufort Seas, so it decided to scrap the lease sales. The move follows the decision from Royal Dutch Shell to abandon Arctic drilling, and without any other companies positioned to move forward, offshore drilling in the U.S. Arctic may not happen for years. In addition to cancelling the lease sales, the Obama administration also denied a request from Statoil (NYSE: STO) and Shell to allow an extension of their leases. They are set to expire in 2017 (Beaufort Sea) and 2020 (Chukchi Sea).

How Much Longer Can The Oil Age Last? - Over the last few months, we have witnessed how oil prices have fluctuated from a 6 year low level of $42.98 per barrel in March 2015 to the current levels of $60 per barrel. It is interesting to note that, in spite of the biggest oil cartel in the world deciding to stick to its high production levels, the oil prices have increased mainly due to falling US crude inventories and strong demand. However, the current upward rally might be short lived and there may yet be another drop in the international oil price when Iran eventually starts pumping its oil into the market at full capacity, potentially creating another supply glut. In these endless price rallies, it is important to take a holistic view of the global energy industry and question which way it is heading. Are the dynamics of global energy changing with current improvements in renewable energy sources and affordable new storage technologies? Can the oil age end in the near future? Will we ever stop feverishly analyzing the rise and fall of oil prices? Or, will oil remain irreplaceable in our life time? With little or no pollution, renewables like solar, wind and biofuels are viewed by many as a means to curtail the rising greenhouse emissions and replace oil as a sustainable alternative. There is little doubt as to why China, US, Japan, UK and Germany, some of the world’s biggest energy gluttons have invested heavily in renewables.  However, the total global investments in renewables fell by 14% to $214 billion in 2013. One of the major reasons of this fall was the backing out of some big oil firms such as BP, Chevron and Conoco Phillips. These companies significantly reduced their investments in renewables and decided to focus on their ‘core’ business; that is, oil and gas. As per Lysle Brinker, an oil and gas equity analyst at IHS “It’s not their (Big oil majors) strong suit to be spending a lot of money and time on renewables when they are definitely challenged in their core industry.”

Mideast Oil Consumption Could Increase Significantly Over Next Five (5) Years -- Arab oil consumption to increase to 17.3 mil b/d by 2020, says new study by Organization of Arab Petroleum Exporting Countries. This is not a data point that I track but it seems consumption to increase by 17 million bopd in the Mideast goes a long way in explaining why Saudi Arabia has stepped up their drilling program (and don't have a whole lot to show for it, yet). Here's more of the story, as reported by PipelineMideast: Energy consumption in Arab oil producing countries is expected to grow by as much as 4.9 per cent a year by 2020, according to a new study by the Organization of Arab Petroleum Exporting Countries.  At the lower end of the estimate – in a low growth scenario for OAPEC member countries, the organization expects energy consumption to be at around 3.2 per cent in the study period. In its 2012 annual report, however, OAPEC estimated the annual rate of growth of energy consumption in OAPEC member countries was 5.3 per cent during the 2009- 2012 period. The report by the Kuwait based organisation found that daily energy consumption would be between 15.4 to 17.3 million barrels of oil equivalent (boepd) by 2020, compared to 12.4 million boepd in 2013. Saudi has not shown much increase in production for quite some time. Sure, they are hitting "new records" but the bar hasn't been rising all that much, certainly not enough to come anywhere close to several million more bopd. Currently about 12.4 million boed (most recent figures available), it seems quite a stretch to get to 17.3 million boepd by by 2020.

United Arab Emirates plans to increase crude oil and natural gas production - (EIA): The United Arab Emirates (UAE) was the world's sixth-largest oil producer in 2014, and the second-largest producer of petroleum and other liquids in the Organization of the Petroleum Exporting Countries (OPEC), behind only Saudi Arabia. Because the prospects for further oil discoveries in the UAE are low, the UAE is relying on the application of enhanced oil recovery (EOR) techniques in mature oil fields to increase production. Using EOR techniques, the government plans to expand production 30% by 2020. EOR is an expensive process, and at current prices, these projects may not be economic. However, despite today's low oil prices, the UAE continues to invest in future production. The Upper Zakum oilfield is one region that has been targeted for further development. The field is the second-largest offshore oilfield and fourth-largest oilfield in the world, and it currently produces about 590,000 barrels per day (b/d). In July 2012, the Zakum Development Company awarded an $800 million engineering, procurement, and construction contract to Abu Dhabi's National Petroleum Construction Company, with the goal of expanding oil production at the Upper Zakum field to 750,000 b/d by 2016. Production from the Lower Zakum field should also increase, with oil production eventually reaching 425,000 b/d, an increase from the current level of 345,000 b/d.

OPEC will keep oil output high, traders say -– Saudi Arabia and the other big Middle East oil producers in OPEC will keep pumping hard to build market share despite mounting over-supply that has brought prices to six-year lows, the world’s top traders say. The Organization of the Petroleum Exporting Countries probably will not change tack and trim output even if it means prices stay low for a long time, senior executives from Vitol, Trafigura and the other big commodities houses said. “I’m expecting OPEC to be quite consistent in this position,” Trafigura Chief Financial Officer Christophe Salmon told the Reuters Commodities Summit. OPEC ministers meet in Vienna on Dec. 4 to decide production policy and are likely to see sharp disagreements between rich Gulf countries with low production costs and poorer members such as Venezuela that need higher prices to meet their budgets. Caracas has proposed that the cartel, source of more than a third of the world’s oil, adopt a price band with a floor around $70 a barrel and has suggested OPEC and non-OPEC producers cooperate to support prices. Venezuela, Nigeria, Algeria and several other OPEC members need oil prices well over $100 barrel to cover their costs – twice the current crude price below $50. But core OPEC members in the Middle East have much lower costs and are more worried about losing market share to shale producers in the North America. They hope lower prices will squeeze out their competition and boost prices in the long term.

Saudi Crude Oil Inventories Reach Record High -- October 20, 2015  -- is reporting: Saudi Arabia oil inventories reach record high as demand wanes -- JODI data over the weekend highlighted that Saudi Arabian crude stocks have reached a record high of 326.6 million barrels in August. As Saudi continues to keep production elevated, and as it struggles to find a home for all its exports amid a highly-competitive global market (awash with crude), this extra oil is finding its way into stockpiles as exports ease. Saudi Arabia crude oil inventory:

  • Currently: 325 million bbls in storage
  • 4Q14: 310 million bbls
  • 4Q13: 285 million bbls

The world consumes around 93 million bopd; produces around 94 million bopd.  Source: IEA.

Saudi Crude Stocks at Record High Amid Quest to Keep Share - Saudi Arabia, the world’s largest oil exporter, is storing record amounts of crude in its quest to maintain market share as it cut shipments. Commercial crude stockpiles in August rose to 326.6 million barrels, the highest since at least 2002, from 320.2 million barrels in July, according to data posted on the website of the Riyadh-based Joint Organisations Data Initiative. Exports dropped to 7 million barrels a day from 7.28 million. “The fall in Saudi crude exports reflects the market reality,”  . “It’s normal to see this fall knowing that the market is becoming highly competitive, with many countries in OPEC selling at discounts and under-pricing the Saudi crude.” Crude inventories have been at record highs since May, a month before Saudi Arabia’s production hit an all-time high of 10.56 million barrels a day. The nation has led theOrganization of Petroleum Exporting Countries in boosting production to defend market share, abandoning its previous role of cutting output to boost prices. Brent crude oil prices have slid 13 percent this year amid a global supply glut. Brent futures for December settlement dropped 2.3 percent to $49.30 a barrel in London on Monday. Saudi Arabia cut oil production in August to 10.27 million barrels a day from 10.36 million in July, according to the JODI data. The kingdom told OPEC that it produced 10.23 million barrels daily in September. It pumped at an all-time high of 10.56 million barrels a day in June, exceeding a previous record from 1980.

Saudi Arabia Said to Delay Contractor Payments as Oil Slumps -- Saudi Arabia is delaying payments to government contractors as the slump in oil prices pushes the country into a deficit for the first time since 2009, according to three people with knowledge of the matter. Companies working on infrastructure projects have been waiting for six months or more for payments as the government seeks to preserve cash, the people said, asking not to be identified because the information is private. Delays have increased this year and the government has also been seeking to cut prices on contracts, the people said. Saudi Arabia is responding to the decline in crude, which accounts for about 80 percent of revenue, by tapping foreign reserves, cutting spending, delaying projects and selling bonds. Net foreign assets fell by about $82 billion at the end of August after reaching an all-time high last year. The country has raised 55 billion riyals ($15 billion) from debt issuance this year. “It’s hard to hold back from boosting spending when oil is on the rise, but very hard to cut when oil prices fall,” . “Cuts are coming -- the budget deficit is too large to ignore and pretend it’s business as usual.”

Expert: U.S. oil squeezing OPEC, Saudis - American shale production has weakened OPEC’s grip on the global oil and gas market, and the balance of control could tip even further toward the West in the years ahead, a former defense official said. The oil cartel led by Saudi Arabia has long influenced prices by increasing or scaling back production, but private U.S. producers are now “edging them to the sidelines,” former deputy assistant secretary of defense James Clad said. “The Saudis have to be looking at their pocketbook every day,” Clad said. “They thought they had enough reserves — nearly $1 trillion in reserves — and they would be able to keep (their national social programs) going. But, can they afford it? Can they afford it at this level of price?” Increasing production to discourage U.S. shale producers “isn’t working out” for OPEC, and lowering production to drive up prices now would give American companies a bigger slice of the pie. “If they reduce production still more, then their percentage of supply to the world market goes down and (American producers) will become disproportionately larger suppliers,” said Clad, an energy consultant. “Then the (domestic) shale industry will say, ‘Thank you very much for making prices go up.'” So does that mean gas prices will stay low? “The answer’s yes, for the time being, because the overhang of excess supply is great,” he said.

IMF: Low oil prices, turmoil keeps Mideast growth 'subdued' — The International Monetary Fund said Wednesday a fall in oil prices and deepening turmoil in parts of the Middle East will keep growth in the region subdued this year at 2.5 percent. Masood Ahmed, IMF director of the Middle East and Central Asia, said oil-exporting countries are facing tough choices as they brace for a $360 billion drop in revenues this year due to a drop in oil prices globally. Among the hardest-hit countries by the drop in prices is the world’s largest oil exporter, Saudi Arabia. The price of oil— the backbone of Saudi Arabia’s economy — has fallen by about half since mid-2014. About 90 percent of the government’s revenue comes from oil. The IMF estimates Saudi Arabia will post a budget deficit of more than 20 percent of gross domestic product this year, amounting to between $100 billion to $150 billion. The IMF’s Middle East economic outlook report launched Wednesday said reforms in Gulf Arab countries that create more jobs and diversify economies outside of the oil sector are “all the more urgent.” “There are difficult decisions that will need to be made in terms of cutting spending,” Ahmed told The Associated Press in an interview on the sidelines of the report’s launch in Dubai. “You could try to postpone some capital projects … you could look at energy prices, which are still subsidized or below international prices in most of the countries in the region.” Ahmed said the six oil-exporting countries of the Gulf Cooperation Council could gain $70 billion if they raised local energy prices to international market rates.

Saudis Risk Draining Financial Assets in 5 Years, IMF Says -- Saudi Arabia may run out of financial assets needed to support spending within five years if the government maintains current policies, the International Monetary Fund said, underscoring the need of measures to shore up public finances amid the drop in oil prices. The same is true of Bahrain and Oman in the six-member Gulf Cooperation Council, the IMF said in a report on Wednesday. Kuwait, Qatar and the United Arab Emirates have relatively more financial assets that could support them for more than 20 years, the Washington-based lender said. Saudi authorities are already planning spending cuts as the world’s biggest oil exporter seeks to cut its budget deficit. Officials have repeatedly said that the kingdom’s economy, the Arab world’s biggest, is strong enough to weather the plunge in crude prices as it did in similar crises, when its finances were under more strain. But the IMF said measures being considered by oil exporters “are likely to be inadequate to achieve the needed medium-term fiscal consolidation," the IMF said. “Under current policies, countries would run out of buffers in less than five years because of large fiscal deficits." Saudi Arabia accumulated hundreds of billions of dollars in the past decade to help the economy absorb the shock of falling prices. The kingdom’s debt as a percentage of gross domestic product fell to less than 2 percent in 2014, the lowest in the world. The recent decline in the price of crude, which accounts for about 80 percent of Saudi’s revenue, is prompting the government to delay projects and sell bonds for the first time since 2007. Net foreign assets fell to the lowest level in more than two years in August, with the kingdom fighting a war in Yemen and avoiding economic policies that could trigger social or political unrest.  The IMF expects Saudi’s budget deficit to rise to more than 20 percent of gross domestic product this year after King Salman announced one-time bonuses for public-sector workers following his accession to the throne in January. The deficit is expected to be 19.4 percent in 2016.

Saudis Poke The Russian Bear, Start Oil War In Eastern Europe -- If the Saudis could use oil prices to force Moscow into ceding support for Bashar al-Assad in Syria, then the West and its regional allies could get on with facilitating his ouster by way of arming and training rebels. Once Assad was gone, a puppet government could be installed (after some farce of an election that would invariably pit two Western-backed candidates against each other) then Riyadh, Doha, and Ankara could work with the new government in Damascus to craft energy deals that would not only be extremely lucrative for all involved, but would also help to break Gazprom’s iron grip on energy supplies to Europe.  Those are the “ancillary diplomatic benefits” mentioned in The Times piece.  Only it didn’t work out that way.  Instead, Russia just kind of rolled with the economic punches (so to speak) and while there’s probably only so much pain Moscow can take between low oil prices and Western sanctions, Putin has apparently not yet reached the threshold.  Meanwhile, the Saudis have found that it’s taking longer than expected for Riyadh to realize another expected benefit from driving crude prices into the floor. Bankrupting the relatively uneconomic US shale space would go a long way towards solidifying Saudi Arabia’s market share, but thanks to wide open capital markets, Riyadh has effectively gotten itself into a war with the Fed. The longer ZIRP persists, the longer otherwise insolvent US producers can stay in business. In short: until the cost of capital starts to rise, there will likely still be investors of some stripe willing to finance some of these drillers.  In other words, the Saudi gambit has been a miserable failure thus far and although they may be able to outlast the US shale space, the battle is nearly lost in Syria. All of this helps to explain why now, Riyadh is looking to muscle in on Moscow’s crude market share in Eastern Europe. Here’s Bloomberg with more: As President Vladimir Putin tries to restore Russia as a major player in the Middle East, Saudi Arabia is starting to attack on Russia's traditional stomping ground by supplying lower-priced crude oil to Poland.

Oil Market Showdown: Can Russia Outlast The Saudis? -- November 27, oil consuming countries will celebrate the first anniversary of the Saudi decision to let market forces determine prices. This decision set crude prices on a downward path. Subsequently, to defend market share, the Saudis increased production, which exacerbated market oversupply and further pressured prices. While the sharp decline in crude prices has saved crude consuming nations hundreds of billions of dollars, the loss in revenues has caused crude exporting countries intense economic and financial pain. Their suffering has led some to call for a change in strategy to “balance” the market and boost prices. Venezuela, an OPEC member, has even proposed an emergency summit meeting. In practice, the call for a change is a call for Saudi Arabia and Russia, the two dominant global crude exporters, which each daily export over seven-plus mmbbls (including condensates and NGLs) and which each see the other as the key to any “balancing” moves, to bear the brunt of any production cuts. Both, it would seem, have incentive to do so, as each has lost over $100 billion in crude revenues in 2015—and Russia bears the extra burden of U.S. and EU Ukraine-related economic and financial sanctions. Yet, while both publicly profess willingness to discuss market conditions, neither has shown any real inclination to reduce output—in fact, both countries seem committed to keeping their feet pressed to their crude output pedals. In the course of 2015, both have raised output and exports over 2014 levels—Saudi Arabia by ~500 and 550~ mbbls/day respectively and Russia by ~100 and ~150. The Saudis have repeatedly cut pricing to undercut competitors to maintain market share in the critical U.S. and China markets, while the Russian Finance Ministry recently backed away from a tax proposal which Russian crude producers said would reduce their output. This apparent bravado notwithstanding, the two countries’ entry into the low-price Crudedome is ravaging their economies. Should crude prices decline from current levels, or even just stagnate, it is possible neither country will exit the CrudeDome under its own power.

Future Of Iraq’s Oil Industry Under Threat -  Iraq is one of the major reasons why OPEC has been able to increase oil production over the past year, even as oil prices have dropped to six-year lows. The war-torn country averaged 3.2 million barrels per day (mb/d) of production in 2014. But despite the onslaught from ISIS and the collapse in oil prices, Iraq succeeded in achieving steady gains in output, surpassing 4.1 mbd in September. Along with Saudi Arabia’s increase of around 600,000 barrels per day since 2014, Iraq has accounted for a majority of OPEC’s production gains over the past year, allowing the cartel to produce more than 31.5 mb/d – well in excess of its stated production target of 30 mb/d. However, although Iraq has succeeded in defying gravity thus far, the cracks in the country’s oil success story are starting to show.  Genel Energy Plc, a London-based oil exploration company that is concentrated in the Kurdistan region of Iraq, trimmed its production forecast for the year, due to the late payments from the Kurdish Regional Government (KRG). The Iraqi central government in Baghdad and the KRG have been at odds over oil sales. In December 2014, the two sides reached an accord that would see the KRG exporting oil under the purview of the Iraqi state, in exchange for access to its portion of national revenues. The collapse in oil prices has sapped the state of resources, however. That has held up payments to the KRG, which in turn has halted the transfer of funds to private oil companies operating within Kurdistan.

Iran’s Supreme Leader approves nuclear deal, orders govt implementation on conditions -- Iran's Supreme Leader Ayatollah Ali Khamenei has approved the nuclear deal between Tehran and world powers, ordering it to be implemented subject to certain conditions, his official website says. In a letter to President Hassan Rouhani, Iran's highest authority said the US and European Union should clearly announce the elimination of sanctions against Tehran. Khamenei has warned that the deal has several structural weak points.  Full text of letter of @khamenei_ir on #JCPOA & #IranDeal to president #rouhani has been published : |#Iran October 21, 2015 Khamenei adds in his letter that any remarks, suggesting that sanctions against Iran will remain in place for some reason, would go against the agreement reached between Iran and the P5+1 group of countries (the US, UK, France, China and Russia, plus Germany) over Tehran’s nuclear program.

Iran to up oil production one week after sanctions - Shana | Reuters: Iran will boost its crude oil production within one week once international sanctions are lifted and is determined to regain its lost market share, senior Iranian oil officials reiterated on Monday. Iran will raise production by 500,000 barrels per day in the first week after sanctions are lifted, Rokneddin Javadi, general manager of the National Iranian Oil Company, was quoted as saying by oil ministry news agency Shaha. "A 500,000-barrel increase in Iran's oil production will take place in less than a week after the effective lifting of sanctions," Shana quoted Javadi as saying. "Our customers for this increased production level will mostly be our traditional customers in Europe and Asia." On Sunday, the United States approved conditional sanctions waivers for Iran, although it cautioned these would not take effect until Tehran had curbed its nuclear program as required under a nuclear deal reached in Vienna on July 14. Iranian Oil Minister Bijan Zangeneh said on Monday that oil producers group OPEC is "rational" and would give room for Iran's gradual return to the market. "The OPEC members welcome Iran's oil return to the market, so do the customers," . "We don’t need permission from anyone to export our oil, and our production will enter the market," he said.

Iran’s Crude Oil Production Game Plan and Its Impact on Crude Oil - The EIA (U.S. Energy Information Administration) reported that Iran produced 3.3 MMbpd (million barrels per day) of crude oil in June 2015 compared to 3.315 MMbpd in May 2015. However, Bloomberg surveys suggest Iran produced 2.8 MMbpd in September 2015. Iran is among the top producers of crude oil among OPEC (Organization of the Petroleum Exporting Countries) countries. OPEC members Saudi Arabia and Iraq produce more crude oil than Iran. Iran’s crude oil production fell due to US and European oil sanctions in 2011 and 2012, respectively. Crude oil and other liquids exports fell by 1 MMbpd following Western oil sanctions. . As soon as sanctions are lifted, Iran could scale up its crude oil production and sell its 40 MMbbls of crude oil inventory.  The Energy Ministry of Iran is estimating $100 billion of investments needed to rebuild its energy industry and scale up production to more than 5.7 MMbpd over the long term. In order to lure energy companies, National Iranian Oil Company might offer a 20-year contract term. Iran’s previous contracts paid oil companies a fixed fee over five to seven years, without giving energy investors a share of a field’s production in the long term. Meanwhile, the World Bank estimates that Iran could increase crude oil production by 0.5–0.7 MMbpd of crude oil to 3.6 MMbpd at least six months after sanctions are lifted. The rise in production from Iran will extend the crude oil glut market, and we could see the new era oil market.

How Iran Plans To Attract $100 Billion In Oil Investment There was little movement on oil prices this week – a few down days and a few up days. WTI closed out the week trading in the mid-$40s, with Brent at $48 per barrel. Crude seemed to weather a huge bearish development – the EIA reported that oil storage levels surged for the week ending on October 16. Inventories jumped by 8 million barrels to 476 million barrels. That is the highest level in months and is close to the 80-year high seen in the spring of this year. Storage levels are filling up as refineries undergo maintenance season, and should reverse course in the coming weeks and months. Still, the sky-high inventories do not necessarily offer strong reasons for crude prices to rally in the near-term. Iran released some more details on its oil contracts this week, revealing some specifics on its reforms intended to attract international investment. For example, Iran will pay larger fees to operators than previously thought. It will also offer 20-year contracts. “What’s been announced so far looks like an attractive contract -- no doubt it’s a vast improvement on the buy-back contracts,’’ Robin Mills, of Dubai-based consultancy Manaar Energy, told Bloomberg in an interview. An Iranian official who helped design the new contracts also told the Financial Times that domestic Iranian companies should be entitled to a 20 percent stake in any joint venture project. Mehdi Hosseini didn’t reveal a specific figure, but said “Naturally you would think of 20-25 or 30 percent as a minimum percentage,” according to an interview on October 21. “We don’t want to just give some small share [around 5 percent] to an Iranian company to try and make some money. We have a long-term view.”

Russia offers gas, oil swap deals to Iran – Russian Energy Minister Alexander Novak said on Friday Kremlin-controlled gas producer Gazprom has offered gas supplies to Iran under a swap arrangement, and similar oil deals were also under consideration. Moscow has boosted efforts to foster political and economic ties with Tehran and increased its activity after a decision in July to lift international sanctions on Iran in principle. The ending of sanctions, related to Iran’s nuclear program and including restrictions on oil exports, have yet to take effect. Novak said Iran normally supplies gas to its northern regions from the south of the country and the proposed swap deals would help to cut its transportation costs. “We could supply gas through to Iran’s north and receive gas from the south (of Iran) via swap deals in the form of liquefied natural gas or pipeline gas,” Novak told Russian state-run TV Rossiya-24. “Similar swaps could be done with oil. This is a reduction of transportation costs. Our colleagues have given a positive response to the idea,” he added. Iran is keen to recover oil market share it lost as a result of the international sanctions.

OPEC, non-OPEC experts to talk, but unlikely to cooperate on cuts – A meeting of OPEC and non-OPEC oil market experts this week is unlikely to increase the prospect of joint co-operation on supply curbs or show much support for Venezuela’s proposed price band, OPEC delegates and analysts said. The Organization of the Petroleum Exporting Countries has invited eight non-member countries including Russia for talks on the market at its Vienna headquarters on Wednesday. OPEC’s own meeting to set policy is not until Dec. 4. Non-OPEC producers have refused to work with OPEC in cutting supply to reduce a surplus that has prompted prices to sink to below $50 a barrel from $115 in June 2014. In turn, OPEC has refused to limit supply alone and many members have raised output. Cash-strapped member Venezuela is nonetheless pushing for OPEC and non-OPEC cuts and has proposed reviving OPEC’s price band mechanism, attempting to set a $70 price floor. But two OPEC delegates said the prospect of joint output cuts was low and the price band was unlikely to find much support. “I really don’t believe that Venezuela will succeed in its attempts,” said one of the delegates. “OPEC countries are now over-producing so the cutback should start from within before trying with non-OPEC producers.” According to OPEC’s own figures, OPEC is pumping 31.57 million barrels per day (bpd), much more than its official 30 million bpd target and the lion’s share of an excess supply of almost 2 million bpd.

Oil Hovers Near Crucial Technical Level As Rig Count Decline Slows, China Inventory Soars - Overnight weakness on the back of 8-month highs in Chinese crude inventory (combined with the recent plunge in super-tanker rates - i.e. China is no longer refilling its SPR) sent WTI Crude towards the critical $44 level (which has acted as support for 2 months). The China rate cut weakened crude further as PBOC admitted it was needed because of the state of the economy. And then Baker Hughes reported a total rig count unchanged 787 (lowest since April 2002) and an oil rig count decline of just 1 to 594 (the 8th weekly drop in a row).WTI slipped on the news. China is getting full...China September Crude Inventory Climbs to Eight-Month High (Bloomberg) -- Crude stockpile rose to 34.31m mt, accord. to Bloomberg calculation based on percentage-change data from Xinhua News Agency’s China Oil, Gas & Petrochemicals newsletter. Sept. kerosene inventory at record high 1.92m mt, Sept. diesel stockpiles drop to 8-mo. low at 8.79m mt, Inventory data refers to commercial stockpiles excluding Strategic Petroleum Reserves And the artificial SPR-refilling demand appears to have stopped...Benchmark Crude Oil Supertanker Rates Fall by Most This Year (Bloomberg) -- Charter rates on Saudi Arabia-Japan VLCC route fall 11% to 61.54 Worldscale pts, according to Baltic Exchange data.  Equates to daily return of $68,921, lowest since Sept. 16.   Baltic Dirty Tanker Index falls 1.3% to 739 pts.  U.S. Gulf-Northwest Europe 38kt clean tanker rates rise 3.2% to 91.43

New Oil Order: Russia Again Tops Saudi Arabia As China's Largest Crude Supplier - Back in May, we noted that for the first time in history, Russia overtook Saudi Arabia as the number one supplier of crude to China.  The implications of that should be clear, but in case they aren’t, allow us to elaborate. First, Moscow is wrestling with crippling Western economic sanctions and building closer ties with Beijing is key to mitigating the pain. Part of the cooperation Russia seeks revolves around energy partnerships and while the Western media has endeavored to play down the arrangements (some of which have admittedly been beset with delays), the interest is there on both sides which means sooner or later, the deals will likely get done.  From a geopolitical perspective (and as regular readers are acutely aware, geopolitics and energy are inextricably linked at almost every turn), there’s a degree to which the shift is symbolic. That is, we don’t think we’re reading too much into it when we draw a connection between Russia’s usurpation of the Saudis on China’s crude suppliers list and the fact that Beijing and Moscow have voted with each other on the Security Council as it relates to Syria, where Riyadh’s interests are sharply at odds with The Kremlin’s.  Meanwhile, the Saudis are struggling to cope with the plunge in crude prices that they themselves engineered (they “Plaxico’d” themselves, as we’re fond of saying). The proxy war in Yemen along with the cost of maintaining the everyday Saudi’s lifestyle doesn’t mix well with plunging oil as is abundantly clear from the following which shows that Riyadh is now facing a deficit on both the current and fiscal accounts.

BP signs $10 bln gas supply deal with China's Huadian - Oil major BP has signed a $10 billion liquefied natural gas (LNG) supply deal with China’s Huadian power producer, sealing the agreement as part of Chinese President Xi Jinping’s state visit to Britain. BP will supply up to 1 million tonnes of LNG per year over 20 years to Huadian, China’s largest gas-fired power generator. The oil major also agreed with China National Petroleum Corporation (CNPC) to cooperate on shale gas exploration and production in the Sichuan Basin, as well as fuel retailing in China. BP and CNPC’s agreement also included jointly finding new oil and LNG trading opportunities and to work together on carbon emissions trading. British Prime Minister David Cameron said more than 12 billion pounds worth of oil and gas deals had been signed with China as part of the President’s visit.

"Good News" - China GDP Beats Expectation Leaving Fed 'Relieved', Stocks Disappointed - AsiaPac stocks were generally lower heading into the all-important Chinese macro data (S&P -6pts, Japan -0.7%, China -0.2%) as JPY erased Friday's ramp and crude dropped back below $47. The PBOC left the Onshore Yuan fix practically unchanged (following Friday's significant devaluation). Then the data hit... China GDP beat expectations (printing 6.9% YoY vs 6.8% exp) but is still the lowest growth since Q1 2009. Industrial Production missed (printing 5.7% YoY vs 6.0% exp). Retail Sales beat (10.9% YoY vs 10.8% exp). The initial reaction was kneejerk buying in USDJPY and stocks but that is fading as "good news" will relieve The Fed's angst over growth...

China Economic Growth Falls Below 7% for First Time Since 2009 - China's once-world-beating economy sputtered further in the third quarter, decelerating to its slowest pace since the global financial crisis and adding to concerns about the world economic outlook. The 6.9% growth rate for the third quarter—dipping below 7% for the first time since 2009—clouds China's prospects for reaching the official targeted growth rate of about 7% for the year. It also renews pressure on Beijing to enact more pro-growth measures. "Overall it's pretty disappointing," said Socié té Gé né rale CIB economist Klaus Baader, who expects fourth-quarter growth of 6.8%. "Investment continued to slow pretty sharply despite efforts by the government to support the economy. It doesn't seem to be sufficient." The better-than-expected result—a Wall Street Journal survey of 13 economists forecast a median 6.8% gain—is likely to renew debate over the accuracy of China's growth statistics. Other economic data released on Monday showed disappointing results in investment and industrial production. Earlier this month, China pledged to start following a stricter global standard in calculating its data. Even in slowdown, China continues to grow at a pace that other major economies envy. China's economy is nearly twice the size it was just six years ago, meaning at lower growth rates it remains a major engine for global consumption and production.

China economy logs weakest growth since 2009 - (Reuters) - China's economic growth dipped below 7 percent for the first time since the global financial crisis on Monday, hurt partly by cooling investment, raising pressure on Beijing to further cut interest rates and take other measures to stoke activity. The world's second-largest economy grew 6.9 percent between July and September from a year ago, the National Bureau of Statistics said, slightly better than forecasts of a 6.8 percent rise but down from 7 percent in the previous three months. That hardened expectations that China would avoid an abrupt fall-off in growth, with analysts predicting a more gradual slide in activity stretching into 2016. "Underlying conditions are subdued but stable," said Julian Evans-Pritchard, an analyst at Capital Economics in Singapore. "Stronger fiscal spending and more rapid credit growth will limit the downside risks to growth over the coming quarters." Chinese leaders have been trying to reassure jittery global markets for months that the economy is under control after a shock devaluation of the yuan and a summer stock market plunge fanned fears of a hard landing. Some analysts were hopeful that the third-quarter cooldown could mark the low point for 2015 as a burst of stimulus measures rolled out by Beijing comes into force in coming months, but muted monthly data for September kept such optimism in check.

How China's new 5-year plan will affect global GDP and recession - Between October 26 and October 29, the 18th Central Committee of the Communist Party of China will hold its 5th annual "Plenary Session," and announce the country's 13th Five-Year Plan. That might sound like a bunch of Mao-ist gobbledook to most of us in the West, but if you're interested in where the global economy is heading next, this is The Big One. China will use the plenum to set its GDP growth rate for the next five years. And if delegates start talking about any number lower than 7%, you can expect markets and projections to tank planet-wide. You might think this won't affect you because you're not Chinese. Wrong. China represents 32% of all global GDP growth, and about 30% of global capital expenditures, according to Credit Suisse. In other words, If China sneezes, the rest of us will get pneumonia. Here is the context: Over the last five years, China has promised to deliver GDP growth of around 7%. But growth in China has slowed recently and many economists have begun to suspect that China's self-reported GDP numbers are basically lies. Andrew Garthwaite, an analyst at Credit Suisse, last week said in a note to investors that China's real growth rate may be as low as 3% — or 400 basis points below where premier Li Keqiang says it is.  At Business Insider, we've been tracking as much data as we can find that suggests China is nowhere near 7% growth. One example: The price of cement — the one thing you need to build anything and everything — has dropped 25% in the last two years. Now, people are used to the idea that China isn't telling the truth about its real growth. So they discount the number. But if the next Five-Year Plan were to name a number lower than 7, then everyone's discounted models would be racked down one notch as well, to compensate.

China GDP: Deflategate Comes to Beijing - WSJ -- The world’s second largest economy registered an official 6.9% growth rate, in inflation adjusted terms, in the third quarter compared with a year ago, just a smidgen off the government’s official target of 7%.   But in nominal terms, it grew just 6.2%, the slowest top-line growth for the economy since 1999. That is distressing news for anyone in China with a lot of debt, as slow nominal growth makes paying off loans more difficult. With credit still expanding double digits, deleveraging writ large remains a far off dream.  The reason the real GDP figure came in higher than nominal GDP is that the “deflator” that Beijing’s statisticians applied was negative for the second time this year. It was also negative in the first quarter.   It isn’t clear, though, if a negative deflator is warranted. While producer prices are shrinking, consumer price inflation actually ticked up last quarter, averaging 1.7%, compared with 1.3% in the second quarter, when the deflator was positive. Investors are right to groan about how fast China is really growing. It is probably both unknowable and not all that great. But nor is it completely collapsing. What’s left to discern is the general direction of things. On that score, China’s old, smog-belching economy continues to sputter. Fixed-asset investment in September grew just 6.8% compared with a year ago, compared with an average of 19% growth over the past five years. But there are signs other parts of the economy are at least holding up. Car sales grew again last month. The critical property sector continued to see double digit increase in sales. And for the first time in a year, housing starts increased, a sign easier lending conditions are spurring developers to build.

The rise and fall of the Chinese economy -- In this new video, The Rise and Fall of the Chinese Economy, I discuss problems and prospects for the Chinese economy, given the latest developments.  This is the most recent addition to the Everyday Economics series from MRUniversity, and it also will be part of our forthcoming macroeconomics course.  It is done in a slightly new style, I hope you enjoy it.  The Learn More page features additional resources about this topic. By the way, here is your China (Africa) fact of the day:  China’s investment into Africa appears to be another casualty of the slowdown in the world’s second-largest economy. Chinese cross-border investment in greenfield projects and in expansion of existing projects in Africa fell by 84 per cent in the first half of this year compared with a year earlier, from $3.54bn to $568m.  The FT article is here.

The New China Syndrome - Harpers - Ford has pledged to do for China in the coming century what it did for America in the previous one, which is to produce vast quantities of high-quality cars that the masses can afford — even the company’s own salesmen. The bet is paying off. In 2014, only two years after committing big money, Ford sold more than a million cars in China, almost as many as it sold in the United States.  For any American who has followed domestic debates over international trade, Ford’s success in China — as well as that of General Motors and Chrysler — must be especially gratifying.  Japan itself has failed this test for the past three decades, keeping its automotive market mostly closed to foreign brands. In China, however, Fords, Chevrolets, Cadillacs, and Jeeps have been roaring off dealers’ lots — largely at the expense of Japanese automakers.  This success might also appear to validate something more important than corporate canniness. Two decades ago, in the wake of the Soviet Union’s collapse, a group of libertarian intellectuals in America put forth a radical vision: Lift all controls on the industrial and financial companies of the West, set them free to manage the world’s trade without any strangulating regulations, and they would entice the People’s Republic of China to join the international system.   But I wonder whether this great experiment in what we have been taught to call globalization really did work as promised. As our biggest manufacturers and traders and investors succeed in China, they also come to depend on China for future profits — which brings them increasingly under the sway of a Chinese state that holds the power to cut those profits off. What if the master capitalists and corporate bosses who have so cowed us here at home are themselves being cowed in Beijing? What if the extreme economic interdependence between the United States and China is not actually carrying our values into a backward and benighted realm, but accomplishing precisely the opposite — granting the Chinese Politburo ever-increasing leverage over America’s economic and political life?

Manufacturing slump creating ghost towns -- Beijing says China's economic slowdown is a necessary phase in the country's transition to sustainable growth, but that is little consolation to the scores of manufacturers fighting for survival amid tanking demand. Job cuts are rippling through the shipbuilding and other industries by the thousands, and local businesses and communities are struggling to cope as their livelihoods disappear. China's growth slowed to below 7% for the first time in six and a half years in the July-September quarter. The government has implemented one stimulus measure after another, but the manufacturing industry, which many say holds the key to a recovery, remains mired in a slump. The shipbuilding industry is a prime example of how bad things have gotten. China is the world's No. 1 shipbuilder, controlling about 40% of the global market. But the sector is reeling, with orders for the January-September period plunging 70% on the year. Because it has become a poster child for industries saddled with excessive production capacity, banks are hesitant to extend credit to shipbuilders, forcing the more desperate players to turn to high-interest lenders. Bankruptcies have been filed one after another this year.

Official Statistics Understate Chinese Unemployment Rate: High and rising unemployment in China created by massive layoffs during major changes in the structure of its labor market is not reflected in government figures.  China's real unemployment rate is much higher than the official rate and, when correctly measured, is much closer to that in other nations at similar levels of development, according to "Long Run Trends in Unemployment and Labor Force Participation in China" (NBER Working Paper No. 21460). The study estimates that the actual unemployment rate in 2002-09 averaged nearly 11 percent, while the official rate averaged less than half that. Moreover, despite some reports to the contrary, by 2009 China's labor market had still not recovered from huge layoffs that occurred during the later 1990s and early 2000s as the nation transitioned from a government-controlled economy to one in which private enterprise and market forces were more at play. "The official unemployment rate series for China is implausible and is an outlier in the distribution of unemployment rates across countries ranked by their stage of development," write researchers Shuaizhang Feng, Yingyao Hu, and Robert Moffitt. "We find that, by approximately 2002, the unemployment in China was actually higher than that of high income countries, exactly the opposite of what is implied by the official series." The official unemployment rate in China, which is based on registered unemployment figures, has long been viewed with suspicion. Various private studies have tried to come up with better estimates. This paper uses for the first time a nationally representative sample of registered urban residents–the "hukou" population–based on urban household survey data, supplemented with weights derived from the decennial census. The study derives a much different picture of how Chinese unemployment has evolved since the mid-1990s.

China continues to see forex settlement deficit - (Xinhua) -- China continued to see a foreign exchange (forex) settlement deficit in September, indicating forex had flowed out of the country at the retail level. Chinese banks sold 232.1 billion U.S. dollars' worth of foreign currencies to individuals and institutions, and bought 122.9 billion dollars from them, resulting in a net sale of 109.2 billion last month, the State Administration of Foreign Exchange said on Thursday. The forex settlement deficit came in at 301.5 billion dollars in the first three quarters of 2015.

Is Africa Becoming China’s New Derivatives? A Modern Story of Colonization -- Over the past decade China has established itself as an increasingly influential player across the continent. Given the impressive scale and scope of its engagement, China’s return to Africa may turn out to be one of the most significant catalysts for developments for the region (Tull, 2006). Such growth is expected to continue, with forecasts suggesting trade between these two partners reaching $1.7t by 2030, up from a mere $200b in 2012 (UNCTAD World Investment Report, 2013). In addition, China has succeeded in strengthening its ties with Africa by establishing the Forum on China-Africa Cooperation (FOCAC) back in 2000. Such tie was further strengthened in November 2006 during the FOCAC Beijing Summit. The inflow of FDI has grown and continues to play an important role in the growth and development of economies by contributing to their Gross Domestic Product (GDP). However, the role of FDI in stimulating economic growth in developing countries is increasingly becoming a controversial issue. Indeed, China’s relationship with Africa has always been a controversial topic of discussion among world leaders. China’s relationship with Africa has often been described as “colonial”, in which most of the benefits are far from mutual and often accrued to China. FDI if allocated properly is a method of financing domestic investments especially for countries that have inadequate capital. It also promotes advanced technology and management that indirectly stimulate growth in an economy. In view of the aforementioned, it is expected that China’s active FDI activities in selected East African countries should have had a positive impact by stimulating economic growth in these countries.

China Slowdown Sees Investment In Africa Plummet 84%  - The slowdown in the world’s second-largest economy has seen Chinese cross-border investment in Africa plunge.  Beijing has invested just $568 million in greenfield projects and expansion of existing projects in the first 6 months of 2015, down from $3.54 billion the previous year. That investment has been focused on China’s primary interest in Africa, namely its raw materials, writes Adrienne Klasa for The Financial Times. While overall investment plunged, investment in extractive industries almost doubled from $141.4 million to $288.9 million over the period. Chinese investment in Africa has at times been controversial, but has played a major role in regional growth. The African growth story has been complicated by global headwinds such as low prices of oil and other commodities. Many African states rely on raw materials for large parts of their revenues. Although foreign direct investment has fallen, China has been Africa’s main trade partner since 2009. In 2013 there was more than $170 billion in trade between China and sub-Saharan Africa, compared to less than $10 billion in 2002. “FDI has dipped across the board from emerging markets into other emerging markets, and into Africa in particular,” says Vera Songwe, the IFC’s director for West and Central Africa. FDI reflects changing patterns of investment.

China Nervously Joins Global Easing Campaign - China’s central bank cut benchmark interest rates for the sixth time this year in a bid to support an economy which is forecast to grow at its slowest annual rate in 25 years. The move comes a day after the European Central Bank indicated it would extend its quantitative easing programme and cut its deposit rate in a bid to boost the eurozone’s sluggish recovery. The People’s Bank of China’s actions, combined with Thursday’s ECB announcement and market doubts over the US Federal Reserve’s commitment to raise interest rates this year, highlight a wider nervousness in official circles over the health of the global economy. Expectations for global growth have already been revised down to 3.1 per cent in 2015, the lowest International Monetary Fund forecast since 2009, and analysts are concerned that prospects for next year are also dimming. The PBoC said on its website that it was lowering the one-year benchmark bank lending rate by 25 basis points to 4.35 per cent and the one-year benchmark deposit rate to 1.5 per cent — its lowest on record — from 1.75 per cent. The central bank also cut the share of customer deposits banks must hold in reserve, injecting Rmb560bn ($90bn) of cash into the banking system to counteract the cash drain from capital outflows in recent months. The required reserve ratio was lowered by 0.5 percentage points to 17.5 per cent.

China's economy: Rate cut shows that even China's government doesn't believe its own data | The Economist: IF GROWTH is so strong, why did the Chinese central bank feel the need to cut interest rates again? It is only reasonable to ask this after the People's Bank of China cut rates on October 23rd, the sixth time in a year, in the same week that the government said the economy grew 6.9% year-on-year in the third quarter, ahead of market expectations. The answer lies in the question: growth is not as strong as official data suggest, and the government knows that. Nominal growth has slowed to 6.2%, the weakest since 1999, translating directly into weak cash flow for companies that already face heavy debt burdens. The industrial sector has been especially hard hit, with the country's northern rustbelt on the brink of a recession. And more than a percentage point of overall growth this year has stemmed from activity in the financial sector, a contribution that will fall away quickly in the wake of this summer's stockmarket collapse. Many analysts reckon real growth is closer to 5-6%, well shy of the government's 7% target. More than three years' worth of producer price deflation tilt risks to the downside. If that all seems bleak, it is important to put the rate cut in the proper context. Paired with a reduction of bank's reserve requirements, and coming unscheduled on the evening of October 23rd, it might have appeared to be a surprise move. But all Chinese monetary policy moves are, strictly speaking, surprises. The central bank does not hold scheduled meetings and it often waits until the weekend to make big announcements, giving the market time to digest the implications. Over the past year it has settled into something of a rhythm, cutting rates every two months or so.

China Pessimism Is Overblown, IMF says, Citing Booming Services Sector -- Recent Chinese economic data is stoking fear the world’s second largest economy is decelerating at pace that could pull the global economy into a recession. But the International Monetary Fund’s top Asia economist, Changyong Rhee, says such pessimism may be unwarranted. A booming services sector—such as shipping and retail—is offsetting the collapse in manufacturing, he argues. “We don’t think there’s enough evidence based on the manufacturing sector that there will be a hard landing,” Mr. Rhee said in an interview. “They definitely have a manufacturing slowdown, an overcapacity problem. But other parts of China are actually growing faster.” If Beijing relies too much on monetary policy to stimulate growth, it could fuel China’s economic problems rather than fix them, the IMF official cautioned. His warning came as the People’s Bank of China on Friday cut interest rates again in a bid to revive growth. Old ways of measuring China’s economy—such as looking at electricity consumption—are outdated because they don’t accurately reflect the changing nature of growth, Mr. Rhee said. Services now account for more than 50% of the country’s economy and there is a good chance their contributions are being underestimated, he said. On first glance, China’s trade data appears to support worries about the economy. But digging a little deeper into the numbers may actually show the country’s move towards a growth model more reliant on consumer demand is already bearing fruit. Although the value of imports has fallen, volumes tell a different story. By adjusting for the fall in commodity prices and the appreciation in the yuan, the IMF calculates imports actually grew in July by 2%. And while the amount of goods imported has declined, imports of services are in double digits. China’s real-estate sector has also fomented concerns. But Mr. Rhee said there are signs property prices are stabilizing.

IMF Said to Give China Strong Signs of Reserve-Currency Blessing -- The IMF has given Chinese officials strong signals in meetings that the yuan is likely to win inclusion in the current review of the Special Drawing Rights, the fund’s unit of account, said three people who asked not to be identified because the talks were private. Chinese officials are so confident of winning approval that they have begun preparing statements to celebrate the decision, according to two people.  At least $1 trillion of global reserves will convert to Chinese assets if the yuan joins the IMF’s reserve basket, according to Standard Chartered Plc and AXA Investment Managers.  While the SDR is not technically a currency, it gives IMF member countries who hold it the right to obtain any of the currencies in the basket to meet balance-of-payments needs. The equivalent of about $280 billion in SDRs were created and allocated to members as of September, compared with about $11.3 trillion in global reserve assets.  SDR status is significant as “a seal of approval” from the IMF that the yuan is indeed an internationalized currency, AXA analysts said in May. The yuan can get a potential weighting of about 13 percent, according to an estimate by Bank of America Merrill Lynch in March. HSBC Holdings Plc said in an April note that the yuan’s share could be 14 percent, reflecting China’s importance in global exports.

IMF Seen Approving Yuan As "Reserve Currency" - Several days ago, Citi announced that it "expects the upcoming IMF review (scheduled for early-November) will probably lead to China’s inclusion in the SDR basket from late-2016. But we expect that the CNY will over time weaken versus the USD either way — either because of a poor outcome from SDR review or (if China joins the SDR) because of gradual (and limited) FX liberalization." While it remains to be seen just how negative the impact on the CNY would be as a result of any possible SDR inclusion, and the definition of China's currency as a reserve currency, it now appears virtually assured that the IMF will include the CNY in its SDR basket, "validating efforts by President Xi Jinping to push through policies aimed at making the world’s second-biggest economy more market oriented, boosting China’s prestige as it prepares to host Group of 20 gatherings next year." Just a few short weeks after The IMF appeared to snub China by delaying its decision on Yuan inclusion in the SDR basket, Bloomberg reports that Otaviano Canuto, executive director at the IMF for 11 countries including Brazil, said "prospects for approval seem to be favorable,"adding that the story "is going in the direction of the renminbi becoming a necessary component of the SDR." China is taking that as a 'yes' and is preparing statements celebrating IMF SDR approval.

Fight for fish: China elbowing US out of Pacific tuna trade- -- A political battle is brewing in the Pacific over tuna as rising competition from Chinese vessels sours long-standing fishing arrangements between the U.S. and Pacific island nations. After lengthy negotiations, the U.S. reached an interim agreement in August to raise its payments to a group of Pacific nations for access to tuna stocks in their exclusive economic zones for 2016. However, regional fishing authorities remain lukewarm about the long-term future of the arrangement, believing that China is prepared to pay more. The U.S. has extended the 1987 South Pacific Tuna Treaty annually since 2013, but it has failed repeatedly to reach a new long-term agreement with the Pacific island nations. The result was the same at recent talks in Brisbane, Australia, on Aug. 5. Washington has now threatened not to extend the treaty after 2016. Yet despite such hard talk, the U.S. may have to return to the negotiating table as world tuna stocks fall and prices spiral higher.  The interim treaty requires that each of 37 U.S.-registered purse seine, or dragnet, vessels that are registered to fish in the Pacific nations' exclusive economic zones pay a "vessel day scheme" rate of $12,600 a day in 2016, 34% more than this year's day rate. U.S. vessels will be allowed up to 5,700 fishing days, down from this year's allotment of 8,300.

South China Sea: US military vessels 'just steaming in international waters'- The U.S. Navy's highest ranking officer in uniform made clear on Thursday that any navigation by a U.S. naval vessel in the South China Sea is an expression of international rights, rebutting China's claim that such voyages are provocations. "They are just steaming in international waters," Admiral John Richardson, chief of naval operations, told reporters at the U.S. Embassy in Tokyo, during his maiden international trip. "I don't see how this can be interpreted as a provocation." Richardson was responding to the backlash in China toward reports that the U.S. Navy is planning to send a cruiser or destroyer within 12 nautical miles of the man-made islands that China is building in the South China Sea. The Global Times, a hawkish newspaper published by the People's Daily of China, carried an editorial on Thursday that said, "China has remained calm with self-restraint even in the face of Washington's escalating provocations, but if the U.S. encroaches on China's core interests, the Chinese military will stand up and use force to stop it." Richardson's cold shoulder and continued emphasis that the South China Sea is part of international waters come as blunt signaling that the U.S. does not recognize the waters around the Nansha Islands -- where China just completed two lighthouses -- as Chinese territory, as the Chinese claim.

Hi-Speed Rail Diplomacy: China vs. Japan - With China eclipsing Japan as the world's second largest economy in 2007, the latter has been keen to maintain its global influence and prestige--especially here in Asia. While both countries compete in nearly all things that are even remotely exportable, the competition has been particularly fierce in infrastructure. Obviously, the Chinese see foreign markets as outlets for expertise gained in constructing massive domestic infrastructure projects, especially now that grandest ones at home are becoming fewer due to the PRC slowing down economically. Meanwhile, the Japanese have massive expertise and a desire to use this industry to build goodwill. A few days ago, the Japanese were dismayed about losing out in constructing a high-speed railway line in Indonesia to the Chinese who offered highly concessional financing to go with the construction: Jakarta dropped both Chinese and Japanese high-speed railway construction proposals early this [October], citing the high cost of each, and offered to consider instead a cheaper medium-speed railway. But [Indonesian planning minister Sofyan Djalil] told Suga that China recently submitted a new proposal to build the high-speed rail link between Jakarta and the West Java provincial capital of Bandung without requiring Indonesian fiscal spending or government debt guarantees. Sofyan was visiting Japan as a special envoy of Indonesian President Joko Widodo...Suga doubted the feasibility of the Chinese proposal to build the railway without Indonesian funding. It is estimated to cost 78 trillion rupiah ($5.3 billion). Cost estimates aside, the larger point is that China and Japan have been made to pony up considerable vendor financing as well in their efforts to outdo each other in selling high-speed rail. Another case in point is that with Indian President Najendra Modi being keen on improving infrastructure for development like his Indonesian counterpart, the Japanese are now offering massive concessional funding again to pre-empt the Chinese this around for a Mumbai-Ahmedabad rail link:

NIRP Goes To Nippon: Japan Auctions 1 Year Paper At Most Negative Yield On Record -- Two weeks ago, on October 5 the financial punditry was dumbounded when - for the first time ever - the US Treasury sold $21 billion in 3-Month Treasury Bills at a yield of nothing, or 0.000%. And while the US had sold 1 month bills at zero yields before, this was the first time that investors were willing to fund Uncle Sam and give Jack Lew the privilege of holding their money not for 1 but 3 months without expecting anything in return.Yet once again, when it comes to the dark hole of the zero lower bound (and beyond), Japan remains the harbinger of what is coming. "Dark hole", because there is simply no escaping it, as Japan so vividly demonstrated back in August 2000 when, just like the US, after years of ZIRP, it tried to "telegraph" normalcy and hiked rates to a modest 25 bps, only to go right back down seven months later. What is surprising about Japan is that unlike most of Europe, which has opted to adopt a Negative Interest Rate Policy, or NIRP, because unlike Japan or the US, it can't push rates synthetically as negative via QE because Europe simply does not have enough sovereign paper to monetize, is that Japan whose monetary policy became a basket case years ago - for those keeping count Japan is currently on QE10... ... it still hasn't thrown in the "all-in" towel and announced negative rates. This may have officially changed yesterday, when in an auction that flew deep under the radar, Japan sold 1 Year (not 3 Month) Bills at the most negative yield in history, or -0.0418%, nearly doubly more negative the -0.0252% yield on the September 16 auction.

Rethinking Japan - Krugman - The IMF held a small roundtable discussion on Japan yesterday, and in preparation for the event I thought it was a good idea to update my discussion of Japan – not so much about the question of whether Abenomics is working / will work (unclear, don’t know) as about the current nature of the Japanese problem.It’s a bit self-centered, but I find it useful to approach this subject by asking how I would change what I said in my 1998 paper on the liquidity trap. Hey, it was one of my best papers; and it has held up pretty well in many respects. But Japan and the world look different now, and trying to pin down that difference may help clarify matters.It seems to me that there are two crucial differences between then and now. First, the immediate economic problem is no longer one of boosting a depressed economy, but instead one of weaning the economy off fiscal support. Second, the problem confronting monetary policy is harder than it seemed, because demand weakness looks like an essentially permanent condition.

Japan third-quarter growth seen slowing sharply as Asian demand slumps | Reuters: Japan's economy is expected to have slowed sharply in the third quarter as demand across Asia ebbed, keeping the Bank of Japan and policymakers under pressure to inject more stimulus to revitalize growth, a Reuters poll found. The poll of 21 economists predicted the economy grew at an annualized rate of 0.4 percent in the third quarter, a significant downgrade from last month's 1.3 percent forecast. The world's third-biggest economy shrank an annualized 1.2 percent in the April-June quarter due to weak capital spending and as Asia's locomotive China continued to lose momentum. Some analysts fear the economy may have slipped into recession. To support growth, Prime Minister Shinzo Abe unveiled his new "three arrows" last month - a target to boost gross domestic product (GDP) to 600 trillion yen ($5 trillion), lifting the fertility rate and pursuing social welfare reforms. Economists were largely skeptical of the impact of the new arrows on growth, with eight of the 14 analysts who responded to the question saying it won't support the economy while six took a positive view. "In addition to weak economic data such as factory output, inflation expectations data like the BOJ's tankan survey on firms' price projections weakened in recent months,"

BOJ to snip GDP, inflation forecasts for 2015, 2016 | The Japan Times: The Bank of Japan will cut its growth and inflation outlook for this fiscal year at a rate review next week, but only slightly tweak its projections for next year, sources said, possibly tempering expectations that the central bank will soon ease monetary policy further. By not straying far from its current projections for next year, the BOJ can maintain that it is still broadly on course to meet its inflation goal of 2 percent next year without needing to step up its massive asset purchase program, people with direct knowledge of the matter said. Critics say the program has been only marginally effective and distorts the bond market, and the BOJ board itself has not been unreservedly behind it. Finance Minister Taro Aso also expressed doubt Friday that further monetary stimulus will help achieve the inflation target. As Japan flirts with yet another recession, hit by weak exports, the BOJ is preparing to cut its core consumer inflation forecast for the fiscal year that began in April to below 0.5 percent in a semiannual report due out on Oct. 30, the sources said. The BOJ forecasted inflation of 0.7 percent three months ago. But the BOJ, which is trying to bring an end to decades of deflationary pressure with its unorthodox quantitative and qualitative monetary easing program, will only cut by 0.1-0.2 point its forecast that price rises will accelerate to 1.9 percent next fiscal year, keeping it near its target, they said.

Japan export growth slows sharply, raising fears of recession | Reuters: Japan's annual export growth slowed to a crawl in September as shrinking sales to China hurt the volume of shipments, raising fears that weak overseas demand may have pushed the economy into recession. Ministry of Finance data showed exports rose just 0.6 percent in the year to September, against a 3.4 percent gain expected by economists in a Reuters poll. That was the slowest growth since August last year, following the prior month's 3.1 percent gain. The weak yen helped increase the value of exports, but volume fell 3.9 percent, the third straight month recording an annual decline. Wednesday's data was the first major indicator for September and is part of the calculation of third quarter gross domestic product. A third quarter contraction would put Japan into recession, following the second quarter's negative GDP result, and could force policy makers to offer further stimulus. "Given this data, the economy probably contracted about an annualized 0.5 percent in July-September. External demand, capital spending and inventory investment were a likely drag, while consumption picked up,"

TPP: Landmark pact a chance to jump-start aging Japanese economy- -- The Trans-Pacific Partnership will thrust Japan into full market competition, opening up opportunities for exporters and bringing in cheap food imports that could threaten farmers but benefit consumers. Of all the items covered by the trade agreement, Japan will eliminate tariffs on 95% of them eventually, the government said Tuesday. The ratio is the highest yet for any trade pact Japan has signed, surpassing the record 88.4% under economic partnership agreements with Australia and the Philippines by nearly seven percentage points. Japan will do away with tariffs on all the industrial products covered, and on 81% of farm and marine products. The country sought to protect domestic producers in five key categories, including rice, beef, pork and dairy, and as a result, its tariff-elimination rate for the agricultural category is the lowest among the 12 countries in the pact. On the other hand, Japan's trade partners will jettison tariffs on 99.9% of industrial items. "Tariff elimination in Mexico, Vietnam and other markets key for business expansion will lead to growth,"Komatsu, which makes mining equipment such as hydraulic excavators, will benefit from the elimination of Australia's high 5% tariff, according to an official.   The U.S. currently levies lofty tariffs on chemicals and apparel products. Japan's Mitsubishi Chemical Holdings, which produces 80% of its annual 10,000-ton carbon fibers at home but sells 90% of it abroad, will benefit as the pact will force the U.S. to immediately scrap its 7.5% to 8% tariffs on raw materials. The agreement "will create a tailwind for increasing exports," a company official said.  For agricultural, forestry and fishery products, Japan will drop tariffs on 1,885 items, making foreign-grown vegetables, fruits and other items available at lower price to Japanese consumers.

Canada election: Opposition's Trudeau wins, raising doubts on TPP- -- Canada's opposition Liberal Party, led by Justin Trudeau, defeated Prime Minister Stephen Harper's Conservative Party in Monday's snap election, ending nine years of Conservative rule. The shift in power to the center-left party casts uncertainty on whether Canada will ratify the Trans-Pacific Partnership trade deal. Trudeau, 43, has been critical of the TPP, a key election issue, calling it an understanding based on backroom negotiations. However, he has also publicly stated that he supports free trade.

The imperative of Thailand’s trade policy -- The imperative of Thailand's trade policy | Bangkok Post: opinion: Most of the post-mortems by pundits and trade policy analysts so far on the recently concluded Trans-Pacific Agreement (TPP) have been critical of the largest free-trade pact in two decades. Few analyses have indicated that the 12-nation TPP can boost the problematic Doha Round of World Trade Negotiations, whereas many have noted the likelihood of global trade competition between competing blocs led by the United States-driven TPP across the Pacific and the China-led Regional Comprehensive Economic Partnership in East Asia. These disconcerting global trade developments are portentous for Thailand. Until the Thai government regains clarity on its trade policy directions, Thailand will stand to lose in the global economic arena. It is instructive to note Thailand's deep-seated polarisation. As Thailand misses out on TPP, those who are against the May 2014 coup have come out to ridicule the military government. They argue that Thailand has been excluded because it is ruled by coup-makers and that TPP members, especially the US, are against the military takeover in Bangkok last year. Those who go along with or are actively supportive of the coup have simply turned a blind eye and shrugged off the benefits of joining the TPP. Most glaring has been the absence of civil society groups, led by FTA Watch, that have successfully stymied some of Thailand's bilateral free-trade agreements over the past decade.

Citi Expects Imminent Easing From Central Banks Of China, Australia, Japan And Europe -- In the past few months, Citi's chief economist Willem "Gold is a 6000 year old bubble" Buiter, has been making increasingly more hyperbolic and grandose predictions about the future, which doesn't make them wrong. First, in August, after the US stock market tanked in the matter of days, he predicted that "Only "Helicopter Money" Can Save The World Now" the reason for which being that just a few days later, Citi made a "global recession in 2016" its base case scenario. Then today, Buiter released another forecast, where while backtracking somewhat on his global recession call, he does cut Citi's global economic growth forecast for 2016 for the fifth consecutive month, now expecting just 2.8% growth, down from 2.9% a month ago.  Buiters said that "if we adjust for the probable mis-measurement of China’s GDP growth in official data, “true” global growth is probably around 2¼% this year and also is likely to be below 2½% in 2016 (i.e. well below the 3% long-run norm). EM growth on this measurement-adjusted basis probably is about 2½% YoY this year, the lowest since the late 1990s. Even after these downgrades, risks to our global forecasts probably lie to the downside."

India bank chief calls for IMF action over monetary easing -- The head of India’s central bank on Monday called for the International Monetary Fund to stop “applauding” the monetary easing policies of many developed countries. Reserve Bank of India governor Raghuram Rajan said in a speech that the IMF should be doing more to assess the knock-on effects of stimulus measures on the global economy. “The IMF is supposed to be looking at these sorts of issues... but it is sitting on the sidelines and applauding such policies,” he told a G-20 consultation meeting in Mumbai. A number of developed economies, most notably the US, have engaged in significant monetary easing to boost their economies as global growth slows. But Rajan said some of the policies had been “extreme” and ultimately detrimental to emerging markets, which struggled to cope with large inflows of capital which then disappeared when the easing stopped. Rajan, the former IMF chief economist, said in his address that the policies initially encourage growth but the effect quickly wears off, leading to a “musical (chair-like) crisis.

Pakistan Economy: Car Sales Up 72%; Cement Shipments Rise 16.89% -- Pakistan auto industry is booming. Toyota, Suzuki and Honda factories are working around the clock in the southern port city of Karachi and eastern city of Lahore -- yet customers can still wait for up to four months for new vehicles to be delivered, according to media reports. At the same time, increase construction activity is visible everywhere in the country. Local car sales, excluding imported cars, jumped to 54,812 units in the first three months (Jul-Sep) of fiscal year 2016, up 72% from 31,899 units in the same period of last year, according to data released by the Pakistan Automotive Manufacturers Association (PAMA). Pak Suzuki led the pack with 33,770 units followed by Indus Motors (Toyota) 14,767 cars and Honda Motors 6,184 units. Industry analysts at Topline Securities expect local car sales to reach 203,653 units during the current fiscal year.  Car sales (excluding imported ones) in Pakistan grew at a five-year (FY11-15) compound annual growth rate (CAGR) of just 5.3% to 179,953 units. While volumes surged by 31% in fiscal year 2015 (FY15) on the back of the new model of Toyota Corolla, Punjab taxi scheme and an increase in car financing due to 42-year low interest rates in the country also helped, according to Express Tribune newspaper. “We forecast local car sales to grow at 13% in FY16 to reach 203,653 units,”

US Reaffirms Ties With Pakistan; Obama Pledges Continuing Support - All the speculations about the United States walking away from Pakistan this year have been proved wrong by the joint statement issued by the White House after this week's summit meeting between Pakistani Prime Minister Nawaz Sharif and US President Barack Obama in Washington D.C. The US-Pakistan joint statement reaffirmed "enduring U.S.-Pakistan partnership" for "a prosperous Pakistan, and a more stable region."  It commits the two sides to work "jointly toward strengthening strategic stability in South Asia".  The statement further said that "President Obama expressed support for Pakistan’s efforts to secure funding for Diamer­ Bhasha and Dasu dams to help meet Pakistan’s energy and water needs." Referring to the strained India-Pakistan ties, the statement said that both leaders "emphasized the importance of a sustained and resilient dialogue process between the two neighbors aimed at resolving all outstanding territorial and other disputes, including Kashmir, through peaceful means and working together to address mutual concerns of India and Pakistan regarding terrorism". There are also media reports indicating that President Obama has decided to sell 8 new F-16s to Pakistan.  Mr. Obama has also pledged $900 million in assistance to Pakistan for 2015-16. In addition, both Washington Post and New York Times have reported that the United States wants to negotiate a civil nuclear deal with Pakistan. Pakistan has said it will not accept any conditions that limit its nuclear weapons program in exchange for a civil nuclear deal with the United States.

Kazakh central bank to use pension fund cash to prop up economy - Kazakhstan's central bank will use 1 trillion tenge ($3.6 billion) from the state pension fund next year to support the slowing economy, the bank's chairman, Kairat Kelimbetov, said on Friday. He also said the bank believed Kazakhstan's currency would strengthen slightly and then stabilise within the next three to five months after losing a third of its value against the dollar in just two months. Kazakhstan, Central Asia's largest economy and the second-largest post-Soviet oil producer after Russia, has been hit hard by a collapse in world oil prices and the weakening of the currencies of Russia and China, its major trading partners. Kazakhstan's gross domestic product grew 4.3 percent last year, down from 6.0 percent in 2013. The International Monetary Fund this month cut its outlook for the country's GDP growth this year to 1.5 percent from 2.0 percent. From a total of 1 trillion of pension fund cash to be taken next year, 400 billion tenge will be used to support the state budget, Kelimbetov told reporters.

Low oil prices affecting remittances from Middle East -- The continued decline in the prices of oil in the world market has started to make a dent on the amount of money sent home by Filipinos working and living in the Middle East. Data from the Bangko Sentral ng Pilipinas (BSP) showed the growth in the amount of remittances from Filipinos based in the Middle East has slowed down 6.77 percent to $3.56 billion from January to August compared to $3.36 billion in the same period last year. Remittances of Filipinos working in the Middle East grew steadily to $5.33 billion in 2014 from $4.35 billion in 2013 and $3.47 billion in 2012 but at a slower pace. This translated to a lower growth rate of 22.5 percent in 2014 from 25.4 percent in 2013. Credit rating agency Moody’s Investors Service also noted the drop in remittances from the Middle East, whose petroleum and service industries rely to a large extent on Filipino labor. Moody’s said remittances from the Middle East account for roughly one-fifth of the total amount of money sent home by overseas Filipinos. Moody’s, on the other hand, noted a slight uptick in the remittances from Filipinos in the US. Remittances from the US went up 5.33 percent to $6.86 billion in the first eight months from $6.5 billion in the same period last year.

Global stocks soar on surprise China rate cut | Reuters: Stock markets worldwide soared on Friday after China cut interest rates for the fourth time this year and several large-cap U.S. technology companies reported better-than-expected quarterly results. Shares across Asia, Europe and the Americas climbed, having already been boosted by Thursday's message from ECB chief Mario Draghi that the central bank was ready to adjust "the size, composition and duration" of its quantitative easing program. Wall Street rallied, with the S&P 500 gaining 1 percent to reach its highest since Aug. 20, which marked the beginning of a selloff initially sparked by weak data out of China.China, in a surprise move, cut its benchmark one-year lending rate by 25 basis points to 4.35 percent and lowered big banks' reserve requirement ratio by 50 basis points to 17.5 percent. Long-dated government debt yields rose, as the gains in equities reduced the appeal of safe-haven bonds. China's rate cut did not move commodities investors to bid up oil prices, which were flat to lower. In the currency markets, the offshore yuan sagged to its lowest in a month, while the euro fell to $1.10 to put the dollar on course for its biggest weekly rise against major currencies since late May. Global bond investors backed off safe-haven debt in the U.S. and Germany. Additional Chinese stimulus could help global growth, boosting yields on benchmark U.S. Treasuries and European debt. The 10-year U.S. Treasury note fell 17/32 in price to boost its yield to 2.091 percent.

PNG to resettle Manus Island refugees, Australia says -  Papua New Guinea (PNG) is to begin resettling refugees from the controversial Manus Island immigration detention centre, Australia has said. Australian Immigration Minister Peter Dutton said the move would allow refugees there to "have a fresh start". Australia made a 2013 deal to provide PNG with aid if it agreed to house a detention centre and resettle refugees. Australia sends asylum seekers arriving by boat to camps in PNG and the Pacific nation of Nauru for processing. However, conditions in the camps have been strongly criticised by UN agencies and rights groups. "Consistent with the RRA (Regional Resettlement Arrangement), persons transferred to PNG, who are found to be refugees, will be resettled in PNG. No-one will be resettled in Australia," Mr Dutton said in a statement. "The PNG government has shown... its commitment to permit those found to be refugees to get on with their lives and have a fresh start in this dynamic nation with a growing economy."

The 'hippo trench' across Africa: US military quietly builds giant security belt in middle of continent -- NIGERIA has welcomed a US decision to send up to 300 military personnel to Cameroon to help the regional fight against Boko Haram, despite having itself requested more direct help from Washington. But the US is not only involved in fighting back Boko Haram on the continent. In recent years, the US has  quietly ramped up its military presence across Africa, even if it officially insists its footprint on the continent is light. The decisive point seems to have been the election of  President Barack Obama in 2008. For years, the United States Africa Command (known by the acronym AFRICOM) has downplayed the size and scope of its missions on the continent, and without large battalions of actual boots on the ground, as was the case in Afghanistan and Iraq, you’d be forgiven for missing its unfolding.  But behind closed doors, US military officials are already starting to see Africa as the new battleground for fighting extremism, and have begun to roll out a flurry of logistical infrastructure and personnel from West to East – colloquially called the “ new spice route” – and roughly tracing the belt of volatility on the southern fringes of the Sahara Desert; the deployment to Cameroon is just the latest of many. These support all the activities that American troops are  currently involved in Africa: airstrikes targeting suspected militants, night raids aimed at seizing terror suspects, airlifts of French and African troops onto the battlefields, and evacuation operations in conflict zones.

The Shifting World Distribution of Income - The fastest-growing countries around the world, now and probably for the next few decades, will not be the high-income countries. As a result, the global distribution of income will become--gradually--more equal over time. Tomáš Hellebrandt and Paolo Mauro offer a projection in their essay, "China’s Contribution To Reducing Global Income Inequality,"   The horizontal axis shows income level per person. You should think of this axis as broken down into small segments that are each $20 in width. Then, vertical axis shows what share of world population receives that income level, for each $20 segment of income. The green line shows distribution of global income in 2003, the red line in 2013, and the blue line is a projection for 2035. You can see the median and mean income distributions rising over time. The overall flattening of the income distribution over time as a smaller share of the population is bunched at the bottom tells you that the income distribution is getting more equal. On the graph, inequality is measured by a "Gini coefficient," which is a standard measure of inequality.  For quick intuition, I'll just say that the Gini coefficient is measured along a scale from 0-100, where zero means complete equality of incomes, and 100 means that a single person receives all the income. To get a more intuitive feel for what the Gini means, the World Bank publishes estimates of Gini coefficients, when data is available, for countries around the world. Countries with a very high level of inequality, like Brazil, Mexico, Zambia and Uganda, have a Gini around 50.  In the United States and China, the Gini is about 40. In Germany and France, it's about 30. In highly egalitarian countries like Sweden or Norway, it's closer to 25. It's not especially surprising that the global Gini coefficient is higher than the Gini for any given country: after all, global inequality is greater than inequality within any given country.

Why Miners Keep Expanding, as Prices Collapse - WSJ: —Even as iron ore prices have collapsed, Brazilian giant Vale is building a $16 billion iron-ore operation that it touts as “the biggest project in our history and in international mining.” How? Because its costs are collapsing as well. From South America to Australia, plunging currencies in mineral-rich nations are helping some companies expand their mines—and contributing to a glut of production that has saturated markets and driven prices down. The cost of producing many commodities is “dropping like a stone,” said Goldman Sachs’s head of commodities research, Jeff Currie, who describes it as a “negative feedback” loop. The dynamic helps explain why commodity busts can be so long-lived. The hope for recovery in commodities markets rests with the prospect that producers will run out of money or tire of losses and shut their facilities, bringing supply back into balance with weakened demand. But for the world’s top miners, which operate mostly outside the U.S., currency declines have dulled the pain of lower commodity prices. Over the last year, the dollar has gained 58% against the Brazilian real, 22% against the South African rand, 21% against the Australian dollar and 16% against the Canadian dollar.  Companies receive U.S. dollars for the gold, iron ore and coal they dig up. But they pay wages, electricity and many other expenses in local currency.

An Exploding Pension Crisis Feeds Brazil’s Political Turmoil - An exploding pension crisis here in Brazil, Latin America’s biggest country, is wreaking havoc on its public finances, intensifying a political struggle over the economy that already has the president fighting for survival.Brazilians retire at an average age of 54, and some public servants, military officials and politicians manage to collect multiple pensions totaling well over $100,000 year. Then, once they die, loopholes enable their spouses or daughters to go on collecting the pensions for the rest of their lives, too. The phenomenon is so common in Brazil’s vast public bureaucracy that some scholars call it the “Viagra effect” — retired civil servants, many in their 60s or 70s, wed to much younger women who are entitled to the full pensions for decades after their spouses are gone.  “The entire country should be frightened to its core. The pensions Brazilians obtain and the ages at which they start receiving them are nothing less than scandalous.” The pension crisis is feeding Brazil’s political turmoil as President Dilma Rousseff fights calls for her ouster. The nation’s economy has soured badly, and this month the Federal Court of Accounts ruled that Ms. Rousseff violated accounting practices by using funds from giant state banks to cover budget shortfalls. School and health budgets are being cut, and Ms. Rousseff is now proposing steps to keep pension spending from ballooning even more. But a rebellious Congress voted this year to significantly expand pension benefits. Ms. Rousseff vetoed the legislation, setting the stage for a bruising battle with lawmakers.

Brazil's inflation approaches 10 percent in mid-October on fuel prices - Brazil's annual inflation rate probably neared 10 percent in mid-October after state-run oil company Petrobras raised fuel prices to adjust for a massive currency drop, a Reuters poll showed on Tuesday. Consumer prices likely gained 9.79 percent in the 12 months through mid-October, the highest since December 2003, according to the median of 22 analysts' estimates for the IPCA-15 index due out on Wednesday. The forecasts ranged from 9.54 to 9.83 percent. In mid-September, the 12-month rate stood at 9.57 percent. On a month-on-month basis, consumer prices probably increased 0.68 percent from mid-September, up from a rise of 0.39 percent in the previous month, according to the median of 26 forecasts in the poll. Petroleo Brasileiro SA, as Petrobras is formally known, raised gasoline and diesel prices by 6 percent and 4 percent respectively in late September as it scrambles to manage the biggest debt load among global oil companies. The unexpected price hike was the latest in a series of increases in government-regulated prices and taxes this year, highlighting how the poor state of Brazil's public finances is fueling inflation and worsening an economic recession. Food prices were another potential source of inflation in early October, analysts in the poll said, while air fares have probably moderated their increase.

Billions in Cheap Loans Show Why Brazil's Losing Inflation Fight - Brazil’s state development bank is making the nation’s fight against inflation even more difficult. The key lending rate for BNDES’s $170 billion loan portfolio is 7 percent, below inflation and less than half the central bank’s Selic overnight rate of 14.25 percent. The cheap cash is flowing at a time when monetary policy makers are desperately trying to restrain credit growth. High lending has helped stoke a surge in consumer-price increases to a 12-year high of 9.77 percent even as Brazil suffers its worst recession in a quarter century. “The Selic rate has to rise more than it should to reduce inflation, as a significant part of the credit market that has access to subsidized credit does not react to its increases, and that diminishes the efficacy of the central bank actions,”   The gap between the development bank’s lending rate and the Selic reached a nine-year high of 7.75 percentage points in June, and has since come down to 7.25 points. Brazil’s currency has fallen 32 percent this year as of 1:57 p.m. in New York on Friday. BNDES, based in Rio de Janeiro, didn’t reply to requests for comment on how its lending is undermining the government’s push to quell inflation while the central bank declined comment. Central bank officials have raised borrowing costs 3.25 percentage points in the past 12 months, the most among the Group of 20 nations, in an attempt to quash inflation running at more than double the official target.

Venezuela sees 85 percent inflation this year, 60 percent next | Reuters: President Nicolas Maduro's government predicted on Tuesday that Venezuela's inflation, already the world's highest, would be 85 percent in 2015 and 60 percent next year. Though high, those figures are conservative compared to estimates by international economic organizations who believe the South American OPEC member's inflation is already well into a three-digit annual rate. Critics say Venezuela's runaway price rises - together with product shortages and a shrinking economy - are evidence of a failed socialist model of price and currency controls combined with hostility towards the private sector. But Maduro, who took over from Hugo Chavez after winning a 2013 election, blames political foes and businessmen for waging an "economic war" to try and subvert his government. The oil price plunge has exacerbated Venezuela's problems. Maduro's forecast of approximately 85 percent inflation this year came as he announced measures intended to help Venezuelans cope with the current economic crisis.

Few in Venezuela Want Bolívars, but No One Can Spare a Dime - The eagerness to dump bolívars or avoid them completely shows the extent to which Venezuelans have lost faith in their economy and in the ability of their government to find a way out of the mess. A year ago, $1 bought about 100 bolívars on the black market. These days, it often fetches more than 700 bolívars, a sign of how thoroughly domestic confidence in the economy has crashed.The International Monetary Fund has predicted that inflation in Venezuela will hit 159 percent this year (though President Nicolás Maduro has said it will be half that), and that the economy will shrink 10 percent, the worst projected performance in the world (though there was no estimate for war-torn Syria). That would be a disastrous drive off the cliff for a country that sits on the world’s largest estimated oil reserves and has long considered itself rich in contrast to many of its neighbors. Yet the real story goes beyond numbers, revealed in the absurdities of life in a country where the government has refused for months to release basic economic data like the inflation rate or the gross domestic product. Even as the country’s income has shrunk with the collapsing price of oil — Venezuela’s only significant export — and the black market for dollars has soared, the government has insisted on keeping the country’s principal exchange rate frozen at 6.3 bolívars to the dollar. That astonishing disparity makes for a sticker-shock economy in which it can be hard to be sure what anything is really worth, and in which the black-market dollar increasingly dictates prices.

Canada's Trudeau topples PM Harper in shock election win | Reuters: Canada's Liberal leader Justin Trudeau rode a late surge to a stunning majority election victory on Monday, toppling Prime Minister Stephen Harper's Conservatives with a promise of change and returning a touch of glamor, youth and charisma to Ottawa. Harper conceded defeat and the Conservative party announced his resignation, ending a nine-year run in power and the 56-year-old's brand of fiscal and cultural conservatism that voters appeared to sour on. The Liberals seized a Parliamentary majority, a turn in political fortunes that smashed the record for the number of seats gained from one election to the next. The center-left Liberals had been a distant third place party before this election.The photogenic son of former Prime Minister Pierre Trudeau pledged to run a C$10 billion annual budget deficit for three years to invest in infrastructure and help stimulate Canada's anemic economic growth. This rattled financial markets ahead of the vote and the Canadian dollar weakened on news of his victory. Trudeau has said he will repair Canada's cool relations with the Obama administration, withdraw Canada from the combat mission against Islamic State militants in favor of humanitarian aid and training, and tackle climate change.

Trudeau wins majority, Harper steps down - The Liberals under Justin Trudeau have won a comfortable majority government after the longest and costliest federal election campaign in Canadian history. Conservative Leader Stephen Harper then stepped down, ending almost 10 years in power. Mr. Harper did not say that directly but John Walsh, president of the Conservative Party, released this statement late Monday: "I have spoken to Prime Minister Stephen Harper and he has instructed me to reach out to the newly-elected parliamentary caucus to appoint an interim leader and to the national council to implement the leadership selection process pursuant to the Conservative Party of Canada constitution."At 2 a.m. ET, the Liberals were elected or leading in 185 seats – 15 more than needed to form a majority government. That compared to 100 for the Conservatives, 42 for the NDP, 10 for the Bloc Québécois and one for the Green party. If those numbers hold, it means the Bloc failed to get the 12 seats necessary for official party status in the new Commons and that the Greens failed to add a seat to their leader's lone tally.

Canada and the Anti-Austerity Movement -- From a global economic perspective, much of the interest in Trudeau’s success lies in his rejection of Harper’s balanced-budgets pitch, and his promotion of an economic plan that would have the federal government borrow money at low interest rates and invest it in infrastructure. While the absolute numbers in Trudeau’s proposal appear to be small—additional outlays of nine and a half billion Canadian dollars a year—they would virtually double infrastructure spending over the next decade. With a collapse in commodity prices having forced the resource-rich Canadian economy into a recession, this investment policy, which would be combined with a tax cut for low- and middle-income families, will provide a much-needed boost to over-all spending. It will also improve Canada’s transport system, which has failed to keep up with population growth, and create more affordable housing—a big issue in a country that has seen a sharp rise in real-estate prices.   To repeat, the spending plan is a modest one. According to the Liberal Party’s projections, it would see the federal government’s budget deficit rise to about ten billion dollars a year—a sum that would be considered a rounding error in Washington. Still, Trudeau’s victory represents a repudiation of the commitment to balanced budgets and spending cuts that all of the major Canadian parties had previously endorsed, his own included.   Coming at a time when, in the United States and much of Europe, the debate about austerity policies seems stuck, what is happening in Canada sends a hopeful message that progress is possible, after all.

Fiscal stimulus plan not enough to boost Canada 2016 GDP: Reuters poll | Reuters: Canada's economic growth will not receive a major boost next year from the newly elected Liberal government's fiscal stimulus plan, because of lingering uncertainty about oil prices and demand for Canadian exports, a Reuters poll released on Thursday showed. A majority of around 30 forecasters, surveyed after the Bank of Canada left policy unchanged on Wednesday, said they have not revised their 2016 predictions and were not considering doing so. Prime Minister-designate Justin Trudeau, who swooped to power in a landslide election victory on Monday, has proposed running an annual budget deficit of up to C$10 billion ($7.63 billion) for three years to invest in infrastructure and boost Canada's anemic economic growth. However, many economists surveyed said they were waiting for Trudeau's policies to be implemented before revisiting forecasts. After almost a decade of Conservative Party rule, economists said if they were to revise growth forecasts, the more likely move would be upward. Canada experienced one of its slowest periods of growth in recent decades under the Conservatives, punctuated by the global credit crisis. Canada, the world's 11th largest economy, slipped into a mild recession in the first half of this year as oil prices tumbled. Still, economists said a change in government does not mean that economic challenges have disappeared.

Europe Secretly Starts Imposing TTIP “Trade” Deal Despite the Public’s Overwhelming Opposition  The European Union is already secretly imposing provisions from the secret Transatlantic Trade and Investment Partnership (TTIP) treaty, even before anyone has signed it, and even before it has been formally approved in any nation. This was revealed over the last weekend in two places: Nick Dearden, director of anti-poverty group Global Justice Now, says the EU’s chief trade counsellor, Damien Levie, has let slip that free trade means undermining current minimum standards agreed by the EU. Dearden says that according to a report in the  [subscription-only] newsletter Washington Trade Daily, Levie told a conference held by US free market thinktank the Cato Institute [which is owned by America’s passionately anti-regulatory billionaire oil-investors, the Koch brothers] that genetically modified crops and chemically washed beef carcasses were being allowed into the EU ahead of a deal.  Previously, information that was made public by wikileaks had made clear that in the negotiations over the TTIP, the U.S. has been the most aggresssive nation pushing for the ability of international corporations to shape national laws — this being the position that’s also favored by the Koch brothers. US officials successfully used the prospect of TTIP to bully the EU into abandoning plans to ban 31 dangerous pesticides with ingredients that have been shown to cause cancer and infertility. A similar fate befell regulations around the treatment of beef with lactic acid. This was banned in Europe because of fears that the procedure was being used to conceal unhygienic  practices. The ban was repealed by MEPs in the European Parliamentary Environment Public Health and Food Safety Committee after EU Commission officials openly suggested TTIP negotiations would be threatened if the ban wasn’t lifted. On climate change, the European Fuel Quality Directive which would effectively ban Canadian tar sands oil [the world’s worst oil from a global-warming standpoint] has foundered in the face of strong US-Canadian lobbying around both TTIP and the EU-Canada CETA deal.

Toxic Trade: TTIP and “Regulatory Cooperation”: ‘Collateral damage’. ‘Enhanced interrogation’. What’s the name for those phrases or words that sound relatively innocuous but are actually covering up something that’s very violent or very bad?Here’s another one: regulatory cooperation. Cooperation is a good thing, right? It doesn’t sound so threatening, but it’s a masterful example of the power of language to make something terrible sound benign.And it’s nestling at the heart of the trade deal being hammered out between the EU and the USA.The widespread public concern about the controversial free trade deal known as the Transatlantic Trade and Investment Partnership (TTIP) can be largely grouped into two main themes.One is concern that it could mean the privatisation of the NHS, and unease about corporations being able to sue governments in secret courts (ISDS).But there’s a less well-known aspect of TTIP that could even more fundamentally and negatively affect many aspects of our lives, but it just sounds so boring that people tend to start glazing over as soon as you mention it. To most people, regulations such as air pollution limits and food safety standards are common sense protections against dangerous threats. However, to many big businesses, these rules are just red tape or ‘non-tariff barriers to trade’ (NTBs) which inhibit profits. Proponents of TTIP say that 80% of the supposed benefits of the deal will come from getting rid of these NTBs. Our new briefing shows how regulatory cooperation presents a unique opportunity for corporate interests on both sides of the Atlantic to lobby for these standards to be brought down to the lowest common denominator.

Salty Issue in U.S.-European Trade Talks: Feta Cheese - WSJ —Negotiators meeting this week to forge a sweeping trade agreement between the U.S. and the European Union are nearing a deal to eliminate tariffs on at least 97% of goods traded across the Atlantic, officials close to the talks say, building momentum for what would be the most ambitious trade pact in more than 20 years. But a host of disputes still stand in the way of an overall agreement, including an unlikely stumbling block: the salty white cheese called feta made for centuries in the rugged mountains of Greece. In the EU, only cheese made from the milk of sheep and goats in swaths of mainland Greece and the island of Lesbos can be called feta. It is one of dozens of regional foods and drinks whose names the EU insists on reserving, in the face of stiff resistance from the U.S. food industry. The problem is American companies also make products that use many of the names. Athenos feta, a U.S. brand from Kraft Foods Group Inc., isn’t made of the milk of sheep and goats grazing on wild grasses of Greek mountain pastures but from cow’s milk in Wisconsin.Economists say the trade deal would lift a broad range of industries, from auto makers to chemical companies. Supporters of a pact call it an “economic NATO” to mirror the military alliance, solidifying U.S.-European ties at a time of geopolitical threats from Russia and economic challenges from China. If successful, the U.S.-EU talks would likely result in each side accepting the other’s auto-safety regulations. Car companies would save millions by no longer having to build different versions to meet two sets of safety rules.

Tax ruling dampens TTIP cheer -  Lead negotiators for the United States and the European Union will brief reporters in just a few hours on the outcome of the 11th round of talks on the Transatlantic Trade and Investment Partnership this week in Miami. But even as Deputy U.S. Trade Representative Michael Punke sounded more optimistic on Wednesday about the negotiations, a European Commission decision that Starbucks and Fiat Chrysler must pay back up to $22 million in tax breaks set off grumbling in the U.S. business community. Story Continued Below Netherlands provided illegal “state aid” for Starbucks, and Luxembourg did the same for Fiat, said European competition commissioner Margrethe Vestager. “I hope that, with today's decisions, this message will be heard by member state governments and companies alike," Vestager said. The message was heard at the U.S. Chamber’s headquarters on H Street, across Lafayette Square from the White House. The ruling injects “a significant degree of uncertainty into the business climate, retroactively calling into question thousands of tax arrangements that were previously understood to be legal and appropriate,” complained Sean Heather, a vice president at the business group. “Companies doing business across the EU are unfairly being placed at risk for their good faith efforts to follow member state tax law. Short of much greater clarification about what is unique about these specific cases, a cloud of uncertainty will remain.”

Greek-owned fleet increases global market share, retains lead, as global fleet growth slows down -- Greece continues to be the largest ship-owning country, accounting for more than 16 per cent of the world total, followed by Japan, China, Germany and Singapore. Together, the top five ship-owning countries control more than half of the world tonnage (dwt). Five of the top ten ship-owning countries are from Asia, four are European, and one (the United States) is from the Americas. Over the last decade, China, Hong Kong (China), the Republic of Korea and Singapore have moved up in the ranking of largest ship-owning countries, while Germany, Norway and the United States have a lower market share today than in 2005. In South America, the largest ship-owning country (in dwt) continues to be Brazil, followed by Mexico, Chile and Argentina. The African country with the largest fleet ownership is Angola, followed by Nigeria and Egypt. China, Indonesia and the Russian Federation have a large number of nationally flagged and owned ships, which are largely employed in coastal or inter-island shipping. These markets tend to be protected from foreign competition and do not necessarily fall under global IMO regulations. Ships deployed on these services tend to be smaller and older than the fleet deployed on international routes.

Greece’s top tax collector sacked by Tsipras -  Greece’s top tax collection official has been sacked by prime minister Alexis Tsipras in a move that has reawakened concerns about the politicisation of a key administrative post. Katerina Savvaidou was removed following a cabinet meeting on Thursday -days after she refused Mr Tsipras’ request that she resign. An Athens lower court prosecutor last week filed charges against Ms Savvaidou for breach of duty because she had allegedly granted an extension to television stations to pay a 20 per cent tax on advertising. The extension came just ten days before the January elections. Ms Savvaidou, a former PriceWaterhouse executive connected to the centre-right New Democracy party, is also under judicial investigation for ordering a review of a €78m fine imposed on an IT company accused of usury. “As we all understand, in times that are difficult for Greek society, for the Greek people, we cannot accept for public officials to operate against the public interest — to favour specific businesses, which benefited in the past from previous governments,” said Olga Gerovasili, a government spokesperson. But in a written statement, Ms Savvaidou rejected those claims, stating: “I refused to resign from my post, because I cannot depart at a time when my attention to duties is being questioned in such an unfounded manner and my honesty and dignity is being slighted.” Tax collection, a long-time Greek failing, has become a perpetual frustration for the country’s international creditors, who have demanded reforms in exchange for their bailout loans.

Greek civil servants call Nov 12 strike over pensions (Reuters) - Greek civil servants union ADEDY on Tuesday called a 24-hour general strike for Nov. 12 in protest at pension reforms required under Greece's latest bailout deal with its international lenders. On Monday, private sector union GSEE called a strike for the same day, adding to a groundswell of public discontent at a raft of tax hikes and pension cutbacks that Athens has had to make under the terms of the 86 billion euro ($97.7 billion) bailout, its third since 2010. The left-wing government has passed legislation raising the retirement age, increasing contributions for health care and scrapping most early retirement benefits. It also plans to merge a multitude of pension funds into one and cut back on supplementary pensions. ADEDY, which represents about 650,000 public sector workers, said the pension reforms would deal the 'final blow' to funds which had already been depleted over the years. "It is clear the government ... has taken over the role of redistributing poverty," the union said in a statement.

Defiant Portugal shatters the eurozone's political complacency - The delayed fuse on the eurozone's debt-deflation policies has finally detonated in a second country. Portugal has joined the revolt against austerity.  The rickety scaffolding of fiscal discipline and economic surveillance imposed on southern Europe by Germany is falling apart on its most vulnerable front.  Antonio Costa, Portugal's Socialist leader and son of a Goan poet, has refused to go along with further pay cuts for public workers, or to submit tamely to a Right-wing coalition under the thumb of the now-departed EU-IMF 'Troika'. Against all assumptions, he has suspended his party's historic feud with Portugal's Communists and combined in a triple alliance with the Left Bloc. The trio have demanded the right to govern the country, and together they have an absolute majority in the Portuguese parliament.   The verdict from the markets has been swift. "We would be very reluctant to invest in Portuguese debt," said Rabobank, describing the turn of events as a political shock. The country's president has the constitutional power to reappoint the old guard - and may in fact do so over coming days - but this would leave the country ungovernable and would be a dangerous demarche in a young Democracy, with memories of the Salazar dictatorship still relatively fresh.

Portugal’s Socialists threaten minority government plan (AFP) - Portugal's Socialist Party on Friday rejected plans for a new centre-right minority government which outgoing Prime Minister Pedro Passos Coelho has been asked to form, insisting they could assemble their own coalition. Passos Coelho's ruling bloc took more than 38 percent of votes in the October 4 election despite overseeing four years of painful austerity in the bailed-out country, but lost its absolute majority in parliament. The president tasked Passos Coelho with forming a government on Thursday but less than a day later the Socialists were working on the details of an alliance with other left-wing parties -- something which has not happened in 40 years of democracy in Portugal. Neighbouring Spain and Germany have both voiced deep concern about the prospect of a left-wing coalition taking power in Portugal, which is recovering only slowly after emerging from a 78-billion-euro ($88-billion) international bailout last year. The threat to Passos Coelho was thrown into sharp relief Friday as the Socialists, who came second in the vote, declared they would "not endorse the formation of a government" by the centre-right. Socialist leader Antonio Costa insisted he can form a government with support from the Left Bloc party, Communists and Greens.

Eurozone crosses Rubicon as Portugal's anti-euro Left banned from power -  Portugal has entered dangerous political waters. For the first time since the creation of Europe’s monetary union, a member state has taken the explicit step of forbidding eurosceptic parties from taking office on the grounds of national interest. Anibal Cavaco Silva, Portugal’s constitutional president, has refused to appoint a Left-wing coalition government even though it secured an absolute majority in the Portuguese parliament and won a mandate to smash the austerity regime bequeathed by the EU-IMF Troika.  He deemed it too risky to let the Left Bloc or the Communists come close to power, insisting that conservatives should soldier on as a minority in order to satisfy Brussels and appease foreign financial markets. Democracy must take second place to the higher imperative of euro rules and membership.  “In 40 years of democracy, no government in Portugal has ever depended on the support of anti-European forces, that is to say forces that campaigned to abrogate the Lisbon Treaty, the Fiscal Compact, the Growth and Stability Pact, as well as to dismantle monetary union and take Portugal out of the euro, in addition to wanting the dissolution of NATO,” said Mr Cavaco Silva.

Europe’s banks face a difficult global retreat -- Credit Suisse is raising SFr6bn of fresh capital while cutting back the amount that it allocates to securities trading; Deutsche Bank is dividing its investment banking division in two and wants to trim it; Barclays’ intended chief executive, Jes Staley, is likely to curtail its investment bank outside the UK and the US. It does not take a genius to notice a common theme for European investment banks: retreat. In April, I wrote that Europe needed at least one investment bank to compete head on with US giants such as Goldman Sachs and JPMorgan Chase. Shortly afterwards, Anshu Jain resigned as co-chief executive of Deutsche Bank and Europe’s banks headed in the opposite direction. UBS, which has raised its profitability since cutting bond trading in 2012, is the new model.  One can see their point. It is very hard to break into Wall Street and even Goldman is having difficulties with bond trading, the dominant revenue producer of the pre-2008 boom. It is even harder for European banks such as Deutsche to make a decent return when such activities have been hit by higher capital and liquidity requirements. Shareholders are no longer willing to tolerate them dallying. Global investment banking is an expensive business that involves paying a lot of employees very highly to do many different things — from advising companies to underwriting equities and bonds, to trading currencies and precious metals — in many places at once. When enough of these activities are doing well they support the rest; when few are, it is painful. But as Napoleon discovered on his way back from Moscow in 1812, retreating can be at least as hard and risky as advancing. In theory, it makes sense to ditch the parts of investment banks that do not achieve high returns and retain the parts that do. In practice, it is not as simple as that. If it were, European banks would not have expanded as much in the first place.

ECB's accidental euro devaluation: (Reuters) - For a central bank not trying to drive down the euro, the European Central Bank is doing a pretty poor job. That's only fair, in that the Federal Reserve is doing a flat-out lousy job of normalizing interest rates for a central bank which says that that is its aim. The euro dropped sharply after Mario Draghi and the ECB indicated that more QE and even lower interest rates could be on the way as early as late this year. The euro fell more than two cents against the dollar to $1.11, taking it back to levels it saw in August, when markets actually believed the Fed would move in 2015. The euro is down more than 8 percent against the dollar year-to-date, and has fallen by 12 percent over the past year. Nothing to do with Mario, of course.

Why Europe Is About To Plunge Further Into The NIRP Twilight Zone, And What It Means For Depositors -- In some respects, today’s ECB presser was a snoozer. Reporters asked the same old questions (some of which we've been asking for years) and, more importantly, there were no glitter attacks. Our ears did perk up however, when Mario Draghi admitted that, unlike the governing council’s last meeting, cutting the depo rate further into negative territory was indeed discussed.  This is significant for a number of reasons. At the general level, it shows that DM central bankers are ready and willing to plunge the world further into the Keynesian Twilight Zone. As we outlined last month, this means the Riksbank and the SNB are now on watch. If the ECB cuts again, the Riksbank will be forced to act as well and as Barclays recently opined, the SNB may be compelled to go nuclear on depositors, as removing the negative rate exemption for domestic banks would force them to pass along the “cost” to customers:  “In contrast, a cut in the ECB’s deposit rate further into negative territory likely would have a significant impact on the EURCHF exchange rate and provoke a more immediate response from the SNB. Indeed, we expect that a cut in the ECB’s deposit rate may have a greater effect on EURCHF than on other EUR crosses. Switzerland applies its negative deposit rate to only a fraction of reserves, currently about 1/3rd of sight deposits by our calculation. In contrast, negative deposit rates apply to all reserves held at the ECB, Riksbank and Denmark’s Nationalbank. Consequently, a cut to the ECB’s deposit rate likely has a larger impact both on the economy and on the exchange rate than a proportionate cut by the SNB.

Draghi the Fiscal Hawk - We are becoming accustomed to European policy makers’ schizophrenia, so when yesterday during his press conference Mario Draghi mentioned the consolidating recovery while announcing further easing in December, nobody winced. Draghi’s call for expansionary fiscal policies was instead noticed, and appreciated. I suggest some caution. Let’s look at Draghi’s words: Fiscal policies should support the economic recovery, while remaining in compliance with the EU’s fiscal rules. Full and consistent implementation of the Stability and Growth Pact is crucial for confidence in our fiscal framework. At the same time, all countries should strive for a growth-friendly composition of fiscal policies. I’m really commenting only on monetary policy, and as we said in the last part of the introductory statement, monetary policy shouldn’t be the only game in town, but this can be viewed in a variety of ways, one of which is the way in which our colleague actually explored in examining the situation, but there are other ways. Like, for example, as we’ve said several times, the structural reforms are essential. Monetary policy is focused on maintaining price stability over the medium term, and its accommodative monetary stance supports economic activity. However, in order to reap the full benefits of our monetary policy measures, other policy areas must contribute decisively. So here we stress the high structural unemployment and the low potential output growth in the euro area as the main situations which we have to address. The ongoing cyclical recovery should be supported by effective structural policies. But there may be other points of view on this. The point is that monetary policy can support and is actually supporting a cyclical economic recovery. We have to address also the structural components of this recovery, so that we can actually move from a cyclical recovery to a structural recovery. Let’s not forget that even before the financial crisis, unemployment has been traditionally very high in the euro area and many of the structural weaknesses have been there before.

German producer prices fall more than forecast - --The prices of goods leaving Germany's factory gates dropped more than expected in September, pulled lower by energy prices, official data showed Tuesday. Producer prices in September fell 0.4% on the month and were 2.1% lower compared with the year-earlier period, federal statistical office Destatis said. That was the sharpest annual reduction since February. Economists polled by The Wall Street Journal forecast declines of 0.1% and 1.8%, respectively. The data indicate there are hardly any upward pressures on consumer prices from the production side. Energy prices once again had the largest effect on producer prices, Destatis said. Energy prices dropped 1.1% from August and were 6.1% lower compared with September last year. Excluding energy prices, which can be volatile, producer prices in Europe's largest economy slipped 0.1% in September from August and declined 0.6% from a year earlier.

Germany Shows Signs of Strain from Mass of Refugees - The road to the reception camp in Hesepe has become something of a refugees' avenue. Small groups of young men wander along the sidewalk. A family from Syria schleps a clutch of shopping bags towards the gate. A Sudanese man snakes along the road on his bicycle. Most people don't speak a word of German, just a little fragmentary English, but when they see locals, they offer a friendly wave and call out, "Hello!" Hesepe, a village of 2,500 that comprises one district of the small town of Bramsche in the state of Lower Saxony, is now hosting some 4,000 asylum-seekers, making it a symbol of Germany's refugee crisis. Locals are still showing a great willingness to help, but the sheer number of refugees is testing them. The German states have reported some 409,000 new arrivals between Sept. 5 and Oct. 15 -- more than ever before in a comparable time period -- though it remains unclear how many of those include people who have been registered twice. Six weeks after Chancellor Angela Merkel's historic decision to open Germany's borders, there is a shortage of basic supplies in many places in this prosperous nation. Cots, portable housing containers and chemical toilets are largely sold out. There is a shortage of German teachers, social workers and administrative judges. Authorities in many towns are worried about the approaching winter, because thousands of asylum-seekers are still sleeping in tents. But what Germany lacks more than anything is a plan to make Merkel's two most-pronounced statements on the crisis -- "We can do it" and "We cannot close our borders" -- fit together. In the second month of what has been dubbed the country's brand new "Welcoming Culture," it has become clear to many that Germany will only be able to cope if the number of refugees drops. Merkel's last hope is Recep Tayyip Erdogan, the Turkish president. The chancellor is visiting Ankara this weekend, bringing with her a number of gifts that Europe's leaders had discussed in their summit in Brussels. The plan is to persuade Erdogan to strengthen the border in the Aegean Sea that "the strong nation of Germany" (as Merkel put it) is unable to.

Furious Germans Stage Massive Anti-Islam Protest: "The Concentration Camps Are Unfortunately Out Of Action" - Over the past several months, we’ve warned repeatedly that Europe’s escalating migrant crisis threatens to set off a dangerous bout of scapegoating xenophobia.  Germany’s open door policy to asylum seekers has effectively been forced on other countries by decree, a move which could very well engender intense and possibly dangerous feelings of nationalism among citizens who disagree with Berlin’s approach to the crisis. We’ve already seen Hungary resort to razor wire fences, water cannons, and tear gas to keep migrants out and Budapest’s move to close its border with Croatia and Serbia has set off a Balkan border battle wherein no one can quite figure out the most efficient way to get the refugees to Germany without allowing their countries to be used as migrant superhighways.  Meanwhile, German Chancellor Angela Merkel is beginning to feel the heat at home. More from Deutsche Welle: The anti-"Islamization" movement PEGIDA marked its first birthday with a significant resurgence - and what many observers saw as a new radicalization. The new influx of refugees over the summer and a significant backlash against Merkel's decision to open the borders to Syrians has apparently given the racist elements in the PEGIDA movement new confidence. Police put the attendance at Monday's PEGIDA rally at between 15,000 and 20,000 people, with an equal number of counterdemonstrators, making this the largest turnout since the movement's previous high point in February. But there was also a new aggression in the crowds: a Saxony police statement said the two sides threw "objects and fireworks" at one another, and said there were several attacks on officers themselves, who deployed pepper spray. Pirincci's extraordinary and occasionally vulgar ramble, all read from notes, included references to refugees as "invaders," politicians as "gauleiters against their own people," Muslims "who pump infidels with their Muslim juice" and a threat that Germany would become a "Muslim garbage dump."

Germany tightens asylum rules from today to cope with record migrant influx - Germany is tightening asylum rules from Saturday – a week earlier than planned – to try to better manage the unprecedented influx of migrants and refugees. The tighter regulations aim to speed up asylum and extradition procedures for migrants from southeastern Europe, in order to focus on refugees from war-torn countries such as Syria, Iraq and Afghanistan. “We want to get better and faster this year at the deportation of rejected applicants who have no claim to remain here,” said Peter Altmaier, Chancellor Angela Merkel’s chief of staff. Support for Merkel’s conservatives is falling due to concern over the refugee crisis, with many Germans feeling the country cannot cope. Government figures show that while many arriving in Germany are fleeing war in the Middle East, at least a third are economic migrants from the Balkans who can have little hope of staying legally. German Interior Minister Thomas de Maiziere said: “Those who must leave our country and have been given a deadline for doing so will have their benefits reduced to nothing, only receiving what is immediately necessary until they have left.” Volunteer doctors and dentists treating newcomers are struggling to cope. “We have to rely on donations for medicines and equipment,” said dentist Sabine Schweden, who cares for refugees staying in a sports hall in Berlin. “These are disposable, for example,” she said, holding up one of her dental tools. “We have to beg.”

EU calls mini-summit on refugee crisis as Slovenia tightens border -- The European Union has called a mini summit with Balkan countries on the migrant crisis as Slovenia became the latest state to buckle under a surge of refugees desperate to reach northern Europe before winter. The leaders of Austria, Bulgaria, Croatia, Germany, Greece, Hungary, Romania and Slovenia will meet in Brussels on Sunday with their counterparts from non-EU states Macedonia and Serbia, the office of European Commission president Jean-Claude Juncker said.   “In view of the unfolding emergency in the countries along the western Balkans migratory route, there is a need for much greater cooperation, more extensive consultation and immediate operational action,” a statement said. The continent has been struggling to find a unified response on how to tackle its biggest migration crisis since 1945. More than 600,000 migrants and refugees, mainly fleeing violence in Syria, Iraq and Afghanistan, have braved the dangerous journey to Europe so far this year, the UN said. Of these, more than 3,000 have drowned or gone missing as they set off from Turkey in inflatable boats seeking to reach Greece, the starting point for the migrants’ long trek north. With the crisis showing no sign of abating, France’s interior minister Bernard Cazeneuve reinforced security in the port city of Calais from where migrants and refugees try to cross to Britain. He also announced that women and children would be given heated tents, as arrivals in a makeshift camp face a dip in temperature.

Report from Lesvos: without safe access to asylum, people will keep risking their lives in the Aegean: I stood in the corner of a dusty cemetery on the Greek island of Lesvos and watched a mother bury her child. As the tiny body of a baby boy wrapped in a white sheet was lifted from the boot of a car, she fell to her knees and howled with pain.  Her baby should not have died. The journey from Turkey to Lesvos is short and safe. If I wanted to take a ferry trip from the port of Mytiline to Ayvalik on the Turkish coast, the trip would take around an hour. I could get there and back for just €30. That’s because I’m British. I am not Syrian, Afghan, Palestinian, Iraqi, Somali or Eritrean. I am not required to put my life at risk by paying a smuggler hundreds or even thousands of euros to sit in the bottom of a motorised dingy with 30 or 40 other people to take the exact same journey. Although (most) EU member states have reluctantly agreed to redistribute 160,000 of those who have already arrived, there is still no legal route for refugees to enter Europe. And with no hope of a better life at home, thousands of people continue to make the illegal, expensive and potentially dangerous journey across the sea. They know the risks, but the water seems like a better option than the alternatives. Although Turkey offers temporary protection to Syrian refugees, it is not a signatory to the 1967 Protocol which extends the protection available under the 1951 Refugee Convention to those coming from outside Europe. That means no guaranteed access to employment, education or even basic health care. Conditions for Syrian refugees in Turkey are well documented and known to be deteriorating. There is no prospect that things will improve, no hope for a better future. Those who are not from Syria get nothing.

Soaring asylum numbers force Sweden to cut costs, borrow more (Reuters) - Sweden will make across-the-board spending cuts and raise borrowing to cope with as many as 190,000 refugees fleeing war in countries such as Syria and Iraq this year, the government said on Thursday. The Migration Agency more than doubled its forecast for asylum seekers and said it needed an extra 70 billion Swedish crowns ($8.41 billion) over the coming two years. Finance Minister Magdalena Andersson said asylum costs were unsustainable in the longer term and called on other European countries to do more to share the burden. "Clearly, the budget shortfall is going to be bigger this year than in our most recent forecast," Andersson told reporters. "It is going to take longer for us to get back to balanced public finances. It is also going to mean that we are going to need to borrow money." Swedish 10-year government bonds yields hit five-week highs . The government had set aside around 40 billion crowns - or 4 percent of its overall budget - for asylum and integration in 2016, but its figures were based on the Migration Agency's previous forecast of 74,000 asylum seekers this year. Andersson said planned savings would include reducing the cost of sick leave and making the asylum system more cost-effective as well as other measures.

Jimmy Carter: A Five-Nation Plan to End the Syrian Crisis -  I HAVE known Bashar al-Assad, the president of Syria, since he was a college student in London, and have spent many hours negotiating with him since he has been in office. This has often been at the request of the United States government during those many times when our ambassadors have been withdrawn from Damascus because of diplomatic disputes.  Bashar and his father, Hafez, had a policy of not speaking to anyone at the American Embassy during those periods of estrangement, but they would talk to me.   The Carter Center had been deeply involved in Syria since the early 1980s, and we shared our insights with top officials in Washington, seeking to preserve an opportunity for a political solution to the rapidly growing conflict. Despite our persistent but confidential protests, the early American position was that the first step in resolving the dispute had to be the removal of Mr. Assad from office. Those who knew him saw this as a fruitless demand, but it has been maintained for more than four years. In effect, our prerequisite for peace efforts has been an impossibility. I questioned President Putin about his support for Mr. Assad, and about his two sessions that year with representatives of factions from Syria. He replied that little progress had been made, and he thought that the only real chance of ending the conflict was for the United States and Russia to be joined by Iran, Turkey and Saudi Arabia in preparing a comprehensive peace proposal. He believed that all factions in Syria, except the Islamic State, would accept almost any plan endorsed strongly by these five, with Iran and Russia supporting Mr. Assad and the other three backing the opposition. With his approval, I relayed this suggestion to Washington.

UK must secure safeguards against further eurozone integration, warns Mark Carney -  Britain's financial stability could be threatened by closer eurozone integration unless the UK secures safeguards from Brussels that protect the interests of non-members, the Governor of the Bank of England has warned. Mark Carney said membership of the European Union had helped to lift UK growth and living standards, while enhancing Britain's flexible jobs market and "dynamism". Mr Carney said the UK had been the "leading beneficiary" in many ways of the "Four Freedoms" of the movement of goods, services, people and capital across borders, first set out in the Treaty of Rome. But while his remarks signalled the backing of Britain's EU membership, Mr Carney said in a speech on Wednesday at Oxford University that it was "essential" that steps towards closer eurozone integration did not ride roughshod over UK policymakers' ability to preserve financial stability. Mr Carney steered clear of making an explicit statement on whether the country should remain inside the 28-nation bloc. However, the Governor said it was vital that the EU had a "robust regulatory framework" that continued to "work for all [its] members". He said Britain should seek a "principled" and "upfront" guarantee from the eurozone that the EU is a multi-currency zone.  A report published alongside the Governor's comments showed Britain's ability to cope with future financial shocks depended on the "flexibility to apply that regulation to meet the specific financial stability challenges in he world's largest international financial centre."  The report, titled: "EU membership and the Bank of England", said: "In the main this combination has been achieved thus far. It may, however, become more challenging as the euro area integrates further."  Mr Carney said "further financial and fiscal integration" was needed within the eurozone in order to ensure its survival.

Barclays, Wachovia to pay $378 million to NCUA to settle RMBS losses - Barclays and Wachovia, now a part of Wells Fargo, will pay a total of $378 million to the National Credit Union Administration as part of two separate settlements stemming from losses related to purchases of residential mortgage-backed securities. In 2013, the NCUA filed suit against Royal Bank of Scotland (RBS), Morgan Stanley and eight other institutions over the sale of nearly $2.4 billion in mortgage-backed securities to Members United and Southwest corporate credit unions. At the time, NCUA alleged that RBS, Barclays, JPMorgan Chase (JPM), Credit Suisse (CS), UBS (UBS) and other institutions sold toxic MBS to both corporate credit unions. The NCUA announced Monday that it reached settlement agreements with Wachovia to the tune of $53 million, and Barclays for $325 million. With the $378 million from the Wachovia and Barclays settlements, NCUA has recovered $2.2 billion in several large settlements. In September, RBS agreed to a $129.6 million settlement with the NCUA over similar claims. When it sued the financial institutions, the NCUA alleged that the firms made misrepresentations in connection with the underwriting and subsequent sales of MBS. The corporate credit unions subsequently became insolvent, were placed into NCUA conservatorship and later liquidated as a result of losses from the faulty bonds, which caused significant losses to the credit union system, according to the NCUA.

Barclays Plots Bombshell Ring-Fencing Plan: Barclays is heading for a showdown with the Bank of England over a secret plan to place its high street operations under the temporary ownership of its investment banking arm.Sky News can reveal that Barclays is preparing to warn regulators that the credit rating of its investment bank could be slashed unless it is allowed to restructure its operations in this way.The development threatens to drop a bombshell into the heart of the debate about banking reform just days after City regulators outlined new measures designed to protect taxpayers in the event of a future banking crisis.John McFarlane, Barclays’ executive chairman, is understood to have briefed more than 100 of the bank’s top executives on the plans at a meeting at a west London hotel this month.Mr McFarlane, who will revert to a non-executive role after a new chief executive is in place, is said to have acknowledged to colleagues the likely difficulty of securing regulators’ approval for the proposals.But an insider familiar with the meeting said he expressed a belief that the idea was consistent with the blueprint drawn up by the Independent Commission on Banking in 2011 for separating banks’ high street and investment banking operations.

Iceland Just Jailed Dozens of Corrupt Bankers for 74 Years, The Opposite of What America Does - In stark contrast to the record low number of prosecutions of CEO’s and high-level financial executives in the U.S., Iceland has just sentenced 26 bankers to a combined 74 years in prison. The majority of those convicted have been sentenced to prison terms of two to five years. The maximum penalty in Iceland for financial crimes is six years, although hearings are currently underway to consider extending the maximum beyond six years. The prosecutions are the result of Iceland’s banksters manipulating the Icelandic financial markets after Iceland deregulated their finance sector in 2001. Eventually, an accumulation of foreign debt resulted in a meltdown of the entire banking sector in 2008. According to Iceland Magazine: In two separate rulings last week, the Supreme Court of Iceland and the Reykjavík District Court sentenced three top managers of Landsbankinn and two top managers of Kaupþing, along with one prominent investor, to prison for crimes committed in the lead-up to the financial collapse of 2008. With these rulings the number of bankers and financiers who have been sentenced to prison for crimes relating to the financial collapse has reached 26, and a combined prison time of 74 years.

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