week ending Nov 21

Wall Street Is Running the World's Central Banks -  Last week’s appointment of Neel Kashkari to run the Federal Reserve Bank of Minneapolis as of January means a third of the Fed’s 12 district banks will soon be run by officials with past ties to Goldman Sachs Group Inc.  Kashkari also worked for Pacific Investment Management Co. and managed the U.S. Treasury’s $700 billion rescue of banks during the financial crisis. The New York Fed’s William Dudley was Goldman’s chief U.S. economist for almost a decade before joining the central bank in 2007, while recently appointed Dallas Fed President Robert Steven Kaplan spent 22 years at Goldman and rose to become its vice chairman of investment banking. Although Patrick Harker joined the Philadelphia Fed from the University of Delaware he also served as an independent trustee of Goldman Sachs Trust. Fed Vice Chairman Stanley Fischer and Atlanta Fed President Dennis Lockhart both spent time working for Citigroup Inc.   Fed Governor Jerome Powell worked as an investment banker early in his career for Dillon, Read & Co., which eventually became part of Switzerland’s UBS Group AG.  It’s not just the Fed. Bank of England Governor Mark Carney and European Central Bank President Mario Draghi both famously worked for Goldman before entering central banking, yet they have recently been joined by others with financial backgrounds. The new head of the Bank of France, Francois Villeroy de Galhau, spent 12 years at BNP Paribas SA, becoming its chief operating officer in 2011. Meanwhile, in September, Gertjan Vlieghe joined the BOE’s Monetary Policy Committee from hedge fund Brevan Howard having also previously worked for Deutsche Bank AG.

FOMC Minutes: "Most participants anticipated conditions could be met by next meeting" --From the Fed: Minutes of the Federal Open Market Committee, October 27-28, 2015. Excerpts:  During their discussion of economic conditions and monetary policy, participants focused on a number of issues associated with the timing and pace of policy normalization. Some participants thought that the conditions for beginning the policy normalization process had already been met. Most participants anticipated that, based on their assessment of the current economic situation and their outlook for economic activity, the labor market, and inflation, these conditions could well be met by the time of the next meeting. Nonetheless, they emphasized that the actual decision would depend on the implications for the medium-term economic outlook of the data received over the upcoming intermeeting period. Some others, however, judged it unlikely that the information available by the December meeting would warrant raising the target range for the federal funds rate at that meeting. [...] In its postmeeting statement, rather than framing its near-term policy path in terms of how long to maintain the current target range, the Committee decided to indicate that, in determining whether it would be appropriate to raise the target range at its next meeting, it would assess both realized and expected progress toward its objectives of maximum employment and 2 percent inflation. Members emphasized that this change was intended to convey the sense that, while no decision had been made, it may well become appropriate to initiate the normalization process at the next meeting, provided that unanticipated shocks do not adversely affect the economic outlook and that incoming data support the expectation that labor market conditions will continue to improve and that inflation will return to the Committee's 2 percent objective over the medium term. Members saw the updated language as leaving policy options open for the next meeting. However, a couple of members expressed concern that this wording change could be misinterpreted as signaling too strongly the expectation that the target range for the federal funds rate would be increased at the Committee's next meeting.

Fed sends strong signal that rates will rise in December - The Federal Reserve has delivered its strongest signal yet that policymakers are prepared to raise interest rates before the end of this year if the economy continues to improve.  The minutes of the Federal Open Market Committee's (FOMC's) October meeting showed "most" of the central bank's policymakers believed the conditions to tighten policy "could well be met" by the time of its next meeting on December 15.  Officials noted that much of the turmoil in financial markets triggered by fears over the Chinese economy had "abated" since its September meeting  "The US financial system appear[s] to have weathered the turbulence in global financial markets without any sign of systemic stress," the minutes said. The dollar rose against a basket of other currencies after the minutes showed policymakers wanted to "convey the sense" that they believed it may be "appropriate" to raise rates at the December meeting. Policymakers were prepared to raise rates for the first time since 2006 "provided that unanticipated shocks do not adversely affect the economic outlook", the jobs market continued to improve, and inflation looked on course to climb back up to the Fed's 2pc target.

Fed officials again flag December; see smooth rates liftoff --  Federal Reserve officials on Wednesday continued to flag December as a likely time for interest rates to rise after seven years near zero, with two expressing confidence they will be able to pull it off smoothly despite fears of an abrupt market reaction. Investors reacted by increasing the odds of a rate hike next month to 72 percent, from 64 percent on Tuesday, based on interest rate futures prices. Cleveland Fed President Loretta Mester repeated her position that the U.S. economy is now strong enough to absorb a modest policy tightening. Atlanta Fed President Dennis Lockhart, sitting alongside her on a panel in New York, said global financial markets have settled since the August turmoil that caused the U.S. central bank to delay raising rates. "I am now reasonably satisfied the situation has settled down ... So I am comfortable with moving off zero soon, conditioned on no marked deterioration in economic conditions," Lockhart told a conference of bankers, traders and regulators. "I believe it will soon be appropriate to begin a new policy phase," he said, adding he will monitor economic data between now and a meeting on Dec. 15-16, for which he has a vote on policy. Mester regains a vote next year under a rotation.

FRB: Press Release--Minutes of the Federal Open Market Committee, October 27-28, 2015--November 18, 2015 - HTML | PDF

FOMC Dissenter Lacker: 'Fingers Crossed' Can Lift Off in Dec -  - Richmond Federal Reserve Bank President Jeffrey Lacker, who was the FOMC dissenter in September and October, Wednesday told CNBC that he has his "fingers crossed" that conditions will finally be right for a rates liftoff in December. "It's too soon to say" whether the environment surrounding the rate hike decision has changed because of the terrorist attacks in Paris, Lacker said. "Obviously we look at all the data we have when we get in the meeting. I always leave the door open to be persuaded by my colleagues on (one) way or another." He made clear, however, that he would like to be able to vote to begin raising rates, something he said he was convinced was necessary in the spring and which he advocated in two Federal Open Market Committee dissents in September and October. "We've been through episodes like this before in which some disruption of sort of a geopolitical or military nature affects things," he continued. "For a time people can get cautious and pull back a little bit." Those kinds of episodes "tend to be transitory," he said. So he's "keeping our fingers crossed and waiting and seeing." Lacker said he is still "where I was in October and September" when he registered the lone dissents at FOMC meetings. Generally repeating what he told reporters as recently as five days ago in Washington, Lacker said there is an increasing chance the Fed is falling "behind the curve" by waiting too long for liftoff.

Is the Fed beginning to see the light? -- For years I've been arguing that trend real GDP growth is lower than the Fed believes, that the new normal of interest rates will be lower than the Fed believes, that rates will again fall to zero in future recessions, and that the interest rate policy instrument is therefore pretty useless, like a steering wheel that locks up every time you drive on twisty mountain roads.  I've also claimed that the Fed will eventually figure all of this out. TravisV directed me to a very interesting Tyler Durden post that suggests it's beginning to happen. The Durden post discusses a Goldman Sachs report on the recent release of the minutes of the October 2015 FOMC meeting. Here is Goldman Sachs: The staff attributed the lower long-run equilibrium rate to a slower rate of potential growth, a consequence of slower population growth and weak productivity growth. These comments might foreshadow another reduction in the median "longer-run" funds rate projection in the Summary of Economic Projections (SEP) in December.  . Participants also noted that the lower long-run equilibrium rate implies that the near-zero effective lower bound could become binding more frequently. As a result, "several" participants indicated that it would be "prudent" to consider "options for providing additional monetary policy accommodation" should the economic recovery falter. And here is how Durden summarizes the much longer GS report:  In other words - The Fed is admitting that the neutral rate (to which they will theoretically raise rates before re-easing) will remain lower for longer......and therefore will reach ZIRP more frequently going forward... Which means, unless The Fed wants to implement NIRP (which it appears it does not), they will have to do more QE, more frequently going forward... So what Goldman discovered was the 'smoking gun' admission that this is no normal recovery and what was once entirely extreme and experimental monetary policy will be the new normal...

Goldman Sachs: Expect FOMC to Raise Fed Funds Rate 100bp in 2016 --A few excerpts from a research piece by Goldman Sachs economists Zach Pandl and Jan Hatzius:  The US economy in 2016 is likely to be driven once again by domestic demand—particularly consumer spending. We forecast that GDP will increase by 2.25% Q4/Q4 next year, in line with our latest estimates for 2015. ... Both narrow and broad measures of unemployment have fallen significantly ... The Federal Reserve looks likely to begin raising short-term interest rates next month, seven years after cutting them to zero. ... Based on our economic forecasts, we currently expect the committee to raise the funds rate by 100bp next year, or one hike per quarter—a fair amount above the 55-60bp pace priced into the bond market. Admittedly, we see the risks to this forecasts as skewed to the downside at the moment. The pace of rate hikes will depend on progress toward the FOMC’s employment and inflation goals, as well as evolving views on the level of equilibrium interest rates.

A More Inflexible Fed Would Cause More Crises - Adam Posen -  Having saved the US economy from a second Great Depression, the Federal Reserve has become a political scapegoat in the Congress for its own failures to secure the recovery. Rather than improving our tax code, investing in our future, or simply passing a budget that is little more than avoiding default, the House is prioritizing so-called “reform” of the Fed.  Just as throughout the global financial crisis and recovery, Congress is abdicating its economic responsibilities to the American people and attacking one of the few policy institutions that worked instead. Both Republicans and Democrats have already curtailed the ability of the US central bank to respond proactively to any financial crisis... They have done this by restricting the Fed’s ability to lend to troubled institutions in a crisis—even though such lending is the very essence of why the central bank exists: ... Now, there are new legislative efforts trying to force the Fed to follow strictly a narrow policy rule when setting monetary policy even in normal times—and report to Congress in a very literal-minded short-term way about any deviations from that rule. ... More closely examined, any imposition of a simplistic rigid policy rule with mechanistic monitoring will only serve to politicize monetary policy to an unprecedented extent. And that, for good reason, is almost universally seen in the economics profession as something that would inevitably lead to ongoing higher inflation and bigger, more frequent boom-bust cycles. ... Any effort to limit US monetary policy to an inflexible rule with politicized short-term oversight should be opposed..., doing so would bring severe harm to the workers, savers, and investors in the US economy.

House Passes Fed Transparency Bill; Obama Will Veto - Moments ago, the in a 241-185 vote, the House passed passed H.R. 3189, aka  Fed Oversight Reform and Modernization Act. The bill would make changes to how the Fed conducts monetary policy and regulatory activities and would direct the Fed to take a rules-based approach to interest rate decisions; require audits of more Fed functions such as monetary policy; and place restrictions on its emergency lending powers. In other words, everything that the banks that are direct and indirect stakeholders in the Fed would fight to the death to prevent. The new House speaker promptly applauded the passage. From Paul Ryan: Today, the House passed H.R. 3189, the Fed Oversight Reform and Modernization Act. The bill would require the Federal Reserve to explain publicly its monetary policy, specifically how it sets interests rates and the country’s money supply. In response, House Speaker Paul Ryan (R-WI) issued the following statement: "If the Federal Reserve explained to the public how it made its decisions, the American people would have greater confidence in them. Families could better plan for the future, invest their money wisely, and create opportunity for all of us. I thank Chairman Hensarling and the Financial Services Committee for offering this commonsense legislation." The victory, however, was very hollow: the White House has repeatedly said Obama’s advisers would recommend veto of H.R. 3189, "which seeks to make changes to Fed operations,including how the independent agency conducts monetary policy and regulatory activities."

Hysteresis and Monetary Policy - In the Washington Post last week, Larry Summers wrote about some new research finding evidence of "hysteresis."  This is a term borrowed from the natural sciences for when temporary occurrences have lasting effects - e.g., when you hold a magnet up to a piece of metal, the metal remains magnetized even after you remove the magnet.  In macroeconomics, hysteresis occurs when an economic downturn has a lasting effect on economic capacity (i.e., reduced "potential output"); that is, lack of demand creates its own lack of supply. Hysteresis could occur through a number of channels. Consider an economy described by an aggregate production function Y* = AF(K,N*) where potential GDP (Y*) depends on productivity (A),  capital (K) and labor at its "natural" or "full-employment" level, N*.  A recession occurs when output falls below Y* and labor is below N* (i.e., there is unemployment in excess of the "natural rate").  Hysteresis implies that there is a lasting impact on Y* - this could occur through technology, capital or labor. All three channels could be operative. In the past several years, productivity growth has been sluggish, though its not clear if this is linked with the recession (productivity trends are always somewhat mysterious).  The recovery of investment (the rate of flow into the stock of capital) from the recession has been less than spectacular, even taking out housing - the share of GDP devoted to nonresidential fixed investment is somewhat below its peak in previous expansions.  Here, I want to focus on labor, where the hysteresis effects are pretty evident, and raise an interesting policy dilemma.

Why Not Just Print More Money? - Between 1947 and 1974, US G.D.P. rose by about four per cent a year, on average, and many American households enjoyed a surge in living standards. In the nineteen-eighties and nineties, growth dropped a bit, but still averaged more than three per cent. Since 2001, however, the rate of expansion has fallen below two per cent—less than half the postwar rate—and many economists believe that it will stay there, or fall even further. In economic-policy circles, the phrase of the moment is “secular stagnation.  What could get us out of the rut? Until recently, the textbook prescription for slow growth involved cutting interest rates and introducing a fiscal stimulus, with the Treasury issuing debt to pay for more government spending or for tax cuts (aimed to spur household spending). . Today, however, neither of the traditional policy responses is readily available. The short-term interest rate that the Federal Reserve controls has been close to zero since December, 2008. Janet Yellen, the Fed chair, and her colleagues can’t cut rates any further. And with over-all federal debt standing at more than eighteen trillion dollars Congress would strongly oppose the Treasury’s borrowing more money for another stimulus package. Adair Turner, an academic, policymaker, and member of the House of Lords, has another idea. In his new book, “Between Debt and the Devil: Money, Credit, and Fixing Global Finance” (Princeton), Lord Turner argues that countries facing the predicament of onerous debts, low interest rates, and slow growth should consider a radical but alluringly simple option: create more money and hand it out to people. “A government could, for instance, pay $1000 to all citizens by electronic transfer to their commercial bank deposit accounts,” Turner writes. People could spend the money as they saw fit: on food, clothes, household goods, vacations, drinking binges—anything they liked. Demand across the economy would get a boost, Turner notes, “and the extent of that stimulus would be broadly proportional to the value of new money created.”

Key Measures Show Inflation somewhat higher in October -- The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning: According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.5% annualized rate) in October. The 16% trimmed-mean Consumer Price Index also rose 0.2% (2.5% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report. Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.2% (2.4% annualized rate) in October. The CPI less food and energy rose 0.2% (2.5% annualized rate) on a seasonally adjusted basis. Note: The Cleveland Fed has the median CPI details for October here. Motor fuel was up a little in October following sharp declines in previous months.  This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.5%, the trimmed-mean CPI rose 1.9%, and the CPI less food and energy also rose 1.9%. Core PCE is for September and increased 1.3% year-over-year. On a monthly basis, median CPI was at 2.5% annualized, trimmed-mean CPI was at 2.5% annualized, and core CPI was at 2.5% annualized. On a year-over-year basis, three of these measures suggest inflation remains below the Fed's target of 2% (median CPI is above 2%). Inflation is still low, but appears to be moving up.

What the Latest Inflation Numbers Mean for the Fed - With a month’s gap between now and the next meeting of the Federal Reserve’s rate-setting committee, traders are taking every incoming piece of information, and plugging it into their own personal Fed calculators, trying to come up their own determinations for what will push the Fed to raise rates next month. The effects of the Paris attacks on the Fed’s thinking have been one major input this week, and this morning’s report on U.S. consumer prices is another. The latter has a more direct correlation with Fed policy, of course. Traders–and the rest of us–learned that consumer prices overall were up 0.2% in October from the prior month, marking the first rise in two months. In both August and September, prices unexpectedly fell 0.2% in September. Of particular note in the latest report was the year-over-year growth in October in the so-called core consumer prices, which means everything except energy and food. It was 1.9%, a number very close to the 2% level that the Fed itself has declared to be a sustainable level of inflation, one that ostensibly reflects an economy that is growing at a healthy rate, healthy enough for the central bank to start raising interest rates. So, is this the final piece in the December jigsaw puzzle? Possibly. The latest reading on the CME’s FedWatch site, which tracks prices on the fed funds futures, has the odds of a December hike at 74%, up from about 64% on Monday. On the other hand, the CPI report may not be the final piece of the puzzle. For one thing, the core rate hasn’t moved much lately. It was 1.9% in September, and 1.8% in August. So it’s not like this report represents a big change in the picture from the environment the last two times the Fed met, in September and October. More importantly, while the consumer price report matters, it is second to the Fed’s key gauge of inflation, the core rate of the personal consumption expenditures index.

October 2015 Leading Economic Index Improved: The Conference Board Leading Economic Index (LEI) for the U.S.improved this month - and the authors believe "despite lackluster third quarter growth, the economic outlook now appears to be improving". 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 0.1 % to 0.7 % (consensus 0.5%) versus the +0.6 % 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. increased 0.6 percent in October to 124.1 (2010 = 100), following a 0.1 percent decline in September, and a 0.1 percent decline in August. "The U.S. LEI rose sharply in October, with the yield spread, stock prices, and building permits driving the increase," said Ataman Ozyildirim, Director of Business Cycles and Growth Research at The Conference Board. "Despite lackluster third quarter growth, the economic outlook now appears to be improving. While the U.S. LEI's six-month growth rate has moderated, the U.S. economy remains on track for continued expansion heading into 2016." The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.2 percent in October to 113.0 (2010 = 100), following a 0.1 percent increase in September, and a 0.2 percent increase in August.

Merrill Lynch on economic impact of El Niño: Q1 "Risk" to Upside -  Merrill Lynch economists expect El Niño to boost economic activity a little in Q1. Here are a few excerpts from a research article by Michelle Meyer and Lisa Berlin of Merrill Lynch: Summer in Winter   While we are not complaining, it does not feel like we are in the middle of November, given the warm weather. ... According to the experts, this is partly a function of El Niño, which is a prolonged warming in Pacific Ocean surface temperatures. While we are not going to attempt to forecast the weather in the coming months (forecasting the economy is hard enough), it seems that there is a considerable risk of a warm winter. This would be a stark contrast to the last two years, with unusually harsh winter weather.  If we do enjoy a warm winter, the risk is that the 1Q economic data could surprise to the upside, particularly if expectations are for a slump akin to the last two years. We make the following arguments in this piece: 1) looking back at prior episodes of El Niño, GDP growth generally accelerated in 1Q. although the evidence is weak; 2) the seasonal adjustment process will be most sensitive to the most recent years, which suggests the seasonal factors will be looking for weakness, therefore, threatening to inflate the data; and 3) the BEA took steps to address the “residual seasonality” issue that has biased 1Q GDP lower over the prior few years, which may mitigate the negative effect.... [W]e think that if the winter ends up being warm, the risk is that the economic data look quite strong. This might just prompt the Fed to justify a second hike earlier than markets are expecting.

The Real Problem With the Economy - The slumping stock market this week and the weaker-than-expected retail sales report are blips.What makes them dismaying is the political and economic backdrop. Lawmakers, most of them Republican, have steadfastly rejected policies to stimulate the economy and Federal Reserve officials have been trying to convince everyone, including themselves, that the economy is reliably on the upswing.It’s not. Even before the wipeout in 2008, most Americans were treading water economically, or sinking, though their predicament was obscured by high levels of debt. Since then, growth has been lopsided, with virtually all of the income and wealth accruing to those at the top of the economic ladder.Little has been done to counter that dynamic – Obamacare is a notable exception because health coverage reduces the threat of job loss and bankruptcy from poor health. But most policymaking, or lack thereof — including big and untimely federal budget cuts coupled with the continued erosion of labor standards — has reinforced lopsided growth.It’s a wonder the economy has been as resilient as it has been. But given its structural inequality, it should come as no surprise when it falters and fails, time and again, to gain real momentum. Rising prosperity for the few means undue hardship for the many. That is the economy’s underlying problem and it won’t be solved until policymakers face up to it.

China, Japan Shed U.S. Treasury Holdings - WSJ: The top buyers of U.S. government debt are shedding their holdings at the fastest pace in months, even as global investors prepare for the U.S. to raise interest rates in coming weeks. China, the largest foreign holder of U.S. Treasurys, reduced its holdings to the lowest level in seven months to $1.258 trillion in September while Japan cut its holdings to $1.17 trillion, the lowest in almost two years, U.S. Treasury data showed. The data runs with a two-month lag. Once the biggest buyers of Treasurys, China and Japan are bucking the global trend of a shift toward higher-yielding, U.S. dollar-denominated assets. In recent months, expectations of higher interest rates in the U.S. have sparked fears of outflows from emerging markets and riskier assets. Federal Reserve officials’ steadfast comments—and improving economic data, including an uptick in consumer prices in October—have led many investors to believe the central bank could raise rates as soon as December.  Yet global money managers are growing cautious as monetary policy between major central banks diverge, with the European Central Bank signaling it is prepared to undertake another large stimulus package as the eurozone struggles with low inflation and a fragile recovery. For bond investors, imminent changes in interest rates could affect the prices of bonds in their portfolios, and makes them more sensitive to any move by the central banks in coming months.

Should Monetary Policy Respond To Financial Conditions? - NY Fed - There is an ongoing debate about whether policymakers should respond to financial conditions when setting monetary policy. An argument is often made that financial stability concerns are more appropriately dealt with by using regulatory and macroprudential tools. This post offers a theoretical justification for policymakers to monitor and possibly respond to financial conditions not because this would lessen concerns about financial stability but because this information helps reveal the state of the economy and the appropriate stance of monetary policy.

MMT and Bernie Sanders -- L. Randall Wray Yesterday Senator Bernie Sanders gave an important speech in which he invoked President Roosevelt’s “second bill of rights” in defense of his platform. As Bernie rightly pointed out, all of Roosevelt’s New Deal social programs to which we have become accustomed, were tagged as “socialism”—just as pundits are branding Bernie’s proposals as dangerous socialist ideas. You can see Bernie’s prepared remarks here. Just before Bernie’s speech, I was asked to do an interview with Alex Jensen, on TBS eFM’s “This Morning” English radio program in Seoul, Korea. I was sent a list of questions and jotted down very brief responses. Unfortunately, in our radio interview we were only able to get through a few of these. You can listen to the interview (uses iTunes) here. My interview is #8, Name: 1119 Issue Today with Professor L.R. Wray.  As you will see, we mostly talked about the platform of Senator Sanders, and why his proposals have caught the imagination of the US population.  Here is the full set of questions and my brief (written) answers.

It’s Time to Focus IRS Audits on the Superrich, Inspector General Says - Is $200,000 a high income? Yes. But maybe it shouldn’t be considered one by the IRS. The Internal Revenue Service spends too much time and effort auditing people who make $200,000 to $400,000 and too little going after the very wealthiest Americans, according to an inspector general’s report released late Thursday. In response, the IRS is re-examining its decision to consider $200,000 a “high income” for auditing purposes and is looking at indexing that threshold to inflation. In an era of declining budgets, that move could let the tax agency concentrate the work of employees who specialize in auditing the complex returns of the superwealthy. The IRS audits fewer than 1% of individual income tax returns and focuses its resources on areas where there is evidence of noncompliance and a good chance that auditors can collect money for the government. In fiscal 2014, for example, the IRS audited 1.5% of tax returns with incomes between $200,000 and $400,000 and 12.1% of returns with incomes above $5 million.But the tippy-top is where the money is. An auditor working those lower-dollar cases recommends $605 in additional taxes per hour, while one working on a $5 million return will find $4,545 per hour. “Because there are more taxpayers in the $200,000 to $399,999 range than in higher income ranges, it appears that the IRS is spending most of its audit resources on auditing tax returns with potentially lower productivity,” the inspector general’s report said. The IRS may change, but it won’t change that much, and the upper-middle class shouldn’t expect that no one is watching over its shoulder. Fear of an audit is one of the tax agency’s best and cheapest tools to encourage compliance, and only focusing on the richest people could undermine that.

Trump adviser Icahn chilly on GOP, tax reform -- Republicans calling for smaller government are misguided and the United States needs a fiscal intervention, an adviser to 2016 presidential candidate Donald Trump, said at the Reuters Global Investment Outlook Summit in New York on Wednesday. Carl Icahn, the billionaire activist investor, who said he talks to Trump once every week or two, said rather than shrink the government as Republican candidates have pledged to do, the next president should focus on economic growth. "I hate it when they say we should have limited government," he said. "The government could get involved to incentivize businesses." Icahn said the U.S.'s number one priority should be to get American corporations to repatriate their cash and pay an 8 percent or 10 percent tax. That revenue could be used to help fix some of the country's crumbling infrastructure. "Forget comprehensive tax reform," he said. "It'll never pass [Congress]." Icahn's comments suggested a new distance between himself and Trump, the front-runner for the Republican presidential nomination. Trump refers to Icahn frequently on the campaign trail as one of the "best people" he would bring into government if elected. He has said he would nominate Icahn for Treasury secretary. "I am not going to be secretary of the Treasury under any condition," Icahn said. "I'm no great expert on exactly what the Treasury secretary can do."

Protecting the tax base: Why it’s important to block tax inversions – Jared Bernstein - Here’s a tax policy issue I humbly submit you should agree with me on even if we have polar opposite views on taxation: an eroding tax base is a bad thing. If you share my perspective, you recognize that we will need more, not less, revenue in the future to meet the basic challenges we face. The more money that is shielded from taxes, the more we’ll have to raise rates on the dwindling share that remains. Also, the parts of the base that are eroding are the types of income held by the wealthy, so base erosion leads to higher after-tax inequality. But even if, unlike me, you’re a supply-side trickle-downer who wants lower rates, an eroding tax base means you’re not going to be able to lower rates without blowing up the deficit — that’s true even if you make unrealistically flattering growth assumptions. That’s why partisans of all stripes should applaud the fact that the Treasury is reportedly about to release new administrative rules — “targeted guidance,” as they call it — to reduce the incentives for American companies to “invert” their tax status.  Corporate inversions, as Treasury Secretary Jack Lew recently put it, occur when a firm “…changes its tax residence to reduce or avoid paying U.S. taxes…a U.S.-based company engages in an inversion when it acquires a much smaller foreign company and then locates the merged company, for tax purposes, outside the United States, typically in a low-tax country.” The key point is that the main thing the inverting company changes here is its tax mailbox and thus where it books its profits, not its actual location. So it’s still taking advantage of our infrastructure, our markets, and our educated workforce — it’s just significantly cutting what it contributes to them.

Wall Street critic Elizabeth Warren slams tax reform plans - Senator Elizabeth Warren, a liberal firebrand, has lambasted Republican proposals to curb tax-cutting deals struck by US companies, stirring fresh political conflict over the transactions ahead of the Obama administration’s plans to move against them this week. Ms Warren, an established enemy of Wall Street, turned her fire on “tax dodging” corporations in a speech on Wednesday, seen as an effort to pull Hillary Clinton to the left in her campaign for the Democratic presidential nomination. Shortly after her remarks, Jack Lew, the US Treasury secretary, said in a letter to lawmakers that he would announce new measures to “deter and reduce” the economic benefits of tax-driven deals called inversions. The deals let US companies slash their tax bills by moving their domicile overseas. While Congress remains too divided to stop them by changing the law, the White House is resorting to administrative action to do what it can. Shares of Allergan, the US botox maker which is domiciled in Dublin and is being pursued by larger rival Pfizer in a $330bn deal, fell more than 4 per cent in late New York trading after Mr Lew’s announcement. If the two companies agree to a merger, it would be the biggest so-called tax inversion deal yet. The US companies says they are using the legal loophole for such deals to remain competitive, but have stirred political controversy.

Obama Faces a Tough Road with TPP Trade Deal -- The mammoth Trans-Pacific Partnership (TPP) trade deal is by far the biggest thing left on President Barack Obama’s legislative agenda. But Obama has Hillary Clinton, Donald Trump, labor unions, and even the tobacco industry standing in his way.  Getting Congress to bless the pact before Obama leaves office will require a high-wire act from the President. He’ll need Senate Majority Leader Mitch McConnell and newly minted House Speaker Paul Ryan to put together large numbers of Republican votes—not to mention a big push from the U.S. Chamber of Commerce and much of the business community.  Earlier this year, the Republicans came together with enough moderate Democrats to give Obama fast-track authority to negotiate the deal, with a 218-208 vote in the House and a 60-38 vote in the Senate. That sets up votes on the TPP—without the right to filibuster or add amendments—for sometime next year. For now, Ryan and McConnell are reviewing the agreement, and if either of them gives it the thumbs down, the deal will be effectively dead for the rest of Obama’s presidency. The early expectation on the Hill is that the deal should be able to squeak through the Senate, but its chances in the House are anyone’s guess. Indeed, the deal has run into tough sledding in recent months, despite a full-court press from the White House and the President selling the lowered tariffs on 18,000 U.S. exports as GOP-friendly tax cuts.

Utah Senator, Crucial Ally for the Pacific Rim Trade Deal, Is Now Its Main Hurdle - — Senator Orrin G. Hatch, with his long record of promoting trade, was a natural and crucial Republican ally for President Obama earlier this year, helping him conclude negotiations among 12 Pacific Rim nations on the largest regional trade accord in history.But now that the deal is done, another longstanding record of Mr. Hatch’s — as perhaps the pharmaceutical industry’s single biggest advocate on Capitol Hill — has helped turn him into the principal impediment to Congress’s approval of the legacy-making agreement in Mr. Obama’s final year.In a vast deal covering myriad goods and services, Mr. Hatch is objecting to language that would limit brand-name drug makers’ monopoly protections abroad for their new, cutting-edge medicines known as biologics. In recent days he went so far as to call for the agreement to be renegotiated, during a speech at the U.S. Chamber of Commerce, which backs the accord.Now all sides are mulling whether Mr. Hatch’s remarks are a potentially fatal blow to Mr. Obama’s chance of winning Congress’s approval of the Trans-Pacific Partnership, or just the latest legislative bluff in a long line of them from the wily, deal-making senator, intended to extract advantage elsewhere.

Eyes on Trade: TPP Financial Stability Threats Unveiled: It’s Worse than We Thought: Public Citizen’s Global Trade Watch has carefully analyzed the Financial Services Chapter of the recently released Trans-Pacific Partnership. One story that has not been told about the TPP is how this first U.S. trade agreement negotiated since the global financial crisis would impose the same model of financial deregulation that is widely understood to have fueled the crisis. For the first time in any U.S. trade agreement, the TPP empowers some of the world’s largest financial firms to challenge U.S. financial regulatory policies in extrajudicial investor-state dispute settlement (ISDS) tribunals using the broadest “minimum standard of treatment” claim. And, the TPP would be the first U.S. pact to empower some of the world’s largest financial firms to launch ISDS claims against U.S. financial policies. Now none of the world’s 30 largest banks may bypass domestic courts, go before extrajudicial investor-state tribunals of three private lawyers, and demand taxpayer compensation for U.S. financial policies. Among the top banks in TPP countries that could newly do so: Mitsubishi UFJ, Mizuho, ANZ, Commonwealth Australia, West Pac, National Australia Bank, Bank of Tokyo, Sumutomo, Royal Bank of Canada. Despite the pivotal role that new financial products, such as toxic derivatives, played in the financial crisis, the TPP would require all TPP countries to allow new financial products and services to enter their economies if permitted in any other TPP countries. Meanwhile, the provision USTR calls a “prudential filter” would not shut down investor attacks on financial policies. Rather, it would provide for 120 day consultation after which the case could proceed unless the government of the suing investor agreed to shut down the case.

Will Janet Yellen Rather Protect Big Banks, or the Fed? - David Dayen - The House-Senate conference on the highway bill represents a choice, with the Federal Reserve pitted against the big banks that partially own them. It’s not a choice we should have to make; the highway trust fund has a shortfall because we haven’t raised the user fee on roads, i.e. the gas tax, in over 20 years, and the severe antipathy to taxes of any kind left Republicans to hunt around the couch cushions for an alternative. So we are where we are now. And this choice between big bank profits and central bank independence is firmly in the hands of Janet Yellen. Yellen, you see, was the one who decided to speak up and protect the big banks, when an egregious, 100 year-old subsidy became the best alternative to filling the highway bill’s shortfall. As Yves wrote in July: Budgeteers have woken up to the fact that banks get a difficult-to-justify perk from membership in the Federal Reserve system, that of getting 6% annual dividend on the preferred stock that they bought at the time they joined. A draft bill by Senate Majority leader Mitch McConnell includes a provision that would cut the dividends to member banks with more than $1 billion in assets from 6% to 1.5%. He’s proposing to use it to help shore up the highway trust fund […] But Fed chairman Janet Yellen did her turn as a bank lobbyist... she throws out the strained argument that cutting this subsidy would hurt the Federal Reserve system […]  This was a victory for ideology over reality. The only consequence of removing a risk-free 6% subsidy (which is tax-free for banks like JPMorgan and BofA who’ve been around before 1942) was that they’d have to find some way to earn profits instead of having them handed to them. There is simply no upside to leaving the Fed system: nationally-chartered banks must be members, and state-chartered ones must abide by the conditions of membership anyway.

Nomi Prins: Crony Capitalism & Corruption - An Entirely Rigged Political-Financial System --Too big to fail is a seven-year phenomenon created by the most powerful central banks to bolster the largest, most politically connected US and European banks. More than that, it’s a global concern predicated on that handful of private banks controlling too much market share and elite central banks infusing them with boatloads of cheap capital and other aid.  Synthetic bank and market subsidization disguised as ‘monetary policy’ has spawned artificial asset and debt bubbles - everywhere. The most rapacious speculative capital and associated risk flows from these power-players to the least protected, or least regulated, locales. There is no such thing as isolated 'Big Bank' problems. Rather, complex products, risky practices, leverage and co-dependent transactions have contagion ramifications, particularly in emerging markets whose histories are already lined with disproportionate shares of debt, interest rate and currency related travails.The notion of free markets, mechanisms where buyers and sellers can meet to exchange securities or various kinds of goods, in which each participant has access to the same information, is a fallacy. Transparency in trading across global financial markets is a fallacy. Not only are markets rigged by, and for, the biggest players, so is the entire political-financial system.  The myth of a free market is that every trader or participant is equal, when in fact the biggest players with access to the most information and technology are the ones that have a disproportionate advantage over the smaller players. What we have is a plutocracy of government and markets. The privileged few don't care, or need to care, about democracy any more than they would ever want to have truly "free" markets, though what they do want are markets liberated from as many regulations as possible. In practice, that leads to huge inherent risk. Michael Lewis' latest book on high frequency trading seems to have struck some sort of a national chord. Yet what he writes about is the mere tip of the iceberg covered in my book.He's talking about rigged markets - which have been a problem since small investors began investing with the big boys, believing they had an equal shot. I'm talking about an entirely rigged political-financial system.

Corporate contribution to savings glut -- Martin Wolf, FT -- The notion of a “savings glut” helps explain the ultra-low real interest rates we have seen since the global crisis of 2007-09. But the idea of “secular stagnation” suggests that this glut had emerged even before that. To explain why this was so, we must look at the behaviour of the corporate sector. Where, then, do corporations fit into an analysis of the shifting balance between planned savings and investment? The answer starts with the fact that companies generate a huge proportion of investment. In the six largest high-income economies (the US, Japan, Germany, France, the UK and Italy), corporations accounted for between half and just over two-thirds of gross investment in 2013 (the lowest share being in Italy and the highest in Japan). Because corporations are responsible for such a large share of investment, they are also, in aggregate, the largest users of available savings, but their own retained earnings are also a huge source of savings. Thus, in these countries, corporate profits generated between 40 per cent (in France) and 100 per cent (in Japan) of gross savings (including foreign savings) available to the economy. In a dynamic economy, one would expect corporations in aggregate to use the excess savings of other sectors, notably those of households — thereby generating both buoyant demand and growing supply. If investment is weak and profits strong, however, the corporate sector will, weirdly, become a net financer of the economy. The result will be a mixture of fiscal deficits, household financial deficits and current account surpluses (that is, capital account deficits). In Japan, fiscal deficits offset huge corporate surpluses. In Germany, a capital account deficit offsets corporate and household surpluses.

Corporate America's buyback binge feeds investors, starves innovation: When Carly Fiorina started at Hewlett-Packard Co in July 1999, one of her first acts as chief executive officer was to start buying back the company’s shares. By the time she was ousted in 2005, HP had snapped up $14 billion of its stock, more than its $12 billion in profits during that time. Her successor, Mark Hurd, spent even more on buybacks during his five years in charge – $43 billion, compared to profits of $36 billion. Following him, Leo Apotheker bought back $10 billion in shares before his 11-month tenure ended in 2011. The three CEOs, over the span of a dozen years, followed a strategy that has become the norm for many big companies during the past two decades: large stock buybacks to make use of cash, coupled with acquisitions to lift revenue. All those buybacks put lots of money in the hands of shareholders. How well they served HP in the long term isn’t clear. HP hasn’t had a blockbuster product in years. It has been slow to make a mark in more profitable software and services businesses. In its core businesses, revenue and margins have been contracting. HP’s troubles reflect rapid shifts in the global marketplace that pressure most large companies. But six years into the current expansion, a growing chorus of critics argues that the ability of HP and companies like it to respond to those shifts is being hindered by billions of dollars in buybacks. These financial maneuvers, they argue, cannibalize innovation, slow growth, worsen income inequality and harm U.S. competitiveness.“HP was the poster child of an innovative enterprise that retained profits and reinvested in the productive capabilities of employees. Since 1999, however, it has been destroying itself by downsizing its labor force and distributing its profits to shareholders,”

Financially Engineered Stocks Drag Down S&P 500 -- Wolf Richter - IBM has blown $125 billion on buybacks since 2005, more than the $111 billion it invested in capital expenditures and R&D. It’s staggering under its debt, while revenues have been declining for 14 quarters in a row. It cut its workforce by 55,000 people since 2012. And its stock is down 38% since March 2013.  Big-pharma icon Pfizer plowed $139 billion into buybacks and dividends in the past decade, compared to $82 billion in R&D and $18 billion in capital spending. 3M spent $48 billion on buybacks and dividends, and $30 billion on R&D and capital expenditures. They’re all doing it.“Activist investors” – hedge funds – have been clamoring for it. An investigative report by Reuters, titled The Cannibalized Company, lined some of them up: In March, General Motors Co acceded to a $5 billion share buyback to satisfy investor Harry Wilson. He had threatened a proxy fight if the auto maker didn’t distribute some of the $25 billion cash hoard it had built up after emerging from bankruptcy just a few years earlier. DuPont early this year announced a $4 billion buyback program – on top of a $5 billion program announced a year earlier – to beat back activist investor Nelson Peltz’s Trian Fund Management, which was seeking four board seats to get its way. In March, Qualcomm Inc., under pressure from hedge fund Jana Partners, agreed to boost its program to purchase $10 billion of its shares over the next 12 months; the company already had an existing $7.8 billion buyback program and a commitment to return three quarters of its free cash flow to shareholders. And in July, Qualcomm announced 5,000 layoffs. It’s hard to innovate when you’re trying to please a hedge fund.  “None of it is optional; if you ignore them, you go away,”

What “Reclining Nude” Tells Us About the Phoney Baloney Economy --Do you think Modigliani’s Nu Couché is beautiful? Would you shell out $170.4 million for it? Well someone just did. Specifically, that “someone” is Liu Yiqiang, an eccentric taxi driver turned billionaire stock trader who outraged the art world last year after buying a Ming dynasty porcelain cup for $36.3 million (a record for a Chinese artwork sold at an international auction) and then being photographed drinking tea from it.  While this kind of eye-popping, record-setting art sale isn’t particularly important in isolation, the overall trend in the art market is a reflection of much bigger forces at work in the economy. And this sale is undeniably part of a trend. Both the record-setting Picasso purchase and the close-second Modigliani purchase took place this year. In fact, five of the top ten art purchases of all time have taken place in the last 15 months, and that is in inflation-adjusted dollars. What’s more, Christie’s set a record earlier this year by selling over $1 billion of art in a single week. And in the ultimate sign that the apocalypse is nigh, art investment funds that offer partial “ownership” of masterpieces are becoming the hip way for jetsetting globalist multi-millionaires to diversify their portfolio (for a cool million dollar minimum investment, of course). Understanding what is happening here is not particularly difficult. It happened in the early 80s during the stock market run up and hit a brick wall in the crash of 1987. It re-surged in the late 80s when the Japanese central bank created a credit bubble that fueled a real estate bubble that led to a stock market bubble and hit a brick wall when the bottom fell out of the Nikkei in 1990. And it’s happening now, with the S&P and Dow at near record valuations after years of Fed-supplied funny money liquidity. It’s an art bubble, and it’s just one of the signs of how far investors have detached from the actual productive economy in search of returns in a world of ZIRP and NIRP.

Justice Department Gets Tougher on Corporate Crime - WSJ: The Justice Department on Monday spelled out new rules that would encourage more charges against individuals in corporate investigations, as the department seeks to address long-running criticism that it treats executive wrongdoing lightly. The department released changes to the guidelines used by prosecutors in determining how to pursue criminal cases. Instead of long-standing language that says individuals aren’t necessarily charged in corporate investigations, the guidelines will now instruct prosecutors to “focus on wrongdoing by individuals from the very beginning of any investigation of corporate misconduct.” Deputy Attorney General Sally Yates in a speech Monday further explained the changes and offered a full-throated defense of the shift, the broad outlines of which were announced earlier this year. In September, Ms. Yates issued a memo to prosecutors recommending they consider a company to have cooperated with an investigation only if it turns over information about the actions of individuals at the firm. Critics have said the changes could force companies to spend millions on extensive investigations. Others complain that the new policy could hurt the ability of company investigators to get to the bottom of potential misconduct because individuals would be reluctant to talk. In her speech, Ms. Yates said the Justice Department expects companies to undertake investigations limited to the specific allegations at issue.

House Bill Would Make It Harder To Prosecute White-Collar Crime -- House Republicans on Monday unveiled legislation that would decriminalize a broad swath of corporate malfeasance, a move that injects white-collar crime issues into the thus-far bipartisan agenda on criminal justice reform.  The public debate over criminal justice reform has focused on reducing severe sentences for nonviolent drug offenses. But some influential conservative voices, including the billionaire Koch brothers and the Heritage Foundation, have quietly advocated for curbing prosecution of corporate offenses as well.The House bill would eliminate a host of white-collar crimes where the damaging acts are merely reckless, negligent or grossly negligent. If enacted, it would make it more difficult for federal authorities to pursue executive wrongdoing, from financial fraud to environmental pollution. Department of Justice spokesman Peter Carr blasted the legislation in a statement provided to HuffPost, saying it "would create confusion and needless litigation, and significantly weaken, often unintentionally, countless federal statutes," including "those that play an important role in protecting the public welfare ... protecting consumers from unsafe food and medicine." The House Judiciary Committee will begin marking up its criminal justice reform package, including the latest bill, on Wednesday. Chairman Bob Goodlatte (R-Va.) and Rep. John Conyers (D-Mich.), the panel's top-ranking Democrat, have been working on bipartisan legislation for months.

Join Occupy the SEC in Urging the Congress to Oppose H.R. 4002 (“Criminal Code Improvement Act of 2015”)!  - naked capitalism - Yves here. I hope you’ll sign this petition. I did. And it would be even better if you’d visit the Occupy the SEC site, scroll to the end of the page, and give them a donation (even a wee one helps) or consider their other suggestions for how to support their work. By Occupy the SEC: Please sign our petition urging the Congress to reject H.R.4002 (inaccurately entitled the “Criminal Code Improvement Act of 2015”)  Congress is currently considering several bills that would overhaul and improve our criminal justice system by reducing mandatory minimum sentences and promoting rehabilitation instead of punishment. The push for criminal justice reform enjoys both bipartisan support and popular support among the American populace.Unfortunately, the Koch Brothers and their cronies are trying to latch onto this momentum for their own purposes. The House is currently considering the Koch-backed H.R. 4002 (sponsored by Rep. James Sensenbrenner [R-WI-5]), a bill that which would serve as a “Get Out of Jail Free” card for white collar criminals.  The bill would require federal prosecutors to prove that a white collar defendant acted with intent in cases where federal law does not currently specify a required mental state. This means that white collar criminals would be able to evade punishment for a host of crimes, EVEN IF they acted with negligence, gross negligence, or recklessness.

On the Lack of Courage in Regulators  - Yves Smith - I’m embedding the text of a short but must-read speech by Robert Jenkins, a former banker, hedge fund manager, and regulator (Bank of England) who is now a Senior Fellow at Better Markets. If nothing else, be sure to look at the partial list of bank misconduct and activities currently under investigation. Jenkins points out that regulatory reform has fallen short on multiple fronts, and perhaps the most important is courage. Readers may understandably object to him giving lip service to the idea that Bernanke acted courageously during the crisis (serving the needs of banks via unconventional means is not tantamount to courage), but he is a Serious Person, and making a case against Bernanke would detract from his bigger message about the lack of guts post-crisis.  Now there have been exceptions, like Benjamin Lawsky, Sheila Bair, Gary Gensler, Kara Stein, and in a more insider capacity, Danny Tarullo. Contrast their examples with the typical cronyism and lame rationalizations for inaction, particularly by the Department of Justice and the SEC. It’s not obvious how to reverse the corrosion of our collective values. But it is important to remember than norms can shift much faster than most people think possible, with, for instance, the 1950s followed by the radicalism and shifts in social values of the 1960s, which conservative elements are still fighting to roll back.  When Timidity Triumphs

What's Worse Than the SEC's Revolving Door? - Barry Ritholtz - Arthur Levitt is incensed. What has Levitt riled up these days is the deepening politicization of the agency he ran for eight years. I spoke with several other former SEC chairs from both parties, and each expressed similar concerns. (Listen to Levitt's comments on the nomination process at at the 41-50 minute mark.) Here's the problem: How do you get qualified nominees with expertise in areas relevant to regulating capital markets and publicly traded corporate entities to fill the five seats on the commission?   This process has been made that much more problematic because of the objections -- many of them justified -- raised by people like Democratic Senator Elizabeth Warren, who opposes the revolving door between regulators and the regulated.  Such nominees obviously understood the regulatory issues in a way that few others could. But these candidates often came with a whiff of a conflict of interest: How was someone supposed to approve rules that potentially governed their former clients -- clients whom they might work for again after leaving the SEC? But what seems to be evolving as an alternative may be no better, and is perhaps even worse. The White House, as Levitt sees it, has ceded the nomination process to the Senate, instead of finding and nominating qualified people itself. How has this manifested itself? Three of the last four SEC nominees have been Senate staffers, the latest being Hester Peirce, a former Banking Committee lawyer. Current commissioners Kara Stein and Michael Piwowar also worked for the Banking Committee. A fourth nominee, Lisa Fairfax, is a law professor at George Washington University. She was picked after Warren objected to another nominee -- a corporate lawyer with ties to Wall Street -- due to those aforementioned revolving door concerns. So here's how this looks. The people most likely to get confirmed by the Senate in the current partisan environment are current or former Senate staffers. Leave aside for a moment whether these candidate are the most qualified (Levitt, the longest-serving chairman in the agency's history, has his doubts). Perhaps an even bigger issue is whether this will lead to a further intensification of the kind of partisan divide that has hobbled the basic functions of our government the past decade or so. By all accounts, it probably will.

The Dark Money Behind the Elizabeth Warren “Commie” Ad -- The Consumer Financial Protection Bureau (CFPB), the federal agency created after the 2008 crash to protect the little guy from Wall Street predators, which has done a top-flight job of it, was portrayed as a commie organization in a advertisement that ran repeatedly during the Republican Presidential debate on November 10. To enhance the communist theme of the ad (see full video below) giant banners of CFPB Director, Richard Cordray, and Senator Elizabeth Warren, who pushed for the creation of the agency, hang on the wall in a nod to Soviet dictators.  The advertisement is grossly misleading, overtly suggesting that the job of the CFPB is to deny car loans and mortgages to regular folks seeking credit. The agency, in fact, has absolutely nothing to do with approving credit applications. Its job is to root out and punish financial institutions that are ripping off customers.   The CFPB’s main threat to Wall Street’s padding of its bottom line through ever-creative frauds against millions of small borrowers is that the CFPB is both educating consumers and making it easy for them to file a complaint on how they’ve been fleeced. Even more dangerous, the CFPB is actively inviting whistleblowers inside financial corporations to blow the whistle directly to them on the lawbreaking.There is one more reason that a much broader swath of corporate America is fighting the CFPB than just financial firms. According to the New York Times, a corporate front group that funded the ad has admitted that keeping private justice systems alive for corporations, known as mandatory or forced arbitration, is one reason behind the $500,000 outlay for the ad.

Efforts to Rein In Arbitration Come Under Well-Financed Attack - A television ad during the Republican presidential debate last Tuesday depicted pale bureaucrats rubber-stamping the word “DENIED” on the files of frustrated Americans, beneath a red banner of Senator Elizabeth Warren evoking a Communist apparatchik. The ad attacks the Consumer Financial Protection Bureau, a federal agency created with Ms. Warren’s strong backing after the 2008 mortgage crisis. What the ad did not say: Its sponsor wants to rein in the agency in part because of its efforts to restrict arbitration — the widespread practice in corporate America of requiring customers and employees to resolve disputes not in the courts, but in private proceedings with neither judge nor jury. In fact, arbitration is one of the reasons the ad’s sponsor, American Action Network, wanted to blast the agency with the $500,000 campaign, the group said.The consumer agency’s stance on arbitration, while difficult to convey in a TV spot, “is a perfect example of how government is taking away the power of individuals and handing it to the trial lawyers,” said Mike Shields, president of the American Action Network and a former top aide at the Republican National Committee. Last week’s ad is one of multiple efforts across the country in recent weeks by both advocates and opponents of arbitration to revisit the much-debated practice, which, in two powerful decisions beginning in 2011, has been affirmed by the United States Supreme Court. The most significant moves came in Washington, where regulators, lawmakers and the Justice Department pushed for new restrictions on arbitration.

Crowdfunding or Crowdphishing? - Robert J. Shiller  - If one were seeking a perfect example of why it’s so hard to make financial markets work well, one would not have to look further than the difficulties and controversies surrounding crowdfunding in the United States. After deliberating for more than three years, the US Securities and Exchange Commission (SEC) last month issued a final rule that will allow true crowdfunding; and yet the new regulatory framework still falls far short of what’s needed to boost crowdfunding worldwide. True crowdfunding, or equity crowdfunding, refers to the activities of online platforms that sell shares of startup companies directly to large numbers of small investors, bypassing traditional venture capital or investment banking. The concept is analogous to that of online auctions. But, unlike allowing individuals to offer their furniture to the whole world, crowdfunding is supposed to raise money fast, from those in the know, for businesses that bankers might not understand. Regulators outside the US have often been more accommodating, and some crowdfunding platforms are already operating. For example, Symbid in the Netherlands and Crowdcube in the United Kingdom were both founded in 2011. But crowdfunding is still not a major factor in world markets. And that will not change without adequate – and innovative – financial regulation. There is a conceptual barrier to understanding the problems that officials might face in regulating crowdfunding, owing to the failure of prevailing economic models to account for the manipulative and devious aspects of human behavior. Economists typically describe people’s rational, honest side, but ignore their duplicity. As a result, they underestimate the downside risks of crowdsourcing. The risks consist not so much in outright fraud – big lies that would be jailable offenses – as in more subtle forms of deception. It may well be open deception, with promoters steering gullible amateurs around a business plan’s fatal flaw, or disclosing it only grudgingly or in the fine print.

Stock Prices of Weapons Manufacturers Soaring Since Paris Attack -- Glenn Greenwald -- The Paris attacks took place on Friday night. Since then, France’s president has vowed “war” on ISIS and today significantly escalated the country’s bombing campaign in Syria (France has been bombing ISIS in Iraq since last January, and began bombing the group in Syria in September).  Already this morning, as Aaron Cantú noticed< have — industry” “defense the as to referred usually is what manufacturers weapons leading of stocks stylethe> the stocks of the leading weapons manufacturers — what is usually referred to as the “defense industry” — have soared: Also enjoying a fantastic day so far is one of the leading Surveillance State profiteers:  France’s largest arms manufacturer, Thales, is also having an outstanding day, up almost 3 percent, even as the leading French index is down: Note how immediate the increases are: The markets could barely wait to start buying. The Dow overall is up today only .12 percent, making these leaps quite pronounced. Reuters, as published on Fox Business, starkly noted the causal connection: “Shares of aerospace and defense rose sharply on Monday in reaction to the attacks in France.” The private-sector industrial prong of the Military and Surveillance State always wins, but especially when the media’s war juices start flowing.

Oil Majors’ Dividends Survive Plunge in Oil Prices - The world’s biggest energy companies have doubled down on their promise to protect dividends, despite a precipitous drop in profits this year, driven by a steep decline in oil prices. In the first nine months of the year, the four oil companies known as the supermajors— Royal Dutch Shell PLC, Exxon Mobil Corp. , Chevron Corp. and BP PLC—have seen their collective earnings fall by more than 70% from a year earlier. Over the same period, they have handed out nearly $28 billion to their shareholders, a roughly 10% increase from the 2014 period. “The dividends and payouts to shareholders have no reason to be as volatile as the oil price,” said Patrick Pouyanné, chief executive of France’s Total SA, the world’s fourth-largest oil company by production, at a conference in Abu Dhabi this week. He added that it would be a “terrible mistake” to remove dividends and a sign that “we aren’t good at our business.” Oil prices are currently trading slightly above $40 a barrel—their lowest levels since August—and more investment banks, energy companies and analysts don’t see the price rising above $60 a barrel until 2017. The International Energy Agency said Tuesday oil prices would slowly rise to $80 a barrel by 2020, but also outlined a scenario in which they stayed at $50 a barrel. This has raised questions on a potential cash crunch at oil companies, a problem the firms acknowledge and say they are taking steps to address. The companies say they retain robust balance sheets that give them flexibility to raise more funds to help cover costs when needed.

Junk-rated and oil and gas loans worry U.S. bank regulators | Reuters: Banks' exposure to junk-rated companies and the oil and gas sector remains high, according to an annual report on loan quality by U.S. bank regulators released Thursday. The regulators gave a negative classification to $372.6 billion out of $3.9 trillion in loans impacted by the review, or 9.5 percent of the loans. Classified loans increased 9.4 percent from a year earlier. While regulators cited progress by banks in improving underwriting practices, they complained in a press release with the report of "persistent structural deficiencies found in loan underwriting." The report could be an early sign of a shift in the credit cycle toward more conservative lending because of stress among some borrowers. Criticism of loan quality in last year's report focused on loans to junk-rated companies. This year's report added worry about oil and gas loans. So called "classified" oil and gas loans - ones that received the three most negative ratings of "substandard," "doubtful," and "loss" - surged to 15 percent from just 3.6 percent a year ago. "Aggressive acquisition and exploration strategies from 2010 through 2014 led to increases in leverage, making many borrowers more susceptible to a protracted decline in commodity prices," the release stated. The review could force banks to scale back loans to energy companies. In September the Office of the Comptroller of the Currency, which conducted the review with the Federal Reserve Board and the Federal Deposit Insurance Corporation, met with banks over the impact of fallen commodity prices on the ability of borrowers to repay loans.

Capital Destruction Rages Beneath S&P 500 Tranquility -- Wolf Richter -- Monday, junk bonds languished after a brutal uninterrupted selloff that had lasted eight trading days. Tuesday and Wednesday, junk bonds rallied. But on Thursday, energy junk bonds got broadly hammered, and Chesapeake Energy saw its $11.6 billion in junk bonds collapse on heavy volume, while its Credit Default Swaps (CDS) — which investors buy to protect against defaults — jumped to the highest level ever, signaling that the company is distressed far beyond its credit rating (BB, two notches into junk), and that a big downgrade is due. Its shares plunged 10% to $5.40, a 13-year low.   Chesapeake’s 6.5% notes due 2017 plunged 10 points to around 70 cents on the dollar, yielding about 30%, according to LCD. A months ago, they were still trading at 96.5 cents on the dollar, yielding 8.7%. Its 5.75% notes due 2023 plunged six points to about 42 cents on the dollar, down from 71 a month ago. Its $1.5 billion of floating-rate notes due 2019 fell about 4 points to 47. Its 5.375% unsecured notes due 2021 dropped the most, down 9 points to 41 cents on the dollar. Picking up energy junk bonds for cents on the dollar – that “lifetime opportunity” hedge funds have been promoting – has been a bloody trade. And now investors fear the worst. The company is staggering under a mountain of debt, most of it dating from the days of former CEO Aubrey McClendon. It’s burning borrowed cash like there’s no tomorrow, a strategy McClendon had perfected. And its assets are dissipating into thin air: it has already written off $15.4 billion over the past three quarters, with more write-offs to come!

Bond Investors Have a $60 Billion Problem With Student Debt -  More than $60 billion in bonds backed by U.S. student debt are likely to be affected if Fitch Ratings adopts new criteria for the securities, Deutsche Bank AG analysts said Thursday. The number of bonds “on review for downgrade by at least one rating agency could increase substantially,” analysts Elen Callahan and Kayvan Darouian said in a report. Securities tied to government-sponsored student debt have come under pressure this year after rating companies warned that borrowers were struggling to repay. On Wednesday, Fitch Ratings revealed the scope of the problem: Its new criteria could mean that about 35 percent to 45 percent of bond deals it rates will be downgraded. The underlying loans were originated by the now-defunct Federal Family Education Loan Program. The Deutsche Bank analysts said their FFELP estimate was based on data from Securities Industry and Financial Markets Association. Only $14 billion have been placed on watch by Fitch, the analysts said.  About $170 billion of these loans are guaranteed by the U.S. government, making a true default virtually impossible, but slow repayments are lengthening the time it takes investors to be repaid. Just over half the bonds rated AAA by Fitch could maintain their ratings under the proposed criteria, Fitch said Wednesday. But about 15 percent of AAA rated bonds could be cut to below investment grade, and 35 percent could drop to AA or A, the company said. Some bond investors have warned that in a worst-case scenario, rating downgrades may force them to liquidate their holdings under guidelines maintained by their investment boards. That has led to a higher trading volumes, and slumping prices. It has also invited bets against certain companies active in that market.

As Investors Shun Debt, Banks Are Left Holding the Bag - In recent years, Wall Street firms have reaped big profits in the scrappy reaches of the credit markets, selling the debt of companies with weak credit ratings to investors who crave higher returns.But now, as investors have suddenly grown skittish, some big Wall Street banks have been stuck with piles of debt that they are struggling to sell. As a result they are starting to book multimillion-dollar losses as they write down the value of these positions.The investment banks that focus on this market appear to be sitting on potential losses that may exceed $600 million, according to an analysis by debt market specialists of several deals that are struggling. These deals have not closed yet, but the markings are based on the lower prices investors are demanding.  A large portion of the paper losses is from debt issued by Veritas, a software entity that the private equity firm Carlyle Group is buying in a $5.5 billion leveraged buyout. Morgan Stanley and Bank of America led this transaction. A lack of demand for the debt has effectively left it on the books of the banks. None of the banks would comment on the calculations.

U.S. Targets RBS, J.P. Morgan Executives in Criminal Probes - WSJ: —Federal prosecutors are actively pursuing criminal cases against executives from Royal Bank of Scotland Group RBS 1.92 % PLC and J.P. Morgan Chase & Co. for allegedly selling flawed mortgage securities, people familiar with the probes said, as the clock ticks down for bringing cases from the 2008 financial crisis. Officials are working to establish that the bankers ignored warnings from associates that they were packaging too many shaky mortgages into investment offerings and are weighing whether they can prove that constituted fraud, the people said. At RBS, prosecutors are scrutinizing a $2.2 billion deal that repackaged home mortgages into bonds in 2007, the people said. In a 2013 civil settlement with RBS, the Securities and Exchange Commission described the lead banker on that deal, whom it didn’t name, as trying to push it through over concerns of the diligence department. At J.P. Morgan, prosecutors are focusing on two people who worked on a different residential-mortgage deal, the people said. J.P. Morgan noted the existence of a criminal probe in a Nov. 2 quarterly securities filing. A spokesman declined to comment beyond that document. RBS, which neither admitted nor denied the SEC’s findings in its settlement with the agency, declined to comment for this article. In a July securities filing, the bank said the civil and criminal divisions of the Justice Department were investigating the bank’s mortgage securitizations.

The U.S. May Be the World’s Richest Country, But It Ranks 14th in Financial Literacy - By many measures, the U.S. is the world’s wealthiest country—but it’s not because Americans are the best with their finances. In fact, a sprawling global survey of financial literacy around the world finds that the U.S. ranks 14th, behind Singapore and the Czech Republic This new measure of financial literacy comes from a survey of 150,000 adults in 148 countries. To conduct a survey of this scope, Standard & Poor’s Ratings Services partnered with the Gallup World Poll, the World Bank and the Global Financial Literacy Excellence Center at George Washington University. On Wednesday, they released a vast treasure trove of new data that, for the first time, make internationally comparable global rankings of financial literacy. To gauge financial literacy, and capture whether adults know how to make sound decisions, the researchers asked questions on four basic personal finance topics: inflation, interest, compounding and financial diversification. Anyone providing correct answers to three of the four topics was rated as financially literate. Only 57% of Americans notched a passing grade, compared with over 70% in Norway, Denmark and Sweden, and over 60% in Israel, Canada, the U.K., the Netherlands, Germany, Australia, Finland and New Zealand.

Use the Post Office to Help the Unbanked - Bloomberg Editorial Board --  Millions of Americans lack access to reliable, reasonably priced financial services. Perhaps the U.S. Postal Service can help. The U.S. financial system does a poor job of serving people with low incomes. Their meager balances don't justify the cost of extra staff and branches. Hefty charges and overdraft fees (sometimes equivalent to interest rates exceeding 3,000 percent) turn such customers away. As a result, more than a quarter of households, some 68 million adults, turn to a hodgepodge of more or less regulated suppliers of payment, savings and credit services. Choices include prepaid debit cards such as RushCard, which left hundreds of thousands without access to their money last month, as well as payday and title lenders, many of which deserve to be called predatory. All told, fees and interest typically eat up about a tenth of such families' incomes. It's a financial poverty trap. How to reach more of the unbanked sooner? Senator Elizabeth Warren and others have suggested that the U.S. Postal Service could help. They'd like post offices to provide basic banking services, such as small loans and savings accounts.  There's a better way. Instead of competing with the private sector, the postal service could offer a curated selection of third-party financial services, of the Bluebird and LendUp variety. This would shelter customers from predators and help new initiatives reach the scale required to make a real difference. Mainly, it would capitalize on the post office's biggest advantages: an unparalleled network of more than 30,000 branches nationwide and a relatively good reputation among the unbanked (even for customer service, believe it or not). Turning the post office into a financial marketplace would require legal and regulatory changes. Congress would have to authorize it to offer a broader range of services, beyond the money orders and international transfers it already provides. Also, it would be best to give nonbank institutions operating through the post office a national charter, so they could serve customers in all 50 states.

Blackstone is largest owner of real estate - Blackstone has grown its size nearly four-fold since its 2007 IPO. But the biggest private equity firm on Wall Street has seen even greater growth in its real estate division, which has expanded from a $17.7 billion business when Steve Schwarzman took his company public to one that today manages nearly $100 billion worth of property. Steve Schwarzman is America's landlord, now, and he's not afraid to acknowledge it. "We’re now, we believe, the largest owner of real estate in the world," he told Business Insider in an interview at his company's Park Avenue headquarters in midtown Manhattan. "We have a performance record that is… pretty much in a league of our own, we’ve compounded [returns of] around 18% after fees. We’ve had almost no losses of any type." 'League of our own' Time and again, Blackstone has taken on real estate deals — even in down markets — and turned them into winners. Since 2009, according to Blackstone's website, the firm has put more than $50 billion to use and earlier this year closed a real estate fund worth nearly $16 billion. That fund is separate to the firm's private equity investing.  After undertaking one of the biggest private equity deals ever, a buyout of Sam Zell's Equity Office Properties, Blackstone has today sold off most of the assets from the $36 billion deal. It is also in the process of exiting Hilton Worldwide Holdings, the high-end hotel chain Blackstone bought in 2007 at the height of the real estate bubble and salvaged during the financial crisis.

The Percentage of Mortgages Entering Foreclosure Is at its Lowest Level Since 2005 - The housing market isn’t finished cleaning up the legacy of the foreclosure crisis, but it is mostly finished claiming new victims. About 0.38% of loans went into the foreclosure process during the third quarter, according to a report released Tuesday by the Mortgage Bankers Association, the lowest rate since the second quarter of 2005. About 3.57% of loans were at least 90 days past due, the lowest rate since the third quarter of 2007. A healthy job market and rising home prices–which let troubled borrowers sell rather than be foreclosed upon–have led to a steady abatement of the foreclosure crisis over the past five years. Fewer foreclosures should help home prices, both because bank-owned homes tend to sell for less than others and because empty houses often deteriorate and affect the values of their neighbors. Now, the foreclosure problem is largely isolated to loans made before 2009 and a few intractable markets that have been slow to process them. About 80% of mortgages that were seriously delinquent in the third quarter were issued before 2009, the MBA said. Among states, New Jersey, New York and Florida continued to have the highest foreclosure rates. While 1.88% of loans were in some stage of the foreclosure process nationwide, about 6.47% of loans in New Jersey were in foreclosure as well as 4.77% of loans in New York. Colorado, North Dakota and Wyoming had foreclosure rates of 0.6% or less.

MBA: Mortgage Delinquency and Foreclosure Rates Decrease in Q3 -- From the WSJ: Foreclosure Starts Hit Lowest Level Since 2005 About 0.38% of loans went into the foreclosure process during the third quarter, according to a report released Tuesday by the Mortgage Bankers Association, the lowest rate since the second quarter of 2005. About 3.57% of loans were at least 90 days past due, the lowest rate since the third quarter of 2007....1.88% of loans were in some stage of the foreclosure process nationwide ... This graph shows the percent of loans delinquent by days past due. The percent of loans 30 and 60 days delinquent are back to normal levels. The 90 day bucket peaked in Q1 2010, and is about 85% of the way back to normal. The percent of loans in the foreclosure process also peaked in 2010 and and is about 80% of the way back to normal. So it has taken 5 1/2 years to reduce the backlog of seriously delinquent and in-foreclosure loans by over 80%, so a rough guess is that serious delinquencies and foreclosure inventory will be back to normal near the end of 2016. Most other mortgage measures are already back to normal, but the lenders are still working through the backlog of bubble legacy loans.

HUD: FHA'S 2015 Annual Report Shows Capital Reserves Now Exceed 2%, First Time Since 2008 -- From HUD: FHA'S 2015 Annual Report Shows Capital Reserves Now Exceed 2%: The U.S. Department of Housing and Urban Development (HUD) today released its annual report to Congress on the financial condition of the Federal Housing Administration’s Mutual Mortgage Insurance (MMI) Fund. The independent actuarial analysis shows the MMI Fund’s capital ratio stands at 2.07 percent—the first time since 2008 that FHA’s reserve ratio exceeded the congressionally required 2 percent threshold. The economic value of the MMI Fund gained $19 billion in Fiscal Year 2015, driven by strong actions to reduce risk, cut losses and improve recoveries.  This is the third consecutive year of economic growth for the MMI Fund, allowing FHA to expand credit access to qualified borrowers even as the broader housing market continues to recover. FHA’s annual report also notes a significant increase in loan volume during FY 2015, due largely to a reduction in annual mortgage insurance premium prices announced in January. Read a comprehensive summary of the report released today. “FHA is on solid financial footing and positioned to continue playing its vital role in assisting future generations of homeowners,” said HUD Secretary Julián Castro. “We’ve taken a number of steps to strengthen the Fund and increase credit access to responsible borrowers. Today’s report demonstrates that we struck the right balance in responsibly growing the Fund, reducing premiums, and doing what FHA was born to do – allowing hardworking Americans to become homeowners and spurring growth in the housing market as well as the broader economy.”

MBA: Mortgage Applications Increase in Latest MBA Weekly Survey, Purchase Applications up 19% YoY  -- From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey Mortgage applications increased 6.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 13, 2015. This week’s results included an adjustment for the Veterans Day holiday. ..The Refinance Index increased 2 percent from the previous week. The seasonally adjusted Purchase Index increased 12 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 19 percent higher than the same week one year ago.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.18 percent, its highest level since July 2015, from 4.12 percent, with points remaining unchanged at 0.45 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Fed Economic Letter: "What’s Different about the Latest Housing Boom?" -- From the San Francisco Fed: What’s Different about the Latest Housing Boom?  After peaking in March 2006, the median U.S. house price fell about 30%, finally hitting bottom in November 2011. Since then, the median house price has rebounded strongly and is nearly back to its pre-recession peak. In some parts of the country, house prices have reached all-time highs. This Economic Letter assesses recent housing market indicators to gauge whether “this time is different.”  We find that the increase in U.S. house prices since 2011 differs in significant ways from the mid-2000s housing boom. The prior episode can be described as a credit-fueled bubble in which housing valuation—as measured by the house price-to-rent ratio—and household leverage—as measured by the mortgage debt-to-income ratio—rose together in a self-reinforcing feedback loop. In contrast, the more recent episode exhibits a less-pronounced increase in housing valuation together with an outright decline in household leverage—a pattern that is not suggestive of a credit-fueled bubble....Figure 2 plots the house price-to-rent ratio and the mortgage debt-to-income ratio, each normalized to 100 at its pre-recession peak. The price-to-rent ratio (red line) reached an all-time high in early 2006, marking the apex of the housing bubble. Currently, the price-to-rent ratio is about 25% below the bubble peak. As house prices have recovered since 2011, so too has rent growth, providing some fundamental justification for the upward price movement.

Why White House Economists Worry About Land-Use Regulations -- White House economic advisers have produced a steady diet of white papers this year to spotlight the puzzle of sluggish productivity, which economists want a better handle on because it helps explain why incomes for the broad middle class aren’t rising. Their latest target: land-use restrictions. Housing is growing less affordable because there’s more demand for rental and, increasingly, owner-occupied housing, but little new supply. This hasn’t been a problem until recently—there’s been a considerable backlog of foreclosures and other vacant homes following last decade’s property bust. Throughout the housing slump, policy makers have focused on boosting demand by keeping mortgage rates low and expanding access to credit. Now, there’s growing attention on what’s happening on the supply side. Some cities face supply constraints beyond their control. Coastal cities often see much pricier housing—and considerable price volatility—because there aren’t too many places left to build. But other cities make things worse with zoning and other land-use restrictions that discourage production, said Jason Furman, chairman of the White House Council of Economic Advisers, in a speech Friday at a housing conference co-hosted by CoreLogic, a data company, and the Urban Institute, a think tank.“Artificial constraints” on housing supply hinders mobility, and increasing mobility “is going to be an important part of the solution of increasing incomes and increasing incomes across generations,” Mr. Furman said. Zoning rules, of course, aren’t distributed randomly across the country, which means they’re “actually correlated with those places that have higher inequality,” he said.

Real Estate Value Impacts From Fracking - In this article, we discuss the following six points to consider before concluding that fracking will inevitability lead to adverse impacts on home prices, values and mortgage lending:

• First, economic factors that can enhance prices and values in fracking areas must be carefully weighed against environmental concerns that could create potential negative impacts;
• Second, the oil and gas industry and federal, state and local governments are developing programs, policies and regulations to decrease the risks of environmental contamination to respond to groundwater and well water contamination concerns, and to mitigate potential adverse impacts of fracking on home prices and values;
• Third, the real estate appraisal profession has developed well-established methods for determining the impact of those risks and the effectiveness of industry and government responses on prices and values;
• Fourth, the few fracking impact studies published to date have weaknesses and limitations, and are only an opening round in what will be a long process of understanding the effects of fracking on the single-family real estate market;
• Fifth, past studies related to oil field groundwater contamination and methane leaks show that real estate impacts, when they do occur, typically are temporary and can be eliminated by careful environmental and policy responses;
• Sixth and finally, mortgage lenders and real estate appraisers will be able to deal effectively with the additional risks for the security of mortgage loans extended to borrowers in communities and regions where fracking is taking place.

October first-time buyer update from AEI’s ICHR -- AEI’s First-Time Buyer Mortgage Share and Mortgage Risk Indexes (FBMSI and FBMRI) are key housing market indicators based on monthly data for nearly all government-guaranteed home purchase loans, a measurement which greatly reduces the risk of sample error.By relying on millions of loans for data, AEI’s International Housing Risk Center‘s approach stands in contrast to traditional first-time buyer surveys based on small samples of home buyers or real estate agents. 

• First-time buyers accounted for 56.0% of primary owner-occupied home purchase mortgages with a government guarantee, up from 53.7 % the prior October.
• The Combined FBMSI (which measures the share of first-time buyers for both government-guaranteed and private-sector mortgages) stood at an estimated 52.4%, up from 50.3% the prior October.
• The number of primary owner-occupied purchase mortgages going to first-time buyers in October totaled an estimated 144,000, up 21% from the 119,000 mortgages in October 2014.
• The Agency FBMRI stood at 15.6%, up 1.2% from a year earlier. The Agency FBMRI is six percentage points higher than the mortgage risk index for repeat home buyers, and the gap has been widening.
• 54% of first-time buyer loans were high risk (MRI above 12%) in October, up from 49% a year earlier.
• Historically low mortgage rates, an improving labor market, and loose credit standards, combined with a 37-month-long seller’s market for existing homes, continue to drive up home prices faster than income.

U.S. Housing Starts Hit Seven-Month Low; Setback Seen as Temporary -- U.S. housing starts in October fell to a seven-month low, weighed down by a steep decline in the construction of multi-family homes, but a surge in building permits suggested the housing market remained on solid ground. Rapidly rising household formation, mostly driven by young adults leaving their parental homes and a strengthening labor market, is supporting the housing sector. Economists had forecast housing starts dropping to only a 1.16 million-unit pace last month. Many viewed the weakness in October as being related to land and labor shortages, constraints that have been flagged by home builders. "Structural issues including a shortfall in immigrant labor are inhibiting construction. The supply shortage in the single-family market is not likely to be alleviated any time soon,"

Housing Starts Plunge To 7-Month Lows As Rental Units Tumble - With new and pending sales tumbling and lumber prices down, yesterday's drop in homebuilders sentiment - from 10 year highs! - appears justified entirely now as Housing Starts collapsed 11% in October to the weakest level since March. This is the biggest miss (and MoM drop) since Feb. Multi-family  unit starts plunged 25.5% MoM as single-family dropped just 2.5%. Starts in The West and South plunged as The Midwest saw a 30.8% collapse in housing completions. Building Permits rose 4.1% after tumbling 4.8% in September but SAAR remains notably below the Q2 cycle peak levels (1.337mm) at around 1.15mm homes (with multi-family permits rising 6.8% MoM). Weakest Starts print since March... Driven by a plunge in Multi-Family units...  Charts: bloomberg

Housing Starts increased to 1.060 Million Annual Rate in October -- From the Census Bureau: Permits, Starts and Completions Privately-owned housing starts in October were at a seasonally adjusted annual rate of 1,060,000. This is 11.0 percent below the revised September estimate of 1,191,000 and is 1.8 percent below the October 2014 rate of 1,079,000. Single-family housing starts in October were at a rate of 722,000; this is 2.4 percent below the revised September figure of 740,000. The October rate for units in buildings with five units or more was 327,000. Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,150,000. This is 4.1 percent above the revised September rate of 1,105,000 and is 2.7 percent above the October 2014 estimate of 1,120,000. Single-family authorizations in October were at a rate of 711,000; this is 2.4 percent above the revised September figure of 694,000. Authorizations of units in buildings with five units or more were at a rate of 405,000 in October. The first graph shows single and multi-family housing starts for the last several years. Multi-family starts (red, 2+ units) decreased in October. Multi-family starts are down year-over-year. Most of the weakness in October was in the volatile multi-family sector. Single-family starts (blue) decreased in October and are up 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 October were below expectations, and starts for August and September were revised down slightly. I'll have more later ...

Housing Starts Plunge 11% to 7-Month Low: Single-Family Down 2.4%, Multi-Family Down 25% -- The crowing over last month's rise in multi-family starts is over (or at least it should be over). In September starts jumped 6.5% led by multi-family starts which surged 18.3%.  Single-family starts were up 0.3%. October wiped away all that good news and then some with an extremely weak 1.060 million (SAAR Seasonally Adjusted Annualized Rate). The housing report was far below the lowest Econoday Estimate of 1.162 million.  Pulled down by a big drop in multi-family homes, housing starts fell a steep 11.0 percent in October to a 1.060 million annualized rate that is far below Econoday's low estimate. Starts for multi-family homes, which spiked in September following a springtime jump in permits for this component, fell back 25 percent in the month to a 338,000 annualized rate. Single-family starts fell a much less severe 2.4 percent to 722,000. And there is important good news in this report. Permits are up, rising 4.1 percent to a 1.150 million rate that hits the Econoday consensus. Single-family permits are up 2.4 percent to a 711,000 rate with multi-family up 6.8 percent to 439,000.  Housing completions fell back in October, down 6 percent to a 965,000 rate that reflects lower work in the Northeast and Midwest. Homes under construction rose 0.9 percent to a recovery best 938,000 rate and are up a very strong 16.4 percent year-on-year, pointing, despite the slip in starts, to ongoing strength for construction spending, at least for October. But the big drop in starts is definitely a negative for the near-term construction outlook, though the rise in permits points to subsequent strength.

US Housing Construction Fell Sharply In October - Residential construction activity tumbled 11% last month, falling at a deeper rate than expected, the US Census Bureau reports. The news adds another dovish factor into the analysis for the already wobbly outlook for a rate hike at next month’s Fed policy meeting. Newly issued building permits rose in October, offering a positive counterpoint to the slide in new housing starts, which was led lower by a slump in multi-family units. But to the extent that there’s a bullish spin to promote, it fades when reviewing the year-over-year comparisons. Indeed, housing starts fell 1.8% in October vs. the year-earlier level—the first case of red ink in the annual comparison since March. Permits are still advancing in year-over-year terms, but the rise has dwindled to a thin 2.7% gain.  The bottom line: housing activity has slowed, suggesting that this critical corner of the economy will provide less support for the economy, if any, in the near-term future. “Housing is still really in a slow grind higher, and at the very least it’s stable,” Gennadiy Goldberg, US rates strategist at TD Securities, tells Bloomberg. “Ongoing strength in permits is really a hint that you are going to get more construction.” Perhaps, but it’s hard to project much more than mild growth. Permits are considered a leading indicator for starts and so the positive comparisons on this front for the monthly and annual changes offer support for thinking positively. But even the bulls have to concede that housing’s growth trend is sluggish at best. And that’s the bullish narrative.

October 2015 Residential Building Sector 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. However, the rolling averages are decelerating. The unadjusted rate of annual growth for building permits in the last 12 months has been around 10% - it is a NEGATIVE 1.3 % this month. Unadjusted 3 month rolling averages for permits (comparing the current averages to the averages one year ago) show that construction completions are lower than permits this month for the tenth month in a row.

• The unadjusted rate of annual growth for building permits in the last 12 months has been around 10% - it is a NEGATIVE 1.3 % this month.
• Unadjusted 3 month rolling averages for permits (comparing the current averages to the averages one year ago) show that construction completions are lower than permits this month for the tenth month in a row.

Econintersect Analysis:

• Building permits growth decelerated 6.2 % month-over-month, and is down 1.3 % year-over-year.
• Single family building permits grew 3.9 % year-over-year.
• Construction completions decelerated 1.0 % month-over-month, up 4.8 % year-over-year.

US Census Headlines:

• building permits up 4.1 % month-over-month, up 2.7 % year-over-year
• construction completions down 7.5 % month-over-month, up 5.2 % year-over-year.

Housing permits and starts tell 2 different stories: 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$. Today's housing report is still affected, as to multi-unit dwellings, by the rush to obtain permits in NYC during May and June due to the expiration of an assistance program. Here is the longer term look at housing permits (blue) and starts (red) dating back to the beginning of 2013. Remember that starts tend to lag permits by a month or so, and starts are about twice as volatile as permits: Permits rose,although not to May-June levels, while starts performed a faceplant. Since the NYC program had no significant affect on single family housing, let's look at single family starts (blue), single family permits (red), and multi-family starts (green): In October single family permits were at the highest since December 2007 -- nearly 8 years ago. It appears that much of the permits surge in May and June turned into starts in June through September, with a big decline in October, the lowest number since March. I anticipate that the lingering effects of the NYC program on monthly numbers should be over by the end of this year -- although the distortions in YoY comparisons will linger for another year. Since starts, while more volatile and slightly less leading than permits, represent the actual economic activity, June appears to represent the temporary peak. This should feed into general economic activity next summer, with a pause in the autumn of 2016. Here is a longer term view of single family permits and starts, and multi-unit starts:

Secular Trends in Residential Building Permits and Housing Starts -   Yesterday we reported separately on the latest residential building permits and housing starts in the government's monthly report, courtesy of the Census Bureau and the Department of Housing and Urban Development. Despite the fact that both are monthly SAAR series (seasonally adjusted annualized rate), they are exceptionally volatile and subject to extensive revisions. Thus it is unwise to assign much credibility to a single month. Over the long haul, however, the two offer a compelling study of trends in residential real estate, especially when we adjust the Permits and Starts for population growth. Here is an overlay of the two series since the 1959 inception of the Starts data and the 1960 inception of the Permits data. The monthly data points are preserved as faint dots. The trends are illustrated with 6-month moving averages of data divided by the Census Bureau's mid-month population estimates. Here is a closer look at the overlay since 1990. About that volatility... The extreme volatility of these indicators is the rationale for paying more attention to the 6-month moving average than to its noisy monthly change. Over the complete data series, the Starts absolute MoM average percent change is 6.3%. The MoM range minimum is -26.4% and the maximum is 29.3%. Permits are slightly less volatile with an absolute MoM average percent change of 4.4%. The MoM range minimum is -24.0% and the maximum is 33.9%.

Homebuilder Sentiment Drops For First Time In 6 Months -- Despite plunges in new and pending home sales (current) and lumber prices (forward-looking), Homebuilder Sentiment surged in October to its highest in over 10 years. November appears to be ushering in some sense of reality check. Having revised up October to 65 (from 64), November saw sentiment drop to 62 - the first drop since May. The Southern and Midwest regions saw overall drops in sentiment as The West rose to new cycle highs. Both current and future sales expectations dropped notably but - despite all the blather about weather - prospective buyer traffic rose to its highest since October 2005!

NAHB: Builder Confidence declines to 62 in November -- The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 62 in November, down from 65 in October. Any number above 50 indicates that more builders view sales conditions as good than poor. From the NAHB: Builder Confidence Drops in November but Still Solid Builder confidence in the market for newly constructed single-family homes slipped three points to 62 in November from an upwardly revised October reading on the NAHB/Wells Fargo Housing Market Index (HMI). Two of the three HMI components posted losses in November. The index measuring sales expectations in the next six months fell five points to 70, and the component gauging current sales conditions decreased three points to 67. Meanwhile, the index charting buyer traffic rose one point to 48. Looking at the three-month moving averages for regional HMI scores, the West increased four points to 73 while the Northeast rose three points to 50. Meanwhile the Midwest and South held steady at 60 and 65, respectively.This graph show the NAHB index since Jan 1985. This was below the consensus forecast of 64, but still a strong reading.

AIA: "Architecture Billings Index on Solid Footing" in October - Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.  From the AIA: Architecture Billings Index on Solid FootingThere has been increasing levels of demand for design services for nearly all construction project types for the majority of the year as revealed in the Architecture Billings Index (ABI). As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the October ABI score was 53.1, down slightly from the mark of 53.7 in the previous month. This score still reflects an increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 58.5, down from a reading of 61.0 the previous month. “Allowing for the possibility of occasional and minor backsliding, we expect healthy business conditions for the design and construction industry to persist moving into next year,”  “One area of note is that the multi-family project sector has come around the last two months after trending down for the better part of the year.”
• Regional averages: South (56.2), West (54.4), Midwest (52.6), Northeast (49.2)
• Sector index breakdown: commercial / industrial (55.1), mixed practice (54.9), multi-family residential (52.5), institutional (51.4)

Rents keep surging, as growth matches seven-year high - The cost of rent continued to climb in October, another sign of a housing market in which demand is fast outstripping supply. Rent rose 3.7% over the past 12 months, the Labor Department said, the same as in September. Yearly rent increases have accelerated steadily since 2010, and are outpacing annual wage growth, which was an inflation-adjusted 2.4% in October.Household formation has picked up as the economy improves, but supply is lagging demand. The inventory of both new and existing homes has held below 5 months’ worth, much lower than the 6 months’ worth of supply considered normal. That’s helping drive up prices of homes for sale, and in turn keeping many renters on the sidelines even as mortgage rates remain historically low. Those supply constraints may start to ease. Home-builder confidence eased slightly in November, but still remained at a 10-year high, the National Association of Home Builders said Tuesday. Builders like D. R. Horton are reporting strong earnings figured backed by robust demand, and NAHB said its members are most concerned about finding available lots on which to place homes and labor for construction. The hefty rise in the cost of rent and health care may also explain why consumers are spending less on goods in categories traditionally tracked by economists. The Commerce Department released retail sales data last week that showed sales barely budged in October, rising just 0.1%. That followed no gain in September.

NY Fed: Household Debt increased $212 billion Q3 2015 --The Q3 report was released yesterday: Household Debt and Credit Report. From the NY Fed: Just Released: New and Improved Charts and Data on Auto Loans Today, the New York Fed announced that household debt increased by a robust $212 billion in the third quarter of 2015. Both mortgage and auto loan originations increased, as auto originations reached a ten-year high and new mortgage lending appears to have finally recovered from the very low levels seen in the past year. This quarter, we’re introducing an improved estimate of auto loan originations, some new charts, and some fresh data on the auto loan market. The Quarterly Report on Household Debt and Credit and this analysis use our Consumer Credit Panel data, which is itself based on Equifax credit data. ...The continued growth in auto lending, subprime lending in particular, is a topic that we’ve monitored closely over the past few years, and we’re just now seeing some increase in delinquency rates on loans made by auto finance companies. Because there are a large number of subprime borrowers in this sector, these borrowers may be more sensitive to developments in the labor market, and the increases in the outstanding balances of these borrowers may pose some risks. That said, any comparison with the subprime mortgage market of the 2000s that led to the crisis should note that the volume of subprime mortgages outstanding in 2007 was nearly four times the volume of subprime auto loans outstanding today ($250 billion).Here are two graphs from the report: The first graph shows aggregate consumer debt increased in Q3.  Household debt peaked in 2008, and bottomed in Q2 2013. Even mortgage debt is increasing now, from the NY Fed. Mortgage balances, the largest component of household debt, increased in the third quarter. Mortgage balances shown on consumer credit reports stood at $8.26 trillion, a $144 billion increase from the second quarter of 2015.

Mortgages Lift Household Debt To 5-Year High, New York Fed Says - Accelerating increases in auto loan debt and mortgage credit helped propel total borrowings of U.S. households to the highest level in more than five years, the Federal Reserve Bank of New York said Thursday. Household debt rose by 1.8%, or $212 billion, in the third quarter to $12.07 trillion, the most since the first quarter of 2010, according to the New York Fed's quarterly report on household debt and credit. The data chimed with other encouraging readings on the U.S. economy that have prodded the central bank to consider raising interest rates from near zero, where they've been held for seven years. Minutes of the Fed's October policy-setting meeting, released in Washington on Wednesday, showed officials leaning toward a hike next month. Auto loan balances rose 11.9% from a year earlier to $1.05 trillion, reaching the highest level since the survey began in 1999. "The growth in auto loan balances and originations has been very robust," New York Fed Research Officer Donghoon Lee said in a statement accompanying the release. The level of overall household debt in the third quarter of 2015 was 3%, or $355 billion, higher than a year earlier, though it remains 4.9% below the peak of $12.68 trillion reached in the third quarter of 2008, the report showed. Mortgage debt jumped 1.8%, or $144 billion, from the second quarter, according to the report. Mortgage originations increased to $502 billion from July to September. Credit card debt rose 1.6% in the third quarter to $714 billion. Student loan balances increased 1.1% from the second quarter to a new high of $1.2 trillion.

Chip Credit Cards Give Retailers Another Grievance Against Banks - Trader Joe’s, like many retailers around the country, recently upgraded its payment terminals around the Oct. 1 deadline to accept debit and credit cards with a new security chip.The timing, retailers say, could not be worse.  The new terminals are often slower, meaning that the long lines during the busy year-end holiday season will grow longer. “If they couldn’t get it done before 10/1, I doubt many are going to have the appetite to turn it on between now and the end of the year,” said Mark Horwedel, chief executive of the Merchant Advisory Group, which advocates on behalf of retailers. “This is make-it-or-break-it sales season for the merchant community.” The new chip cards are also at the center of a growing dispute that has pitted two of America’s most prominent industries — banking and retailing — against each other, and pulled in attorneys general and even the Federal Bureau of Investigation in the process. But the debate involves more than whether consumers will be adequately protected during a season that has been rife with security breaches: The battle could affect the long-simmering war over the billions of dollars in interchange fees that merchants pay to process credit and debit transactions.

CPI increased 0.2% in October -- From the BLS:  The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in October on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 0.2 percent before seasonal adjustment.  The indexes for food, energy, and all items less food and energy all increased modestly in October. The food index, which increased 0.4 percent in September, rose 0.1 percent in October, with four of the six major grocery store food group indexes rising. The energy index, which declined in August and September, advanced 0.3 percent in October; major energy component indexes were mixed. The index for all items less food and energy rose 0.2 percent in October, the same increase as in September. ... The index for all items less food and energy has risen 1.9 percent over the past 12 months; this is the same figure as the 12 months ending September.

October Consumer Price Index: Up Fractionally from September - The Bureau of Labor Statistics released the October CPI data this morning. The year-over-year unadjusted Headline CPI came in at 0.17%, up from -0.04% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 1.91% (rounded t0 1.9%), little changed from the previous month's 1.89% (rounded to 1.9%).  Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data:  The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in October on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 0.2 percent before seasonal adjustment. The indexes for food, energy, and all items less food and energy all increased modestly in October. The food index, which increased 0.4 percent in September, rose 0.1 percent in October, with four of the six major grocery store food group indexes rising. The energy index, which declined in August and September, advanced 0.3 percent in October; major energy component indexes were mixed. The index for all items less food and energy rose 0.2 percent in October, the same increase as in September. Advances in the indexes for shelter and medical care were the largest contributors to the increase, with the indexes for personal care, airline fares, recreation, alcoholic beverages, and tobacco also rising. In contrast, the indexes for apparel, new vehicles, household furnishings and operations, and used cars and trucks all declined in October. The all items index rose 0.2 percent over the last 12 months. The 12-month change has been between negative 0.2 percent and positive 0.2 percent since January. The food index has increased 1.6 percent over the past year, and the index for all items less food and energy has risen 1.9 percent. These advances have been mostly offset by a 17.1 percent decline in the energy index. [More…] The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumptions Expenditures (PCE) price index.

July 2015 CPI Annual Inflation Rate Is Now 0.2%: According to the BLS, the Consumer Price Index (CPI-U) year-over-year inflation rate rose from 0.1% to 0.2%. The year-over-year core inflation (excludes energy and food) rate remained unchanged at 1.8%, and continues to be under the targets set by the Federal Reserve. As a generalization - inflation accelerates as the economy heats up, while inflation rate falling could be an indicator that the economy is cooling. However, inflation does not correlate well to the economy - and cannot be used as a economic indicator. Energy inflation was the major influences on this month's CPI. The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in July on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 0.2 percent before seasonal adjustment. The indexes for food, energy, and all items less food and energy all rose slightly in July. The food index rose 0.2 percent as all six major grocery store food group indexes increased. The energy index rose 0.1 percent as an increase in the gasoline index more than offset declines in other energy component indexes. The index for all items less food and energy also rose 0.1 percent in July. A 0.4-percent advance in the shelter index was the main contributor to the increase, though the indexes for medical care and apparel also rose. In contrast, the index for airline fares fell sharply, and the indexes for used cars and trucks, household furnishings and operations, and new vehicles all declined. The all items index increased 0.2 percent for the 12 months ending July. The 12-month change has been rising since April. The index for all items less food and energy increased 1.8 percent for the 12 months ending July; this was the fourth time in 5 months the 12-month change was 1.8 percent. The food index increased 1.6 percent over the last 12 months. The energy index, however, continues to show a 12- month decline, falling 14.8 percent over the past year.

Monthly October CPI 0.2% Change Matches Annual One -- The Consumer Price Index increased by 0.2% for October as energy price declines abated.  Gasoline alone increased 0.4% for the month.  Inflation without food or energy prices considered increased 0.2% for the month.  From a year ago overall CPI has increased 0.2%, which is very low, yet without energy and food considered, prices have increased 1.9%.  While 1.9% is below the Fed's 2.0% inflation target, it is close enough to justify a rate increase from the Federal Reserve in December. The flat yearly overall inflation is shown in the below graph, driven by low energy prices.Core inflation, or CPI with all food and energy items removed from the index, has increased 1.9% for the last year. Core CPI is one of the Federal Reserve inflation watch numbers and 2.0% per year is their target rate. The Fed watches other inflation figures as well as GDP and employment statistics on deciding when to raise rates. Graphed below is the core inflation change from a year ago. For the past decade the annualized inflation rate has been 1.9%.Core CPI's monthly percentage change is graphed below. This month core inflation increased 0.2%, as shelter increased 0.3%. Apparel prices dropped -0.8%, the largest drop since September 2014 and are down -1.9% for the year.The energy index is down -17.1% from a year ago. The BLS separates out all energy costs and puts them together into one index. For the year, gasoline has declined -27.8%, while Fuel oil has dropped -32.9%. Fuel oil dropped -1.1% for the month,continuing it's slide. Graphed below is the overall CPI energy index.Graphed below is the CPI gasoline index only, which seems to be leveling out this month. Core inflation's components include shelter, transportation, medical care and anything that is not food or energy. The shelter index is comprised of rent, the equivalent cost of owning a home, hotels and motels. Shelter increased 0.3% and is up 3.2% for the year. Rent just keeps increasing and this month rent jumped by 0.3% and is up 3.7% for the year. Graphed below is the rent price index.Food prices increased 0.1% for the month, which is much less than September's 0.4% increase. Food and beverages have now increased 1.6% from a year ago. Groceries, (called food at home by BLS), increased 0.1% for the month, and are up 0.7% for the year. Eating out, or food away from home increased 0.2% for the month and is up 2.9% for the year. Graphed below are groceries, otherwise known as the food at home index.

Healthcare & Housing Cost Surge Sparks Biggest Rise In Core Consumer Prices Rise In 16 Months -- Following September's strongest Core CPI gain since June 2014, October accelerated that modestly with CPI ex food and energy rising 1.9% YoY. Broad CPI rose 0.2% YoY (slightly better than the 0.1% expected rise) - the highest sicne December. Month-over-month saw new and used vehicle prices drop, Apparel prices drop 0.8% (most since Dec 2014), PCs drop 0.9%, but was notably offset by the bigger-weighting in Medical Care which rose 0.7% MoM (3.0% YoY) and Shelter rose 3.2% YoY. The index for all items less food and energy increased 0.2 percent in October, the same increase as the previous month.

• The shelter index continued to rise, increasing 0.3 percent for the second consecutive month. The rent index rose 0.3 percent and the index for owners' equivalent rent advanced 0.2 percent. The index for lodging away from home increased 0.8 percent, the same increase as in September.
• The medical care index rose 0.7 percent in October, its largest increase since April. The hospital services index increased 2.0 percent, the index for prescription drugs rose 0.1 percent and the physicians' services index was unchanged. The index for personal care increased 0.5 percent in October, its largest increase since January.
• The index for airline fares turned up in October, rising 1.5 percent and ending a string of three consecutive declines. The index for recreation increased 0.2 percent, the index for alcoholic beverages rose 0.6 percent, and the tobacco index advanced 0.4 percent.

In contrast to these increases, the apparel index declined in October, falling 0.8 percent, its largest decline since December 2014. The index for new vehicles, which fell 0.1 percent in September, fell 0.2 percent in October. The index for used cars and trucks declined for the sixth month in a row, falling 0.3 percent. The index for household furnishings and operations also declined in October, falling 0.1 percent. The index for all items less food and energy has risen 1.9 percent over the past 12 months; this is the same figure as the 12 months ending September. Indexes that have increased more rapidly include shelter (3.2 percent) and medical care (3.0 percent). Among the indexes that posted smaller increases are recreation (0.6 percent) and new vehicles (0.1 percent). Indexes that declined over the past year include airline fares (-5.2 percent), apparel (-1.9 percent) and used cars and trucks (-1.4 percent). Indexes that have increased more rapidly include shelter (3.2 percent) and medical care (3.0 percent).

The Importance of Commodity Prices in Understanding U.S. Import Prices and Inflation - NY Fed -  The dollar rose sharply against both the euro and yen in 2014 and 2015 and non-oil import prices subsequently fell. An explanation for this relationship is that a stronger dollar reduces the dollar-denominated cost of producing something in Germany or Japan, giving firms room to lower their dollar prices in order to gain sales against their U.S. competitors. A breakdown by type of good, however, shows that import prices for autos, consumer goods, and capital goods tend not to move much with changes in the dollar as foreign firms choose to keep the prices of their goods stable in the U.S. market. Instead, the connection between import prices and the dollar largely reflects the tendency for commodity prices to fall in dollar terms when the dollar strengthens. As a consequence, the dampening effect of a stronger dollar on U.S. inflation is transmitted much more through falling commodity prices than through cheaper imported cars and consumer goods.

Weekly Gasoline Price Update: Regular and Premium Down, WTIC Largest Drop Since July - It's time again for our weekly gasoline update based on data from the Energy Information Administration (EIA). The price of Regular and Premium dropped five and four cents, resepctively. WTIC ended today at $41.74, down $6.63 from the previous week and its largest weekly decline since July. According to GasBuddy.com, Hawaii has the highest average price for Regular at $2.85 and Los Angeles,CA is averaging $2.88. South Carolina has the cheapest at $1.89.  How far are we from the interim high prices of 2011 and the all-time highs of 2008? Here's a visual answer. The next chart is a monthly chart overlay of West Texas Light Crude, Brent Crude and unleaded gasoline end-of-day spot prices (GASO). In this monthly chart, WTIC closed today at 41.74 a barrel. The volatility in crude oil and gasoline prices has been clearly reflected in recent years in both the Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE). For additional perspective on how energy prices are factored into the CPI, see What Inflation Means to You: Inside the Consumer Price Index.

DOT: Vehicle Miles Driven increased 2.3% year-over-year in August, Rolling 12 Months at All Time High -- The Department of Transportation (DOT) reported: Travel on all roads and streets changed by 2.3% (6.3 billion vehicle miles) for August 2015 as compared with August 2014. Travel for the month is estimated to be 277.3 billion vehicle miles. ◦The seasonally adjusted vehicle miles traveled for August 2015 is 263.3 billion miles, a 3.6% (9.1 billion vehicle miles) increase over August 2014. It also represents a -0.4% change (-1.2 billion vehicle miles) compared with July 2015.  The following graph shows the rolling 12 month total vehicle miles driven to remove the seasonal factors. The rolling 12 month total is moving up - mostly due to lower gasoline prices - after moving sideways for several years. The second graph shows the year-over-year change from the same month in the previous year.  In August 2015, gasoline averaged of $2.73 per gallon according to the EIA.  That was down significantly from August 2014 when prices averaged $3.57 per gallon.  Gasoline prices aren't the only factor - demographics is also key. However, with lower gasoline prices, miles driven - on a rolling 12 month basis - is setting new highs each month.

Auto loan debt tops $1 trillion -- Americans owe more on their cars than ever. U.S. car buyers are $1 trillion dollars in debt on car purchases. Analysts attribute that to low interest rates and strong car sales despite rising prices. The average payment is just under $400 a month. Analysts said the car industry is on track to sell a record number of cars this year, mostly because of low interest rates. New car sales are up nearly six percent so far this year, according to sales tracker Autodata.

Just Released: New and Improved Charts and Data on Auto Loans  - NY Fed  -- Today, the New York Fed announced that household debt increased by a robust $212 billion in the third quarter of 2015. Both mortgage and auto loan originations increased, as auto originations reached a ten-year high and new mortgage lending appears to have finally recovered from the very low levels seen in the past year. This quarter, we’re introducing an improved estimate of auto loan originations, some new charts, and some fresh data on the auto loan market. The Quarterly Report on Household Debt and Credit and this analysis use our Consumer Credit Panel data, which is itself based on Equifax credit data.  In general, our method of calculating data series for our Quarterly Report is simple—we aggregate variables from our 5 percent sample of credit reports; any adjustments we make are well documented. Because we do not observe auto loan originations directly, we impute them using an algorithm to identify newly originated balances. Our original approach was contingent on an increase in number of accounts, but would tend to underestimate originations in cases in which account numbers don’t increase—as in back-to-back leases, for example.  With our new, more accurate approach, we’re able to find new loans even when there isn’t an increase in accounts. We are releasing a revised historical series that uses our new approach.

Auto Originations Hit 10-Year High, Subprime Loans Fuel Growth; Party About Over?  -- A New York Fed study notes a huge surge in subprime auto loans after taking into account a newer, more accurate methodology.  The new approach takes into consideration new originations as opposed to new accounts. The result was an upward shift in the volume of newly originated auto loans by 25 to 30 percent. A credit score of 660 is the generally acknowledged line between good and poor credit. Scores below 620 are outright awful. With those numbers in mind, let's see how things stack up. Originations by Credit Score Originations hit $156.8 billion in the third quarter, the highest level in a decade. Loans to borrowers with scores below 620 jumped to nearly $40 billion in the second quarter. Loans to borrowers with credit scores below 660 are the highest since 2005. The Fed reports notes "With the surge in the second quarter, the total number of subprime originations has since reached a ten-year, pre-crisis high, only surpassed by the unique periods in 2005 that were associated with 'employee pricing' promotions and record sales for the auto manufacturers." Is "employee pricing" poised for a return?The uptick in delinquencies is modest ... so far but some banks have become concerned. For example, the New York Times reported in March Wells Fargo Puts a Ceiling on Subprime Auto Loans. Wells Fargo, one of the largest subprime car lenders, is pulling back from that roaring market, a move that is being felt throughout the broader auto industry. The giant San Francisco bank, known for its stagecoach logo and its steady profits, has been at the center of the boom in making loans to people with tarnished credit scores. Wall Street, meanwhile, has been bundling and selling such loans as securities to investors, reaping big profits while allowing millions of financially troubled borrowers to buy cars.

Subprime Auto Lending Soars As Fed Report Shows Spike In Loans To Underqualified Borrowers -- When last we checked in on America’s auto loan bubble (which recently ballooned past the $1 trillion mark) the “visionary” ex-Santander execs over at Skopos Financial had just finished selling some $154 million in paper backed by a collateral pool wherein 75% of the loans were made to borrowers with credit scores less than 600.  14% of the loans were made to borrowers with no credit score at all. That deal followed a $150 million securitization the company sold earlier this year in which a fifth of the borrowers had FICOs between 351 and 500.  What this represents is the resurrection of the infamous originate to sell model that was instrumental in exacerbating the housing bubble. Put simply: if you can offload the credit risk to investors, you don’t really care who you’re loaning money to. It’s moral hazard at its finest and it’s enabled by Wall Street’s securitization machine. Skopos’ latest abomination of an ABS deal came just weeks after Comptroller of the Currency Thomas Curry warned that what's happening in the auto loan market “reminds [him] of what happened in mortgage-backed securities in the run-up to the crisis.” Obviously the market isn't nearly as large, but auto loan-backed ABS supply is expected to grow 25% this year. Here's an up to date look at consumer ABS supply:

Is the U.S. Trucking Industry Entering a Profit-Killing Era of Overcapacity? - As surface transportation’s peak period ends for the year, and trucking eyes the traditionally slowest time for the industry as first quarter 2016, economic signals are, at best, mixed. U.S. factory activity grew last month at its slowest pace since May 2013 as manufacturers pared their stockpiles and cut jobs.mThe Institute for Supply Management’s index of factory activity slipped to 50.1 in October from 50.2 in September. The figures barely signal growth, which is any reading above 50. Third-quarter Gross Domestic Product grew at a 1.5 percent annual rate in the third quarter, far below the 3.9 percent pace in the April-June quarter.  ABF Freight, the seventh-largest LTL carrier reported a decline in revenues due to lower fuel surcharges and lower tonnage levels, even though shipments rose year over year. But ABF showed “great cost discipline,” Stifel analyst David Ross noted. UPS Freight, the fifth-largest LTL, reported tonnage off 10 percent (matching the record decline reported in the 2009 3Q during the depth of the Great Recession) and shipments down 5 percent year over year (the worst drop since 2008 fourth quarter). That has spread to the truckload side as well. Heartland Express, the 12th-largest TL, reported a whopping 35 percent drop in third quarter earnings year of year. Operating revenue decreased 15.9 percent to $182.5 million. Revenue, excluding fuel surcharge revenue, decreased less precipitously, by 8.1 percent to $160.7 million.

Rail Week Ending 14 November 2015: Contraction Grows: Week 45 of 2015 shows same week total rail traffic (from same week one year ago) declined according to the Association of American Railroads (AAR) traffic data. Intermodal traffic contracted year-over-year, which accounts for approximately half of movements. and weekly railcar counts continued in contraction. The 52 week rolling average contraction grew.  A summary of the data from the AAR:  For this week, total U.S. weekly rail traffic was 543,681 carloads and intermodal units, down 4.7 percent compared with the same week last year. Total carloads for the week ending Nov. 14 were 270,793 carloads, down 8.7 percent compared with the same week in 2014, while U.S. weekly intermodal volume was 272,888 containers and trailers, down 0.3 percent compared to 2014. Three of the 10 carload commodity groups posted an increase compared with the same week in 2014. They included: miscellaneous carloads, up 19.8 percent to 9,077; motor vehicles and parts, up 3.3 percent to 18,206; and chemicals, up 0.1 percent to 29,178 carloads. Commodity groups that posted decreases compared with the same week in 2014 included: metallic ores and metals, down 22.9 percent to 20,715 carloads; petroleum and petroleum products, down 16.8 percent to 13,171 carloads; and coal, down 14.5 percent to 95,293 carloads. For the first 45 weeks of 2015, U.S. railroads reported cumulative volume of 12,548,012 carloads, down 4.8 percent from the same point last year; and 12,046,567 intermodal units, up 1.9 percent from last year. Total combined U.S. traffic for the first 45 weeks of 2015 was 24,594,579 carloads and intermodal units, a decrease of 1.6 percent compared to last year.

Global Trade (Still) In Freefall: Imports Collapse At Largest Three US Ports -- We’ve said it before and we’ll say it again: global growth and trade are grinding to a halt.   Trade growth, the WTO observed, has averaged just 3%/year since 2010. That compares rather unfavorably with around 6% a year from 1983 to 2008. “Few see any signs that trade will soon regain its previous pace of growth, which was double the rate of economic expansion before 2008. In 2006, global trade volumes grew 8.5%, compared with a 4% expansion in global GDP,” WSJ pointed out at the time. Besides being proof that trillions in global QE - not to mention DM central bankers’ descent into NIRP-dom - has been utterly insufficient to provide the global economy with the defibrillator shock it apparently needs, this also suggests that we may have entered a new era, where lackluster global growth and trade are systemic rather than cyclical. For the latest bit of evidence that global trade is indeed in free fall, look no further than the container terminals at the ports of Los Angeles, Long Beach, Calif. and around New York harbor which handle more than 50% of seaborne freight coming into the US. As it turns out, “peak” season turned out to be anything but. Here’s WSJ: For the first time in at least a decade, imports fell in both September and October at each of the three busiest U.S. seaports, according to data from trade researcher Zepol Corp. analyzed by The Wall Street Journal. Combined, imports at the container terminals at the ports of Los Angeles, Long Beach, Calif. and around New York harbor, which handle just over half of the goods entering the country by sea, fell by just over 10% between August and October. The declines came during a stretch from late summer to early fall known in the transportation world as peak shipping season, when cargo volumes typically surge through U.S. ports. It is a crucial few months for the U.S. economy as well: High import volumes can signal a confident view on the economy among retailers and manufacturers, while fears of a slowdown grow when ports are quiet.

LA area Port Traffic declined in October  - First, from the WSJ: Quiet U.S. Ports Spark Slowdown Fears For the first time in at least a decade, imports fell in both September and October at each of the three busiest U.S. seaports, according to data from trade researcher Zepol Corp. analyzed by The Wall Street Journal. .... The declines came during a stretch from late summer to early fall known in the transportation world as peak shipping season, when cargo volumes typically surge through U.S. ports. It is a crucial few months for the U.S. economy as well: High import volumes can signal a confident view on the economy among retailers and manufacturers, while fears of a slowdown grow when ports are quiet.  Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic. The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).  To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.  On a rolling 12 month basis, inbound traffic was down 0.2% compared to the rolling 12 months ending in October.   Outbound traffic was down 0.5% compared to 12 months ending in October. The recent downturn in exports might be due to the strong dollar and weakness in China. For imports, August was the all time inbound record, so some of September and October traffic probably arrived in August. The 2nd graph is the monthly data (with a strong seasonal pattern for imports).  Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March (depending on the timing of the Chinese New Year).  Imports were down 2% year-over-year in October; exports were down 6% year-over-year. For the July through October peak period, imports were up 2.1% year-over-year - not the weakness described in the WSJ article (although the WSJ article included New York harbor).

Airport workers at 7 U.S. hubs to strike Wednesday night -- Airport workers at seven of the busiest U.S. airports are going on strike Wednesday night to protest what they say are poor working conditions and retaliation for unionizing. More than 2,000 workers, including cleaners, wheelchair attendants, and baggage handlers plan to strike at Fort Lauderdale, Philadelphia, Boston, Chicago O’Hare, Newark Liberty and New York’s Kennedy and LaGuardia airports, the Service Employees International Union said. The walkout is part of a growing national campaign for a $15-an-hour minimum wage for the lowest-paid airport workers who keep terminals and plane cabins clean, move bags and transport people with disabilities. They work for contractors that serve all major airlines, and some of them are making hourly salaries as low as $6.75, union leaders say. “Despite working fulltime, they cannot afford to rent a room for themselves let alone take care of their families,” said Marc Goumbri, an SEIU spokesman with the workers campaign. “Theworkers have a right to get together under federal law and fight for better working conditions, but when they do so they face retaliation from the contractors.”

The Next Tech Hot Spot: Rural America - There’s a lot of apocalyptic talk on the campaign trail about jobs moving overseas. But just as every action invites a counteraction, there’s also a reverse trend developing, with jobs being outsourced not to India but to rural America. Corporations that once led the charge to India like it, and so do Americans with IT skills attracted by a work environment away from the rat race and long commutes of big cities—and who know how to code software. A college degree is not required, and that’s a major distinction Monty Hamilton, the chief executive of Rural Sourcing Inc., has made in setting his business apart from the industry standard. “If you’re an elementary school kid and you can code, we’ll hire you,” Hamilton said at a recent panel on job creation at the conservative American Enterprise Institute think tank. After some nervous laughter about child-labor laws, Hamilton explained there’s a large reservoir of talented Americans who don’t finish college for one reason or another, including the recent steep rise in tuition, and too many are shut out from their chosen career. “I couldn’t care less whether they have a college degree or not,” he says. “If you can do the job, you can get the job.” General Electric and General Motors are leaders in the trend to repatriate IT jobs, principally from India. Asked at a recent Gartner symposium whether GE had made a mistake in sending so much of its IT work offshore, CEO Jeffrey Immelt said yes. “At the time, they were the leader and other people followed suit, so we had this huge rush of sheep outsourcing to India,” says Hamilton, who was in the audience for Immelt’s talk.

Fed: Industrial Production decreased 0.2% in October -- From the Fed: Industrial production and Capacity Utilization Industrial production declined 0.2 percent in October after decreasing the same amount in September. In October, the index for manufacturing moved up 0.4 percent, while the index for mining fell 1.5 percent and the index for utilities dropped 2.5 percent. For the third quarter as a whole, total industrial production is now estimated to have increased at an annual rate of 2.6 percent; a gain of 1.8 percent had been reported previously. At 107.2 percent of its 2012 average, total industrial production in October was 0.3 percent above its year-earlier level. Capacity utilization for the industrial sector declined 0.2 percentage point in October to 77.5 percent, a rate that is 2.6 percentage points below its long-run (1972–2014) average. This graph shows Capacity Utilization. This series is up 10.6 percentage points from the record low set in June 2009 (the series starts in 1967). Capacity utilization at 77.5% is 2.6% below the average from 1972 to 2012 and below the pre-recession level of 80.8% in December 2007. The second graph shows industrial production since 1967. Industrial production decreased 0.2% in October to 107.2. This is 22.9% above the recession low, and 2.0% above the pre-recession peak. This was below expectations of a 0.1% increase, however August and September were revised up.

Headline Industrial Output Falls As Manufacturing Strengthens - Industrial output continued to contract last month, according to this morning’s report from the Federal Reserve. US production slipped 0.2% in October, dashing expectations for a mild gain via two surveys of economists. The decline leaves the year-over-year trend higher by only 0.3%–the weakest advance in nearly six years.  The bearish trend in industrial output is a weight on the economy but it’s not yet translating into a clear signal of heightened recession risk for the US. The odds are still low that an NBER-defined recession has started for the US, as detailed in theNov. 15 issue of the US Business Cycle Risk Report. It’s worth pointing out that while headline industrial activity weakened last month, the manufacturing component strengthened, posting a 0.4% rise in October—the first increase in three months. The firmer data in manufacturing juiced the annual pace a bit, lifting manufacturing output by 1.9% in October vs. the year-earlier level, which is slightly above September’s 1.7% gain. “It was a warm month nationally,”   “There wasn’t as much need to heat homes and that weighs on utility output,” which was a factor in pushing the headline industrial data lower while manufacturing activity perked up. Nonetheless, the outlook for manufacturing remains mixed at best. Yesterday’s November update of the Empire State Manufacturing Survey was surprisingly weak in the New York Fed region, suggesting that a sustained turnaround for the sector may not be imminent. The virtually flat reading of the ISM Manufacturing Index for October echoes that view.

US Industrial Production Growth Slumps To Weakest Since January 2010 -- Following September's 0.2% MoM drop, October's Industrial Production dropped a further 0.2% (missing expectations of a 0.1% rise by a mile). This is the 9th MoM drop in the 10 months of this year. Utilities (-2.5%) and Mining (-1.5%) were big drivers, as year-over-year, IP rose just 0.34% - the weakest growth since January 2010 - is flashing recessionary signals loud and clear.  9 of the last 10 months have seen declines in Industrial Production... (not seen outside of a recession)

Industrial Production Unexpectedly Declines Again: Don't Worry, It's the Weather and Mining -- Econoday labels the unexpected 0.2% decline in Industrial Production deceptive. The consensus estimate was for a 0.1% gain. But subtract out the decline utilities blamed on weather that was "too good" and mining which no one cares about and there is reason to cheer.  In a deceptive headline, industrial production fell 0.2 percent in October but weakness is in utilities and mining. Boosted by construction supplies, manufacturing, which is the core component in this report, rose a very solid and higher-than-expected 0.4 percent to end two prior months of decline.  Construction supplies jumped 1.7 percent in the month in a reminder of how strong construction spending is right now. Motor vehicle production, a center of strength all year for the manufacturing sector, jumped 0.7 percent with the year-on-year rate in the double-digits at plus 10.9 percent. High-tech industries, where production has been flat all year, also rose 0.7 percent in the month. Spending this year on capital goods, held down by weak foreign demand, has also been flat, though production of business equipment did rise a respectable 0.2 percent in the month. Production of consumer goods slipped 0.1 percent though the year-on-year rate is a respectable plus 3.5 percent. Utility output, reflecting the nation's unseasonably warm weather, was really down October, falling 2.5 percent. Year-on-year output is down 1.5 percent. Mining output, the report's third main component after manufacturing and utilities, fell 1.5 percent. This component, down a year-on-year 6.9 percent, has been getting hit by weak commodity prices.  Turning to capacity readings, total utilization came in at 77.5 percent which is unchanged from September's initial reading but down 2 tenths from September's revised reading. Capacity utilization in the manufacturing sector rose 2 tenths to 76.4 percent. It's not been easy to find good news out of the manufacturing sector which makes this report a standout of sorts. Gains in production, however, would have to extend through year-end to turnaround what has been a weak, export-hit year for the manufacturing sector.

The Big Four Economic Indicators: October Industrial Production Contracts Again - According to the Federal Reserve: Industrial production declined 0.2 percent in October after decreasing the same amount in September. In October, the index for manufacturing moved up 0.4 percent, while the index for mining fell 1.5 percent and the index for utilities dropped 2.5 percent. For the third quarter as a whole, total industrial production is now estimated to have increased at an annual rate of 2.6 percent; a gain of 1.8 percent had been reported previously. At 107.2 percent of its 2012 average, total industrial production in October was 0.3 percent above its year-earlier level. Capacity utilization for the industrial sector declined 0.2 percentage point in October to 77.5 percent, a rate that is 2.6 percentage points below its long-run (1972–2014) average. The full report is available here. Today's report on Industrial Production for October shows a month-over-month decline of -0.2 percent (-0.15 percent to two decimal places), which was below the Investing.com consensus of a 0.1 percent increase. Despite upward revisions ranging from 0.1 to 0.3 percent to the previous three months, this indicator has posted a monthly decline for seven of the last ten months and is up only 0.34% year-over-year. The year-over-year level is lower than at the start of nine of the ten recessions since 1950. In some respects, Industrial Production is the least useful of the Big Four economic indicators. It's a hodge-podge of underlying index components and subject to major revisions, which undercuts its value as a near-term indicator of economic health. As a long-term indicator, it needs two key adjustments to correlate with economic reality. First, it should be adjusted for inflation using some sort of deflator relevant to production. Second, it should be population-adjusted. The chart below is another way to look at Industrial Production over the long haul. It uses the Producer Price Index for All Commodities as the deflator and Census Bureau's mid-month population estimates to adjust for population growth. We've indexed the adjusted series so that 2012=100.

NY Fed: Manufacturing Activity Declined in November  - From the NY Fed: Empire State Manufacturing Survey Business activity declined for a fourth consecutive month for New York manufacturers, according to the November 2015 survey. The general business conditions index was little changed at -10.7. .. Labor market conditions continued to weaken. The index for number of employees was little changed at -7.3, a sign that employment levels fell for a third consecutive month, and the average workweek index moved down seven points to -14.6, its lowest level since mid-2011. ..Indexes for the six-month outlook were little changed from last month, and suggested that optimism about future business conditions remained muted.  This is the first regional survey for November, and manufacturing contracted further in the NY region.  This was well below the consensus forecast of a reading of -5.0.

Empire State Manufacturing Declined for Fourth Consecutive Month - This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at -10.7 (-10.74 to two decimals) shows a fractional increase from last month's -11.6, which still signals a decline in activity. These are some of the lowest levels since 2009.  The Investing.com forecast was for a reading of -6.0. The Empire State Manufacturing Index rates the relative level of general business conditions in New York state. A level above 0.0 indicates improving conditions, below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state. Here is the opening paragraph from the report. The November 2015 Empire State Manufacturing Survey indicates that business activity declined for a fourth consecutive month for New York manufacturers. The headline general business conditions index was little changed at -10.7. New orders and shipments also declined, although at a slower pace than last month. Price indexes suggested that input prices increased slightly, while selling prices were slightly lower. Labor market conditions continued to deteriorate, with survey indicators pointing to a decline in both employment levels and hours worked. Indexes for the six-month outlook were little changed from last month, and suggested that optimism about future conditions remained tepid, even though employment is expected to increase. Here is a chart of the current conditions and its 3-month moving average, which helps clarify the trend for this extremely volatile indicator:

Empire Fed Misses (Again), Contracts For 4th Straight Month As Average Workweek Collapses  -- For the 4th month in a row, and 9th month of the last 10, Empire Fed Manufacturing survey missed expectations printing -10.74 (against expectations of -6.34). This is the 4th monthly contraction - the longest streak of contraction outside of recession. Future outlook (hope) dropped to recent lows as New Orders have now contracted for 7 straight months, and number of employees shrinks once again as the average workweek collapsed to the lowest sicne July 2011. Recession anyone?

Empire State Manufacturing Negative Fourth Month, Work Week Lowest Since Mid-2011 -- The string of manufacturing negatives continues unabated with the Empire State Survey. Economists expected another negative month, but the result was worse than the lowest Econoday economist's prediction of -8.50.   Negatives are beginning to run in Empire State with the index at minus 10.74 in November, right in line with the prior four readings and well below the Econoday consensus for minus 5.00. Several components are showing extended weakness including unfilled orders, at minus 18.18 for the lowest reading of the year, and also the workweek, at minus 14.55 for a fifth straight decline and the weakest run since mid 2013. With unfilled orders down and the workweek down, it's no surprise that employment is down, at minus 7.27 for a third straight loss and the weakest streak since late 2009. And prices, even outside of energy and commodities, are not helped by weak demand with prices for final goods at minus 4.55 for a third straight decline and the longest run of contraction since early 2013. Good news is hard to find but there is easing weakness in new orders, at minus 11.82 vs October's minus 18.91, and in shipments as well, at minus 4.10 vs minus 13.61. Still, this is the sixth straight decline for new orders and the fourth straight for shipments. Manufacturers are keeping their inventories down while delivery times, reflecting the weakness in shipments, are speeding up.  This report is the first indication on November's factory sector and it points to another run of weak regional reports, starting Thursday with the Philly Fed. The factory sector, hit by weak exports and in contraction for a full year, is becoming perhaps the economy's Achilles heal -- and also perhaps a dovish wildcard for the December FOMC.

November 2015 Empire State Manufacturing Index Remains Deep In Contraction: The Empire State Manufacturing Survey improved insignificantly and remains deeply in contraction. Expectations were for a reading between -8.5 to -2.5 (consensus -5.0) versus the -10.7 reported. Any value above zero shows expansion for the New York area manufacturers. New orders and unfilled orders sub-index of the Empire State Manufacturing Survey are in contraction and worsened this month. This noisy index has moved from +10.2 (November 2014), -3.6 (December), +10.0 (January 2015), +7.8 (February), +6.9 (March), -1.2 (April), +3.1 (May), -2.1 (June), 3.9 (July), -14.9 (August), -14.7 (September), -11.4 (October) - and now -10.7. As this index is very noisy, it is hard to understand what these massive moves up or down mean - however this regional manufacturing survey is normally one of the more pessimistic. Econintersect reminds you that this is a survey (a quantification of opinion). Please see caveats at the end of this post. However, sometimes it is better not to look to deeply into the details of a noisy survey as just the overview is all you need to know. From the report:The November 2015 Empire State Manufacturing Survey indicates that business activity declined for a fourth consecutive month for New York manufacturers. The headline general business conditions index was little changed at -10.7. New orders and shipments also declined, although at a slower pace than last month. Price indexes suggested that input prices increased slightly, while selling prices were slightly lower. Labor market conditions continued to deteriorate, with survey indicators pointing to a decline in both employment levels and hours worked. Indexes for the six-month outlook were little changed from last month, and suggested that optimism about future conditions remained tepid, even though employment is expected to increase.

Philly Fed Manufacturing Survey showed slight expansion in November -- From the Philly Fed: Manufacturing Conditions Showed Slight Improvement in November Manufacturing conditions in the region showed slight improvement this month, according to firms responding to the November Manufacturing Business Outlook Survey. The indicator for general activity was slightly positive this month, following two months in negative territory.... The diffusion index for current activity edged higher this month, from -4.5 to 1.9, its first positive reading in three months. ...The survey’s indicators for labor market conditions were mixed this month. The percentage of firms reporting increases in employment (14 percent) was slightly greater than the percentage reporting decreases (11 percent). The employment index increased 4 points, from -1.7 to 2.6. Firms, however, reported overall declines in average work hours in November.  This was above the consensus forecast of a reading of 0.0 for November. Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The yellow line is an average of the NY Fed (Empire State) and Philly Fed surveys through November. The ISM and total Fed surveys are through October.  The average of the Empire State and Philly Fed surveys increased in November, but was still negative.  This suggests another weak reading for the ISM survey.

Philly Fed Manufacturing Index: Activity Improves Slightly -- The Philly Fed's Manufacturing Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. While it focuses exclusively on business in this district, this regional survey gives a generally reliable clue as to direction of the broader Chicago Fed's National Activity Index. The latest gauge of General Activity came in at 1.9, up from last month's -4.5. The 3-month moving average came in at -2.9, down from -0.7 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook was up at 43.4, versus the previous month's 36.7. Today's 1.9 came in above the -1.0 forecast at Investing.com.Here is the introduction from the survey released today: Manufacturing conditions in the region showed slight improvement this month, according to firms responding to the November Manufacturing Business Outlook Survey. The indicator for general activity was slightly positive this month, following two months in negative territory. Indexes for new orders and shipments remained negative, although they increased from lower readings in October. Firms reported slight increases in overall employment this month but declines in average work hours. Manufactured goods prices were near steady. The survey’s future indicators showed improvement. Only a small percentage of firms expect a downturn in business activity over the next six months. (Full Report) The first chart below gives us a look at this diffusion index since 2000, which shows us how it has behaved in proximity to the two 21st century recessions. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average, which is more useful as an indicator of coincident economic activity. We can see periods of contraction in 2011 and 2012 and a shallower contraction in 2013.

November 2015 Philly Fed Manufacturing Squeaks Into Expansion.: The Philly Fed Business Outlook Survey squeaked out of contraction. However, key elements are mixed. This is a very noisy index which readers should be reminded is sentiment based. The Philly Fed historically is one of the more negative of all the Fed manufacturing surveys but has been more positive then the others recently. The index improved from -4.5 to +1.9. Positive numbers indicate market expansion, negative numbers indicate contraction. The market expected (from Bloomberg) -2.1 to 3.2 (consensus 0.0). Manufacturing conditions in the region showed slight improvement this month, according to firms responding to the November Manufacturing Business Outlook Survey. The indicator for general activity was slightly positive this month, following two months in negative territory. Indexes for new orders and shipments remained negative, although they increased from lower readings in October. Firms reported slight increases in overall employment this month but declines in average work hours. Manufactured goods prices were near steady. The survey's future indicators showed improvement. Only a small percentage of firms expect a downturn in business activity over the next six months.  The diffusion index for current activity edged higher this month, from -4.5 to 1.9, its first positive reading in three months (see Chart). The indexes for current new orders and shipments approached zero this month, increasing 7 points and 4 points, respectively. Both indexes remained negative, however, suggesting continued weakness.

Philly Fed Slightly Positive After Two Months of Contraction, but New Orders and Shipments Negative --In what likely amounts to a bit of economic noise, the Philadelphia Fed regional manufacturing report posted a rise of 1.9, slightly beating the economic consensus of 0.  Unlike Monday's Empire State report which is pointing to out-and-out weakness for the November factory sector, the Philly Fed's November report is no worse than flat and points to little month-to-month change for a sector, however, that continues to struggle. The Philly Fed index ended two months of contraction with a small gain of 1.9 which is near enough to the Econoday consensus for no change. But new orders are not in the plus column, at minus 3.7 for a second straight negative score. Shipments are also in the wrong column, at minus 2.5 for what is also a second straight negative month. The average workweek is down very sharply in the Mid-Atlantic factory sector, at minus 16.2 which doesn't point to strength ahead for employment. But employment is one of the positives in the November report, at plus 2.6 and up from minus 1.7 in October. Still, this is a small gain. But one indication pointing to employment strength ahead is the first upturn in backlogs since June, at plus 2.4. Also pointing to employment strength is a strong 6.7 point gain for the six-month outlook to 43.4 where the future employment component is very strong, up more than 14 points to 28.2. There's good new and bad news in this report but compared to the report's own trend, the news is mostly good and underscores Tuesday's strong bounce in the manufacturing component of the industrial production report. Not strong at all, however, have been some other regional Fed reports with Kansas City to give its November update tomorrow.

Philly Fed Creeps Back Into Positive Despite Collapse In Prices Paid, Workweek -- After 2 months of notably unusual negative prints, November's Philly Fed rose from -4.5 to +1.9 (the best MoM rise since June). Sadly, the survey's headline gains were driven by a big surge in 'hope' as the outlook surged from 36.7 to 43.4, as under the covers of the current business environment was a collapse in prices paid, further deterioration in new orders and shipments, and a plunge in average workweek. Philly Fed remains well below 'recovery' averages...

Kansas City Fed Survey: Back in Positive Territory - 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 November Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that growth in Tenth District manufacturing activity was largely flat, although expectations for future activity improved considerably."We saw our composite index move just slightly into positive territory for the first time since February, as some segments of durable manufacturing improved even as activity in our energy states remained sluggish," said Wilkerson. [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 back to levels last seen in April.

Kansas City Fed: Regional Manufacturing Activity expanded slightly in October, First Time since February - From the Kansas City Fed: Tenth District Manufacturing Activity was Largely Flat  The Federal Reserve Bank of Kansas City released the November Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that growth in Tenth District manufacturing activity was largely flat, although expectations for future activity improved considerably. “We saw our composite index move just slightly into positive territory for the first time since February, as some segments of durable manufacturing improved even as activity in our energy states remained sluggish,” said Wilkerson...Tenth District manufacturing activity was largely flat in November, although expectations for future activity improved considerably from the previous few months. Most price indexes edged back down after rising slightly last month.  The month-over-month composite index was 1 in November, up from -1 in October and -8 in September ..Most future factory indexes continued to rise after falling markedly a few months ago. The future composite index jumped from -1 to 8, and the future production, shipments, and new orders indexes also increased. The future employment index rose from 6 to 13, its highest level in nine months.  The declines for most of this year in manufacturing activity, in the Kansas City region, was probably mostly due to lower oil prices and weaker exports due to the strong dollar.  

Weekly Initial Unemployment Claims declined to 271,000 -- The DOL reported:  In the week ending November 14, the advance figure for seasonally adjusted initial claims was 271,000, a decrease of 5,000 from the previous week's unrevised level of 276,000. The 4-week moving average was 270,750, an increase of 3,000 from the previous week's unrevised average of 267,750.  There were no special factors impacting this week's initial claims.  The previous week was unrevised at 276,000. The following graph shows the 4-week moving average of weekly claims since 1971.

 Where have all the workers gone? - Brookings - Employment rates among prime-age workers, especially men, have declined sharply over the last few decades. The Great Recession made matters worse. Recent declines in the unemployment rate have enticed some back into the active labor force but the long-term picture is still discouraging. When we compare the U.S. to other advanced countries, working-age adults are simply not working as much as adults in most European nations.  What's going on here? As my colleague Gary Burtless notes, three developments have probably played a role. First, real wages have fallen by 28 percent for high-school educated men since 1980, making work much less attractive, but also signaling that employers are looking for a higher level of skill. Second, the disability rolls have been growing (primarily because of musculoskeletal and mental health issues). Although getting onto disability is a long and involved process, the benefits compete favorably with what a low-skilled worker could earn and create a disincentive to re-enter the labor market. Third, now that women are almost half the labor force, the pressure for men to work has lessened. In the shorter run, it's hard to tell how much of the recent sharp drop in employment is related to weak demand and how much to these longer-term factors. Of course, the two are related. A further tightening of the labor market would relax employer hiring requirements and provide more opportunities and on-the-job experience for those with the fewest skills. But a rather large group may simply be unemployable at an attractive wage and may have figured out how to get by without working very much.

October Retail Hiring Update: 200K Jobs Added, Most October Gains Ever Recorded | Challenger, Gray & Christmas, Inc.: Holiday hiring got off to its strongest start ever last month, as retailers added more than 200,000 new workers in October. However, the record pace is not expected to continue into November and December, according to global outplacement firm Challenger, Gray & Christmas, Inc. The number of Americans employed in the retail industry increased by 214,500 in October. That represents the largest number of retail jobs ever added in October, based on Bureau of Labor Statistics data going back to 1939. The October employment gains in retail were 16 percent higher than a year ago, when 185,700 workers were added to these payrolls. Strong hiring in October does not necessarily signal an overall increase in holiday hiring. Last year’s 185,700 retail job gains in October represented a record high at the time, but employment gains over the entire the three-month holiday hiring period ended up lower than 2013 levels. Last year, retail employment increased by 755,000 from October 1 through December 31. That was down 4.0 percent from the previous year, when the holiday period saw employment grow by 786,800.

BLS on State Unemployment Rates: No State at or above 7%, First Time since early 2007  --- From the BLS: Regional and State Employment and Unemployment Summary Regional and state unemployment rates were little changed in October. Thirty-two states and the District of Columbia had unemployment rate decreases from September, 3 states had increases, and 15 states had no change, the U.S. Bureau of Labor Statistics reported today... North Dakota had the lowest jobless rate in October, 2.8 percent, followed by Nebraska, 2.9 percent. West Virginia had the highest rate, 6.9 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 6.9%, 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 11 states with an unemployment rate at or above 11% (red). Currently no state has an unemployment rate at or above 7% (light blue); Only eight states are at or above 6% (dark blue).

Halfway there—25 states are now at their pre-recession unemployment rates  - -  The state employment and unemployment figures for October, released today by the Bureau of Labor Statistics, were slightly more encouraging than the previous few months. Job growth remained steady in most states and unemployment rates ticked down slightly more, on average, than was the case heading into fall. Still, the U.S. labor market is far from fully healed. In fact, this month’s report marks something of a bittersweet milestone: there are now 25 states that have reached their pre-recession unemployment rates. Only 25 more to go. From July to October, 37 states and the District of Columbia added jobs, with Idaho (+1.5 percent), Nebraska (+1.2 percent), and Arizona (+1.1 percent) posting the largest percentage gains. The gains in Idaho and Arizona exemplify the strong growth experienced in a number of western states of the past year. Since October of 2014, states in the West—particularly those off the coast, such as Utah, Idaho, and Nevada—have had the strongest job growth nationwide. Job totals fell in 13 states from July to October, although only North Dakota’s (-0.7 percent) and Louisiana’s losses (-0.3 percent) seem indicative of a trend. Unemployment rates fell in 40 states plus the District of Columbia since July. The largest reductions were in Missouri (-0.8 percentage points), South Carolina (-0.8 percentage points), Mississippi (-0.6 percentage points), New York (-0.6 percentage points), Ohio (-0.6 percentage points), South Dakota (-0.6 percentage points), Virginia (-0.6 percentage points), and West Virginia (-0.6 percentage points).

Where Construction Jobs Are Booming - Construction employment increased in 43 states including the District of Columbia since last year, the Labor Department said Friday, a bit of good news for a sector still struggling with the effects of the Great Recession. The West and the South led the way: Arkansas, Idaho, Kansas and Nevada have posted double-digit percentage growth in construction employment since October 2014, while California added the most construction jobs overall. While broad gains in construction jobs were spread nationwide in October’s data, for the year, the Pacific region stood out. Ken Simonson, chief economist for the Associated General Contractors of America, said high-tech industries are driving activity in Silicon Valley and San Francisco, while the Gerald Desmond bridge replacement project has been a boon to the Los Angeles area. California had the largest increase in overall seasonally adjusted nonfarm payroll employment both on the month and on the year in October, the Labor Department said. The state added 463,000 new jobs over the past 12 months. Regional and state unemployment rates were little changed for the month. Despite gains for the building sector, the industry is still well below what’s considered normal, economists said. A weak recovery from the housing boom and bust of the last decade has been compounded by a slow rate of household formation. Home construction remains sluggish as millennials spend longer living at home or choose downtown residences over the suburbs, tamping down demand for newly built homes. Mr. Simonson said the sector still has “a long way to go,” with construction spending and jobs well below their 2006 peak. In October’s data, West Virginia was an outlier to the generally positive construction trend: building jobs plummeted by 5,800 or 17% over the past year. Its plunge in construction employment is due to the economic hit from the large pullback in oil and gas production following the drop in energy prices over the past year and a half.

Long-Term Unemployment Affected Older Women Most Following Recession – St Louis Fed - The surge in unemployment during the Great Recession put a spotlight specifically on long-term unemployment (LTU). A recent Economic Synopses essay examined the distribution of LTU before and after the recession. Research Officer and Economist Alexander Monge-Naranjo and Technical Research Associate Faisal Sohail broke down the shares of the unemployed who were long-term unemployed by age and gender.¹ The tables below show these shares for the periods 2006-07 and 2012-13, before and after the Great Recession.Across both periods, the share of unemployed in LTU rose with age, except when reaching 65 and older. The decline when reaching this age was much more pronounced in the earlier period (7 percentage points) than in the later period (1 percentage point). Males vs. Females In the first period, the share of males in LTU was higher than or the same as females across all age groups. The largest gap was among the oldest workers, at 9 percentage points. In the second period, however, this is true only for the younger groups. In most older groups, larger shares of women were long-term unemployed. Increase in LTU after the Great Recession As the authors noted: “A third, salient finding shown in the table is how dramatically the ratios increased from 2006-07 to 2012-13.” Nearly every male group and all female groups saw the share of unemployed in LTU double from the first period to the second. The largest increase occurred for the oldest group of workers.

Mobility Is More Important Than Ever, and Here’s Who’s Missing Out --There’s been a lot of hand-wringing about the decline of mobility in America, both residential and economic. “When Moving Matters,” a new report from Scott Winship of The Manhattan Institute, argues some of that worry is misplaced: While mobility is no longer climbing, as it did for the first half of the 20^th century, it has been fairly consistent for most Americans since the 1980s. Unfortunately, one group has been left behind: African-Americans. This matters because residential and geographic mobility appear to be related. Research from the likes of Raj Chetty and Douglas Massey has shown that children growing up in wealthier neighborhoods have better outcomes as adults. Mr. Winship’s research shows that the connection between moving around and moving up the economic ladder has grown even stronger in the last decade. Mr. Winship examined a broad set of national data, some going back to 1880, to tease out the types of residential mobility that corresponded with increased earnings later in life. He found that two kinds of moves were correlated with economic mobility: moving across a state boundary, and moving between childhood and adulthood. And the advantages of those kinds of moves have only grown in recent years. Black Americans haven’t shared the benefits. Unlike mobility among whites, which merely leveled off, black mobility began falling after 1960 or 1970, Mr. Winship wrote. By 2010, 70% of black Americans in their 30s lived in their birth state, compared with 62% of whites and up significantly from a historical low of 55% in 1960. A similar share of Hispanics, 71%, lived in their birth state in their 30s, though that figure has stayed roughly constant since 1950, when it reached a low of 68%.

Uber Is Not the Future of Work - The rise of Uber has convinced many pundits, economists, and policymakers that freelancing via digital platforms is becoming increasingly important to Americans’ livelihood. It has also promoted the idea that new technology—particularly the explosion of platforms enabling the gig economy—will fundamentally alter the future of work.  While Uber and other new companies in the gig economy receive a lot of attention, a look at Uber’s own data about its drivers’ schedules and pay reveals them to be much less consequential than most people assume. In fact, dwelling on these companies too much distracts from the central features of work in America that should be prominent in the public discussion: a disappointingly low minimum wage, lax overtime rules, weak collective-bargaining rights, and excessive unemployment, to name a few. When it comes to the future of work, these are the aspects of the labor market that deserve the most attention.

The Argument for a 70% Pay Raise for Women - Try this thought experiment: Close your eyes, and rewind a little more than 35 years ago to 1979. Pretend that both women and men earned the median wage at the time, a cool $16 an hour (in fact, men earned $20.13 and women made $12.61, but leave that aside for the moment). Now, as you fast forward to 2014, imagine that wages keep pace with rising productivity, bringing the median hourly wages for all workers to $26.04. Now open your eyes and look at the sobering reality. Women’s real hourly earnings in 2014 were just $15.21. That translates to a 71% “gender and inequality wage gap,” the key finding of a new report from the left-leaning Economic Policy Institute.  Economist Elise Gould and researcher Alyssa Davis calculated that gap by combining EPI’s favorite bugaboo, the pay-productivity gap, and that old standby, the gender pay gap. (A previous report on productivity and wages kicked off a vigorous back-and-forth between economists—how you measure matters.) For blacks, whites and Hispanics, they found that women’s wages have risen faster than men’s. But both women and men have experienced little growth in pay in real terms, especially relative to the economy-wide increases in productivity. Overall, men’s wages have actually declined in real terms to $18.35, and Hispanic men have fared worst of all: their wages are nearly 10% lower than they were in 1979. To Ms. Gould, that makes the narrowing of the gender pay gap over the past 35 years a pyrrhic victory.“Unfortunately, 40% of the closing of that gap is because men’s wages fell,” she said. “That’s not a way to close the gap, and that’s not a way to achieve women’s economic security.”

Obama Says 10,000 "Carefully Vetted" Syrian Refugees Are Still Headed To The US -- As reported earlier Texas, and five other states, including Louisiana, Alabama, Arkansas, Indiana, and Michigan announced that in the aftermath of the Paris attack, they have rescinded their invitations to Syrian refugees. Some of the excerpts: "Michigan is a welcoming state and we are proud of our rich history of immigration," Michigan governor Rick Snyder said, according to the Detroit Free Press. "But our first priority is protecting the safety of our residents." “The acts of terror committed over the weekend are a tragic reminder to the world that evil exists and takes the form of terrorists who seek to destroy the basic freedoms we will always fight to preserve," Alabama Gov. Robert Bentley said in his statement. "I will not place Alabamians at even the slightest, possible risk of an attack on our people," he added. "As Governor I will oppose Syrian refugees being relocated to Arkansas," Arkansas Gov. Asa Hutchinson tweeted. "Indiana has a long tradition of opening our arms and homes to refugees from around the world but, as governor, my first responsibility is to ensure the safety and security of all Hoosiers," Indiana Governor Mike Pence wrote in a statement. "Unless and until the state of Indiana receives assurances that proper security measures are in place, this policy will remain in full force and effect.” But while these states profess to putting the safety of their citizens first and foremost, then perhaps the Federal government is looking for... more explosions? At least that is the initial take on the statement by the State Department spokesman Mark Toner who said that the United States "still plans to try to admit 10,000 Syrian refugees into the country in the coming year, the State Department said on Monday as the weekend attacks in Paris renewed scrutiny on Syrian migrants."

Marshall Auerback and Branko Milanovic Discuss Income Inequality: The Global Haves And Have-Nots In The 21st Century -- naked capitalism -- Dave here. This discussion between Marshall Auerback of the Institute for New Economic Thinking and Branko Milanovic of the Luxembourg Income Study Center offers a great historical primer on income inequality. Well-trod ground for anyone who follows Milanovic’ work – such as the concept of the “global middle class” and the relationship to wage stagnation – but a fine catch-up for the unaware and worth watching for the sharpness of the explanations. Milanovic believes we are living in the “second Kuznets cycle,” a period of rising inequality, due to technological change, rent-seeking from elites and a movement in richer countries from manufacturing into services. Lots of talk on financialization here as well. It’s about 20 minutes long, and I’ve added the introduction from INET. The video is underneath. Although inequality has recently become one of the current topics “de jour” in the economics profession, Branko Milanovic is certainly not a newbie to this area. Indeed, the World Bank economist and development specialist (currently a visiting presidential professor at CUNY’s Graduate Center and a senior scholar at the Luxembourg Income Study Center), has been studying this particular field of economics since his days as a graduate student. One of his unique contributions has been to link this scholarship to prevailing financial conditions, providing substantial empirical evidence which illustrates how financial bubbles and the increasing financialisation of the global economy has played a key role in terms contributing to greater inequality.

Electing to Ignore the Poorest of the Poor - The first few primary debates of the presidential election season are in. We can see where the economic policy discussion is going.Republicans remain wedded to the fantasy that there is no problem tax cuts can’t fix. Democrats offer a more varied policy tool kit, hoping to lean against widening inequality and give a leg up to struggling workers.But both parties, focusing most of their concern on the middle class, appear to be ignoring the Americans who need their attention most: the deeply, persistently poor.It is not a small number. Even after accounting for every government assistance program — housing subsidies, food stamps, help with the electricity bill — nearly 16 million Americans still fall below 50 percent of the poverty line, measured by the Census Bureau’s revamped poverty measure that includes the effect of government support. That translates to roughly $8.60 per person per day for a family of four. That group is six million people larger than half a century ago.  No other advanced nation tolerates this depth of deprivation. It amounts to one in 20 Americans — a share that has refused to shrink despite five decades of economic growth.  What’s perhaps most surprising is how the apparatus of government assistance has turned its back on these people, not just failing to offer new strategies to help overcome the deepest deprivation but even removing critical programs that used to keep many of them afloat. How can this be possible, given that support for low-income families has grown substantially since the 1980s? The answer is that even as the government increased its assistance to the poor, it became pickier about which poor it supported.

Treasurer Unveils Open Data Website Detailing $1.5 Trillion in Government Debt: - State Treasurer John Chiang unveiled a new open data website today, providing important details about $1.5 trillion in debt issued by state and local government entities as part of his ongoing efforts to promote transparency in government. The site, debtwatch.treasurer.ca.gov, makes it easier for taxpayers to track proposed and issued debt, cost of issuance, and bond and tax election results. “The state and its local governments have borrowed more than $1.5 trillion from Wall Street over the past three decades to build roads, schools, and other critical public works,” said Chiang. “Bonds are not free money and, indeed, obligate the public to repay them through higher taxes and fees. DebtWatch aspires to empower Californians to hold government accountable for its borrowing decisions.” The site's debt-related information covers more than 30 years, from 1984 to the present. Included are more than 2.8 million fields of data, which will be updated monthly. State statute requires government entities to submit debt issuance data to the Treasurer’s California Debt and Investment Advisory Commission (CDIAC) in a timely manner. "The new DebtWatch data portal provides the public, the media, policy makers and local agencies themselves a great new resource for understanding state and local government bond activity,” said Matt Cate, executive director of the California State Association of Counties (CSAC). “We applaud State Treasurer Chiang’s continued commitment to use the latest technology to promote public finance accountability and understanding.”

Puerto Rico default nears as debt deadline looms: Fear that Puerto Rico will default on some of its bonds builds as a major debt service deadline edges closer. Money managers, value investors, and analysts are all eyeing Dec. 1, when $355 million of notes issued by the Government Development Bank come due, as a litmus test of sorts, to see if the island is willing to make difficult decisions to avoid default on some of its most senior and constitutionally protected bonds. The GDB, which is Puerto Rico's financing arm, recently released an update on its finance that showed the bank's net liquidity was approximately $875 million as of Sept. 30. The statement also disclosed that the bank's cash resources "may be depleted before the end of the calendar year 2015 in the absence of market access, other financing alternatives (including agreements with GDB's creditors) or emergency liquidity measures." Moody's Investors Service believes that Puerto Rico will likely default on at least a portion of its debt obligations in the coming weeks, which would be the second default by Puerto Rico to date.

Police Civil Asset Forfeitures Exceed The Value Of All Burglaries In 2014 -- Between 1989 and 2010, U.S. attorneys seized an estimated $12.6 billion in asset forfeiture cases. The growth rate during that time averaged +19.4% annually.  In 2010 alone, the value of assets seized grew by +52.8% from 2009 and was six times greater than the total for 1989. Then by 2014, that number had ballooned to roughly $4.5 billion for the year, making this 35% of the entire number of assets collected from 1989 to 2010 in a single year. Now, according to the FBI, the total amount of goods stolen by criminals in 2014 burglary offenses suffered an estimated $3.9 billion in property losses. This means that the police are now taking more assets than the criminals. The police have been violating the laws to confiscate assets all over the country. A scathing report on California warns of pervasive abuse by police to rob the people without proving that any crime occurred. Even Eric Holder came out in January suggesting reform because of the widespread abuse of the civil asset forfeiture laws by police. Bloomberg News has reported now that Stop-and-Seize authority is turning the Police Into Self-Funding Gangs. They are simply confiscating money all under the abuse of this civil asset forfeiture where they do not have to prove you did anything. ...in the U.S., I see some troubling signs of a shift toward low-end institutions. Bounty hunting was a recent example (now happily going out of style). Another example is the use of private individuals or businesses to collect taxes, a practice known as tax farming. A third has been the extensive use of mercenaries in lieu of U.S. military personnel in Iraq and elsewhere. Practices such as these can save money for the government, but they encourage abuses by reducing oversight. I’ve recently been reading about an even more worrying example of low-end statecraft: Stop-and-seize. This term refers to a practice, increasingly common since the turn of the century, of police confiscating people’s property without making an arrest or obtaining a warrant. That may not sound legal, but it is! The police simply pull you over and take your money.

1.5 Million U.S. Families Living On $2 A Day - Raising the minimum wage has been an issue both in the presidential campaign and in protests around the country. But as a new book points out, there are many thousands of households in America where the minimum wage would be a step up.  Kathryn Edin and Luke Schaefer estimate that 1.5 million households – including 3 million children – are subsisting on no more than $2 per person per day. Here & Now’s Indira Laskshmanan speaks with the researchers about their book “$2.00 a Day: Living on Almost Nothing in America.”

Texas school board rejects push to enlist academics to check textbooks for factual errors: — Members of Texas' State Board of Education on Wednesday narrowly rejected a plan to create a group of state university professors to scour Texas schoolchildren's textbooks for factual errors. The vote against was 8-7, with all the board's Republicans except two opposing the measure. The push for more experts to be involved came after more than a year of controversy over board-sanctioned books' coverage of global warming, descriptions of Islamic history and terrorism and handling of the Civil War and the importance of Moses and the Ten Commandments to the Founding Fathers. A tipping point to add more fact checking may have come last month. A suburban Houston mom's alert that a newly approved geography text described African slaves forcibly brought to North America as "workers" set off a national furor. At issue is whether the board should continue to rely on publishers and the public to flag errors. Currently, citizen panels nominated by the board have a narrower mission — to determine whether a book fits into Texas' curriculum standards. Mostly, current and retired teachers sit on the panels. Board vice chairman Thomas Ratliff, R-Mount Pleasant, offered the backstop panel of university professors as an amendment to a proposed overhaul of textbook approval procedures. Under his proposal, the board could set up a new panel drawn "solely from Texas institutions of higher education" to check the books for errors. "I know that people are concerned about pointy headed liberals in the ivory tower making our process ... worse,"

Study finds more child abuse in homes of returning vets: — The babies and toddlers of soldiers returning from deployment face the heightened risk of abuse in the six months after the parent’s return home, a risk that increases among soldiers who deploy more frequently, according to a study scheduled for release Friday. The study will be published in the American Journal of Public Health. The abuse of soldiers’ children exposes another, hidden cost from the wars in Iraq and Afghanistan that killed than 5,300 U.S. troops and wounded more than 50,000. Research by the Children’s Hospital of Philadelphia looked at families of more than 112,000 soldiers whose children were 2 years old or younger for the period of 2001 to 2007, the peak of the Iraq War. Researchers examined Pentagon-substantiated instances of abuse by a soldier or another caregiver and from the diagnoses of medical personnel within the military’s health care system. “This study is the first to reveal an increased risk when soldiers with young children return home from deployment,” David Rubin, co-director of the hospital’s PolicyLab and the report’s senior author, said in a statement. “This really demonstrates that elevated stress when a soldier returns home can have real and potentially devastating consequences for some military families.”

Watch: Senator Berger Suggests Scrapping Teacher Assistants, Schools Of Ed -- Republican Senate leader Phil Berger made blunt remarks about public school reform at a recent gathering held by Best NC, a business-backed education advocacy group. He suggested “scrapping schools of education” and likened investing in teacher assistants to investing in manual typewriters. “The stakes are too high to be risk and conflict adverse when it comes to education policy,” he argued. Berger explained the state should either try to improve the programs that aren't working or no longer invest in them. He pointed to the UNC schools of education as an example. “[They] need to do a better job of preparing teachers for the classroom,” he said. “We either need to fix our schools of education in North Carolina or scrap them in favor of new, different approaches to teacher preparation.” Berger also talked about cutting back on teacher assistants. This year, the senate budget called for cutting thousands of teacher assistant positions – up to 8,500 by some estimates – in favor of smaller class sizes. After long negotiations, the final spending plan kept money for TAs intact. Still, Berger argues that TAs don’t have a meaningful impact on student performance. “We will spend almost $400 million on TAs next year,” he said. “I equate it to an office supply business that chooses to continue to invest in manual typewriters.”

Philly union heads raided teacher health care fund to pay for offices - Philadelphia Federation of Teachers officials used millions of taxpayer dollars earmarked for teacher health care to finance the operation of its troubled Center City headquarters and offer free rent to at least one tenant, a Watchdog investigation has revealed. While this does not appear to be illegal, it does put unnecessary financial strain on the School District of Philadelphia, which faced an $80 million deficit less than a year ago. The district looked to restructure teacher health benefits as a way to close its budget gap. Philadelphia teachers do not pay for health care and the union has refused to offer any concessions there. “Once again, it’s evident that PFT leadership is putting its own political interests over the well-being of teachers and students,” James Paul, a senior education policy analyst at the Commonwealth Foundation, told Watchdog. “While teachers are working hard in the classroom, the union is secretly draining its insurance fund for its own political gain.”  Every year, the district is bound by its contract with the Philadelphia Federation of Teachers to pay more than $69 million for employee health care benefits.  The payments come in increments of $167.41 per teacher every two weeks during the school year, adding up to some $4,352 annually for each of the PFT’s 16,000 members. Those funds come from a pool of state and local taxes. The PFT’s Health and Welfare Fund receives a chunk of that money, which is earmarked for supplemental benefits, such as dental and vision, along with other programs like life insurance and its annual educational conference, which will be held in March 2016.

Clinton says ‘no evidence’ that teachers can be judged by student test scores -- Hillary Rodham Clinton said she is opposed to using student test scores as a way to judge a teacher’s performance, dismissing a key feature of education policies promoted by the Obama administration. Clinton, who is seeking the Democratic presidential nomination, made the remarks during a closed-door meeting with 25 teachers and paraprofessionals that was organized by the American Federation of Teachers on Nov. 9 in New Hampshire. Liz Lynch, a teacher from North Bergen, N.J., told Clinton that she was in favor of teachers being held accountable but that in recent years, overtesting has consumed her school. “Students have been made to take paper and pencil tests in PE and music just so they can be evaluated,” Lynch said, according to a transcript released by AFT on Monday. “Teachers spend an inordinate amount of time giving benchmark tests to prepare for more tests. And all the testing is crowding out time my students and I used to spend on cooperative learning, critical thinking and project-based learning.” According to the transcript, Clinton responded, “I believe in diagnostic testing that teachers can use to try to figure out how to help individuals and classes deal with their learning challenges. I do believe that there can be and should be a set of tests that everybody agrees on.” “And I have for a very long time also been against the idea that you tie teacher evaluation and even teacher pay to test outcomes,” she said. “There’s no evidence. There’s no evidence. Now, there is some evidence that it can help with school performance. If everybody is on the same team, and they’re all working together, that’s a different issue, but that’s not the way it’s been presented…”

Do Charter Schools Cherrypick Students? | mathbabe: Yesterday I looked into quantitatively measuring the rumor I’ve been hearing for years, namely that charter schools cherrypick students – get rid of troublesome ones, keep well-behaved ones, and so on. Here are two pieces of anecdotal evidence. There was a “Got To Go” list of students at one charter school in the Success Academy network. These were troublesome kids that the school was pushing out. Also, I recently learned that Success Academy doesn’t accept new kids after the fourth grade. Their reasoning is that older kids wouldn’t be able to catch up with the rest of the kids, but on the other hand it also means that kids kicked out of one school will never land there. This is another form of selection. Now that I’ve said my two examples I realize they both come from Success Academy. There really aren’t that many of them, as you can see on this map, but they are a politically potent force in the charter school movement. Also, to be clear, I am not against charter schools as a concept. I love the idea of experimentation, and to the extent that charter schools perform experiments that can inform how public schools run, that’s interesting and worthwhile. From talking to friends of mine who run NYC schools, I learned of two proxies for difficult students. One is ‘Percent Students with Disabilities’ and the other is ‘Percent English Language Learners’ (I also learned that charter schools’ DBN code starts with 84). Equipped with that information, I was able to build the following histograms:  I also computed statistics which you can look at on the iPython notebook.. Finally, I put it all together with a single scatterplot: The blue dots to the left and all the way down on the x-axis are mostly test schools and “screened” schools, which are actually constructed to cherrypick their students. The main conclusion of this analysis is to say that, generally speaking, charter schools don’t have as many kids with disabilities or poor language skills, and so when we compare their performance to non-charter schools, we need to somehow take this into account.

Can my students now use The Onion as a legitimate news source? - In March 2003, soon after the U.S. invaded Iraq, a news outlet predicted the war would be a colossal disaster that would ultimately destabilize the Middle East and fuel the rise of anti-Western forces willing to die for a fundamentalist cause.  That outlet was The Onion. And the satirical news site nailed it.  In a point-counterpoint op-ed titled "This War Will Destabilize The Entire Mideast Region And Set Off A Global Shockwave Of Anti-Americanism vs. No It Won't," the fictional Nathan Eckert eerily described a world in which newly radicalized militants fueled by hate, much like the Islamic State, rise up after the war and obtain weapons of mass destruction to try to drive out Western influence.  "If you thought Osama bin Laden was bad, just wait until the countless children who become orphaned by U.S. bombs in the coming weeks are all grown up. Do you think they will forget what country dropped the bombs that killed their parents?" said Eckert. "In 10 or 15 years, we will look back fondly on the days when there were only a few thousand Middle Easterners dedicated to destroying the U.S. and willing to die for the fundamentalist cause." He added, "From this war, a million bin Ladens will bloom."

The REALLY ANNOYING Don’t-Wanna-Subsidize-Wealthy-Kids’-College-Tuition Canard – Beverly Mann - Fast-forward a month and Stromberg, this time speaking only for himself (as far as I know; I don’t read all the Post’s editorials) and for the Clinton campaign, picks up on Clinton’s invocation of the horror of the public paying college tuition for Donald Trump’s kids.  But since he probably knows that Trump’s kids no more went to public colleges than did Clinton’s kid, he broadens it. Instead of making college free for everyone, increase access to those who need it and decline to subsidize wealthy kids’ tuition.  Good line!  At least for the ears of voters who are unaware that public universities, like private ones, quietly skew their admissions processes to favor the kids of parents who likely can full tuition simply by switching the funds from a CD or other savings account into a checking account at the beginning of each semester, thus removing the need for the school to dig into its endowment fund to provide financial assistance.  Or worry about whether the student will have that loan money ready at the beginning of each semester.  Which is why Jennifer Gratz, salutatorian at her working class Detroit suburb’s high school was denied admission to the University of Michigan back in 1995.  And why she sued the University in what eventually became a landmark Supreme Court case challenging the constitutionality under the equal protection clause of UM’s affirmative action program.  She did not challenge the constitutionality of the U’s almost-certain, but unstated, admissions policy that would admit a substantial percentage of students from families wealthy enough to pay the full tuition. Y’know, the ones wealthy enough to pay for SAT tutoring, SAT practice courts, and if necessary more than one SAT exam. What especially angers me about this let’s-not-subsidize-wealthy-kids’-college-tuition canard is that uses disparities in ability to pay the tuition as a clever way to ensure the admissions status quo.  Or something close to the status quo.

Obama Administration Goes Easy on For-Profit-College Company With Goldman Sachs Ties: The Obama administration has again shown that it is as lax in reining in for-profit college corporations as it is in disciplining Wall Street firms. In regards to both Wall Street and for-profit colleges, the executive branch is using relatively insignificant fines - not mandated structural change - against companies that violate regulations, laws, and the public trust through fraud. Last week, we wrote about the bankruptcy of Corinthian colleges which used high-pressure sales to lure students into educational programs that promised preparation for jobs that frequently never materialized - in large part due to inadequate training. In total, former Corinthian students with federal loans may owe up to $3.5 billion to the government. A movement to forgive the Corinthian student federal loan debt is currently underway. This would mean that the taxpayer underwrote Corinthian executive salaries and bonuses - as well as investor gains - before the corporation went belly up. We quoted Sen. Richard Durbin (D-IL) warning, "If we continue to feed this beast, shame on us, and we should be held accountable by taxpayers for those who are going to make excuses for this industry." Based on a Department of Justice (DOJ) settlement announced this week with another for-profit higher education corporation, Education Management Corp. (the second largest such chain in the US), the Obama administration is doing little to eliminate the incentive for such predatory companies to engage in fraudulent practices.  Yes, the DOJ did fine Education Management Corp. and force a repayment of loans to a small group of specified students, but that leaves the company benefiting from more than $9 billion dollars in federal loans owed by students, according to a November 16 article in The New York Times:

Settlement forgives loans for more than 7000 Ohioans -State Attorney General Mike DeWine and nearly 40 other attorney generals announced on Monday that nearly $11 million in student loans will be forgiven as part of a nearly $100 million federal settlement with Pennsylvania-based Education Management Corp., which runs for-profit trade schools and colleges, including Brown Mackie College and South University. The settlement applies to former students who enrolled with under 24 hours of transfer credit, withdrew within 45 days of their first term and last attended between 2006 and 2014. The firm also agreed to better inform prospective students about the costs and pledged to reform its recruiting practices.

One of nation’s largest for-profit chains will forgive loans for 80,000 former students in settlement - About 80,000 former students will have their loans forgiven after the nation’s second largest for-profit education company, Education Management Corp (EDMC), reached an agreement with state attorney generals Monday. The announcement came as a result of a multi-year investigation into the company’s recruitment practices, which the Department of Justice said violated federal regulations. The company was accused of giving its admissions personnel bonuses based on the number of students they enrolled.These types of payments are prohibited under Title IV of the federal Higher Education Act. But, beginning in 2003, EDMC allegedly falsely told the U.S. Department of Education and various state offices of higher education that it was complying with Title IV regulations, and, as a result, collected federal grant and loan dollars.  In response to these claims, EDMC reached a settlement where it will forgive $102.9 million in debt owed by about 80,000 former students. These are students who left their schools within 45 days of their first semester, and whose final day of attendance was between Jan. 1, 2006, and Dec. 31, 2014. Nearly 450 former students in Massachusetts are eligible for debt forgiveness for a total of $689,472. That averages to about $1,530 per student.

Many unhappy returns - The Economist -- When final-salary pension schemes, which are still prevalent among America’s public-sector employees, decide how much to put aside to pay pensions, they have to make an assumption about what returns they will earn. The higher their estimate, the less employers have to contribute today. Similarly, endowments have to estimate their future returns to determine how much to spend each year: pay out too much and their funds will dwindle away.The average American state or local-government pension fund assumes it will earn a nominal (ie, not accounting for inflation) annual return of 7.69% in future, according to the National Association of State Retirement Administrators (NASRA). Based on past performance, that seems reasonable. Over the past five years the median pension fund has earned an annualised return of 9.5%; over the past 25 years, the return has been 8.5%. College endowments use very similar assumptions: they target a return of 7.4%, on average, according to a survey from the National Association of College and University Business Officers (NACUBO) and Commonfund, an asset manager. Again, this jibes with the average annual return in 2005-14, of 7.1%. But as the saying goes, past performance is no guide to future returns. Investment returns come from two sources: income and capital gains. The income portion is much lower than it used to be. The yield on long-dated Treasury bonds 25 years ago was more than 8%; an investor who held such bonds to maturity could lock in that nominal return. Now the yield on the ten-year Treasury bond is just 2.3%. Yields on corporate bonds, which pay a spread over government debt, have fallen in tandem. For equities, the dividend yield on the S&P 500 index in 1990 was 3.7%; now it is just 2.1%.

Pension for most state workers falls to 19 percent funded — The public pension fund that covers 120,595 Kentucky state government workers and retirees continued its rapid decline in Fiscal Year 2015, ending with only 19 percent of the assets it’s expected to need to pay its future bills. The total pension and retiree health insurance liability of the Kentucky Retirement Systems, which operates multiple pension funds for state and local governments, was $35.8 billion on June 30. KRS had $16.1 billion in assets, or just 45 percent of what it will need for promised benefits. It ranks among the nation’s worst-funded retirement systems, between Illinois and Connecticut. Nationally, the median state pension fund last year had 70 percent of the money required to meet its obligations, according to a Bloomberg report released in October. Kentucky’s grim news was presented Thursday to the audit committee of the KRS board of trustees. KRS oversees pension and insurance funds for about 350,000 people employed by or retired from state or local governments or state police. The most anemic pension plan is the $2.3 billion fund covering most state workers. Due to inadequate contributions by the state, the 2008 recession and weak investment returns, the funding level for Kentucky Employees Retirement System (Non-Hazardous) fell from 85 percent in 2004 to 21 percent last year.

Taxpayers will pay billions more as CalPERS lowers estimate of investment returns -- The board of California's largest public pension fund approved a plan Wednesday to lower its estimate of future investment returns — a move that will require taxpayers to pay billions of dollars more than expected over the next decades. For years, the California Public Employees' Retirement System has estimated it will earn an average of 7.5% or more a year from its investments. Under the new plan, the pension fund will slowly reduce that rate to 6.5%. The board voted 7 to 3 on Wednesday to approve the plan that will reduce the rate in small increments over the next 20 years. With investment income contributing less to the cost of government worker pensions, taxpayers must pay more. "Ensuring the long-term sustainability of the fund is a priority for everyone on this board, and this policy helps do that," said Rob Feckner, president of the CalPERS board. The vote was criticized by Gov. Jerry Brown, who had urged the board to move more aggressively to 6.5% rather than stretching the change over decades.

CalPERS drops wellness program to avoid Cadillac tax - A key committee at the California Public Employees’ Retirement System voted Tuesday to defer further development of a statewide wellness program because it could cost millions in higher taxes under the Affordable Care Act. This is one of the first public displays of employer action in anticipation of the so-called Cadillac tax. The tax doesn’t kick in until 2018. Intended to help finance expanded coverage under the ACA, it is levied on expensive health insurance plans, but the extra cost is expected to be passed on to employers — and their employees. Every health premium dollar above the tax threshold of $10,200 a year for individuals and $27,500 annually for families will be subject to a 40-cent tax. A proposed statewide “wellness platform” with flexible options to engage and align employers, members, health plans and providers could cost CalPERS $60 million to $419 million a year, health benefits staff told committee members Tuesday. The concept was identified in 2011 and is different from wellness services provided by health plans in the CalPERS benefits program. Thirteen vendors responded to a request for information issued in June, but CalPERS staff is worried that program costs could trigger the tax. The Pension and Health Benefits Committee voted Tuesday to defer the program, monitor federal rules on the tax — and reassess it later. “It is disappointing for us, but we hope we can make progress on the excise tax,” committee chair Priya Mathur said after the vote.

Virginia slated to spend $1 billion more on Medicaid - Virginia faces a $1 billion increase in Medicaid spending through fiscal 2018, according to a two-year forecast Tuesday that state Republicans swiftly used as a cudgel against Gov. Terry McAuliffe’s bid to embrace Obamacare and expand the government health insurance program for the poor. If the forecast is met, the $956 million rise in projected costs to the state would crowd out investments in education, GOP lawmakers warned. House Majority Leader Kirk Cox, Colonial Heights Republican, said the spending is on an “unsustainable trajectory” and there are flaws with the program’s eligibility and verification systems, so it shouldn’t be expanded to cover more Virginians. “The volume of evidence against Medicaid expansion continues to grow,” he said. Yet Mr. McAuliffe, a Democrat, has made expanding Medicaid to give more state residents health coverage a focal point of his tenure in Richmond. He’s signaled he will not give up the fight, though he faces long odds in swaying GOP lawmakers who retained full control of the General Assembly earlier this month. The sharp increase in state costs was attributed to a recent uptick in enrollees who realized they were eligible for the program, including up to 11,000 parents of children who were already eligible for Medicaid, according to McAuliffe spokeswoman Christina Nuckols.

Kentucky counties with highest Medicaid rates backed Matt Bevin, who plans to cut Medicaid - — The 66 percent of Owsley County that gets health coverage through Medicaid now must reconcile itself with the 70 percent that voted for Republican Governor-elect Matt Bevin, who pledged to cut the state's Medicaid program and close the state-run Kynect health insurance exchange. Lisa Botner, 36, belongs to both camps. A Kynector — a state agent representing Kynect in the field — recently helped Botner sign up for a Wellcare Medicaid card for herself and her 7-year-old son. Without that, Botner said, she couldn't afford the regular doctor's visits and blood tests needed to keep her hyperthyroidism in check. "If anything changed with our insurance to make it more expensive for us, that would be a big problem," Botner, a community college student, said Friday at the Owsley County Public Library, where she works. "Just with the blood tests, you're talking maybe $1,000 a year without insurance." Yet two weeks earlier, despite his much-discussed plans to repeal Kynect and toughen eligibility requirements for Medicaid, she voted for Bevin. "I'm just a die-hard Republican," she said.

Colorado health care spending increases fourfold in 20 years, says report - Denver Business Journal: Coloradans spend slightly more on hospital care than they do on preventative care, lower-severity physician services and prescription drugs combined, despite recent efforts to contain hospital costs, according to a report Monday from a commission seeking ways to reduce health-care spending in the state. The report ( download here) says that as of 2013, personal health care costs in Colorado stood at $36.3 billion, more than four times the level of two decades ago. Just since 2000, that spending is up 122.7 percent — 3.7 times the rate of inflation in the state.  The 327 percent increase in Colorado personal health care expenditures in 20 years compares to a 216 percent rise nationwide, the report says. Members of the Colorado Commission on Affordable Health Care, approved in 2014 through a bipartisan bill, did not offer specific recommendations in the report that was sent to Gov. John Hickenlooper and legislative health care leaders on how to bring down spending. But they laid out a number of specific cost drivers and said they hope to produce recommendations that impact the total cost of care in a final report in June 2017 — if the Legislature agrees to fund their work one more year. Bill Lindsay, president of the Lockton Benefit Group in Denver and chairman of the commission, said in an interview that many of the broad conclusions in this initial report will come with little surprise. But he said it is important to lay them out for legislators — and to show that observations and eventual recommendations will be based upon quantifiable data.

Health Care Law Forces Businesses to Consider Growth’s Costs - Starting in January, the Affordable Care Act requires businesses with 50 or more full-time-equivalent employees to offer workers health insurance or face penalties that can exceed $2,000 per employee. Ms. Hunter, who has 45 employees, is determined not to cross that threshold. Paying for health insurance would wipe out her company’s profit and the five-figure salary she pays herself from it, she said.“The margins are not big enough within our industry to support it,” she said. “It’s not that I don’t want to — I love my employees, and I want to do everything I can for them — but the numbers just don’t work.”The health care law’s employer mandate, a provision that business groups fought against fiercely, is intended to make affordable health insurance available to more people by requiring employers to bear some of the cost of providing it.  Without the mandate, the law’s creators feared, companies would be tempted to cancel their insurance benefits and encourage employees to move to the online marketplace exchanges created by the law, where many low- and middle-income workers qualify for government subsidies. Those who are offered insurance through their jobs are ineligible to collect subsidies if they instead choose to buy coverage through the exchanges. The rule took effect this year for businesses with 100 or more workers, but companies with 50 to 99 employees got an extra year to comply. Those with fewer than 50 workers are exempt. For some business owners on the edge of the cutoff, the mandate is forcing them to weigh very carefully the price of growing bigger.“There’s kind of a deer-in-headlights moment for those who say, ‘I have this new potential client, but if I bring them on, I have to hire five additional people,’”

Kentucky’s ObamaCare case study | TheHill: Kentuckians surprised the pundits and pollsters on Election Day by voting in favor of Matt Bevin, an underdog challenger who promised to undo the president’s health care law, root and branch. Bevin’s victory shocked the political establishment, who expected the opposite result. When I saw these results my response was simply, “I’m not surprised at all!” Why not? Let me give you my insight as a doctor who hears from patients everyday and from someone who has spent the past few years talking to patients and doctors around the country about this issue.What I’ve heard is a drip, drip, drip of disappointment, disillusionment, and distrust with ObamaCare and the politicians who supported it. This is especially true among the people who initially supported the law – in particular, those patients and doctors who had insurance and have now lost their doctor or their plan, all of whom are paying far more in premiums and deductibles.   That’s what drove the election in Kentucky too. They’re just as mad about ObamaCare as everyone else. And they have every reason to be. ObamaCare has been an utter disaster in the Bluegrass State.   Let me count the ways. Let’s start with premium increases. Kentuckians have had some of the worst since ObamaCare went into effect in 2014. At the start of that year, the average premiums in the state were up by between 10 and 69 percent. For next year, the average plan is rising by another 23 percent. This is one of the highest average increases in the country for next year.

Obamacare: Why the ACA May End Up Raising Medicare Costs: Lately the news about Medicare costs has been surprisingly good. Congress recently made a deal to spare some beneficiaries what would have been steep 50% hikes in Part B premiums (for doctor and outpatient services) next year. Even better, data from the Medicare Trustees Report show, the five-year-old Affordable Care Act (ACA), aka Obamacare, has helped slow the rise in health care costs.  But these welcome short-term gains may not be sustainable, according to a new report by the Boston College Center for Retirement Research. That’s because the cost savings are being funded in part by reduced payments to doctors and hospitals, who could stop accepting Medicare patients if lower reimbursements continue. It goes without saying that raising their payments would substantially boost Medicare’s longer-term price tag—indeed, the movement to higher payments already has begun.Earlier this year, the so-called “doc fix” law was enacted to help compensate doctors for nearly 20 years of inadequate Medicare payments. It will cost at least $200 billion over the next 10 years and most of this spending is not supported by higher fees or taxes. In 20 years, one taxpayer watchdog group estimates, this single bill will add half a trillion dollars to the federal debt all by itself.

UnitedHealth Raises Doubts About Its Participation in Affordable Care Act -- The biggest U.S. health insurer said it has suffered major losses on policies sold on the Affordable Care Act’s exchanges and will consider withdrawing from them, adding to worries about the future of the marketplaces at the heart of the Obama administration’s signature health law. The disclosure by UnitedHealth Group, which had just last month sounded optimistic notes about the segment’s prospects, is the latest sign that many insurers are finding the new business unprofitable, despite an influx of customers that has helped swell revenues. The industry’s woes, and broad rate increases aimed at stanching the red ink, are putting pressure on the Obama administration to tweak aspects of the law; the issues also risk pulling the ACA back into the political spotlight.  Republicans, who have remained opposed to the health law, quickly jumped on the news. “Premiums are up and ultimately, health care is more expensive,” said Rep. Jason Chaffetz (R., Utah). “The consequences we see from this hastily and poorly conceived legislation were entirely foreseeable and not at all surprising.” The administration and Democratic lawmakers said the law is working well. A spokesman for the federal Department of Health and Human Services said the exchanges are “stable, vibrant and a growing source of coverage for new consumers.” UnitedHealth’s comments are “not indicative of the marketplace’s strength and viability,” he said.

UnitedHealth May Quit Obamacare Markets in Blow to Health Law - The biggest U.S. health insurer is considering pulling out of Obamacare as it loses hundreds of millions of dollars on the program, casting a pall over President Barack Obama’s signature domestic policy achievement. UnitedHealth Group Inc. has scaled back marketing efforts for plans sold to individuals this year and may quit the business entirely in 2017. It’s an abrupt shift from October, when the health insurer said it was planning to sell coverage through the Affordable Care Act in 11 more states next year, bringing its total to 34. The company also cut its 2015 earnings forecast. While millions of Americans have gained coverage under Obamacare since new government-run marketplaces for the plans opened in late 2013, in UnitedHealth’s case they haven’t been the most profitable. Customers the company has added have tended to use more medical care. UnitedHealth also said today that some people are signing up for coverage, getting care and then dropping their policies. “We cannot sustain these losses,” Chief Executive Officer Stephen Hemsley told analysts on a conference call. “We can’t really subsidize a marketplace that doesn’t appear at the moment to be sustaining itself.” UnitedHealth said it expects as much as $500 million in losses on the Obamacare plans in 2016. The insurer will record $275 million of the costs in the fourth quarter.

Obamacare's Fate May Rest on Patience of Insurers Aetna, Anthem - The fate of Barack Obama’s signature health-care law may depend on how long Anthem Inc. and Aetna Inc. are willing to wait before starting to make money off it. The two insurers are on the hot seat now that UnitedHealth Group Inc. appears unlikely to linger as a seller on the Affordable Care Act’s government-run markets. UnitedHealth, the U.S.’s largest health insurer, said Thursday that if it can’t turn a profit, in 2017 it may quit the health plan marketplaces where millions of Americans buy coverage. While UnitedHealth has a small share of that market, Anthem and Aetna are two of the biggest players. Like UnitedHealth, neither has had financial success there -- Aetna has said it’s losing money, while Anthem is making less than it would like. They’re both working to widen profit margins and have said their strategy is based on the expectation that covering people under the law will become more profitable. “It’s a wake-up call that there’s been some pretty rough headwinds.” There have been other worrying signs. Already 12 of the 23 nonprofit exchanges created to sell insurance under the Affordable Care Act have said they’re closing down, overwhelmed by financial losses. So far, though, Anthem and Aetna are holding steady in the market. Both companies said Friday they hadn’t seen any deterioration in their individual businesses through the end of October.. “We expect that the experience of insurers will either improve in 2017 and beyond, or they will choose to no longer participate in the market.”

Many Say High Deductibles Make Their Health Law Insurance All but Useless - — Obama administration officials, urging people to sign up for health insurance under the Affordable Care Act, have trumpeted the low premiums available on the law’s new marketplaces.But for many consumers, the sticker shock is coming not on the front end, when they purchase the plans, but on the back end when they get sick: sky-high deductibles that are leaving some newly insured feeling nearly as vulnerable as they were before they had coverage.“The deductible, $3,000 a year, makes it impossible to actually go to the doctor,” said David R. Reines, 60, of Jefferson Township, N.J., a former hardware salesman with chronic knee pain. “We have insurance, but can’t afford to use it.” In many states, more than half the plans offered for sale through HealthCare.gov, the federal online marketplace, have a deductible of $3,000 or more, a New York Times review has found. Those deductibles are causing concern among Democrats — and some Republican detractors of the health law, who once pushed high-deductible health plans in the belief that consumers would be more cost-conscious if they had more of a financial stake or skin in the game. “We could not afford the deductible,” said Kevin Fanning, 59, who lives in North Texas, near Wichita Falls. “Basically I was paying for insurance I could not afford to use.” He dropped his policy.

90% of small businesses say Obamacare drove up health-care costs -- The vast majority of small businesses are paying more for health insurance for their employees under the health-care law, and many expect their costs to keep going up next year, according to a survey by the advocacy group National Small Business Association. Ninety percent of owners said their costs are up in 2015 over last year, and 84 percent expect to pay more in 2016. The number of companies that offer health benefits to their employees fell 5 percent, to 65 percent, this year from 2014, the survey found.

Satisfaction With Health Insurance Hits Ten-Year Low: Next time you’re on the phone with your health insurance company and feel like pulling your hair out in irritation, take comfort that you’re not the only one sick and tired of it all: Customer satisfaction in the industry has slipped to its lowest level in a decade. Overall satisfaction with health insurance fell 1.4% to a score of 69 in the 2015 American Customer Satisfaction Index, released Tuesday.  Satisfaction is slightly higher among individual policy holders (71) than those with group insurance (68), which is typically provided through an employer. “More Americans get group coverage through their employer, where they typically do not have a choice of provider,” ACSI director David VanAmburg, said in a press release. “As is generally the case, satisfaction is lower in industries where there is little or no choice.” The health insurance industry as a whole scores poorly, delivering satisfaction levels below that of the airline business and tying with landline phone providers and the U.S. Postal Service. Only the dreaded pay TV and Internet service providers score lower as an industry.Customers cite the difficulty in understand their insurance statements, the range of plans available and call center services as their three biggest complaints with health insurers. The ASCI warns that impending mergers among big industry players could only deepen the problems. “The health insurance industry is in the midst of merger mania among large insurers that could tighten the field if the federal government grants approval,” the report says, referring to proposed unions of Humana and Aetna, and of Anthem and Cigna. “Ongoing consolidation among the big players is not likely to bode well for an industry that is already underwhelming its policyholders, as characterized by low and declining customers satisfaction.”Read the full report here.

Specialty drugs now cost more than the median household income - The average annual retail cost of specialty drugs used to treat complex diseases such as cancer, rheumatoid arthritis and multiple sclerosis now exceeds the median U.S. household income, according to a report to be published Friday. The study of 115 specialty drugs found that a year's worth of prescriptions for a single drug retailed at $53,384 per year, on average, in 2013 -- more than the median U.S. household income, double the median income of Medicare beneficiaries, and more than three times as much as the average Social Security benefit in the same year. The report was prepared by the AARP Public Policy Institute to highlight the impact of drug prices on seniors. "We're talking about drugs that are now costing more than a lot of people are making in a year," said Leigh Purvis, director of health services research at the AARP Public Policy Institute. She acknowledged that people with insurance do not pay the full retail cost of drugs, but noted that as drug prices increase, even the small portions of drug costs borne by consumers can add up. A study this year by the pharmacy benefit company Express Scripts, for example, found that in 2014, patients whose pharmacy bills were more than $100,000 that year paid less than 2 percent of their costs -- on average, $2,782 out of pocket. Insurance plans and employers shouldered the rest, although those costs are ultimately passed on to patients in the form of higher premiums. A study published in the New England Journal of Medicine last month estimated that if 5 percent of middle-aged adults with high cholesterol were eligible for a new generation of pricey high cholesterol drugs, premiums would increase by $124 per person.

It’s Way Too Easy to Hack the Hospital -- In the fall of 2013, Billy Rios flew from his home in California to Rochester, Minn., for an assignment at the Mayo Clinic, the largest integrated nonprofit medical group practice in the world. Rios is a “white hat” hacker, which means customers hire him to break into their own computers. His roster of clients has included the Pentagon, major defense contractors, Microsoft, Google, and some others he can’t talk about.  The Mayo Clinic job, in comparison, seemed pretty tame. He assumed he was going on a routine bug hunt, a week of solo work in clean and quiet rooms.  But when he showed up, he was surprised to find himself in a conference room full of familiar faces. The Mayo Clinic had assembled an all-star team of about a dozen computer jocks, investigators from some of the biggest cybersecurity firms in the country, as well as the kind of hackers who draw crowds at conferences such as Black Hat and Def Con. The researchers split into teams, and hospital officials presented them with about 40 different medical devices. Do your worst, the researchers were instructed. Hack whatever you can. Like the printers, copiers, and office telephones used across all industries, many medical devices today are networked, running standard operating systems and living on the Internet just as laptops and smartphones do. . For a full week, the group spent their days looking for backdoors into magnetic resonance imaging scanners, ultrasound equipment, ventilators, electroconvulsive therapy machines, and dozens of other contraptions. The teams gathered each evening inside the hospital to trade casualty reports. “Every day, it was like every device on the menu got crushed,” Rios says. “It was all bad. Really, really bad.” The teams didn’t have time to dive deeply into the vulnerabilities they found, partly because they found so many—defenseless operating systems, generic passwords that couldn’t be changed, and so on.

U.S. still losing the war on obesity – especially women -- Americans are still getting fatter, a new CDC report finds. The battle of the bulge is still a losing one, according to a new report released this November by the Centers for Disease Control and Prevention (CDC). The report, conducted by the National Center for Health Statistics (NCHS), found that adult obesity rates in the US have only risen in the past three years, after having stayed relatively stable throughout the previous decade. Furthermore, women have definitively become the heavier gender, with a 38 percent rate vs 34 percent seen in men. About the only saving grace is that rates of child obesity have remained level, at 17 percent. In order to come to their conclusions, the report authors scoured data taken from the National Health and Nutrition Examination Survey (NHNES), a representative survey of 5,000 or so Americans performed annually by the CDC.  Compared to 2011-2012, the obesity rate among all adults (20 and older) climbed to 37.7 percent, from 34.9 percent. These numbers bode especially worse for minority groups, particularly black and Hispanic women. Nearly 46 percent of Hispanic women and nearly 57 percent of black women were obese, greatly overshadowing men at 39 percent and 37.5 percent, respectively. When it came to age, those 40 to 59 were the heaviest, at just a smidge over 40 percent, but this again broke down across gender lines, with 42 percent of women aged 40-59 obese.  The figures are particularly sobering in light of encouraging research showing that some contributing factors of obesity, like soft-drink consumption, have declined among Americans in recent years. NHNES data prior to 2011-2014 also indicated that we had reached a obesity plateau since 2005. Earlier this November, Medical Daily reported on research finding that Americans’ diets have become noticeably healthier since 1999. The study, however, only looked as far back as 2012, meaning that any recent trends of unhealthy eating may have gone unnoticed. As with obesity in general, the reasons behind our continuing weight gain are likely complex. [more]

Blow jobs ‘expected to overtake smoking’ as the main cause of mouth cancer - While smoking, excessive alcohol consumption and chewing tobacco were once the primary risk factors for mouth cancer, recent years have seen an increase in cases caused by HPV, or the human papillomavirus, according to online health clinic Euroclinix. The HPV virus currently accounts for 25% of all mouth cancers gloabally and 35% of throat cancers, compared to two thirds attributed to smoking – though it is difficult to quantify the effect precisely, due to the testing methods available and the other risk factors involved. As outlined by the NHS, detecting HPV cells in a patient with oral cancer does not mean HPV caused the cancer. The virus becomes part of the genetic material of the cancer cells, triggering their growth. Though the claim that somehow HPV will overtake smoking as the main cause is questioned by some:  ‘Smoking is linked to about 65 per cent of mouth cancers in the UK, whereas only 8 to 14 per cent of cases are thought to be linked to HPV,’ Fiona Osgun, Cancer Research UK’s health information officer, told Metro.co.uk. ‘Around 90 per cent of mouth cancer cases are preventable – things like staying smokefree, cutting down on alcohol and making sure you get your 5-a-day can all help reduce the risk.’

High dose of vitamin C kills cancer cells in mice - A new study published in Science presents evidence that perhaps some of the apparently extravagant ideas about vitamin C were not completely off base. The study in question examined human colorectal cancers containing specific genetic mutations that are found in up to half of these cancers. These cells ended up drawing in so much vitamin C that it caused their death. The researchers used a cell culture and subsequent experiments in mice to explore the effects of high doses of vitamin C on cancer cells. The initial data came from an application of vitamin C and metabolized versions of vitamin C to a cell culture that included both mutated cancer cells and wild type control cells. The cancerous cells carried two mutations (in KRAS and BRAF) that are commonly found in colorectal cancers. Their results indicated that the colorectal cancer cells were more likely to absorb the vitamin C metabolite than the cells without those mutations. This is due to an up regulation of the protein that pulls vitamin C and its metabolites into cells. These cells imported so much of these chemicals that they experienced cell death. The researchers then grafted tumors with these mutations into mice to see if these results would hold within an animal. They again found that the vitamin C was selectively toxic to the tumors containing KRAS mutations, effectively killing these cells. Further examination of the effects of vitamin C revealed that it reduced the availability of intracellular energy units known as ATP, causing a critical lack of energy in these cells.

Climate change could bring tropical disease epidemics to Britain, health expert warns -- Epidemics of dengue fever and other tropical diseases could soon affect people in Britain because of global warming, one of the world’s leading medical experts has warned. Jeremy Farrar, director of the Wellcome Trust, said he also believed the planet is already being affected by many other serious health threats triggered by climate change – including malnutrition and deaths from air pollution. However, these dangers were not being given proper attention by world leaders, added Farrar, an expert on infectious diseases.  Climate negotiators heading to Paris this month did not appear to have understood the widespread impact that global warming has already had on Earth. “I don’t think the health community has had a big enough input into climate talks,” Farrar told the Observer. “Bodies like the World Health Organisation have not made their voices heard.” His stark warning adds another worrying dimension to the threat posed to human welfare by rising carbon emissions. Farrar, 53, worked for 18 years in Ho Chi Minh City, Vietnam, researching potential human pandemics such as bird flu and Sars (severe acute respiratory syndrome). Two years ago he was appointed director of the Wellcome Trust, and now argues that the health dangers posed by climate change have been seriously underestimated. “When you talk about climate change to people in general, they think of loss of habitat, loss of ice caps or loss of coral reefs. They don’t think of its health impacts. But these affect us today, never mind affecting our children or our grandchildren. This is not some abstract threat; it is immediate and it is personal.”

GMO salmon gets final FDA approval - The Food and Drug Administration has approved the first genetically engineered animal for human consumption in the U.S. The AquAdvantage salmon, developed by AquaBounty Technologies began seeking FDA approval 20 years ago. “After an exhaustive and rigorous scientific review, FDA has arrived at the decision that AquAdvantage salmon is as safe to eat as any non-genetically engineered (GE) Atlantic salmon,” the FDA says. The FDA also finds that the genetically engineered salmon, which grows faster and consumes less food than natural salmon, is equally as nutritious. The fish will be raised on land-based farms, currently located in Canada and Panama, and any new facilities would have separately seek approval. A 2012 environmental assessment from the FDA finds the fish pose “no significant impact.” But critics of the salmon, who have labeled it the “frankenfish,” say that there are not sufficient safeguards to prevent the fish from escaping. If the genetically engineered fish were introduced in the wild, there’s concern that it could outperform or interbreed with wild species. AquaBounty has taken some measures to prevent such an outcome. Fish raised for food—but not breeding—will be all female and sterile.

Food Advocacy Group to Sue FDA Over Controversial Approval of GMO Salmon -- Opposition against the Food and Drug Administration’s (FDA) approval of the first genetically engineered food animal, AquaBounty’s GMO salmon, is fiercely mounting. The Center for Food Safety, an nonprofit organization, announced plans to sue the federal agency. Grocery store chains around the country have also made commitments to not sell the controversial fish.  “The fallout from this decision will have enormous impact on the environment. Center for Food Safety has no choice but to file suit to stop the introduction of this dangerous contaminant,” said Andrew Kimbrell, executive director of Center for Food Safety. “FDA has neglected its responsibility to protect the public.” Kimbrell, on behalf of the environmental organization, submitted a citizen petition to the FDA requiring “foods that are genetically engineered organisms, or contain ingredients derived from genetically engineered organisms” be labeled under the Federal Food, Drug, and Cosmetic (FD&C) Act. The FDA has since repsonded to the petition with a 35-page document that denies the Center for Food Safety’s request. It states: Under the FD&C Act [the] FDA cannot require that all foods derived from genetically engineered plants, as a class, be labeled as having been genetically engineered. Further, while we appreciate consumer interest in the labeling of food derived from genetically engineered plants, consumer interest alone does not provide a sufficient basis to require labeling disclosing whether a food has been produced with or without the use of such genetic engineering.

Monsanto’s Roundup: The Whole Toxic Enchilada -- Last week, while we waited for the U.S. Environmental Protection Agency (EPA) to announce whether or not the agency will give Monsanto’s Roundup a free pass by green lighting the use of glyphosate for another 15 years, the EPA’s counterpart in Europe made its own big announcement. Glyphosate is “unlikely to cause cancer” said the authors of the new report by the European Union Food Safety Authority (EFSA). That headline, music to Monsanto’s ears, seemed to fly in the face of the findings published earlier this year by the World Health Organization (WHO). After extensive review of the evidence, all 17 of WHO’s leading cancer experts said glyphosate is a “probable human carcinogen”  Sustainable Pulse, publisher of global news on GMOs and other food-related issues, quickly reported the glaring omission made by the majority of news sources reporting on EFSA’s findings.  According to Sustainable Pulse, what EFSA really concluded is this: Glyphosate by itself doesn’t cause cancer. But products like Monsanto’s Roundup, which contain glyphosate and other additives and chemicals that are essential to making the herbicide work? That’s another, or in this case, the rest of the story. According to the EFSA report: It is likely, therefore, that the genotoxic effects observed in some glyphosate-based formulations are related to the other constituents or “co-formulants.” Bingo. Take some glyphosate, mix it up with other chemicals, and you’ve got yourself a cancer-causing concoction. . Remove those additives (or adjuvants as scientists refer to them), and you’ve got yourself a weed killer that doesn’t work.

Pediatricians say farm use of antibiotics harms children -- In a new technical report, the American Academy of Pediatrics (AAP) argues that unnecessary use of antibiotics in livestock is fueling drug-resistant, life-threatening infections in humans, particularly young children. The report, published Monday in Pediatrics, recommends limiting the use of antibiotics on farms.  As Ars has reported before, the vast majority of antibiotics used in the US go to agriculture and aquaculture—about 80 percent of total tonnage, to be exact. Those drugs are often given to livestock to fatten them up or prevent future illness. Such doses of drugs, many of which have crossovers in human medicine, can spur drug-resistant microbes that may make their way off the farm and spread to food or share their drug-resistant genes with other microbes, the AAP noted. More than 2 million people in the US catch drug-resistant infections each year, resulting in 23,000 deaths, according to the Centers for Disease Control and Prevention. The agency does not report how many of those infections and deaths are in children. However, previous research has found that the incidence of some types of drug-resistant infections are increasing in children nationwide. Additionally, the AAP notes that the CDC’s data on foodborne disease incidence shows that kids under 5 years of age are often most at risk. Kids may be exposed to farm-borne drug-resistant microbes from contact with livestock, food, and environmental sources, such as surfaces in homes and supermarkets. The AAP recommends that livestock producers only give antibiotics to animals when they are sick.

Antibiotics in Animal Feed May Endanger Kids, Doctors Warn - Scientific American: - Overuse of antibiotics in animal feed is making it harder for doctors to treat life-threatening infections in young children, a report from U.S. pediatricians warns. The report from the American Academy of Pediatrics (AAP) says the widespread practice of giving antibiotics to healthy livestock to promote growth and prevent disease among animals is making the drugs ineffective when they are needed to treat infections in people. “The antibiotics that are fed to the animals lead to the development of antibiotic resistant bacteria in the animal,” study co-author Dr. Theoklis Zaoutis of the University of Pennsylvania and the Children’s Hospital of Philadelphia said by email. “These bacteria can then be spread to other animals, the environment and to humans.” More than two million Americans become ill with antibiotic-resistant infections each year, and 23,000 die as a result, Zaoutis and co-author Dr. Jerome Paulson report in the journal Pediatrics. Paulson formerly chaired the executive committee of the AAP’s Council on Environmental Health, They estimate that national costs to the U.S. healthcare system attributable to antibiotic resistant infections run from $21 billion to $34 billion annually. Infants and children are affected by antibiotic-resistant bacteria in the food supply, direct contact with animals and exposure in the environment, the researchers report. For most infections, incidence was highest among children under age five, according to data the researchers cited from Center for Disease Control and Prevention's Foodborne Diseases Active Surveillance Network.

Scientists discover new antibiotic-resistant gene MCR-1 in China - Scientists found a gene that allows bacteria to become resistant to a class of antibiotics known as polymyxins, commonly used to fight superbugs. The gene called MCR-1 makes bacteria invincible, making previously treatable diseases like pneumonia potentially deadly again. A study published in the British medical journal "The Lancet" said that the discovery stood out for identifying a gene with mobile DNA, a so-called plasmid, which can easily spread from one strain of bacteria to another. Previously-identified cases of antibiotic resistance were formed by genetic mutation and then replicated as the bacteria reproduced, so did not transfer as readily. Liu Jian-Hua, a co-author of the study, said that the findings amounted to "extremely worryingly results." In particular, the scientists behind the study identifiedantibiotic-resistant DNA strands that were being transferred between Klesbsiella pneumoniae, which causes pneumonia, and Escherichia coli (better known as E. Coli), a leading cause of urinary tract infections. The scientists behind the discovery have called for urgent restrictions on the use of drugs used in livestock farming, particularly polymyxins, which include the drug colistin used to control common germs like E. Coli.

Antibiotic resistance: World on cusp of 'post-antibiotic era' - BBC News: The world is on the cusp of a "post-antibiotic era", scientists have warned after finding bacteria resistant to drugs used when all other treatments have failed. They identified bacteria able to shrug off the drug of last resort - colistin - in patients and livestock in China. They said that resistance would spread around the world and raised the spectre of untreatable infections. It is likely resistance emerged after colistin was overused in farm animals. Bacteria becoming completely resistant to treatment - also known as the antibiotic apocalypse - could plunge medicine back into the dark ages. Common infections would kill once again, while surgery and cancer therapies, which are reliant on antibiotics, would be under threat. Chinese scientists identified a new mutation, dubbed the MCR-1 gene, that prevented colistin from killing bacteria.  The report in the Lancet Infectious Diseases showed resistance in a fifth of animals tested, 15% of raw meat samples and in 16 patients.   And the resistance had spread between a range of bacterial strains and species, including E. coli, Klebsiella pneumoniae and Pseudomonas aeruginosa.  There is also evidence that it has spread to Laos and Malaysia.  "All the key players are now in place to make the post-antibiotic world a reality. "If MRC-1 becomes global, which is a case of when not if, and the gene aligns itself with other antibiotic resistance genes, which is inevitable, then we will have very likely reached the start of the post-antibiotic era.

India Has the World’s Longest Line for the Toilet - If the 774 million people living without a household toilet in India stood in line, they would stretch from the Earth to the moon, and maybe beyond, a report released to mark World Toilet Day showed Thursday. Clearing the line would take at least 5,892 years, if each person took a minimum of four minutes to use the toilet, according to the report by WaterAid, a water and sanitation nonprofit headquartered in London said.  India continues have the largest number of people without toilets at home and the highest number of people defecating in the open, the report titled, “It’s No Joke: The State of the World’s Toilets 2015,” says. But despite this, it doesn’t feature in the list of 25 countries with the least safe and hygienic latrines per person. India, though, is far from out of the woods in terms of safe toilet habits. More than 770 million people in India still don’t have access to improved home toilets, more than double China’s 329 million people who don’t have a toilet in their house. And nearly half of India’s population–569 million people–relieve themselves in the open, sometimes even when public facilities are available.

The Enduring Crime of ‘Agent Orange’ -  Fifty years ago next month the United States Air Force started secretly spraying the forests of Laos with a deadly herbicide that was known as Agent Orange.  The purpose of the operation was to defoliate trees and shrubs and kill food crops that were providing cover and food for the “enemy.” Operation Ranch Hand consisted of spraying a variety of highly toxic polychlorinated herbicide solutions that contained a variety of chemicals that are known to be (in addition to killing plant life) human and animal mitochondrial toxins, immunotoxins, hormone disrupters, genotoxins, mutagens, teratogens, diabetogens and carcinogens that were manufactured by such amoral multinational corporate chemical giants like Monsanto, Dow Chemical, DuPont and Diamond Shamrock (now Valero Energy). All were eager war profiteers whose CEOs and share-holders somehow have always benefitted financially from America’s wars.   Agent Orange was a 50/50 mixture of two herbicides: 2,4-D (2,4-dichlorophenoxyacetic acid) and 2,4,5-T (2,4,5-trichlorophenoxyacetic acid). Other herbicide agents were mixtures of other equally toxic polychlorinated compounds, but every barrel was contaminated by substantial amounts of dioxin, one of the most toxic industry-made chemicals known to man. The toxicity of the herbicidal chemicals known as “dioxins” or “dioxin-like compounds” is due to the chlorine atoms and the benzene molecules (or phenyl groups) in the compound to which they are attached. Dioxins have very long half-lives and are thus very poisonous to the liver’s detoxifying enzymes that humans and animals rely on to degrade synthetic chemicals that get into the blood stream. The fatty tissues of exposed Vietnam vets, even decades after exposure, continue to have measureable levels of dioxins. …Four million innocent Vietnamese civilians were exposed to Agent Orange, and as many as 3 million have suffered diagnosable illnesses because of it, including the progeny of people who were exposed to it, approximating the number of innocent Vietnamese civilians that were killed in the war. The Red Cross of Vietnam says that up to 1 million people are disabled with Agent Orange-induced illnesses. There has been an epidemic of birth defects, chronic illnesses, fetal anomalies and neurological and mental illnesses since the “American War.”

This year’s disgusting, green algal bloom in Lake Erie was the most severe on record - – The algae in Lake Erie was more severe and more highly concentrated this summer than in any summer since NOAA began measuring the blooms in 2002. This year’s harmful green bloom was due to excessive Midwest rainfall in spring and summer, and the fertilizer that rain picks up and carries to rivers which empty into the lake. [Lake Erie HABs Bulletin] The algae isn’t just an eyesore — it’s incredibly harmful to humans. It produces a toxin called microcystin that, in August of 2014, reached such high levels that officials declared a water ban in Toledo — you couldn’t even drink it if you boiled it. When swallowed, mycrocystin can cause stomach pain, nausea, vomiting, severe headaches and fever. The toxic algae feed off of nutrients that run into Lake Erie primarily from the Maumee River, which snakes through the fertile farmlands of Ohio and Indiana. The runoff from these farms contains nitrogen from fertilizer and phosphorus from livestock manure and sewage, which sends the algae in Lake Erie into overdrive.  This year the rain over Ohio and Indiana was truly excessive. The Maumee River watershed received as much as eight inches more than normal in the month of June. It was also the fourth wettest June in Toledo, Ohio, and one of the top 20 wettest months since records began in 1880. It was also the Maumee River’s highest discharge for the month of June, a full 30 percent higher than the previous discharged record in 1980, and third highest discharge month out of any month on record, according to Rick Stumpf, an oceanographer and toxic algae expert at NOAA.

Montreal is going to start dumping untreated sewage into one of Canada's biggest rivers - Montreal, Canada's second-largest city, began dumping untreated sewage into the St. Lawrence River on Wednesday, angering environmentalists with a repair operation that could release as much as 8 billion liters (2.1 billion gallons) of wastewater into a major waterway. The city has said the dump, expected to last up to a week, is necessary while work is carried out to replace ageing parts of the waste treatment system that could create a greater environmental hazard if it unexpectedly broke. The action prompted outrage from cities and citizens downstream - worried about raw sewage in the water and the possibility of detritus such as condoms washing up on riverbanks. Even some upstream were concerned because of the precedent it was setting. "It's surprising, disgusting and outrageous that the city of Montreal took this path, which is the least costly alternative for them," said Lee Willbanks, from advocacy group Save the River, based in the riverside town of Clayton in New York state. "If Montreal does it, others municipalities might do the same." Signs advising against touching the water were posted on the banks of the river directly opposite Montreal's main port area. Despite the large size of the dump, waste will likely be quickly diluted and swept away by the huge volume of the river and there was no odor or physical signs of the operation, which has generated the Twitter hashtag #flushgate.

Yellowstone National Park Proposes Slaughtering 1,000 Wild Bison --Yellowstone National Park officials are proposing a plan to slaughter 1,000 bison—mostly females and calves—from its herd this winter. The reason for the cull is to lessen the risk of Yellowstone bison infecting cattle herds in Montana with brucellosis, a bacterial disease, officials said yesterday.  Park officials will meet today with tribal leaders, state and other federal agencies to reach a decision on the exact number to kill. “No formal decision has been made, but the park proposal is for 1,000 fewer bison,” park spokesperson Amy Bartlett said.  The annual cull is deeply controversial. Yellowstone bison are the last wild herd of bison in America with fewer than 5,000 left. The amount slaughtered varies from year to year, but a 1,000-bison slaughter would be the largest cull since the winter of 2007-2008, when more than 1,600 were killed. “Ecologically extinct throughout their native range, and not yet federally protected, bison are endangered,” the Buffalo Field Campaign said. The organization keeps a running tally of the number of Yellowstone bison killed since 1985. To date, that number is 8,567. Buffalo Field Campaign contends that “there has never been a single documented case of wild buffalo transmitting brucellosis to livestock.” The organization points out that “Yellowstone elk and other wildlife, also known to carry brucellosis, are allowed to freely exit the park without coming under fire as the buffalo do.” They blame Montana’s powerful livestock industry for the unnecessary slaughter.

Debate spreads about Saudi dairy drilling wells in arid Arizona - Arizonans are debating what actions to take after a Reveal investigation showed the state’s limited aquifers are being drained to grow and ship crops overseas. Local leaders in La Paz County, where a Saudi dairy company bought 15 square miles of land to grow water-intensive hay for export back to the Middle East, are asking Gov. Doug Ducey and state officials for help, the Associated Press reports: “We just want to make sure the people who have lived here, who have invested in La Paz County will not run out of water,” said county Supervisor Holly Irwin. Reveal disclosed that a Saudi dairy company and other corporations were buying large tracts of desert land in an unregulated part of the state, then drilling new groundwater wells, each capable of pumping 1.5 billion gallons of water annually for irrigation. The report has sparked widespread debate in the arid state and beyond, including a column in the state’s largest paper, The Arizona Republic, by staff opinion writer EJ Montini, who wrote that Reveal’s report caught many in the state by surprise: We are fast asleep on this issue. Snoring away. Hopefully, we’ll wake up and do something about it before we die of thirst. And a letter to the editor in The Arizona Republic in which a reader wrote: Our legislators need to wake up and enact laws that prevent foreign governments from depleting our life’s blood. The Saudi government has told its domestic dairy companies to import hay from overseas because after three decades of intensively pumping its own desert aquifers, Saudi Arabia’s groundwater supply is nearly depleted.

Water Conservation Order Is Extended in California - Gov. Jerry Brown has extended his executive order requiring Californians to conserve water as the state prepares for a fifth year of drought.The order, which was announced Friday, gives state water officials expanded authority to take new measures to deal with the parched conditions and to cope with potential storms from an El Niño weather pattern.Mr. Brown has ordered communities throughout the state to reduce water use by 25 percent this year. State water regulators set individual targets for local agencies to meet, which were to expire in February.“We’re going to need to continue it past February because we will not know the state of the drought until later in the season,” said Felicia Marcus, the chairwoman of the State Water Resources Control Board, which imposes the water-savings targets.The new executive order allows emergency water conservation measures to continue through October if California still faces a drought in January.The order also extends the suspension of some environmental rules, expedites permits to rebuild power plants that were damaged by wildfires and allows some Californians to capture more water.“The goal of this is not necessarily to deal with next year, but to recognize the fact that we may well be in our own millennial drought,” Ms. Marcus said. “The problem of this drought is it’s beyond anything in our experience.”

El Niño ‘is here, and it is huge,’ as officials race to prep for winter -- El Niño continues to gain strength in the Pacific Ocean, climate experts said, with unusually wet conditions expected to hit California between January and March -- and perhaps into May. The latest forecast increased the urgency for both government agencies and property owners to prepare for possible flooding. Local flood control agencies are busy clearing out storm drains, catch basins and other waterways. In Los Angeles, the California Department of Transportation is increasing its maintenance staff by 25% through the winter months to deal with El Niño. The agency is stockpiling sandbags, readying plows and earth-moving equipment, and pruning trees and brush. "January and February are just around the corner. If you think you should make preparations, get off the couch and do it now. These storms are imminent," said Bill Patzert, a climatologist for NASA's Jet Propulsion Laboratory in La Canada Flintridge. "El Niño is here. And it is huge.... At this point, we're just waiting for the impacts in California." The National Weather Service's Climate Prediction Center said El Niño is already strong and mature, and is forecast to continue gaining strength. It is expected to be among the three strongest on record since 1950. Generally, El Niño doesn't peak in California until January, February and March, Patzert said. That's when Californians should expect "mudslides, heavy rainfall, one storm after another like a conveyor belt."

El Niño reaches record level for a single week period --There are different ways of measuring the strength of El Niño, the periodic warming of equatorial sea surface temperatures in the Pacific Ocean. Perhaps the simplest, most widely accepted metric is to look at temperatures between 90 degrees west and 160 degrees east longitude, and 5 degrees north and 5 degrees south of the equator, known as the Niño 3.4 region.  The latest analysis from NOAA shows this area of the Pacific had a weekly average temperature 3.0 degrees Celsius above normal, which is a record high. This weekly mark is higher than the 2.8 degrees Celsius anomaly recorded during the week of November 26, 1997, the last really strong El Niño. The NOAA scientists predict El Niño will likely peak during the Northern Hemisphere winter 2015-16, with a transition to neutral conditions during the late spring or early summer 2016. However it's not clear how much stronger El Niño can get, as there is a finite limit on the amount of warm water available. Additionally, by other metrics, this year's El Niño isn't yet stronger than the previous two biggest events since 1950, during the winters of 1982-1983 and 1997-1998. For example, the average temperature for August through October, this year, was 1.7 degrees Celsius in the Niño 3.4 region, below that of nearly 2.0 degrees Celsius in a comparable period in 1997. In addition, a broader metric that uses both temperature and atmosphere data, the Multivariate ENSO Index, still ranks the 1982-1983 event as the strongest El Niño since at least 1950.

El Niño Does Something It's Never Done Before. Watch Out, California. -  Tropical Pacific water temperatures are shockingly hot. Last week equatorial Pacific water temperatures averaged 3 degrees Celsius above normal for the first time ever in the key Niño 3.4 region. The previous weekly high Niño 3.4 value of 2.8 degrees was tied last week with Nov. 28, 1997. The Niño 3.4 region, used to measure the strength of an El Niño ranges from 170W to 120W from 5 degrees north to 5 degrees south of the equator. If temperatures continue to rise, or plateau for a few more weeks, this will be the strongest El Niño in history.  When warm water stored below the surface of the western Pacific ocean moves east along the equator it moves the earth’s tropical atmospheric convection cells with it. Responding to the eastward shift in the tropical convection, the jet stream moves south on normal on the west coast bringing heavy winter rains to California in strong El Niño years. With this year’s El Niño at record or near record strength NOAA’s CFS climate model predicts a strong southward drop of the storm track off the west coast. A very stormy winter can be expected from California, across the gulf states and up the east coast. This year’s intense jet stream pattern will bring much warmer than normal temperatures to the northeastern United States and eastern Canada.  This winter, California can expect heavy rains, floods and mudslides, but snow levels will be high because moisture flows from the tropics are warm and wet. California’s water situation will improve but ground water levels are unlikely to rebound to levels seen before the drought began. One year’s rains will not alleviate the long-term water problems caused by the record California drought but reservoir levels will rebound.

El Niño Update: Possibly "most powerful on record" -- From the LA Times: El Niño could be the most powerful on record, scientists say.  On the impact:   For the United States, El Niño can shift the winter track of storms that normally keeps the jungles of southern Mexico and Central America wet and moves them over California and the southern United States. The northern United States, like the Midwest and Northeast, typically see milder winters during El Niño.  The South will probably be wetter than normal, and the north warmer.  Typically growth picks up a little during an El Niño due to the milder winters in the midwest and northeast. And on the data:  A key location of the Pacific Ocean is now hotter than recorded in at least 25 years, surpassing the temperatures during the record 1997 El Niño. Some scientists say their measurements show that this year’s El Niño could be among the most powerful on record -- and even toppling the 1997 event from its pedestal. “This thing is still growing and it’s definitely warmer than it was in 1997,” said Bill Patzert, climatologist with NASA’s Jet Propulsion Laboratory in La Cañada Flintridge. As far as the temperature readings go, "it’s now bypassed the previous champ of the modern satellite era -- the 1997 El Niño has just been toppled by 2015.”

It's Official - Biggest Nino Ever - Killer La Nina to Follow -- This morning NOAA released its data for the Pacific Ocean temperatures for the week of November 9th. We hit a record - the current El Nino is the strongest in recorded history. Before 2015 the largest recorded weekly reading of El Nino occurred during the week of November 26 in 1997. We passed that milestone last week. The data from 1997 - The El Nino index set a record of 2.8: (Link to data) So another weather record has been set. What does it mean? In the very short term it means that there will be some hellacious weather in the US Pacific West/Texas in the next 90 days. It also means there will be a drought in Australia and Indonesia. Other parts of the globe will feel the consequences of the mega Nino. However, there is another consequence of this year's El Nino that is virtually a sure thing to happen within the next half year. A very rapid change in El Nino water temperatures will follow - in nine months we will have gone 180 degrees in the opposite direction and we will be dealing with a very strong La Nina. The following plots the changes from El Nino (red) to La Nina (blue). Note the rapid change that occurred from November of 1997 to the fall of 1998. A very big La Nina followed the record El Nino:

October 2015 a Scorcher! The hottest month in the entire instrumental record, going back to the 1800s! - Tamino - A few days ago I learned that JMA (the Japan Meteorological Agency) had released their global temperature data for October, according to which this year’s October beat the pants off any preceding October: I wasn’t sure what other organizations would report, but NASA just released their October update — and this year’s October beat the pants off any preceding:We’re also on track — in fact it’s almost a lock — to set a new record hottest year. Here’s the year-so-far compared to preceding years:By the way, this month wasn’t just the hottest October temperature anomaly on record in NASA data. It was the hottest month, period.What do you think — will Congressman Lamar Smith try to issue a subpoena demanding all the emails from scientists at the Japan Meteorological Agency?

2015 Certainly to Be Warmest on Record -- As it stands, 2015 is going down in the record books as the warmest year on record. On Wednesday, the National Oceanic and Atmospheric Administration released its October 2015 climate report, which notes that, thanks to the month being the warmest October on record, in lockstep with the last six months also ranking as the warmest on record, 2015 now has a 99.9 percent certainty of being the hottest in a 136-year period. Temperatures in 2015 are running an average of 1.55 degrees above the 20th-century median, and well above averages in 2014, which until now was the warmest year on record. The data — when visualized like this chart, with splotches of red indicating record-breaking temperature percentiles and soaking wide swaths of nearly every continent and ocean — reveal that no portion of the globe has gone untouched by the temperature spikes. NOAA reports that "record warmth was observed across the entire southern half of Australia, part of southern and southeastern Asia, much of central and southern Africa, most of Central America and northern South America, and parts of western North America.” The only regions in the entire world to experience neutral heating gains or even cooling of some kind were the wilds of northeastern Canada and the tip of South Africa. Oceans in both the Northern and Southern Hemispheres experienced record temperatures in 2015, including large portions of the Atlantic and Pacific Oceans, along with the entire Indian Ocean. Even Arctic waters around northern Europe exceeded historical averages.

2015 shatters the temperature record as global warming speeds back up  -- With just a month and a half left in 2015, it’s clear this year will be by far the hottest on record, easily beating the previous record set just last year. The temporary slowdown in the warming of global surface temperatures (also misnamed the “pause”) has ended, as each of the past four years has been hotter than the one before. El Niño is one reason 2015 has been such an incredibly hot year. During El Niño events, hot water is transported from the deep ocean layers to the surface. Over the past 15 years, we’ve experienced more La Niñas than El Niños, which helped temporarily slow the warming of global surface temperatures. That changed in 2015, which has seen the third-largest surface temperature warming influence from an El Niño event on record (behind 1998 and 1987). The chart below breaks down global surface temperature data into years with El Niño, La Niña, neutral, and volcanic eruption temperature influences. As the chart shows, 2015 will be more than 0.2°C hotter than 1998, despite having a slightly weaker El Niño warming influence. That temperature difference is the result of human-caused global warming. If we look at the temperature trends just for El Niño years, for La Niña years, and for neutral years, each has a trend of 0.15–0.17°C global surface warming per decade since the 1960s. This tells us that the long-term global warming trend persists, and it was only temporarily slowed because of the prevailing La Niña conditions from 1999 to 2012. In short, La Niña years in the 2000s have been hotter than previous La Niña years because of continued global warming, but they’re cooler at the surface than recent El Niño and neutral years.

Photos Reveal the Astonishing Situation of Brazil's Worst Drought in a Century - – Brazil’s Amazonian rainforest has become a shadow of its former self as the worst drought the country has seen in 100 years continues.  Low levels of water in the Rio Negro have left boats stranded and isolated homes sitting in the middle of the large deserted landscape, reports Daily Mail. Locals are surviving with as little as small pools of water to live off of.   The main water supply in São Paulo has been running on emergency reserves, and the system is only able to deliver about 40 percent of its usual capacity. Before 2014, it was able to supply approximately 8,700 gallons of water per second, but now, it only delivers around 3,500 gallons per second.   Because two-thirds of Brazil’s power comes from hydroelectric power plants, electricity has also been in short supply. Widespread blackouts have hit the country’s largest cities, and increased energy rationing is a possibility, which could stunt the economy. Navigation of rivers in the region has been impeded and delivery and shipments have become problematic. As a direct result, companies such as state oil company Petrobras are facing difficulties while trying to ship crude and natural gas, reports the Latin American Herald Tribune.   Petrobas has had to halt some of its tankers on the Rio Negro and the Solimões rivers until they become navigable and the navy allows ships to sail out to the oil fields. […]  Limited access to water has also caused issues amongst neighbors as they get into disputes during temporary shutoffs. Poorer areas of the city have just as bad or even worse luck, considering they have even less access.  “They have two hours of water on tap - the women don’t sleep because the water comes in the early hours of the morning, at around 4 a.m.,” said Martha Lu, a resident of São Paulo. “They don’t have water storage, so they have to stay awake because they don’t know when the water is coming again. They stay up to collect it in buckets and try to do laundry, it’s terrible.”

Indonesia’s forest fires take toll on wildlife, big and small – ‘This double-punch or triple-punch of drought, fire, and smoke is likely to be much more damaging to the biome than any one of these elements alone’ - Veterinarians care for 16 abandoned baby orangutans already living at the centre. The babies had developed respiratory infections because of haze from the fire, delaying the conservationists’ continuing attempts to teach them how to live on their own in the wild. Long-awaited heavy rains this week in the Indonesian regions of Sumatra and Kalimantan appeared to be the beginning of the end of the mass forest fires that have raged since late August, Indonesia’s worst such disaster in at least 20 years. While plenty has been written about the economic costs of the fires and the human suffering they have caused — hundreds of thousands of people sickened by the haze in Indonesia and Southeast Asia, and a regional price tag that one expert estimated at more than US$14 billion (S$19.6 billion) — so far, scientists and environmentalists can only speculate about the extent of the damage to wildlife, including endangered species like the orangutan. But the early signs are not good. “We’re still not sure how many might have gotten sick or died,” “The impact is not really visible now, but maybe in the next two or three months,” she said. […] But orangutans are far from the only species suffering. Indonesia’s fauna is among the world’s most diverse, and a broad spectrum of wildlife — including elephants, birds, snakes, and even insects — has been severely affected by the fires and choking haze, scientists say. This month, Indonesia’s Forestry Ministry announced that more than 4.2 million acres of forest and open land had been destroyed by the fires. Each year, fires are intentionally set to clear land cheaply — for palm oil plantations, for pulp and paper mill operations, and for other agricultural uses — but they grew out of control this year because of prolonged drought and the effects of El Niño, scientists say. […]

In Greenland, another major glacier comes undone – ‘The changes are staggering and are now affecting the four corners of Greenland’: It's Zachariae Isstrom, the latest in a string of Greenland glaciers to undergo rapid change in our warming world. A new NASA-funded study published today in the journal Science finds that Zachariae Isstrom broke loose from a glaciologically stable position in 2012 and entered a phase of accelerated retreat. The consequences will be felt for decades to come. The reason? Zachariae Isstrom is big. It drains ice from an area of 35,440 square miles (91,780 square kilometers). That’s about 5 percent of the Greenland Ice Sheet. All by itself, it holds enough water to raise global sea level by more than 18 inches (46 centimeters) if it were to melt completely. And now it's on a crash diet, losing 5 billion tons of mass every year. All that ice is crumbling into the North Atlantic Ocean. “North Greenland glaciers are changing rapidly,” said lead author Jeremie Mouginot, an assistant researcher in the Department of Earth System Science at the University of California, Irvine. “The shape and dynamics of Zachariae Isstrom have changed dramatically over the last few years. The glacier is now breaking up and calving high volumes of icebergs into the ocean, which will result in rising sea levels for decades to come.”

Collapsing Greenland glacier could raise sea levels by half a metre, say scientists -- major glacier in Greenland that holds enough water to raise global sea levels by half a metre has begun to crumble into the North Atlantic Ocean, scientists say. The huge Zachariae Isstrom glacier in northeast Greenland started to melt rapidly in 2012 and is now breaking up into large icebergs where the glacier meets the sea, monitoring has revealed. The calving of the glacier into chunks of floating ice will set in train a rise in sea levels that will continue for decades to come, the US team warns.“Even if we have some really cool years ahead, we think the glacier is now unstable,” said Jeremie Mouginot at the University of California, Irvine. “Now this has started, it will continue until it retreats to a ridge about 30km back which could stabilise it and perhaps slow that retreat down.” Mouginot and his colleagues drew on 40 years of satellite data and aerial surveys to show that the enormous Zachariae Isstrom glacier began to recede three times faster from 2012, with its retreat speeding up by 125 metres per year every year until the most recent measurements in 2015. The same records revealed that from 2002 to 2014 the area of the glacier’s floating shelf shrank by a massive 95%, according to a report in the journal Science. The glacier has now become detached from a stabilising sill and is losing ice at a rate of 4.5bn tonnes a year. Eric Rignot, professor of Earth system science at the University of California, Irvine, said that the glacier was “being hit from above and below”, with rising air temperatures driving melting at the top of the glacier, and its underside being eroded away by ocean currents that are warmer now than in the past.

The Secrets in Greenland’s Ice Sheet -  The ice sheets covering Greenland and large areas of Antarctica are now losing more ice every year than they gain from snowfall. The loss is evident in the rushing meltwater rivers, blue gashes that crisscross the ice surface in warmer months and drain the sheets’ mass by billions of tons annually. Another sign of imbalance is the number of immense icebergs that, with increasing regularity, cleave from the sheets and drop into the seas. In late August, for instance, a highly active glacier in Greenland named Jakobshavn calved one of the largest icebergs in its history, a chunk of ice about 4,600 feet thick and about five square miles in area.If the ice sheets on Greenland and Antarctica were to collapse and melt entirely, the result would be a sea-­level rise of 200 feet or so. This number, though fearsome, is not especially helpful to anyone but Hollywood screenwriters: No scientist believes that all that ice will slide into the oceans soon. During the last year, however, a small contingent of researchers has begun to consider whether sea-­level-­rise projections, increased by the recent activity of collapsing glaciers on the periphery of the ice sheets, point toward a potential catastrophe. It would not take 200 feet to drown New Orleans. Or New York. A mere five or 10 feet worth of sea-­level rise due to icebergs, and a few powerful storm surges, would probably suffice.

Rising sea levels leaving Canadian coastal real estate vulnerable | Toronto Star: Coastal cities and towns throughout the Maritimes are closely studying how flooding and erosion caused from rising sea levels and storm surges will impact private property and municipal infrastructure over the coming decades.    The idea behind Coastal Impacts Visualization Environment (CLIVE) was simple: turn what was confidently known about coastal erosion rates, sea-level rise and Atlantic storm activity and upload it into a 3D video-game engine that generates a bird’s eye view of how PEI’s coast is expected to change over time.  Fenech’s first chance to publicly demonstrate the tool was on Earth Day in 2013 at an event in Charlottetown. The audience, he said, wasn’t prepared for what they saw. “The gasps were so loud,” recalled Fenech, who visually simulated what water levels would be 30, 60 and 90 years from now. At each 30-year interval, the ocean gobbled up more land, property and infrastructure. A thousand homes disappeared, as did light houses, golf courses and water treatment plants.“The change we documented was surprising for them,” he said. “I had grown men crying as they watched their investments being swamped by water.”

A Rising Tide: Miami is sinking beneath the sea—but not without a fight - Miami Beach consists of a long, low barrier island accompanied by a scattering of manmade islets. It’s one of the lowest-lying municipalities in the country, and its residents are leading the way into the world’s wetter future. Along the island’s low western side bordering Biscayne Bay, people have come to dread full-moon high tides, when salt water seeps into storm-drain outlets and the porous limestone that provides the island’s foundation, forcing water up and out into the streets and sidewalks and threatening buildings and infrastructure.And Miami Beach is just one small part of a region that’s in big trouble. If sea levels rise as projected, no major U.S. metropolitan area stands to rack up bigger losses than Miami-Dade County. Almost 60 percent of the county is less than six feet above sea level. Even before swelling of the seas is factored in, Miami has the greatest total value of assets exposed to flooding of any city in the world: more than $400 billion. Once you account for future sea-level rise and continued economic growth, Miami’s exposed property will far outstrip that of any other urban area, reaching almost $3.5 trillion by the 2070s.The sea level around the South Florida coast has already risen nine inches over the past century. Among experts, the optimists expect it to edge up another three to seven inches in the next 15 years and nine inches to two feet in the next 45 years. More pessimistic (some say increasingly realistic) predictions say the rise will be much faster. Even the very gradual rise of recent decades will make extensive infrastructure reengineering necessary—Mowry’s job. However, according to a report published by the Florida Department of Transportation, it will become difficult, expensive, and maybe impossible for these efforts to keep up with the accelerated sea-level rise that is actually expected.

Impacts on Oceans Need Urgent Attention in Climate Talks, Researchers Say - Warming waters, rising sea levels, ocean acidification and changing water currents caused by climate change are having devastating effects on marine environments, scientists say. But despite these effects, which researchers say will intensify and spread inland as the planet warms, oceans have not been a focus of international climate negotiations. The authors of a set of five studies on oceans and climate change in a special issue of the journal Science published Thursday hope to change that.  In a review paper, Sydeman and colleagues assessed the impact of climate change on marine mammals, birds and fish in the world’s oceans. They found that fish, which are ectothermic, or cold-blooded, are more susceptible to climate change, but even more adaptable mammals and birds face increasing challenges and may not be able to evolve quickly enough to avoid extinction. Changes to the world’s oceans, including sea level rise, the oceans’ impact on global weather patterns and a potential decrease in the ability to absorb additional heat and carbon dioxide have implications that stretch far beyond marine environments. A recent study suggests that sea level rise alone could displace 187 million people by 2100. "Changes in ocean physics and ocean temperature affect the whole planetary climate system," said Edward Allison, a marine scientist at the University of Washington and the lead author of a paper examining societal impacts and responses to the changing ocean climate. "If the [carbon dioxide] buffering capacity of the oceans is altered, then that also alters the future climate," Allison said. "We are talking about the whole bio-geochemical functioning of the earth system and the whole climate system."

13-Year-Old Sues North Carolina, Asks Judge to Force State to Take Action on Climate Change -- Many young people, such as 13-year-old Hallie Turner, are worried that their generation will have to deal with the most intense consequences of unchecked climate change. That’s why Turner, an eighth-grader in North Carolina, is one of a number of young people across the country who is suing her state over its failure to address climate change. Turner’s case is being brought forth by the help of Our Children’s Trust, an Oregon-based climate change nonprofit that has helped youth around the country file lawsuits at the state level and is also helping 21 young people sue President Obama and the federal government for violating the youngest generation’s constitutional rights to life, liberty and property by not addressing climate change.  She’s challenging a decision made last year by the state’s Environmental Management Commission and pushing for the state to mandate that North Carolina reduce its carbon emissions by at least four percent each year. “Hallie’s not asking for more than what’s considered best available science,” said attorney Tuch. The state’s Commissioner Benne Hutson rejected Turner’s petition, “not on its merits” but because it was “incomplete,” according to the News Tribune. Hutson also cited the fact that “North Carolina law prohibited environmental agencies from enacting state laws that were stricter than federal law.” Turner, however, is undeterred. “I feel like my voice needs to be heard,” Turner told reporters inside the courthouse on Friday. “I haven’t really ever let my age get in the way of it. There are definitely people who are like, ‘You’re a kid. What do you know?’ and that was always the frustrating thing for me.”

Who Will Pay for Climate Change? - The Munich Reinsurance Company has been in the sober business of managed risk since 1880. Munich Re, as it is now known, paid out approximately $45 billion in claims and netted $4 billion in profit, employs some 43,000 people—underwriters, economists, accountants, lawyers, and scientists—all working to predict and plan for the future, and with a shared mission: to make sure Munich Re is never surprised. These days, the greatest unpredictable risk Munich Re faces is climate change.  Munich Re began studying global warming in 1974, when, in response to a global surge in natural catastrophes, it founded what it called the Joint Office for Natural Hazards. Known today as the Corporate Climate Center (CCI), the operation involves in-house geologists, geographers, hydrologists, and other scientists who research climate change and then model the ways it might affect the frequency and force of the natural disasters for which Munich Re sells surety. “We may run into a situation where we have abrupt changes, and things become uninsurable,” Peter Hoeppe, who heads the CCI, told me. Abrupt changes is scientific euphemism for major disasters that Munich Re can’t foresee. That translates into premiums set too low to cover unexpected claims—and, more specifically, losses that could wipe out an alarming chunk of the company’s profits... As governments dither, however, some of the world’s most potent multinationals have concluded that rising temperatures threaten their business. Thus they have begun to respond to global warming in the way they’d respond to any material financial threat: They’re looking to minimize it. What’s significant is that a widening web of corporate powerhouses—most notably in the finance industry, led by big insurers and banks—have begun to demand serious, sophisticated, and specific steps to counter global warming. Big businesses want nothing so much as predictability, and many of them have concluded that climate change is a wild card, one that they must control and ought to exploit.

Bernie Sanders: ‘Climate Change Is Directly Related to the Growth of Terrorism’ --In last night’s Democratic presidential debate, a day after the horrific terrorist attacks in Paris, Bernie Sanders stood by his claim that climate change is the greatest threat to national security. CBS’s John Dickerson, last night’s moderator, asked Sanders : “You said you want to rid the planet of ISIS. In the previous debate you said the greatest threat to national security is climate change. Do you still believe that?” “Absolutely,” Sen. Sanders replied. “Climate change is directly related to the growth of terrorism and if we do not get our act together and listen to what the scientists say, you’re going to see countries all over the world, this is what the CIA says, they’re going to be struggling over limited amounts of water, limited amounts of land to grow their crops and you’re going to see all kinds of international conflict. But, of course international terrorism is major issue that we have to address today.”

Video: Drought, Climate, Security, and Syria - “Drought, water, war, and climate change” is the title of this month’s Yale Climate Connections video exploring expert assessments of the interconnections between and among those issues. With historic 1988 BBC television footage featuring Princeton University scientist Syukuru (“Suki”) Manabe and recent news clips and interviews with MIT scientist Kerry Emanuel, Ohio State University scientist Lonnie Thompson, CNN reporter Christiane Amanpour, and New York Times columnist and book author Tom Friedman, the six-minute video plumbs the depths of growing climate change concerns among national security experts. Friedman, in footage from the 2014 Showtime “Years of Living Dangerously” nine-episode documentary, points to a NOAA analysis that climate change has caused the Mediterranean region, in Friedman’s words, “to dry up . . . . leading to longer and more severe droughts.” Friedman in that piece pointed out that severe droughts struck Syria – “which is right at the epicenter” of the worst impacts — in the four years leading up to the Syrian revolution. MIT scientist Kerry Emanuel points to increasing concerns among military experts over climate change. “These are not sandal-wearing, fruit juice-drinking hippies from the sixties,” he says. “These are serious folk” concerned about “significant geopolitical impacts around the world.” CNN reporter Christiane Amanpour reports that climate change and dwindling water supplies “may have helped fuel Syria’s war.” She says drought in Syria from 2006 through 2010 “scorched 60 percent of Syria’s land, and it killed 80 percent of livestock in some regions, putting three-quarters of the farmers out of work, and ultimately displacing 1.5 million people.” “While no one’s claiming a direct cause and effect” relationship, Amanpour says, “the drought did bring on the diaspora from dying farms and over-crowded cities, and thereby put enormous economic and social pressures on an already fractured society.”

France Cancels Major Climate March, Groups Say They Won’t Be Silenced - The Prefecture of Police of Paris has reportedly canceled a march planned for Nov. 29 that organizers expected to draw at least 200,000 people, citing security concerns. Activists noted that other actions planned worldwide will still move forward. Nicolas Haeringer, French campaigner for climate advocacy group 350.org, said in response: “The government can prohibit these demonstrations, but our voices will not be silenced. While this makes it difficult to go forward with our original plans, we will still find a way for people in Paris to make the call for climate justice heard, and we encourage everyone around the world to join a Global Climate March and raise their voices louder than ever. There’s never been a greater need. “While our plans in Paris must change, the movement for climate justice will not slow down. Around the world, marches, demonstrations, and civil disobedience are all planned for the weeks and months ahead. Together, we will continue to stand against violence and hatred with our peace and resolve. For people around the world, join the Global Climate March in your community to show your support for climate justice. For those who were planning to travel to Paris, still come and join us, and together we’ll find a way to take action together.”

France Says Climate Talks Must Produce Binding Deal -   — French officials said on Thursday that any agreement at the coming climate conference in Paris would have to be legally binding, expressing alarm at comments by the American secretary of state that suggested the opposite.President François Hollande of France, speaking to reporters at a summit meeting of European and African leaders in Malta, said that “if the agreement is not legally binding, there is no agreement,” because there would be no way to verify that countries had enforced their pledges. In an interview with The Financial Times on Wednesday, the secretary of state, John Kerry, said that the agreement was “definitively not going to be a treaty” and that although it would push for a significant amount of investment to support low-carbon economies, there were “not going to be legally binding reduction targets like Kyoto.”  The French foreign minister, Laurent Fabius, speaking on the sidelines of the summit meeting in Malta, which focused on migration, described Mr. Kerry’s choice of words as unfortunate.  In Washington, State Department officials were quick to clarify Mr. Kerry’s position. “The F.T. interview with Secretary Kerry may have been read to suggest that the U.S. supports a completely nonbinding approach,” a State Department official said, speaking on the condition of anonymity because the department had not released an official statement on the matter. “That is not the case, and that is not Secretary Kerry’s position. Our position has not changed: The U.S. is pressing for an agreement that contains both legally binding and non-legally binding provisions.”

We need incentives to save the climate - If, as now seems likely, world leaders reach an agreement on climate change when they meet in Paris at the end of the month, they will have taken a momentous step towards protecting our planet. But it will still only be a start. To make true progress on climate change, we need new economic structures and new technology. This will come at a price; developing countries in particular will have to balance the cost of environmental clean-up with the need for continued growth. But it will also bring benefits, creating new and more sustainable sources of prosperity. And, as so often in cases where progress depends on upfront investment, finance holds the key. Green finance should not be another form of aid that wealthy nations will provide to poorer countries. Nor can it be state-backed project financing in disguise. Instead, the focus should be on harnessing market principles to draw in private capital so that clean technologies can be commercialised and financing shifted away from polluting industries that rely on wreaking environmental destruction without paying for it. The required transformation in the financial system will not be easy. It will be especially difficult for developing countries that lack the mature, deep and liquid capital markets of advanced economies such as the US. There are encouraging precedents. The Chinese government, with the UN, has put forward proposals to align its financial system with low-carbon growth. It has called for the creation of new lending institutions with specific environmental objectives, which would lower the funding cost for green projects. While this is a positive step, much more work remains to be done.

Here comes the climate cliff - Politico -- A calendar coincidence may have given Congressional Republicans some additional leverage in their quest to derail President Obama's legacy-shaping climate deal. Friday Dec. 11 is the last day of the climate summit in Paris, a day when world leaders will either emerge with a grand deal to save the world, or not. But the linchpin of the deal will be whether rich countries, especially the U.S., can come up with billions of dollars to help poor countries decarbonize their economies and adapt to the changing climate. By the kind of coincidence that even NCIS Special Agent Jethro Gibbs would have to appreciate, Dec. 11 is the same day funding for the federal government runs out. As Pro's Andrew Restuccia and Darren Goode report, that creates an opportunity for Republicans to add provisions to federal spending bills to stop any climate aid from flowing overseas. "We want to make sure that any of these countries that think they’re going to have a check to cash because of an agreement that the president may make in Paris — that they shouldn’t cash the check just yet," Sen. John Barrasso said of Republicans' strategy.

Senate Republicans Just Promised To Undermine The Paris Climate Negotiations -- At a hearing Wednesday, Senate Republicans said that any financial commitments made by the United States to help other countries curb carbon emissions would not be approved by Congress, effectively promising to undercut the Paris negotiations before they even begin.  In the lead-up to the Paris climate conference beginning at the end of the month, nearly every nation has submitted a plan for reducing its carbon emissions. Many of those plans include asking for help — mostly technical and investment assistance, and one mechanism for that help is the Green Climate Fund.   “Congress has the power of the purse,” Sen. Shelley Moore Capito (R-WV) said in her opening remarks at the Environment and Public Works Committee meeting.   President Obama has said that the United States will contribute $3 billion towards the fund and requested $500 million in his budget for next year.  Capito, who also sits on the Appropriations Committee, said that the Senate has allocated “zero dollars.” Many of the world’s leading carbon emitters are also facing poverty and under-development. India, for instance, is the fourth-largest carbon emitter (after China, the United States, and the EU), even though millions of people there don’t have electricity. People in developing nations argue that they are victims of climate change — and are expected to contribute to mitigation strategies — but don’t have any of the advantages that come with a century of coal- and concrete-powered modernization.

Climate change could erase years of global anti-poverty efforts, study finds - Climate change could mean a lot more than rising temperatures, rising sea levels and increased risks of natural disasters — it might also erase years of hard work to reduce poverty around the world.  A new study published by the World Bank Group on Sunday predicts that without climate-smart development and strict reductions in greenhouse gas emissions that will decrease the impacts of climate change in developing countries, global warming could force more than 100 million additional people below the poverty line by 2030 — bringing the total close to 1 billion people in a worst-case scenario. This means climate change could thwart the success of important global efforts to lift up the world's poor, such as the U.N.'s new Sustainable Development Goal to eradicate extreme poverty within the next 15 years. "The report clearly addresses two of the defining issues of our generation — first, ending poverty, and secondly, addressing climate change," "What the report shows is that one of these cannot be addressed [without] the other."  It has long been known that impoverished communities and low-income countries are especially vulnerable to the effects of climate change, and poor people lose much more relative to the average person. They're more exposed to natural disasters, such as floods, which can wash away assets and livelihoods, and also magnify the threat of climate-related waterborne illnesses, such as malaria and diarrheal disease.The world's poor are also prone to decreased crop yields due to less rainfall, as well as spikes in food prices following extreme weather events.

Economist: ‘More pronounced global warming is probably a net negative’: – Human societies will soon start to experience adverse effects from manmade climate change, a prominent economist has warned. Prof Richard Tol predicts the downsides of warming will outweigh the advantages with a global warming of 1.1C - which has nearly been reached already. Prof Tol is regarded by many campaigners as a climate "sceptic". He has previously highlighted the positive effects of CO2 in fertilising crops and forests. His work is widely cited by climate contrarians. "Most people would argue that slight warming is probably beneficial for human welfare on net, if you measure it in dollars, but more pronounced warming is probably a net negative," Prof Tol told the BBC Radio 4 series Changing Climate. . Asked whether societies were at the point where the benefits start to be outweighed by consequences, he replied: "Yes. In academic circles, this is actually an uncontroversial finding." But it is controversial for climate contrarians, who often cite Professor Tol's work to suggest that we shouldn't worry about warming.

Brazil's slow-motion environmental catastrophe unfolds - Nine people are now confirmed dead, and a further 19 remain unaccounted for as a slow-motion environmental catastrophe continues to unfold following the collapse of two mining dams in Brazil’s mineral-rich state of Minas Gerais. Eight days after the town of Bento Rodrigues was swept away by 50m cubic metres of toxic mud, a slow-moving tide of toxic iron-ore residue is oozing downriver, polluting the water supply of hundreds of thousands of residents as it makes its way to the ocean.Brazil’s national water agency, ANA, has warned that the presence of arsenic, zinc, copper and mercury now present in the Rio Doce make the water untreatable for human consumption. Already the lack of oxygen and high temperatures caused by the pollutants has killed off much of the aquatic life along a 500km stretch of the river. “It is a tragedy of enormous proportions,” Marilene Ramos, president of Ibama, the federal environmental agency, said. “We have thousands of hectares of protected areas destroyed and the total extinction of all the biodiversity along this stretch of the river.”   On a visit to the affected region on Thursday, President Dilma Rousseff described the incident as “possibly the biggest environmental disaster to have impacted one of the major regions of our country”.

Brazil mining flood could devastate environment for years --  The collapse of two dams at a Brazilian mine has cut off drinking water for quarter of a million people and saturated waterways downstream with dense orange sediment that could wreck the ecosystem for years to come. Nine people were killed, 19 are still listed as missing and 500 people were displaced from their homes when the dams burst at an iron ore mine in southeastern Brazil on Nov. 5. The sheer volume of water disgorged by the dams and laden with mineral waste across nearly 500 km is staggering: 60 million cubic meters, the equivalent of 25,000 Olympic swimming pools or the volume carried by about 187 oil tankers. President Dilma Rousseff compared the damage to the 2010 oil spill by BP PLC in the Gulf of Mexico and Environment Minister Izabella Teixeira called it an "environmental catastrophe." Scientists say the sediment, which may contain chemicals used by the mine to reduce iron ore impurities, could alter the course of streams as they harden, reduce oxygen levels in the water and diminish the fertility of riverbanks and farmland where floodwater passed. Samarco Mineração SA, a joint venture between mining giants Vale SA and BHP Billiton and owner of the mine, has repeatedly said the mud is not toxic. But biologists and environmental experts disagree. Local authorities have ordered families rescued from the flood to wash thoroughly and dispose of clothes that came in contact with the mud. "It's already clear wildlife is being killed by this mud," said Klemens Laschesfki, professor of geosciences at the Federal University of Minas Gerais. "To say the mud is not a health risk is overly simplistic."

Hundreds Of Thousands Can’t Drink Their Water After Massive Mine Flood In Brazil -  Nine people are dead, 19 are missing, and 250,000 still don’t have drinking water two weeks after two dams at a mine in Brazil collapsed, sending 15.8 billion gallons of waste-laden water and sludge though downstream towns in the state of Minas Gerais, about 250 miles north of Rio de Janero.  Brazil’s president compared the disaster to the 2005 BP oil spill in the Gulf of Mexico.  Hundreds of people have been displaced and an entire town was swept away by the floodwaters.  Immediately after the collapse, officials from the mining company said the deluge was “not toxic.” The iron ore being mined in the area is responsible for the bright orange color.  But scientists told Reuters that the mud and water may also contain chemicals used by Vale to purify the ore. In addition, simply releasing this much water and mud into the area may change the pathways of local streams and suffocate wildlife. It will also likely affect the riverbanks.  “It’s already clear wildlife is being killed by this mud,”   The Rio Doce valley in Minas Gerais has a long history of mining. But the state is also the country’s foremost producer of coffee and milk. South of the disaster, mineral spas are a leading tourist attraction. In recent years, the area has been plagued by both flooding and drought, which are both exacerbated by the mine-related damming.  The company was in the process of raising the dam wall, which authorities said was cheaper than replacing it. The state is investigating whether the reservoir was too full when the beach occurred.

Texas tornado levels Halliburton chemical plant - Emergency crews are working to contain a chemical leak after a tornado leveled a Halliburton chemical plant in Pampa, Texas. According to the New York Times, two deputies with the Gray County Sheriff’s Office were exposed to an unidentified chemical that spilled after the twister ripped through the building on Monday. The deputies refused medical treatment and no other injuries were reported. A hazmat team from nearby Potter County arrived at the scene on Monday night and emergency officials are working to contain the leak, ABC 7 News said.Images taken at the scene by ABC 7 News showed that plant was completely leveled by the storm. Radioactive material stored at the site was not affected, the Times said.

Senate Quietly Passes Bipartisan Bill To Allow Conquest Of Space -- In a bipartisan bid to encourage commercial exploitation of outer space, the U.S. Senate this week unanimously passed the Space Act of 2015, which grants U.S. citizens or corporations the right to legally claim non-living natural resources—including water and minerals—mined in the final frontier. The legislation - described by IGN‘s Jenna Pitcher as “a celestial ‘Finders Keepers’ law” - could be a direct affront to an international treaty that bars nations from owning property in space. The bill will now be sent back to the House of Representatives, which is expected to approve the changes, and then on to President Barack Obama for his anticipated signature. Pitcher continued: The new Space Act allows ventures to keep and sell any natural resources mined on planets, asteroids and other celestial bodies. Commercial operations could reap trillions of dollars from mining precious metals like platinum, common metallic elements such as iron, and water, the “oil of space.” The vote was celebrated by the Google-backed “asteroid mining company” Planetary Resources, which lobbied hard for the legislation and says “the market in space is ripe to bloom.”

New analysis finds routes to economic growth with carbon limits --  International agreements to regulate the emissions of carbon dioxide have been limited so far. One argument commonly used against them is economic—politicians believe that limiting greenhouse gas emissions could hurt economic growth. A recent study published in Nature uses a novel integrated analysis of energy, food, and water to demonstrate that economic growth can remain strong even as environmental concerns place restrictions on industry. The authors of this study focus on Australia, building an analytical framework using more than 20 scenarios that explore a range of factors that can shape environmental and economic outcomes. These include national trends and policies, energy and resource efficiency, agricultural productivity, as well as consumption and working hours. These variables were modeled against four levels of greenhouse gas reduction efforts, as well as projected climate trajectories. This analytical framework allows for detailed examination of the interactions among variables. It also allows for factors that could constrain environmental sustainability or make it particularly challenging over time. There are several novel aspects to this specific approach. To start, it considers the potential for a market to emerge for selling and purchasing ecosystem services. It also accounts for the development of water stress, rather than assuming that the same volume of water will always be available. In all modeled scenarios, including those with increasing and decreasing environmental pressures, Australia’s economy and living standards area was projected to grow strongly. The model found that in the presence of a strong or a very strong greenhouse gas abatement effort, the GDP would still grow up to 150 percent by the year 2050.

G20 spends four times more on fossil fuel output than on renewables, think tank says - The G20 countries spend almost four times as much to prop up fossil fuel production as they do to subsidize renewable energy, calling into question their commitment to halting climate change, a think tank said on Thursday The G20 spent an average $78 billion on national subsidies delivered through direct spending and tax breaks in 2013 and 2014, according to a report from the Overseas Development Institute (ODI) on Thursday. A further $286 billion was invested in fossil fuel production by G20 state-owned enterprises. Related public finance was estimated to average a further $88 billion a year. Meanwhile, renewable energy subsidies in 2013 were estimated at $121 billion by the International Energy Agency (IEA). Turkey, which will host leaders of the G20 this weekend, paid national subsidies for fossil fuel production of at least $627 million annually in 2013 and 2014, ODI said in its report. The figure may be higher because of missing data, it said. In addition, Turkish state-owned enterprises invested $1 billion in fossil fuel production domestically, part of a strategy of a rapid expansion of coal-fired generation and coal production. "It is tantamount to G20 governments allowing fossil fuel producers to undermine national climate commitments, while paying them for the privilege," ODI said.

UK becomes only G7 country to increase fossil fuel subsidies - The UK is alone among G7 nations in dramatically increasing its fossil fuel subsidies, despite an earlier pledge to phase them out, a new report has found. The revelation will embarrass ministers who want to take a leading role at a crunch UN climate change summit in Paris in December, but who have been sharply cutting support for green energy at home. The report from the Overseas Development Institute (ODI) and Oil Change International found that as a whole, G20 nations are responsible for $452bn (£297bn) a year in subsidies for fossil fuel production. The G20, which meets on Sunday in Turkey, pledged in 2009 to phase out fossil fuel subsidies.  In the UK, production subsidies of £5.9bn have already benefited major fossil fuel companies operating in the country, most foreign-owned, while £3.7bn is used to subsidise fossil fuel production overseas in countries including Russia, Saudi Arabia and China, the new analysis found. New tax breaks for North Sea oil and gas production announced by the chancellor, George Osborne, earlier in 2015 will cost taxpayers a further £1.7bn by 2020, according to government figures. Shelagh Whitley, an author of the ODI report, said: “The UK has been cutting back support for solar power and energy efficiency, arguing that the burden was too high. Our figures reveal that in spite of supposed budget constraints the government is giving ever increasing handouts to oil and gas majors.”

Ethanol industry making profits despite lower price of fuel  - Low prices at the gas pump have put a persistent squeeze on Midwest ethanol producers, but most are staying profitable. Of eight Minnesota-affiliated ethanol producers tracked by the Star Tribune, all but one made money in the third quarter, although not like the high profits of 2014. “The Midwest ethanol industry is healthy,” said Ron Monson, vice president for agribusiness capital at AgStar Financial Services in Apple Valley. “Plants have been able to make money and operate in the environment we have today.” Low gasoline prices pinch ethanol producers because they sell into the same fuel market. The result is thinner operating margins at ethanol plants, a condition that could persist for 12 to 18 months, according an ethanol industry analysis by the national cooperative bank CoBank. Valero Energy, the San Antonio-based owner of Minnesota’s largest ethanol plant in the city of Welcome, said its companywide ethanol margins fell by more than half — from $1 a gallon in third quarter 2014 to 47 cents in the same period this year. “There is just so much oil, and oil refiners have been producing a tremendous amount of gasoline and that has weighed on the gas price,”  Ethanol sold for more than $2 per gallon on the commodities market during much of 2014. Lately, the front-month contract has been below $1.50 per gallon. Ethanol is blended into gasoline at a rate of 10 percent or more at the pump.

EPA Ready To Announce New Ethanol-Gasoline Blend Rules -- Americans are paying attention but can't do anything about it. This is downright scary. Oil & Gas Journal reports that EPA is ready to announce new ethanol-gasoline blend rules despite overwhelming concern that such a blend will damage almost every conventional internal combustion gasoline engine.   Growing numbers of US voters are concerned about possible adverse impacts as the US Environmental Protection Agency prepares to issue new ethanol quotas under the federal Renewable Fuel Standard, the American Petroleum Institute said.  It cited a Harris Poll telephone survey it commissioned of 1,021 registered voters nationwide Nov. 5-8 in which 78% said they were concerned that new ethanol quotas could breach the so-called blend wall, the point at which the mandate exceeds the level of ethanol in the nation’s fuel supply.  By party, API said that concern was expressed by 91% of respondents identified themselves as Republicans, 80% of independents, and 73% of Democrats. “The results are telling,” “Across the political spectrum, voters are concerned about the significant damage the RFS-mandated higher ethanol blends could cause to automobiles, motorcycles, and almost every type of gasoline powered engine.  “We would not be surprised if the rule came out next week, and will operate under that assumption,” Greco said. “EPA continues to insist it will be out by Nov. 30 despite the Thanksgiving holiday and Paris climate talks. We’ve heard from EPA that there’s interest in bumping the mandate up and testing the blend wall. We think that’s a bad idea.” The government is running amok.

Countries Announce Major Phase-Out Of Coal Plant Financing -- On Tuesday, representatives from 34 of the world’s developed and major emerging economies reached an agreement to phase out public financing that supports the construction of new coal power plants around the world. Member countries of the Organization for Economic Cooperation and Development (OECD) announced that starting in 2017, all OECD countries will immediately stop providing export credit support for new coal-fired power plants, except when the most efficient technology is used or in the poorest countries where there are no viable alternatives.  Export credit support encompasses a wide range of financial tools and includes publicly backed loans and insurance for businesses seeking to export products to new markets around the world. This agreement ends export credit eligibility for all large coal-fired power plants with a capacity above 500 megawatts, except for the most modern coal-fired power plants, dubbed “ultra-supercritical” power plants. These new plants are still relatively uncommon — in fact, only one such plant exists in the United States. The agreement also allows support for less efficient plants with a capacity under 500 megawatts in very poor developing countries.   This move represents a significant step in limiting financing of new coal generation around the world. The agreement will end public financing for 85 percent of proposed coal-fired power plant projects seeking OECD export support, rendering more than 300 projects currently in the pipeline ineligible for credit. From 2007 to 2014, OECD countries provided over $40 billion in public financial resources for international coal projects, of which 77 percent went to coal-fired power plants. OECD export credit agencies contributed the majority of these resources — over $31 billion. During this time-frame, Japan and Korea — both members of the OECD who did not restrict coal financing before this agreement — were the number one and number three providers of public coal finance respectively.

This Coal Mine Could Create More CO2 Emissions Than Entire Countries  -- Australia’s Carmichael coal mine project has been under major scrutiny by large conservation groups and prominent Australians for months. Now, progressive think tank the Australia Institute has found just how damaging the emissions from burning coal at the mine could really be. The coal mine project, which is a backed by India’s Adani Enterprises and approved by the Australian government in October, has the potential to out-weigh annual emissions from entire cities and countries, according to a new report by the Australia Institute. According to the report, Carmichael will emit 79 million metric tons of carbon dioxide equivalent a year — more than the annual emissions from Sri Lanka and Bangladesh, and about equal to the average annual emissions from both Malaysia and Austria. The projects will also emit three times as much carbon dioxide equivalent per year as the city of New Delhi, six times as much as Amsterdam, and twice as much as Tokyo.  The report also puts the project’s size in perspective. “The mine pits themselves would be 40 km [24.85 miles] long and 10 km [6.2 miles] wide, bigger than many capital cities,” the authors write in the report. “At peak capacity the mine would output 60 million [metric tons] of thermal coal per year. Adani expects Carmichael will output 2.3 billion [metric tons] of coal over its lifetime: enough to build a road one-meter thick, ten-meters wide, wrapped around the world five times.”  Environmentalists have previously said the increase in coal shipping that the mine will spur threatens the Great Barrier Reef, and the emissions that will come from burning the coal will contribute to the ocean warming and acidification that’s already threatening the suffering reef. Last week the Australian Conservation Foundation launched legal action against Australia’s environment minister, Greg Hunt, in an attempt to have the decision declared illegal. The group claims that Hunt didn’t consider the impacts the mine would have on the reef before approving it.

Coal not going away anytime soon despite renewables push -- Coal: Can’t live with it and can’t live without it — at least not yet. It is the biggest source of heat-trapping greenhouse gases that negotiators around the world hope to limit in an agreement to be thrashed out in Paris next month. Demand for coal is leveling off, but it will remain a key energy source for decades, no matter how many billions of dollars of investment go into cleaner energy like wind and solar. Too much of the world depends on it now for heating and power generation for us to suddenly live without it. There are vast parts of the developing world that will continue to see growth in demand for electricity, driven by sales of televisions, refrigerators and the construction of highways and malls as incomes increase, said Xizhou Zhou, the China chief for energy consultants IHS Energy. “The cheapest way to provide electricity in many of these places is still coal-based,” Zhou said. This underlines the challenge facing negotiators who will convene in Paris Nov. 30 to agree on how to limit emissions of fossil fuels. Scientists say coal, oil and gas emissions, including carbon dioxide and methane, are key drivers of rising temperatures that could lead to intense droughts or flooding of island nations.

Fossil Fuel Subsidies Top $450 Billion Annually, Study Says -- The governments of the world's 20 largest economies spend more than $450 billion annually subsidizing the fossil fuel industry, a new analysis has concluded, four times more than what they spend on renewable energy.  The report by Oil Change International, a Washington-based advocacy organization, and the Overseas Development Institute, a British research group, calculates the amount of money the G20 nations provide to oil, gas and coal companies through tax breaks, low cost loans and government investments. It comes just weeks before country representatives convene in Paris to forge a climate deal that aims to put the global energy economy on a path to zero emissions, and it underscores the obstacles this effort faces. "If the G20 leaders want to be credible ahead of the Paris talks, they need to show they're serious," said Alex Doukas, a senior campaigner at OCI and one of the authors of the report. "Handing money to fossil fuel companies undermines their credibility."Doukas said phasing out subsidies should be a top priority because it hinders the transition to clean energy at the scale needed. Researchers at Oil Change International tracked three main ways in which governments subsidize fossil fuel companies:

1. National subsidies: Direct spending by governments to build out fossil fuel infrastructure and tax exemptions for investments in drilling and mining.
2. State owned companies: Government-owned oil and gas companies that benefit from government involvement.
3. Public financing: Investments in fossil fuel production through government-backed banks and other financial institutions.

Senate Passes Resolutions To Kill Obama’s Power Plant Rule -- The Senate approved two resolutions Tuesday to stop the EPA from implementing the Clean Power Plan, a rule that limits the amount of carbon allowed from the electricity sector.  If — or more likely when — the resolutions reach his desk, President Obama will veto them, making Tuesday’s vote obviously symbolic, even to the senators participating. A combined version of the resolutions, which apply separately to new power plants and existing ones, is already being considered in the House. Tuesday’s resolutions, introduced under the Congressional Review Act, were approved 52-46, largely down party lines. Democrats Joe Donnelly (IN), Heidi Heitkamp (ND) and Joe Manchin III (WV) assented. Republicans Kelly Ayotte (NH) and Mark Kirk (IL), two of a group of four Republicans who have pledged to tackle climate change, dissented, along with Susan Collins (ME). Lamar Alexander (R-TN), the third member of the group, voted yes to the resolutions, and Lindsey Graham (R-SC), the fourth member of the group, wasn’t present for the vote. Nor was Graham’s fellow presidential candidate Marco Rubio (R-FL).  “This will never become law. It is just a big exercise in time-wasting,” Sen. Sheldon Whitehouse (D-RI) said during the hearing leading up to the first vote. He said he thought the Senate was considering the resolutions in order to “send a signal. To send a signal to the big coal interests, the big oil interests, the Koch brothers, the Tea Partiers, ‘We’re with ya.'”  “The American people aren’t ‘with ya,'” Whitehouse told his colleagues.

Why many states are panicked by the federal Clean Power Plan - The four huge power plants that stand smoking in Colstrip, Montana, don’t just employ hundreds of workers. They pay property taxes that allow the city of some 2,000 people to afford services other remote, rural communities lack, such as a parks and recreation department. The electricity-generating plants consume almost all the coal mined at the Rosebud Mine, the second largest coal mine in Montana. When the mine removes–or “severs”–coal from the earth, the mining company pays the state a severance tax on the value of the coal. Some of the money is invested into state trust funds, and some goes to support statewide services, such as public schools. But new federal regulations for power plants threaten to put cities like Colstrip out of business. Puget Sound Energy, a part-owner of the Colstrip plants, already wants to close two of them. That would have a fiscal impact on the entire state. A 2010 University of Montana study found that the Colstrip operations contributed 4.5 percent of all state tax revenue and $104 million in state and local taxes. Many states with significant reserves of coal, oil and natural gas depend on revenue from severance taxes on natural resources. In 2013, Montana’s tax revenue from severance taxes was nearly 12 percent. In West Virginia it was 13 percent and in Wyoming it was 39 percent, according a Stateline analysis of U.S. Census Bureau data. No wonder those states are so upset about federal Clean Power Plan regulations, President Obama’s bid to reduce the emission of greenhouse gases affecting the Earth’s climate. The regulations, which take effect in December, will require states to reduce emissions from power plants. Coal emits more greenhouse gases than other energy sources, so one way for states to meet the federal goal is to shut down coal-fired plants.

Coal Industry Cash: Lawmakers Working To Block Clean Power Rules Get Big Money From Mining Industry -- The U.S. Senate voted this week to block new Obama administration rules designed to reduce carbon emissions and combat climate change, and 23 state attorneys general are mounting a legal challenge to the rules. Both the federal and state efforts to block the clean power rules come after coal companies made major campaign contributions to the politicians leading the charge against the administration’s climate change initiatives.On Wednesday, senators voted in favor of two resolutions to stop the Environmental Protection Agency from implementing carbon and greenhouse gas emissions rules. A handful of Democrats joined with Republicans in support of the bills, which both passed 52-46. The Senate vote came in the same week a new government report showed 2015 is on track to be the hottest year on record. According to MapLight, a campaign finance watchdog group, senators who voted for the anti-EPA resolutions received, on average, more than $75,000 each from the coal mining industry -- or 17 times as much in contributions from those companies as those who voted against the bills. The 21 Republican and two Democratic attorneys general are filing a lawsuit aiming to block EPA performance standards that they say will prevent companies from building new coal-fired power plants and lead to the eventual phase-out of coal energy entirely. Coal companies, mining services, electric utilities and their employees have donated more than $1.1 million to those 23 state attorneys general, according to data compiled by the National Institute on Money in State Politics. The industry has contributed more than $4.7 million to the state parties supporting those officials since 2012.

Deal in works on profit guarantees for Ohio plants of AEP, FirstEnergy? -- A decision is near in the several-year push by Ohio electricity utilities to obtain profit guarantees for some power plants, leading to fevered speculation about how utility regulators will rule and questions about whether a negotiated settlement is possible. Opponents say this is a bailout for utility companies, money that would be used to prop up unprofitable plants that are bad for the environment. The utilities — American Electric Power and FirstEnergy — have argued that the plants are needed to keep the electricity grid reliable, such as at times when electricity use spikes. The companies say these plants otherwise might close. For the utilities, the best chance of success might be in reaching a settlement with some of the leading opponents. This possibility has led to speculation this week that a deal or deals might be in the works. And yet, several of the most-vocal opponents, such as the Sierra Club and Dynegy, say they are not part of any talks, which indicates there is little possibility of a broad-based accord. “Settlement talks? There’s nothing to talk about,” said Robert Flexon, CEO for Dynegy, the Houston-based power-plant operator that has several Ohio plants that compete with AEP’s and FirstEnergy’s. Meanwhile, Akron-based FirstEnergy is “working very hard to reach a settlement as soon as we can,” said company spokesman Doug Colafella.

Application pending for new injection in Athens County -- An application for drilling of a new injection well in Rome Twp. is under consideration by the Ohio Division of Oil and Gas Resources Management. D.T. Atha Inc. of Albany filed the application this summer, and last week published legal notices that any public comments and objections must be received by the division within 15 calendar days of the final notice, which was published this past Saturday. The notices state that the average injection is estimated to be 2,500 barrels per day. The well would be located off Route 144. If approved it would be Atha's second injection well in Rome Twp. A permit for the first well — which involved converting a production well into an injection well — was approved by the state in 2013. Prior to approval, local residents and the Athens County Commissioners had asked the state to hold a formal public hearing on the application. The division opted instead to have an informal open house in Athens, which drew protestors. If the current application is approved, it would become the ninth injection well in Athens County. Injection wells are used to dispose of brine and other waste from oil and gas wells, including fracking waste. Members of the Athens County Fracking Action Network have announced there will be a local event held as part of a National Day of Action, a day that is intended to "shine light on the numerous problems associated with toxic fracking waste and its disposal."

County group launching anti-frackwater campaign - Star Beacon -- Ashtabula County Water Watch, an all-volunteer grassroots environmental group, is preparing an educational campaign on the potential dangers of hydraulic fracturing wastewater, or brine, called “Brine Ain’t Fine.” The campaign kicks off today, in conjunction with a “National Day of Action” organized by several national anti-fracking groups, and ACWW is seeking more volunteers to inform the local community about frackwater’s hazards. Though brine is classified as saltwater — making it OK to dump into more than a dozen county Class II injection wells, or to spread on county roads as a dust suppressant — fracking chemicals in the brine solution are often radioactive or carcinogenic, as watchdog groups have found. Stephanie Blessing, an ACWW coordinator who also farms organic vegetables in Jefferson, said with the county government and municipalities’ recent concerted effort to stand up against the proliferation of injection wells — calling for a moratorium on new wells until local regulatory control is restored — now is the time to start a community discussion and spread awareness. Blessing is a West Virginia transplant who helped organize Kentucky communities against mountaintop removal and coal mining in the state. The oil and gas industry is “the same monster,” she said. “There’s a lot of misinformation out there and it’s hard to learn what is real and what is not real,” she said. “If there is something toxic and radioactive, then I would want to know whether or not my crops were essentially absorbing any of that. I’d want to put up barriers along the road.”

Injection wells spark local protests - Around 40 protesters waived anti-fracking signs Tuesday at U.S. Rt. 50 highway drivers, with many honking in support, as part of a national day of action meant to call awareness to the oil and gas horizontal hydraulic fracturing industry. The protesters were gathered at the rest area off the highway near Torch and Coolville in southeast Athens County, about 500 yards away from the K&H fracking waste injection well site up a nearby hill and beyond the trees. Frances Spencer, from Coolville, said that she attended the day of action not only to raise awareness but to “get rid of them, if we can,” referring to the two K&H injection wells on the site. “I’m older, and the impact of all this taking place, it might not affect me but what about the next generation? The little ones? I’m worried about the little kids,” she said. “What are they going to have to live with if we don’t fight this and get rid of it?”

Local activists have protests at Trumbull County oil-and-gas-waste disposal sites  — Members of the environmental group Frackfree Mahoning Valley traveled to several Trumbull County locations Tuesday to call attention to the dangers of waste from hydraulic fracturing and disposal of its wastewater. At the Sodom Hutchings Road headquarters of Kleese Development Associates, they railed against environmental damage done when oil field wastes escape from holding tanks and flow into wetlands, ponds and streams. At the state Route 169 Weathersfield Township oilfield disposal site of American Water Management, they protested the danger posed by earthquakes caused by injecting oil field waste deep underground. The Ohio Department of Natural Resources has stopped injection operations at both sites — in Weathersfield because of small earthquakes in 2014 and in Vienna because of the spill that occurred there in March. State officials said last week KDA’s spill may have been caused by failure of the company to construct the type of containment pad with a liner that was called for in the plans KDA submitted to the Ohio Department of Natural Resources. Geologist and Frackfree Mahoning Valley member Susie Beiersdorfer said that news makes her concerned about the injection wells KDA is still operating along U.S. Route 422 in Warren Township. “When we get a chance, we’re going to see if the Warren Township site has a liner,” she said.

Ohio should enact moratorium on fracking waste: Letter to the Editor | cleveland.com -- The under-reported part of the fracking story in Ohio is the tremendous amount of toxic and radioactive waste this practice is creating. Billions of gallons of this waste — much of which is from out of state — are being pumped into the ground beneath our feet in more than 200 Class II injection wells across the state, two of which are in Lake County, two in Geauga County, 19 in Ashtabula County, 22 in Trumbull County and 17 in Portage County. This practice has already caused numerous earthquakes in Youngstown and other areas. And now the state of Ohio even allows toxic and radioactive frack waste to be spread on landfills.  We are only at the beginning of fracking here, as Ohio is expected to eventually have 30,000 fracked deep shale wells. Geologists tell us everything underground moves, and frack waste will be no exception. Shouldn't Ohio at least enact a moratorium on frack waste until we can really be assured it will not cause irreparable harm to the health and safety of Ohioans?
Ron Prosek, Mentor

Feds schedule meetings to discuss possible fracking leases in Wayne National Forest -- The federal government will hold three meetings this week concerning the possibility of opening Wayne National Forest to fracking.  Oil and gas companies have formally expressed interest to the U.S. Bureau of Land Management in hydraulically fracturing about 31,900 acres of the Wayne.  The bureau is reviewing those requests to see if the federal government owns the mineral rights beneath those sections of the forest, and it plans to assess potential environmental risks.  Four years ago, oil and gas companies told the bureau they wanted to drill for oil and gas beneath the Wayne. Environmental groups and local residents were outraged, and, eventually, the bureau pulled the proposal.  The areas that oil and gas companies have proposed for drilling are similar to the ones proposed in 2011.  Oil and gas companies filed documents called “expressions of interest” with the Bureau of Land Management as a first step to opening the Wayne to fracking. The companies’ requests cover land in the forests’ Athens, Ironton and Marietta ranger districts.

Anti-Frackers protest Wayne National Forest, other drilling projects - People gathered Tuesday at a protest of fracking in Athens County are concerned not only about plans to drill for oil and natural gas in the Wayne National Forest, but projects as well in Athens and neighboring Meigs County.They gathered near a drilling site in the Torch-Coolville area, part of what was billed as a national day of action against the fracking process used to extract natural gas and oil.About four dozen people fear more of what they believe the process already has done to their neighborhoods."We know that once our aquifer is polluted," said demonstrator Bob Berardi of Meigs County, "our property values are worthless, our communities will disintegrate, everything we've worked for will be destroyed.""It is a well-regulated, long-understood process," says Mike Chadsey of the Ohio Oil and Gas Association, "and as long as you've done everything right, it's a safe process."The protest was held in the shadow of a drilling platform built just in recent months-one a demonstrator said she's concerned already is affecting the area where she lives.

Foes challenge proposed fracking in national forest in Ohio - SFGate (AP) — Opponents are pushing back as a federal agency again considers requests to open Wayne National Forest in southeastern Ohio to oil and gas drilling.The Buckeye Forest Council, Sierra Club, Athens County Fracking Action Networks and other advocacy groups have called for the U.S. Bureau of Land Management to conduct a "full-scale environmental report" before allowing drilling beneath about 31,900 acres of the forest through hydraulic fracturing, or fracking. The bureau is reviewing whether the government owns mineral rights beneath those forest sections and assessing potential environmental risks. The last of a series of public meetings this week discussing industry interest and leasing is scheduled for Thursday. Companies indicated an interest in drilling in the forest in 2011, but the bureau dropped the proposal due to concern over environmental impacts.

Environmental groups protested potential fracking in the Wayne National Forest at public meeting - A public meeting about leasing land in the Wayne National Forest for oil and gas development was cut short Wednesday night after protesters with Appalachia Resist took the floor while an official from the U.S. Bureau of Land Management addressed the crowd.The meeting, hosted by the federal agency, came after the announcement that the agency is considering about 31,900 acres of land in Wayne National Forest for oil and gas purposes, including land in Athens County. The bureau will perform environmental assessments to determine the impact of using the land for hydraulic fracturing, or fracking. The meeting began with officials from the bureau speaking with people about leasing land in the forest and allowing people to ask questions. During the meeting, members of environmental groups began speaking out against fracking in the national forest. Members of Appalachia Resist, a group of Athens and Meigs County residents who oppose fracking and injection wells, were present at the meeting. Crissa Cummings, who helped plan the protest, said planning took about three weeks. “We all work full time and have families,” she said, which limited their planning time to four meetings. The Buckeye Forest Council, an Ohio environmental organization, also helped support the group. Teresa Mills, the fracking coordinator for the council, said she works with community and grassroots groups and gives them information to help their cause.

Protesters Shut Down Athens Meeting on Fracking in Wayne National Forest - Opponents are pushing back as a federal agency again considers requests to open Wayne National Forest in southeastern Ohio to oil and gas drilling. According to the Athens Messenger, protesters shut down a meeting in Athens concerning the possible lease of federal oil and gas rights in the Wayne National Forest. The meeting at the Athens Community Center was shut down an hour early Wednesday as opponents to leasing began chanting against drilling on the Wayne while supporters chanted for more jobs. The Buckeye Forest Council, Sierra Club, Athens County Fracking Action Networks and other advocacy groups have called for the U.S. Bureau of Land Management to conduct a “full-scale environmental report” before allowing drilling beneath about 31,900 acres of the forest through hydraulic fracturing, or fracking. The bureau is reviewing whether the government owns mineral rights beneath those forest sections and assessing potential environmental risks. The last of a series of public meetings this week discussing industry interest and leasing is scheduled for Thursday. Companies indicated an interest in drilling in the forest in 2011, but the bureau dropped the proposal due to concern over environmental impacts.

Ohio's Utica Shale development grows by $5.7 billion or 20.4 percent since last spring | marcellus.com: Ohio’s Utica Shale has seen an additional $5.7 billion in investment or a 20.4 percent increase since last spring, a Columbus law firm says in a new report. The shale industry has invested $33.7 billion in Ohio, according to the report from Bricker & Eckler LLP, which tracks the industry. Ohio’s shale development is growing despite low commodity prices and a natural gas glut that have hurt some drilling companies. The biggest factors in Ohio’s Utica Shale boom are continuing development of needed infrastructure including pipelines and natural gas-processing plants, plus development of new natural gas-fired power plants that will generate electricity, said attorney Matt Warnock, partner and co-chair of Bricker & Eckler’s oil and gas industry group. “The infrastructure continues to get built out,” he said. Major interstate pipelines are being added and natural gas processing plants are being expanded, he said. The report looks largely at what are called midstream and downstream development, not the actual leasing and drilling of wells, he said. Many of those big-dollar projects in eastern Ohio are continuing, despite the economic downturn, he said. The report lists 162 projects, of which 16 are new since last spring’s report.

Our states can’t afford to delay pipeline projects - Opinion - The Canton Repository - While we are currently enjoying the last days of the fall season here in the Midwest, we should not forget that winter looms ahead. Record cold spells this past winter drove up demand for natural gas and electricity across the United States. In the last decade, demand for natural gas has skyrocketed. Recent technological advancements have made new sources of natural gas readily available to Midwest customers, helping to make Ohio the eighth and Michigan the ninth largest consumers of natural gas in the United States. This has driven the need for a direct pipeline to new natural gas sources. The fact is, existing pipeline infrastructure has failed to keep up with the growth and demand. Our regions and our businesses need a direct link to the abundant natural gas reserves in the Utica and Marcellus shale fields. Despite representing varying business interests in two different states, our organizations recognize the need for more natural gas supplies. We know that having a steady supply of energy is an important part of our region’s productivity, no matter what economic sector we’re involved in. That’s why we’ve come together with a variety of other trade associations, business and union groups to support the responsible expansion of critical energy infrastructure across Michigan, Ohio, Pennsylvania and West Virginia. As part of the Coalition for the Expansion of Pipeline Infrastructure (CEPI), we strongly embrace the idea that we must invest in safe and reliable pipeline technology. Construction of pipelines will boost our economies, provide more stable prices for consumers, increase efficiency and help our utilities provide better service. Lower energy costs will also help attract new business to our states and create jobs.

Group Strives for tougher regulations on oil and gas drilling - A small group of local residents met Nov. 9 with officials from Earthworks of Washington D. C. to discuss and record their opinions regarding the lack of regulations for methane and other chemicals involved with the gas and oil industry.  Alan Septoff, Earthworks strategic communications director, Melanie Houston, director of Water Policy & Environmental Health for the Ohio Environmental Council, and Nadia Steinzor, eastern program coordinator and Earthworks representative for Carroll County, presented information, statistics, and showed a video using a special infra red camera that recorded day and night time emissions from gas and oil drilling sights and operations in Texas, Colorado and Ohio.  The video showed heavy emissions the industry claims do not exist, according to Steinzor. The federal Environmental Protection Agency (EPA) wants to reduce emissions of methane and other chemicals used in or produced by gas and oil exploration. Houston said in 2013, the oil and gas industry leaked more than 7.3 million tons of methane into the air. She said the newly proposed amendments would call for oil and gas developers to limit methane emissions on newly installed or modified equipment, such as natural gas compressors, pumps, controls and fracking oil and gas wells.  This includes equipment related to the production, gathering, processing, and transmission of natural gas.  The industry is also responsible for providing the largest industrial source of volatile organic compounds (VOCs).  “These chemicals cause ground-level ozone or smog and has been proven to lead to lung and heart problems and premature death, according to Steinzor. “What is omitted are regulations for storage vessels, compressors at well sites and monthly inspections.  No citizen complaints system is in place and won’t be. They must address existing sources,” said Houston. Unfortunately, these rules won’t affect already existing pipes and equipment which account for 90 percent of emissions.  It also does not apply for pipes used in distribution that bring natural gas to homes and businesses, according to Houston.

The Double Standard of Oil and Gas Vs. Clean Energy Development in Ohio: Do Lawmakers Really Care About Your Property Rights? - Natural Resources Defense Council - Just last year, the Ohio General Assembly delivered a one-two-punch to the state's growing clean energy industry with dual bills: SB 310 imposed a two-year freeze on energy efficiency and renewable energy requirements, and HB 483 nearly tripled the setback distance for wind turbines from property lines. These bills dealt a devastating blow to renewable energy development in Ohio, but for wind in particular; the setback requirement has effectively halted future commercial-scale wind development in the state. Lawmakers opposed to wind claim the new setback law protects private property rights. But is this concern real, or merely a justification for a coordinated effort to undermine Ohio's wind industry?  When you look closely, it appears to be the latter. One key example of the state's double-standard when it comes to energy development and property rights is Ohio's "unitization" program. It allows fossil fuel developers to gain control over a common pool of oil or natural gas, giving them an upper hand over even unwilling landowners to access (and frack) these resources beneath their land. Some form of unitization is allowed in 39 other states. Unfortunately, it would appear that Ohio's lawmakers are bending over backwards to accommodate this practice for the oil and gas industry. About a year after the state effectively zoned out wind turbines, the House passed new legislation (HB 8) broadening the already-permissive unitization program. No such favors are being done for wind companies. It's even difficult to get legislation passed--HB 190--that would give local counties the power to decide for themselves how far wind turbines should be set back from property lines.

Ohio scientist to test water before fracking - As the shale gas boom was making its way into Ohio in 2012, University of Cincinnati scientist Amy Townsend-Small began testing private water wells in Carroll County, the epicenter of the Utica Shale.   Her project, which includes samples of more than 100 wells, is one of the few sustained efforts in the nation to evaluate drinking water quality before, during and after gas drilling. Although it likely will be another year before Townsend-Small releases the results, her work offers a template for other communities worried about how drilling, fracking and producing unconventional natural gas might contaminate groundwater supply.  Most residents test their water only after they suspect it has been polluted; few have the resources or foresight to conduct baseline testing prior to the drilling. The tests cost hundreds of dollars, “so it's not something everybody can afford to do regularly,” said Townsend-Small, an assistant professor in the geology department. Once her sampling results are published, the data points won't be matched with specific locations — in order to protect residents' privacy and to avoid affecting property values. Townsend-Small's team offers free water testing about four times a year to interested landowners in and around Carroll County. She uses drilling reports the industry files with Ohio regulators to determine which water samples were taken near active gas wells. Each sample is tested for methane, the main component of natural gas.

Company wants to draw water from Ohio River for fracking - Shale development company PennEnergy Resources LLC, based in Findlay Township, received approval last month from Freedom Council to construct one or more water pipelines through the borough. That would allow the company to bring water from the Ohio River to fracking operations in Beaver County, company and government representatives said. “They want to supply water instead of trucking it,” New Sewickley Township Manager Walter Beighey Jr. said. The water would help operations in New Sewickley and Daugherty townships, as well as Economy, said PennEnergy Chairman and CEO Richard Weber. In New Sewickley, one well pad is already active and another on Zeigler Road could produce natural gas in the next few weeks, Weber said. Another fracking site known as B5 on Mellon Road in the township just had a big drill rig arrive last week, Beighey said. That well pad belongs to PennEnergy, and it currently has a pipeline being built to it that would move gas to a compressor station, Weber said. Compressor stations help pump extracted natural gas to other locations. Freedom officials hailed the project’s benefits to the borough. Council President John Kaercher noted promised improvements to Eighth Street, including repaving. “That’s the easiest way for them to get from point A to point B,” Kaercher said of the proposed water line. “They want to get a supply line out there so they can have a constant draw of water.” Weber said a water pipeline would also help the company reduce costs.

Fracking chemicals led to Leetsdale warehouse fire, evacuations; 4 hurt - A fire at the Leetsdale Industrial Park that reached three alarms and prompted a hazmat response and local evacuations Tuesday morning is now being reported as mostly under control.Sky 4 video showed large flames and thick smoke coming from a building owned by Lubrizol Corporation, which said the fire started when employees were mixing chemicals used in fracking in a production tank. "We were working with a chemical, an oxidizer, that had an adverse reaction," said plant manager Ed Michalowski. "We don't know the full details of it yet. We're still doing some investigation."  VIDEO: Sky 4 over large fire in Leetsdale Industrial Park The fire just northwest of Pittsburgh was reported shortly after 10 a.m. Flames shot from the roof, and dark gray smoke could be seen for miles. The mobile unit from Allegheny County Emergency Services responded, along with a hazmat team. Emergency Services Chief Alvin Henderson Jr. said people from approximately 72 nearby homes were sent to Quaker Valley High School's gymnasium during the evacuation. "We did an announcement, and we did a door by door knock to make sure that if there were any elderly residents there, that we got everybody out,"

Evacuation lifted after fire at fracking chemical warehouse - — Workers at a warehouse were pouring hydraulic fracturing chemicals into a production tank Tuesday when a fire started, forcing residents from more than 70 nearby homes for several hours and injuring several people, emergency and company officials said. Hazardous materials crews moved people living near the warehouse in Leetsdale to a high school gymnasium as a precaution. The people were allowed to return after crews announced the fire was largely under control Tuesday afternoon. The fire was at Lubrizol Corp.'s Oilfield Chemistry site about 15 miles northwest of Pittsburgh. Thecompany and Allegheny County Emergency Services chief Alvin Henderson said three employees were injured. One had a burned hand and two inhaled fumes, Henderson said. Several firefighters were being evaluated for inhaling fumes. None of the injuries was deemed life-threatening, Henderson and the company said. The fire was reported Tuesday morning. Flames shot from the roof, and dark gray smoke could be seen for miles as two buildings burned and firefighters tried to keep six others from burning.

Fracking poses potential threat to drinking water in Morgantown -- Morgantown’s drinking water faces a threatening levels of a chemical byproduct from fracking that can cause cancer, experts say. By itself, bromide, a salt compound that is naturally occurring and also found in discharges from fracking and mining, is of little concern. But when mixed with chlorine, a chemical commonly used to make water safe for drinking, it can become carcinogenic, according to Dr. Alan Ducatman, a professor of public health at West Virginia University. "Can two things together be more dangerous than either thing alone? The answer is yes," Ducatman said.  If people are exposed to the compound produced by combining bromide and chlorine, a mixture known as trihalomethane, for prolonged periods of time, Ducatman and other experts say it can cause cancer even at relatively low amounts. Since testing began in 2009, the Monongahela River, which is Morgantown’s main source of drinking water, has tested positive for elevated levels of bromide a number of times,  The increased levels of bromide seem to be coming from wastewater produced during the fracking process, Ziemkiewics said. "If the cement job in fracking pipelines has cracks, fluid and gases can start leaking out and get into shallow groundwater (sources) where a lot of wells are located that supply drinking water," . The West Virginia Department of Environmental Protection has issued permits to several natural gas companies to build fracking sites along the Mon River,  According to the Morgantown Utility Board, there are currently 342 active Marcellus wells located within the Mon River watershed.  However, one fracking site is of particular concern to Morgantown officials. That is Northeast Natural Energy’s fracking operation, which is taking place in the Morgantown Industrial Park just above the Mon River in Westover. The drilling itself happens as close as 1,500 feet from the city’s water intake system, Glass said. "It doesn’t seem like the best location for (a fracking site),"

Value of utility property grows in WV - Assessed value of all property owned by public utilities in the state grew by $530 million to $10.04 billion in the past year, as Marcellus Shale counties continued to see major investments while southern coalfield counties suffered severe losses, according to a report Tuesday to the Board of Public Works. “The Marcellus counties are getting richer, and the southern coal counties are getting poorer,” Jeff Amburgey, director of the state Department of Revenue’s Property Tax Division, told the board. The value of pipelines for transportation of natural gas jumped more than 10 percent, to $1.88 billion, while the value of property owned by electric power companies increased 6.5 percent to $5.01 billion, despite the ongoing shuttering of coal-fired power plants, he said. Overall, that will mean about a $12 million increase in property tax collections statewide in 2016, he said. Natural gas-producing counties continued to see a boom in investments in 2015 despite a downturn in natural gas prices, with utility property valuations up 36 percent in Doddridge County, 16 percent each in Ritchie and Tyler counties, and 9 percent in Taylor County.

Application filed for new pipeline in Hudson Valley -- A pipeline company has filed a permit application to build two underground oil pipelines running 178 miles between Albany and Linden, New Jersey. Pilgrim Pipeline Holdings said Wednesday that most of the pipeline will follow rights of way along the Thruway in the Hudson Valley. One pipeline would carry crude oil south to refineries and the other would carry refined products such as heating oil and gasoline north. The permit application is before the state Thruway Authority. A formal environmental review will include public comment. The company says the pipeline would be a safer way to transport crude oil that is now shipped by rail and Hudson River barge from the Port of Albany. The project has drawn opposition from local groups and municipalities in New York and New Jersey.

Kinder Morgan files federal application to build Northeast Energy Direct pipeline -- The future of the proposed Northeast Energy Direct pipeline is now officially in the hands of the Federal Energy Regulatory Commission. Officials with Tennessee Gas Pipeline Co. LLC, a subsidiary of Kinder Morgan, filed their application with the federal commission today for permission to build the high-pressure natural gas transmission line, according to a news release from the company. While the application has been filed, it was unavailable to view on the FERC website as of this afternoon. The approximately $5 billion project will expand the company’s existing pipeline system in Pennsylvania, New York and New England, and connect it to low-cost natural gas supplies from northern Pennsylvania to New York and New England markets, according to the news release. “The NED Project is a transformative project for the northeast United States,” Kimberly S. Watson, Kinder Morgan East Region Natural Gas Pipelines president, said in a statement.The proposed Northeast Energy Direct pipeline would carry fracked natural gas from shale gas fields in Pennsylvania through upstate New York, parts of northern Massachusetts and into southern New Hampshire before going to a distribution hub in eastern Massachusetts. The route would cross about 70 miles of southern New Hampshire, including the local towns of Fitzwilliam, Richmond, Rindge, Troy and Winchester, and would carry up to 1.3 billion cubic feet of natural gas per day.

Fracking moratorium comes closer to fruition — A two-year moratorium on hydraulic fracturing — commonly known as fracking — in Lee County came one step closer to reality Monday evening as the Lee County Board of Commissioners voted in favor of it after a heated exchange involving two board members. Following a public hearing, the commissioners voted 5-2 on the first reading of the moratorium, with commissioners Andre Knecht and Kirk Smith voting against. Passing the ordinance requires a second reading and vote, but no public hearing. The second reading now is scheduled for the board’s Dec. 7 meeting. Of the nearly two dozen people in attendance, five spoke in favor of the moratorium while three were in opposition. The people who spoke for the moratorium — under which the commissioners intend to research the effects of fracking — primarily questioned the effects to property and public services in Lee County, while moratorium opponents urged the commissioners to listen to experts and state law. The N.C. legislature passed a bill in September prohibiting local governments from passing ordinances related to fracking, and this moratorium covers the practice, as well as all other oil and gas extraction activities. The moratorium would violate that law, according to its opponents, and Knecht said he was concerned that Lee County would face unknown repercussions from the decision. In addition to Lee County, the counties of Anson, Chatham, Rockingham and Stokes, as well as the city of Walnut Cove, have passed moratoriums; Bakersville and Creedmoor have banned the practice altogether.

Health concerns discussed during first fracking summit hosted by environmental group: Many of the chemicals used in fracking can cause health problems, and those chemicals can remain a secret under trade laws, health experts said Tuesday during a regional summit on the unconventional oil extraction method. Health experts appearing at the Florida Fracking Summit outlined the potential risks to people who live or work near fracking sites. Adrienne Hollis, an attorney with Earthjustice, said about 75 percent of the chemicals used in the practice can cause skin, respiratory or digestive problems. Half of the chemicals, she said, could lead to problems affecting the brain, nervous system or immune system. Hollis said since trade secret laws often prohibit the disclosure of chemicals, it's difficult to know how the combination of chemicals impacts a person's health. "It's very hard to treat public health issues and stop them if you don't know what the exposure is, what the chemicals are and what combination is," she said. "This should not be proprietary information. We have the right to know." The impact of fracking was at the center of discussions during the inaugural summit, as environmentalists outlined the potential risks unconventional oil extraction techniques could have on the environment and public health.

 Fracking bill draws complaints about how far it goes to block local governments: A bill to regulate hydraulic fracturing triggered concerns Tuesday about how far it goes to limit local governments that want to create their own drilling rules. The legislation passed its first committee, but not before questions about provisions that void local ordinances passed this year to regulate oil and gas drilling. Opponents said more than 50 communities across the state have passed resolutions asking for a statewide ban on fracking. Some local governments, including Bonita Springs, have passed their own local bans. Those local laws would be void if Rodrigues' bill were to become law. "I think if we have counties and cities that are putting forth resolutions on this issue, I think it's a little arrogant as legislators to push forward a law that they have explicitly addressed to us they have a concern with," said Rep. Clovis Watson, Jr., an Alachua Democrat and a retired city manager. "As someone who has worked with municipalities for 30 years before I was here in a Legislature, I understand the importance of local control and these pre-eminence laws cause heartache, if you will, for local people." The state House agriculture and natural resources subcommittee voted 9-4, with the committee's four Democrats voting against it, to approve the measure (HB 191) that would increase penalties, creates a chemical disclosure registry and requires drillers to get permits before they can begin hydraulic fracturing in Florida. The proposal, sponsored by Rep. Ray Rodrigues, R-Estero, also prohibits cities and counties from creating their own permitting process for drilling. Zoning ordinances in place before Jan. 1, 2015, would not be impacted.

Editorial: Boost rail safety before luck runs out - When it comes to rail safety, we shouldn’t have to count on luck. The derailment upriver more than a week ago could have been much, much worse. Frankly, it was bad enough. A derailed BNSF Railway freight train dumped as much as 20,000 gallons of ethanol in Mississippi River backwaters near Alma. There was no explosion. So far, no significant environmental damage has been reported. But we shouldn’t have to rely on luck. Consider these quotes: From Stephen Schiffli, Buffalo County’s director of emergency management: “We dodged a bullet. It should be a wake-up call.” From Alma Fire Chief Tom Brakke: “It could have been a whole lot worse.” From Sarah Feinberg, head of the Federal Railroad Administration, who toured the site Thursday: “This is probably a great example of an incident where we feel like we got really lucky.” We’re foolish to continue counting on luck. It’s time Congress and the state of Wisconsin take up legislation to improve safety measures, training and transparency for the rail industry and its growing shipment of potentially hazardous cargo.

Speed rules didn’t apply to train in ethanol spill— The train that derailed earlier this month in Wisconsin and spilled 20,000 gallons of ethanol into the Mississippi River didn’t have a sufficient number of cars carrying flammable liquids to meet lower federal speed requirements The government set the new requirements this year in response to safety concerns about transporting crude oil by rail. According to railroad shipping documents, the train had 15 tank cars loaded with ethanol, five fewer than would trigger speed restrictions set by federal regulators. Because it didn’t meet that threshold, the train was permitted to operate at 55 mph. Some lawmakers, environmentalists and community groups have criticized the speed limits in U.S. Department of Transportation’s rules, announced in May, because they only apply to trains that meet the department’s definition of high-hazard flammable trains. The train that derailed on Nov. 7 near Alma, Wis., did not. Under the new rules, trains with 20 or more tank cars carrying flammable liquids in a continuous block or 35 cars dispersed throughout the train are held to 50 mph. They’re restricted to 40 mph within a 10-mile radius of 46 high-threat urban areas designated by the U.S. Department of Homeland Security. The Wisconsin train originated in Minneapolis and was bound for Kansas City, Kan., according to shipping documents. Both cities are high-threat urban areas, and BNSF voluntarily set a lower speed limit of 35 mph, compared with the federal government’s 40 mph, in those cities.

Oil Producers Hungry for Deals Drool Over West Texas 'Tiramisu'  |  Rigzone -- The worst oil market in decades would be hard to spot in West Texas, where two-lane county roads are still jammed with trucks and energy companies are on the prowl for deals. The Permian Basin, the biggest of the shale-oil regions that ignited the U.S. energy boom, is also the only one where production is increasing even as drillers idle more than half the rigs in the country during the longest price slump since the 1980s. That’s drawn the interest of companies from Exxon Mobil Corp. to Anadarko Petroleum Corp. that have hunted for assets in the hot, arid flatland that spans an area the size of Syria. Anadarko’s bid for Apache Corp. was seen driven by Apache’s vast holdings in the Permian. Rising output from the region has helped buoy U.S. production after OPEC’s decision to pump more oil to maintain market share sent crude prices into a tailspin. “We’re already seeing a lot of people that are targeting the Permian,” Allen Gilmer, chief executive officer of Austin- based Drilling Info Inc., said in an interview in Houston. “If you were to look for the most stable area today to go do anything, it’s got to be there. Today you might even argue it’s more stable than Saudi Arabia.” Exxon, the largest publicly traded energy company in the world, bought 48,000 acres in the Permian in two deals in August and is meeting with small, closely held producers to discuss additional purchases and joint ventures. Anadarko made an unsolicited, all-stock offer to purchase Apache, which has one of the largest Permian positions with 3.2 million acres, before withdrawing it, Anadarko CEO Al Walker said last week.

Coalition irrigates cotton with recycled water from Texas oil, gas industry --- Houston firm Energy Water Solutions announced earlier this month the completion of a six-month project to irrigate a cotton crop in Pecos, Texas, with recycled produced water from oil and natural gas activity in the Delaware Basin. A coalition of partners teamed up to work on the project, including the Texas Railroad Commission, Texas A&M AgriLife Research, Anadarko Petroleum Corporation, Gibson Energy and Energy Water Solutions. The Texas Railroad Commission granted a permit to Energy Water Solutions that allowed produced water to be used at the AgriLife Research station. “I have always said that the only thing more important to the economic future of Texas than oil and gas is water,” said David Porter, Chairman of the Railroad Commission. The produced water used in the research was provided by Anadarko, which owns and operates oil and natural gas wells in the Delaware Basin. The produced water was stored and recycled onsite at the research station. Gibson Energy provided the storage for both the produced water and the recycled water used in the field. EWS used patented technology to recycle the water to a standard suitable for growing cotton.

It’s Official: Oklahoma Experiences More Earthquakes Than Anywhere Else in the World -- It’s official: Oklahoma now has more earthquakes than anywhere else in the world, according to a spokesman from the Oklahoma Corporation Commission (OCC), which oversees the Sooner State’s oil and gas industry.  Several earthquakes have struck Oklahoma in just these past four days. As Oklahoma Corporation Commission spokesman Matt Skinner said about the state’s increased seismic activity, “We’ve got an earthquake issue.”  “We have had 15 [earthquakes] in Medford since 5 o’clock Saturday morning,”  “OCC has developed areas of interest, where earthquake clusters have occurred. A cluster is two earthquakes within a half mile of each other, with one measuring at least magnitude 3.2. Originally, they were three-mile circles, then six-mile circles. The circles grew in number and now encompass a very large area of Oklahoma—about 9,000 square miles in all, [Skinner] said,” reported the Enid News. Scientists have linked this never-ending spate of tremors to the state’s drilling boom. The Oklahoma Geological Survey concluded that the injection of wastewater byproducts into deep underground disposal wells from fracking operations has triggered the seismic activity in Oklahoma.  As EcoWatch reported two months ago, Oklahoma went from two earthquakes a year before 2009 to two a day. This year, roughly 700 earthquakes of magnitude 3 or higher has shook the state, compared to 20 in 2009.

Strong Earthquake Rattles Oklahoma, Felt in 7 Other States - A 4.7 magnitude earthquake struck northern Oklahoma Thursday night, followed by two more. Kansas and other neighboring states also felt the quakes miles away.  Oklahoma City’s KOCO 5 News reports that the first and strongest earthquake was Oklahoma’s largest since 2011. According to Reuters, the U.S. Geological Survey (USGS) said the 1:42 a.m. quake’s epicenter was centered 8 miles southwest of Cherokee, Oklahoma, with a depth of 3.8 miles. KOCO 5 News reported that there were two additional Cherokee quakes on Thursday: a 3.1 magnitude earthquake at 3:46 a.m. and a 3.7 magnitude earthquake at 6:03 a.m.  While there have been no reports of significant damage, both Oklahoma and Kansas have seen repeated seismic activity over the past decade, especially in recent years. The frequent temblors have been tied to the states’ drilling booms. The Oklahoma Geological Survey concluded that the injection of wastewater byproducts into deep underground disposal wells from fracking operations has awakened the state’s dormant fault lines. Oklahoma now has more earthquakes than anywhere else in the world, a spokesperson from the Oklahoma Corporation Commission reported.

Disposal wells targeted after 4.7 earthquake in Oklahoma — The Oklahoma Corporation Commission says it’s working to have two disposal wells shut down and volume reduced at 23 others after a magnitude 4.7 earthquake rattled northern Oklahoma and southern Kansas early Thursday. The commission’s oil and gas division released a plan calling for changes to oil and gas wastewater disposal wells in the area near the towns of Cherokee and Carmen. According to the National Earthquake Information Center, the quake occurred at 1:42 a.m. Thursday and was centered about 8 miles southwest of Cherokee. There were no immediate reports of major damage or injuries from the quake, which was felt more than 300 miles away. Two other earthquakes were reported later Thursday: a 3.1-magnitude temblor at 3:46 a.m. and a 3.7-magnitude quake at 6:03 a.m.

Local economy impact of fracking -- Fracking has driven an oil and natural gas boom in the US over the past decade. This column examines the impact these mining activities have had on local and regional economies. US counties enjoy significant economic benefits, including increased wages and new job creation. These effects grow as the geographic radius is extended to include neighbouring areas in the region. The results suggest that the fracking boom provided some insulation for these areas during the Great Recession, and lowered national unemployment by as much as 0.5%.

Oil Theft Soars as Downturn Casts U.S. Roughnecks Out of Work - “This is like a drug organization,” said Mike Peters, global security manager of San Antonio-based Lewis Energy Group, who recounted the heist at a Texas legislative hearing. “You’ve got your mules that go out to steal the oil in trucks, you’ve got the next level of organization that’s actually taking the oil in, and you’ve got a gathering site -- it’s always a criminal organization that’s involved with this.” From raw crude sucked from wells to expensive machinery that disappears out the back door, drillers from Texas to Colorado are struggling to stop theft that has only worsened amid the industry’s biggest slowdown in a generation. Losses reached almost $1 billion in 2013 and likely have grown since, according to estimates from the Energy Security Council, an industry trade group in Houston. The situation has been fostered by idled trucks, abandoned drilling sites and tens of thousands of lost jobs. “You’ve got unemployed oilfield workers that unfortunately are resorting to stealing,” said John Chamberlain, executive director of the Energy Security Council. In Texas, unemployment insurance claims from energy workers more than doubled over the past year to about 110,000, according to the Workforce Commission. In North Dakota, average weekly wages in the Bakken oil patch decreased nearly 10 percent in the first quarter of 2015, compared with the previous quarter, according to the Federal Reserve Bank of Minneapolis. With dismissals hitting every corner of the industry, security guards hired during boom times are receiving pink slips. That’s leaving sites unprotected.

Shale Oil and Crude Oil Production Generate Similar Levels of Greenhouse Gas Emissions: The U.S. Department of Energy's Argonne National Laboratory this week released a pair of studies on the efficiency of shale oil production excavation. The reports show that shale oil production generates greenhouse gas emissions at levels similar to traditional crude oil production. The research, which was conducted in collaboration with Stanford University and the University of California, Davis, analyzed the Eagle Ford shale formation, also called a play, in Texas and the Bakken play mainly in North Dakota. These plays are shale formations with low permeability and must be hydraulically fractured to produce oil and gas. Eagle Ford and Bakken are the second and third largest oil producing shale formation regions in the United States, during the last three years. Together, Bakken and Eagle Ford in 2014 accounted for 54 percent of oil production and 19 percent of gas production among the top seven production regions. "These two studies have concluded that the net greenhouse gas intensity of production is similar to conventional production." Both studies showed that after taking into consideration flaring and venting of natural gas, the greenhouse gas emissions associated with shale/tight oil production are similar to those generated at conventional crude oil reserves. This emission intensity stays consistent during the lifespan of extraction at the oil play. This contradicts an earlier estimate that the Bakken play might produce greenhouse gas emissions 20 percent higher more than for crude oil production.

New Colorado oil, gas rules could affect very few sites -- New rules intended to ease tensions over oil and gas drilling near Colorado communities might have only limited impact, affecting as few as 1 percent of future sites, an analysis by state regulators shows. The two proposed rules would give local governments a consulting role when energy companies want to put big facilities near homes, schools and businesses. Regulators would have more authority over such facilities, which would include sites with multiple wells or storage tanks. The Colorado Oil and Gas Conservation Commission, which regulates drilling, drew up the proposals and will hold hearings on them Monday and Tuesday in Denver. The rules were designed to address conflicts that arise when Colorado’s growing cities and oilfields expand into each other. Residents complain of around-the-clock noise and lights from nearby drilling rigs, and they worry about spills and air pollution. But only 13 drilling and storage sites approved over the past two years — 0.8 percent of the total — were in areas that would be covered by the new rules, the commission’s cost-benefit analysis said. And one of those facilities wouldn’t be considered a large site and wouldn’t be subject to the regulations.

More study, same result on fracking - The Denver Post Editorial -One of the stock charges used by those who campaign to ban hydraulic fracturing in oil and gas drilling is that it endangers groundwater supplies. And yet the pile of studies largely refuting this fear-mongering keeps growing by the year. In the past month alone, two major studies — one by Yale University and the other by Colorado State University — reached similar conclusions about two different centers of drilling, the first in northeastern Pennsylvania and the second in northeastern Colorado, mainly in Weld County. The Yale-led study — the largest of its kind, according to a university press release — found "no evidence that trace contamination of organic compounds in drinking water wells near the Marcellus Shale" resulted from underground migration of the chemicals. When the researchers did find "low levels of organic compounds" near a natural gas well, it was caused by "surface releases" — in other words, spills and accidents above ground that can be readily addressed and treated. And the study found no dangerous level of any compound, based on federal or state exposure standards. The CSU study also found "no evidence of water-based contaminants seeping into drinking water," the university said. And while researchers detected non-toxic methane seepage in 2 percent of the wells, they concluded that it likely stemmed from "compromised well casings."

Colorado oil and gas spill report for Nov. 15 - The following spills were reported to the Colorado Oil and Gas Conservation Commission in the past two weeks.

• NOBLE ENERGY INC, reported Nov. 3 that a flowline that developed a leak was discovered during plugging and abandonment near New Raymer. Between one and five barrels of oil spilled.
• DCP MIDSTREAM LP, reported Nov. 3 that a manual drain valve on an unstabilized condensate tank remained open, overfilling the produced water sump and filling the secondary containment of the sump near Evans. Between five and 100 barrels of condensate spilled.
• KERR MCGEE OIL & GAS ONSHORE LP, reported on Nov. 3 that petroleum hydrocarbon impacted groundwater was encountered beneath the produced water sump during deconstruction activities near Platteville. An unknown amount of oil, condensate and produced water spilled.
• NOBLE ENERGY INC., reported on Nov. 4 that impacts were discovered by the oil and produced water lines running from a tank battery to the separator near LaSalle. Between one and five barrels of oil and produced water spilled.
• BILL BARRETT CORP., reported Nov. 6 that a flowline leak was discovered during pressure testing near Kersey. Between five and 10 barrels of oil and between one and five barrels of produced water spilled.
• WHITING OIL & GAS CORP., reported Nov. 9 that a valve failed on a pipeline near New Raymer. Between one and five barrels spilled.
• DCP MIDSTREAM LP, reported Nov. 9 that a landowner contacted about a pipeline leak near Johnstown. An unknown amount of condensate spilled.
• NOBLE ENERGY INC., reported Nov. 10 that the oil line developed a leak near LaSalle. Between one and five barrels of oil spilled.

Bloomberg Reporting North Dakota Crude Oil Production Down 12% -- In a Bloomberg/Rigzone article linked earlier today, this was reported: Oil production in the Permian is forecast by the government to rise 0.6 percent in December to 2.02 million barrels a day, even as drillers have idled 59 percent of the rigs there in the past year. Output in rival shale fields like the Bakken and Eagle Ford has fallen 12% and 25%, respectively, as drillers pulled out after oil prices crashed last year. From the monthly Director's Cut posting North Dakota crude oil production:

• September, 2015:  1,162,253 (preliminary)
• August, 2015: 1,187,631 (final, revised)
• July, 2015: 1,206,996 (final, revised) 
• June, 2015: 1,211,328 (final)(second highest; highest was December, 2014)
• May, 2015: 1,202,615 (final)
• December, 2014: revised, 1,227,483 bopd (preliminary - 1,227,344 bopd - preliminary, new all-time high)

Doing the math:

• the all-time high: 1,227,483 bopd, back in December, 2014
• the most recent figure: 1,162,253 (preliminary)
• 1,227,483 - 1,162,253 = 65,230 / 1,227,483 = 5.3%

Disclaimer: I often make simple arithmetic errors, and often make factual and typographical errors, but that 12% decrease reported by Bloomberg seemed on the high side.  For the record, 88% of 1,227,483 = 1,080,185 bopd.

At Seeking Alpha: 1,000 Bakken Wells Waiting To Be Fracked -- November 14, 2015 -- From Seeking Alpha:  The number of oil wells in North Dakota that have been drilled but not fracked surpassed 1,000 for the first time in September, as producers wait for prices to recover before turning them on.  As a result, more than 8% of oil wells in North Dakota now are sitting idle, harming the industry's ability to grow production; daily output in the state fell 2% in September to ~1.16M bbl/day.  The backlog is "sending a definite signal to the market that oil and gas operators are not willing to do a lot of drilling or hydraulic fracturing or production at these low prices," says Lynn Helms, director of the state's Department of Mineral Resources, who figures the backlog is not likely to be worked off until next year at least, and only if oil prices rise..  For more of September, 2015, data, click here.

Evidence Of Communication Between TFH Wells -- While looking up this well for other reasons I happened across this little gem, which is another pixel in the Bakken mosaic, helping me to better understand the Bakken. 9564, SI/NC, Statoil, Skarston 1-12 XE 1H, Banks, no production data, I post the following -- a small excerpt -- from the file report on this well: As a measured depth of 20,411', April 4, 2015, the decision was made to stop and circulate out gas while transferring mud and increasing the mud weight. The decision was then made to continue to circulate off bottom while preparation could be made to switch the drilling fluid to oil-based mud. The oil-based mud was then increased to 12 ppg. It was found that even with 12 ppg oil-based mud, the shut in casing pressure (SICP) continued to increase while the well was shut in. It was then decided that the mud weight should be increased further to near 14.2 ppg. This process took several days to complete. It was later discovered that the unidentified mineral was in fact, ceramic proppant. This is sometimes used as frac sand, or in conduction with quartz sand. It was also later confirmed, that there was in fact communication with an adjacent well that had been recently completed.  It was believed that this communication between wells was causing the increased pressure and fluid gains. This adjacent well was the Statoil Johnston 7-6-3TFH. The mud weight was increased to 14.2 ppg....after drilling resumed, the pressure increased, and fluid gains were seen. The decision was then made to shut the well in and circulate bottoms up. This yielded a trip gas of 4,602 units, and a large flare ....

Pipelines now outpacing trucks for gathering Bakken oil – More oil is now gathered by pipeline than truck in western North Dakota, taking pressure off Oil Patch communities faced with congestion, traffic fatalities and dust.  New figures from the North Dakota Pipeline Authority show that for the first time in several years, more oil is leaving well sites by pipeline, and that trend is expected to continue, Director Justin Kringstad said. “We’ve seen some significant progress in the major counties in western North Dakota getting crude off the roadways and into gathering pipeline systems,” Kringstad said. An estimated 441,644 barrels of oil left well sites by truck each day in April, while 725,743 barrels per day were transported by gathering pipelines to either a transmission pipeline or a rail-loading terminal, Kringstad said, using the most recent figures available. All counties saw a reduction in oil truck traffic in 2015, with the exception of McKenzie County, which still had an average of 892 oil truckloads each day in April.

One dead and three injured in PG&E natural gas line explosion southwest of Bakersfield -  One person died and three others were sent to the hospital with second- and third-degree burns Friday afternoon after a natural gas line explosion sent flames hundreds of feet into the air near Houghton and Wible roads southwest of Bakersfield. Flames from the ruptured line could clearly be seen from the top of the City of Bakersfield’s 18th Street parking structure in downtown Bakersfield, at least 10 miles from the blast. “A third party, more than likely a farmer, hit the line with a piece of heavy equipment,” Kern County Fire Department Capt. Tom Ellison said. “The operator of that vehicle was killed.” Witness Marla Proffitt, who supplied dramatic video of the flames from the passenger seat of a pickup, said the fire was such that it “heated the interior of our truck, and the roar was louder than a jet engine. “Unfortunately the vehicle and house (near the blast) were all but gone and a hay barn also was burning,” Proffitt said in a text. “I don’t see how anyone still in the house could’ve survived once the flames got there.” The push of gas and flames threw trees into the air, she said.

Weekly Natural Gas Storage Report - EIA: Working gas in storage was 4,000 Bcf as of Friday, November 13, 2015, according to EIA estimates. This represents a net increase of 15 Bcf from the previous week. Stocks were 404 Bcf higher than last year at this time and 207 Bcf above the five-year average of 3,793 Bcf. At 4,000 Bcf, total working gas is above the five-year historical range.

Natural Gas Tumbles After Stockpiles Hit New Record - WSJ: Natural gas prices sank Thursday afternoon as record high stockpiles and the chance they’ll keep growing led traders to shrug off a brief rally from a smaller-than-expected weekly surplus. Natural gas storage levels reached an unprecedented 4 trillion cubic feet last week, the U.S. Energy Information Administration said late Thursday morning. And weather--though it is not as mild as once expected--is warm enough that many analysts are expecting stockpile additions to continue for at least another week, two weeks beyond what is normal, said John Saucer, vice president of research and analysis at Mobius Risk Group in Houston. “The trend is down and people are looking to sell rallies,” said Scott Gettleman, an independent trader in New York. “Mild weather, big inventories, we’re just setting up for lower.” Prices for the front-month December contract settled down 7.1 cents, or 3%, at $2.276 a million British thermal units on the New York Mercantile Exchange. It is the largest one-day percentage decline since gas sank to a three-year low on Oct. 26. It has lost 4.6% over a three-session losing streak. Prices had seen small gains immediately after the EIA’s data release. It showed producers added 15 billion cubic feet of natural gas to storage in the week ended Nov. 13, 2 bcf less than the average forecast from analysts and traders surveyed by The Wall Street Journal. Because storage levels are high, traders have been reluctant to send more gas to storage and are instead selling it immediately on the spot market, said Aaron Calder, senior market analyst at energy-consulting firm Gelber & Associates in Houston. Physical gas for next-day delivery at the Henry Hub in Louisiana averaged $2.1463/mmBtu Thursday, more than 13 cents below the futures settlement.

Natural Gas Prices Down on Record Stock, Mild Weather -  The U.S. Energy Department's latest weekly inventory release showed an increase in natural gas storage by 15 billion cubic feet. This was below the market expectation of around 23 billion cubic feet but pushed natural gas storage levels to a record 4 trillion cubic feet. As a result, natural gas prices are still averaging less than half of what it did some five to six years ago. With production remaining plentiful and expected to outpace demand for the most of 2015, this fuel is likely to stay depressed for a while.Stockpiles held in underground storage in the lower 48 states rose by 15 billion cubic feet (Bcf) for the week ended Nov 13, 2015, below the guided range (of 17–21 Bcf gain) as per the analysts surveyed by Platts, the energy information arm of McGraw-Hill Financial Inc. However, the increase – the 33rd successive weekly injection – was more than both last year’s build of 11.2 Bcf and the 5-year (2010–2014) average addition of 5.5 Bcf for the reported week. Following last week’s climb, the current storage level – at 4.000 trillion cubic feet (Tcf) – is up 404 Bcf (11.2%) from last year and 207 Bcf (5.5%) above the five-year average. Moreover, with this addition, natural gas inventories are now in the record territory, getting past the previous highest level of 3.985 Tcf set last week. From a peak of about $13.50 per MMBtu in 2008 to just above $2.2 now – sinking in between to a 10-year low of under $2 in 2012 – the plummeting value of natural gas represents a decline of around 80% over seven years. In the absence of major production cuts, we do not expect much upside in gas prices in the near term. Things were made worse by expectations of soft heating demand with forecasts of higher temperatures across certain regions of the U.S. in the short term.

Could The Tide Be Turning Against North American Natural Gas? -- A lot of hope has been pinned on liquefied natural gas (LNG) exports as an outlet for surging North American gas supply. But a couple of events the past week show that getting LNG exports off the ground may be more difficult than most observers have predicted. The biggest potential setback came in western Canada, where it appears that the newly-elected Canadian federal government is making a move to limit offshore shipments of petroleum.Local press reported that new Prime Minister Justin Trudeau has directed the country's Transport Ministry to impose a ban on crude oil tankers for the northern coast of British Columbia. With the directive now expected to be formalized with other government departments including fisheries, natural resources and environment. That's a tough development for oil export projects like the planned Northern Gateway pipeline which was supposed to carry heavy oil to the British Columbia coast for export -- but now appears likely to fall by the wayside. The anti-tanker directive also calls into question planned LNG developments on Canada's west coast. A number of plans are on the books for LNG export terminals here, from firms like Shell and Petronas. But the ban on oil tankers raises the issue of whether LNG vessels might also come under scrutiny -- and potential restrictions -- from the government. At the same time, another government has also rejected coastal LNG -- on the other side of the continent, in the state of New York.  New York's governor Andrew Cuomo said last Thursday that his government is rejecting a proposed LNG terminal off the coast of Long Island with the state saying that security risks and possible damage to fisheries and offshore wind developments make the project unacceptable. All of which suggests that sentiment (as well as economics) may be turning against North American LNG; an important factor to consider as we assess the future for natural gas prices in this key market.

BP Could Get A Huge Tax Break On Its Oil Spill Fine -  When the Justice Department announced a $20 billion settlement with BP over the Gulf of Mexico oil spill, it called the amount “historic.” It did not mention, though, that BP would likely be able to write off a large portion of the settlement — saving $5 billion in taxes.  On Wednesday, a group of 53 House Representatives sent a letter to Attorney General Loretta Lynch, urging her to make sure the deal’s final language closes this loophole. The agreement is currently in a public comment period.  “The ‘gross negligence’ that led to perhaps the worst environmental disaster in US history should not be an opportunity to game the tax code,” the legislators, led by Rep. Raul Grijalva (AZ), write. “Challenging fiscal choices may lie ahead, and every dollar we lose in revenue is a dollar cut from much needed programs, raised from another source, or added to the national debt.” According to the letter, only the $5.5 billion in fines levied under the Clean Water Act are not able to be deducted. The remaining $15.3 billion could be, which the group estimates would save BP $5 billion on its tax bill.

Another Blow For Alaska -- - Seeking Alpha is reporting:

• Statoil says it is exiting its Alaskan operations and closing its office in Anchorage, saying its leases in the Chukchi Sea are no longer competitive within its global portfolio
• the decision means STO will exit 16 operated leases and its stake in 50 leases operated by ConocoPhillips
• it follows Shell's September decision to pull out of controversial drilling off Alaska's Arctic cost after failing to find sufficient signs of oil and gas to make further exploration worthwhile

Statoil announces it will exit Alaska offshore exploration — A second major oil company has abandoned plans to drill in the Arctic Ocean off the northwest coast of Alaska. Statoil announced Tuesday it is giving up 16 of its company-operated leases in the Chukchi Sea. The Norwegian company also is abandoning its stake in 50 Chukchi leases operated by ConocoPhillips. The company on its website said the leases, purchased at a federal lease sale in 2008, no longer made financial sense. “Solid work has been carried out, but given the current outlook we could not support continued efforts to mature these opportunities,” said Tim Dodson, executive vice president for exploration. The leases are set to expire in 2020. The company will close its Anchorage office. The move was not a surprise. Statoil hasn’t drilled any exploratory wells in the Chukchi and the decision comes after Royal Dutch Shell PLC similarly bowed out of exploration in the U.S. Arctic after drilling the only recent exploratory well in the region. Environmental groups contend that tapping into the vast underwater reserves, estimated by the U.S. Geological Survey at 26 billion barrels of conventionally recoverable oil, will accelerate global warming, which is blamed for melting Arctic sea ice and shrinking habitat for polar bears and walrus.

Big oil writes off $US38 billion in assets in September quarter, Energy Information Administration says - The world's big listed oil companies have taken another nasty hit, writing down the value of their assets by $US38 billion in the September quarter. The US Energy Information Administration (EIA) said the oil price driven write-downs were the largest since 2008 at the depth of the global financial crisis. The EIA study of the balance sheets of 46 global and US upstream oil producers showed the lower prices had also contributed to a 33 per cent decline in cash flows despite increased production over the quarter. Royal Dutch Shell led the way with $US8 billion in impairment charges on ditching its Canadian oil sands projects and reducing its proved reserves by 418 million barrels. Other big players suffering the pain include the US shale oil driller Chesapeake Energy, which wrote off $US4 billion on its acreages in August and Whiting Petroleum which took an $US870 million hit over its takeover of Kodiak Oil and Gas just nine months earlier. While not included in the EIA survey, Australian energy producers also racked up heavy impairment charges for the quarter. AGL wrote off $600 million on upstream gas assets in the Hunter Valley, Cooper Basin and Queensland's Moranbah district in July and was followed by Origin Energy $337 million write-down a few weeks later. Among the smaller players, Beach Energy announced a $789 million write-down in value of assets in the Cooper Basin and Egypt in August — a heavy impost for a company with a market capitalisation of around $750 million — while AWE wrote off $158 million on the same day.

U.S. Thirst for Oil Straining International Water Supplies -- Rising energy demand is straining freshwater supplies globally, especially in the developing world, and U.S. oil demand is disproportionately responsible for that strain, a new study says. Global freshwater resources are a critical climate issue because global warming could threaten drinking water supplies for billions of people worldwide, as droughts become more severe, seas rise and precipitation patterns change across the globe. Fossil fuel production is a major freshwater consumer. In the U.S., for example, most new oil and gas wells use millions of gallons of water each. Much oil and gas development is taking place in drought-stricken and arid regions suffering from water scarcity like the Colorado River Basin, a major source of water for Los Angeles, Phoenix and Las Vegas. The study by the University of Southampton in the UK, published Monday in the Proceedings of the National Academy of Sciences, found that petroleum is responsible for most of the global demand for water when it comes to energy production. About 56 percent of all the petroleum sector’s freshwater consumption is international, straining other countries’ water supplies. In other words, oil the U.S. imports from the arid Middle East strains the freshwater supplies of Saudi Arabia and other countries, outsourcing not just oil production but water stress as well.

Oil Demand In The U.S. Can Stress Water Supplies In Countries Thousands Of Miles Away - That’s according to a new study published in the Proceedings of the National Academy of Sciences, which looked at how demand for oil, natural gas, and electricity affected water supplies around the world. It found that a country’s demand for natural gas and electricity tends to result in water resources being taken from the country itself — so, for instance, the water needed to frack a gas well in North Dakota is likely to come from the United States. But oil is different, the study found, because it’s much more likely to have an international water footprint. So when a country like the U.S. imports water from countries like Saudi Arabia, that demand can put a strain on that country’s — and, in some cases, surrounding countries’ — water supplies.   “Our analyses demonstrate that the US petroleum sector is reliant on economic activity in countries/regions of the world that are exposed to significant pressures on renewable freshwater resources (e.g., India, Pakistan) and where it may be difficult to implement the necessary market reforms to safeguard freshwater resources,” the authors write in the study. Worldwide, about 56 percent of the oil sector’s water needs come from countries outside of where demand for that oil originates. In the U.S., about 73 percent of all the water associated with the country’s oil demand comes from international sources. That’s a significant percentage, especially compared to China, where 22 percent of the oil sector’s water needs come from international sources. Most of the water associated with U.S. demand comes from western, southern, and eastern Asia, along with northern Africa — which makes sense, as Climate Central points out, since those regions are the source of much of the country’s oil imports.

Oil industry layoffs climb past 200,000 - Petro Global News: Barely a year and half since oil prices began tumbling, layoffs in the energy industry have already climbed above 200,000. According to Forbes, data collected by Continental Resources shows that layoffs in the oil and gas industry have shot past 200,000 globally, with the service sector bearing the brunt of those cuts. Houston-based Schlumberger has cut about 20,000 jobs since the downturn as upstreams continue to slash spends and put projects on the back burner. Schlumberger chairman and CEO Paal Kibsgaard said in April that, while he expects U.S. onshore drilling to bounce back, a recovery is likely to “fall well short of reaching previous levels, hence extending the period of pricing weakness.” Houston-based Baker Hughes will see its layoff tally rise to 13,000 this year while its pending merger target Halliburton will shed a total of 18,00 jobs, Forbes said. Weatherford International plans to cut another 3,000 jobs by the end of 2015 after laying off 10,000 workers earlier this year. The company is also planning to shut down and consolidate 60operating facilities across North America by the end of the year, in addition to the planned shutdown of seven manufacturing facilities. The transportation sector hasn’t been spared from the layoff pain. Calgary-based TransCanada said in September that it will cut about twenty percent of its senior leadership positions this year and will evaluate the need for further staff cuts.

Enbridge cuts 5 percent of workforce in Canada and U.S. - Canada’s largest pipeline company Enbridge Inc cut 5 percent of its workforce on Monday, a company spokesman said, as low crude prices continued to drag on the North American oil and gas industry. Enbridge spokesman Graham White said the reductions were made across Canada and the United States and represented about 500 employees at all levels and 100 unfilled positions. He said the reductions had nothing to do with the Canadian government’s announcement on Friday that it plans to ban tankers along British Columbia’s northern coast, where Enbridge’s long-delayed Northern Gateway pipeline terminates. “All decisions were made prior to that announcement and Northern Gateway was not impacted by the reductions,” White added. The layoffs at Enbridge follow tens of thousands of other job cuts across the Canadian oil and gas industry as a result of the prolonged slump in global crude prices. Producers have been hardest hit but service providers including pipeline companies are also feeling the pinch. “While Enbridge is more resilient to commodity price downturns than others, we’re not immune,” the company said in a statement, adding it was making the cuts to remain competitive. Rival pipeline company TransCanada Corp is also preparing for more job cuts this week, although a spokesman declined to provide more details until all managers, employees and contractors are notified. TransCanada announced in October that is was eliminating about 20 percent of its directors as slumping oil prices continued to take its on customers.

OPEC Menaced by US Shale Hits Canada Harder in Price Fight - Rigzone: OPEC took a swing at U.S. shale and knocked down Canada.Threatened by surging production from North America, the Organization of Petroleum Exporting Countries has been pumping above its quota for 17 months as it seeks to take market share from higher-cost regions. The resulting 60 percent price crash is hitting Alberta harder than Texas. Canadian producers are struggling to cut the cost of extracting bitumen from the oil sands, and their other wells are failing to match the efficiency gains of U.S. rivals. While output keeps rising in the Permian Basin, the largest U.S. shale play, companies are slowing output from wells in Alberta and have shelved 18 oil- sands projects during the downturn. “OPEC wants to hinder shale from its strong growth trajectory but there are higher-cost producers, such as in the oil sands of Canada, that are in the line of fire,” said Peter Pulikkan, an analyst at BI in New York. “Shale will eventually be impacted but it’s not the first on the list.” In a policy shift a year ago, the 12-nation cartel decided against propping up oil prices, keeping its output target at 30 million barrels a day even as the supply glut worsened. It has exceeded that ceiling since June 2014 and pumped 32.2 million barrels a day in October. In Alberta, high extraction costs and oil price discounts relative to global benchmarks are poised to continue crimping output. Production, excluding bitumen extraction, dropped about 13 percent this year through July, That compares with a roughly 19 percent increase in output from Permian wells over the same period.

Canada says oil pipeline reviews proceed despite process revision – Canada’s environmental review of existing applications for crude oil pipeline projects is continuing despite the new Liberal government’s plans to make the assessment process more robust, Natural Resources Minister Jim Carr said on Wednesday. “They have not stopped. The process continues,” he told reporters on a conference call. “There will be a transition as we amend the ways in which the National Energy Board goes about the process of evaluating these projects, and we will announce those changes as soon as we can, but the process continues.” The Liberal government’s pledge to toughen up the environmental review process for oil pipelines had raised the question of whether existing applications would have to be resubmitted. Key projects are TransCanada Corp’s application for the Energy East pipeline to take oil from Alberta and Saskatchewan to the East Coast, and the expansion of Kinder Morgan Inc’s Trans Mountain Pipeline to the Pacific.

Keystone XL developer ‘committed’ to completing project — The developer of the Keystone XL pipeline remains committed to completing the final leg of the project even though President Barack Obama denied the Canadian company’s request for a federal permit, a spokesman said Wednesday. TransCanada’s announcement came as the company withdrew its application for route approval through Nebraska. Even before Obama rejected the permit Nov. 6, Nebraska had been a major roadblock because of lawsuits filed by landowners and environmental groups. Company officials were scheduled to meet with the Nebraska Public Service Commission on Thursday to discuss the application process. “Although we are withdrawing the application at this time, we are reserving the right to reapply to the (Nebraska Public Service Commission) at a later date and remain committed to completing the final leg of the Keystone Pipeline system,” TransCanada spokesman Mark Cooper said in a statement, noting that the company was still considering what to do next. The pipeline is likely to factor into the 2016 presidential election, because all of the leading Republican candidates who support the project as a job creator and Democratic hopefuls oppose it because of environmental concerns. The pipeline was projected to carry 800,000 barrels a day of crude from Canada and North Dakota to Nebraska, where existing pipelines would bring the oil to Gulf Coast refineries.

Why the oil sands no longer make economic sense - Lost in the political fallout from President Barack Obama’s decision to once and for all reject Keystone XL is the fact that there is no longer an economic context for the pipeline. For that matter, the same can be said for any of the other proposed pipelines that would service the planned massive expansion of production from Alberta’s oil sands. Whether it’s Shell’s decision to scrap its 80,000 barrel a day Carmon Creek project or earlier industry decisions to abandon the Pierre River and Joslyn North mines, the very projects that were going to supply all these new pipelines are being cancelled left and right. At today’s oil prices they no longer make any commercial sense. Western Canadian Select, the price benchmark for the bulk of oil sands production, is trading at $30 (U.S.) a barrel. That gives the oil sands the dubious distinction of being the lowest-priced oil in the world with one of the highest cost structures.  The key reason that Mr. Obama rejected the pipeline is that the U.S. market no longer needs Alberta’s oil sands. Thanks to the shale revolution which has doubled U.S. oil production over the past decade, the security of Canadian oil supply no longer has the same cachet as it once did in the U.S. market. In fact, the explosive growth in U.S. domestic production from fracking shale formations in the Bakken, Eagle Ford and the Permian Basin has spurred the American oil industry to actively lobby the Obama administration to remove the export ban that was imposed after the OPEC oil shocks. But it’s not just the U.S. that doesn’t need the oil sands’ bitumen. Even if Alberta’s landlocked fuel could get to tidewater, it’s no more needed in foreign markets than it is in the U.S. market. Even world oil prices like Brent no longer justify any expansion of the resource. Worse yet, they signal the need for contraction.

Ban looms on crude tankers off northern BC - Canadian Prime Minister Justin Trudeau appears ready to fulfill a campaign promise to ban crude oil tankers off northern British Columbia in a move that would throw the proposed Northern Gateway Pipeline into question. The $6.5 billion, 1,177-km twin pipeline proposed by Enbridge Corp. would carry blended bitumen from Alberta to a terminal at Kitimat, BC, and return diluent to Alberta. Trudeau, whose Liberal party won a pivotal election Oct. 19, has asked new Transport Minister Marc Garneau to make the crude-oil tanker ban a priority, according to press reports.  As a potential link between the Canadian oil sands and global trade, the Northern Gateway proposal gained importance when US President Barack Obama on Nov. 6 rejected TransCanada Corp.’s application for the border crossing of the Keystone XL project, which would have increased pipeline capacity between Alberta and the US Gulf Coast (OGJ Online, Nov. 6, 2015). TransCanada also has proposed a project called Energy East, which would link the oil sands with eastern Canadian provinces and the Atlantic.

Mexico's oil sector in a state of flux - Mexico’s energy relationship with the U.S. is undergoing radical changes as its oil production sags, its refineries produce too much high-sulfur fuel oil and too little gasoline and diesel, and its imports of U.S. natural gas and transportation fuels rise. Add to this already complicated story the Mexican government’s efforts to inject competition and private-sector participation into a national energy sector long-dominated by state-owned Petróleos Mexicanos (Pemex) and that company’s plan to swap light U.S. crude for heavy Mexican oil. In today’s blog, “With A Little Help From My Friends—Mexico’s Oil Sector in a State of Flux,” Housley Carr begins a look at the ongoing transformation of U.S.-Mexico hydrocarbon trade and what it may mean for U.S. players—and Pemex.  A number of RBN posts over the past couple of years have detailed the evolution of the U.S. –Mexican energy relationship. The most significant development to date has been a large increase in Mexican imports of U.S. natural gas – aided by new cross-border pipelines and Mexico’s build out of gas fired power generation assets. More recently we covered the existing and potential market for imports to Mexico of U.S. liquefied petroleum gas (LPG _ a mixture of propane and butane – mostly propane. But the energy trade traffic is not all in one direction. The U.S. is a significant importer of heavy Mexican crude that is refined by Gulf Coast refineries and we have described the battle for market share at those refineries between Pemex and rival Western Canadian oil sands producers. In the past year the U.S./Mexico crude oil relationship has gotten even more complex with the advent of crude oil swaps that we described in “Have Another Swap of Mexican Crude” and which were finally approved to begin in early November 2015 at a rate of 75 Mb/d.

Mexico's reforms aim to boost oil, gas sectors --Eager to boost oil and natural gas production, the government of Mexico is in the midst of a multi-year effort to introduce more private-sector involvement and competition. The hope is that a series of reforms will lead to more investment and—over time—a Mexican energy sector that more closely resembles that of Mexico’s amigos North of the Border. Today, we continue our look at the ongoing transformation of U.S.-Mexico hydrocarbon trade and what it may mean for energy companies on both sides of the Rio Grande.  Since 2010, U.S. crude oil production has risen by 71%--from 5.5 MMb/d in 2010 to an average of 9.4 MMb/d in the first eight months of 2015, according to the U.S. Energy Information Administration (EIA). U.S. natural gas marketed production is also up: from about 61 Bcf/d in 2010 to 79 Bcf/d, on average, in the January-through-August period in 2015, again according to EIA. Over the same period, however, oil and gas production at Petróleos Mexicanos (Pemex)—Mexico’s state-owned energy company and (since 1938) the only producer in that country—has slipped and stagnated. Pemex’s oil production averaged 2.6 MMb/d in 2010 (from a peak of 3.4 MMb/d in 2004, when its Cantarell field in the Gulf of Mexico was going great guns; see upper chart in Figure 1) and has fallen every year since; in the first nine months of 2015 it averaged 2.3 MMb/d.

Shale oil technology could unlock billions of barrels overseas - Adapting the technology that powered the shale oil boom in Texas to the deserts of Saudi Arabia and elsewhere could produce 141 billion barrels of crude, according to research firm IHS. Horizontal drilling and hydraulic fracturing, alongside other technological breakthroughs in recent years, could pump that much oil out of 170 older, largely unproductive fields around the world, from the Middle East to Russia to Latin America. Adapting the technology that powered the shale oil boom in Texas to the deserts of Saudi Arabia and elsewhere could produce 141 billion barrels of crude, according to research firm IHS. Horizontal drilling and hydraulic fracturing, alongside other technological breakthroughs in recent years, could pump that much oil out of 170 older, largely unproductive fields around the world, from the Middle East to Russia to Latin America.  In its initial assessment, IHS found the 96 percent of the oil that could be recovered from those fields would have to be released using hydraulic fracturing, a process of blasting water, sand and chemicals underground to crack open tough rock formations. And drilling horizontally would allow oil producers including Saudi Aramco, Russia’s Gazprom and Mexico’s Pemex to tap into thinner bands of rock that conventional, vertical drilling couldn’t reach. “Horizontal wells allow engineers to connect compartmentalized portions of the reservoir with one well instead of many vertical wells, which addresses cost and footprint considerations,” IHS upstream researcher Leta Smith said in a written statement.  But where would these technologies help the most? IHS says Iran, Russia, Mexico and China have the most potential. Nearly 70 billion barrels could be squeezed out of the Middle East, and 25 million out of Latin America

Report recommends higher fines for resource companies contravening fracking regulations - ABC News (Australian Broadcasting Corporation): Resource companies could face increased fines and be banned from using certain chemicals under recommendations contained in a wide-ranging West Australian report into the controversial process of hydraulic fracturing. The report, by an Upper House parliamentary committee, made 12 recommendations to beef up the regulation of the industry but conservationists say they do not go far enough. The committee spent two years conducting the public inquiry into the implications of the practice, known as fracking, which is used to extract unconventional gas. The process has faced strong opposition from communities in the Mid West and Kimberley which are concerned about its impact on the environment, groundwater and farming practices. Committee chairman Simon O'Brien said the recommendations tightened safeguards facing resource companies.The report recommends a range of changes including the establishment of an independent arbiter for gaining access to land, full public disclosure of chemicals used in the process and increasing the penalties facing resource companies for not adhering to regulations.

Brazil prosecutors say bribes paid in Petrobras Texas refinery deal - Brazilian police and prosecutors investigating corruption at Petroleo Brasileiro SA said on Monday they have evidence that bribes were paid as part of the state-run oil company's $1.2 billion purchase of Pasadena Refining Systems Inc in 2006. At a news conference announcing a new round of searches, seizures and arrests, federal prosecutor Carlos Fernando dos Santos Lima said the bribes related to the U.S. Gulf Coast-based refinery could lead to the cancellation of the purchase. After Monday's police operation, two were arrested and five brought in for questioning, prosecutors said, the latest twist in a nearly 20-month probe of price-fixing and political kickbacks at the company known as Petrobras. "This case is important because, who knows, we might be able to annul the sale or recover assets belonging to the Brazilian public," Lima told reporters in Curitiba, Brazil where the investigation is being run. The prosecutor did not say how a U.S.-based transaction could be canceled, but throughout the corruption prosecution, serious efforts have been made to return illegally diverted funds to the government or Petrobras. The prosecutor said Petrobras lost $792 million in the purchase of the 100,000-barrel-a-day refinery from Astra Oil, a unit of Belgian-controlled Astra Transcor Energy. He also alleged that Petrobras overpaid for the facility, claiming it was in terrible condition when acquired.

Future Of Brazil's Oil Industry In Serious Doubt -- Oil market analysts keep a close watch on the weekly and monthly production figures from the U.S. EIA, watching for a sign that a contraction in output will help to balance global supply and demand. Still, it is useful to pay attention to supply changes from outside the U.S. For example, in its November report, OPEC raises a few red flags on Brazil, where a deteriorating economy, a simmering corruption scandal, and a major pullback in the state-owned oil firm Petrobras, could all conspire to cut into Brazil’s oil output. Brazil is expected to increase oil production by 180,000 barrels per day in 2015, hitting 3.04 million barrels per day (mb/d). But 2016 is a different story. Petrobras has been embroiled in a corruption scandal since last year, which has cost the company tens of billions of dollars. Given that Petrobras was already the most indebted oil company in the world, major cut backs in spending were in order. OPEC sees Brazilian oil production plateauing as soon as next year. That is a pretty significant development considering the fact that, not too long ago, Petrobras thought output would continue rising rapidly through the rest of the decade. But Petrobras is slashing investment in its mature oil-producing assets in the Campos Basin, where much of Brazil’s output comes from. These large fields have steep decline rates, and the losses are starting to show up in the data. OPEC cites the Marlin field, a field that produced 240,000 barrels per day in 2014, but suffered a staggering decline in output this year, dropping 30 percent (although some of that is due to maintenance). Several other significant fields, including Roncador in the Campos Basin, have also posted declines recently, even though, again, Petrobras attributes the slump to maintenance.

Petrobras's Dangerous Debt Math: $24 Billion Owed in 24 Months -  The debt clock is ticking down at Brazil’s troubled oil giant, Petrobras. Next up: $24 billion of repayments over 24 months. That’s a towering hurdle for a company that hasn’t generated free cash flow for eight years and whose borrowing rates are soaring. Annual debt servicing costs have doubled to 20.3 billion reais ($5.4 billion) in the past three years.  The delicate task of managing the massive $128 billion mound of debt accumulated by Petroleo Brasileiro SA -- 84 percent of it in foreign currencies -- falls to the two banking veterans parachuted atop the company earlier this year, CEO Aldemir Bendine, 51, and Chief Financial Officer Ivan Monteiro, 55. The pair came from the state-controlled Banco de Brasil to contain the damage from the biggest corruption scandal in the country’s history. While prosecutors continue to grind away at years of suspicious dealings, Act II for the boys from the Bank of Brazil will further test their mettle. The challenge of Petrobras’s runaway debt, which has grown four-fold in five years, has been exacerbated by low oil prices, a weak currency and the Brazilian government’s own fiscal travails. “If you considered them to be totally independent and there were no chance of any kind of government support, I think the risk of default would certainly be there in a big way,”

IEA Says Record 3 Billion-Barrel Oil Stocks May Deepen Rout - Oil stockpiles have swollen to a record of almost 3 billion barrels because of strong production in OPEC and elsewhere, potentially deepening the rout in prices, according to the International Energy Agency. This “massive cushion has inflated” on record supplies from Iraq, Russia and Saudi Arabia, even as world fuel demand grows at the fastest pace in five years, the agency said. Still, the IEA predicts that supplies outside the Organization of Petroleum Exporting Countries will decline next year by the most since 1992 as low crude prices take their toll on the U.S. shale oil industry. “Brimming crude oil stocks” offer “an unprecedented buffer against geopolitical shocks or unexpected supply disruptions,” the Paris-based agency said in its monthly market report. With supplies of winter fuels also plentiful, “oil-market bears may choose not to hibernate.” Crude has dropped about 40 percent in the past year as OPEC defends its market share against rivals such as the U.S. shale industry, which is faltering only gradually despite the price collapse. Oil inventories are growing because supply growth still outpaces demand, the 12-member exporters group said in its monthly report Thursday. Total oil inventories in developed nations increased by 13.8 million barrels to about 3 billion in September, a month when they typically decline, according to the agency. The pace of gains slowed to 1.6 million barrels a day in the third quarter, from 2.3 million a day in the second, although growth remained “significantly above the historical average.” There are signs the some fuel-storage depots in the eastern hemisphere have been filled to capacity, it said.

The Stunning Visualization Of The World's 3 Billion Barrel Oil Glut -- While talk of record backlogs of supertankers and an unprecented 3 billion barrels of crude oil stock-piles sound impressive - and are weighing on crude prices - the following stunning image provides some context for just what this means... If the 3 billion barrels of crude oil gluttiness was put into tankers, the line would reach a stunning  530 kilometers... As we previously noted, via Bloomberg, Oil stockpiles have swollen to a record of almost 3 billion barrels because of strong production in OPEC and elsewhere, potentially deepening the rout in prices, according to the International Energy Agency. This “massive cushion has inflated” on record supplies from Iraq, Russia and Saudi Arabia, even as world fuel demand grows at the fastest pace in five years, the agency said. Still, the IEA predicts that supplies outside the Organization of Petroleum Exporting Countries will decline next year by the most since 1992 as low crude prices take their toll on the U.S. shale oil industry. “Brimming crude oil stocks” offer “an unprecedented buffer against geopolitical shocks or unexpected supply disruptions,” the Paris-based agency said in its monthly market report. With supplies of winter fuels also plentiful, “oil-market bears may choose not to hibernate.”Total oil inventories in developed nations increased by 13.8 million barrels to about 3 billion in September, a month when they typically decline,according to the agency.

Should we worry as oil stocks hit 3 billion barrels? - Commentators have seized on the 3 billion figure as a shorthand way to convey how oversupplied the oil market has become. Large round numbers exert a powerful pull on the imagination but shorn of context they are meaningless and apt to confuse rather than illuminate. The statistic is technically accurate but the way in which it is being employed by analysts and journalists is hugely misleading. It would be more helpful to report the change, which is 240 million barrels, or 9 percent, over the last year.The 3 billion barrels figure being widely quoted is actually for a relatively small subset of the total crude and products being stored. Global stocks of crude oil and refined products are probably at least double this figure, at more than 6 billion barrels. Oil producers, traders, pipeline operators and refiners held crude and products stocks in the OECD countries amounting to 2.989 billion barrels in September, according to the IEA (“Oil Market Report” Nov 2015). But the figure excludes government-controlled stocks in the OECD, private and government stocks in emerging markets, oil in transit by tanker, as well as all stocks held by wholesalers and end-users. OECD governments controlled a further 1.581 billion barrels of oil and refined products stocks as emergency reserves, taking total stocks on land in OECD countries to almost 4.6 billion barrels, according to the IEA. Developing countries tend to hold smaller stocks in private and government-controlled storage but they account for half of global oil demand and could easily be holding another 1 billion barrels of stocks.The impression is sometimes given that stocks are sitting idle waiting for an upturn in demand before being consumed, but holding large volumes of stock at all points in the supply chain is an operational necessity.

Beware Buying Crude: Oil Storage Is "Increasingly Full" -- If you follow geopolitics and the oil market (and really, you can’t follow the latter without following the former) you might be wondering whether the tragedy that took place in Paris last Friday may be enough to override the fundamentals for a while.  That is, if ever there were a catalyst that had a chance of bringing about a sustained rally in crude, surely the prospect of World War III starting in the Middle East is it.  Well, before you get any ideas about BTFD-ing via some nightmare of a triple leveraged crude ETF, you might want to consider that no matter how close we get to a global conflict in Syria, the world is simply awash in black gold and with more Iranian supply set to come online starting as early as Q1, the fundamental picture will likely overshadow all other concerns. Or at least that’s Citi’s take.  “The Paris tragedy may warrant some uptick in geopolitical premia but this is likely trumped by near-term negative impacts on European air travel and/or economic blowback, adding further weight to the market,” Chris Main writes, in a note out Tuesday.  As Main goes on to note, there simply isn’t much on-land storage left and once the Iranians are up and running at full capacity, the “problem” will only get worse. Consider the following: On-land storage is getting increasingly full, with Citi estimating around 47-m bbls of available ex-US commercial storage left. Oil in “quasi-storage”, which is oil on the water that is yet to be delivered but has not been earmarked for floating storage, is on the rise at ~100-m bbls of combined crude and oil products.

Tanker rate spike dents efforts to store oil glut at sea - Record high freight rates are creating more headaches for traders looking to house millions of barrels of unsold crude oil and who already face potential losses due to record high stocks. They have to decide on whether to use tankers for longer term storage until they can sell their cargoes, or dump them at even more discounted prices in order to keep wells running. This is expected to come at a bigger cost as rates for supertankers have soared – reaching their highest since 2008 at over $100,000 a day last month and currently around $70,000 a day. Some have already been caught out with extra oil, and had no choice but to keep it on vessels. Trade sources said the expensive freight meant this was not a money-making play – and is unlikely to become one any time soon. “They’re losing money, and they want to place the vessel as fast as possible,” said Eugene Lindell, senior crude market analyst with JBC. “It’s putting pressure on anyone who has to take a vessel out.” Booking a supertanker on a one-year time charter has also spiked to over $50,000 a day – double the rate last year – with the overall monthly cost of storing oil on a vessel estimated at just over $2 million.

Oil Prices Poised to Surge: Just last week, The Financial Times’ headline said it all: Oil Glut to Swamp Demand Until 2020. The report was based on the dire assessment of the International Energy Agency. Thanks to China’s slowing growth, said one of the group’s bureaucrats, “We are approaching the end of the single largest demand growth story in energy history.” But amid the hand-wringing, a new global oil player is coming in off the sidelines: India. And India could change the demand dynamic yet again for the oil industry — and ultimately, oil prices. India produces some of its own oil. But as the U.S. Energy Information Administration noted last year, the country is increasingly dependent on imported fossil fuels. The agency ranks India as the fourth largest consumer of oil imports behind the U.S., China and Japan. Other groups, using more updated data, rank India third. But as the Oxford Institute for Energy Studies recently noted, India’s oil demand broke out to even higher levels in a trend that started in December last year. By February, oil consumption rose to a record 3.91 million barrels a day, the second highest ever recorded in the country. The trend continues despite the removal of fuel subsidies and the imposition of excise taxes by the reformist Modi government. What’s going on? For one, Indians are learning to love cars. When many of us think of India’s transportation networks, we think of creaky overcrowded trains, millions of motorcycles and ubiquitous three-wheeled “auto rickshaws” on narrow streets. Cars weren’t really a significant economic factor in energy demand.Yet last month, passenger car sales rose 22%, the fastest pace in nearly five years. In fact, in that same half-decade period, car sales rose more than 33% to 2.6 million total passenger vehicles a year.

Why Oil Production Is Increasing, Despite the Oil Glut - WTI closed at $42.93 yesterday, down 1.4% in the six intervening sessions. Meanwhile, Brent was at $45.83, down 9.3%. Both are sitting at two-month lows. The “culprit” was another anticipated rise in production, primarily in the U.S. Despite weekly declines in the number of working rigs in the American market (now at the lowest levels in some six years) and, as I noted in the last Oil & Energy Investor, rising cuts in capital commitments for new projects, the market surplus in oil is once again rising. Crude oil prices are languishing in the face of what is projected to be another build in U.S. production stockpiles. Given all that has been said about an oil glut, why is the production continuing? There are two overriding answers. First, as the surfeit of shale and tight oil production hit the market a year ago, and continued thereafter, developments in field technology advanced even quicker. When oil prices were north of $80 a barrel, operational costs were of little consequence. The primary reason for the current consistent surplus arises from the introduction of more efficient field operations, allowing cash-strapped companies to continue production even as the wellhead price (the producer’s revenue from the first exchange of oil, always lower than the resulting market price) went down. That set the stage for the second factor. Given that 80% or more of overall project expenses are front loaded (that is, spent before anything comes out of the ground), a company will want to recover investment by a resulting oil flow… even if that flow is feeding into an oversupplied and lower-priced market.  This need to sell what comes up is accentuated by the intensifying fiscal squeeze now under way. Most operators are carrying heavy debt. Previously in a higher-priced market companies would simply roll over that debt into new paper. Unfortunately, energy debt now occupies the most risky range of “junk bonds” (high-yield debt well below investment grade).

Oil Weakness Accelerates, Slams OPEC Export Price Below $40 For First Time Since Feb 2009 --  Overnight saw a significant ramp higher in crude prices as, presumably, the Paris attacks sparked further Mid-East tension fears and increased the war premium (as Japanese economic growth raises more demand conccerns). But that has all gone now as WTI Crude nears a $39 handle once again... And, for the first time since February 2009, OPEC Oil Basket price has traded with a $39 handle.  As Bloomberg notes, the daily OPEC Basket Price fell to $39.21 a barrel on Nov. 13,according to an e-mail on Monday from the organization’s secretariat in Vienna. The basket, an average of export grades from each of the group’s 12 members, typically trades below international oil futures as some OPEC nations pump denser or higher-sulfur crude that’s less profitable to refine.  Charts: bloomberg

Jack Kemp's Weekly Energy Tweets -- November 18, 2015:

• California's gasoline demand growth slowed over the summer. Article at Reuters.
  US gasoline stocks are in line with long-term seasonal average when adjusted for increased consumption. [There are several story lines in that sentence.]
  US refined products stocks -- the line if off the graph -- were unchanged last week after 8 straight weeks of drawdowns.
  US commercial crude stocks were unchanged last week after seven weeks of large builds.The line is still almost off the chart.
  US refiners continued to return from maintenance with processing up another 137,000 bopd to 16.1 million bopd. The line is slightly above last's year line, which set the top for the past ten years.
  US propane market remains severely oversupplied with another counterseasonal build to a new record of 104 million bbls. The graph is incredibly staggering. Last year, propane stocks set a 10-year record at 80 million bbls; last week: 104 million bbls. The 10-year low was around 25 million bbls.
  Residual fuel oil stocks continue to climb and are now at the highest seasonal level for more than a decade (for this time of the year; stocks have been higher in the second quarter in the last decade.
  US distillate stocks were little changed last week either nationally or along the East Coast.
  Polar vortex could see temperatures plunge early in 2016. Times of Malta is reporting.
  Rhine River (Germany, Europe) water levels are at record low disrupting fuel shipments to central European markets.
  Platts is tweeting:Saudi Arabian crude oil exports were up 113,000 bopd to 7.11 million bopd; total ouptut fell to 10.226 million bopd fro 10.265 milion bopd.
  EIA is tweeting: US commercial crude oil inventories were up 300,000 bbls; refinery utilization at 90%.

Oil boosted by smaller than forecast U.S. stockpile growth – Oil prices gained on Wednesday after U.S. data showed a smaller than forecast build in crude inventories, but analysts said a global supply glut would keep prices under pressure. Brent crude futures were up 35 at $43.92 per barrel by 1549 GMT after settling 99 cents lower the day before. U.S. crude futures were up 28 cents at $40.95 a barrel. U.S. crude stocks nudged higher last week even as imports fell and refiners ran even harder, while gasoline stocks increased and distillate inventories fell, data from the Energy Information Administration showed on Wednesday. “The data was moderately bullish as crude stocks built less than expected, driven by increased refinery utilization, which generated a build in distillates and gasoline stocks,” said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland. Crude inventories rose by 252,000 barrels to 487.3 million barrels in the last week, compared with analysts’ expectations for an increase of 1.9 million barrels. Eight straight weekly increases have boosted stockpiles to close to their modern-day record 490.9 million barrels in April. Despite the gains on Wednesday, most analysts expect prices to remain low for the rest of the year and into 2016 as production continues to outpace demand.

Oil down as US stockpiles edge up to near record highs - Oil fell to near three-month lows and U.S. crude futures slipped to below $40 a barrel before settling higher on Wednesday as short-covering lifted a market initially suppressed by worries about a global supply glut. U.S. crude inventories grew by 252,000 barrels last week, according to data from the Energy Information Administration (EIA) that came in below a 2 million-barrel build forecast by analysts in a Reuters poll. The smaller-than-expected stockpiles growth convinced some traders and investors to cover short positions in late trading, helping oil prices recover. Crude futures tumbled earlier after the EIA data showed the eighth straight week in builds leaving inventories at 487.3 million barrels, within a hair of the April record of 490.9 million. U.S. crude's West Texas Intermediate (WTI) futures settled up 8 cents at $40.75 a barrel, after hitting a session low at $39.91. The last time WTI traded below $40 was on Aug. 27. Brent settled up 57 cents, or 1.3 percent, at $44.14, helped by a relatively better outlook for the global crude benchmark versus WTI.

Crude Tumbles To $40 Handle After DOE Confirms Significant Cushing Inventory Build -- Following last night's API-reported surprise inventory draw (but major Cushing build), DOE reports a modest (as expected) inventory build (of 252k barrels) - the 8th week in a row. Most crucially, given rising fears of the fullness of land storage capabilities, is DOE confirmed a significant 1.495mm barrel inventory build at Cushing. Total crude produiction fell a tiny amount (after 3 weeks of rising). WTI Crude oscillated a little before timbling back to a $40 handle once again - erasing the API kneejerk gains.Another major inventory build at Cushing... And WTI erases the algo gains overnight... As we noted earlier, In short: "The US is the last place with significant onshore crude storage space left." Which leads directly to Citi's conclusion: "'Sell the rally' near-term as fundamentals remain very sloppy and inventory constraints are becoming increasingly more binding." Charts: Bloomberg

WTI Tumbles Back Below $40, Goldman Warns Risk Of "Sharp Leg Lower"- After an exuberantly-shaped recovery of hawkish fed minutes, WTI Crude (Dec contract) has tumbled back below $40 this morning following warnings from Goldmn Sachs of the potential for a "sharp leg lower" to $20 handle given expectations for warmer-than-normal weather this winter. As Goldman Sachs notes, Risks of a sharp leg lower remain elevated: Our forecasts reflect our belief that “financial stress” can solve the current market imbalances, by gradually reducing excess supply capacity as demand recovers. We believe however, that there are high risks that this may prove too slow an adjustment as inventories continue to accumulate. This is particularly the case in the oil market where storage utilization is nearing historically elevated levels. The risk of markets adjusting through “operational stress”, when a surplus breaches logistical capacity such that supply can no longer remain above demand, rather than financial stress, is now much greater. Mild winter weather over the coming months (a concerning risk given current El Niño conditions) could see weak heating demand in the US and Europe. If this materializes, it would likely be the trigger for adjustments through the physical market, pushing oil prices down to cash costs which we estimate are likely around $20/bbl (see New Oil Order: Too full for comfort, published October 25, 2015 for more details). As such a drop in spot prices to cash costs would force rapid adjustments, it would likely be followed by periods of stronger returns in both spot and roll returns, as historically has been the case (1986, 1988 and 1998). Charts: Bloomberg

Goldman eyes $20 oil as glut overwhelms storage sites - Telegraph: The world is running out of storage facilities for surging supplies of oil and may soon exhaust tanker space offshore, raising the chances of a violent plunge in crude prices over coming weeks, experts have warned. Goldman Sachs told clients that the increasing glut of oil on the global market has combined with mild weather from a freak El Nino this winter. The twin-effect could send prices plummeting to $20 a barrel, the so-called ‘cash cost’ that forces drillers to abandon production. “Risks of a sharp leg lower remain elevated,” it said. Oil has fallen from $110 a barrel early last year and is hovering near $40 for US crude, and $44 for Brent in Europe. The US investment bank said the overall glut in the commodity markets may take another twelve months to clear. It cited ‘red flag’ signals on the Shanghai Future Exchange over recent days. Copper contracts point to “imminent weakening” in China’s ‘old economy’ of heavy industry and construction, it said.The warnings came as OPEC producers and Russian companies fight a cut-throat battle for market share in Europe and Asia. Saudi Arabia is shipping crude to Poland and Sweden for the first time, poaching new customers in the Kremlin’s traditional backyard. Iraq is selling its low grade ‘Basra heavy’ crude on global markets for as little as $30 a barrel as the country runs out of operating cash and is forced to cut funding for anti-ISIS militias. Iraq is seeking a large rescue loan from the International Monetary Fund. “The drop in oil prices is a difficult test for us,” said premier Haider al-Abadi. It is estimated that at least 100m barrels are now being stored on tankers offshore, waiting for better prices. A queue of 39 vessels carrying 28m barrels is laid up outside the Texas port of Galveston, while the Iranians have a further 30m barrels offshore ready to sell as soon as sanctions are lifted.

Oil slides again as focus returns to heavy glut – Oil prices fell on Thursday, with U.S. crude dipping below $40 per barrel, retreating from early gains amid a persistent global glut of crude and refined fuel. Brent crude futures were down 20 cents at $43.94 a barrel by 1411 GMT. Rising U.S. stockpiles served as the most visible evidence of oversupply in oil markets. Goldman Sachs said on Thursday there remained a downside risk to oil prices “as storage utilization continues to climb.” The bank added that “we don’t believe that current prices present an appealing entry point.” “Ultimately the focus will return to the balance of demand relative to supply, and until inventory data provides evidence of a tighter supply, the path of least resistance will be lower,” CMC Markets chief market analyst Michael Hewson said. International benchmark Brent is down nearly 12 percent this month and 24 percent this year, having slumped from as high as $115 in 2014. Brent has not closed higher for two consecutive days since early October. U.S. crude last traded down 64 cents at $40.11, having touched $39.89, the lowest since August. The contract fell below $40 for the first time since August on Wednesday.

Oil trades near three-month low as excess supply takes toll – Brent crude oil futures gained some ground on Friday but remained near three-month lows as the pressure of a persistent supply glut limited optimism for a price recovery. Brent crude struggled to hold onto small gains as the overhang that has cut prices by more than 10 percent this month continued to weigh on the market. “The drivers that pushed prices lower are still there,” said Hamza Khan, head of commodity strategy at ING, pointing to the strong dollar and increasingly efficient U.S. shale operations in addition to the overhang of physical oil. “Any rally today is going to have a difficult time finding traction.” The front-month Brent crude contract was 20 cents higher at $44.38 a barrel at 0950 ET. The contract finished 4 cents higher on Thursday at $44.18. U.S. WTI crude traded 30 cents lower at $40.24 per barrel. Earlier in the day, it dipped to $39.88, a low since Aug. 27. The strength of the U.S. dollar, near seven-month highs, has a negative impact on crude prices, making oil and other commodities more expensive for holders of other currencies.

Oil Finds Some Support As WTI Hits $40 -- Oil prices continued to test a lower bound at $40 per barrel, but have so far resisted plunging much below that level. The story has been the same for the past few weeks: production in the U.S. is inching down, but slowly. Meanwhile, storage levels have climbed. This past week, crude inventories leveled off after several weeks of gains, perhaps portending a coming drawdown. Still, bearish sentiment persists.  Goldman Sachs published yet another bearish prediction for crude oil, once again raising the possibility that oil will drop as low as $20 per barrel. With storage levels near record levels not just in the U.S., but also around the world, there is not a lot of room on the upside for prices, while there increasingly seems to be room on the downside. The Wall Street Journal estimates that 37 oil and gas companies have filed for chapter 11 bankruptcy protection so far this year, as the financial storm from low crude prices overwhelms their ability to keep the lights on. The bankruptcy cases account for more than $13.1 billion in outstanding debt among the companies involved. Still, despite the wave of bankruptcies, the industry is not consolidating as fast as many previously anticipated, which appears to be delaying market adjustment. Mexico’s state-owned oil company Pemex announced that it would be willing to market oil and gas extracting from producers that win an upcoming auction in December. Mexico has opened up its energy sector and has held a few rounds auctioning off offshore tracts, but has not garnered as much interest as it would like. Pemex’s offer to market oil and gas for private producers could offer a degree of certainty to companies on the fence about bidding in the auction, providing some assurances about how to move product to market.

U.S. oil drillers cut rigs for 11th week in the last 12 – Baker Hughes -- U.S. energy firms cut oil rigs for an 11th week in the last 12 this week, data showed on Friday, a sign drillers were still waiting for higher prices before returning to the well pad en masse. Drillers removed 10 oil rigs in the week ended Nov. 20, bringing the total rig count down to 564, oil services company Baker Hughes Inc said in its closely followed report. That is about a third of the 1,574 oil rigs operating in same week a year ago. After cutting 103 oil rigs over the past two months, drillers added two rigs last week. U.S. oil futures averaged $41 a barrel so far this week, down from $43 last week, as crude inventories rose for the eighth consecutive week and were inching closer to record highs. Crude oil futures on Friday fell below $40 for a third day in a row to the lowest level since August as the pressure of a persistent supply glut limited optimism for a price recovery. The strength of the U.S. dollar, near seven-month highs, has a negative impact on crude prices, making oil and other commodities more expensive for holders of other currencies, analysts said. Energy traders noted the rate of weekly oil rig reductions since the start of September, about nine on average, was much lower than the 18 rigs cut on average since the number of rigs peaked at 1,609 in October 2014, due in part to expectations of slightly higher prices in the future.

Oil rig count resumes plunge, with Permian among hardest hit - Fuel Fix: The number of active oil rigs in the U.S. resumed its steep decline this week, falling by 10, oil field services company Baker Hughes said Friday. The total number of oil rigs still operating now stands at a five-year low of 564, less than half the 2014 high of 1,609 just over a year ago. The number of natural gas rigs stayed the same this week at 193. The rig count has fallen for nine of the last 10 weeks For most of 2015, Texas oil fields have led the pullback in rigs. But on Friday, Baker Hughes data showed that Texas gained three rigs in the last week, with losses coming in three other states. Wyoming and Colorado each shut down three rigs, and Oklahoma shut down four. Texas’ biggest oil and gas field, the Permian Basin in West Texas, idled five rigs last week, but gains elsewhere made up for that loss statewide. The oil rig count for the Permian stood at 219 Friday, Baker Hughes said.

US oil for December delivery settles at $40.39 a barrel, down 0.4%: U.S. crude held support at above $40 a barrel while Brent futures gained about 1 percent. A firmer dollar had weighed on oil earlier as commodities denominated in the greenback became less affordable to holders of other currencies such as the euro. U.S. crude futures had also struggled to stay above $40 as worries about large domestic oil stockpiles pressured the market's spot contract ahead of its expiry. Brent futures were up 40 cents, or 0.88 percent, at $44.57 a barrel.U.S. crude's West Texas Intermediate (WTI) futures for December delivery — which expired Friday —settled down 15 cents, or 0.4 percent, at $40.39 a barrel. "WTI couldn't convincingly push below $40 despite a few attempts today and that's what probably what led to the late support before contract expiry," "We've also hit technical oversold levels on both Brent and WTI, making the pre-weekend short-covering logical." Crude prices were supported as well by the latest weekly reading on the U.S. oil rig count, which showed a drop of 10 rigs this week. The data, compiled by industry firm Baker Hughes, is an indication of U.S. oil production in coming months. While WTI held above $40, its spot December contract reached a record discount, or contango, of nearly $2 a barrel to nearby January, showing traders' reluctance to bid oil up in the near term. On a continuation-basis, the front-month's discount, or contango, to the second month was the largest since late April.

Oil traders prepare for next big price drop in March 2016 - Oil traders are preparing for another downward turn in prices by March 2016, market data suggests, as what is expected to be an unusually warm winter dents demand just as Iran’s resurgent crude exports hit global markets after sanctions are ended. Crude futures have already lost around 60 percent of their value since mid-2014 as supply exceeds demand by roughly 0.7 million to 2.5 million barrels per day to create a glut that analysts say will last well into 2016. Goldman Sachs said that there was a substantial risk of a “sharp leg lower” in oil prices. “Mild winter weather over the coming months could see weak heating demand in the U.S. and Europe,” it said. This “would likely be the trigger for adjustments through the physical market, pushing oil prices down to cash costs, which we estimate are likely around $20 per barrel,” the bank added. A recent steep rise in March put option positions tied to a $35-per-barrel strike price in Brent and West Texas Intermediate (WTI) crude suggests traders agree with the bank and expect the major benchmarks to slump in coming months. For WTI, put positions at the $30 strike price have more than doubled since Nov. 10, but have stayed flat at a more modest level for Brent. This is in accord with a broadly held view that while oil prices in general will remain under pressure over the medium term, WTI prices may fall faster and further than Brent.

Russia says OPEC unlikely to cut output at December meet - agencies – Russian Energy Minister Alexander Novak said he does not expect the Organization of the Petroleum Exporting Countries to take steps to cut oil output at a meeting on Dec. 4, Russian news agencies Interfax and TASS reported. “I consider it unlikely, taking into account the position of the biggest producers,” TASS quoted Novak as saying. Novak also reiterated that Russia would not deliberately cut its own oil output. “We are not going, let’s put it like this, to lower oil production volumes,” Novak was quoted by TASS as saying. “In general we focus on the total amount laid out in the strategy (of energy sector development): around 525 million tonnes (10.5 billion cubic meters per day),” Novak said. He said earlier that Russian oil production was expected to rise to a post-Soviet record of 533 million tonnes (10.66 million barrels per day) this year after 526.7 million in 2014 but could fall by between 5 and 6 million tonnes in 2017 from the current level due to a rising tax bill.

Scant signs of Russia – OPEC output cut deal ahead of Vienna meeting – There is little likelihood Russia will work with OPEC on cutting oil output ahead of or on the sidelines of a meeting of the exporter group in Vienna next month, officials and industry insiders say. OPEC made a historic policy shift late last year, led by Saudi Arabia and backed by its Gulf allies, and refused to cut production to prop up sliding prices in order to defend market share. The group confirmed the strategy at a meeting in June. Organization of the Petroleum Exporting Countries ministers will meet on Dec. 4 to coordinate the group’s production, and a delegation from Russia, which accounts for about 12 percent of global oil output, may take part in a pre-meeting consultation once again. A source close to the consultations said that Venezuela, an OPEC member which has been a proponent of output cuts, is keen to organize a meeting with non-OPEC countries beforehand. “Russia’s stance has not changed: we will make no cuts in oil production,” the source said. Russia, which depends heavily on oil revenues for its budget, has so far staunchly resisted making cuts to production, in part because it is locked in a battle for market share and knows a cut could see it cede ground.

Large-scale MENA oil investment must continue to sustain industry: Naimi -  Arab oil producers will need about $700 billion in financing for petroleum sector projects over the next 10 years to assure the sustainability of the Middle East and North Africa region's key industrial sector, Saudi Arabia's oil minister said Thursday. Forecasting a continued rising trend in global oil demand to the tune of about 1 million b/d, despite the current market oversupply and sluggish world economic growth, Ali al-Naimi said annual depletion from producing fields was running at about 4 million b/d. He calculated that the petroleum industry would need to add 5 million b/d of new production every year to satisfy future demand. "This needs financial solutions at the Arab and international level. Investment should include all the phases of production and manufacturing," he said during a keynote speech at the Apicorp Energy Forum in Bahrain. In the context of the sustained slump in oil prices since mid-2014, which officials addressing the forum described as a financial and economic crisis for Arab countries, petroleum sector sustainability in the Middle East and North Africa region emerged as a key concern during a ministerial panel session.

Saudis Planning For A War Of Attrition In Europe With Russia's Oil Industry - Russia’s central bank recently warned about the growing financial risks to the Russian economy from Saudi Arabia encroaching upon its traditional export market for crude oil. Russia sends 70 percent of its oil to Europe, but Saudi Arabia has been making inroads in the European market amid the oil price downturn. The result is a heavier discount for Russia’s crude oil, the so-called Urals blend.Bloomberg reported that the Urals typically lands in Rotterdam, a major European destination, at a discount to Brent of around $2 or less. But the discount has widened to $3.50 lately due to increased competition from Saudi Arabia. “Oil supplies to Europe from Saudi Arabia are probably adversely affecting Urals prices,” the Russian central bank warned in a recent report.  Russian officials have accused Saudi Arabia of “dumping” its oil in Europe, a move that Rosneft chief Igor Sechin said would “backfire.” Russia’s economy has been battered by the collapse in crude prices, compounded by the screws of western sanctions. The Russian economy could shrink by 3.2 percent this year.  Oil exports account for around half of the revenue taken in by the Russian government. And for an economy so dependent on oil, it is no surprise that the plummeting crude oil price has led to a dramatic depreciation of the ruble, although over the past month the currency regained some lost ground. The weakening currency has pushed up inflation, which creates a conundrum for the Russian central bank. To stop the ruble from plunging further and to keep inflation from spiraling ever upwards, the Russian central bank took aggressive action by hiking interest rates to as high as 17 percent at the beginning of 2015. However, that has negatively impacted the economy. As the ruble stabilized, the bank dialed the interest rate back to 11 percent, where it stands today.

The Saudis Are Stumbling (And They May Take The Middle-East Down With Them) -- For the past eight decades Saudi Arabia has been careful. Using its vast oil wealth, it’s quietly spread its ultra-conservative brand of Islam throughout the Muslim world, secretly undermined secular regimes in its region, and prudently kept to the shadows while others did the fighting and dying.  Today that circumspect diplomacy is in ruins, and the House of Saud looks more vulnerable than it has since the country was founded in 1926. The kingdom’s first stumble was a strategic decision last fall to undermine competitors by scaling up its oil production and thus lowering the global price. They figured that if the price of a barrel of oil dropped from over $100 to around $80, it would strangle competitors that relied on more expensive sources and new technologies, including the U.S. fracking industry, companies exploring the Arctic, and emergent producers like Brazil. That, in turn, would allow Riyadh to reclaim its shrinking share of the energy market. There was also the added benefit that lower oil prices would damage oil-reliant countries that the Saudis didn’t like – including Russia, Venezuela, Ecuador, and Iran. In one sense it worked. The American fracking industry is scaling back, the exploitation of Canada’s tar sands has slowed, and many Arctic drillers have closed up shop. And indeed, countries like Venezuela, Ecuador, and Russia have taken serious economic hits. But it may have worked a little too well, particularly with China’s economic slowdown reducing demand and further depressing the price – a result that should have been entirely foreseeable but that the Saudis somehow missed. The price of oil dropped from $115 a barrel in June 2014 to around $44 today. While it costs less than $10 to produce a barrel of Saudi oil, the Saudis need a price between $95 and $105 to balance their budget. The country’s leaders, who figured that oil wouldn’t fall below $80 a barrel – and then only for a few months – are now burning through their foreign reserves to make up the difference.

Saudi facing 'a crisis in the next 3-5 years' if oil price remains low - Saudi Arabia faces a crisis in the next three to five years if oil prices remain low and the country still has big budget deficits and a rigid, pegged currency, participants in the Reuters Global Investment Outlook Summit said on Tuesday. During a panel discussion about emerging markets and China, investors also predicted a broadly stronger dollar in 2016, but they also doubted a systemic corporate debt crisis would develop in the developing world next year. That was especially the case with China, where three of the four participants saw annual growth averaging 6.5 percent, with the authorities fully capable of dealing with market wobbles and capital flight by "zombifying" - effectively freezing - the financial system. But its slowdown, with the knock-on effect for oil and commodities, is raising red flags elsewhere, investors reckon. Countries such as Brazil and Russia have let their currencies fall 20 to 30 percent against the dollar this year, but the risk lies in place where no such adjustment is occurring, they say.

US State Department approves Saudi Arabia arms sale - BBC News: The US State Department has approved the sale of $1.29 billion (£848.6m) worth of bombs to Saudi Arabia, as its military carries out air strikes in neighbouring Yemen. President Obama pledged to bolster military support for Saudi Arabia after tensions were strained following a US-brokered nuclear deal with Iran. The US Congress now has 30 days to stop the deal if it wishes to do so. Saudi Arabia is one of the biggest buyers of US weapons. The Saudi-led campaign against Iran-backed Houthi rebels in Yemen has drawn criticism, with several reports of civilian casualties on the ground. Washington has backed the campaign and Saudi Arabia - who is a central ally in the air assault against the so-called Islamic State group in Syria and Iraq.  US-Saudi ties are said to have been strained by Mr Obama's unwillingness to take military action against Syria's President Bashar al-Assad, and his support for a nuclear deal with Iran that the Saudis fear will ultimately allow Iran to acquire nuclear weapons.

Al-Naimi urges Arab states to boost energy cooperation — Petroleum and Mineral Resources Minister Ali Al-Naimi called for joint action among fellow Arab energy producers to increase trade, investments and partnerships. “The challenge which we are facing in the Arab world is representing our need for more joint action in the field of the oil and energy, and try to have more trade partnerships in between the states,” Al-Naimi said at conference on Bahrain. The minister delivered the speech at the seminar on ‘Future of Energy in the Middle East and North Africa’ in Manama. The seminar was organized by organized Arab Petroleum Investments Corporation (APICORP). Following is the text of the speech:

Iran to boost oil exports after sanctions are lifted (AP) — Iran says it will export an additional 500,000 barrels of oil a day in a bid to reclaim its market share after sanctions are lifted under a landmark nuclear deal. Oil Minister Bijan Zanganeh told reporters Tuesday that the increase is part of Iran’s plan to double its crude oil exports as sanctions are lifted, which officials expect to happen in early 2016. OPEC member Iran currently exports 1.3 million barrels of crude oil per day and hopes to get back to its pre-sanctions level of 2.2 million, last reached in 2012. Zanganeh says Iran will not concede its share of the market and does not fear a further decline in prices. Oil prices have plunged by more than half over the last year, to just over $40 a barrel.

Iraqi oil selling at $30 as OPEC readies for new battles - Iraq may increase oil output further in 2016, although less dramatically than this year, intensifying a battle for market share between OPEC members and non-OPEC rivals that has forced Baghdad to sell some crude grades for as little as $30 a barrel. Iraq’s output in 2015 has jumped almost 500,000 barrels per day (bpd), or 13 percent, according to the International Energy Agency (IEA). That has made Iraq the world’s fastest source of supply growth and a key driver of surging OPEC production. At most, that growth is likely to give way to a modest rise next year, easing downward pressure on prices that are close to a 2009 low. But a lifting of sanctions on Iran or an easing of violence in Libya could further boost OPEC supplies, without cutbacks by Saudi Arabia or other members. “Stable to limited growth in output from Iraq would give some potential for an uptick in prices – if it were not for Iran,” said Eugene Lindell, analyst at JBC Energy in Vienna. “Libya is another big wild card.” The southern fields produce most of Iraq’s oil. Located far from the fighting in other parts of the country, they have kept pumping and seen record exports, most recently in July, when 3.064 million bpd was sold abroad. Iraq plans to export 3.0-3.2 million bpd from the south in 2016, an Iraqi oil source told Reuters. He declined to forecast exports from Iraq’s north, which restarted in late 2014 and have grown to about 600,000 bpd, despite tension between Baghdad and the Kurdistan region.

Airstrikes hurt, but don't halt, IS oil smuggling operations — The United States and Russia are going after the Islamic State group’s oil industry, destroying refineries and hundreds of tanker trucks transporting oil from eastern Syria in a heavy bombardment in recent days aiming to break the extremists’ biggest source of income. The campaign already appears to be having some effect, with oil prices rising in areas of Syria that rely on crude smuggled out of IS areas. But experts say it will be difficult to cut off the militants’ trade completely since they are likely to switch to smaller, more elusive vehicles. Putting a total end to the industry would mean destroying the oil fields in Syria, but that would also bring hardship to millions in the population under IS rule and others who depend on the group’s oil, causing fuel shortages as winter sets in. Otherwise, taking the fields would require ground forces. Still, the campaign could hit hard on an industry that U.S. officials say generates more than half the revenue the Islamic State group uses to maintain its rule over its swath of territory across Syria and Iraq and pay its fighters.

Russian military says its bombing sharply cut IS oil incomes — The Russian military has destroyed numerous oil facilities and tankers controlled by the Islamic State group in Syria, sharply cutting its income, Russia’s defense minister said Friday. Sergei Shoigu reported to President Vladimir Putin Friday that Russian warplanes destroyed 15 oil refining and storage facilities in Syria and 525 trucks carrying oil during this week’s bombing blitz. He said this deprived the IS of $1.5 million in daily income from oil sales. Russia, which has conducted an air campaign in Syria since Sept. 30, sharply raised the intensity starting Tuesday following confirmation that the Russian plane in Egypt was downed by a bomb, which the Islamic State group said it had planted. The Russian leader has discussed cooperation on fighting the IS during his meetings with President Barack Obama and other Western leaders at the sidelines of the Group of 20 rich and developing nations in Turkey earlier this week. French President Francois Hollande is set to travel to Washington and Moscow next week for talks on joint military action against IS, and Putin already has ordered the military to cooperate with the French “like with allies.” Russian state TV on Friday showed Russian air force ground crew writing “For Ours!” and “For Paris!” on bombs being attached to Russian warplanes.  According to Shoigu, Russian warplanes have flown 522 sorties and destroyed over 800 targets over the last four days. Russian long-range bombers and navy ships have launched 101 cruise missiles in four days, including 18 fired by Russian navy ships from the Caspian Sea on Friday.

How Kurdistan bypassed Baghdad and sold oil on global markets -- Iraq’s semi-autonomous region of Kurdistan has for the first time detailed its secretive oil exports operations and said it plans to sell more, whether Baghdad likes it or not, as it needs money to survive and fight Islamic State. The region’s minister for natural resources, Ashti Hawrami, said that to avoid detection oil was often funneled through Israel, transferred directly between ships off the coast of Malta, and decoy ships used to make it harder for Baghdad to track. Kurdistan says it had been forced to bypass Baghdad and begin exporting oil directly because the latter refused to respect budgets in 2014 and 2015. The current and former Iraqi central governments have both said the Kurds have failed to respect deals to transfer agreed volumes of oil to Baghdad. Kurdistan is entitled to 17 percent of Iraqi’s overall budget, and argued it needed stable revenues to pay its bills, support over a million of refugees fleeing the war in Syria and Iraq finance its Peshmerga army fighting against Islamist militants. Kurdistan is exporting over 500,000 barrels per day (bpd) of oil – or every seventh barrel of OPEC’s second largest exporter – and believes that Baghdad has now accepted, at least in part, direct Kurdish exports going to as many as 10 countries.With new pipelines completed, the Kurdistan Regional Government (KRG) still needed to find buyers for its oil, effectively one large tanker every two days.Most customers were scared of touching it with Baghdad threatening to sue any buyer. Large oil companies – including Exxon Mobil and BP – have billions of dollars worth of joint projects with Baghdad. “The scale was huge. And it was a totally new game for us. Buyers wanted the KRG to lease its own crude cargo ships. We knew nothing about the shipping or sea transportation industry,” The KRG engaged a veteran oil trader, Murtaza Lakhani, who worked for Glencore in Iraq in the 2000s, to assist finding ships.

China slashes wholesale gas prices as it seeks to spur demand for cleaner fuel - – China announced a near 25 percent cut in wholesale prices of natural gas from Friday, the second reduction this year, as it seeks to boost flagging growth in demand for the cleaner-burning fuel. China’s energy giants have been forced to resell or renegotiate long-term global supplies as a cooling economy has hit gas demand in the world’s third-largest consumer, while an inflexible pricing policy also curbed consumption. Benchmark city-gate prices for non-residential users will be lowered by 0.70 yuan ($0.1097) per cubic meter from Nov. 20, the country’s top economic planner, the National Development & Reform Commission, said in a statement on its website on Wednesday. Besides cutting the benchmark prices, the agency also said it allowed a 20 percent upward float, but set no limit for a downward adjustment. Some market watchers had expected another cut in prices but not by as much, illustrating that the government wanted to send a strong price signal to boost demand, but the impact could be mixed for players in the market. “It should boost demand on the direct, large end users of especially domestic pipeline gas, and also benefits those with integrated value chains such as downstream assets in power plants and city distribution networks,” said Li Yao, CEO of Beijing-based consultancy SIA Energy.

India, not China, powering growth in fuel demand – China’s fuel usage tends to gather headlines as an indicator of the strength of global crude oil demand, and while this has been justified, the real growth action is happening over the Himalayas in India. India’s total demand for oil products is about one one-third of that in China, but the South Asian nation is powering up as China’s growth moderates. This isn’t entirely unexpected given that the slowdown in China’s economic growth is well known, as is the rotation towards a more service- and consumer-oriented economy from one reliant on heavy industry. India’s rapid gains in fuel consumption have seen it overtake Japan to become Asia’s second-largest crude oil importer behind China, and this growth trend appears likely to continue. India’s fuel demand in October grew at its fastest pace in almost 12 years, rising 17.5 percent from the same month a year earlier, according to data from the Petroleum Planning and Analysis Cell, a unit of the oil ministry. Total consumption of refined oil products was 15.2 million tonnes, which equates roughly to 3.6 million barrels per day (bpd). This is using a conservative conversion rate, the crude oil factor of 7.3 barrels per tonne, while the factors for the main products India consumes, diesel and gasoline, are 7.5 and 8.5, respectively. If the pace of fuel demand growth for the first seven months of India’s April to March fiscal year is maintained, it puts the nation on track for consumption of at least 3.6 million bpd for the 2015-16 year.  If this is achieved, it will mean that India’s fuel demand growth was 8.7 percent higher in 2015-16 over the prior year, equivalent to a gain of about 290,000 bpd.

Copper Is Crashing In China -- Shanghai Copper is down 4.6%, hitting fresh cycle lows not seen since March 2009.No clear catalyst is evident for now aside from stronger US Dollar, Codelco's cuts, and more chatter of CCFD unwinds. If COMEX Copper holds these losses, it will be down for 10 straight days - the longest on record from what we could tell. The USDollar is pushing higher, weighing broadly on commodities. Also continued forced liquidations in CCFDs is not helping as hope for a low evaporates. However, it appears the Codelco cuts are the most prescient... Concerns metals demand is ebbing deepened as Codelco, the biggest copper producer, cut its surcharge for sales to China by 26 percent next year, according to two buyers. The reduction highlighted waning consumption in the Asian country. Obviously the tragic developments in Paris have caused a capital flight out of metal and into safety. Secondly, collapsing physical premiums for metal being imported into China really underscores how anemic demand is there.” China is facing an unprecedented drop in refined copper imports as a slowing economy erodes demand, according to one of the country’s largest buyers. Shipments to the country will shrink 10 percent next year, Stephen Huang, chief executive officer of trading house Arc Resources Co., said in an interview.

Copper Tumbles to Six-Year Low as Industrial Metals Extend Slump -  Copper plunged to the lowest intraday price since May 2009 on concern Chinese demand is slowing and as the dollar traded near its strongest level in more than a decade. Lead touched the lowest since 2010, while all industrial metals retreated. The metal used in power cables and wiring lost as much as 2.1 percent to $4,590 a metric ton on the London Metal Exchange before trading at $4,654 by 4:51 p.m. in Singapore, while futures slumped as much as 4.3% in Shanghai. Codelco, the largest producer, has cut the premium it will charge buyers in China next year by the most since the global financial crisis, while Arc Resources Co. predicts a 10 percent drop in refined imports by the biggest consumer in 2016. “There is a sense that this move is a little bit China-related,” Ric Spooner, a chief market strategist at CMC Markets Asia Pacific Pty, said from Sydney. “There has been a trend towards destocking of inventory in recent times and that appears to be creating downward momentum, particularly in copper.” Metals are being battered by a stronger dollar. The greenback is buoyed by expectations for the first U.S. interest-rate increase since 2006 in December and by heightened geopolitical risk after the terror attacks in Paris. The Bloomberg Dollar Spot Index rose 0.2 percent on Tuesday, making assets denominated in the currency more expensive. Zinc fell as much as 2 percent, while lead dropped as much as 1.5 percent and nickel lost 1.7 percent. Shanghai copper pared losses to 2.9 percent.

Copper says it’s not looking good for China’s ‘old economy’ --  Izabella Kaminska -- Goldman’s on to the seismic shift occurring in Chinese metal markets. Specifically copper markets. Of note: …since late October has been an eye catching rise in Shanghai Futures Exchange open interest across the metals complex – for copper, it has been the largest increase in Shanghai open interest in 12 months – since the 1Q15 collapse in Chinese metals demand. In our view, this development raises a red flag regarding ongoing and near term activity in China’s ‘old economy’ and metals demand growth, as measured by our GS China Metals Consumption Index (see chart below). Indeed, over the past five years, periods of rising SHFE open interest and falling metals prices have been associated with concurrent orimminent weakening in China’s commodity intensive ‘old economy’. Essentially, what metal futures seem to be pricing in according to Goldman, is concurrent or future weakness in China’s “old economy”. This has bearish implications for China’s upcoming activity data releases and asset classes dependent on this data. For Goldman that means there is sufficient room for LME and Comex market positioning to push copper prices lower despite the recent declines. These declines are necessary if supply curtailments are to be incentivised. A stylised account of the degree to which commodity demand is currently undershooting looks like this, according to Goldman:

The Great Fall Of China Started At Least 4 Years Ago -- Ilargi -- Looking through a bunch of numbers and graphs dealing with China recently, it occurred to us that perhaps we, and most others with us, may need to recalibrate our focus on what to emphasize amongst everything we read and hear, if we’re looking to interpret what’s happening in and with the country’s economy. It was only fair -perhaps even inevitable- that oil would be the first major commodity to dive off a cliff, because oil drives the entire global economy, both as a source of fuel -energy- and as raw material. Oil makes the world go round. But still, the price of oil was merely a lagging indicator of underlying trends and events. Oil prices didn‘t start their plunge until sometime in 2014. On June 19, 2014, Brent was $115. Less than seven months later, on January 9, it was $50. Severe as that was, China’s troubles started much earlier. Which lends credence to the idea that it was those troubles that brought down the price of oil in the first place, and people were slow to catch up. And it’s only now other commodities are plummeting that they, albeit very reluctantly, start to see a shimmer of ‘the light’. Here are Brent oil prices (WTI follows the trend closely): They happen to coincide quite strongly with the fall in Chinese imports, which perhaps makes it tempting to correlate the two one-on-one: But this correlation doesn’t hold up. And that we can see when we look at a number everyone seems to largely overlook, at their own peril, producer prices: About which Bloomberg had this to say: China Deflation Pressures Persist As Producer Prices Fall 44th Month The producer-price index fell 5.9%, its 44th straight monthly decline. [..] Overseas shipments dropped 6.9% in October in dollar terms while weaker demand for coal, iron and other commodities from declining heavy industries helped push imports down 18.8%, leaving a record trade surplus of $61.6 billion. 44 months is a long time. And March 2012 is a long time ago. Oil was about at its highest since right before the 2008 crisis took the bottom out. And if you look closer, you can see that producer prices started ‘losing it’ even earlier, around July 2011.

Wal-Mart Uprising: The Battle for Labor Rights in China  - Mao beams over a group of mobilized workers. A caption reads: “The working class must lead everything.”   Zhang is not a fan of Mao, or his trade unions, but he is trying to revive a Maoist dictum in a cat-and-mouse game with both China’s only legal trade union and his capitalist bosses in Bentonville, Arkansas. Zhang’s loosely defined movement — the “Wal-Mart China Staff Association” — is neither huge nor high profile, and it doesn’t have a national political agenda. But the activists involved are no longer just focused on specific workplace grievances. Instead, they are fighting for workers’ rights to organize a real union with teeth: namely, collective bargaining power. And while this transition is standard in the history of labor movements around the world, the fight of activists like Zhang in China is unique. They are trying to re-code the only union that’s allowed to exist in China, the so-called All-China Federation of Trade Unions (ACFTU). As a socialist institution, it was a conduit for the Communist Party to its large working class, as opposed to a trade union with collective bargaining power that represents workers’ interests. As a result, the ACFTU has mostly stood on the sidelines as protests and collective strikes have intensified and increased in frequency. Prompted by signs that Beijing’s central leadership is urging the 200-million member ACFTU to reform, Zhang and a small cadre of like-minded organizers are applying pressure on the ACFTU from below — demanding democratic elections of the grassroots layers of the ACFTU at their respective Wal-Mart stores, which they claim have been illegally controlled by Wal-Mart’s management since unionization in 2006.

Exclusive: China's Tsinghua Unigroup to invest $47 billion to build chip empire | Reuters: China's Tsinghua Unigroup Ltd plans to invest 300 billion yuan ($47 billion) over the next five years in a bid to become the world's third-biggest chipmaker, the chairman of the state-backed technology conglomerate said on Monday. Chairman Zhao Weiguo also told Reuters in an interview in Beijing that the company controlled by Tsinghua University, which counts President Xi Jinping among its alumni, was in talks with a U.S.-based company involved in the chip industry. A deal could be finalized as early as the end of this month, he said. He declined to give more details but said buying a majority stake was unlikely as it was too "sensitive" for the U.S. government. "If you can't be the top-three giant, it will be very hard to develop your business in the chip industry," Zhao said, citing reports that China imported more chips than crude oil every year. "The next five years is key... There is an enormous market out there." Currently, Qualcomm holds the No.3 position in the global chip rankings, behind Samsung Electronics  and market leader Intel, which has a market capitalization of $151.5 billion. The sheer size of Tsinghua Unigroup's planned investments is almost equal to Intel's $50 billion chip revenue last year and could disrupt the NAND chip industry. The top five chipmakers control more than 90 percent of the global NAND chip market after years of boom-and-bust squeezed out smaller players.

America says China’s fifth-generation jet fighter J-31 stolen from its F-35 - American experts have accused China of stealing the US design in its first indigenously developed fifth-generation fighter jet, which was displayed at Dubai Airshow on Sunday, raising doubts over the achievement of the country which has stolen a march over India in developing the aircraft. US defence and strategic affairs experts alleged that the design of the FC-31 "Gyrfalcon" or J-31, which was showcased for the first time abroad according to a Chinese military run portal, was stolen from the US-made F-35 in April 2009 when Chinese hackers entered the networks of American defence equipment maker Lockheed Martin.  The FC-31's airframe is similar to that of the F-35. The FC-31 also has two internal weapons bays that can carry guided and unguided weapons, just like the F-35. "The similarity includes the use of two tracking mirrors and a flat-facetted optical window, with bottom fuselage placement just aft the radar radome,"

Chinese 'low-level' banking crisis biggest threat to global economy: China is on the verge of a "credit event" that authorities will tightly manage to maintain the country's financial stability, says JPMorgan's chief Asian and emerging markets equity strategist. Hong Kong-based Adrian Mowat says a surge in corporate debt in the final years of China's infrastructure drive poses the biggest threat to banks' balance sheets. A government-led bond market refinancing of loans taken out by companies set up to carry out local government projects will prevent the restructuring from becoming a "Lehman-like credit event", he says, although banks will have to carry some of the load. Similarly, companies will pay off about $US550 billion in foreign currency denominated debt via cheaper, lower-risk and longer-dated refinancing in domestic bond markets, he says. Corporate indebtedness in China has ballooned from about 60 per cent of gross domestic product in 2008 to 157 per cent at the end of last year, according to research compiled by the bank. This compares with 92 per cent in Japan, 69 per cent in the US and 94 per cent for Europe. In Brazil, a comparable emerging market, corporate indebtedness is worth just 64 per cent of GDP. "What China will do is that it will have a low-amplitude credit event," says Mowat. "The view is that having a very high-amplitude credit event, such as a Lehman's, is not considered a good idea at all.

China banks turn blind eye to soaring overdue loans -- Some Chinese banks, hit by a surge of troubled borrowing in a weakening economy, are increasingly failing to recognise loans gone sour on their books to avoid having to stump up capital. Loans to borrowers that have missed a payment are growing three times faster than loans the banks recognise as non performing, according to their regulatory filings. An increasingly large chunk of these overdue loans sit on the banks' books at their full value, even when payments have been missed for more than 90 days - the accepted international criteria for classifying loans as non-performing. This hidden build up of substandard corporate loans, spurred by China's slowest economic growth in a quarter of a century, flatters the strength of its banks' balance sheets and would hit earnings if the loans were declared in default and written down. "In the past, NPLs outnumbered overdue loans," said an official at the China Banking Regulatory Commission (CBRC), who spoke on condition of anonymity. "Now overdue loans are surpassing NPLs." At 18 listed Chinese banks, overdue loans that had not been written down jumped 57 percent to 645 billion yuan ($101 billion) in the first half of this year from the end of 2014, while NPLs increased 17 percent to 692 billion yuan, a UBS analysis of Chinese banks' balance sheet data show.

China makes new move to curb capital outflows and hold yuan stable, say sources - Offshore yuan clearing banks and related offshore participant banks have had their trading in bond repos and account finance suspended by the central bank, people with direct knowledge of the matter told Reuters. That move would limit the transfer of funds outside of the country, restricting capital outflows and contributing to holding the exchange rate stable as China tries to hold the yuan flat in the run-up to the International Monetary Fund's decision on whether to include the currency in its reserve basket. "We received window guidance from the central bank on Friday," a person at an offshore yuan clearing bank said. "We have already temporarily suspended trade in yuan account financing and bond repurchases with onshore banks."  Faxes and calls by Reuters to the People's Bank of China (PBOC) requesting comment were not immediately answered.

China’s Central Bank Cuts Rates for Its Standing Lending Facility - WSJ: China’s central bank took another step to reduce the rates banks charge businesses and consumers in an attempt to counter the deflationary pressure that is weighing on growth in the world’s second-largest economy. In a move characteristic of its incremental approach to dealing with China’s economic slowdown, the central bank on Thursday lowered rates charged by a short-term lending facility used to provide liquidity to commercial lenders. The reduction is just one of many measures, including six interest-rate cuts and multiple releases of bank reserves, that the People’s Bank of China has taken in the past year to try to recharge economic growth. Some economists and analysts have criticized the central bank for failing to move decisively enough, saying that monetary policy to date has been ineffective in addressing the growing risks of deflation, or falling prices, faced by China’s economy. Prices at the factory gate have been declining for more than three years, while consumer prices have been undershooting the central bank’s inflation target for months. A result is that businesses are having to sell more to make money, making it harder to pay off debts and obtain new credit. Meanwhile, wary of rising bad-debt levels, Chinese banks also have become reluctant to lend, especially to small and private businesses. The barrage of reductions in China’s benchmark lending and deposit rates has done little to make the lenders more willing to open the credit spigot.

China has S1.7 trillion Ponzi problem as debt piles up  — Chinese borrowers are taking on record amounts of debt to repay interest on their existing obligations, raising the risk of defaults and adding pressure on policy makers to keep financing costs low. The amount of loans, bonds and shadow finance arranged to cover interest payments will probably rise 5 per cent this year to a record 7.6 trillion yuan (S$1.7 trillion), according to Beijing-based Hua Chuang Securities, whose lead fixed-income analyst was top-ranked by China’s New Fortune magazine in 2012 and 2013. Dubbed “Ponzi finance” by Mr Hyman Minsky, the use of borrowed funds to repay interest was seen by the late US economist as an unsustainable form of credit growth that could precipitate financial crises. Chinese companies are struggling to generate the cash flow needed to service their obligations as economic growth slows to the weakest pace in 25 years and corporate profits shrink. While the debt burden has been eased by six central bank interest-rate cuts in 12 months and a tumble in corporate borrowing costs to five-year lows, the number of defaults in China’s onshore corporate bond market has increased to six this year from just one last year. “Some Chinese firms have entered the Ponzi stage because the return on investment has come down very fast,” said Mr Shi Lei, the Beijing-based head of fixed-income research at Ping An Securities, a unit of the nation’s second biggest insurance company. “As a result, leverage will be rising and zombie companies increasing.”

Is China the new Japan? - The new Chief Economist at the IMF, Maurice Obstfeld, posed a challenging question at the end of his first major policy conference in charge last week: “Is China the new Japan?”  He cited the work of the late Ronald McKinnon, a distinguished international economist who argued in the 1990s that Japan was being forced into deflation by an overvalued exchange rate. That, in turn, stemmed from the political pressure exerted on Japan to correct its current account surplus by raising the value of the yen. The implied threat, notably (but not solely) from the US Congress, was that direct trade controls would be imposed on Japanese exports if the exchange rate were “artificially” held down. China has been subjected to similar threats from the US and others in recent years, and has responded by allowing the inflation adjusted valuation of the renminbi to rise by 60 per cent in the past decade. Even in the last 12 months, with China suffering from deep deflation in its manufacturing sector, the real value of the renminbi has been dragged upwards by 15 per cent because it has been largely fixed against the appreciating US dollar. Clearly, Chinese exchange rate policy has been determined by its over-arching goal of gaining admission to the SDR – something which seems likely to happen now that the IMF staff has recommended in favour. The US treasury has also said that it will support the move. While there is no official requirement for a currency within the SDR to be “stable” – it only needs to be “widely used” and “freely available” – there have been suspicions that US support would not have been forthcoming if China had embarked on a significant exchange rate devaluation when it moved to a more market determined regime in August.

APEC summit: China President Xi Jinping says China's economy resilient, ample room for manoeuvring - The Hindu: Chinese President Xi Jinping on Wednesday sought to reassure regional economic and political leaders that his government will keep the world’s No. 2 economy growing. In a speech to a business conference on the sidelines of the Asia-Pacific Economic Cooperation summit, Mr. Xi said China is committed to overhauling its economy and raising the living standards of its people. China’s growth fell to a six-year low of 6.8 percent in the latest quarter as Beijing tries to shift the economy away from reliance on trade and investment. The slowdown, which has been unfolding for several years, has rippled around the world, crimping growth in countries such as South Korea and Australia that were big exporters to China. “The Chinese economy is a concern for everyone, and against the background of a changing world must cope with all sorts of difficulties and challenges,” Mr. Xi said. But China would “preserve stability and accelerate its development,” he said. “We will work hard to shift our growth model from just expanding scale to improving its structure.”

Chinese investment in Africa falls 40% --  Chinese investment in Africa fell by more than 40 per cent year-on-year in the first half of 2015, officials say, as the Asian giant's slowing growth dents its commodity demand. Natural resources from Africa have helped fuel China's economic boom, and it became the continent's largest trade partner in 2009. But growth in the world's second-largest economy has slowed to its lowest rates since the aftermath of the global financial crisis, reducing commodity prices worldwide. Beijing's direct investment in Africa slumped "more than 40 per cent" to about $US1.2 billion ($A1.69 billion) in the first six months of the year, commerce ministry spokesman Shen Danyang told reporters on Tuesday. China has handed out loans and funded infrastructure across Africa in what critics branded as deals made for mining rights and construction contracts. Shen blamed the sluggish global economy and international commodity price volatility for the rapid decline. For the past decade, China gobbled up much of the goods that Africa produces, overtaking the United States to became the continent's single largest trading partner.

China Has "Right" To "Seize" Neighboring Islands, Official Says -- Well you can say one thing for Washington’s narrative when it comes to Beijing’s land reclamation efforts in the South China Sea: the rhetoric has been consistent. That is, it’s always been about deterring Chinese “aggression”. And about China seeking to “militarize” the Spratlys.  To be sure, this is just the US parroting what Washington’s regional allies - most notably The Philippines - have said regarding the 3,000 or so new acres of sovereign territory China has built atop reefs and on a certain level, it’s not entirely clear that the US cares as much about this dispute as it does about what’s going on in say, Syria or Ukraine. On Tuesday, Chinese Vice Foreign Minister Liu Zhenmin is out with some highly amusing commentary ahead of the Asia-Pacific Economic Cooperation summit which will be held in Manila tomorrow and Thursday.  Far from being “aggressive” or seeking to “militarize” the region, China, Liu says, has actually “shown great restraint” because in reality, the PLA could have by all rights seized "dozens" of islands occupied by Vietnam, the Philippines, and Malaysia. Here’s Reuters with more: China has shown "great restraint" in the South China Sea by not seizing islands occupied by other countries even though it could have, a senior Chinese diplomat said on Tuesday ahead of two regional summits where the disputed waterway is likely to be a hot topic. But China was the real victim as it had "dozens" of its islands and reefs in the Spratlys illegally occupied by three of the claimants, Chinese Vice Foreign Minister Liu Zhenmin told a news conference in Beijing. He did not name the countries, but all claimants except Brunei have military fortifications in the Spratlys.

Tens of Thousands March in S. Korea Anti-Government Rally: South Korean police detained 51 protesters and were seeking out others Sunday after violent clashes marred the largest anti-government demonstrations in Seoul in more than seven years. Police said about 70,000 people took to the city's streets Saturday to protest the conservative government's push for labor reform and mandated, state-issued history textbooks. The protesters marched from several locations in Seoul to an area near City Hall, with rallies stretching well into the evening. Police fired tear gas and water cannons as they clashed with marchers. A 69-year-old farmer, Baek Nam-gi, remained unconscious at a hospital after he fell and injured his head as police doused him with water cannons near City Hall, said Cho Byung-ok, secretary general of the Korea Peasants League. Video footage showed Baek lying motionless as other demonstrators struggled to drag him away while police continued to fire water cannons from atop buses. Critics of President Park Geun-hye are demanding an end to what they see as her business-friendly labor policies, including those they say benefit businesses while keeping wages low, and others that make it easier for companies to fire activists.

Six percent of Korean firms face insolvency- The government has been preparing to preemptively restructure insolvent companies ahead of the anticipated interest rate hike by the U.S. central bank, and a new study showed that nearly 6 percent of Korean companies could need it. According to a report by private corporate analysis agency Korea CXO Institute, 117 of Korea’s 2,000 companies, excluding financial firms, have debt-to-asset ratios of over 200 percent and are also suffering from operating and net losses as of last year. The combined operating losses of the 117 companies amounted to 3.48 trillion won ($2.98 billion), while net losses totaled 8.3 trillion won. The ratio of poor performers has grown significantly compared to 1996, the year before Korea faced its first financial crisis that bankrupted many companies, including conglomerates like Daewoo Group. The report said 295 companies, or 14.8 percent, have a debt ratio of over 200 percent, but not all are recording operating or net losses.

Japan Enters Recession as Economy Contracts in the Third Quarter - Japan’s economy contracted in the third quarter on sluggish business investment, confirming what many economists had predicted: The nation fell into its second recession since Prime Minister Shinzo Abe took office in December 2012.  Gross domestic product declined an annualized 0.8 percent in the three months ended Sept. 30, following a revised 0.7 drop in the second quarter, the Cabinet Office said Monday in Tokyo. Economists had estimated a 0.2 percent decline for the third quarter. Weakness in business investment and shrinking inventories contributed to the contraction amid concerns over slower growth in China and the global economy that prompted Japanese companies to hold back on spending and production. While growth is expected to pick up in the current quarter, the GDP report could put pressure on Abe and Bank of Japan Governor Haruhiko Kuroda to boost fiscal and monetary stimulus. The BOJ holds a policy meeting later this week.

Japan enters recession again as Abenomics falters -- Japan’s recovery is being held back by a shortage of skilled labour, a leading minister has claimed, after the world’s third-largest economy entered its fourth technical recession in five years.  Economics minister Akira Amari said a lack of workers available for public works projects worth billions of pounds restricted the government’s ability to bolster the economy. Amari urged Japanese firms to use their record cash holdings to raise wages and increase capital spending to generate sustainable growth led by the private sector, instead of relying on government to always take the lead. He added that Tokyo was not considering a fresh stimulus. The plea for big business to support the recovery came as official data on Monday showed Japan’s economy shrank by an annualised 0.8% in July to September after a deeper than previously estimated 0.7% contraction in the previous three months, providing the two consecutive quarters of declines needed to mark a recession. Japanese GDP growth Analysts said labour shortages were a significant feature of an ageing population in a country that had put severe restrictions on immigration. But the government maintained its cautiously upbeat outlook, saying that despite a downturn in national income during the summer and autumn, an improved outlook for jobs and wages would mean a return to growth later in the year.

'Abenomics' architect predicts no more Bank of Japan easing this year - The Bank of Japan is unlikely to offer any further monetary easing this year to avoid unwelcome yen falls that would hurt low-income households, one of the architects of Prime Minister Shinzo Abe's economic policy strategy said on Monday. With monetary policy already ultra-loose, the government should boost fiscal spending to support private consumption through pay-outs to households, said ruling party lawmaker Kozo Yamamoto. "If the U.S. Federal Reserve raises interest rates this year, that could accelerate yen declines. That would hurt households" by pushing up imported food costs, Yamamoto said. "The BOJ will probably stand pat for the rest of this year" to scrutinize how an expected Fed rate hike could affect yen moves, he told Reuters in an interview. Fed officials have signaled that they could kick off a round of rate hikes in December. Expectations of a Fed rate hike have pushed up the dollar to around 123 yen. Yamamoto has played a key role in the drafting of Abe's "Abenomics" stimulus policies of bold monetary easing and flexible fiscal policy. His latest remarks underscore a growing belief among Abe's aides that the BOJ has done enough for now, and that further stimulus could do more harm than good by pushing up import costs via a weak yen.

Japan's Endless Struggle to Spark Inflation - Why does Japan need inflation? Usually, economists think of inflation as a bad thing -- at best, they see it as an acceptable byproduct of efforts to stimulate economic growth. Mainstream theory says that when you have idle resources -- empty offices, unemployed people sitting at home wishing they had jobs -- you can use monetary and/or fiscal policy to stimulate the economy, putting those workers into those offices. Inflation, the theory says, will be a natural consequence of the stimulus. But Japanese unemployment is very low, and the economy is expanding at or above its long-term potential growth rate of around 0.5 percent to 1 percent. So according to mainstream theory, inflation would be an unnecessary and pointless negative for Japan’s economy. Why, then, are there always voices calling for Japan to raise its inflation rate? Actually, there are several reasons. The main one is that inflation reduces the burden of debt. Japan’s enormous government debt represents the government’s promise to transfer resources from young people (who work and pay taxes) to old people (who own government bonds). Since Japan is an aging society, there are more old people than young people. That makes the burden especially difficult to bear. Young people also tend to have mortgages, the repayment of which is another burden. Sustained higher inflation would represent a net transfer of resources from the old to the young. That would increase optimism, and hopefully raise the fertility rate, helping with demographic stabilization. It would also decrease the risk that the Japanese government will eventually have to take extreme measures to stabilize the debt. So despite having low unemployment, Japan could use some more inflation. The question then becomes: How does it get it? The usual solution, loose monetary policy, isn't working. Japan has engaged in an asset-buying program of quantitative easing so vigorous and aggressive that it puts former Federal Reserve Chairman Ben Bernanke’s efforts to shame. Although inflation has accelerated, Japanese core inflation (excluding food and energy) hasn't yet hit the 2 percent target, and is drifting lower again.

The TPP is a Multi-Dimensional Simultaneous Equation  - If I’d called it such, readers would probably think I was given to exaggeration because while the Trans-Pacific Partnership is a complex beast as Lambert has already covered, maybe you’d say that’s embellishing it a little. But it is not I who coined that description for the TPP. It was the Japanese cabinet minister who led Japan’s negotiating team.  It’s certainly as good a way to describe the TPP as any I’ve come across. And although there’s been quite a few other notions floated around what the TPP is supposed to be, they do not sing from the same hymn sheet. All of which got me thinking, what *is* the TPP? Now that we have the full text, it’s a question which lawmakers in the TPP-participating countries are starting to ask in earnest. USTR Froman has already babbled his way through his response but last week the Japanese Diet got their chance to ask Japan’s Prime Minister Abe and Economy Minister Amari, who was Japan’s chief negotiator for the TPP agreement, the same questions at the Lower House Budget committee (which is the Japanese equivalent of a Congressional hearing). The Nikkei provided excellent domestic coverage, which received the customary lack-of-interest from all other media outside Japan – what English-language translations there were managed to miss everything of importance. There’s a lot packed into five paragraphs so I’ll refrain from my usual habit of interrupting the flow with my two cents’ worth. The Nikkei article is best read as a whole because there is a pattern to Abe’s thinking, the merits of which we’ll discuss afterwards.

India’s energy efficiency -- Urbanisation in India is taking many twists and turns. Organised manufacturing is moving out of urban areas, while unorganised manufacturing is transitioning towards urban areas. As the fourth greatest energy consumer in the world, how the country manages this ongoing industrialisation and urbanisation process will have important environmental implications. This column looks at the relationship between growth, geography, and energy efficiency in manufacturing in India. Electricity consumption per unit of output has declined in urban and rural areas, but these overall trends mask substantial variation between states and substantial potential for further efficiency improvements in energy-intensive industries.

Reserve Bank of India hit as 17000 staff take 'mass casual leave' --  India’s central bank ground to a halt on Thursday as 17,000 staff went on strike to protest against a proposed overhaul of the country’s monetary policy framework that would curb the bank’s independence, and to demand improved pensions. The United Forum of Reserve Bank Officers and Employees, an umbrella group of four unions representing Reserve Bank of India staff, said its members had taken a day’s mass “casual leave” to protest against what it called New Delhi’s plans to “cripple the RBI”. But the one-day strike was also aimed at raising the stakes in a long-running battle over the RBI’s pension scheme, with disgruntled retirees complaining that their benefits have been severely eroded by years of high inflation. The unions warned they would step up their agitation — with longer strikes in the weeks ahead — if New Delhi did not accept the RBI staff’s “very reasonable demand” of improved pension payment. The basic pension does not rise with inflation “which puts thousands of RBI pensioners in extreme penury in these days of soaring prices, increased medical costs, etc,” the central bank unions said in a joint statement. They added that peaceful efforts had failed to bear fruit after eight years. Now “RBI staff and retirees have reached [their] limit of patience and are compelled to mobilise to fight”. The strike by the RBI employees is the latest setback for Prime Minister Narendra Modi’s administration, which is also under pressure from its military veterans to overhaul military pension schemes. Veterans have been protesting for months in New Delhi to demand a “one-rank, one-pension scheme,” which would ensure that all retirees of the same rank and length of service received the same pension, regardless of when they retired. The government promised to make such changes in August, but has subsequently angered veterans by trying to impose various caveats.

Ever wondered what a strike by 17,000 Indian central bank employees looks like? - The scene, as we went to pixel, outside the Reserve Bank of India in Mumbai — from where Rajan stares across the city — on the day 17,000 of its staff decided to up sticks in protest about interference from India’s government in its workings and, one suspects more pressingly, pensions:  Observe the… absolutely nothing unusual happening. This is actually a “mass casual leave” to “strongly oppose the Goverment of India’s current moves to cripple RBI”.  To be fair, there was a single lonely news van earlier. But it left. And there was a sign inside the security gate at the building which said “bandh” (strike, or closed more generally, in hindi), which we would also have taken a picture of, if not for the very nice and friendly solder who suggested that wasn’t a terribly good idea. Not even to commemorate the first RBI strike in six years. Maybe he’ll let us take a photo when the real fight begins later?

India Proposes $15 Billion Salary Boost as Deficit at Risk - A panel appointed by India’s finance ministry recommended a 23.55 percent increase in the salaries and allowances of federal government employees, a move that may boost consumption in Asia’s third-largest economy and derail plans to curb the region’s widest budget deficit. The changes suggested by the Seventh Pay Commission will benefit as many as 4.7 million workers and about 5.2 million pensioners and will take effect starting Jan. 1. The government will need to spend 1.02 trillion rupees ($15.4 billion) in the year starting April 1 if the recommendations are accepted. While a higher payout puts at risk Finance Minister Arun Jaitley’s goal of narrowing the deficit to 3.5 percent of GDP, more cash in the hands of consumers without matching steps to raise supply may fan inflation, undermining efforts by the central bank to cap gains in prices. Consumer price-gains accelerated to 5 percent in October from a year earlier as food costs surged, matching the Reserve Bank of India’s goal for March 2017. "We see a permanent fiscal stimulus of about $50 billion over the next two years," . It will raise expenditure by about 0.7 percent of GDP, making the deficit target "impossible to achieve,"  The government is confident of sticking to its fiscal deficit roadmap, Shaktikanta Das, economic affairs secretary, said in an interview to Bloomberg TV India.  India spent a net 221 billion rupees when it last raised salaries following the 2008 pay panel recommendations for a raise of about 35 percent to 40 percent. Jaitley in August projected an increase of 16 percent in government salaries in the year through March 2017, including back pay adjustments based on the panel’s suggestions and a 10 percent increase the following year. While staff pay is adjusted for inflation every six months through the so-called dearness allowance, fixed salaries are revised once in about 10 years.

Indonesia to require pension funds hold minimum percentage of govt bonds | Reuters: Indonesia plans to require domestic pension funds and insurers to keep a minimum percentage of government bonds in their portfolios to help provide stability to the debt market, the country's financial services authority (OJK) said on Thursday. Pension funds and insurers invest around 18 percent of their funds in government bonds, OJK Chairman Muliaman D. Hadad said, declining to specify a minimum percentage. "This is good as a back-up, so that bonds are not too volatile, and so the domestic investor base becomes stronger," Hadad told reporters on the sidelines of a conference. Domestic pension funds and insurers owned 15.3 percent of government bonds as of Nov. 13, finance ministry data showed. Foreign investors held 37.4 percent. The chair of Indonesia's pension fund association (ADPI), Mudjiharno Sudjono, said a minimum government bond requirement could result in lower investment yields for pension funds. The yield on the benchmark 10-year government bond was 8.6 percent on Thursday, lower than the 9 percent interest some banks offer for rupiah deposits. Still, Sudjono said such a policy would be positive for risk management. "Government bonds are much more stable (than shares), which is good for long-term investors like us," he said. "There are some pension funds which are exposed as high as 40 percent to stocks, which is not good especially in today's market."

The Fate Of Goldman's Global Growth Forecast Is In The Hands Of Just Three Countries - This is what Goldman said in a Wednesday note: On the surface, our “more of the same” forecast sounds a bit dispiriting because the recovery in global GDP growth after the Global Financial Crisis (GFC) has been so underwhelming. Year after year, forecasters have had to revise down their initially lofty GDP growth estimates to rates that look pedestrian by pre-GFC standards. This pattern is illustrated in Exhibit 3, which shows how the consensus GDP forecast for the G7 economies has evolved in the Bloomberg survey of economic forecasters for each year since 2011. Every line ends lower than where it started. Although the pattern is no longer as pronounced as in the 2011-2013 period, when the Euro area re-entered recession, reality is still coming in below expectations. For the time being, here is a the country-by-country bridge of how we get there from the 3.2% growth expected in 2015 to 3.6% a year from now. What is immediately clear is that the entire growth is predicated on two things: India and China maintaining their growth. The irony here,is that in a note earlier this week it was once again Goldman who admitted that Chinese real growth, not the goalseeked joke that the Politburo spews out every quarter, is at best just over 5%. As for India, that may well be the biggest wildcard of 2016. But what is by far the most notable observation from the chart below: in 2016 just three countries will grow above Goldman's blended global average growth rate of 3.6%: India, China and Indonesia.

Philippines Detaining Homeless Before APEC Summit, Rights Group Says - The Philippine government is conducting “clearing operations” to round up and detain hundreds of homeless people, including children, so that they will not be visible during this week’s Asia-Pacific Economic Cooperation meeting, the group Human Rights Watch said on Monday.More than 3,000 visiting government officials, business leaders and journalists are in the Philippine capital this week for a meeting of the APEC forum that will include President Obama, President Xi Jinping of China, Prime Minister Shinzo Abe of Japan, and more than a dozen other national leaders.The Philippine government denied that people were being held against their will or that the homeless were taken off the street only for the APEC forum.  Thousands of police officers and other security officials have been deployed across Manila in preparation for the gathering. Many of the main roads through the city have blocked lanes or are completely closed. Residents of high-rise buildings near where the world leaders will pass have been told to close their curtains and stay off balconies. Most government offices and many private companies have closed for the week.

Women Will Likely Be Paid Less Than Men for Next 118 Years, Says World Economic Forum -- Men and women across the globe will not receive equal salaries until 2133 based on current trends, according to the World Economic Forum (WEF) Global Gender Gap report.  Almost 250 million more women are in the global workforce today than 10 years ago, says the report, yet they are currently paid what their male counterparts earned in 2006. And while many countries have observed more women entering higher education — in several countries more so than men — this trend has not necessarily been reflected in the number of women occupying skilled roles or leadership positions. The WEF report compared the status of men and women in each nation regarding health, education, economic participation and political empowerment. Iceland, Norway and Finland were ranked the top three countries in terms of gender parity in declining order. The worst country was Yemen, followed by Pakistan and then Syria. “Unless we start changing the culture around the division of labor at home there’s always going to be that extra burden on women,” said the report’s lead author, Saadia Zahidi. “That means we’re not going to be able to maintain those high levels of women joining the workforce all the way through to middle management and senior positions.”

Baltic Dry Index Crashes Near Record Low -- The Baltic Dry Index staged a recovery mid-year, hopefully rising amid promises of stability in China and an 'escape' velocity USA. All that centrally-planned hope and hype faith has been eviscerated on the altar of economic reality. With no ability to directly manipulate the Baltic Dry Index to 'pretend' everything is awesome, it remains among the best 'real' indicators of the state of the global economy... and it's in the toilet... The Batlc Dry nears all-time record lows once again... In fact, for this time of year, it has never been lower... But apart from that, buy stocks because terrorism rocks and The Fed would not be raising rates unless everything was awesome, right? Charts: Bloomberg

As Of Today, The Baltic Dry Freight Index Has Never Been Lower -- Having fallen for 20 straight days, crushing the hopes and dreams of the mid-year bounce - and thoroughly breaking down from seasonally positive tendencies - The Baltic Dry Freight Index has collapsed to all-time (back to 1984) record lows.  At 504, this is the lowest cost for dry freight ever (which must be an unequivocal good right?)   Supply has indeed surged...  But only thanks to totally manipulated and decoupled-from-reality signals from 'markets' that caused firms to massively mal-invest in building ships for the renaissance of global trade... which never happened.In fact, as Bloomberg notes, China is leading the global slump in demand growth for the shipping industry's biggest source of cargoes... A surge in China’s imports of iron ore will slow to just 1 percent in 2016, about half this year’s expansion and the weakest pace in six years, according to data from Clarkson Plc, the world’s biggest shipbroker. Global trade in the raw material will increase the most slowly since 2001. China’s economy will grow by 6.5 percent in 2016, the least in a generation. “The main issue is the lack of demand for iron ore from China,” Eirik Haavaldsen, an analyst at Pareto Securities AS in Oslo, said by phone. “This market is looking like a disaster and the rates are a reflection of that. It is looking scary for the market and it doesn’t look like there is going to be any life in the market in the near term.” Charts: Bloomberg

Government Tax Revenues in Brazil Down 11% from Last October -- The slowdown of Brazil’s economy this year has deeply affected the government’s tax revenues and federal contributions. In October, according to Brazil’s Federal Revenue Office revenues from taxes and federal contribution totaled R$103.53 billion, the lowest value for the month since 2009.  According to the government agency, corporate income tax and tax over net profits were two of the main factors to explain the decline in revenues. With consumer sales declining steadily the volume of cashflow for corporations in Brazil has declined substantially. In comparison to October of 2014 revenues declined by 11.33 percent, deducting the official inflation for the period. For the first ten months of the year, revenues totaled a little over R$1 trillion, down by 4.54 percent from the same period last year. Despite the gloomy outlook, the government welcomed news on Tuesday that the Congressional Budget Commission (CMO) authorized the government to close 2015 with a primary deficit of up to R$119.9 billion. The amount will substitute the original budget law for the year, which called for a primary surplus of R$55.3 billion for the Union and R$11 billion for other government bodies. The text approved by the CMO establishes a primary deficit target of R$51.8 billion for the Brazilian public sector and allows for an additional R$68.1 billion in deficit due to debts by the Treasury and the possible negative revenue results from hydroelectric plant concessions which are scheduled to be auctioned off this year.

Brazil annual inflation rate tops 10 pct in mid-November -- Brazil's annual inflation rate climbed past 10 percent in mid-November, hitting a 12-year high, despite the central bank's bid to curb price rises by raising interest rates to double-digit levels. Brazil's IPCA-15 consumer price index rose to 10.28 percent in the 12 months through mid-November, up from 9.77 percent in mid-October and in line with forecasts. Consumer prices rose 0.85 percent from mid-October, up from an increase of 0.66 percent in the previous month. It is the first time since November 2003 that Brazil's inflation surpasses 10 percent, a milestone that could add to pressure on President Dilma Rousseff as the economy sinks into recession and unemployment rises to the highest in more than six years. Brazilians are particularly wary of price rises after several bouts of hyperinflation in the past century. Although the current spike in inflation remains milder than previous bouts, it has been accompanied by the worst recession in decades, with an expected economic contraction of more than 3 percent this year and hundreds of thousands of lost jobs. Fuel prices led inflation higher in mid-November after cash-strapped state oil firm Petroleo Brasileiro SA raised gasoline and diesel prices to help service its massive debt. The increase followed a sharp decline in Brazil's currency this year, which analysts say is likely to lift prices of imports even as the economy plunges deeper into recession. Food prices and telephone rates also picked up steam in mid-November, government statistics agency IBGE said on Thursday. Inflation is set to end this year at 10.04 percent, according to a weekly central bank survey on Monday, falling next year to 6.5 percent. The central bank has held interest rates at 14.25 percent, a nine-year high, and is not expected to cut rates until late 2016.

How can Philip Morris sue Uruguay over its tobacco laws? |The little-known investor-state dispute settlement (ISDS) mechanism is a unique privatised system of arbitration, often buried in bilateral investment treaties and multilateral trade agreements (such as Nafta and TTIP). It grants an investor the right to use private dispute settlement proceedings against a foreign government, yet governments cannot sue the investors. The system is neither transparent nor accountable and often results in aberrant judgments without the possibility of appeal. Over the years, it has led to inconsistent, unpredictable and arbitrary awards contrary to national and international public order.  In 1993, a waste management business, Metalclad, sued Mexico for indirect expropriation after Mexico had adopted an ecological decree declaring the area where the company was doing business and seeking to develop a landfill to be a natural reserve. The ISDS tribunal found that the government had taken a measure tantamount to expropriation and ordered Mexico to pay $16.7m (£11m) in compensation – later reduced to $15.6m. More recently, Philip Morris sued Uruguay after it adopted a number of anti-tobacco regulations with a view to implementing the 2003 World Health Organisation’s framework convention on tobacco control, aimed at tackling the health dangers posed by tobacco. A decision from the International Centre for Settlement of Investment Disputes is expected later in 2015, but the figures are telling: Philip Morris is claiming $25m in compensation from Uruguay. This is not only absurd: it gives me moral vertigo.

IMF cuts Mexico economic outlook as oil output falls -- The International Monetary Fund on Tuesday trimmed its economic growth forecasts for Mexico citing a decline in oil production, which funds nearly a third of the country's budget. In its yearly analysis of Latin America's second-largest economy, the IMF also urged the central bank to taper foreign exchange intervention aimed at stemming the peso's deep slide, arguing it would sap reserves over time. The IMF lowered estimates for Mexico's economic expansion to 2.5 percent for next year from 2.8 percent predicted in October, citing expected cuts in production at state-owned oil giant Pemex.  It also lowered this year's forecast to 2.25 percent, from 2.3 percent previously. The Fund said growth could be even lower if capital flow volatility spikes, domestic oil production shrinks further, or the economy of the United States, Mexico's chief export market, expands more slowly than expected. The Fund praised the Bank of Mexico for keeping rates at a record low as growth has wobbled and inflation remains tame. But it recommended an end to daily dollar auctions to support the peso, which in the past year has slumped 30 percent against the dollar. The central bank's interventions have shrunk reserves to $182 billion as of September from $195.7 billion at the end of 2014, the IMF said.

Innovation Central-Bank Style: Engaging with the Research Community -  John Maynard Keynes wrote “It’s astonishing what foolish things one can temporarily believe if one thinks too long alone, particularly in economics.” Today, this is truer than ever, and it’s a principle the Bank of Canada is keeping top of mind as we tackle some tough policy and research questions. As I explained in a speech last week, we’ve been thinking a lot lately about “innovation, central-bank style.” That means taking on board the lessons from the most recent global financial crisis, questioning old answers to policy questions and changing our corporate culture to remove obstacles to new ideas.  It starts with a clear research agenda. Here are some highlights:

• While we’re committed to our inflation-targeting framework, we’re taking a hard look at it ahead of the official renewal in 2016. The questions we are asking are: Should we consider targeting a rate of inflation higher than 2 per cent? Should we continue to use CPIX as our operational guide? How do we incorporate financial stability risks into the conduct of monetary policy?
• We’re analyzing the effectiveness of unconventional monetary policy used by various countries since the crisis. We’ve just published staff discussion papers on quantitative easing, forward guidance and negative interest rates.
• We’re making a big investment in economic modelling and using new analytical methods like big data and behavioural economics.
• We’re preparing to confront “alternative futures” such as China’s new role in the international monetary system; new payment methods like Apple Pay and PayPal; disruptive technologies and business models like Bitcoin, peer-to-peer lending and others in the sharing economy.

G-20 Faces Dwindling Capacity to Spur Souring Global Growth - WSJ: —World leaders are running out of options to revive a sickly global economy. After coasting for years on support from their central banks, top economies are struggling to come up with viable steps to reshape an increasingly dour outlook. They are also facing a host of newer troubles, from political problems to security crises, clouding the horizon and raising doubts about their ability to keep the world economy from falling into a long-term funk.  Leaders from the Group of 20 largest economies confronted that reality as they began an annual summit in Turkey on Sunday. China’s slowdown and turmoil across emerging markets had heightened worries for months. Now, a growing refugee crisis in Europe and renewed fears of terrorism after the Paris attacks on Friday are sapping attention from underlying economic problems that had already proven difficult to fix. Facing a global crisis in 2009, the G-20 became the world’s economic executive board and managed to coordinate a powerful policy response with government spending and central-bank support. But since then, these countries have struggled to jump-start anemic output and their coordinating abilities are straining their limits.

Putin Transformed from Outcast to Problem Solver at G20 - Vladimir Putin left last year’s G20 meeting in Brisbane early in a huff, tired of being chided by world leaders over Ukraine. Twelve months on, an audience with the Russian president was one of the hottest tickets in town, as western leaders were forced to recognise the road to peace in Syria inevitably runs through Moscow. Few at the annual summit of world leaders have seen such a transformation in their fortunes, or appeared to enjoy it as much, as Mr Putin moved from a scolded diplomatic outcast to a self-styled problem-solver the west cannot ignore.  Whether it was shifting air strikes to target Isis rather than Syrian rebels, or backing a political settlement in Ukraine and offering a debt restructuring deal, Mr Putin felt he held all the cards as the west came to him for answers.  While progress this weekend in the Vienna peace talks on Syria has exceeded expectations, it will now enters a fraught period involving shepherding and bringing order to the ranks of more “moderate” rebels in Syria, who would partake in a transition process and unity government. Until there is official consensus on that, Mr Putin can continue doing what he has been doing: bombing the rebels and at the same time trying to engage and pressure them into talks with Mr Assad. Washington and Moscow may agree on the strategy, said Yuri Ushakov, Mr Putin’s foreign policy aide, but on “tactics” they are still far apart.  The depth of mistrust still to overcome with the US was captured by Mr Putin himself. “It is difficult to criticise us when they tell us: ‘You are not hitting [Isis]’, and we say: Tell us where, name targets’, but they don’t,” the Russian leader said. He added: “Curiously enough, there are reasons and principles for that. And one of them is ... that they fear to give us territories which they don’t want us to hit, as they fear that we will then strike just there.”

Russia in full blown banking crisis: Sberbank head - --Russia's banking sector is the midst of a "wide-scale banking crisis," the head of Sberbank said Tuesday. German Gref said Russia's banking system is suffering from low profitability and the pace the Bank of Russia is purging the financial system of small lenders that appear to be in financial trouble. "What we see now is indeed a full-scale banking crisis," he said, state-run RIA news agency reported. Although Russian officials are claiming that the economy may be recovering from the turbulence caused by double digit inflation and the depreciation of the ruble, a number of sectors are still experiencing hard times. Data released Tuesday showed Russia's industrial production contracted in annual terms for the ninth consecutive month in October, dragged down by the manufacturing sector, data showed Tuesday. According to the Federal Statistics Service, industrial output declined by 3.6% in October compared with a year earlier, after falling 3.7% in September. According to analysts, Russia's central bank sacrificed consumer-related sectors for major state-owned companies in late 2014 by increasing the key interest rate to 17% to ease pressure on the free-falling ruble.

Germany protests lack of transparency in US trade talks - The German government has protested to the US authorities against the lack of access for German MPs to TTIP talks documents.According to the Sueddeutsche Zeitung daily, the German ambassador in Washington was asked by Berlin to notify a formal protest to US trade representative Michael Froman and request that MPs can access documents related to the EU-US negotiations for the Transatlantic Trade and Investment Partnership.The ambassador and the US official were due to meet Thursday evening (12 November) in Washington.The German government wants to address "the public reproach that TTIP is negotiated beyond the reach of parliaments and with disregard for democratic rights," the instruction to the ambassador quoted by the newspaper said.Last month, the president of the Bundestag, Norbert Lammert, protested that members of the parliament did not have access to the documents.Only 139 German ministry of finance officials were authorised to look at the so called consolidated texts, which gather both EU and US positions on the talks, at the Berlin US embassy, and only for two days a week between 10.00am and 12.00 noon.

German auditors warn of risks to balanced budget --A German financial watchdog has warned the German government's preoccupation with balanced annual federal budgets covers up a number of underlying risks. They point to grave structural discrepancies.  According to a fresh analysis by Germany's Supreme Audit Institution, huge financial risks hide behind the shining facade of the government's 2016 draft budget, which once again foresees no fresh borrowing despite rising costs to accommodate a growing number of refugees.  The parliamentary budget committee had only last week paved the way for the 2016 draft plan which it said would be based on continuously high revenues, enabling Berlin to do without fresh loans. But the audit office's president, Kay Scheller, on Tuesday criticized the government for drawing up a budget that was far too dependent on rising revenues and continuously low interest rates."By contrast, structural budgetary reforms, including a systematic decrease in federal spending and freeing up resources for more investments had once again been given short shrift," Scheller maintained. He said the German state now had to pay roughly 20 billion euros ($21.3 billion) a year in terms of debt servicing amid record-low interest rates, while back in 2008 it paid about 40 billion euros for the same purpose. An interest rate trend reversal had not been penciled in to the draft budget, the office warned.

France's Far-Right Party Calls For Nation To "Re-Arm Itself", Revoke Muslims' Passports, "Eradicate" Radical Islam - If there is one 'winner' from last night's terrible events in Paris, it is France's anti-EU, anti-immigration far-right wing Front Nationale party leader Marine Le Pen. Having already ascended to the lead in yet another poll ahead of France's 2017 elections, Le Pen came out swinging this morning call for France to "re-arm itself," stating that radical Islam must be "eradicated" from France. She further demanded that border controls be made "permanent" and binational Islamists must be depreived of their French passport. As Bloomberg notes: The Front National party in France are moving one step closer to seriously challenging for the country’s presidency. A new opinion poll reveals that their leader, nationalist firebrand Marine Le Pen, has topped yet another poll ahead of the elections in 2017. The IFOP poll in conjunction with Sud Radio and Lyon Capitale gives Ms. Le Pen a lead under three different scenarios, reflecting the panic setting into the French political establishment which is considering a ‘grand coalition’ of centre-left and centre-right parties to keep the Front National out. According to IFOP, if centrist politician Francois Bayrou and centre-right Nicolas Sarkozy ran, Ms. Le Pen would top the first choice in the multi-round election with 28 per cent of the votes. In second, the Republican Party’s Sarkozy (23), and in third, current president, socialist Francois Hollande (21).

Terrorists and Aliens - Krugman - The Great Depression wasn’t ended by the intellectual victory of Keynesian economics; in fact, what put a decisive end to the slump was World War II, which led to deficit spending on a scale that was politically impossible before. This story is what led me to facetiously suggest that we fake a threat from space aliens, to provide a politically acceptable cover for stimulus.  Now France has been attacked, unfortunately by real terrorists instead of fake aliens, and Hollande is declaring that security must take precedence over austerity. Is this the start of something big?  OK, obligatory disclaimer that will do no good in the face of the stupidity. I am NOT saying that terrorism is a good thing, just as those of us who point to wartime fiscal stimulus aren’t saying that World War II was a good thing. (Don’t kill baby Hitler — we need him to justify stimulus!) We’re just trying to think through some side effects of the atrocity.  The question we should ask is whether the fiscal indiscipline caused by jihadists will make a significant difference to French performance.  Well, my guess is that the numbers will probably be too small. U.S. defense and security spending rose by around 2 percent of GDP after 9/11 — but that involved a much bigger military buildup than France is likely to undertake, plus the Iraq War. More likely we’re looking at fraction of a percent of GDP, which is small compared with the austerity Europe has imposed. Unless the French response is much bigger than I’m imagining, the impact on growth won’t be large.

Nouriel Roubini: "Positive Impacts of Paris Attacks Modest Unless More Attacks Follow" - Economic stupidity permeates from every mainstream media corner in a myriad of ways. I typically expect economic stupidly, and stupidity certainly has provided endless things for me to write about. Nonetheless, I am somewhat surprised that renown economist Noutiel Rounbini would actually say Paris Attacks Could Boost the Eurozone Economy.  Economist Nouriel Roubini said Tuesday the Paris attacks could end up boosting the eurozone economy if the European Central Bank decides to increase its program of monetary stimulus by a larger margin than it would have otherwise. In an interview with CNBC, the founder of Roubini Global Economics said the [positive] impact of the attacks would otherwise be 'modest', unless more follow.  In context, the word "positive" is implied. The notion disasters cause positive economic activity was thoroughly discredited over two centuries ago.  French political economist, Frederic Bastiat’s 1850 essay, “That Which is Seen, and That Which is Unseen” provides the debunking.  There is never any benefit to the destruction of productive assets. Money used on repairs could otherwise have been put to much more productive use.  If Roubini truly believes there is any economic benefit to disasters he is a Nobel-prize winning Keynesian-economist fool.

Catalan Lawmakers Approve Plan for Secession from Spain  - The regional parliament of Catalonia launched a plan Monday to set up a road map for independence from Spain by 2017, defying warnings from the central government in Madrid that it is violating the nation's constitution. Spanish Prime Minister Mariano Rajoy pledged to halt the effort. The chamber, based in the northeastern city of Barcelona, passed the secession resolution in a 72-63 vote. The proposal was made by pro-secession lawmakers from the "Together for Yes" alliance and the extreme left-wing Popular Unity Candidacy (CUP).  Spain's government reacted swiftly Monday. In a nationally televised address, Rajoy said his government will appeal the decision at the Constitutional Court, which has in the past blocked moves toward independence.  Catalan branches of Spain's ruling conservative Popular Party and the Socialist and the Citizens opposition parties had filed appeals to halt the vote, but Spain's Constitutional Court ruled last Thursday that it could proceed. Later Monday, the parliament began what is expected to be a long, heated debate over whether Artur Mas should continue for a third term as regional president.  While his "Together for Yes" alliance backs him with 62 votes, it is short of the required majority of 68. The anti-independence parties are against him, and the CUP has said it won't support Mas because of his conservative austerity policies and the corruption investigations involving his Convergence Party. The parliament has until Jan. 9 to form a government or a new election must be called.mBy then, Spain will have held a national election — on Dec. 20 — and the issue of how to handle the situation in Catalonia will play a crucial role in whether the Popular Party can hold onto power.

EU warns Italy, Lithuania, Austria on budget plans - --The European Union warned Italy, Lithuania and Austria that their 2016 budget plans risk violating the bloc's spending rules and urged them to revise them to meet EU targets. The review comes a month after the European Commission--the EU's executive arm-- fired a warning shot at Spain, which submitted its spending plans early, telling it that its budget for this year and next would violate European Union spending rules and should be revised. The assessments, published Tuesday, are part of the eurozone's new system of budget oversight, whose main goal is to keep public debt in check. Officials in Brussels get to review eurozone budgets before they are adopted by national parliaments. If they identify major problems, authorities can issue formal recommendations that can lead to fines against governments that refuse to follow them. In its review of public finances across the bloc, the commission said that debt and deficits in the eurozone were set to fall in 2016. Based on the budgets submitted by the currency union's members, debt should also fall from 91.1% of gross domestic product in 2015 to just below 90% of GDP for 2016, the commission said. "For the first time since the beginning of the crisis, we see debt starting to fall too,"

France to miss deficit target amid boost to security  -- Manuel Valls told French radio station France Inter on Tuesday that the EU deficit target of 3 percent of gross domestic product (GDP) would "necessarily be exceeded" as extra spending on anti-terrorism measures would not be compensated by cuts elsewhere. "We have to accept that and Europe has to understand," he said, adding: "It's also time the [European] Commission understood that this struggle concerns France but also concerns Europe."  Valls spoke hours before the EU executive Commission was going to pass judgment on draft 2016 budget plans submitted by France and 15 other eurozone members. Greece and Cyprus did not have to submit their budgets for scrutiny because they are under bailouts, while Portugal failed to do so.  France has repeatedly been admonished for failing to meet EU budget goals. The country has been in breach of deficit limits since 2009, and has already been granted three deadline extensions to bring its budget shortfall below 3 percent deficit limit. In March, EU peers told Paris to trim the deficit to 2.8 per cent of GDP by 2017. But earlier this month, the commission said France was already on track to miss the target, even before extra spending on security came into play. On Monday, a finance ministry told the news agency Reuters that extra security spending was likely to entail hundreds of millions of euros but less than 1 billion euros ($1.08 billion).

Greece passes bailout bill but government majority shrinks | Reuters: Greece approved a reform bill on Thursday to secure further bailout funds from its international lenders but Prime Minister Alexis Tsipras' parliamentary majority shrank to just two seats after two dissenting lawmakers were expelled. The bill, outlining regulation on tax arrears and home foreclosures, paves the way for the disbursement of 2 billion euros (916 million pounds) to pay state arrears and a further 10 billion euro to recapitalise Greece's top four banks. The reforms were agreed by Tsipras' government and its lenders on Tuesday after weeks of negotiations and are key for it to complete the first review of a new aid programme worth up to 86 billion euros which Greece signed up to this summer. However the defections of Nikos Nikolopoulos of the right-wing Independent Greeks party and Stathis Panagoulis of Tsipras' Syriza party further weakened the left-right coalition. Nikolopoulos voted against the bailout bill, while Panagoulis abstained. Both were expelled from the ruling coalition's parliamentary group, meaning the government can now count on 153 votes in the 300-seat chamber. That is exactly the number of "yes" votes obtained by the bill on Thursday.

Ex-Swiss central bank head Roth says ECB easing has gone too far -SRF -- Former Swiss National Bank Governor Jean-Pierre Roth has criticised the European Central Bank's monetary easing as excessive and said that only structural reforms could help the euro zone return to robust health. In an interview aired with Swiss broadcaster SRF on Tuesday, the head of the Swiss National Bank from 2001 to 2009 also defended the current SNB leadership for abandoning in January its cap on the Swiss franc's exchange rate against the euro. "I think the ECB policy has gone too far," said Roth, who is now chairman of Geneva's cantonal bank, citing the ECB's aggressive policy steps as undermining the urgency for structural change in euro zone member countries. "The reform appetite is no longer there. One doesn't need more expansive monetary policy in Europe. One needs reform." Keen to boost weak growth and head off falling prices, the ECB launched a 1 trillion euro ($1.07 trillion)programme of asset purchases in March. ECB chief Mario Draghi last week underlined its readiness to extend money printing. That in turn could put more pressure on the SNB to weaken the franc, which it has repeatedly called overvalued. It has used negative interest rates and willingness to intervene in currency markets as its main tools to rein in the currency.

QE in the Eurozone Has Failed -- Eight months have passed since the ECB started its own quantitative easing (QE) program, and almost everyone in Europe seems to agree with Mario Draghi that ‘QE has been a success’. But is such enthusiasm warranted? Let’s take a look at the data. The obvious starting place is the inflation rate. As is well known, the ECB’s mandate only foresees a single measurable objective – maintaining the inflation rate ‘below, but close to, 2 per cent’ – and it is thus logical to judge the central bank’s actions first and foremost according to this parameter (as narrow as it may be), especially since one of the stated aims of the ECB’s QE program is to bring the inflation rate back towards the 2 per cent target. So how did the program fare in this respect? Not well: in September the inflation rate turned negative again (-0,1 per cent – coincidentally, the exact same level registered in March of this year, when the ECB launched its asset-buying program). Focusing on whether the inflation rate is just above or below zero per cent is beyond the point, though: the fact of the matter is that the euro area’s average inflation rate – notwithstanding the huge inflation differentials between countries – has been below the ECB’s target of 2 per cent since late 2012, and below 1.5 per cent – which essentially amounts to deflation, according to a generally accepted guideline – since the beginning of 2013. That is, for almost three consecutive years. If we look the GDP growth rate for the euro area, the conclusions are even more damning: as one can see in the following image, the growth rate actually starts to contract once again – putting an end to the slow climb commenced in 2014 – precisely a few months after the launch of the QE program, in March 2015.

Eurozone reacts to anticipated fed rate hike - Almost without warning, the Eurozone government bonds and the Euro experience spikes in volatility this past month. These abrupt movements are clearly correlated with the mayor announcements of a change in monetary policy by, initially by the ECB and then, by the FED. The European banks had been actively pursuing front-running strategies which try to anticipate ECB's moves until the beginning of Quantitative Easing program (PSPP). Not always with success, as experienced with the “flash crash” of April and June. The new game plan spectacularly backfired with the hawkish statement of Ms. Yellen during the FOMC of the 28th of October. This igniting a massive sell-off of Eurozone bonds with an intensity comparable to the previous “flash crashes”.  At the October 22 meeting, Draghi has clearly anticipated an acceleration of the monetary easing policies. He hinted at cutting the deposit facility rate (now at -0.2%) by at least 10 basis points and at increasing the pace of asset purchases. Finally, the ECB strongly suggested that the PSPP program may be extended for another 6 months. Both policy moves were designed to counter a strengthening Euro. In August it has become apparent to the European policy makers that a stronger Euro was having an adverse effect on the Eurozone’s balance of trade (Figure 2), thus harming the export driven recovery envisioned by the ECB. Since a rising currency was not seen then with favor by the ECB, the market began to evaluate a further monetary easing by the ECB as very likely, especially a reduction of the ECB deposit facility rate. This, in turn, resulted in the European banks resuming their hoarding of government bonds and pushing yields to very low levels in the following month. Even issues characterized by negative rates slipped below the deposit facility rate (Figure 3) thus becoming ineligible for the ECB purchase under the PSPP.

First ever negative yields in auctions of short-dated government debt - Portugal on Wednesday for the first time ever saw negative yields in an auction of government debt, placing €1.5 billion - more than initially planned - of six- and 12-month treasury bills at average yields of -0.018% and -0.006% respectively. According to the page on the Bloomberg system of the state debt management agency, the IGCP, €400 million in six-month bills were placed at an average yield of -0.018%, against a positive yield of 0.006% in the last comparable auction, in mid-September, with demand 2.72 times supply. At the same time, €1.1 billion in 12-month bills were placed at an average yield of -0.006%, compared with a positive 0.051% in the previous auction, also in mid-September, and with demand in the auction 2.18 times supply. The IGCP had said before the auctions that the overall indicative amount for them was between €1 billion and €1.25 billion. Portugal is among southern European countries zone that have enjoyed record low yields in recent months, largely thanks to the bond-buying programme of the European Central Bank, which was aimed at supporting a faltering euro-zone economy.

Draghi Put Pushes 40% of German Bond Yields Below Deposit Rate (Bloomberg) -- With yields on about 40 percent of German government securities excluding them from the European Central Bank’s bond-buying program, pressure is increasing on President Mario Draghi to deliver additional stimulus in two weeks’ time. Germany’s two-year note yields are about 18 basis points, or 0.18 percentage point, less than the ECB’s deposit rate, currently minus 0.2 percent, signaling that traders have priced in another reduction when policy makers meet Dec. 3. The amount of securities with yields below the deposit rate has climbed to $469 billion, reducing the range and amount of debt available to the central bank’s 1.1-trillion-euro ($1.2 trillion) quantitative-easing plan. Some policy makers called for more stimulus at the Oct. 22 Governing Council gathering in Malta, according to an account published by the ECB on Thursday. The danger for investors going into the next policy meeting is that officials fail to meet market expectations, which may threaten a rally that has seen euro-area bonds outperform their U.S. and U.K. counterparts in the past month. “He always has managed to outperform expectations but of course now the expectations are building again that he will deliver something big,” said Mathias Van Der Jeugt, a fixed- income strategist at KBC Bank NV in Brussels, referring to ECB President Draghi. “Quite amazing expectations are already discounted in markets.”

German Bunds Give Draghi The Finger: 2-Year Hits Record Negative Low -0.39% - As we reported moments ago, Mario Draghi just unleashed another "whatever it takes"speech, this time focusing on the ECB's fight with the "deflation monster" and explaining how the central bank plans to boost inflation and inflation expectations, saying that "while inflation will remain low for a prolonged period, we see it gradually rising back to 2%. The delay is largely explained by the impairments in the transmission mechanism that lengthen the lag between our accommodative policy stance and price developments." And while the initial EUR response was as expected, dropping about 30 pips (but already rebounding on concerns that the Draghi bazooka may truly be empty this time - after all what else can he surprise with as CA's Valentin Marinov said), German Bunds, especially the short-end, were quick to give Mario Draghi  the middle finger and the 2Y has dropped to a quite deflationary all time record low of -0.389%, because all they heard was that the ECB will monetize even more debt.

IMF debunking of the German View’s austerity stance comes too late for Greece - The IMF has put to bed the German View. The German View is a hypothesis about monetary unions: that in the euro zone, economically depressed members need to cut wages and prices for them to grow again. The German View argues that for the euro zone to thrive, those members must accept further misery by cutting wages and prices at home. Then investors will flock in to take advantage of cheap labour and asset prices, and the country’s exports will cost less in international markets. Exports and inward investments will grow and the economy will thrive. This is the economic position that has been imposed on Greece. But now the IMF is saying that it’s junk. The IMF is not alone in this. Plenty of people have been saying this for some time. If you have a crisis-hit country and you further depress economic activity in that country by cutting wages and reducing government spending, you are likely to make things worse. The German View argues that this is counteracted by increased demand from outside the euro zone. But if, as has happened in the euro zone, many countries attempt to lower labour costs all at once, external demand doesn’t increase sufficiently to encourage firms to take advantage of lower asset and labour costs. In Greece, the prices of assets and exports don’t become cheaper than those of Germany’s, so Greece doesn’t sell more exports or attract more investment than Germany. Greece is just made worse off by cutting input costs.

UK sees worst October for government borrowing since 2009 | Reuters - British public finances recorded the worst deficit for any October since 2009, making it more likely Chancellor George Osborne will miss his annual borrowing target, as he prepares for a major spending review next week. Official data on Friday showed Britain's headline public borrowing rose to 8.2 billion pounds in October from 7.1 billion pounds a year earlier, higher than all forecasts in a Reuters poll that predicted borrowing of only 6.0 billion pounds. While government borrowing in the current 2015/16 financial year is 11 percent less than it was at the same point in 2014, progress has been slower than Osborne might have hoped. Economists said the figures made it more likely that the Office for Budget Responsibility will bump up its forecast for government borrowing this fiscal year, when Osborne outlines his comprehensive spending review next Wednesday. "For three consecutive months now the path of borrowing has drifted in the same direction and so we stand by our expectation that borrowing will be revised up,"

Britain is in the longest period of deflation since records began -- Britain is in the longest period of deflation since records began after inflation remained at minus 0.1 per cent for the second month in a row.  Inflation has been at or close to zero for nine months and is at the lowest level in 55 years, according to the Office for National Statistics.  It means a basket of goods and services that cost £100 in October last year would have cost £99.90 last month. Falling food and drink prices, driven by a price war between supermarkets, and low fuel costs pulled the inflation rate down in the year to October. Fuel prices fell by 14 per cent compared to last year and energy costs were 4.1 per lower, while food and drink prices dropped by 2.7 per cent. The tripling of university tuition fees in 2012 has also finally dropped out of the annual comparison, meaning there was a smaller increase in education spending, according to the ONS. The downward trend was slightly off-set by rising clothing and footwear prices, as high street shops reduced the amount of items on sale, as well as the increased cost of eating and drinking out. Chancellor George Osborne said the figures meant household budgets were ‘going further’.