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

Saturday, November 7, 2015

week ending Nov 7

 Fed Admits "Something's Going On Here That We Maybe Don't Understand" - In a somewhat shocking admission of its own un-omnipotence, or perhaps more of a C.Y.A. moment for the inevitable mean-reversion to reality, Reuters reports that San Francisco Fed President John Williams said Friday that low neutral interest rates are a warning sign of possible changes in the U.S. economy that the central bank does not fully understand. With Japan having been there for decades, and the rest of the developed world there for 6 years... Suddenly, just weeks away from what The Fed would like the market to believe is the first rate hike in almost a decade, Williams decides now it is the time to admit the central planners might be missing a factor (and carefully demands better fiscal policy)...(as Reuters reports) "I see this as more of a warning, a red flag that there's something going on here that isn't in the models, that we maybe don't understand as well as we think, and we should dig down deep deeper and try to figure this out better," said San Francisco Federal Reserve President John Williams on Friday pointing out that low neutral interest rates are a warning sign of possible changes in the U.S. economy that the central bank does not fully understand. Williams, who is a voting member of the Fed's policy-setting panel through the end of the year, has said the central bank should begin to raise interest rates soon but thereafter go at a gradual pace; ironically adding that the low neutral interest rate had "pretty significant" implications for monetary policy, and put more focus on fiscal policy as a response.

Yellen Signals a Fed Tilt Toward December Rate Increase -- The Federal Reserve could raise its benchmark interest rate in December as long as economic growth continues, two senior Fed officials said on Wednesday, hammering that message in repeated public remarks.   Janet L. Yellen, the Federal Reserve chairwoman, told Congress on Wednesday that the Fed would consider raising its benchmark interest rate in December, citing an economy that she said was “performing well.”  “It could be appropriate” to act at the Fed’s final policy-making meeting of the year, Ms. Yellen told the House Financial Services Committee. She suggested that if growth continued apace, the Fed was inclined to start raising interest rates, although she added the cautionary note that “no decision has been made.”  Her remarks were echoed a few hours later by William C. Dudley, the president of the Federal Reserve Bank of New York. “I fully agree with the chair,” he told reporters at a news conference in New York. “It is a live possibility, but let’s see what the data shows.”  While the timing of an increase has captivated markets, Ms. Yellen also emphasized that the path of rate increases over the next several years would be more economically significant. The Fed has said it plans to raise rates more slowly than during previous periods of economic growth because the pace of expansion has been unusually weak.

Dudley, Yellen concur: December in play for rate hike: Another top Federal Reserve official said on Wednesday that a policy meeting set for Dec. 15-16 is a "live possibility" for raising U.S. interest rates for the first time in nearly a decade. New York FedPresident William Dudley, addressing reporters, said he would "completely agree" with Fed Chair Janet Yellen who had earlier said December is in play for a policy tightening if the economic data points to further improvement in the labor market and to a rebound in inflation. Dudley also remarked on the need for more diverse sets of data in Federal Reserve policy earlier Wednesday.The Federal Reserve must look beyond broad measures of the U.S. labor and housing market to understand how its policies affect individual Americans, Dudley said. In remarks that did not address the current state of U.S. monetary policy, Dudley said that "micro-level" economic data can paint a different picture of the U.S. economy and must be better understood. "Looking at the national unemployment rate tells only part of the story of the labor market experiences for different groups of individuals," he said. "Understanding this diversity is critical to better understanding the health of the labor market and the overall economy, and is important for informing policy." Dudley, a close ally of Yellen's and a permanent voter on policy, noted for example that younger and less-educated workers, as well as black and Hispanic Americans have "significantly higher" unemployment rates compared to older and better-educated Americans.

Fed would consider negative rates if economy soured - Yellen | Reuters: The Federal Reserve would consider pushing interest rates below zero if the U.S. economy took a serious turn for the worse, Fed Chair Janet Yellen said on Wednesday. "Potentially anything - including negative interest rates - would be on the table. But we would have to study carefully how they would work here in the U.S. context," Yellen told a House of Representatives committee. This would happen if the economy were to "deteriorate in a significant way," she said, adding that she believed negative rates "would have some at least modest favorable effect on banks' incentives to lend."

The Fed’s Communication Breakdown - Kenneth Rogoff  – Nothing describes the United States Federal Reserve’s current communication policy better than the old saying that a camel is a horse designed by committee. Various members of the Fed’s policy-setting Federal Open Markets Committee (FOMC) have called the decision to keep the base rate unchanged “data-dependent.” That sounds helpful until you realize that each of them seems to have a different interpretation of “data-dependent,” to the point that its meaning seems to be “gut personal instinct.” In other words, the Fed’s communication strategy is a mess, and cleaning it up is far more important than the exact timing of the FOMC’s decision to exit near-zero interest rates. After all, even after the Fed does finally make the “gigantic” leap from an effective federal funds rate of 0.13% (where it is now) to 0.25% (where is likely headed soon), the market will still want to know what the strategy is after that. And I fear that we will continue to have no idea. To be fair, deciding what to do is a very tough call, and economists are deeply divided on the matter. The International Monetary Fund has weighed in forcefully, calling on the Fed to wait longer before raising rates. And yet central bankers in the very emerging markets that the IMF is supposedly protecting have been sending an equally forceful message: Get on with it; the uncertainty is killing us. Personally, I would probably err on the side of waiting longer and accept the very high risk that, when inflation does rise, it will do so briskly, requiring a steeper path of interest-rate hikes later. But if the Fed goes that route, it needs to say clearly that it is deliberately risking an inflation overshoot. The case for waiting is that we really have no idea of what the equilibrium real (inflation-adjusted) policy interest rate is right now, and as such, need a clear signal on price growth before moving. But only a foaming polemicist would deny that there is also a case for hiking rates sooner, as long as the Fed doesn’t throw random noise into the market by continuing to send spectacularly mixed signals about its beliefs and objectives. After all, the US economy is at or near full employment, and domestic demand is growing solidly.

Fed communication - Ben Bernanke -- Wednesday was something of a trifecta for Fed watchers: Chair Yellen, Board Vice-Chair Stanley Fischer, and Federal Reserve Bank of New York president Bill Dudley (who is also the vice chair of the Federal Open Market Committee) all made public appearances. Moreover, the comments by all three members of the Fed’s leadership explicitly or implicitly supported the idea that a December rate increase by the FOMC is a distinct possibility. (The possibility of a rate increase is even more distinct with this morning’s strong job market report.) The relative unanimity of views expressed on Wednesday was unusual. As many as nineteen Fed officials—the seven Board members (when all seats are filled) and twelve Reserve Bank presidents—comment regularly on the economy and monetary policy, and their messages can vary widely. The diversity of voices has engendered frequent complaints about cacophony from market participants and the markets-oriented media. Many ask, can’t Chair Yellen do a better job of herding her cats? The complaint is understandable, but it reflects an incomplete understanding of both the communications process at the Fed and of the purposes of the Fed’s public commentary. Regarding process: Board members and Reserve Bank presidents are not the chair’s subordinates. Rather, they are, to a substantial extent, independent policymakers. (Board members are individually appointed by the president and confirmed by the Senate. The Board as a whole must approve the selection of Reserve Bank presidents, but those decisions are not based on policy positions.) The chair consequently has little or no ability to orchestrate what FOMC participants say, even if she were inclined to do so. When I was chair, I sometimes got advance copies of participants’ speeches as a courtesy; but my approval was not necessary or expected. What you hear from the Fed is policymakers’ unfiltered, unorchestrated opinions!

Why are short-term real interest rates so persistently negative these days? - Low productivity will get rates low but not consistently negative.  Why might they be negative is a question raised by Brad DeLong and also Paul Krugman, in response to my earlier post about the natural rate of interest. The most obvious answer is “risk,” but unfortunately that is directly contrary to the data.  The domestic and global economies have become much less risky since 2008-2009, and yet if anything negative real rates for safe short term assets seem all the more ensconced.  VIX volatility indicators are down (admittedly there is a spike back up since August, but that is not going to do the trick, try the ten-year series too), consumer confidence is back up, and so are business confidence indicators.  The TED spread, Krugman’s own previously favored index of extreme volatility, has been way down for years.  The eurozone crisis of 2011 has passed, at least for the time being.  Some of the emerging economies aside, most market prices are signaling low risk.  So it is strange to invoke high risk to explain current asset prices, when the relevant prices and yields do not seem to be moving with that risk.  If it is indeed risk, it is risk of a kind which we do not know how to measure or perhaps even conceptualize. The other hypotheses are interesting but unproven, let’s take a look:

Fed's Williams says low neutral interest rates a 'warning sign' | Reuters: San Francisco Federal Reserve President John Williams said on Friday that low neutral interest rates are a warning sign of possible changes in the U.S. economy that the central bank does not fully understand. "I see this as more of a warning, a red flag that there's something going on here that isn't in the models, that we maybe don't understand as well as we think, and we should dig down deep deeper and try to figure this out better," he said during a panel discussion at the Brookings Institute in Washington. Williams, who is a voting member of the Fed's policy-setting panel through the end of the year, has said the central bank should begin to raise interest rates soon but thereafter go at a gradual pace.  He added that the low neutral interest rate had "pretty significant" implications for monetary policy, and put more focus on fiscal policy as a response. "If we could come up with better fiscal policy, find a way to have the economy grow faster or have a stronger natural rate of interest, then that takes the pressure off of us to try to come up with other ways to do it, like through a large balance sheet or having a higher inflation target," Williams said. "It also means we don't have to turn to quantitative easing and other policies as much."

The Opening of the American Macroeconomy and the Implications for Monetary Policy - Or, why I think Governor Brainard is right to say it’s too soon to tighten. Tim Duy’s interpretation of the last FOMC statement as a dismissal of international concerns as laid out by Governor Lael Brainard is troubling.  The removal of international factors from the statement reminds me that we ignore the external conditions at our peril (see also Krugman’s take).  Here are some observations to keep in mind:

  • 1. Trade is an increased share of GDP. During the mid 2000’s, net exports increased to record share of GDP – nearly 6%, dwarfing the international sibling of the “twin deficits” of the 1980’s experienced under Reagan. More importantly, the economy is more open: exports plus imports as a share of GDP is now around 30%, as compared to 25% between the previous two recessions, as shown in Figure 1.
  • 2. The relative importance of the contribution of net exports to growth has increased over time.  Using the decomposition of contributions to growth (in an accounting sense) as reported in Jim’s post on the GDP release, it can be shown that over time the absolute value of GDP growth (SAAR) has decreased, while the absolute value of net export contributions to growth has remained largedly unchanged.
  • 3. The responsiveness of trade to exchange rates has risen. US exports and imports also appear to be more responsive to exchange rates than they were in previous periods. Hence, the observation that the recent appreciation has not reached heights recorded in the early 2000’s and in the mid-1980’s is not necessarily sufficient to dismiss worries. In this post (extended in Chinn (2010)) I report estimates that indicate that export price (exchange rate) elasticities are greater in the more recent period than in earlier; similarly IMF (2007) (Table 3.2) finds that price elasticities are higher over the 20 year period up to 2006 as compared to the entire 33 year period.

Why The Fed May Wait Until 2017 To Raise Rates - Forbes: Wall Street has been volatile throughout 2015, and the Federal Reserve has been a big factor behind that. Investors have swung back and forth on when the Fed is likely to raise interest rates–the first such increase in about a decade, following a period with a zero-rate policy that many consider a major contributor to equity gains over the past few years–as well as what such a move would mean for markets. The central bank’s most recent commentary hardly clarified matters. Following a two-day policy meeting, the Fed made explicit reference to the possibility of a rate hike in December, the first time such a mention has appeared in its statement. “The committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2% inflation” in order to determine whether such a move would be warranted, the Fed wrote. I have long considered a December rate hike unlikely. The Fed’s next meeting coincides with what is historically a thin period of trading. Investors are out on holiday, there tend to be fewer news events to trade off, and in general there’s less liquidity floating around. Raising rates in that kind of environment would amplify volatility unnecessarily, and if the Fed can avoid turbulence by waiting, it probably will. .If a rate hike doesn’t occur by February, we’re probably looking at a 2017 hike. By March, there will be new questions about first-quarter growth, as well as the first-quarter earnings season to dig through, as well as political risk from presidential primaries. The Fed will likely avoid raising rates amid that given a desire to not appear to be politicizing the issue.

Solid jobs report will likely lead the Fed to raise next month…but what about after that?  -- The nation’s employers added 271,000 jobs in October, and the unemployment rate ticked down slightly to 5% in a solid report on labor market conditions. Wages grew 2.5% over the past year, their strongest yearly performance since the recession officially ended in June 2009.  Today’s report portrayed a very different job market than that seen in the September release, when payrolls were up a by only (a revised) 137,000. As I stressed last month (“a weak report, but does it represent a true downshift?”), this sort of volatility is to be expected in “high-frequency” data and it is a strong reminder not to over-weight any one month’s data when forming your views of the job market. Better to average monthly payroll gains as seen in my monthly smoother below. Over the past three months, payrolls were up 187,000 on average, compared to 235,000 over the past year. That suggests a mild deceleration of job growth but I consider anything above 150K to be solid employment growth meaning enough jobs per month to put legitimate downward pressure on the jobless rate. Other positive signs in today’s report include:

  • –A decline in the number of involuntary part-time workers, down 1.2 million over the past year.
  • –We finally may be seeing some wage acceleration, and if it sticks, that would be a very big story. I already noted the annual 2.5% growth rate, but I also averaged hourly wages over the past three months and the three months before that, creating pseudo quarterly wage values (as opposed to calendar quarters). Annualized, wage growth is up 2.7% over the past three months, compared to 2.1% over the prior “quarter.”
  • –Outside of manufacturing and mining, which remain weakened by cheap oil and the strong dollar, most industries added jobs, with strong showings in construction, business services, health care, retail trade, and bars and restaurants. The latter two industry gains may reflect a broader swath of consumers flexing their spending muscles given stronger nominal wage growth amidst very low inflation.

Desperate-To-Hike Fed Admits "Inflation Is Not As Low As You Think" -- Following this morning's basic admission by Janet Yellen that "no matter what" The Fed is raising rates in December (which was then solemnly supported by an obedient Bill Dudley who "100% agrees with Yellen"), Fed Vice-Chair Stan Fischer, speaking tonight, reaffirmed this belief by, as we detailed previously, telling investors to ignore weak inflation. After San Fran Fed's Williams admission that "there's something going on here we don't understand,"Fischer tonight admitted "US inflation is not as low as you think," at once contradicting Yellen's earlier comments and the various market-based measures, while confirming our previous detailed solving of the mystery of the hidden inflation.

Only a crisis can stop the Fed -- After the initial astonishment, a few clear lessons arise from the October US non-farm jobs report, which revealed that almost 100,000 more people had found work last month than economists had predicted. First, the data are nowhere near robust enough for the weight that markets and policymakers put on it. This report followed September’s survey that was equally shocking in the opposite direction, suggesting that growth was far weaker than had been thought. That report has now been revised, and the dramatic market gyrations of the past two months look as though they owed much to bad data. It is galling to think of the amount of money that has changed hands, and the amount of analysis that has been produced, on essentially false premises. This is not a new problem. As long ago as 2006, well before the financial crisis, Tim Bond, then an analyst at Barclays, complained that non-farm payroll data were so unreliable that “bussing in grannies for a monthly Bingo Friday would be the more optimal way to allocate capital in the global bond market”. A second lesson is that the rise is almost entirely down to the private sector, which accounted for 267,000 of the extra 271,000 jobs created. The government has done virtually nothing to prime the pump of this labour market. Whether that shows the folly of government austerity, or the wisdom of getting out of the private sector’s way, can be left for the politicians to argue about. Third — and by far the most important — is that we can revert to assuming a rate rise from the Federal Reserve next month is a virtual certainty. There is no reason from the labour market for a central bank that plainly wants to raise rates from zero to stay its hand. The initial reaction in the Fed Funds futures market, which put the implied chance of a December rate rise up to 72 per cent, looks understated. The rise in interest rate-sensitive two-year Treasury bond yields to their highest level since early 2010, however, seems reasonable. That was a point when many assumed, wrongly, that the Fed was already finished with its QE bond purchases. Despite the turbulence of the last few months, it also looks as though the US stock market, at least, can handle a rate rise. Stocks are close to the record highs set in May this year; the Fed has successfully prepared traders for higher rates.

Hike They Shouldn't - Paul Krugman -- Does today’s good job report mean that the Fed will raise rates next month? Probably yes. Does it mean that the Fed should raise rates? Definitely not. The arguments against an early rate rise remain compelling, and shouldn’t be abandoned based on one month’s data. First of all, some perspective: while wage growth has picked up, it’s still well below pre crisis levels; core inflation is also still below the Fed’s target. And here’s the thing: there’s very good reason to believe that the pre-crisis target was too low. The Fed used to think that 2 percent inflation was high enough to make the chances of hitting the zero lower bound on interest rates trivial; we now know that this was utterly wrong. So the Fed should not be eager to raise rates until inflation and wage growth are at least at, and preferably above, where they were before the bottom fell out. And it certainly shouldn’t be conveying the impression that 2 percent is not a target but a ceiling, which is exactly what it would do with a rate hike.  Beyond that, although related, is the asymmetry of risks. Yes, US job growth is OK right now. But the world economy as a whole is struggling, and we tend to import that weakness via a strong dollar; also, there are plenty of other things that can go wrong. Maybe they won’t, and inflation accelerates a bit. If so, the Fed knows what to do. But if the economy weakens, the Fed doesn’t have adequate ammunition. So uncertainty says wait. I guess we’ll be talking about this at the IMF later today. I wish I thought we’d get traction.

Nonseasonally Adjusted Median CPI and Inflation - Cleveland Fed  - Since controlling inflation is a central monetary policy goal, monetary policymakers focus intently on inflation signals. But they face a major difficulty: inflation data contain a lot of transitory shocks. The presence of the transitory “noise” in inflation data makes it difficult to detect early warnings of sustained movements. Responding to these transitory shocks would be a bad idea, because doing so would translate into policy swings and reversals and introduce uncertainty and volatility into the economy. Instead, policymakers attempt to respond to the sustained movements in inflation—that is, to underlying trend inflation. Discerning the underlying trend in the midst of the noisy inflation data is a challenging task. Numerous approaches to this important problem have been proposed. Perhaps the most well-known trend inflation measure is the so-called “core” Consumer Price Index (CPI). An alternative approach first proposed in the early 1990s—one which does possess a theoretical justification—has arguably proven to be superior in practice: the median CPI. This measure was introduced in Bryan and Cecchetti (1993) and is produced by the Federal Reserve Bank of Cleveland. While the median CPI has proven useful in many contexts, it has an inherent drawback: its history is subject to revision about once a year, when the BLS releases its updated seasonal adjustment factors for the CPI. Conversely, a nonseasonally adjusted median CPI would rarely be subject to revision. In this Commentary, we introduce a nonseasonally adjusted version of the median CPI (hereafter, the NSA-median). This index differs from the median CPI primarily in that it is built exclusively using nonseasonally adjusted data (see Higgins and Verbrugge 2015 for details). While the NSA-median will rarely be revised, one drawback is that, in many applications, a user will need to perform seasonal adjustment prior to subsequent analysis. We show that our new NSA-median measure is slightly superior to the median CPI in tracking trend inflation. But in keeping with prior research, we find that both of the median series clearly dominate the core CPI for discerning inflation trends.

The missing lowflation revolution  It will soon be eight years since the US Federal Reserve decided to bring its interest rate down to 0%. Other central banks have spent similar number of years (or much longer in the case of Japan) stuck at the zero lower bound. In these eight years central banks have used all their available tools to increase inflation closer to their target and boost growth with limited success. GDP growth has been weak or anemic, and there is very little hope that economies will ever go back to their pre-crisis trends. Some of these trends have challenged the traditional view of academic economists and policy makers about how an economy works. Some of the facts that very few would have anticipated:
- The idea that central banks cannot lift inflation rates closer to their targets over such a long horizon.
- The fact that a crisis can be so persistent and that cyclical conditions can have such large permanent effects on potential output.
- The slow (or inexistent) natural tendency of the economy to adjust by itself to a new equilibrium.
To be fair, some of these facts are not a complete surprise and correspond well with the description of depressed economies that have hit the zero lower bound level of interest rates because of deflation or "lowflation". We had been warned about this by those who had studied the Japanese experience: both Krugman and Bernanke, among others, had described these dynamics for the case of Japan. But my guess is that even those who agreed with this reading of the Japanese economy would have never thought that we would see the same thing happening in other advanced economies. Most thought that this was just a unique example of incompetence among Japanese policy makers. Now we have learned that either all central bankers are as incompetent as the Bank of Japan in the 90s or that the phenomenon is a lot more natural, and likely to be repeated, in economies with low inflation, more so when the natural real interest rates is very low.

Demand Creates Its Own Supply - Paul Krugman  One of the intellectually horrifying things about the response to economic crisis was the way many economists, some of them famous, reinvented old fallacies in the belief that they were saying something profound. In particular, quite a few economists seemed utterly unaware that Say’s Law – the proposition that supply creates its own demand, that shortfalls in aggregate demand were impossible – had been refuted three generations ago.  In fact, not only doesn’t supply create its own demand; experience since 2008 suggests, if anything, that the reverse is largely true – specifically, that inadequate demand destroys supply. Economies with persistently weak demand seem to suffer large declines in potential as well as actual output. The suggestion that this might be true goes back a long ways, to work by Olivier Blanchard and Larry Summers in the 1980s. But events since the crisis provide a lot more evidence, just as they do on fiscal multipliers. A new paper by Fatas and Summers looks at the impact of fiscal austerity, not on actual output, but on estimates of potential output; it finds large negative effects.  The implications are shocking: austerity looks like even more of a catastrophe than the conventional analysis indicates. In fact, it’s a pretty good bet that imposing austerity in economies that can’t offset its effects with monetary policy inflicts pain without any gain whatsoever: by reducing the future size of the economy and hence the tax base, austerity actually worsens the fiscal outlook. The Very Serious People have a lot to answer for. But of course they never will.

GDP Data Indicates Economy is Stronger than Headline 1.49% Growth - In their first estimate of the US GDP for the third quarter of 2015, the Bureau of Economic Analysis (BEA) reported that the economy was growing at a +1.49% annualized rate, down -2.43% from the second quarter. Follow up: This report included significant changes in the details as well as the headline. By far the greatest quarter-over-quarter change was in inventories, which subtracted -1.44% from the headline after being essentially neutral during the prior quarter. As we have mentioned before, the BEA's treatment of inventories can introduce noise and seriously distort the headline number over short terms -- which the BEA admits by also publishing a secondary headline that excludes the impact of inventories. This BEA "bottom line" (their "Real Final Sales of Domestic Product") reported a much more respectable +2.93% growth rate for the third quarter. Consumer activity once again contributed the bulk of the headline number (providing +2.19% in total), although that contribution was less than during the prior quarter (down -0.24% in aggregate). Fixed commercial investments, governmental spending and exports also weakened materially, while imports subtracted less from the headline than during the prior quarter. Meanwhile there was better news for household income. Real annualized per capita disposable income was reported to be $38,086 per annum, up $251 per year from the prior quarter. The household savings rate was reported to be 4.7% -- up slightly from the prior quarter's 4.6% rate. For this revision the BEA assumed an annualized deflator of 1.22%. During the same quarter (July 2015 through September 2015) the inflation recorded by the Bureau of Labor Statistics (BLS) in their CPI-U index was negative (dis-inflationary), at -0.37%. Over estimating inflation results in pessimistic growth rates, and if the BEA's "nominal" data was deflated using CPI-U inflation information the headline number would show a much better +3.10% growth rate.

Atlanta Fed Q4 GDP Forecast Tumbles From 2.5% To 1.9% -- Just a few days after we got a very disappointing Q3 GDP print of only 1.5% annualized growth, of which healthcare spending accounted for over a third, the Atlanta Fed's GDPNow forecast, which has traditionally been the most accurate indicator of real-time GDP swings, was just slashed by nearly a quarter from the 2.5% as originally reported on October 30, to just 1.9%.  The reason: "The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2015 is 1.9 percent on November 2, down from 2.5 percent on October 30. Following this morning's Manufacturing ISM Report On Business, the forecast for fourth-quarter real consumer spending growth declined from 2.9 percent to 2.4 percent while the forecast for real equipment investment growth declined from 3.9 percent to 1.3 percent."  Wait, didn't the market jump on the ISM which at 50.1, was spun as "better than expected"? Whatever: it certainly was good enough to push the S&P500 back above 2,100, even if should Q4 GDP indeed stay at 1.9% and well below sellside consensus once again as the following chart from @not_jim_cramer shows... ... will mean 2015 full year GDP will grow below 2.0%, and far below the 2.4% "almost escape velocity" hit in 2014. Which in turn almost assures new all time highs for stocks: after all if whatever the Fed did hasn't worked for 7 years, it will surely work in year 8.

GDP at Stall Speed Once Again - Inquiring minds may be interested in the initial Atlanta Fed GDPNow Estimate for 4th quarter 2015. Here is the chart.  The ISM release on November 2 had a big impact.  The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2015 is 1.9 percent on November 2, down from 2.5 percent on October 30. Following this morning's Manufacturing ISM Report On Business, the forecast for fourth-quarter real consumer spending growth declined from 2.9 percent to 2.4 percent while the forecast for real equipment investment growth declined from 3.9 percent to 1.3 percent.  I wrote about the ISM report on November 2 in Manufacturing ISM Flirts With Contraction Third Month, Employment Shifts to Contraction. Although the ISM index was the lowest reading since May of 2013, the reading was still positive (presumably showing growth). I sometimes have difficulty predicting large moves in GDPNow estimates following economic news releases. This was one of those times. The GDPNow model sees things this way. I would have guessed a decline of 0.2% or so. Instead, the model says the ISM numbers led to a 0.6% decline. Regardless, here we go again. The initial GDPNow estimate is already contracting, and is below the stall speed of 2.0% growth. And the Fed, for the first time ever, now seeks to hike interest rates in December with GDP averaging a mere 2%+- growth for an entire year.

Wow! First-Time Unemployment Claims Surge; Jump Far More Than Expected; GDPNow Forecasts 2.3 GDP -- November 4, 2015  Initial jobless claims rise more than expected, from Business Insider: Initial jobless claims climbed to 276,000 last week. Economists had forecast, according to Bloomberg, that the Department of Labor's data showed first-time claims for unemployment insurance totaled 262,000 last week, up 2,000 from the prior period.  The total number of claims has not topped 300,000 since March. The four-week moving average, which evens out some of the weekly volatility, rose to 262,750.  Last week's number of 260,000 was revised to 262,000. Today, the number surges 14,000 to 276,000. The rise was so much it affected the four-week average which also rose. From GDPNow: The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2015 is 2.3 percent on November 4, up from 1.9 percent on November 2. Following this morning's Non-Manufacturing ISM Report On Business, the forecast for fourth-quarter real consumer spending growth increased from 2.4 percent to 2.7 percent while the forecast for real fixed investment growth increased from 3.0 percent to 4.3 percent.

Why ‘how’s the economy doing?’ is no longer the right question - Jared Bernstein - Here are some facts:

  • — The unemployment rate, which hit 10 percent in late 2009, is now 5.1 percent;
  • — Though the pace of job growth has slowed in recent months, with average gains around 170,000 per month in the most recent quarter, employment growth has been solid compared with past recoveries;
  • — Real GDP growth (measured on a year-over-year basis) last clocked in at 2 percent, lower than recent quarters but about the average over the past few years;
  • — The stock market has had some tough weeks recently but is up 90 percent in real terms over the recovery (S&P 500 index); real corporate profits are up 44 percent.

If you asked an economist “how’s the economy doing?” based on those numbers, she’d probably say, “Pretty well.” On the other hand:

  • — Despite low unemployment, wage growth before inflation has been stuck at 2 percent over six years of expansion (see figure above);
  • — One of the most important single variables in any economy is its rate of productivity growth, or output per hour, a key determinant of living standards, at least on average; in the United States, that has slowed to a trend growth rate of less than 1 percent per year, compared with 2.5 percent a decade ago;
  • — That phrase in the last bullet is in bold because the pay of the median worker has drifted below productivity growth in recent decades, a function of increased inequality; even if productivity growth were to accelerate, there’s no guarantee that it would reach most workers.
  • — The growth in corporate profitability relative to wages has driven the share of corporate income going to workers to its lowest point since 1951.

Employment report, plus houses and cars, supports no US downturn: This morning's jobs report was so good that it is a worthwhile counterweight to the increasing glee in the Doomer recession camp. I decided to take a look at how long it took for the economy to enter recession after a monthly increase of 271,000 (today's report) or more. I started in October 1945 after the big WW2 demobilization. Here is 1945-80: and here is 1980 - present: To cut to the chase, the minimum number of months after a report equal or better to today's until a recession began was 7 months, in 1969, 1979, and 1990. Three other times it was 10 or 11 months. The remaining times it was over 1 year. This is in accord with what I've been saying about houses and cars carrying the economy. As to housing, while September new home sales were poor, that series is very volatile and subject to serious (e.g., 5% or more revisions). When we look at single family permits (unaffected by the expiration of the NYC building permit program) and starts, we see that the positive trend is intact: And auto sales just had another great month in October (graph courtesy Calculated Risk):  The bottom line is that today's employment report adds to the evidence that the weakness in the US economy stemming from the strong US$ is not sufficient to tip the US into recession.

2-Year Treasury Yield Spikes, Close To Six-Year High -- A December interest-rate hike is a “live possibility,” Federal Reserve Chair Janet Yellen said in yesterday’s testimony in Congress. The Treasury market took the hint and the 2-year Note—said to be the most sensitive maturity for rate expectations—jumped to 0.84% yesterday (Nov. 3), edging up to the highest level in nearly six years, based on daily data from Since last month’s low on Oct. 14, the 2-year yield has climbed sharply, rising 27 basis points. Interest rates have been on a rollercoaster in recent months as incoming economic reports have delivered mixed messages. But Yellen’s message is that the economy’s still recovering, albeit unevenly lately. Nonetheless, she emphasized that the forward momentum is sufficiently strong to raise the possibility that the central bank will begin tightening monetary policy, if only slightly, at next month’s FOMC meeting. Yes, we’ve heard this before, only to learn later that the expecting a hike was premature, thanks to the news du jour. Is this time different? Maybe, although much depends on how the numbers stack up in the weeks ahead. Meantime, the crowd’s on board with assuming that the first rate hike is near.  Indeed, the 2-year yield has surged in recent days. The benchmark 10-year yield’s climb is less striking but the rebound is still conspicuous on this front too.

Obama signs two-year budget deal: — President Obama formally signed a two-year budget agreement Monday that heads off potential showdowns with Republicans over the debt ceiling and government shutdowns for the remainder of his presidency. "It is a signal of how Washington should work," Obama said as he signed the bill shortly after it was delivered to the White House, saying the new budget plan invests in both the economy and national security. The bill suspends the debt limit until March 15, 2017, basically enabling the government to borrow the money it needs to pay off existing U.S. debt — and kicking the issue into the next presidency. Some House Republicans had proposed the former debt limit — which was set to expire Tuesday — to leverage more spending cuts from the administration. Outgoing House speaker John Boehner, R-Ohio, put together a plan to avoid breaching the debt limit, saying that doing so would threaten the nation's credit rating. The bill sets the federal budget for fiscal years 2016 and 2017, with an end to spending caps that had affected both national defense and domestic programs. "By locking in two years of funding," Obama said, "it should finally free us from the cycle of shutdown threats and last-minute fixes. It allows us to, therefore, plan for the future."

162 Days Later, The Treasury Finally Updates The Total US Debt Number, And It Is...On March 16 of 2015, the US Treasury officially hit what was then the US statutory debt limit of $18.113 trillion. At that moment the Treasury started using "emergency" measures to fund itself while the total reported debt remained unchanged and just dollars below the technical debt limit. This prompted much confusion among the punditry, leading to questions how is it that for many months the US has not updated its official debt number. The reason is that until last Friday, the US had no official debt deal and as a result was unable to show legally the official current debt holdings. As of Friday, this peculiar situation has been resolved following the latest deal by both parties to suspend the debt ceiling until March 2017 which also means that we finally got an updated total public debt number. And so, after 162 work days without an update, the latest US debt number is$18,492,091,120,833.99 (yes, and 99 cents), an increase of $339.1 billion since the latest official pre-debt ceiling update. This is also 102.5% of GDP.

National debt sees one-day record increase after debt limit suspended: — The U.S. national debt shot up $339.1 billion Tuesday — the largest daily increase in the national debt in history, according to Treasury Department data. The increase is largely a matter of accounting, in that the Treasury Department had been using "extraordinary measures" to artificially hold the total U.S. debt under the debt limit imposed by Congress. So on paper, the national debt had been frozen at $18.1 trillion since March, as the Treasury instead deferred payments to pension funds and borrowed from reserve accounts in order to keep the government running. But once President Obama signed a suspension of the debt limit into law on Monday, the Treasury Department was able to borrow new money for spending Congress had already authorized — averting a potential debt crisis as its accounting measures began to run out. The previous records for one-day increases in the national debt have all come under similar circumstances:A $328.2 billion increase after the government shutdown ended on Oct. 17, 2013, and a $238.3 billion increase the day after Obama signed the Budget Control Act into law on Aug. 2, 2011.

Paul Ryan’s first shutdown fight: The new House speaker is facing his first challenge with appropriations bills  -- Funny thing about that budget and debt ceiling agreement that supposedly removed the threat of a government shutdown for two years: It did no such thing. It didn’t even remove it for two months. The Bipartisan Budget Act of 2015 “should finally free us from the cycle of shutdown threats and last-minute fixes,” President Obama said while signing the agreement Monday.   The 114th Congress should have a smooth appropriations ride now that the budget agreement has resolved the thorniest aspect of the spending process: setting top-line funding numbers. House Republicans, with their flashy new hot-shot speaker, should offer their input and then do whatever the new boss says to avoid embarrassing him this early in his tenure over some  ideological fantasy. But things are going to get a little bumpier than they should. Now that the framework for funding the rest of the fiscal year is agreed upon, Congress must pass the actual appropriations by Dec. 11 as agreed to under the short-term continuing resolution passed at the end of September. You’ll recall back then that Congress was barreling toward a shutdown over certain demands from the House Freedom Caucus. They wouldn’t vote for any funding measure that gave Planned Parenthood access to federal dollars, and they would attempt to oust Speaker John Boehner if he called up and passed with Democratic votes a bill that funded Planned Parenthood. So Boehner offered to topple himself instead and passed the two-and-a-half-month extension as a lame duck.

Paul Ryan Unites House Republicans Under a Single Extremist Agenda -- The extended media honeymoon of Paul Ryan, the zombie-eyed granny starver from the state of Wisconsin and the first runner-up in our most recent vice-presidential pageant, a honeymoon that never has really ended, has reached a new level of intensity now that Ryan graciously has assumed the position of Speaker of the House of Representatives. It is said that Ryan, the biggest fake in the history of recent American politics, was the only Republican capable of reuniting the House majority, which is not a very good idea, because a fractious, disunited GOP majority often was the only thing standing between the country and some truly bad ideas, many of which Paul Ryan has spent a political lifetime supporting. I, for one, was all in favor of an unruly, undisciplined mob as opposed to organized, disciplined chicanery, like we're seeing at the moment with a couple of vital pieces of legislation.  First of all, Ryan is waving his mighty sword at the president over the budget deal, and on funding a federal agency, all of which has to be accomplished in a little over a month. Ryan also refuses to say whether he will allow poison-pill riders to be attached to the bill—a measure of the fact that he's still a fairly weak Speaker in thrall to the extremists whose support he needs to function. "This is the legislative branch, and the power of the purse rests within the legislative branch. And we fully expect that we are going to exercise that power," Ryan said when pressed over whether he planned to attach so-called "policy riders" to a must-pass spending bill that Congress needs to approve before December 11.

Debate over Medicare, Social Security, other federal benefits divides GOP -- Republicans are openly feuding over whether to seek drastic changes to Medicare, Social Security and other entitlement programs, risking a potentially damaging intraparty battle ahead of the 2016 elections. The rift was exemplified this week by the GOP stars of the moment. Newly installed House Speaker Paul D. Ryan (R-Wis.) said he plans to pursue a “bold alternative agenda” that would include major revisions in entitlements. At the same time, leading Republican presidential candidate Donald Trump railed against proposals to end or significantly change Medicare. The dispute is part of a larger GOP argument over which policies Republicans will present to voters next year and how far the party should go in pushing for changes. Three years ago, GOP presidential nominee Mitt Romney and Ryan, his running mate, faced withering Democratic attacks after endorsing dramatic overhauls of Medicare and Social Security that proved unpopular. The Republican presidential candidates are jockeying to be seen as in solidarity with Ryan, the darling of party elders, or with Trump, a voice for grass-roots voters. “This is the biggest fault line in the party: whether Republicans should be talking about reducing benefits,” conservative economist Stephen Moore said in an interview. “Republicans have fallen on their sword for 30 years trying to reform Social Security and Medicare, but the dream lives on — and it makes everyone nervous. Some see a political trap; others see it as necessary.”

Economic Policy Splits Democrats -  The old guard of a party that laid the groundwork for the election of a two-term president watches with unease at what’s happening to their electoral prospects and economic policy proposals. It could be a description of the Republican Party, but it applies to the Democratic Party, too. That alarm shines through in a new 52-page report from centrist Democratic think tank the Third Way, which unveiled a raft of policy proposals last week designed to rebut populist messages that they say could lead to a washout for the party in next year’s election campaign. “The right cares only about growth, hoping it will trickle down,” says Jonathan Cowan, president of Third Way. The left, meanwhile, is too focused on “redistribution to address income inequality.” Third Way says a better agenda focuses on growth by promoting skills, job growth and wealth creation without adding to deficits or raising taxes on the middle class. Its report outlines a series of policies it says can do this, including new employer-provided pension savings programs and a plan that promotes mortgage-equity buildup. The gist of the report concludes that the economic problems facing the American middle class have less to do with unfairness—or the idea that the system is fundamentally “rigged” against workers—and more to do with technological and globalization forces that can’t be reversed.

How much will new U.S. stealth bomber really cost? Nobody knows. The Defense Department on Oct. 27 selected Northrop Grumman to build a new U.S. strategic bomber fleet. Between 80 and 100 planes are expected to be produced over the next decade. But three important questions must be answered before Congress approves significant funds for the program. First, what will the bombers actually cost? The Air Force claims it can build 100 for no more than $564 million each. But even if that were true, the price tag does not include the development costs, estimated to exceed $20 billion.The projected costs are also in 2010 dollars — not the actual amount taxpayers must fork over in 2017, when the planes begin to roll off the assembly line. In addition, the 2010 price assumes that there will be no cost overruns or delays — though the F-35 joint strike fighter’s projected costs nearly doubled over the past 20 years it has been in development. In April, the Government Accountability Office warned that the F-35’s severe, continuing technical problems and escalating costs jeopardize the program’s affordability. Total costs of the F-35 fighter are now expected to exceed $1.3 trillion — roughly $400 billion each to buy the planes and another $900 billion to maintain them over their lifespan. After the spiraling cost estimates of the F-35, Congress should be skeptical of the Air Force’s estimate of the cost of the new bomber. Second, can the Defense Department really afford this new bomber, given that it is simultaneously modernizing the other two legs of its nuclear triad: the submarine-launched and land-based ballistic missiles?

Burden on the administration to show that TPP is a good deal In early October, the Obama administration announced conclusion of negotiations to create the Trans-Pacific Partnership (TPP) consisting of 12 nations across the Asia-Pacific region. Trade advocates cautiously welcomed this long-awaited news because they understand what’s at stake. A high-standard TPP has the potential to provide significant opportunities to U.S. workers and consumers while helping to expand economic growth throughout the region. In the 21st century global economy, we must have a strong trade agenda to chart a prosperous economic future for our country. The world is rapidly changing, and we can’t afford to be left behind. After all, according to the World Trade Organization (WTO), since President Obama took office in 2009, nations across the world have notified the WTO that they have entered into more than 110 bilateral or regional trade agreements. The United States, however, has signed zero, leaving U.S. workers at a significant disadvantage in much of the world. That’s why earlier this year, Congress passed and the president signed the Bipartisan Congressional Trade Priorities and Accountability Act, which renewed trade promotion authority (TPA) and set the stage for the conclusion and passage of high-standard trade agreements, including a potential TPP. But make no mistake: TPA does not guarantee approval for the TPP or any trade agreement. That’s because not all trade agreements meet the TPA criteria and not every trade deal is a good deal. In fact, quickly following the announcement that TPP negotiators had reached a deal, a number of initial reports signaled potential trouble for congressional approval.

Pls read and summarize… - Jared Bernstein - Well, we asked for…we got it. Here’s the text of the TPP. Those of us who said we couldn’t take an informed stand on the agreement until we read it, while grousing about the secrecy of the drafting must now slog through the damn thing. And man, it’s no picnic. So pls, tap your inner trade lawyer and bite off a slice of this. Leave any relevant thoughts/reactions in comments. Thanks, in advance!

Full text of the Trans-Pacific Partnership agreement - Here are several links to the Trans-Pacific Partnership trade agreement just released:

Full Text of TPP, Including Annexes, and Boy is it Nasty -- Yves Smith - As readers probably know, New Zealand put the full text of the TPP online yesterday. There were some technical issues in getting the docs (lots of subsections), no doubt in part due to the servers being accessed heavily. Reader Synoia has made all the TPP files available on Dropbox in PDF form, zippped (link here). Here’s the directory of files in the zip, which as you can see, includes the Annexes:  marxmarv has put them up in HTML here. The Washington Post has also put up the main text and made it searchable (hooray!) but they do not include the annexes, while the links above do. Perhaps a motivated reader will either make the annexes searchable or alert us to a site that has made all the documents searchable. I also hope knowledgeable readers will focus on sections where they have expertise. One of the issues with an agreement this complex is you need to have an understanding of how it affects existing regulations and prevalent practices and contract terms. This is one of the reasons that Public Citizen has proven to be so valuable over time. They’ve been dogging trade deals for years and their focus on this topic enables them to give informed, fast responses. I hope you’ll find time to make a donation to them, even a small one.  The text of the Public Citizen press release on the TPP is now over 12 hours old, yet it is still the best overview:

ObamaTrade Details Unveiled, Officials Warn "It's Worse Than We Thought" -- "The Trans-Pacific Partnership means that America will write the rules for 21st century trade,"according to President Obama, but as Reuters reports, U.S. unions, lawmakers and interest groups questioned the long-awaited text of a landmark U.S.-backed Pacific trade deal on Thursday. "It's worse than we thought,” Lori Wallach, director of Public Citizen’s Global Trade Watch, told members and U.S. labor representatives said the agreement contained weak, poorly worded or unenforceable provisions, concluding "we do not believe those improvements are significant or meaningful for workers." It appears, that ObamaTrade may be a boon for factory and export economies like Malaysia and Vietnam, but - as expected - will achieve little for the average joe in America. President Barack Obama, who championed the deal, will have to muster support among moderates in Washington to ensure ratification. "The TPP means that America will write the rules of the road in the 21st century," Obama said in post online. "If we don't pass this agreement - if America doesn’t write those rules - then countries like China will." As Reuters reports, U.S. unions, lawmakers and interest groups questioned the long-awaited text of a landmark U.S.-backed Pacific trade deal on Thursday, setting up a potentially long and difficult path to ratification by the United States, the biggest of the 12 partners. Arguments over the Trans-Pacific Partnership agreement, aimed at freeing up commerce in 40 percent of the world's economy, are set to focus on transparency and how the pact affects workers and businesses. "It's worse than we thought,” Lori Wallach, director of Public Citizen’s Global Trade Watch, told reporters on a conference call after examining the full text of the pact, which was unveiled early on Thursday.

You can now read the text of a major Trans-Pacific trade deal. Read this TPP explainer first. - After negotiating for the better part of a decade, 12 Pacific Rim nations have finally come to an agreement about how they should conduct trade among one another. Until now, the drafts had been under wraps, available only to lawmakers, staff with clearance and advisers. Today, the parties released the full text. We're still reading to see what's in it, but environmentalists, labor unions and humanitarian groups are already decrying the agreement as a repeat of past trade agreements, while U.S. industry groups — primarily agriculture, pharmaceutical makers and retail companes — have supported it.  Over the past few months, we've covered the battle over fast track legislation, the treatment of tobacco under the text, the concerns around labor rights, the challenges of negotiating in secret, a dustup over human trafficking and the importance of enforcement. We'll write more as we figure out what's in the deal. In the meantime, if you're just getting caught up, here's a place to start.

Breaking down 5 big sections of the TPP -- A month after they wrapped up negotiations , 12 Pacific Rim economies led by the US and Japan released the text of the agreement on Thursday, swamping business groups and critics alike with thousands of pages of detail. There’s a good reason for the volume. The Trans-Pacific Partnership includes countries representing 40 per cent of the global economy and is meant to set new rules for everything from the free flow of data to how state-owned enterprises compete internationally. When the countries in the TPP first set about their negotiations they committed to eliminating all tariffs. The TPP will eliminate tariffs on thousands of goods — 18,000 by the Obama administration’s count — but it will take decades before some disappear. And, when it comes to time and tariffs, potentially the biggest protectionist of the TPP countries is the US while the biggest beneficiary may be the US auto industry. A 2.5 per cent tariff now in place on imported Japanese cars will take 15 years to go down to 2.25 per cent and further decade to go down to zero. A 25 per cent tariff on imported Japanese trucks, meanwhile, will remain in place for 30 years after the agreement goes into force.  The deal enshrines rules to make sure companies can send data across borders freely. It also bans member governments from requiring companies to house “computing facilities” such as servers in a country, or the sort of “localisation” rules some authoritarian countries have been imposing in what cloud computing companies and others see as a major trade barrier. There are caveats to both. The financial services industry is not covered by the cross-border data rules and Australia has been given an exemption for medical records. The deal also creates a big loophole to the server localisation ban by giving governments the right to introduce such requirements to “achieve a legitimate public policy objective”. But the TPP is littered with other references to the digital realities of doing business. The chapter on the “national treatment and market access for goods” includes a prohibition on any bans on “cryptographic” or encryption products. The intellectual property chapter requires TPP countries to have laws banning the sort of cybertheft of trade secrets that Chinese hackers have been accused of. There are also requirements for data privacy regulations and a ban on governments requiring software companies and other companies to reveal their source code to do business in a country.

Next Steps for the TPP - The Obama administration today released the full text of the Trans-Pacific Partnership (TPP), arguably the “largest regional trade accord in history.” The release, coupled with Obama’s statement that he intends to sign the deal, triggers two of the timelines set up by Trade Promotion Authority (TPA) legislation that Congress passed back in June. The first is the ninety-day clock. TPA requires the president to wait ninety days after announcing his intent to sign a trade deal before actually signing it. So while the United States and its eleven negotiating partners announced exactly one month ago that they had struck a deal, it’s still awaiting signatures. Indeed, the text is still being translated into French (for Canada) and Spanish (for Chile, Mexico, and Peru), and the lawyers might still make some technical corrections. The second timeline is a sixty-day clock. TPA requires that the terms of any trade deal be made public for at least sixty days before Congress can consider it. Because the administration released the text at the same time it announced its intent to sign the deal, the sixty-day clock has no practical effect. Does this mean that Congress will be taking up the legislation needed to implement TPP come early-February? Not quite. With the sixty-day clock already satisfied by then, Congress certainly could begin considering TPP once Obama signed it. But TPA does not require it to. Instead, the decision on when to formally begin deliberations rests with congressional leaders. Once they introduce the implementing legislation, Congress will have at most ninety days to hold an up-or-down vote. The legislation can’t be filibustered or buried in committee, so the common ways in which legislation gets killed on Capitol Hill won’t apply in this case.

White House may have to renegotiate Pacific trade pact-senator -- A key U.S. senator said on Friday the Obama administration may have to renegotiate parts of a Pacific trade pact, heralding a tough battle to win support in Congress. The administration notified lawmakers on Thursday it plans to sign the 12-nation Trans-Pacific Partnership, starting a countdown to a congressional vote that could come in the middle of next year's election campaign. But U.S. Senate Finance Committee Chairman Orrin Hatch, a Republican whose support will be crucial to passing the deal, said that although he reserved judgment on the fine print, negotiators might have to go back to the table. "I understand that renegotiation may be difficult, particularly with so many parties involved," he said in a speech at the U.S. Chamber of Commerce, which also has yet to give a verdict on the pact. "But at the end of the day, the alternative to renegotiation may very well be no TPP at all." Some of President Barack Obama's Democrats have also suggested renegotiating the deal, which must be ratified by Congress. But a senior administration official slapped down the call and said the deal was as good as it gets.

How the TPP Trade Deal Could Blow Up the Primaries - With the full-text release of the proposed Trans-Pacific Partnership trade deal on Thursday, the Obama administration is expected to inform Congress of the president’s intention to sign the agreement, starting a 90-day countdown that will likely put the bill before Congress in the heat of the primary election season. At 30 chapters and supplemented by dozens of appendices and annexes, the TPP runs to thousands of pages of sometimes dense legalese that will ultimately govern trade in goods and services amounting to some 40 percent of the global economy.Under an agreement struck with Congress earlier this year, Obama’s notification that he intends to sign the agreement is followed by a 90-day period in which the text of the deal, which was negotiated in secret, is publicly available. When the 90 days have passed, Obama may then actually sign the deal, triggering the next step in the TPP’s journey toward enactment. In the same deal with Congress, the president was granted “fast-track” trade authority, which allows him to present a trade deal directly to Congress for a vote, with no possibility of amendment. Fast-track is widely seen as improving the chances of the package gaining legislators’ ultimate approval. Congress will have 45 legislative days to consider the deal before it comes to the floor. The arrangement means that the deal will likely come before Congress in March, just as presidential candidates are barnstorming the country hoping to nail down primary election victories. Candidates on both sides of the Democratic-Republican divide are likely to make opposition to the deal central to their stump speeches. Arguably the most visible candidate in either race, real estate billionaire Donald Trump has made criticism of the Obama administration’s negotiations with other countries a centerpiece of his campaign.

Right Up There With France: U.S. Is #2 Among OECD Countries In “Social Expenditures” Relative To GDP - David Stockman - According to the Organization of Economic Cooperation and Development (OECD), “social expenditures” are expenditures that occur with the purpose of redistributing resources from one group to another, in order to benefit a lower-income or presumably disadvantaged population.  Social Security in the US is one example, and would be considered a “public expenditure” because it involves direct spending by a government agency. However, governmental bodies in the US and elsewhere also employ a wide array of mandates and tax-based benefits and incentives to carry out social policy. This distinguishes the US in particular from most European countries that rely more on cash benefits or non-cash benefits administered directly by governments. But governments are not limited to direct benefits. Governments may also employ “tax breaks for social purposes” (TBSPs) including tax credits for child care, and tax breaks for health-care related spending. Furthermore, in the United States —  more so than in other countries — governments create tax incentives and mandates that lead to high levels of “private social expenditure.” The OECD defines these private expenditures as expenditures that are designed to redistribute wealth, but are not administered directly by government agencies:

"Shocking And Incredible": IG Slams DOD For "Having No Knowledge" About $800 Million Program - By now most have heard of the infamous gas station in Sheberghan, northern Afghanistan which "cost" the U.S. Department of Defense nearly $43 million to build, even though its real cost was only $500,000. This "world's most expensive gas station" has promptly become the latest example of waste and budgetary abuse which comes courtesy of a debt ceiling which is increased by over $1 trillion every year and a government whose only purpose is to spend every dollar budgeted to it or else risk losing future fund allocations. This was revealed in a report released by John Sopko, head of the Special Inspector General for Afghanistan Reconstruction, a congressional body, which was released yesterday. However the biggest stunner in the report is not the gas station, which costs almost as much as a luxury New York duplex meant to be sold to Chinese money laundering oligarchs, but something else namely that the task force behind the project had closed operations in March and for that reason the Department of Defense said it did not possess "the personnel expertise to address these questions." The result: a stunned IG exclaims it is "shocking and incredible that DOD says it has no knowledge about an $800 million program."

Drone Company Misled Military into Buying UAVs that Were Basically Toys: Lawsuit -- A breach-of-contract squabble has spiraled into broader allegations of misconduct against a drone manufacturer with millions of dollars worth of US military contracts. A drone retailer claims that Prioria Robotics bilked the Army by selling a substandard drone that could be outflown by many hobby drones, which are far cheaper, according to a court motion.  The motion, filed earlier this month in Florida civil court by Condor Aerial, alleges that Prioria misrepresented specs for its flagship “microdrone,” and also sold refurbished units as if they were new.  Gainsville-based Prioria Robotics manufactures the Maveric microdrone, which weighs less than 3 pounds, has a 30-inch wingspan, and boasts a camouflaged, “bird-like” profile. The Maveric can be hand-launched from its storage tube without any assembly.  Prioria markets its Maveric drone for military, surveillance, and public safety applications. In 2014, the Defense Logistics Agency paid $240,000 per Maveric system. The company has won contracts with the Army, the Navy, the Air Force, and NASA, among other federal agencies, for drones and accompanying gear.

60% of Ted Cruz‘s Tax Cut Goes to the Top 1%: I haven’t been commenting on Republican tax plans this season because, well, it takes a lot to impress me when it comes to absurd tax cut proposals. Ted Cruz has done it. The major components of Cruz’s plan amount to this:

  • A flat 10% tax on individual income (labor and investments)—down from top rates today of 43.4% on labor and 23.8% on capital gains and dividends
  • No payroll taxes (15.3% for most people today), corporate income tax (average rate about 13% today), or estate tax
  • A 19% value-added tax (16% of gross business receipts, including the tax)

There are two big things that are crazy about this plan. The first is that it eliminates an enormous amount of tax revenue: $3.6 trillion over ten years, according to the right-wing Tax Foundation’s “static” analysis—that is, before the growth fairy waves her magic wand. To put that in context, that’s more than we plan to spend on the military over the next ten years. The second is the astonishingly naked handout to the very rich: 60% of the tax cut goes to the top 1%. That leaves only 40% for everyone else. This number is so embarrassing that you won’t find it in the Tax Foundation’s analysis. ... Of course, none of this should be any surprise. Republican tax proposals became completely divorced from reality long ago. More importantly, the Republican nomination lies in the hands of a handful of donors who are in the 0.001%, so the rational thing for any candidate to do is pander to them as enthusiastically as possible.

Free stuff: hypocrisy of a growing campaign theme - At last week’s Republican presidential debate, New Jersey Governor Chris Christie characterized the first Democratic debate as “a parade of, ‘I’ll give you this for free; I’ll give you that for free.’” Senator Marco Rubio made a similar comment a few weeks ago: “It was basically a…debate about who was going to give away the most free stuff: Free college education, free college education for people illegally in this country, free health care, free everything.”  Such remarks also mirror Jeb Bush’s argument that black voters will back him because his “message is one of hope and aspiration,” not “one of division and get in line and we’ll take care of you with free stuff.” There are at least three definitions of “free stuff.” The broadest would simply include all government benefits. A narrower version might apply only when people receive more in benefits than they pay in taxes. A third might refer to any net gain relative to the status quo.  Under any of these definitions, the claims made by Christie, Rubio, and Bush are both biased and misleading: they attack help for people who need it while implicitly condoning favors for the wealthy. Consider the first definition of “free stuff,” preferred by Bryce Covert and Emily Badger, which refers simply to “government benefits.”  The Republican candidates have alluded to a subset of these: public education, Medicaid, and direct cash assistance to the poor, to name a few.  But the government issues numerous other benefits as well, benefits that the politicians complaining about “free stuff” seem perfectly happy to keep intact. For example, Rubio and Bush would cut the tax rate on capital gains below its current level (Rubio would completely abolish it); this reduced rate already provides a significant benefit to people who invest in assets (i.e., the wealthy). Politicians also regularly rail against critical housing assistance for the most vulnerable while defending or expanding expensive, regressive, and unnecessary housing tax breaks, about 70 percent of which go to those in the top 20 percent.  How can it be that government benefits for poor people are “free stuff” while benefits for the wealthy are not?

Mussolini-Style Corporatism, aka Fascism, on the Rise in the US  - Yves Smith - One of the distressing things about politics in the US is the way words have either been stripped of their meaning or become so contested as to undermine the ability to communicate and analyze. It’s hard to get to a conversation when you and your interlocutors don’t have the same understanding of basic terms. And that is no accident. The muddying of meaning is a neo-Orwellian device to influence perceptions by redefining core concepts. And a major vector has been by targeting narrow interest groups on their hot-button topics. Thus, if you are an evangelical or otherwise strongly opposed to women having reproductive control, anyone who favors womens’ rights in this area is in your vein of thinking, to the left of you, hence a “liberal”. Allowing the Overton Window to be framed around pet interests, as opposed to a view of what societal norms are, has allowed for the media to depict the center of the political spectrum as being well to the right of where it actually is as measured by decades of polling, particularly on economic issues. Another way of limiting discourse is to relegate certain terms or ideas to what Daniel Hallin called the “sphere of deviance.” Thus, until roughly two years ago, calling an idea “Marxist” in the US was tantamount to deeming it to be the political equivalent of taboo. That shows how powerful the long shadow of the Communist purges of the McCarthy era were, more than a generation after the fall of the Berlin Wall.  Similarly, even as authoritarianism is rapidly rising in the US and citizens are losing their rights (see a reminder from last weekend, a major New York Times story on how widespread use of arbitration clauses is stripping citizens of access to the court system*), one runs the risk of having one’s hair on fire if one dares suggest that America is moving in a fascist, or perhaps more accurately, a Mussolini-style corporatist direction. Yet we used that very expression, “Mussolini-style corporatism,” to describe the the post-crisis bank bailouts. Former chief economist of the IMF, Simon Johnson, was more stark in his choice of terms, famously calling the rescues a “quiet coup” by financial oligarchs.

JP Morgan & Morgan Stanley Have Their CEOs on the Board NY Fed - Regulatory Capture & What YOU Can Do About It! -- I was watching the movie "Pay it Forward" with my 9 year old daughter last night, and we were both moved by the homework assignment Kevin Spacey gave the child star of the movie -"Think of an idea to change the world and put it into action". Well, here I go.... The CEO of Morgan Stanley just got appointed to the board of the NY Federal Reserve. He joins the CEO and chairman of JP Morgan, Jamie Dimon. These are two of the largest and most powerful banks in the world and these appointments represent the most blatant illustration of regulatory capture that I have ever witnessed. The NY Fed is the most powerful, influential and direct regulator of these two banks, yet the top executives of each bank sits on the board of their own regulators? That is EXACTLY like putting the fox in charge of the hen house.. Among the other regional banks, New York Federal Reserve Bank and its president are considered first among equals. Its current president is William C. Dudley. It is by far the largest (by assets), most active (by volume) and most influential of the 12 regional Federal Reserve Banks. This video explains more and shows what we're doing about it.

Fed looks at way to shift big-bank losses to investors - (AP) — In their latest bid to reduce the chances of future taxpayer bailouts, federal regulators are proposing that the eight biggest U.S. banks build new cushions against losses that would shift the burden to investors. The Federal Reserve's proposal put forward Friday means the mega-banks would have to bulk up their capacity to absorb financial shocks by issuing equity or long-term debt equal to prescribed portions of total bank assets. The idea is that the cost of a huge bank's failure would fall on investors in the bank's equity or debt, not on taxpayers. The Fed governors led by Chair Janet Yellen voted 5-0 at a public meeting to propose the so-called "loss-absorbing capacity" requirements for the banks, which include JPMorgan Chase, Citigroup and Bank of America. The eight banks would have to issue a total of about $120 billion in new long-term debt to meet the requirements of the proposal, the Fed staff estimates. If formally adopted, most of the requirements wouldn't take effect until 2019, and the remainder not until 2022. The new cushions would come atop rules adopted by the Fed in July for the eight banks to shore up their financial bases with about $200 billion in additional capital — over and above capital requirements for the industry. And they would be in addition to 2014 rules directing all large U.S. banks to keep enough high-quality assets on hand to survive during a severe downturn. Combined with the regulators' previous actions, the new proposal "would substantially reduce the risk to taxpayers and the threat to financial stability stemming from the failure of these (banks)," Yellen said

Corporate Bond Market Booms, a Bright Sign for U.S. Economy - WSJ: The bond market is booming again, a sign of investors’ faith in the resilience of the U.S. economy. U.S. bond sales by companies with good credit ratings hit $103 billion in October, a record for the month, according to deal tracker Dealogic. Corporate-bond sales in the U.S. are on track for their fourth straight annual record, according to data from the Securities Industry and Financial Markets Association. Many analysts say they expect bond sales to continue at a vigorous pace through the end of the year, reflecting steady economic growth, pent-up investor demand following a late-summer slowdown in bond issuance, and efforts by corporate treasurers to lock in low interest rates before a possible Federal Reserve interest-rate increase in December. Microsoft Corp. MSFT 0.46 % sold $13 billion in new bonds on Thursday, a day after the Fed said it might raise rates this year for the first time since 2006. Earlier in the week, insurer ACE Ltd. ACE 0.28 % sold $5.3 billion and Nike Inc. NKE -0.56 % sold $1 billion, its first debt sale in more than two years. Oil-field services giant Halliburton Co. HAL 0.05 % is planning a large bond sale that could hit the market as early as this week. The gap in yields between highly rated corporate bonds and benchmark Treasurys had fallen from 1.71 percentage points at the beginning of October to 1.59 percentage points as of Friday, according to Barclays BCS 2.42 % data. A smaller spread means buyers are willing to accept lower interest payments relative to Treasurys to own corporate bonds, and suggests investors perceive that default and other risks are falling. High-grade corporate bonds yielded 3.22% as of Friday, according to the S&P U.S. Investment Grade Corporate Bond Index.

"For Every Job Created In The US This Decade, US Corporations Spent $296,000 On Stock Buybacks" - Yesterday in "$20 Trillion In Government Bonds Yield Under 1%: The Stunning Facts How We Got There", we did just that: showed several "facts" demonstrating how, as Bloomberg puts it this morning, "QE Helped Wall Street Steamroll Main Street." It appears many missed the findings of how central planning has now gone full retard, so here again, are the facts:

  • There have been 606 global rate cuts since LEH
  • $12.4 trillion of central bank asset purchases (QE) since Bear Stearns
  • The Fed is operating a zero rate policy for the longest period ever (even exceeding the WW2 Aug’37-Sep’42 zero rate period)
  • European central banks operating negative rate policies (Swiss policy rate currently -0.75%; Sweden’s policy rate currently -0.35
  • Just this month, the PBoC cut rates, the ECB confirmed QE2, Sweden announced additional QE, and the BoJ promised additional easing if necessary "without hesitation"
  • $6.3 trillion global government bonds currently yielding <0%
  • $20.0 trillion global government bonds currently yielding <1%
  • An investment of $100 in a portfolio of global stocks & bonds (60:40) since the onset of QE1 would now be worth $205; in contrast, a wage of $100 has risen to just $114 over the same period
  • US prime (“CBD”) office real estate has appreciated 168% this decade; in contrast, the value of US residential property across America has risen just 16%
  • For every $100 US venture capital & private equity funds raised Jan 1st 2010 they are now raising $275; in contrast, for every $100 of US mortgage credit extended and accepted at the beginning of this decade, just $61 was extended and accepted in June 2015 (see Chart 6 - a big reason the US consumer remains so moribund)

How Mergers Damage the Economy - In many industries, like airlines, telecommunications, health care and beer, mergers and acquisitions have increased the market power of big corporations in the last several decades. That has hurt consumers and is probably exacerbating income inequality, new research shows.  A recent paper by two economists, Jason Furman and Peter Orszag, says that consolidation might have contributed to the trend of some businesses earning “super-normal returns” that are about 10 times as large as the median returns, up from three times in the early 1990s. This trend may have driven the rise in income inequality by increasing the income of executives and shareholders of those businesses relative to everybody else In addition, two finance professors at the University of Southern California estimate that nearly a third of American industries were highly concentrated in 2013, up from a quarter of all industries in 1996, according to The Wall Street Journal. These trends ought to concern everybody, particularly lawmakers in Congress and officials at the antitrust division of the Department of Justice, the Federal Trade Commission and other government agencies that review mergers. It is increasingly clear that officials have allowed too many mergers.  The George W. Bush administration, for example, allowed Whirlpool to acquire Maytag even though the two companies controlled three-quarters of the market for some home appliances. Also under that administration, the wireless phone industry consolidated from six national companies to four. The two largest, Verizon and AT&T, now command about 70 percent of all subscribers. The Obama administration  also waved through some big mergers. Officials approved two big airlines mergers — United and Continental, and American and US Airways. Just four national airlines now carry the vast majority of domestic passenger traffic, down from six when Mr. Obama came into office. The big carriers control so many gates and takeoff and landing slots at their hub airports that other airlines can’t mount a real challenge.

Foreign Banks Such as Deutsche Using Variant of Lehman “Repo 105” Balance-Sheet Tarting Up Strategy  -- Yves Smith - For readers who did not follow the run-up to the crisis closely, one of hte heated debates was over “how sick is Lehman?” We were of the “very sick” persuasion because Lehman was making large mis-marks on assets that outside parties could see, such as greatly exaggerating the worth of garbage barge commercial real estate investments in exurban California (SunCal and Archstone). A general rule is if you need to cook your books, do it in such as way as to be difficult to detect. Lehman had so many position that would not be readily observed by third parties that it could fudge that it clearly had to be desperate if it also needed to tart up valuations that could be checked.   Fast forward to the new revelations via the Financial Times: Foreign banks operating in the US short-term debt markets are “window-dressing” their accounts, routinely cutting about $170bn of balances at the end of each quarter to appear safer and more profitable, says a new study. The study from the Washington, DC-based Office of Financial Research describes a pattern of behaviour that has prevailed since July 2008, and suggests that the banks are carrying more risk than their investors or customers can easily see.  The study examines the vast market for repurchase agreements, or “repos,” where banks lend out assets in return for short-term financing. It finds that dealers sell heavily to customers in the last days of the quarter, and immediately buy assets back once the new quarter starts… Analysts said the behaviour outlined in the study has shades of the notorious “Repo 105” trades that Lehman Brothers used to bring down its reported leverage in the quarters leading up to its collapse. In that programme, the broker accepted a relatively high 5 per cent fee in order to count its repo transactions as true sales, even though it remained under a contractual obligation to buy the assets back.

There’s a new way traders are defrauding the market — and they’re starting to get busted for it - Panther Energy trader Michael Coscia has been found guilty in a high-profile market-manipulation trial in Chicago. His crime? Spoofing. It's a funny-sounding term for the practice of making and cancelling bets in a way that can push prices around. It's what alleged "Flash Crash" trader Navinder Singh Sarao was accused of earlier this year. Spoofing investigations have actually become quite a trend at the Justice Department, the Securities and Exchange Commission, and other regulators. But Coscia is the first person to be found guilty of spoofing since it was forbidden under the 2010 Dodd-Frank Act, and his conviction shows that a key defense against the charge may not be effective. Coscia was indicted last year and charged with multiple counts of commodities fraud and spoofing. Prosecutors say the Chicago-based high-frequency commodities trader defrauded the market to make some $1.6 million in illegal profits. His lawyers tried to prove that the anti-spoofing law is "hopelessly vague, and its criminal enforcement would violate Michael Coscia's right to due process of law." They didn't succeed.

Spoofing verdict shocks futures trading industry -- The futures industry was reeling after a New Jersey-based trader became the first person to be found guilty of manipulative trading, or “spoofing”, in a landmark criminal case. A jury in Chicago late on Tuesday found Michael Coscia guilty on 12 counts, including intending to defraud other traders by flooding futures markets with small orders and then cancelling them. It took the jury about an hour to reach a verdict. The decision after a seven-day trial was a jolt for an industry with a long and colourful history of rule-breaking and sharp behaviour but little record of imprisoning market abusers. Mr Coscia, 53, had previously settled civil charges with the Commodity Futures Trading Commission, the main US regulator, and CME Group in 2013. Spoofing involves rapidly placing orders with the intent to cancel them before they trade in order to trick other investors by creating an illusion of demand. As futures trading has changed from raucous human pits to computers, authorities have grown concerned that the practice could be repeated thousands of times a second by algorithms. FIA Expo, a big annual trade show for the industry in Chicago, started a few hours after the verdict. “The trading industry is shocked at the verdict,” said Leslie Sutphen, a former trading executive who is president at Financial Markets Consulting in Chicago. “It seems that the Justice Department will define spoofing as excessive cancellation. If that is the case, then everybody spoofs. This will have a profound and negative effect on liquidity. “Actual spoofing — intentional manipulation of the market — by placing orders with no intent to execute is uncommon and frowned upon by legitimate traders.” The victory for government prosecutors marks the first use of the tougher powers awarded under the Dodd-Frank Act of 2010.

Subprime Auto Goes Full-Retard: Lender Sells $154 Million ABS Deal Backed By Loans To Borrowers With No Credit -- If you frequent these pages, you may remember Skopos Financial, the subprime auto lender that’s been busy packaging all manner of questionable auto loans and offloading credit risk to investors via some of what can only be described as the most noxious looking ABS deals in the history of securitization.  Earlier this year for instance, Skopos sold some $150 million worth of paper backed by a collateral pool wherein 20 percent of the loans were made to borrowers with a credit score ranging from 351 to 500. In other words, a fifth of the loans backing the deal are to the least creditworthy borrowers in the country. Here’s a look at the details:

Blackstone Executive Commits Perjury via Declaration that Information in SEC Order is “Confidential” and “Trade Secret” -- Yves Smith - Today we have a case study on how readyily top officials of private equity firms make flagrant misrepresentations, in this case, even under penalty of perjury, to pretend that information that is not even remotely confidential is not merely confidential, but rises to the level of “trade secret” status. Recall that “trade secret” is a high bar from a legal standpoint, that is it as valuable from a commercial standpoint as the formula for Coca-Cola or the schematics for Intel’s next microprocessor chip.  The example is from a response by Florida State Board of Administration to a Public Records Law request (its version of a FOIA) for Blackstone’s communications regarding the SEC investigation and settlement announced on October 7, 2015. The SEC settlement with Blackstone was two abuses, the improper allocation of legal fee discounts and charging undisclosed “termination of monitoring fees”. Blackstone agreed to the wet-noodle lashing of paying $10 million plus $29 million in interest and disgorgement.  Now here’s the fun part.   As part of the response to its records request, Florida provides a heavily redacted version of Blackstone’s October 7 missive, along with a declaration that makes lengthy invocations arguments as to why the letter contained information that was both confidential and trade secret, and therefore could be released only with the redactions that Blackstone insisted upon. However, we were able to recover the information from some of the redacted sections. And you can see that Blackstone’s arguments are utter hogwash. Rehman has clearly committed perjury. Florida was remiss in taking his word at face value and not making an independent assessment of whether the redactions insisted on by Blackstone were defensible.

CfA Report Reveals Payday Lenders Paid for At Least One Favorable “Academic” Study | Campaign for Accountability: – Today, Campaign for Accountability (CfA) released a new report, Academic Deception, exposing the payday lending industry’s efforts to produce so-called “academic research” to promote its agenda. CfA Communications and Research Director Dan Stevens said, “The payday lending industry has manufactured at least one academic study in a desperate attempt to cover up the fact that payday loans ensnare borrowers in an endless cycle of debt.” CfA sought records from several universities that published work on the industry, including Arkansas Tech, Kennesaw State University in Georgia, George Mason University in Virginia and the University of California, Davis. Internal Arkansas Tech University documents reveal a close working relationship between the payday lending industry and the author of a key academic paper. The Consumer Credit Research Foundation (CCRF), an industry trade group, paid a professor at the Arkansas Tech University College of Business, nearly $40,000 to produce the study, and CCRF’s chairman edited the study and directed the professor to remove negative information. Unsurprisingly, the paper concluded payday loans are not responsible for a “cycle of debt,” an important industry talking point. CCRF filed a lawsuit to block Kennesaw State from releasing any records and CfA is in litigation over the matter. George Mason has refused to release records and UC Davis claims to have very few.

Low oil lifts credit risk at US banks -- Stresses created by the low oil price are contributing to elevated credit risk in the US banking sector despite a relatively strong economy, regulators have warned. In a joint report US banking watchdogs said the value of weak loans nationwide had risen by 9.4 per cent from last year, while the value of loans that were heading towards trouble was up 18.5 per cent. Agency officials attributed the deterioration in large part to the troubled state of many oil and gas companies, which are straining under the pressure of a sub-$50 per barrel oil price. The total value of loans to oil producers and service companies is $276.5bn, or 7.1 per cent of the universe of big loans assessed jointly by three federal regulators in an annual review. Outside the oil and gas sector, the regulators said leveraged lending and loose underwriting were also increasing credit risk. The report said that banks active in the energy sector were “taking reasonable actions during this stressed environment”. But agency officials said they continued to press lenders to carefully monitor loan portfolio risks, ensure they had sufficient loan collateral, and build up reserves as a cushion against souring loans. The regulators’ report said: “[The] examination observed that the significant decreases in [oil and gas] market prices have impaired many [oil and gas] companies’ ability to pay interest and principal, and has led to some defaults.” Banks nonetheless made reassuring noises about their energy portfolios during third-quarter earnings presentations, many of them highlighting the investment-grade quality of their loan books and the seniority of their positions within the borrowers’ capital structures. But while the impact of falling oil prices has yet to result in material loan losses, most of the banks reported increases in energy-related problem assets.

Supervising Culture and Behavior at Financial Institutions - naked capitalism - Yves here. Financial regulators increasingly acknowledge organizational culture as a source of systemic risk, yet they have been loath to do more than influence compensation structures, since they do not want to be perceived to be interfering with management. This post describes how a new approach in the Netherlands, of gathering information about the culture of various institutions and scoring them, and sharing information about best practices, seems to be influencing behavior. One can see how that might work. One is just the Schrodinger’s cat element of human behavior: people tend to operate more carefully if they know certain activities are being monitored. And the top brass and boards might be concerned that if regulators effectively told them that their bank fell well short of good practice in certain areas, they could be held liable if they hadn’t taken action and Something Bad happened later. . This column reviews efforts since 2011 by De Nederlandsche Bank to oversee executive behaviour and cultures at financial institutions. These measures aimed at identifying risky behaviour and decision-making processes at a sufficiently early stage for appropriate countermeasures to be implemented. The findings show that regulators can play a larger part in securing the stability of the financial system by taking an active role in shaping institutional cultural processes.

Fed Survey: Banks reports stronger demand for CRE loans  --  From the Federal Reserve: The October 2015 Senior Loan Officer Opinion Survey on Bank Lending Practices  Regarding loans to businesses, the October survey results indicated that, on balance, banks reported little change in their standards on commercial and industrial (C&I) loans in the third quarter of 2015. In addition, banks reported having eased some loan terms, such as spreads and loan maturities, on net. However, banks also indicated that they increased premiums charged on riskier loans for larger firms on net. With respect to commercial real estate (CRE) lending, on balance, survey respondents reported that standards on loans secured by nonfarm nonresidential properties, loans secured by multifamily residential properties, and construction and land development loans remained about unchanged. On the demand side, banks reported that demand for C&I loans was about unchanged, on balance, and moderate net fractions of survey respondents experienced stronger demand for all three categories of CRE loans during the third quarter.  Regarding loans to households, banks reported having eased lending standards on loans eligible for purchase by the government-sponsored enterprises and on qualified mortgage (QM) loans over the past three months on net. On balance, modest fractions of banks indicated having eased standards for credit card loans as well as for auto loans. On the demand side, modest net fractions of banks reported weaker demand across most categories of home-purchase loans. In contrast, respondents experienced stronger demand for credit card loans on net.

Freddie: REO inventory declined in Q3, Down 31% Year-over-year --  From Freddie Mac: Freddie Mac today reported a net loss of $475 million for the third quarter of 2015, compared to net income of $4.2 billion for the second quarter of 2015. The company also reported a comprehensive loss of $501 million for the third quarter of 2015, compared to comprehensive income of $3.9 billion for the second quarter of 2015. “In the prior quarter, we had the opposite result with a $1.5 billion positive contribution to earnings as rates rose significantly.” And on Real Estate Owned (REO):  Our single-family REO inventory (measured in number of properties) declined 31% from December 31, 2014 to September 30, 2015, primarily due to our loss mitigation efforts and a larger proportion of properties being sold to third parties at foreclosure auction. ...Our REO acquisition activity is disproportionately high for certain types of mortgage loans, including mortgage loans with certain higher-risk characteristics. For example, while the percentage of interest-only and Alt-A mortgage loans in our single-family credit guarantee portfolio, based on UPB, was approximately 1% and 3%, respectively, at September 30, 2015, the percentage of our REO acquisitions during the nine months ended September 30, 2015 that had been financed by either of these mortgage loan types represented approximately 20% of our total REO acquisitions, based on mortgage loan amount prior to acquisition. In addition, mortgage loans from our 2005-2008 Legacy single-family book comprised approximately 69% of our REO acquisition activity during the nine months ended September 30, 2015.

Fannie: REO inventory declined in Q3, Down 34% Year-over-year  - From Fannie Mae:   The continued decrease in the number of our seriously delinquent single-family loans has resulted in a reduction in the number of REO acquisitions in the first nine months of 2015 as compared with the first nine months of 2014. We continue to manage our REO inventory to appropriately manage costs and maximize sales proceeds. However, we are unable to market and sell a large portion of our inventory, primarily due to occupancy and state or local redemption or confirmation periods, which extends the amount of time it takes to bring our properties to a marketable state and eventually dispose of them. This results in higher foreclosed property expenses, which include costs related to maintaining the property and ensuring that the property is vacant. Before we market our foreclosed properties, we may choose to repair them in order to maximize the sales price and increase the likelihood that an owner occupant will purchase. In some cases, we engage in third party sales at foreclosure, which allow us to avoid maintenance and other REO expenses we would have incurred had we acquired the property. Fannie is unable to currently market about 40% of their inventory (see table 32 on page 62 for status). Fannie and Freddie are still working through the backlog of loans made during the housing bubble, mostly in judicial foreclosure states.  Here is a graph of Fannie and Freddie Real Estate Owned (REO). REO inventory decreased in Q3 for both Fannie and Freddie, and combined inventory is down 35% year-over-year. For Freddie, this is the lowest level of REO since Q4 2007. For Fannie, this is the lowest level since Q2 2008. Short term delinquencies are at normal levels, but there are still a number of properties in the foreclosure process with long time lines in judicial foreclosure states.

Fannie Mae: Mortgage Serious Delinquency rate declined in September, Lowest since August 2008 - Fannie Mae reported today that the Single-Family Serious Delinquency rate declined in September to 1.59% from 1.62% in August. The serious delinquency rate is down from 1.96% in September 2014, and this is the lowest level since August 2008.  The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%. These are mortgage loans that are "three monthly payments or more past due or in foreclosure". The Fannie Mae serious delinquency rate has only fallen 0.37 percentage points over the last year - the pace of improvement has slowed - and at that pace the serious delinquency rate will not be below 1% until 2017.  The "normal" serious delinquency rate is under 1%, so maybe Fannie Mae serious delinquencies will be close to normal some time in 2017.  This elevated delinquency rate is mostly related to older loans - the lenders are still working through the backlog.

Black Knight September Mortgage Monitor -- Black Knight Financial Services (BKFS) released their Mortgage Monitor report for September today. According to BKFS, 4.87% of mortgages were delinquent in September, down from 4.79% in August. BKFS reported that 1.46% of mortgages were in the foreclosure process, down from 1.89% in September 2014.  This gives a total of 6.33% delinquent or in foreclosure. It breaks down as:
• 2,457,000 properties that are 30 or more days delinquent, but not in foreclosure.
• 737,000 loans in foreclosure process.
For a total of ​​3,194,000 loans delinquent or in foreclosure in September. This is down from 3,800,000 in September 2014. Press Release: Black Knight’s September Mortgage Monitor: Recent Surge in Purchase Originations Driven Primarily by High-Credit BorrowersPurchase mortgage originations are up significantly in 2015,” said Graboske. “Q2 2015 purchase originations were up 15 percent from the same quarter in 2014. In June, we saw the highest level of purchase lending since June 2007 and early Q3 figures show purchase originations are up 11 percent from the same period last year. What’s striking about this rise, though, is that it’s being driven almost entirely by high-credit borrowers.  This graph from Black Knight shows the delinquency rates for the 30, 60 and 90 day buckets. From Black Knight: 30-day and 60-day delinquencies saw quarterly increases due to market seasonality in Q3, rising 4.7 and 5.6 percent respectively Despite the Q3 rise in 30-day delinquencies, they remain below 2005’s pre-crisis levels; 60-day delinquencies remain slightly above 2005 levels Positive movement continues in 90-day inventory, despite the seasonal inflow of new delinquencies, on both a quarterly and yearly basis 90-day delinquencies are down 25 percent over the past year

Biased Lending Evolves, and Blacks Face Trouble Getting Mortgages - Outlawed decades ago, redlining has re-emerged as a serious concern among regulators as banks have sharply retreated from providing home loans to African-Americans in the wake of the financial crisis.Over just the past 12 months, federal, state and city officials have successfully required banks to expand minority lending programs and, in some instances, to pay penalties as part of redlining settlements in Buffalo; Milwaukee; Providence, R.I.; Rochester; and St. Louis. And more banks are facing scrutiny. The Justice Department now has more active redlining investigations underway than at any other time in the past seven years, officials said.“Redlining is not a vestige of the past,” Vanita Gupta, the principal deputy assistant attorney general of the Justice Department’s civil rights division, said last month in a conference call with reporters.The effect on minority communities can be profound. Homeownership is a cornerstone of economic mobility, and without a stable group of homeowners, neighborhoods can be left vulnerable to blight and disrepair.The recent cases illustrate how redlining has evolved. Bankers no longer talk openly about denying loans to black people. Instead, officials said, some banks have quietly institutionalized bias in their operations, deliberately placing branches, brokers and mortgage services outside minority communities, even as other banks find and serve borrowers in those neighborhoods.The intent of such management decisions is typically left unspoken, officials said. But in interviews with federal bank examiners, Hudson executives made their reluctance to venture into minority neighborhoods plain.

The housing shortage and low real interest rates -- The mystery of low natural interest rates has become the topic of the hour, and everyone is perplexed by the mystery.  Why are interest rates so low?  Has anybody mentioned housing?  This virus infected everyone’s brain so that we can only believe houses are too expensive or too plentiful, but not the other way around.  So, nobody seems to notice that the return on real estate investments is very high.  I have posted some version of this graph several times.  In the 1970s & 1980s, its tough to get a read on it because there weren’t markets in inflation-adjusted treasury bonds at the time.  But, there is clearly a relationship between real estate returns and real interest rates.  Why wouldn’t there be? And this relationship broke down at the end of 2007 when we shut down real estate credit markets.  The lack of access to home ownership made real estate returns go up while bond yields were going down.  This is an important signal of financial breakdown, and nobody seems to notice. So, no.  Natural interest rates are not low.  The real long term natural rate right now is about 2.5%.  If you have tons of cash or you can run the gauntlet and get a mortgage, or if you are an institituional investor going through the difficult organizational process of buying up billions of dollars of rental homes, you get the preferred rate of 4% real returns.  If you aren’t, then you get the “class B” shares of low risk fixed income, which pay about 1% real (3% nominal).

Mortgage Rates Back to 4 Percent After Yellen -- Mortgage rates maintained their upward momentum today, rising to the highest levels since late September after Janet Yellen confirmed the Fed's rate hike outlook. Bond markets (which include the mortgage-backed securities that most directly affect mortgage rates) began adjusting for that outlook last week after the Fed announcement. Markets saw a roughly 1 in 3 chance of a December rate hike before that announcement, and better than 50 percent afterward. [In testimony today] Yellen confirmed the shift in tone represented by last week's official announcement. Bottom line: the Fed looks pretty serious about hiking in December. That confirmation was worth a bit of extra pain for bond markets, hence the move higher in mortgage rates. The average lender is now back to 4.0% on conventional 30yr fixed quotes, with only the aggressive few offering anything in the high 3's. Here is a table from Mortgage News Daily:

MBA: Mortgage Applications Decrease Slightly in Latest Weekly Survey, Purchase Applications up 20% YoY  From the MBA: Mortgage Applications Slightly Decrease in Latest MBA Weekly Survey Mortgage applications decreased 0.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 30, 2015 ...The Refinance Index decreased 1 percent from the previous week. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 20 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 4.01 percent from 3.98 percent, with points increasing to 0.47 from 0.44 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index. Refinance activity remains low. 2014 was the lowest year for refinance activity since year 2000, and refinance activity will probably stay low for the rest of 2015. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is 20% higher than a year ago.

CoreLogic: House Prices up 6.4% Year-over-year in September -- The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).  From CoreLogic: CoreLogic US Home Price Report Shows Home Prices Up 6.4 Percent Year Over Year According to the CoreLogic HPI, home prices nationwide, including distressed sales, increased by 6.4 percent in September 2015 compared with September 2014 and increased by 0.6 percent in September 2015 compared with August 2015. “After nearly 10 years of very high home price volatility, home price increases have been remarkably stable for the last 15 months, ranging between a 4.8 percent and 6.5 percent year-over-year increase,” said Sam Khater, deputy chief economist for CoreLogic. “Home price volatility is now back to the long-term trend prior to the boom and bust which is a good barometer of the market’s stability and health.” “The continued growth in home prices is welcome news for many homeowners but more markets are becoming overvalued. In the near term, this trend is likely to continue and pose evaluated risks to the housing economy,” "More has to be done to expand inventories if we are going to address the emerging affordability crisis, especially in hot markets like California and Colorado.”   This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100. The index was up 0.6% in September (NSA), and is up 6.4% over the last year. This index is not seasonally adjusted, and this was a solid month-to-month increase. The second graph shows the YoY change in nominal terms (not adjusted for inflation).

September 2015 CoreLogic Home Prices Year-over-Year Growth Rate Now 6.4%.: CoreLogic's Home Price Index (HPI) shows that home prices in the USA are up 6.4 % year-over-year year-over-year (reported up 0.6% month-over-month). There is considerable backward revision in this index which makes monthly reporting problematic. CoreLogic HPI is used in the Federal Reserves's Flow of Funds to calculate the values of residential real estate. Sam Khater, deputy chief economist for CoreLogic stated: After nearly 10 years of very high home price volatility, home price increases have been remarkably stable for the last 15 months, ranging between a 4.8 percent and 6.5 percent year-over-year increase. Home price volatility is now back to the long-term trend prior to the boom and bust which is a good barometer of the market's stability and health Anand Nallathambi, president and CEO of CoreLogic stated: The continued growth in home prices is welcome news for many homeowners but more markets are becoming overvalued. In the near term, this trend is likely to continue and pose evaluated risks to the housing economy. More has to be done to expand inventories if we are going to address the emerging affordability crisis, especially in hot markets like California and Colorado.

Great expectations – the driving force behind latest property crisis --Is it possible that we have got ourselves into the position where we have a housing crisis again, where those at the bottom and middle can’t find a place to live and those moving from the middle upwards are locked into, yet again, bidding wars for homes where the speculator and the owner are pitted against each other? Could we be in the situation where investors and large foreign funds are sitting on land waiting for the prices to go up in order to make a killing, thus exacerbating the supply shortage? It’s hard to believe – after everything we have been through – but it’s true. Above all, the Irish property market needs stability. It needs to be liberated from constantly changing expectations about where prices are going to go. Expectations about future prices are what destroy a property market and lead to the unhealthy intrusion of speculators in the market for accommodation. Accommodation should be a fixed cost in an economy, a cost faced by all of us, like the cost of electricity. Can you imagine what would happen to the use of electricity if people thought the price was going to change on a daily basis and everyone had their own generator trying to sell at the best price to a national grid? Imagine the surges and scarcities in both use and supply as users and suppliers tried to get the best price. Now think about the housing market.

Differences in Rent Inflation by Cost of Housing - NY Fed - We know that different people experience different inflation rates because the bundle of goods and services that they consume is different from that of the “typical” household. This phenomenon is discussed in this publication from the Bureau of Labor Statistics (BLS), and this article from the New York Fed. But did you know that there are substantial differences in inflation experience depending on the level of one’s housing costs? In this post, which is based upon our updated staff report on “The Measurement of Rent Inflation,” we present evidence that price changes for rent, which comprises a large share of consumer spending, can vary considerably across households. In particular, we show that rent inflation is consistently higher for lower-cost housing units than it is for higher-cost units. Note that since owners’ equivalent rent inflation is estimated from observed changes in rent of rental units, this finding applies to homeowners as well. While we cannot be certain about why this is the case, it appears to be at least partly related to how additional units are supplied to the housing market: in higher-price segments additional units primarily come from new construction, while most of the increase in lower-price segments comes from units that previously were occupied by higher-income households.

Construction Spending increased 0.6% in September, Up 14.1% YoY --  The Census Bureau reported that overall construction spending increased in September: The U.S. Census Bureau of the Department of Commerce announced today that construction spending during September 2015 was estimated at a seasonally adjusted annual rate of $1,094.2 billion, 0.6 percent above the revised August estimate of $1,087.5 billion. The September figure is 14.1 percent above the September 2014 estimate of $959.2 billion.  Both private spending and public spending increased: Spending on private construction was at a seasonally adjusted annual rate of $794.2 billion, 0.6 percent above the revised August estimate of $789.7 billion. ... In September, the estimated seasonally adjusted annual rate of public construction spending was $300.0 billion, 0.7 percent above the revised August estimate of $297.8 billion.  Non-residential for offices and hotels is generally increasing, but spending for oil and gas has been declining. Early in the recovery, there was a surge in non-residential spending for oil and gas (because oil prices increased), but now, with falling prices, oil and gas is a drag on overall construction spending.  This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted. Private residential spending has been increasing, but is 42% below the bubble peak. Non-residential spending is only 4% below the peak in January 2008 (nominal dollars). Public construction spending is now 8% below the peak in March 2009 and about 14% above the post-recession low. The second graph shows the year-over-year change in construction spending. On a year-over-year basis, private residential construction spending is up 17%. Non-residential spending is up 15% year-over-year. Public spending is up 9% year-over-year.

September 2015 Construction Spending Growth Continues Strong.: The headlines say construction spending grew. The backward revisions make this series very wacky - but the backward revisions this month were upward making the data better than the headline view. In any event, construction spending is growing much faster than the economy in general. Econintersect analysis:

  • Growth deceleration 0.1 % month-over-month and Up 14.2 % year-over-year.
  • Inflation adjusted construction spending up 12.2 % year-over-year.
  • 3 month rolling average is 14.1 % above the rolling average one year ago, and up 0.3 % month-over-month. As the data is noisy (and has so much backward revision) - the moving averages likely are the best way to view construction spending.

US Census Analysis:

  • Up 0.6 % month-over-month and Up 14.1 % year-over-year (versus the reported 12.0 % year-over-year growth last month).
  • Market expected -0.1 % to 1.0 % month-over-month (consensus +0.4) versus the +0.6 % reported

Hotel Occupancy: 2015 on pace for Best Year Ever  -- From STR: US results for week ending 24 October The U.S. hotel industry recorded positive results in the three key performance measurements during the week of 18-24 October 2015, according to data from STR, Inc. In year-over-year measurements, the industry’s occupancy increased 1.7% to 70.6%. Average daily rate for the week was up 4.6% to US$124.76. Revenue per available room increased 6.4% to finish the week at US$88.08.  The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.  Hotels are now in the Fall business travel season.The red line is for 2015, dashed orange is 2014, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.  Purple is for 2000.  I added 2001 (yellow) to show the impact of 9/11/2001 on hotel occupancy.  Occupancy was already down in 2001 due to the recession, and really collapsed following 9/11. For 2015, the 4-week average of the occupancy rate is solidly above the median for 2000-2007, and above last year. Right now 2015 is above 2000 (best year for hotels), and 2015 will probably be the best year ever for hotels.  This is why lodging investment is up 39% year-over-year

Consumer Credit Has Biggest Jump In History, Led By Government-Funded Car And Student Loans -- If there was any confusion where all those soaring new car sales are coming from, we now have the definitive answer: moments ago the latest consumer credit data for September was released, and surging by $28.9 billion - a 4.9% jump Y/Y - not only did this smash expectations of a "modest" $18 billion rise, this was the biggest monthly increase ever!  And while revolving credit rose a respectable $2.7 billion to $925 billion, still well below its historic high of $1.02 trillion... ... the monthly swing was all in the non-revolving credit, i.e., the student and car loans: soaring by $22.2 billion, this was the second biggest monthly jump on record.

Retailers Work Harder to Lure Holiday Employees -  Retailers are facing a shrinking pool of workers as they staff up for the holidays, prompting some to offer more hours or higher pay to make sure they have enough cashiers or salespeople for the Christmas crush. Toys “R” Us Inc. is giving part-time employees the chance to double their hours compared with a year ago. Macy’s is offering holiday workers more money for the busiest shifts. With unemployment at a seven-year low, hourly retail work is becoming less attractive to job seekers who now have more options. The number of people employed part-time for economic reasons—those who want to work full-time but can only get a part-time job—has shrunk by 1 million to 6 million since September 2014, and stands at the lowest level since August 2008, according to the Labor Department. “It’s a big hassle working in retailing over the holidays,” said Savannah Hughes, who earned around $9 an hour at the Chico’s chain White House Black Market near her home in Dallas in 2013 and 2014.“You are basically helping angry people buy sweaters.”

American Consumers Feel Great. Europeans, Not So Much - U.S. consumers are feeling pretty good about the economy. So are the Chinese. But Europeans are anxious in the wake of a migrant crisis, a new report from Nielsen shows. U.S. consumer confidence surged in the third quarter of the year to its highest level since Nielsen began conducting its global survey a decade ago. “Despite some mixed economic signals from the U.S., consumer confidence has strengthened and consumer spending is driving the economy,” said Louise Keely, a senior vice president at Nielsen and president of The Demand Institute. The report is due to be published early Tuesday.  The 18 percentage-point jump in U.S. consumer confidence comes despite a marginal uptick in spending by Americans in September, the slowest increase since January. China’s market turmoil and growing worries the world’s second-largest economy may be slowing at a much faster pace than expected fomented turbulence in markets across the globe, including in the U.S. According to the Nielsen survey, however, consumers may be shrugging off those worries, a potential harbinger for stronger spending in October. Chinese consumers, meanwhile, don’t appear to be fazed by rising debt levels, slumping manufacturing and slowing growth prospects. Consumer confidence in the country was roughly flat for the quarter. But rising worries in Europe over the risk of terrorism and the potential economic impact of the region’s refugee crisis threatens to stifle rising consumer hopes in the area.

Gallup US Consumer Spending Measure November 2, 2015: In October, Americans' daily self-reports of spending averaged $92, up $4 from September. This is just above the $81 to $91 range seen since January 2015. Compared with Octobers in prior years, last month's $92 average is similar to readings from 2008 ($91), 2013 ($88) and 2014, but it is significantly higher than the October averages in 2009-2012, which ranged from $63 to $72. Depending on November's spending figure, 2015 could follow the autumn spending pattern of the previous two years, as well as those of 2010 and 2011, in which spending increased in both October and November. September-to-October changes have seen mixed results. In recent years, spending was slightly higher in October. In some years, such as 2009 and 2012, spending dipped slightly or was flat. In 2008, though, average daily spending fell $8 from September to October at the onset of the economic crisis. Gallup's self-reported Consumer Spending measure is based on a question that Gallup tracks daily, asking a nationally representative sample of about 500 adults, aged 18 and older, and reports monthly based on approximately 14,000 interviews. Gallup asks Americans each day to estimate the amount of money they spent "yesterday," excluding the purchase of a home, an automobile or normal household bills. The survey is conducted with respondents contacted on landlines and cellphones.

October Is Sixth Consecutive Month Of Record Gun sales -- Two things happened after the most recent widely publicized US mass shootings: i) Obama once again made a concerted effort to pass anti-gun legislation, and ii) gun sales soared most likely in response to i). As we reported a month ago citing the FT, "gun sales this year could surpass the record set in 2013, when gun purchases surged after the December 2012 Sandy Hook murders." ... the calls for tighter gun laws lead to an increase in weapons sales. “Once the public hears the president on the news say we need more gun controls, it tends to drive sales,” said Mr Hyatt, who owns one of the largest gun retailers in the US. “People think, if I don’t get a gun now, it might be difficult to get one in the future. The store is crowded.”"We don’t want our business to be based on tragedy but we have to deal with what we have no control over,” Mr Hyatt said. “And after these shootings and then the calls for tougher gun laws, we see a buying rush.” This is not surprising: as Wired noted back in 2013, sharp spikes in gun sales usually following mass shootings for several reasons.

Gallup US ECI November 3, 2015: Gallup's Economic Confidence Index averaged minus 13 in October. This is essentially the same as the minus 14 average for September. The index has declined since peaking at plus 3 in January 2015, and has remained below minus 10 for four months. Since March, Americans have consistently viewed the outlook for the economy more negatively than they have viewed current economic conditions. From a broader perspective, the main cause for the decline in the index since January is the drop in Americans' economic outlook, which has fallen more steeply than their views of the current economy. Both components have been level since August. In October, 24 percent of Americans described current economic conditions as "excellent" or "good," while 31 percent rated them "poor." This resulted in a current conditions average of minus 7. The economic outlook average was minus 19 for this same period. This was the result of 38 percent of Americans saying the economy is "getting better" and 57 percent saying it is "getting worse."

U.S. retailers push banks to use PINs on credit cards as confusion reigns - Some big U.S. retailers are stepping up efforts to use personal identification numbers, or PINs, with new credit cards embedded with computer chips in a bid to prevent counterfeit card fraud. But they are being resisted by the banking industry, which sees no need to invest further in PIN technology, already used with debit cards, resulting in halting adoption and widespread confusion. A small band of retailers with the clout to call the shots on their branded credit cards is leading the charge. Target Corp is moving ahead with a chip-and-PIN rollout, and Wal-Mart Stores Inc plans to do the same. But Wal-Mart said it faces obstacles because its credit card partner, Synchrony Financial, is not yet able to handle PINs on credit cards. Synchrony declined comment. Broadly, U.S. banks are unprepared or resisting the change. The impasse comes after many consumers got their hands on new credit cards embedded with so-called EMV chips in advance of an Oct. 1 deadline that required retailers to accept chip cards or be liable for fraud losses. EMV stands for EuroPay, MasterCard and Visa. But only about a third of merchants are actually using the chip technology, according to analyst estimates. The number may not pick up until early next year, if at all, because the retail industry typically halts upgrades during the crucial holiday shopping season.

Tons of People Are Stealing Meat from Supermarkets Because It’s So Expensive -- Despite recent studies indicating the link between red meat and cancer, America remains hungry for beef. Droughts have reduced cattle herds around the world, pushing prices up and up: For instance, the price of beef in Australia, an important exporter to the U.S., is up 40% this year, according to the Wall Street Journal. Steaks in American supermarkets cost an average of $7.19 a pound in August, an all-time high (before adjusting for inflation.) High beef prices have caused many consumers to shy away from steak dinners in favor of cheaper meats such as pork. Apparently, sky-high beef prices are also nudging some into shoplifting prime cuts, either for their personal consumption or to resell on the black market. CBS News reported this week that meat is currently the top item stolen by shoplifters in America, and soaring prices are a big reason why. Thieves have been swiping meat all over the country in recent months, amounting to huge losses for grocery stores. Criminals aren’t only targeting supermarkets. In some cases, they’re going directly to the source. Hence the return of cattle rustlers, who have been stealing calves off ranches in places like Texas and Iowa. In some cases, calves can sell for well over $1,000 at auction. So clearly, people aren’t stealing solely to put dinner on the table that night. Because of the sharp increase in beef prices, the prospect of stealing meat—or cows—is more lucrative for the thieves, so heists are more worth the risk.

Arbitration Everywhere, Stacking the Deck of Justice -  On Page 5 of a credit card contract used by American Express, beneath an explainer on interest rates and late fees, past the details about annual membership, is a clause that most customers probably miss. If cardholders have a problem with their account, American Express explains, the company “may elect to resolve any claim by individual arbitration.”  Those nine words are at the center of a far-reaching power play orchestrated by American corporations, an investigation by The New York Times has found.By inserting individual arbitration clauses into a soaring number of consumer and employment contracts, companies like American Express devised a way to circumvent the courts and bar people from joining together in class-action lawsuits, realistically the only tool citizens have to fight illegal or deceitful business practices.Over the last few years, it has become increasingly difficult to apply for a credit card, use a cellphone, get cable or Internet service, or shop online without agreeing to private arbitration. The same applies to getting a job, renting a car or placing a relative in a nursing home. Some state judges have called the class-action bans a “get out of jail free” card, because it is nearly impossible for one individual to take on a corporation with vast resources.

Dear NY Times: Thank You For Letting Me Sue Only 500 Miles From My Home -- So the New York Times has just finished a three-part series on arbitration. For such lengthy coverage, the Times reveals almost nothing that will be new to those who have been following debates over the use of pre-dispute arbitration agreements. But if you haven't been following the issue, the Times series is a good place to start. It highlights some pressing recent issues, such as the use of arbitration to eliminate class action liability, while also touching on issues that often escape attention, such as judicial enforcement of contracts requiring religious arbitration.Discussions about arbitration can be frustrating. For one thing, it is hard to have them without sending (often unintended) ideological signals. Those who highlight flaws in anti-arbitration arguments--even if simultaneously supporting greater regulation--are often characterized as "defenders" of "forced arbitration," as if the only valid choice is to justify or oppose (rather than investigate) the practice. Meanwhile, lawyers for large business interests have the irritating habit of presenting themselves as defenders of the common good, rather than as zealous advocates for corporate clients.  The attention on arbitration also seems a bit disproportionate, given the nearly-infinite ways that businesses use contracts to extract hidden value from employees and customers: incomprehensible warranty disclaimers, clauses limiting liability for damages, clauses requiring claimants to bring claims in remote and therefore expensive places, etc. Even if competition results in somewhat lower prices, that's cold comfort for those on whom the costs fall most heavily. For all its high-mindedness, the NY Times is no different. Have a legal claim arising out of Times digital products? The Times graciously lets you file a lawsuit, but you'll have to go to New York to do it, wherever you happen to live.*

House votes to keep highway spending level, ignores warnings -- The House voted Thursday to continue transportation programs for six years with no significant increase in spending, despite warnings from the White House and statehouses across the country that the nation’s roads, bridges and transit systems are falling apart. The bill, approved 363-64 with wide bipartisan support, authorizes $325 billion in spending through the 2021 federal budget year. But the bill provides only enough money to pay for the first three years because lawmakers were unable to settle on a politically acceptable way to pay for it all. The bill would continue current rates of spending adjusted for inflation. At least $400 billion over six years is needed to prevent traffic congestion from getting worse, Transportation Secretary Anthony Foxx has said. Most lawmakers lauded the bill as a major accomplishment because it would assure states and local communities that they can count on federal highway and transit aid for at least three years. State officials say they find it increasingly difficult to plan major construction projects because they can’t always be sure federal aid will be available. Since 2008, Congress has kept the federal Highway Trust Fund teetering on the edge of bankruptcy, unwilling to raise the federal 18.4 cents-a-gallon gasoline and 24.4-cent diesel taxes. The fuel taxes, the trust fund’s main source of revenue, were last raised in 1993. Transportation aid has continued through dozens of short-term extensions and transfers of money from the general treasury to make up the gap between revenues and spending.

Human Cost Rises as Old Bridges, Dams and Roads Go Unrepaired -  From coast to coast, the country’s once-envied collection of bridges, dams, pipelines, sewage treatment plants and levees is crumbling. Studies have shown that a lack of investment in public infrastructure costs billions of dollars a year in lost productivity, as people sit in traffic or wait for delayed shipments.But experts on transportation infrastructure say the economic measures obscure the more dire threat to public safety: Every year, hundreds of deaths, illnesses and injuries can be attributed to the failure of bridges, dams, roads and other decaying structures. On Thursday, the House overwhelmingly approved a highway bill that would make significant investments in transportation infrastructure over the next three years. But the bill, and a similar Senate version passed earlier in the year, still fall far short of what many infrastructure experts say is needed, both in terms of time and money. Obtaining permits alone can be a yearslong process for many projects, and lawmakers have long said that six-year bills are optimal so that states have the ability to plan and to properly fix decaying structures that could pose a hazard to public safety. “There is no question that there are safety impacts and loss of life because we didn’t take the time or spend the money to make infrastructure what it should be,” Anthony R. Foxx, the transportation secretary, said in an interview.

West Coast ports' volume, market share recedes West Coast ports in September suffered a drop in container volume as well as import market share, but it is too early to determine if this is the beginning of a trend or just a one-month anomaly for ports that appeared to be recovering from the loss of business earlier in the year.After falling three straight years, U.S. containerized imports of toys began to rebound in the second half of 2014 partly because of strong demand for Disney’s “Frozen” gear, which generated $531 million in sales in the U.S., according to research firm NPD Group. Toys imports are now up for five straight quarters, year-over-year, through the third quarter, and are expected to end the year up 10.9 percent to  581,053 twenty-foot equivalent units, after growing 3.5 percent in 2014. Disney's Star Wars toys are expected to drive much of that growth this year, with some retail experts forecasting U.S. sales tied to "the Force" to hit at least $1 billion.  U.S. toy import growth, however, will likely shrink around 3 percent in 2016 as the Star Wars surge fades, and the larger trend of children choosing tablets and consoles over traditional toys continues, according to IHS Senior Economist Mario Moreno.

U.S. September trade deficit smallest in seven months -- The U.S. trade deficit narrowed sharply in September to its lowest level in seven months as exports rebounded, a tentative sign that the worst of the drag from a stronger dollar may be over. The Commerce Department said on Wednesday the trade gap fell 15 percent to $40.8 billion, the smallest deficit since February. Lower crude oil prices also helped to curb the import bill. The drop in the trade deficit reversed the widening seen in August, though the prior month’s figure was revised slightly down to $48 billion from the previously reported $48.3 billion. Economists had forecast the trade gap shrinking to $41.1 billion in September. When adjusted for inflation, the deficit fell to $57.2 billion in September from $63.0 billion in the prior month. Trade had a neutral impact on gross domestic product for the third quarter, which expanded at a 1.5 percent annual rate. The sharp step-down in growth from the second quarter’s brisk 3.9 percent rate mainly reflected a slow pace of inventory accumulation and ongoing spending cuts by energy firms. The dollar has gained 16.8 percent against the currencies of the United States’ main trading partners since June 2014, undercutting export growth. Lackluster global demand also has put a damper on exports. Related: U.S. import prices barely decline in September Exports in September rose 1.6 percent to $187.9 billion, with exports of services hitting a record high. There were increases in exports of capital goods and automobiles. Exports of industrial supplies and materials, however, were the lowest since October 2010. Exports to Canada, the European Union and China rose in September. Exports to Japan, however, fell 13.8 percent to their lowest level since April 2010. Imports fell 1.8 percent to $228.7 billion, the lowest level since February. They had received a boost in August from Apple’s new iPhone model.

September Trade Deficit Lowest in Seven Months -- The U.S. International Trade in Goods and Services, also known as the FT-900, is published monthly by the Bureau of Economic Analysis with data going back to 1992. The monthly reports include revisions that go back several months. This report details U.S. exports and imports of goods and services.  Here is an excerpt from the latest report:  The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $40.8 billion in September, down $7.2 billion from $48.0 billion in August, revised. September exports were $187.9 billion, $3.0 billion more than August exports. September imports were $228.7 billion, $4.2 billion less than August imports. The September decrease in the goods and services deficit reflected a decrease in the goods deficit of $7.3 billion to $60.3 billion and a decrease in the services surplus of $0.1 billion to $19.5 billion. Year-to-date, the goods and services deficit increased $14.9 billion, or 3.9 percent, from the same period in 2014. Exports decreased $66.3 billion or 3.8 percent. Imports decreased $51.3 billion or 2.4 percent. This series tends to be extremely volatile, so we use a six-month moving average. Today's headline number of -40.81B was better than the forecast of -41.10B. The previous month was revised upward by 313M. The September deficit was the lowest monthly number since February.

US Trade Deficit Narrows 15%, Smallest Since Feb 2015 As Petroleum Imports Collapse -- Against expectations of a $41bn deficit, September's trade deficit was practically in line at -$40.8bn, dramatically narrower than the revised higher (less negative) August print of $48.02bn as petroleum imports plunge to lowest since May 2004. With the smallest deficit since Feb 2015, The Fed is going to need a bigger boat to have enough debt to monetize when the looming rate hike drags the economy to the point of requiring more intervention.US petroleum imports:  The US September monthly international trade deficit decreased from $48.0 billion in August (revised) to $40.8 billion in September, as exports increased and imports decreased. The previously published August deficit was $48.3 billion.The goods deficit decreased $7.3 billion from August to $60.3 billion in September. The services surplus decreased $0.1 billion from August to $19.5 billion in September. However, if one excludes petroleum trade, the core US trade deficit is about as about as bad as ever. Should the shale destruction continue, and US imports of oil return, this will be what happens to overall US trade. The breakdown by category: Exports

  • Exports of goods and services increased $3.0 billion, or 1.6 percent, in September to $187.9 billion. Exports of goods increased $2.9 billion and exports of services increased $0.1 billion.
  • The increase in exports of goods mainly reflected increases in consumer goods ($1.3 billion) and in capital goods ($0.9 billion).
  • The increase in exports of services mainly reflected increases in travel (for all purposes including education) ($0.1 billion) and in other business services ($0.1 billion), which includes research and development services; professional and management services; and technical, trade-related, and other services.


  • Imports of goods and services decreased $4.2 billion, or 1.8 percent, in September to $228.7 billion. Imports of goods decreased $4.4 billion and imports of services increased $0.1 billion.
  • The decrease in imports of goods mainly reflected decreases in industrial supplies and materials ($1.6 billion), in capital goods ($1.0 billion), and in automotive vehicles, parts,and engines ($0.8 billion).
  • The increase in imports of services mainly reflected an increase in travel (for all purposes including education) ($0.1 billion).

Trade Deficit decreased in September to $40.8 Billion -- The Department of Commerce reported: The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was was $40.8 billion in September, down $7.2 billion from $48.0 billion in August, revised. September exports were $187.9 billion, $3.0 billion more than August exports. September imports were $228.7 billion, $4.2 billion less than August imports. The trade deficit was close to the consensus forecast of $41.1 billion. The first graph shows the monthly U.S. exports and imports in dollars through September 2015. Imports decreased and exports increased in September. Exports are 13% above the pre-recession peak and down 4% compared to September 2014; imports are 1% below the pre-recession peak, and down 4% compared to September 2014. The second graph shows the U.S. trade deficit, with and without petroleum. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products (wild swings earlier this year were due to West Coast port slowdown). Oil imports averaged $42.72 in September, down from $49.33 in August, and down from $92.52 in September 2014. The petroleum deficit has generally been declining and is the major reason the overall deficit has declined since early 2012. The trade deficit with China increased to $36.3 billion in September, from $35.6 billion in August 2014. The deficit with China is a substantial portion of the overall deficit.

September 2015 Trade Data Shows Declining Trade Balance: A quick recap to the trade data released today paints a relatively positive picture. The unadjusted three month rolling average value of exports accelerated month-over-month - but imports decelerated,. Many care about the trade balance which declined.

  • Import goods growth has positive implications historically to the economy - and the seasonally adjusted goods and services imports were reported down month-over-month. Econintersect analysis shows unadjusted goods (not including services) growth deceleration of 2.5% month-over-month (unadjusted data). The rate of growth 3 month trend is decelerating.
  • Exports of goods were reported up, and Econintersect analysis shows unadjusted goods exports growth acceleration of (not including services) 4.8 % month-over month. The rate of growth 3 month trend is accelerating (but still negative year-over-year).
  • The increase in seasonally adjusted exports was due to consumer and capital goods. Import decrease was general.
  • The market expected (from Bloomberg) a trade deficit of $-47.2 B to $-40.2 billion (consensus $-40.8 billion deficit) and the seasonally adjusted headline deficit from US Census came in at a deficit of $--- billion.
  • It should be noted that oil imports were down 12 million barrels from last month, and down 2 million barrels from one year ago.
  • The data in this series is noisy, and it is better to use the rolling averages to make sense of the data trends.

There’s a Bright Spot for U.S. Exports (Hint: It’s Not Goods) - Exports of U.S. services hit new records in August and September, a sign the sector hasn’t been as weighed down by a strong dollar and tepid demand for American goods. U.S. service exports climbed to $60.6 billion in September, the Commerce Department said Wednesday. Even adjusted for inflation, the latest figure remains a record. By contrast, September’s exports of goods were down 8% from a July 2014 peak. Even a small rebound in September exports did little to change a gloomy outlook for American factories. The latest figures suggest the service sector remains resilient, a finding echoed in other data released on Wednesday. The Institute for Supply Management’s nonmanufacturing purchasing-managers index rose to 59.1 in October from 56.9 in September. The service sector is a key component of the economy. Consumer spending on services–housing, health care, transportation, recreation, entertainment and the like–is twice the spending on goods. Elsewhere, the trade picture has reflected cheap commodity prices, the relative strength of the dollar and slow growth abroad. Through the first nine months of 2015, service exports are up 1.8%, while goods exports are down 6.2%. That’s partly because of cheap oil–nonpetroleum exports are down more than 30% in that period–but nonpetroleum exports are still down a substantial 3.5%. “I think the issue is how the dollar affects the two components–the dollar effect is less severe on the services side,”

U.S. rail freight falls as industrial economy struggles -- Coal shipments to power plants, the biggest commodity on the network, accounting for about one-third of  – Freight carried by major U.S. railroads fell by 7 percent in the second quarter of 2015 compared with the same period in 2014, confirming that large parts of the industrial economy are in recession. The major Class 1 railroads carried 431 billion ton-miles of freight in the three months ending June, down from 463 billion ton-miles in 2014, according to the U.S. Surface Transportation Board. Changes in freight volumes reflect broader difficulties in the industrial economy. Rail operators have been struck by a perfect storm which has hit both their traditional and new business lines.  Coal shipments to power plants, the biggest commodity on the network, accounting for about one-third of total tonnage, have been hit by a combination of environmental regulations and low gas prices. Coal shipments were down by 27 million tonnes, around 15 percent, in the second quarter compared with same 2014 period. Petroleum shipments, one of the fastest growing sources of new business during the oil boom, fell more than 650,000 tonnes, 5 percent, as production began to peak and new pipelines diverted crude from the rails. And shipments of sand and gravel, a key ingredient in fracking, plunged by more than 2 million tonnes, nearly 14 percent, as the number of new wells drilled and fracked tumbled. Shipments of a range of other items from chemicals to fertilizers and other industrial supplies were also lower as the industrial economy ran into stiff headwinds from a stronger dollar and sluggish capital spending

Rail Week Ending 31 October 2015: Monthly Data Now Contracting 4.3% Year-over-Year: Week 43 of 2015 shows same week total rail traffic (from same week one year ago) and monthly total rail traffic (from same month one year ago) declined according to the Association of American Railroads (AAR) traffic data. Intermodal traffic contracted year-over-year, which accounts for approximately half of movements. and weekly railcar counts continued in contraction. October 2015 is down 4.3% over October 2014.A summary of the data from the AAR: Carload traffic in October totaled 1,124,470 carloads, down 6.9 percent or 83,578 carloads from October 2014. U.S. railroads also originated 1,089,310 containers and trailers in October 2015, down 1.4 percent or 15,769 units from the same month last year. For October 2015, combined U.S. carload and intermodal originations were 2,213,780, down 4.3 percent or 99,347 carloads and intermodal units from October 2014. In October 2015, five of the 20 carload commodity categories tracked by the AAR each month saw carload gains compared with October 2014. This included: grain, up 12.9 percent or 11,366 carloads; miscellaneous carloads, up 27.3 percent or 5,293 carloads; and motor vehicles and parts, up 6.7 percent or 4,654 carloads. Commodities that saw declines in October 2015 from October 2014 included: coal, down 13.3 percent or 59,791 carloads; petroleum and petroleum products, down 18.6 percent or 12,209 carloads; and metallic ores, down 27.9 percent or 9,029 carloads. Excluding coal, carloads were down 3.1 percent or 23,787 carloads in October 2015 from October 2014. Total U.S. carload traffic for the first ten months of 2015 was 12,005,156 carloads, down 4.6 percent or 579,405 carloads, while intermodal containers and trailers were 11,506,577 units, up 2.1 percent or 234,100 containers and trailers when compared to the same period in 2014. For the first ten months of 2015, total rail traffic volume in the United States was 23,511,733 carloads and intermodal units, down 1.4 percent or 345,305 carloads and intermodal units from the same point last year.

U.S. factory orders fall for second straight month - New orders for U.S. factory goods fell for a second straight month in September as the manufacturing sector continues to struggle under the weight of a strong dollar and deep spending cuts by energy companies. Motor vehicle production, however, remains a bright spot as orders surged in September. That trend is likely to continue, with early reports on Tuesday showing auto sales on track for another strong month in October. The Commerce Department said new orders for manufactured goods declined 1.0 percent after a downwardly revised 2.1 percent drop in August. Factory activity, which accounts for about 12 percent of the economy, is also being constrained by efforts by businesses to reduce an inventory overhang and tepid global demand. But the worst could be over for the sector after a report on Monday showed new orders rose in October for the first time since July. U.S. financial markets were little moved by the report. Factory orders were previously reported to have declined 1.7 percent in August. The dollar has gained 16.8 percent against the currencies of the United States' main trading partners since June 2014, which has undercut export growth and weighed on the profits of multinationals. Orders for transportation equipment fell 3.1 percent in September, largely reflecting a drop in aircraft orders. Orders for automobiles and parts rose 1.5 percent in September.

U.S. Factory Orders See Further Downside In September - After reporting a sharp drop in new orders for U.S. manufactured goods in the previous month, the Commerce Department released a report on Tuesday showing that factory orders saw further downside in the month of September. The Commerce Department said factory orders fell by 1.0 percent in September after tumbling by a revised 2.1 percent in August. Economists had expected orders to drop by 0.9 percent compared to the 1.7 percent decrease originally reported for the previous month. The report showed that orders for durable goods slumped by 1.2 percent following a 2.9 percent drop in August. Orders for transportation equipment led the decrease, plunging by 3.1 percent. Orders for non-durable goods also fell by 0.8 percent in September after sliding by 1.3 percent in the previous month. The Commerce Department also said shipments of manufactured goods dipped by 0.4 percent in September after falling by 0.9 percent in August. Inventories of manufactured goods also fell by 0.4 percent in September, matching the decrease seen in the previous month. Subsequently, the inventories-to-shipments ratio for September came in unchanged from August at 1.35.

Factory Orders Sink 11th Time in 14 Months --Factory orders decline once again, in line with the Bloomberg Consensus, but last month was also revised lower.  New orders for the export-hit factory sector fell 1.0 percent in September for the 11th decline in 14 months with August revised 4 tenths lower to minus 2.1 percent. September orders for durable goods, initially posted in last week's advance report, are unrevised at minus 1.2 percent, held down in part by a downswing in civilian aircraft but nevertheless showing wide weakness. Orders for non-durable goods, pulled down by weakness for petroleum and coal products, fell 0.8 percent to extend a run of sizable declines going back to July. The factory sector has been struggling with weakness in the energy sector and especially weak foreign demand that for U.S. goods has been made weaker by the strength in the dollar. Primary metals were down in the month as were both machinery and computers. Orders for core capital goods, despite the decline for machinery, were flat though shipments improved from an especially weak August. Industries showing gains for orders in the month include fabricated metals and electrical equipment, both getting a lift from what are strong gains in construction spending. Orders for vehicles were also up. Outside of new orders, readings are negative with shipments down 0.4 percent for a third straight decline and with unfilled orders down 0.5 percent for a second straight decline. Declines in these readings, not to mention weakness in new orders, are not good for the sector's employment outlook. Inventories also declined, down 0.4 percent for a third straight decline. With the factory sector in downturn, unwanted inventories are a heightened risk and manufacturers are keeping them in check, a factor that sharply held down third-quarter GDP growth and, unless orders pick up, may also hold down fourth-quarter GDP as well. The factory sector is struggling and is chief on the list of 2015 disappointments.

Factory Orders Comes Crashing the Economic Party - The Manufacturers' Shipments, Inventories, and Orders report shows factory new orders declined by -1.0% for September.  In August, new factory orders plunged by -2.1%.  Durable goods dropped by -1.2%.  In August, Durable goods slid down by -2.9%  Transportation new orders lead the decrease as they plunged by -3.1%.  Inventories also contracted again.  Generally speaking, this is another bad report implying the economy is slowing down.  The Census manufacturing statistical release is called Factory Orders by the press and covers both durable and non-durable manufacturing orders, shipments and inventories. While transportation equipment new orders plunged by -2.9% , motor vehicles bodies & parts new orders increased by 0.4%.  Volatile aircraft new orders declined in nondefense by -36.0%.  Core capital goods new orders decreased by -0.1%.  The previous month showed a -1.4% decrease .  Core capital goods are capital or business investment goods and excludes defense and aircraft.  This is indicating slower economic growth.   Nondurable goods decreased by -0.8%.  Manufactured durable goods new orders, decreased -1.2%, as shown in the below graph.  Shipments decreased by -0.4% for the month, also not a good sign.  Durable goods shipments increased by 0.1%  Nondurable goods shipments decreased by -0.8% as petroleum refineries shipments plunged by -5.7%.  Core capital goods shipments increased 0.5%, a bright spot in a sea of declines.  Core capital goods shipments go into the GDP calculation.  Below is a graph of core capital goods shipments. Inventories for manufacturing overall contracted by -0,4%. Durable goods inventories decreased by -0.4% while nondurables decreased -0.4%.  Petroleum refineries inventories plunged by -4.3% for the month and automobiles dropped by -3.1%.  Inventories have contracted for all three months of the 3rd quarter. The inventory to shipments ratio was 1.35.  Increasing ratios can imply economic sluggishness, but this is nothing to worry about as a ratio. Unfilled Orders decreased -0.5%.  Core capital goods unfilled orders declined by -0.3% in durable goods decreased -0.5%.  Part of this report goes into calculating GDP.  The BEA takes this report, called M3, and uses the shipments values to calculate investment in private equipment, investment in software.  Manufacturing inventories also goes into the changes in private inventories GDP calculation.  At the bottom of this post is a little more information to estimate part of the GDP investment component.

U.S. Light Vehicle Sales at 18.1 million annual rate in October -- Based on a WardsAuto estimate, light vehicle sales were at a 18.13 million SAAR in October. That is up almost 10% from October 2014, and up slightly from the 18.1 million annual sales rate last month. This was the second consecutive month over 18 million. This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for October (red, light vehicle sales of 18.13 million SAAR from WardsAuto). This was above the consensus forecast of 17.7 million SAAR (seasonally adjusted annual rate).  The second graph shows light vehicle sales since the BEA started keeping data in 1967. Note: dashed line is current estimated sales rate. This was another very strong month for auto sales and it appears 2015 will be the best year for light vehicle sales since 2001.

UAW Warns of General Motors Strike If Workers Fail to Approve Contract - WSJ: United Auto Workers leaders are pressing members to ratify a proposed contract from General Motors Co. GM 0.06 % after a handful of factories turned it down in initial rounds of voting, with union officials saying a costly strike is likely unavoidable if the deal fails, according to several people familiar with the matter. The UAW’s voting on GM’s proposed agreement to 52,700 of its U.S. factory workers began late last week and ends Saturday. Workers at a number of components plants and four assembly plants approved the contract, but workers at two other assembly plants and one transmission plant have rejected it, leaving open the possibility that the UAW could see an offer rejected for a second time in this round of negotiations with Detroit’s auto makers. UAW officials are under significant pressure to get the GM deal ratified after having run into resistance to a Fiat Chrysler deal in October. It took the UAW two rounds of negotiations to come away with an offer members would approve. Workers have demanded raises and a closing of the pay gap between entry-level workers and those with more seniority. A work stoppage would come at a time when GM is racing to make enough trucks and SUVs to keep up with U.S. demand. Reporting a 16% sales increase in October compared with the same period in 2014, GM said it had enough inventory to last it past the end of the year.  Much of that inventory, however, is composed of passenger cars that are not as popular as light trucks. Demand for vehicles like the Chevrolet Silverado and Cadillac Escalade were primary drivers behind GM’s record third-quarter operating profit.

US Manufacturing PMI At 7-Month Highs As Canada's Crashes To Record Low (Below China) -- Amid a slew of sometimes contradictory Manufacturing data, Canada appears to have suffered the most with its Markit PMI tumbling to 48.0 - a record low. Canada's weakness puts it below China (based on China's Caixin/Markit measure). US manufacturing rose marginally from its preliminary 48.0 print to end October at 48.1, highest since March. Output and New orders are seen rising at the fastest pace since March, but despite this 'strength' Markit is careful to warn a rate hike would be premature.

ISM Manufacturing index decreased to 50.1 in October -- The ISM manufacturing index barely suggested expansion in October. The PMI was at 50.1% in October, down from 50.2% in September. The employment index was at 47.6%, down from 50.5% in September, and the new orders index was at 52.9%, up from 50.1%. From the Institute for Supply Management: October 2015 Manufacturing ISM® Report On Business®  "The October PMI® registered 50.1 percent, a decrease of 0.1 percentage point from the September reading of 50.2 percent. The New Orders Index registered 52.9 percent, an increase of 2.8 percentage points from the reading of 50.1 percent in September. The Production Index registered 52.9 percent, 1.1 percentage points above the September reading of 51.8 percent. The Employment Index registered 47.6 percent, 2.9 percentage points below the September reading of 50.5 percent. Backlog of Orders registered 42.5 percent, an increase of 1 percentage point from the September reading of 41.5 percent. The Prices Index registered 39 percent, an increase of 1 percentage point from the September reading of 38 percent, indicating lower raw materials prices for the 12th consecutive month. The New Export Orders Index registered 47.5 percent, up 1 percentage point from September, and the Imports Index registered 47 percent, down 3.5 percentage points from the September reading of 50.5 percent. Comments from the panel reflect concern over the high price of the dollar and the continuing low price of oil, mixed with cautious optimism about steady to increasing demand in several industries."Here is a long term graph of the ISM manufacturing index.

ISM Manufacturing Index: Lowest Reading Since May 2013 - Today the Institute for Supply Management published its monthly Manufacturing Report for October. The latest headline PMI was 50.1 percent, a decrease of 0.1% from the previous month and above the forecast of 50.0. This was the 34th consecutive month of expansion but the lowest reading since May 2013. Here is the key analysis from the report: "The October PMI® registered 50.1 percent, a decrease of 0.1 percentage point from the September reading of 50.2 percent. The New Orders Index registered 52.9 percent, an increase of 2.8 percentage points from the reading of 50.1 percent in September. The Production Index registered 52.9 percent, 1.1 percentage points above the September reading of 51.8 percent. The Employment Index registered 47.6 percent, 2.9 percentage points below the September reading of 50.5 percent. Backlog of Orders registered 42.5 percent, an increase of 1 percentage point from the September reading of 41.5 percent. The Prices Index registered 39 percent, an increase of 1 percentage point from the September reading of 38 percent, indicating lower raw materials prices for the 12th consecutive month. The New Export Orders Index registered 47.5 percent, up 1 percentage point from September, and the Imports Index registered 47 percent, down 3.5 percentage points from the September reading of 50.5 percent. Comments from the panel reflect concern over the high price of the dollar and the continuing low price of oil, mixed with cautious optimism about steady to increasing demand in several industries." Here is the table of PMI components.

Manufacturing ISM Flirts With Contraction Third Month, Employment Shifts to Contraction -- Economists who looked at last months barely above contraction and predicted the same results this month were nearly spot on. Last month the Manufacturing ISM was 50.2, this month the Bloomberg Consensus was 50.0, and the report came in at 50.1.  For a third straight month, the ISM is skirting near contraction, at 50.1 in October vs 50.2 and 51.1 in the prior two months. New orders are showing some life, up nearly 2 points to a 52.9 reading that is safely above breakeven 50. Production is also at 52.9. But other readings are not as a favorable. Backlog orders remain in deep contraction at 42.5 while employment, for the first time in six months, is also in contraction, down nearly 3 points to 47.6. Exports have been the difference this year for the factory sector and new export orders in this report, at 47.5, remain below 50 for the fifth straight month. Prices, at 39.0, extended their long run of contraction.That was the lowest reading since May of 2013. Let's investigate all the details of today's report straight from the Institute for Supply Management Manufacturing ISM® Report On Business® released this morning. Key Points:

  • Backlog of orders are in contraction
  • Growth in new orders barely positive
  • Exports contracting for the fifth month
  • Prices have plunged

ISM Manufacturing Tumbles To Weakest In 3 Years As Employment Crashes To Lowest Since August 2009 -- With Markit suggesting US Manufacturing is at a 7-month high (with new orders surging), The ISM appears to disagree as ISM Manufacturing PMI dropped to 50.1 - its lowest since Dec 2012. The silver lining in the ISM report is that it was a 'Chinese beat' - 50.1 vs 50.0 exp - but with the employment sub-index at its lowest since August 2009, the report is anything but positive. Finally, ISM inventory drops to 46.5 (its weakest since January) after Chicago PMI inventories soared over 60; and along with export orders in contraction for the fifth month (while Markit claims highest new orders in 7 months), today's US manufacturing outlook is just more baffle-em-with-bullshit.

October 2015 ISM Manufacturing Survey Insignificantly Declined and Barely In Expansion -- October 2015 ISM Manufacturing Survey Insignificantly Declined and Barely: The ISM Manufacturing survey continues to indicate manufacturing growth expansion - but again marginally declined this month with this survey remains barely in expansion. The key internal new orders improved and remains in expansion. Backlog of orders contraction improved over the contraction the previous month.. The ISM Manufacturing survey index (PMI) marginally declined from 50.2 to 50.1 (50 separates manufacturing contraction and expansion). This was at expectations which were 48.9 to 51.5 (consensus 50.0). Earlier today, the PMI Manufacturing Index was released - from Bloomberg:  Highlights Most measures of the U.S. factory sector are in contraction or, like the upcoming ISM report, in near contraction, but not the manufacturing PMI which continues to post solid rates of growth. In the best reading since April, the PMI came in at 54.1 for final October for a 1 tenth gain from the flash reading and a very definitive 1.0 point gain from September. Output is described as "robust" while new orders are accelerating as are, in what is a real contrast with other manufacturing reports, backlog orders where the build is contributing to strength in the sample's employment. Delivery times are up, which is another indication of strength. Input prices are down sharply while finished goods prices are fractionally higher. This report, though on its own in terms of direction, at least has been consistent, never coming close to contraction over a year of actual contraction. . This is the 34th month of expansion. The regional Fed manufacturing surveys indicated little growth or contraction in September, and now the ISM indicates manufacturing shows weak expansion.

September 2015 Manufacturing Remains Bad: US Census says manufacturing new orders declined. Our analysis says sales were not good. Unadjusted unfilled orders' growth remains in CONTRACTION year-over-year. Part of the reason for the bad data is that the data is not inflation adjusted (deflation is occuring in this sector) - but it does not explain all the decline. Most of the data was soft, but civilian aircraft was the major headwind. US Census Headline:

  • The seasonally adjusted manufacturing new orders is down 1.0 % month-over-month, and down 7.2 % year-to-date (last month was down 7.2 % year-to-date)..
  • Market expected month-over-month growth of -2.0 % to 0.0 % (consensus -0.9 %) versus the reported -1.0 %.
  • Manufacturing unfilled orders down 0.5 % month-over-month, and down 2.2 % year-over-year.

Econintersect Analysis:

  • Unadjusted manufacturing new orders growth decelerated 0.3 % month-over-month, and down 7.1 % year-over-year
  • Unadjusted manufacturing new orders (but inflation adjusted) down 0.6 % year-over-year - there is deflation in this sector.
  • Unadjusted manufacturing unfilled orders growth decelerated 0.9 % month-over-month, and down 2.2 % year-over-year
  • As a comparison to the inflation adjusted new orders data, the manufacturing subindex of the Federal Reserves Industrial Production was growth decelerated 0.1 % month-over-month, and up 1.6% year-over-year.

Manufacturing in Midwest, including Minnesota, slumps in October - Conditions in Minnesota and other central U.S. factories fell yet again as manufacturers in October struggled with a drop in wholesale farm and energy prices and the strong U.S. dollar, according to a widely watched economic report released Monday. The Creighton University Mid-America Business Conditions Index also found that employment fell throughout its nine-state region as manufacturers let workers ago or slowed hiring. The trifecta of woes produced a disappointing index in Minnesota that sunk to 42.7 from 53 in September. That was a hair better than the index for the entire nine-state region, which slumped to just 41.9 in October from 47.7 in September. Any index below 50 signals economic contraction. Worrying economists is that October delivered the third consecutive month of results below 50 for the nine-state mid-America region. Minnesota, specifically, was challenged last month by the high dollar, lackluster orders and declines in inventories. The strong U.S. dollar also affected export orders. “Our survey of supply manager in the state point to slight losses into the first quarter of 2016 as manufacturing exports slide even lower,” said Ernie Goss, report author and director of Creighton University’s Institute for Economic Inquiry. The entire region, which includes Minnesota, Iowa, South and North Dakota, Missouri, Arkansas, Oklahoma, Kansas and Nebraska, faces similar restrained forecasts.

Miracle In Manhattan? - ISM New York Spikes By Most In 12 Years (From Lowest Since 2009) - File this under 'WTF' - despite job growth and purchase volume dropping for the 2nd consecutive month for the first time in 3 years, ISM New York reported a headline print of 65.8 in October. The jump from 44.5 (6 year lows) in September is the largest MoM jump since Nov 2003... Under the surface it was weak all around except for one thing... "outlook" - or hope - which soared from 62.8 to 74.0 (despite a plunge in expected demand 6 months out). All in all - we reiterate our initial thoughts - WTF!?

So “the Sky is Falling” on California Manufacturing(?!) | Wolf Street: A month ago, the Institute of Applied Research, which publishes the Purchasing Managers’ Index for the Inland Empire – with about 4 million people, the third-most populous region in California – reported: “We are not yet ready to say that ‘the sky is falling.’” Back then, they were lamenting that the Inland Empire PMI had dropped below 50 for the second month in a row (below 50 = contraction), hitting 44.1 in September, after having already hit 46.6 in August. But the sky wasn’t falling “yet,” the report pointed out, because, given how volatile the index is, “it takes three months of figures below 50 before a new trend (in this case a trend of contraction rather than growth) is established.” Alas, on Monday, the IAR released the Inland Empire PMI for October, and it was sharply below 50 for the third month in a row, this time at 45.9. So is the IAR now “ready to say that ‘the sky is falling?’” We don’t know. The authors didn’t specifically address the issue. We only know that the index is falling – and a lot: back in April, it was still flying high at 60. But the index covers only manufacturing. And the rest of the Inland Empire economy? On the bright side, a PMI over 43.1 percent generally indicates an expansion of the overall economy, thus the Inland Empire economy appears to be continuing its slow growth even as the manufacturing sector is experiencing weakness.” The details weren’t exactly pretty, with Production at 40, New Orders at 41.9, and the Employment Index deteriorating from 50.0 in September to 41.9 in October. Now September’s employment stagnation seems like nirvana.

Is U.S. manufacturing signaling a recession? - Nov. 2, 2015: Demand has cooled as the global economy slows down, especially in China. What happens in manufacturing is often seen as a leading indicator of U.S. recessions. It's an alarming sign when it starts to look queasy. On Monday, the ISM Manufacturing Index -- the official thermometer of the U.S. manufacturing sector since 1915 -- declined for a fourth straight month. It came in with a reading of 50.1. That's just above the red flag zone. Anything below 50 would signal a manufacturing contraction. The hit to manufacturing is due to three reasons:

  • 1. The dramatic plunge in oil prices
  • 2. The sluggish global economy
  • 3. The strong U.S. dollar

None of those factors is likely to change soon. Oil and gas prices are expected to stay low as the world remains flooded with oil. Similarly, the U.S. dollar will probably remain strong, making American goods more expensive relative to European and Asian products.

ISM Non-Manufacturing: October Growth at Faster Rate - Today the Institute for Supply Management published its latest Non-Manufacturing Report. The headline NMI Composite Index is at 59.1 percent, up 2.2 percent from last month's 56.9 percent. Today's number came in above the forecast of 56.5 percent. Here is the report summary: "The NMI® registered 59.1 percent in October, 2.2 percentage points higher than the September reading of 56.9 percent. This represents continued growth in the non-manufacturing sector at a faster rate. The Non-Manufacturing Business Activity Index increased to 63 percent, which is 2.8 percentage points higher than the September reading of 60.2 percent, reflecting growth for the 75th consecutive month at a faster rate. The New Orders Index registered 62 percent, 5.3 percentage points higher than the reading of 56.7 percent in September. The Employment Index increased 0.9 percentage point to 59.2 percent from the September reading of 58.3 percent and indicates growth for the 20th consecutive month. The Prices Index increased 0.7 percentage point from the September reading of 48.4 percent to 49.1 percent, indicating prices decreased in October for the second consecutive month. According to the NMI®, 14 non-manufacturing industries reported growth in October. After the slight cooling off in September, the non-manufacturing sector reflected growth across most of the indexes. Respondents remain mostly positive about business conditions and the overall economy." Unlike its much older kin, the ISM Manufacturing Series, there is relatively little history for ISM's Non-Manufacturing data, especially for the headline Composite Index, which dates from 2008. The chart below shows Non-Manufacturing Composite. We have only a single recession to gauge is behavior as a business cycle indicator.

ISM Non-Manufacturing Index increased to 59.1% in October -- The October ISM Non-manufacturing index was at 59.1%, up from 56.9% in September. The employment index increased in October to 59.2%, up from 58.3% in September. Note: Above 50 indicates expansion, below 50 contraction.  From the Institute for Supply Management: October 2015 Non-Manufacturing ISM Report On Business®  "The NMI® registered 59.1 percent in October, 2.2 percentage points higher than the September reading of 56.9 percent. This represents continued growth in the non-manufacturing sector at a faster rate. The Non-Manufacturing Business Activity Index increased to 63 percent, which is 2.8 percentage points higher than the September reading of 60.2 percent, reflecting growth for the 75th consecutive month at a faster rate. The New Orders Index registered 62 percent, 5.3 percentage points higher than the reading of 56.7 percent in September. The Employment Index increased 0.9 percentage point to 59.2 percent from the September reading of 58.3 percent and indicates growth for the 20th consecutive month. The Prices Index increased 0.7 percentage point from the September reading of 48.4 percent to 49.1 percent, indicating prices decreased in October for the second consecutive month. According to the NMI®, 14 non-manufacturing industries reported growth in October. After the slight cooling off in September, the non-manufacturing sector reflected growth across most of the indexes. Respondents remain mostly positive about business conditions and the overall economy." This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index. This was well above the consensus forecast of 56.7% and suggests faster expansion in October than in September.  A strong report.

US Services Economy Weakest Since January As New Orders, Employment Tumble (But ISM Surges) -- Following the "baffle 'em with bullshit" beats and misses, improvements and deteriorations in China's Services and Manufacturing PMIs, this morning we round out the US data. After US Manufacturing rose (Markit PMI) and dropped (ISM), US Services PMI dropped to 54.8 and has not been lower since January (despite modestly beating the preliminary print) amid theweakest new order volume since January and poorest employment growth in 8 months. As Markit warns, "the survey data also reinforce strong arguments – notably a continued absence of inflationary pressures – that there is no rush to tighten policy." But then, just to top off all the idiocy, ISM Services surges from 56.9 to 59.1, smashing expectations confirming the "baffle 'em with bullshit" meme.

Weekly Initial Unemployment Claims increased to 276,000 -- The DOL reportedIn the week ending October 31, the advance figure for seasonally adjusted initial claims was 276,000, an increase of 16,000 from the previous week's unrevised level of 260,000. The 4-week moving average was 262,750, an increase of 3,500 from the previous week's unrevised average of 259,250.  There were no special factors impacting this week's initial claims.  The previous week was unrevised at 260,000. The following graph shows the 4-week moving average of weekly claims since 1971.

Challenger Job-Cut Report November 5, 2015: Layoff announcements fell in October to 50,504 vs September's 58,877 and vs the third-quarter monthly average of 68,586. October's announcements were concentrated in the retail and energy sectors, the latter being hurt of course by low oil prices. Challenger estimates that just a little more than 1/4 of October's announcements were tied to oil prices. Definition This monthly report counts and categorizes announcements of corporate layoffs based on mass layoff data from state departments of labor. The job-cut report must be analyzed with caution. It doesn't distinguish between layoffs scheduled for the short-term or the long term, or whether job cuts are handled through attrition or actual layoffs. Also, the job-cut report does not include jobs eliminated in small batches over a longer time period. Unlike most economic data, this series is not adjusted for seasonal variation

Gallup U.S. Job Creation Index November 4, 2015: Gallup's U.S. Job Creation Index averaged plus 32 in October, the sixth month in a row in which the index has held at this level. This is the highest index score since Gallup began measuring employees' perceptions of job creation at their workplaces in 2008. When Gallup began measuring job creation in January 2008, the index measured a healthy plus 26. But it quickly fell, including substantial drops in the fourth quarter of 2008 after the start of the financial crisis. The index hit a nadir of minus 5 in early 2009, and has slowly rebounded since. In October, 43 percent of workers said their employer was hiring workers and expanding the size of its workforce, and 11 percent said their employer was letting people go and reducing the size of its workforce, resulting in the index score of plus 32. Forty percent of workers say their employer is "not changing" the size of its workforce. These percentages have been steady for the last several months. Since April, a higher percentage of Americans have said their employer is "hiring" than have said the size of their workforce is "not changing." No regions had significant changes in perceptions of hiring in October compared with September. Net hiring continues to be lowest in the East, at plus 28, as has generally been the case since 2013. Hiring perceptions were similar in the Midwest (plus 34), South (plus 33) and West (plus 33). Although steady between September and October, hiring in the Midwest has dropped from plus 36 in August, which tied the highest score recorded for any region since Gallup began tracking this metric. Hiring perceptions were steady in both the private sector and among government workers. Net job creation measured plus 34 among nongovernment workers, where the majority of the country is employed, and plus 27 among government workers.

ADP: Private Employment increased 182,000 in October --  From ADP: Private sector employment increased by 182,000 jobs from September to October according to the October ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis. ... Goods-producing employment rose by 24,000 jobs in October, representing the best month in this sector since January of this year. The construction industry added 35,000 jobs in October, roughly matching September’s gain. Meanwhile, manufacturing remained in negative territory losing 2,000 jobs in October after shrinking by 17,000 in September. Service-providing employment rose by 158,000 jobs in October, down from a downwardly revised 182,000 in September. ... Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth as measured by the ADP Research Institute is not slowing meaningfully in contrast with the recent slowdown in the government’s data. The economy is creating close to 200,000 jobs per month. Job gains are broad based with energy and manufacturing alone subtracting from the top line. Small businesses, in particular, are contributing to the labor market’s solid performance.” This was close to the consensus forecast for 185,000 private sector jobs added in the ADP report.

ADP Employment Slows Further; Services Job Growth Weakens As Manufacturing Jobs Drop By 2,000 -- Having relatively disappointed all year, compared to 2014's high levels, ADP for October printed 182k (practically in with expectations of 180k and below September's revised lower 190k) - the lowest since July. Following September's biggest manufacturing job losses since Jan 2010, October saw further losses (-2k) and Services job growth slowed as small business gains dominated large business (which ADP reports facing strong dollar challenges). December rate hike odds were 52.0% before ADP with no significant change yet. Zoomed in: Compared to NFP: And by industry: Change in Total Nonfarm Private Employment by Company Size But manufacturing lost jobs again (charts: ADP) A glass-half-full Mark Zandi, chief economist of Moody’s Analytics, said: “Job growth as measured by the ADP Research Institute is not slowing meaningfully in contrast with the recent slowdown in the government’s data. The economy is creating close to 200,000 jobs per month. Job gains are broad based with energy and manufacturing alone subtracting from the top line. Small businesses, in particular, are contributing to the labor market’s solid performance.”

The ADP Employment Report Defies Recent Economic Trends -- ADP's proprietary private payrolls jobs report gives a monthly gain of 182,000 private sector jobs for October 2015.  Manufacturing jobs though are not good with another -2,000 reported lost.  Construction on the other hand really grew with 35,000 jobs gained.  The goods sector overall had the best month since last January.  By the numbers the overall job growth appears to be defying other economic reports showing a slow down, although economic data typically lags the other bad economic news.  This report does not include government, or public jobs.  The official BLS employment report will be released on Friday.ADP's reports in the service sector alone job gains were 158,000 private sector jobs.  The goods sector gained 24,000 jobs.  Unfortunately ADP does not give a lot of breakdown in their job categories but clearly other areas of the goods producing sector lost jobs.  Professional/business services jobs grew by 13,000.  Trade/transportation/utilities continues to grow with 35,000 jobs.  Financial activities payrolls added 9,000 jobs.  Graphed below are the monthly job gains or losses for the five areas ADP covers, manufacturing (maroon), construction (blue), professional & business (red), trade, transportation & utilities (green) and financial services (orange).  ADP reports payrolls by business size.  Small business, 1 to 49 employees, added 90,000 jobs with establishments having less than 20 employees adding 50,000 of those jobs.  ADP does count businesses with one employee in there figures.  Medium sized business payrolls are defined as 50-499 employees, added 63,000 jobs.  Large business added 29,000 to their payrolls, and companies with 1,000 or more workers added 22,000 of those jobs.  It appears oil prices and a strong dollar (or should we say recent currency manipulation) are impacting large businesses and their global activity whereas small businesses are benefiting from the cheaper energy prices.  Below is the graph of ADP private sector job creation breakdown of large businesses (bright red), median business (blue) and small business (maroon), by the above three levels.  For large business jobs, the scale is on the right of the graph.  Medium and Small businesses' scale is on the left.

October 2015 ADP Job Growth at 182,000 - At Consensus Expectations: ADP reported non-farm private jobs growth at 182,000. The rolling averages of year-over-year jobs growth rate remains strong but the rate of growth continues in a downtrend.

  • The market expected 140,000 to 230,000 (consensus 185,000) versus the 182,000 reported. These numbers are all seasonally adjusted;
  • In Econintersect's October 2015 economic forecast released in late September, we estimated non-farm private payroll growth at 150,000 (unadjusted based on economic potential) and 170,000 (fudged based on current overrun of economic potential);
  • This month, ADP's analysis is that small and medium sized business created 84 % of all jobs;
  • Manufacturing jobs contracted by 2,000;
  • 86% of the jobs growth came from the service sector;
  • September report (last month), which reported job gains of 200,000 was revised down to 190,000;
  • The three month rolling average of year-over-year job growth rate has been slowing declining since February 2015 - it is now 2.16% (down from 2.20% last month)

ADP changed their methodology starting with their October 2012 report, and ADP's real time estimates are currently worse than the BLS. Per Mark Zandi, chief economist of Moody's Analytics: Job growth as measured by the ADP Research Institute is not slowing meaningfully in contrast with the recent slowdown in the government's data. The economy is creating close to 200,000 jobs per month. Job gains are broad based with energy and manufacturing alone subtracting from the top line. Small businesses, in particular, are contributing to the labor market's solid performance.

ADP: US Employment Rises A Moderate 182k In October -- US companies added 182,000 jobs last month, according to this morning’s Octoberupdate of the ADP Employment Report. The gain is in line with expectations and reflects a moderate increase that suggests that the US economy continued to expand at a stable if somewhat diminished rate compared with recent history. But while today’s release implies that US business cycle risk remained low in October, there’s a worrisome trend to consider for the near-term future: the ongoing deceleration in the year-over-year growth rate.  Let’s recognize right off that the 2.11% annual gain through last month in the ADP numbers is a healthy advance… if it continues. The concern at this point, particularly in light of mixed economic numbers in recent months generally, is the slight but persistent slide in the year-over-year increase. Downside momentum is still soft on this front from month to month, but the cumulative effect is starting to take a toll. Private-sector jobs increased 2.11% in October vs. the year-earlier level, the slowest rise since March 2014. The question is whether the rate will continue to slump in the months ahead? Recent history suggests as much, which raises the possibility that growth will remain slow for the US in the near term. That’s the current forecast via the Atlanta Fed’s GDPNow model, which projects fourth-quarter growth at a tepid 1.9% rate (seasonally adjusted annual rate) as of Nov. 2. In other words, the economy doesn’t look set to accelerate much beyond Q3’s weak 1.5% GDP rise at this point.

U.S. Unemployment Rate Falls to 5 Percent: (Reuters) - U.S. job growth surged in October after two straight months of tepid gains, with the unemployment rate hitting a 7-1/2-year low in a show of domestic strength that makes it almost likely the Federal Reserve will hike interest rates in December. Nonfarm payrolls increased 271,000 last month, the largest rise since December 2014, the Labor Department said on Friday. In addition, average hourly earnings increased 9 cents last month. The solid gains added to robust automobile sales in painting an upbeat picture of the economy at the start of the fourth quarter. The unemployment rate fell to 5.0 percent, the lowest level since April 2008, from 5.1 percent the prior month. The jobless rate is now at a level many Fed officials see as consistent with full employment.  Payrolls data for August and September were revised to show 12,000 more jobs created than previously reported. With speeches from several Fed officials, including Chair Janet Yellen, suggesting a low bar for a December rate increase, economists say monthly job gains above 150,000 in October and November would be sufficient for the central bank to lift benchmark overnight borrowing costs from near zero. Minutes from the Fed's Oct. 27-28 meeting and subsequent comments from Yellen have firmly put a rate hike on the table at the central bank's Dec. 15-16 policy meeting.

October Employment Report: 271,000 Jobs, 5.0% Unemployment Rate  -- From the BLS:  Total nonfarm payroll employment increased by 271,000 in October, and the unemployment rate was essentially unchanged at 5.0 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, retail trade, food services and drinking places, and construction. .. The change in total nonfarm payroll employment for August was revised from +136,000 to +153,000, and the change for September was revised from +142,000 to +137,000. With these revisions, employment gains in August and September combined were 12,000 more than previously reported. ...In October, average hourly earnings for all employees on private nonfarm payrolls rose by 9 cents to $25.20, following little change in September (+1 cent). Hourly earnings have risen by 2.5 percent over the year. The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes). Total payrolls increased by 271 thousand in October (private payrolls increased 268 thousand). Payrolls for August and September were revised up by a combined 12 thousand. This graph shows the year-over-year change in total non-farm employment since 1968. In October, the year-over-year change was 2.75 million jobs. That is a solid year-over-year gain. The third graph shows the employment population ratio and the participation rate. The Labor Force Participation Rate was unchanged in October at 62.4%. This is the percentage of the working age population in the labor force. A large portion of the recent decline in the participation rate is due to demographics. The Employment-Population ratio increased to 59.3% (black line).

October Jobs Report – The Numbers - WSJ: Friday’s job report appears to be the best so far for 2015, marked by brisk hiring, falling unemployment and rising wages. Here are the highlights.  U.S. employers added a seasonally adjusted 271,000 jobs in October, well above economists’ expectations for a gain of 183,000 and the healthiest number so far this year. Nonfarm payrolls for the prior two months were revised up by a combined 12,000–employers added 153,000 jobs in August and 137,000 in September. So far this year, job gains have averaged 206,000 per month, compared with 260,000 in 2014. The latest stretch of job gains at 61 consecutive months marks a record for any expansion. The unemployment rate fell to 5% in October as more people found jobs. The headline number has fallen sharply from a 10% peak during the recession and is now at the lowest level since April 2008. A broader measure–which includes people who aren’t working or looking for work, and people who want a full-time job but can only find a part-time position–dropped to 9.8%, the lowest since May 2008 but still above levels typical during this phase of an expansion. One reason the unemployment rate has fallen over the past few years: Americans are dropping out of the workforce. But that wasn’t the case in October. The labor-force participation rate held steady at 62.4% last month as more people joined the labor force and found jobs. Still, participation remains at levels last seen in the 1970s. The low level is in part because baby boomers are retiring but also because discouraged workers have given up on their job searches. The trend started to emerge in the early 2000s but accelerated during the recession. At $25.20, average hourly earnings for private-sector workers were up 2.5% in October from a year earlier. That’s nicely above the 2% average throughout the latest economic expansion, though still below levels seen before the recession. With a tightening labor market, many economists are looking for signs of stronger pay gains, though those have been slow to materialize. It’s not clear if October’s figures were another blip or the start of a trend.  Cheap oil is ravaging the U.S. mining industry, a sector that includes oil and gas. Employment in mining shrank by 5,000 in October and has shed 109,000 jobs since peaking in December 2014.

Strong Payroll Bounce +271,000; December Rate Hike Likely  -- Following last month's downside shock, comes this month's big surprise to the upside. The Bloomberg Consensus estimate was 190,000 jobs and the headline total was 271,000. The unemployment rate declined to 5.0%, the lowest since April 2008. A rate hike in December is likely. BLS Jobs Statistics at a Glance

  • Nonfarm Payroll: +271,000 - Establishment Survey
  • Employment: +320,000 - Household Survey
  • Unemployment: -7,000 - Household Survey
  • Involuntary Part-Time Work: -235,000 - Household Survey
  • Voluntary Part-Time Work: +198,000 - Household Survey
  • Baseline Unemployment Rate: -0.1 at 5.0% - Household Survey
  • U-6 unemployment: -0.2 to 9.8% - Household Survey
  • Civilian Non-institutional Population: +216,000
  • Civilian Labor Force: +313,000 - Household Survey
  • Not in Labor Force: -97,000 - Household Survey
  • Participation Rate: Unchanged at 62.4 - Household Survey (a 40-year low)
Please consider the Bureau of Labor Statistics (BLS) Current Employment Report. Total nonfarm payroll employment increased by 271,000 in October, and the unemployment rate was essentially unchanged at 5.0 percent. Job gains occurred in professional and business services, health care, retail trade, food services and drinking places, and construction.

October Jobs Soar To 271K, Smash Expectations, Unemployment Rate 5.0%, Hourly Earnings Spike - If there was any doubt if the Fed would hike rates in December, it is gone now: October payrolls soared by 271K, smashing not only consensus of 184K, but the highest expected print. This was the highest monthly print since December 2014 when the gain was 329K and pushed the YTD average monthly gain from 199K to 206K. The household survey likewise posted a solid gain of 320K, with the number of employed rising from 148,800 to 149,120, another post-crisis high. The unemployment rate dropped from 5.1% to 5.0%, the lowest since April 2008, and most importantly, the average hourly earnings rose from 0.2% to 0.4%, the highest hourly earnings jump since 2009! The two charts which the Fed will be most focused on are the following, showing both average hourly and weekly earnings rebounded solidly from recent week levels. The breakdown from the report: Total nonfarm payroll employment increased by 271,000 in October. Over the prior 12 months, employment growth had averaged 230,000 per month. In October, job gains occurred in professional and business services, health care, retail trade, food services and drinking places, and construction. (See table B-1.) Employment in professional and business services increased by 78,000 in October, compared with an average gain of 52,000 per month over the prior 12 months. In October, job gains occurred in administrative and support services (+46,000), computer systems design and related services (+10,000), and architectural and engineering services (+8,000). Health care added 45,000 jobs in October. Within the industry, employment growth continued in ambulatory health care services (+27,000) and in hospitals (+18,000). Over the past year, health care has added 495,000 jobs. Employment in retail trade rose by 44,000 in October, compared with an average monthly gain of 25,000 over the prior 12 months. In October, job gains occurred in clothing and accessories stores (+20,000), general merchandise stores (+11,000), and automobile dealers (+6,000). Food services and drinking places added 42,000 jobs in October. Over the year, the industry has added 368,000 jobs.

BLS Jobs Situation Was Very Good in October 2015.: The BLS job situation headlines from the establishment survey was very good. The unadjusted data shows growth is at the highest levels this century. The rate of growth for employment dramatically accelerated this month (red line on graph below).

  • The unadjusted jobs added month-over-month was well above normal for times of economic expansion.
  • Economic intuitive sectors of employment were strong.
  • This month's report internals (comparing household to establishment data sets) was fairly consistent with the household survey showing seasonally adjusted employment growing 320,000 vs the headline establishment number of growing 271,000. The point here is that part of the headlines are from the household survey (such as the unemployment rate) and part is from the establishment survey (job growth). From a survey control point of view - the common element is jobs growth - and if they do not match, your confidence in either survey is diminished. [note that the household survey includes ALL jobs growth, not just non-farm).
  • The household survey added 313,000 people to the workforce.
  • BLS reported: 271K (non-farm) and 268K (non-farm private). Unemployment down 0.1 to 5.0%.
  • ADP reported: 182K (non-farm private)
  • In Econintersect's October 2015 economic forecast released in late September, we estimated non-farm private payroll growth at 150,000 (unadjusted based on economic potential) and 170,000 (fudged based on current overrun of economic potential);

October Jobs Growth Pushes Unemployment Rate Down to 5.0 Percent, by Dean Baker --The Labor Department reported the economy added 271,000 jobs in October, with all but 3,000 of these jobs in the private sector. This is a sharp bounce back from the prior two months when private sector job growth averaged just 137,000. This job growth was sufficient to push the unemployment rate down slightly to 5.0 percent. While the employment-to-population ratio edged up slightly to 59.3 percent, it is still below the 59.4 percent high for the recovery. The labor force participation rate is actually down 0.4 percentage points from its year-ago level. The job growth was led by health care (44,900), retail (43,800), restaurants (42,000), construction (31,000), business and technical services (26,900), and temp help (24,500). The rise in health care employment is in line with the 41,000 average for the last year. The strong retail growth follows two months in which reported growth averaged less than 5,000. The restaurant number is slightly better than recent growth rates. On the negative side, mining shed another 4,500 jobs due to continuing fallout from the plunge in oil prices. Employment in the sector is down by 12.6 percent from its year-ago level. Manufacturing employment was flat in October, after having dropped by 28,000 over the prior two months. Average weekly hours were unchanged at 34.5, although they edged up by 0.1 hours for production workers. The average hourly wage jumped 9 cents, but this was primarily a sampling error. The average hourly wage was reported as rising just 1 cent last month. Over the last three months, wages have risen at a 2.70 percent annual rate, a slight increase from the 2.48 percent rate over the last year. For production and non-supervisory workers, wages are up just 2.22 percent over the last year.

This is the real unemployment rate - Ed Lazear - The government announced Friday that October's unemployment rate stood at 5 percent, lower than it has been for two-thirds of the time since 2000. Many economists view rates around this level as full employment. Despite this, wages haven't been growing. The general sense is that the labor market is far from tight, and economic growth is weak. For these reasons, the Federal Reserve has resisted raising interest rates (though it may begin doing so in December).  Why the disconnect? As many fear, the unemployment rate may not be indicative of labor market strength. Indeed, other indicators of labor market activity, especially hiring, imply that the unemployment rate number comparable to past rates is actually around 6.3 percent. There are two measures of the employment situation. The most widely reported is the unemployment rate, which is defined as the proportion of the labor force that is without a job. To be in the labor force, a person must have a job or be actively seeking work. The other measure, which is generally preferred by many who study labor markets, is the employment rate, which is defined as the proportion of the working-age population (that is, 16 and above) that has a job. The employment rate is the bottom line because it measures the number actually working compared to the number who could work. But to the extent that failure to actively seek work is voluntary — for example, reflecting retirement or school attendance — taking that into account as the unemployment rate seems relevant to assessing the strength of the labor market. So which is right — the unemployment rate or the employment rate? If credible, October's unemployment rate of 5 percent would mean that we have essentially recovered from the recession. But Friday's reported employment rate of 59.3 percent signals an economy that is well below capacity. Is the unemployment rate higher than it appears, or is the employment rate too low to reflect the appropriate strength of the labor force?

A Surprising Surge In US Job Growth In October -- US private-sector employment rocketed higher in October, the Labor Departmentreports. Last month’s bigger-than-forecast 268,000 increase is the biggest monthly rise so far in 2015 and dramatically above the soft increases in the previous two months. The gain is strong enough to dispense the first improvement in the annual pace of growth since May. It remains to be seen if the bullish rebound survives future revisions and endures in the months ahead. But for the moment, today’s employment report just gave the Federal Reserve a green light to start rising interest rates. “It’s a shocking number,” John Canally, chief economic strategist at LPL Financial,tells Bloomberg. “People need to prepare for a December rate hike. I’d expect the probability of a December liftoff to go to the low 90[% probability] unless something really bad happens between now and then. There’s no soft spot in the economy, that’s over. Things are tightening all around.” Perhaps, although it’s dangerous to radically revise one’s economic outlook based on one number. Nonetheless, there’s no other way to spin the data du jour as anything less than bullish in no uncertain terms. Not surprisingly, the initial reaction in the bond market is to sell, which of course translates into higher yields. The benchmark 10-year yield at the moment (roughly 9:40 am New York time) is up sharply to 2.32%, the highest level since July. The question is whether today’s hefty improvement in the employment data marks the return of a sustained reacceleration of US growth? But until we learn otherwise in the reports to come, the game has changed and the focus turns to growth and how the markets and economy will fare at what appears to be the start of a higher-interest-rate regime as of next month’s FOMC meeting.

Jobs Report: Full-Time Employment Now Above Where It Was Before the Recession -  October’s jobs report shows that the number of Americans with full-time jobs has finally stabilized above where it was before the recession, one of the last employment indicators to hit that mark. More than 122 million Americans were employed in full-time positions at the end of October, above the 121.6 million full-time workers in December 2007, when the recession officially started. The number of full-time workers first crossed the prerecession level in August. The number tends to be volatile from one month to the next, and it dropped in September. But looking at October’s latest data with a three-month moving average shows that the full-time employment measure has now stabilized above the level before the recession. The data show that nearly all of the net increase in jobs since June 2009, when the recession officially ended, has come from full-time positions, not part-time. Through October, there were nearly nine million more full-time jobs than when the recession ended, while the number of part-time jobs is actually down by around 300,000. The numbers strongly undercut the idea that all of the jobs added during the recent expansion have been part-time jobs. That was true for the first two and a half years, but it hasn’t been true for the last four years. But wait a minute, you say. Don’t these back-of-the-envelope calculations fail to account for the growth of the U.S. population over that time? Yes, they do. The share of Americans between 25 and 54 years old who were employed in October stood at roughly 77%.

The October Jobs Report in 12 Charts - The economy added more jobs in October than any other month this year and the unemployment rate ticked down to 5%, the lowest reading since April 2008. The monthly jobs report provides a rich snapshot of the state of labor markets. Here’s a look at the latest report. With 271,000 jobs added in October, plus revisions that showed a net gain of 12,000 jobs than had been previously estimated for August and September, the U.S. economy has averaged 206,000 jobs a month this year. That is the second-highest level since 1999, surpassed only by the 236,000 average jobs added through the first 10 months of last year. The hiring increase brings to 2.8 million the number of jobs added over the past year. That’s about the same as the level of a year earlier, but down from a high of 3.2 million in February. The hiring gains pushed the unemployment rate to 5%. A broader gauge of unemployment that includes workers who have part-time jobs but would like full-time work fell below 10% for the first time since the spring of 2008. Average hourly earnings rose 2.5% from a year earlier, the largest annual gain since the middle of 2009. The share of the population either working or actively looking for work, known as the labor-force participation rate, was unchanged. The employment-to-population ratio climbed to 59.3% from 59.2%. Among workers in their so-called prime working years, participation and employment rates are much higher. The share of people ages 25 to 54 in the labor force climbed to 80.7% from 80.6%. The employment-to-population ratio was unchanged. After declining in each of the last two months, employment in private goods-producing sectors rebounded in October. Public-sector hiring has been relatively flat. The median spell of joblessness edged downward to 11.2 weeks, the shortest since the recession. The level of unemployment for those who’ve been looking for work for six or more months is slightly above the precession level and has steadily marched lower over the past four years.As the recovery has progressed, fewer of the unemployed lost their jobs. A growing share of the unemployed are new entrants to the job market or people returning after having left, such as for school or to care for family members. A wide discrepancy between workers with different education levels has persisted for decades, continuing through the recession and recovery. The unemployment rate for people of both genders and all races has continued to come down. During the recession, men experienced higher unemployment rates, but these gaps are narrowing.

Labor Participation Rate Remains At 37 Year Low As 94.5 Million Remains Outside The Labor Force - In another sign that the labor market slack, at least from the Fed's perspective, is now reaching a peak, the Household survey reported that while the civilian labor force rose by over 300K in October, the number of people not in the labor force actually declined by 97K to 94.5MM (as those employed rose by 320K), following a surge of over half a million in September. Despite this headline improvement, however, the participation rate remained at 62.4%, same as the prior month, and at a level last seen in 1977. Elsewhere, the civilian employment to population ratio also remained rather downbeat at 59.3%, a modest increase from last month's 59.2% and virtually unchanged from the 59.2% also reported one year ago. Finally, while there are many explanations why the participation rate remains so low (and continues to decline) most notably from the Fed who said that people "just don't want a job", the reality is that 94.5 million Americans either no longer have an interest or desire to look for a job.

Comments: Strong October Employment Report, Seasonal Retail Hiring at Record Level  - This was a strong employment report with 271,000 jobs added, and employment gains for August and September combined were revised up slightly. Also wages increased, from the BLS: "In October, average hourly earnings for all employees on private nonfarm payrolls rose by 9 cents to $25.20, following little change in September (+1 cent). Hourly earnings have risen by 2.5 percent over the year." :  Total employment is now 4.3 million above the previous peak.  Total employment is up 13.0 million from the employment recession low. Private payroll employment increased 268,000 from August to September, and private employment is now 4.7 million above the previous peak. Private employment is up 13.5 million from the recession low. In October, the year-over-year change was 2.81 million jobs. According to the BLS employment report, retailers hired seasonal workers in October at the highest level since 1999.   Typically retail companies start hiring for the holiday season in October, and really increase hiring in November. Here is a graph that shows the historical net retail jobs added for October, November and December by year. Retailers hired 214.5 thousand workers (NSA) net in October. This is the all time record.  Note: this is NSA (Not Seasonally Adjusted). This suggests retailers are optimistic about the holiday season.  Note: There is a decent correlation between October seasonal retail hiring and holiday retail sales. Since the overall participation rate declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old. In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle. The 25 to 54 participation rate increased in October to 80.7%, and the 25 to 54 employment population ratio was unchanged at 77.2%.  The participation rate for this group might increase a little more (or at least stabilize for a couple of years) - although the participation rate has been trending down for this group since the late '90s.

No High School Diploma? The Job Market’s Looking Up - Things are looking up for the group of Americans who fared worst during the economic crisis, suggesting a shortage of skilled workers might be sending employers deeper into the labor pool. The unemployment rate for those at least 25 years old without a high school diploma fell to 7.4% in October—a sharp drop from 7.9% in September and a year earlier, the Labor Department reported Friday. That is the best rate since February 2008.In 2014, the unemployment rate averaged for high-school dropouts stood at 9%, compared with a 6% unemployment rate for high-school graduates who didn’t attend college and a 3.2% rate for Americans with at least a bachelor’s degree. The participation rate for that segment of the population—the number of people working or actively looking for work–has been far lower than for those with higher levels of education, but there has been improvement. In the third quarter, the participation rate for those over 25 with less than a high school diploma rose to 45.5%, up from 40% in the second quarter and from 44.8% in last year’s third quarter. This suggests the improvement in the jobless rate isn’t just because more people are giving up their job searches.   The retail sector tends to help provide a bump in hiring ahead of the holidays, and Inc., for its part, said last month that it planned to hire 100,000 workers for the holidays, up from 80,000 last year. The government said retail trade employment grew by 44,000 in October, which accounted for 16% of the total increase in nonfarm payrolls and was up from an average monthly gain of 25,000 over the past 12 months. A chunk of that increase came from clothing and accessory stores.

America’s labour market is not working - Martin Wolf -- In 2014, 12 per cent — close to one in eight — of US men between the ages of 25 and 54 were neither in work nor looking for it. This was very close to the Italian ratio and far higher than in other members of the group of seven leading high-income countries: in the UK, it was 8 per cent; in Germany and France 7 per cent; and in Japan a mere 4 per cent. In the same year, the proportion of US prime-age women neither in work nor looking for it was 26 per cent, much the same as in Japan and less only than Italy’s. US labour market performance was strikingly poor for the men and women whose responsibilities should make earning a good income vital. So what is going on? (See charts.) The debate in the US has focused on the post-crisis decline in participation rates for those over 16. These fell from 65.7 per cent at the start of 2009 to 62.8 per cent in July 2015. According to the Council of Economic Advisers, 1.6 percentage points of this decline was due to ageing and 0.3 percentage points due to (diminishing) cyclical effects. This leaves about a percentage point unexplained. Princeton’s Alan Krueger, former chairman of the council, argues that many of the long-term unemployed have given up looking for work. In this way, prolonged cyclical unemployment causes permanent shrinkage of the labour force. Thus unemployment rates might fall for two opposite reasons: the welcome one would be that people find jobs; the unwelcome one would be that they abandon the search for them. Happily, in the US, the former has outweighed the latter since the crisis. The overall unemployment rate (on an internationally comparable basis) has fallen by 5 percentage points since its 2009 peak of 10 per cent. In all, the proportion of the fall in the unemployment rate because of lower participation cannot be more than a quarter. Relative US unemployment performance has also been quite good: in September 2015 the rate was much the same as the UK’s, and a little above Germany’s and Japan’s, but far below the eurozone’s 10.8 per cent. US cyclical unemployment performance has at least been decent by the standards of its peers, then. Yet as the 2015 Economic Report of the President notes, the UK experienced no decline in labour-force participation after the Great Recession, despite similar ageing trends to those in the US. Even on a cyclical basis, the decline in participation in the US is a concern. It is, however, the longer-term trends that must be most worrying. This is particularly true for the prime-aged adults.

Martin Wolf on the Low Labor Participation as the Result of the Crapification of Jobs -  Yves Smith - The Financial Times’ Martin Wolf today pointed to the flagging US labor participation rate as a sign that all is not well with the US economy: In 2014, 12 per cent — close to one in eight — of US men between the ages of 25 and 54 were neither in work nor looking for it. According to the Organisation for Economic Co-operation and Development, US minimum wages were 20 per cent below UK levels in real terms in 2014 and far further below the generous levels in France. Moreover, the US still has the OECD’s least-regulated labour market… In the case of prime-aged women, the ab­sence of affordable childcare would seem a plausible explanation. Society has apparently decided it does not want to pay to keep women in the workforce. Another possible explanation is that labour market flexibility allows emp­loyers to substitute the young and the old for prime-aged workers. The US has relatively high participation rates for people aged 15 to 24. It has also experienced a big rise in the participation rate for people over 65, from 13 per cent in 2000 to 19 per cent in 2014. The latter puts it behind only Japan in the G7. Low minimum wages and high transport costs for workers living in sprawling US conurbations might also make low-wage work unprofitable. Despite Wolf’s bloodless language, he clearly regards the issue as serious. He describes this withdrawal from work as a “dysfunction” and says it demands not just study but action as well. The underlying pathology is not hard to describe: employers (enabled by the Fed which has since the 1980s been only too wiling to provide for higher levels of unemployment so as to curb labor bargaining power to keep inflation tame) have succeeded in eliminating labor bargaining power. That program has been aided and abetted by the popularization of libertarian ideologies, which encourage many to see themselves as more in charge of their destiny than they are and thus see success and failure as the result of talent and work, as opposed to circumstance. For instance, one group that could have disproportionate power if they chose to use it, tech workers (particularly systems administrators and key support personnel in large systems deployments) have never seemed inclined to find a way to use it.

Can we get the long-term unemployed back to work? - The debate about the Phillips curve and the amount of “slack” in the U.S. labor market has to do with the prospects of long-term unemployed workers. In the wake of the Great Recession of 2007-2009, the share of unemployed workers who were unemployed for 27 weeks or longer hit historical highs. In fact, the share is higher now than it was at its previous peak in June 1983. The question is whether the long-term unemployed are locked out of the labor market or if they can return to work in the short term.  Princeton economist Alan Krueger has argued that the long-term unemployed really shouldn’t be counted as part of labor market slack as they don’t influence wage growth. Stephen Williamson, Vice President at the Federal Reserve of St. Louis, presents historical data that show the long-term unemployed being more likely to drop out of the labor force. A National Bureau of Economic Research working paper released this week, however, presents evidence that we might be able to get long-term unemployed workers back into employment more readily than many have assumed.  With the high levels of long-term unemployment staying elevated as the labor market recovered from the Great Recession, many economists and commenters worried that these workers would be unable to find work again. Their story was that employers would discriminate against long-term unemployed workers and instead hire workers who had been unemployed for a shorter time or already had a job. Several papers backed up this concern, Ghayad tried to figure out how much discrimination the long-term unemployed faced. His answer: quite a bit. Other research found similar results.  But the new working paper released this week finds some contradictory evidence.

Exploring Differences in Unemployment Risk –  NY Fed - The risk of becoming unemployed varies substantially across different groups within the labor market. Although the “headline” unemployment rate draws the most attention from the news media and policymakers, there is rich heterogeneity underlying this overall measure. We delve into the data to describe how unemployment and job loss risk vary with demographics (gender, age, and race), skill (educational attainment), and job characteristics (occupation and earnings).  Differences in unemployment across these groups are long-standing. The table below shows the average unemployment rate for various demographic, skill, and occupation groups in the labor force since 1976. Workers who are younger or less educated, workers in manual occupations, and workers who identify as Black or Hispanic experienced significantly higher average unemployment rates than college educated and older workers. To better understand the impact of unemployment on households, it is important to establish whether these differences are related to differences in the incidence of unemployment or the duration of unemployment. Frequent but short spells of unemployment might have different consequences for well-being than less frequent but longer spells of unemployment. To examine this issue, we plot in the chart below the average job-loss rates and unemployment durations across individuals within different groups of the labor force over the same period.

Study: Interim Jobs Set Workers Back - US News:  Good jobs come to those who wait, according to a recent study published by the National Bureau of Economic Research.  The study – conducted by a team of researchers from Arizona State University, Princeton University and the University of California-Los Angeles – set out with the goal of assessing how employers respond to equally qualified job applicants who vary in age and have been unemployed for different lengths of time.   It ultimately found that middle-aged workers' duration of unemployment didn't meaningfully impact whether they would receive a call from a recruiter after applying for a job. But individuals who had already taken jobs for which they were overqualified were actually less likely to get a call than those without a job at all.  The researchers sent out more than 12,000 fake resumes to companies advertising white-collar office openings for positions like executive assistant, receptionist, secretary and office associate. Because these jobs are disproportionately occupied by female employees, all fake resumes were filed under a woman's name. Each fake applicant was also given a four-year bachelor's degree from "a non-elite public university or college with a current admission rate higher than 65 percent," according to the study. Resumes were given minor tweaks to adjust for age, experience and duration of unemployment.

The Mystery of the Vanishing Pay Raise -  AMID the global economic turmoil and seesawing markets, millions of Americans have one overriding question: When will my pay increase arrive? The nation’s unemployment rate has fallen substantially since the end of the Great Recession, sliding to 5.1 percent from 10 percent in 2009, but wages haven’t accelerated upward, as many had expected. In fact, the labor market is a lot softer than a 5.1 percent jobless rate would indicate. For one thing, the percentage of Americans who are working has fallen considerably since the recession began. This disappearance of several million workers — as labor force dropouts they are not factored into the jobless rate — has meant continued labor market weakness, which goes far to explain why wage increases remain so elusive. End of story, many economists say. But work force experts assert that economists ignore many other factors that help explain America’s stubborn wage stagnation. Outsourcing, offshoring and imports exert a steady downward tug on wages. Labor unions have lost considerable muscle. Many employers have embraced pay-for-performance policies that often mean nice bonuses for the few instead of across-the-board raises for the many.In recent years, wage increases, before factoring in inflation, have averaged about 2 percent annually. But real, after-inflation wages have remained dismayingly flat since 2009, according to the Bureau of Labor Statistics, even though real wages did bump up last fall when the drop in oil prices pulled down inflation. (In a minority view, the Heritage Foundation and some other conservative groups say the bureau has underestimated wage increases.)

Shift to Benefits From Pay Helps Explain Sluggish Wage Growth - WSJ: U.S. employers, slow to reward workers with higher pay, have been quicker in recent years to offer signing bonuses, more paid time off and other perks. The move toward benefits over pay provides a few clues that help explain a chief mystery of the current expansion: the unusually sluggish growth in wages. Some of the move toward benefits reflects a workforce that puts a high value on flexibility, health insurance, time off and other things besides wages. But the shift also highlights the fragility of an expansion in which employers remain hesitant to commit to higher wages and are turning instead to more revocable perks. That could have broader repercussions if consumers aren’t able to tap bigger paychecks and boost their spending. The share of worker compensation that comes in the form of wages or salaries has slipped over the past decade, with the decline accelerating since the recession ended. In the second quarter, 31% of total compensation came in the form of benefits such as vacation time, health insurance and bonuses, up from 29% a decade earlier. Companies began offering health insurance to skirt wage controls during World War II. Now they are getting more creative, offering gym memberships, cappuccino machines, free cellphones and dog-friendly workplaces.

Child care workers aren’t paid enough to make ends meet -- Child care workers play an important role in the U.S. economy by allowing parents of young children to pursue employment outside the home and providing children a stimulating and nurturing environment in which to learn and grow.  In recent decades families have increasingly had to rely on child care because spending more time at work has become an economic necessity for many. Over the last 35 years, most American workers have endured stagnant wages—a reality that has led many two-parent households to work significantly longer hours to cover their rising expenses (Mishel et al. 2012). Despite the crucial nature of their work, child care workers’ job quality does not seem to be valued in today’s economy. They are among the country’s lowest-paid workers, and seldom receive job-based benefits such as health insurance and pensions. As with any other industry or occupation, paying decent wages and providing necessary benefits is essential to attract and retain the best workers.  This paper directly examines child care workers’ job quality, including how much they earn, whether they receive benefits on the job, and whether they and their families are able to make ends meet. Key findings include:

  • Child care workers are 95.6 percent female, and are disproportionately workers of color.
  • Child care workers receive very low pay.
  • Child care workers rarely receive job-based benefits.
  • Child care workers have a harder time making ends meet than workers in other occupations.
  • Many preschool and child care workers cannot afford child care for their own children.

Obama To Openly Welcome Criminals As Government Workers -- President Obama has just unleashed a new executive order to remove admission of a criminal history from job applications, or in The White House's words, to reduce potential discrimination against former convicts in the hiring process for federal government employees. As NBC News reports, this is a further step towards what many criminal justice reformers call "ban the box" – the effort to eliminate requirements that job applicants check a box on their applications if they have a criminal record - and continues Obama’s emphasis on assisting criminals who want to re-enter society as part of his continuing agenda items from his "My Brother’s Keeper Task Force." About 60-to-75% of former inmates cannot find work within their first year out of jail, according to the Justice Department, a huge impediment to re-entering society. Research shows the existence of a criminal record can reduce an employer’s interest in applicant by about 50%, and that when white and black applicants both have records, employers are far less likely to call back a black applicant than a white one. As a 2009 re-entry study in New York city found, “the criminal record penalty suffered by white applicants (30%) is roughly half the size of the penalty for blacks with a record (60%).” And so, as NBC News reports, President Obama's executive order is a step towards what many criminal justice reformers call “ban the box” – the effort to eliminate requirements that job applicants check a box on their applications if they have a criminal record.

Ban the box: President Obama’s plan to help ex-prisoners get jobs, explained - Vox: There is no bigger stigma for job seekers than having a criminal record. But it's much harder for an ex-prisoner to stay out of prison if he doesn't have a job. Several states and cities think they've found a way to break that vicious cycle: preventing employers from asking about criminal records in job applications, a policy known as "ban the box." Today President Obama announced his administration will institute "ban the box" for federal agencies — they'll be required to wait until later in the hiring process to check the criminal histories of job applicants. It's something advocates have been asking Obama to do for a long time, and a concrete step toward not just reversing mass incarceration in the future, but also making sure its past victims don't slip through the cracks. But it's also a reminder that fixing discrimination is rarely simple — and that the people who are most victimized by a problem might not be the ones most helped by a solution."Ban the box" (or, as some advocates call it, "fair-chance hiring") doesn't refer to a single law or policy. There are 19 states and more than 100 cities with some form of ban the box — but they take a lot of different shapes.Some ban-the-box policies, like the federal one Obama is announcing, only apply to governments (or in some cases, to governments and contractors); some apply to any employer in the state. Some ban-the-box policies simply delay the point in the process at which an employer can ask about criminal history; others prohibit the employer from finding out anything about an applicant's criminal history until the company is ready to hire him or her.

New Study Says America Is Slowly Getting Less Religious and More Tolerant - A new Pew Research Center survey released Tuesday shows that the US is ever so slightly inching toward godlessness, with the percentage of nonbelievers growing and more young people willing to turn their backs on their parents' religion.   For the second installment of the Religious Landscape Study—the first one was conducted in 2007—Pew called over 35,000 US adults to get a snapshot of religious life in America. The results weren't surprising: This is still an intensely religious country, with 89 percent of adults professing a belief in a deity (it was 92 percent in 2007). The number of believers hasn't dropped, nor have they really become any less observant.   The section of the population that believes with absolute certainty that there is a god, however, has declined from 71 to 63 percent. And the "nones," a demographic of religiously unaffiliated people that's been getting an increasing amount of attention over the past few years, has grown and also become more willing to admit to not believing in a god. Millennials are more likely not to belong to a religion and don't appear to be getting more pious as they age. As a result, the country is getting a bit less godly, though this isn't a result of religious people losing their faith. "As the overall U.S. population has grown, there are now many more nonreligious people than was the case just a few years ago," reports the survey.  Of course, the US is still far more religious than Europe, and Christianity still dominates private and public life in huge swaths of the country—even if there are more self-identified atheists and agnostics out there, they are massively outnumbered.

Matthew 22:39: Far from bolstering generosity, a religious upbringing diminishes it - Economist - In Dr Decety’s version, each child was presented with a collection of 30 attractive stickers and told that he or she could keep ten of them. Once a child had made his selection, the experimenter told him that there was not time to play the game with all the children at the school, but that he could, if he wished, give away some of his ten stickers to a random schoolmate who would not otherwise be able to take part. The child was then given a few minutes to decide whether he wanted to give up some of his stickers—and, if so, how many. The researchers used the number of stickers surrendered as a measure of altruism. The upshot was that the children of non-believers were significantly more generous than those of believers. They gave away an average of 4.1 stickers. Children from a religious background gave away 3.3. And a further analysis of the two largest religious groups (Jews, Buddhists and Hindus were excluded because of their small numbers in the sample), showed no statistical difference between them. Muslim children gave away 3.2 stickers on average, while Christian children gave away 3.3. Moreover, a regression analysis on these groups of children showed that their generosity was inversely correlated with their households’ religiosity. This effect remained regardless of a family’s wealth and status (rich children were more generous than poor ones), a child’s age (older children were more generous than younger ones) or the nationality of the participant. These findings are, however, in marked contrast to parents’ assessments of their own children’s sensitivity to injustice. When asked, religious parents reported their children to be more sensitive than non-believing parents did.

What’s Driving Inequality: CEO Pay or Company Success? - Income inequality has often been attributed to top executives reaping a windfall while their workers’ pay stagnates. As my Capital Account column notes, that story misses something important. There is a growing body of research that finds inequality between firms is more important than inequality within firms at driving the overall pay gap. In other words, the best-paying companies are pulling away from the worst-paying companies. Yet rising executive still plays a role. The question is, what’s the relative contribution? A National Bureau of Economic Research paper caused a stir earlier this year by claiming all of the rise in inequality since 1980 was between firms, not within firms, implying executive pay played no role. The paper looked at a large sample of more than 100 million employees and linked their pay to the average pay within their own firm. They found that while incomes of the highest-paid workers (e.g., those earning more than 90% or 99% of all others) had indeed grown faster than the median, they had not grown faster than those of their co-workers. For example, the employee at the 90th percentile earned 1.69 times as much as his firm’s average wage in 1980, and 1.73 times as much in 2013. An employee at the 99th percentile earned 3.57 times his firm’s average in 1980, and 3.48 times in 2013. From this they concluded that “virtually all of the rising dispersion between workers” was caused by the dispersion between firms, contradicting Thomas Piketty, author of “Capital in the Twenty-First Century,” and others who say it’s due to the top 1% pulling away. Several researchers criticized this finding. Marshall Steinbaum at the Center for Equitable Growth noted that their sampling technique could have missed the growth in earnings of the top 0.001% of all earners, and thus understated its role in inequality, both within firms and overall.

The assumption that less immigration equals less inequality is fundamentally flawed - New research published this week by the Organisation for Economic Cooperation and Development (OECD) shows that rising inequality in Western societies is harming overall economic growth. This inequality problem has been called – in the words of US President Barack Obama – ‘the defining challenge of our time’. Governments scramble to promise citizens they will restore the lost promise of social mobility. But the real question is: how?  If you ask British politicians, one answer lies in restricting immigration. As the May 2015 General Election approaches, fears over immigration look set to remain centre-stage. And although their policy proposals vary, Cameron, Farage, Miliband et al. seem agreed on one fundamental, that mass immigration exacerbates inequality. ‘Ordinary, hard-working people of this country’ do not benefit from mass migration, instead they lose wages, jobs, opportunities that were previously theirs.  It’s a seductive narrative; the success of the anti-immigration United Kingdom Independence Party in the May 2014 European elections was partly a result of a campaign that insisted immigrants keep Britons poor. Yet as my new book The Huddled Masses: Inequality and Immigration shows, this assumption is fatally flawed. There is in fact overwhelming empirical evidence that enabling freedom of movement can play a vital role in combating poverty and opening up opportunity, not just for immigrants and foreigners, but for the poor here too.

Kraft Heinz plans new plant, job losses in Davenport : Business: Kraft Heinz announced Wednesday that it plans to move its operations on Davenport's Rockingham Road to the city's Eastern Iowa Industrial Park as part of a company-wide restructuring that will mean a net loss of 2,600 jobs in North America. Company officials did not say what would happen with employment levels in Davenport at the longtime Oscar Mayer plant. A company estimate in January put the number of workers at the plant at 1,400. But an economic development package that will be voted on Thursday morning by the Iowa Economic Development Authority calls for a minimum of 475 jobs to be retained. State lawmakers who were on a conference call Tuesday with Debi Durham, Iowa's top economic development official, said they weren't given specifics but were told there will be losses here.  Through the use of tax increment financing, the city will contribute an estimated $10 million over 15 years to the project, Davenport Mayor Bill Gluba said after the city council voted on a series of resolutions.

Some Options for Addressing Puerto Rico’s Fiscal Problems -- NY Fed - Puerto Rico’s economic and fiscal challenges have been an important focus of work done here at the New York Fed, resulting in two reports (2012 and 2014), several blog posts and one paper in our Current Issues series in just the last few years. As the Commonwealth’s problems have deepened, the Obama administration and Congress have begun discussing potential approaches to addressing them. In this post, we update our previous estimates of Puerto Rico’s outstanding debt and discuss the effect that various forms of bankruptcy protection might have on the Commonwealth.   As we discussed in detail in our 2014 report (using data from 2012), Puerto Rico’s debt burden is very heavy both in comparison to mainland states, and to advanced and emerging market economies. The latest available data do not change those conclusions. In fact, the Island’s fiscal situation has become even more challenging since we wrote the previous report because the territory has lost normal access to capital markets, even for very short-term funding. Here we update our figures using data contained in a report published by Anne Krueger and two other former International Monetary Fund officials (the Krueger Report) and in Puerto Rico’s Fiscal and Economic Growth Plan (FEGP).   As illustrated in the table below, Puerto Rico's total public sector debt amounted to about $71 billion as of mid-2015, equivalent to about 103 percent of its Gross National Product (GNP). This figure includes all debt owed by the public sector, including the central government, municipalities, and a wide array of public corporations. (The interested reader should see the 2014 report for additional detail.) Not shown in this table is the estimated present value of net unfunded pension liabilities, estimated at $44 billion, or 64 percent of GNP.

Texas Cop granted Immunity Over Killing of Unarmed Black Man: Manslaughter charges against a Texas cop who shot and killed an unarmed black man have been dropped by a federal judge, after he ruled that the police officer had federal immunity at the time because of his work with the FBI.Charles Kleinert, a former Austin police detective who also worked for the FBI, killed 32-year-old Larry Jackson Jr. after shooting him in the neck following a chase in Texas on July 26, 2013. Kleinert was initially indicted on manslaughter charges by a Texas grand jury for the crime. However, on June 26, 2015, he filed a motion to dismiss the indictment.

Study: 1 in 14 U.S. Children Has Had a Parent in Prison: One in 14 American children has a parent who has spent time in jail or is currently behind bars, according to a report released on Tuesday by Child Trends, a Maryland-based research center.The study, which sought to examine “both the prevalence of parental incarceration and child outcomes associated with it,” concluded that an unexpectedly high number of children in the U.S. — more than 5 million — have seen a parent who lived with them go to jail. The study posits that a parent’s incarceration has a deleterious impact on his or her child’s mental and physical health, yielding, among other things, behavioral issues and substandard academic performance.It is a crisis that disproportionately impacts black families. A black child is twice as likely to have an incarcerated parent, with nearly 14% of all black youths currently between the ages of 12 and 17 having seen a parent go to jail in their lifetimes. However, the study ventures that this figure may be an underestimation, since it does not account for parents who do not live at home with the child.

Child pretends to shoot student with imaginary bow, suspended for 3 days -- A first-grader at Our Lady of Lourdes is serving a three-day suspension for pretending to shoot another student with a bow and arrow.The boy's parents, Matthew and Martha Miele, told WLWT their son was playing a game of Power Rangers at recess on Thursday when it happened. "I think he's a good principal. I just think a bad decision was made," Matthew Miele said. Watch this story Martha Miele said she was called Thursday afternoon while at work by Principal Joe Crachiolo. "I didn't really understand. I had him on the phone for a good amount of time so he could really explain to me what he was trying to tell me," Martha Miele said. "My question to him was 'Is this really necessary? Does this really need to be a three-day suspension under the circumstances that he was playing and he's 6 years old?'" The Mieles sent Crachiolo an email Thursday evening and met with him Friday morning asking him to reconsider. "He told me that he was going to stand firm and that he was not going to change it," Martha Miele said. On Friday, Crachiolo sent a letter home to parents stating in part, "I have no tolerance for any real, pretend, or imitated violence. The punishment is an out of school suspension."

Success Metrics Questioned in School Program Funded by Goldman - It was, in the vernacular of corporate America, a win-win: a bond that paid for preschool for underprivileged children in Utah while also making money for investors.Goldman Sachs announced last month that its investment in a Utah preschool program had helped 109 “at-risk” kindergartners avoid special education. The investment also resulted in a $260,000 payout for the Wall Street firm, the first of many payments that is expected from the investment. Gov. Gary R. Herbert of Utah hailed the program as a model for a new way of financing public projects. Such so-called social impact bonds are a new kind of public-private partnership, promising financing from Wall Street and imposing a goal on local governments. Yet since the Utah results were disclosed, questions have emerged about whether the program achieved the success that was claimed. Nine early-education experts who reviewed the program for The New York Times quickly identified a number of irregularities in how the program’s success was measured, which seem to have led Goldman and the state to significantly overstate the effect that the investment had achieved in helping young children avoid special education.

CPS Warns Of Potential Layoffs As Union Tells Teachers To Prepare For Strike « CBS Chicago: (CBS) –Drastic cuts leading to teacher layoffs and dramatically higher class sizes could hit Chicago classrooms in the first week of February. Meantime, the Chicago Teachers Union is warning its members to start saving money to get ready for a strike. CBS 2 Chief Correspondent Jay Levine reports it’s both pretty simple and quite complicated. The teachers want a new contract and more money. CPS not only doesn’t have any more money, but may not be able to finish the school year with what it has. So what we have here is a three-way fight, with Chicago public school students caught in the middle. “All roads lead through Springfield,” said Chicago Public Schools CEO Forrest Claypool. “We cannot solve this crisis without Springfield stepping up first.”   CTU president Karen Lewis upped the ante by announcing what she called practice strike votes in all schools later this week and a huge rally in Grant Park right before Thanksgiving. She is also urging the teachers to save 25 percent of their pay in anticipation of a strike.“You can’t blow up schools because you don’t have any money, you have to figure out some other way to do this,” Lewis said. The vote would test which contract issues are most important to teachers and test support for a walkout. Lewis says the layoffs would mean disruption for 175,000 students.

CPS Faces Possible Teachers Strike, Massive Layoffs This Winter -- The Chicago Teachers Union today began taking steps toward a possible teachers strike in winter, and the district laid out plans for massive teacher layoffs in February. The key to averting both scenarios, according to CPS chief Forrest Claypool, is action in Springfield on a long-delayed measure to inject CPS with state aid. CTU said they will have teachers at all schools take a practice strike vote to gauge interest in another teachers strike. This, as Claypool announced today he’s pushing the doomsday scenario back to Feb. 8. That's the date when thousands of teachers could be laid off and classroom sizes would swell to help close a half-billion dollar budget gap.Originally, Claypool had made Thanksgiving the cutoff date, absent help from Springfield. Today, he laid out plans for the new doomsday scenario and urged parents and teachers to start lobbying Springfield to persuade Gov. Bruce Rauner to pass a plan to inject $480 million into CPS coffers by picking up a share of Chicago teacher pension costs. Or else, he says, plan B will go into effect.

Where can we find hope for our schools? -- Bringing It Back Home, a report issued by the Economic Policy Institute at the end of October, provides a distinct service in reminding Americans that they can learn more about how to improve their schools by looking at successful American states than they can by heading overseas to pry lessons out of foreigners. The authors, Stanford’s Martin Carnoy, EPI’s Emma Garcia, and Tatiana Khavenson at the National Research University Higher School of Economics in Moscow, have produced an impressive piece of scholarship. Their work makes a genuine new contribution to the discussion about how to improve American schools. In considering this study, several points need to be born in mind. First, the United States has very real problems in its schools. We cannot be Pollyannas about where we are. Average student performance is not where we would like it to be, and the average conceals terrible gaps between students doing well and those bringing up in the rear. Historically, we have done a reasonably good job with the traditional students our schools were designed to serve. But now we face a new challenge: a student population in which the majority of students are, for the first time in our history, both low-income and children of color.

In Denver suburb, a school board race morphs into $1 million ‘proxy war’ --When voters cast ballots Tuesday in a school board race in suburban Denver, it will mark the climax of a two-year battle over public education that has reverberated well beyond the Rockies. Spending on the school board election in Jefferson County, Colo., is expected to top $1 million, with money pouring in from Americans for Prosperity, the national organization founded by the Koch brothers, as well as a libertarian think tank and teachers unions. The contest is actually a recall election, with activists trying to kick out three conservative members who won seats in 2013, becoming the majority power block on the five-member board. “This is not a school board race, this is a proxy war,” said Jon Caldara, the president of the libertarian Independence Institute in Denver, which wants to keep the three conservatives in power. “This is a proxy war between education reform and union power.” Tina Gurdikian, a parent who helped spearhead the recall effort, agrees that the election is a stand-in for a larger national debate about public education and she said she sees it as an ideological fight. “This is really part of a national agenda by special-interest groups like Americans for Prosperity to privatize public education,” said Gurdikian, who has two children in the Jefferson County public schools. “We have a nearly $1 billion budget, and I think a lot of people look at that and want a piece of it. Privatization can work for some things, but not really public education. It really is a common good.”

Mississippi Ballot Initiative Would Let the Courts Decide Education Spending -- The power of the purse lies with legislatures—except, sometimes, where education funding is concerned. In that realm one finds a long history of judicial intervention, originally on questions of equity—ensuring that school funding formulas did not disadvantage certain communities or discriminate against minorities—and, subsequently, on questions of adequacy. Whereas equity cases flowed out of equal protection and did not concern themselves with the size of the overall appropriation but rather its distribution, adequacy litigation challenged legislative primacy over the budget while drawing upon state constitutions’ guarantees of public education. A constitutional ballot initiative in Mississippi, to be placed before the voters on Tuesday, would take the next step by explicitly granting the courts a role in the appropriations process. Initiative 42 would amend Section 201 of Mississippi’s voluminous state constitution as follows, where new language is indicated by underlining and deletions are indicated by strikethrough: SECTION 201. To protect each child's fundamental right to educational opportunity, The Legislature the State shall, by general law, provide for the establishment, maintenance and support of an adequate and efficient system of free public schools upon such conditions and limitations as the Legislature may provide. The chancery courts of this State shall have the power to enforce this section with appropriate injunctive relief.

School vs. Society in America’s Failing Students - American schools may not be as bad as we have been led to believe.  The rest of American society is failing its disadvantaged citizens even more than we realize. The question is, Should educators be responsible for fixing this? The perennial debate about the state of public education starts with a single, seemingly unassailable fact. American students sorely lag their peers in other rich nations and even measure up poorly compared with students in some less advanced countries. Americans scored more than halfway down from the top in the last round of the so-called PISA standardized tests in math, administered in 2012 by the Organization for Economic Cooperation and Development to 15-year-olds in about 60 countries. They scored about a third of the way down in reading and almost halfway down in science. The lackluster performance has reinforced a belief that American public education — the principals and teachers, the methods and procedures — is just not up to scratch. There must be something wrong when the system in the United States falls short where many others succeed. But is the criticism fair? Are American schools failing because they are not good at their job? Perhaps their job is simply tougher.  In a report released last week, Martin Carnoy et al suggest that socioeconomic deficits impose a particularly heavy burden on American schools.“Once we adjust for social status, we are doing much better than we think,” Professor Carnoy told me. “We underrate our progress.”

Study on online charter schools: ‘It is literally as if the kid did not go to school for an entire year’ -- A new study on the effectiveness of online charter schools is nothing short of damning — even though it was at least partly funded by a private pro-charter foundation. It effectively says that the average student who attends might as well not enroll. The study was done by the Center for Research on Education Outcomes, known as CREDO, and located at Stanford University, in collaboration with the Center on Reinventing Public Education at the University of Washington and Mathematica Policy Research. CREDO’s founding director, Margaret Raymond, served as project director. CREDO receives funding from the pro-charter Walton Family Foundation, which provided support for the new research. CREDO has released a number of reports in recent years on the effectiveness of charters — using math and reading standardized test scores as the measure — which collectively conclude that some perform better than traditional public schools and some don’t. In its newest report, released this week, CREDO evaluated online K-12 charter schools. There are 17 states with online charter students: Arizona, Arkansas, California, Colorado, Florida, Georgia, Louisiana, Michigan, Minnesota, Nevada, New Mexico, Ohio, Oregon, Pennsylvania, Texas, Utah and Wisconsin, as well as the District of Columbia.

Good Little Maoists -- Kunstler - Sometimes societies just go batshit crazy. For ten years, 1966 to 1976, China slid into the chaotic maw of Mao Zedong’s “cultural revolution.” A youth army called the Red Guard was given license to terrorize authorities all over the nation — teachers, scientists, government officials, really just about anyone in charge of anything. They destroyed lives and families and killed quite a few of their victims. America’s own cultural revolution has worked differently. It was mostly limited to the hermetically-sealed hot-house world of the universities, where new species of hierophants and mystagogues were busy constructing a crypto-political dogma aimed at redefining status arrangements among the various diverse ethnic and sexual “multi-cultures” of the land. There is no American Mao, but there are millions of good little Maoists all over America bent on persecuting anyone who departs from a party line that now dominates the bubble of campus life. It’s a weird home-grown mixture of Puritan witch-hunting, racial paranoia, and sexual hysteria, and it comes loaded with a lexicon of jargon — “micro-aggression,” “trigger warnings,” “speech codes,” etc — designed to enforce uniformity in thinking, and to punish departures from it. At a moment in history when the US is beset by epochal problems of economy, energy, ecology, and foreign relations, campus life is preoccupied with handwringing over the hurt feelings of every imaginable ethnic and sexual group and just as earnestly with the suppression of ideological trespassers who don’t go along with the program of exorcisms. A comprehensive history of this unfortunate campaign has yet to be written, but by the time it is, higher education may lie in ruins. It is already burdened and beset by the unintended consequences of the financial racketeering so pervasive across American life these days. But in promoting the official suppression of ideas, it is really committing intellectual suicide, disgracing its mission to civilized life.

Tenure is disappearing. But it’s what made American universities the best in the world - Tenure, they charged, was the place where deadbeat faculty could go for a rest cure, protected from critical standards, working as little as they could — and generally sending a once world-renowned system to the backwater, behind the rising tide of Asia and Europe. Not quite. The idea of tenure — promoted by John Dewey, the Columbia philosophy professor who in 1915 founded the American Association of University Professors — meant only that a faculty member couldn’t be dismissed without evidence of incompetence, professional misconduct or program discontinuance because of serious financial difficulty at the school. And even in 2010, the tenure critics were beating a dead horse. The number of tenure-track faculty was dropping like a stone, from 57 percent of faculty at its peak in 1975 to just above 30 percent today. The current American higher education workforce is more than two-thirds part-time, adjunct or limited-contract hires. Tenure is going, going — and probably in another 50 years, with the exception of those 100 top colleges and universities who compete with each other for faculty — gone. The idea of tenure was born of trustee, donor and presidential abuse, the destruction of the German and European universities by Hitler, the extraordinary transformation of American higher education after World War II from mediocrity to world-dominating excellence and the enormous demand for talent that took America to the top of the academic mountain in the thirty years of the Golden Age of research, from 1945 to 1975. Tenure was part of that Golden Age. Let’s take a look at the history:

Debt Collectors Can Make Robocalls Those Who Owe Student Loans  (CBS) — It’s Washington, DC’s version of ‘the fine print’: A provision tucked into the bipartisan budget bill signed yesterday by President Obama gives new power to debt collectors. Their target? People who owe federal student loans. Recording: “Hello, we’re trying to reach ‘Angela.’ Please contact the offices of Alliance.” A robocall like this one to a cell phone had been illegal — but not anymore. “You can only imagine what the debt collectors are going to be like once this door is opened, and they just have the computer calling and calling and calling,” Wayne attorney Michael Forbes says. While collection agency lobbyists argued auto-dialing mobile devices would help them get borrowers current, Forbes says it flies in the face of consumer protections and the Student Aid Bill of Rights — a White House directive the president signed this spring. “I think it is a harbinger of more efforts by the debt collection industry lobbyists to expand upon the provisions of the Telephone Consumer Protection Act,” Forbes says. About 40 million Americans have student loans. The overall debt: $1.2 trillion.

Teachers retirement fund earns 5.2%, lowers estimates: -- The state's Teachers Retirement System said its rate of return was 5.2 percent for last fiscal year and will lower its expected rate of return from 8 percent to 7.5 percent a year. The lowered assumed rate comes after years of criticism from fiscal watchdogs that the $109.7 billion retirement system was sticking to a lofty 8 percent return rate -- and thus straining the fund. "The revised assumptions are more consistent with recent member experiences and future expectations," John Cardillo, the fund's spokesman, said in an email. The fund provides benefits to 426,000 educators in New York, including nearly 268,000 active members and more than 158,000 retired members and beneficiaries. The rate of return for the fiscal year that ended June 30 was less than its five- and 10-year averages. Over the past five years, the fund had a rate of return of 12.4 percent and over 10 years, 7.2 percent; it was 8.4 percent over 20 years, Cardillo said.

Health Care Costs Plague Small Businesses, Survey Says | CPR: A survey of small Colorado businesses that offer health insurance to employees finds increasingly they’re struggling with costs, and shifting costs to employees. Researchers surveyed 300 businesses with 100 or fewer employees. About one in three surveyed changed insurance carriers or health plans or both. Among that group, two-thirds shifted costs to employees. “A lot of them are really kind of struggling with how much longer can we continue to do this if we keep seeing the cost increases," said Karl Weiss, president of Market Perceptions & HealthCare Research, which did the research for Delta Dental of Colorado. A vast majority that offers health insurance want to continue to offer it. Another recent study found fewer Coloradans are getting insurance coverage through a small employer. Open enrollment for health insurance for 2016 began Sunday.

New York City, CalSTRS Engage in Pension Fee Transparency Theater to Try to Fool Critics -- Yves Smith - As readers may know, how much public pension funds are paying in fees, particularly for pricey “alternative” investment strategies like private equity and hedge funds, has become a hot topic. For instance, David Sirota and other reporters at the International Business Times have been digging relentlessly into which firms get lucrative public pension fund mandates, and whether people connected to those firms have been or become donors to elected officials. And investing in high-fee investments can’t be defended on its merits. The Maryland Policy Institute published a study that updated and reconfirmed the findings of an analysis performed two year earlier, that public pension funds that invest in high fee strategies like private equity give up billions in performance as a result.  As Dennak Murphy of American Federation of Teachers pointed out at a recent CalSTRS board meeting, “What is not measured is not managed.” The overwhelming majority of public pension funds don’t even try to track all the fees they pay. And worse, this willful blindness means those fees are not being properly negotiated either. Thus, choosing to be ignorant about total fees and costs gives the purveyors of complex strategies license to price-gouge. Stung by the outcry over CalPERS’ admission that it did not keep tabs on one of the biggest fees it pays, the private equity profit share widely mislabeled as a “carry fee,” more public pension funds are trying to pretend that they capture their investment fees and costs. The problem is that these claims don’t stand up to serious scrutiny.

Employees face higher health costs as open enrollment season starts - It’s open enrollment season, and for many workers that means learning they’ll be responsible for a larger portion of their health care costs in 2016. This growing burden is cutting into their retirement savings, according to a survey by LIMRA, an insurance and financial services trade association. Six in 10 workers agreed that the rising cost of health insurance directly affects how much they set aside in their workplace retirement savings plan, according to LIMRA. That could mean leaving their 401k contribution rate the same when they really should be increasing it over time, or even reducing the rate at which they contribute, said Anita Potter, assistant vice president at LIMRA. Employee healthcare costs have risen steadily in recent years as wages have stagnated. Single and family average premiums for employer-sponsored health insurance rose 4% this year over last, according to a Kaiser Family Foundation survey released this fall. The average annual premium for single coverage is $6,251, of which workers pay an average of $1,071; the average family premium is $17,545, of which workers pay an average of $4,955. Deductibles have risen more sharply than premiums. That’s the amount that consumers must pay out of pocket before insurance pays for anything, except for certain preventive services that are covered at 100%. The average deductible for workers with employer-sponsored health insurance who face a deductible is $1,318 for single coverage this year, up 44% from $917 in 2010, according to the Kaiser Family Foundation. By contrast, over that same period, single premiums are up 24% and wages have risen 10%, just outpacing general inflation at 9%, according to Kaiser.

Obamacare prices increase for those who don't get subsidies: "Cheap" could cost you more for Obamacare next year. People who buy the cheapest health plans on the biggest Obamacare exchange without getting financial assistance are facing the largest increases for premiums and out-of-pocket costs in 2016, new analyses show.Average prices of the so-called bronze plans on the marketplace are rising 11 percent for nonsubsidized customers over 2015 prices. Average deductibles for individuals are increasing by the same percentage, to $5,731, according to a study by, an insurance comparison site. Average premiums for the most popular types of plans, known as "silver plans," are going up nearly as much — 10 percent — for customers who are unsubsidized, HealthPocket found. Silver plan deductibles, however, are rising more modestly next year, by 6 percent for an individual, to $3,117. The Avalere Health consultancy, in its own analysis, found that the average price of the lowest-cost bronze plan in states was rising by an average of 16 percent. Avalere said the average price of the lowest-cost silver plan was rising by 13 percent, compared to the 3.2 percent rise that was seen for 2015 plans. Both HealthPocket and Avalere found wide variation in premium price changes across individual states. Some states saw far higher price hikes, while other states saw less dramatic spikes

Many Need to Shop Around on as Prices Jump, U.S. Says - In Tennessee, the state insurance commissioner approved a 36 percent rate increase for the largest health insurer in the state’s individual marketplace. In Iowa, the commissioner approved rate increases averaging 29 percent for the state’s dominant insurer. Health insurance consumers logging into on Sunday for the first day of the Affordable Care Act’s third open enrollment season may be in for sticker shock, unless they are willing to shop around. Federal officials acknowledged on Friday that many people would need to pick new plans to avoid substantial increases in premiums. But, they said, even with a number of companies leaving the marketplace for health insurance under President Obama’s signature health care law, most people around the country will still be able to choose from three or more insurers in 2016. “Shopping can save you money,” said Richard G. Frank, an assistant secretary of health and human services, who unveiled a huge collection of data on health plans that will go on sale on Sunday in the 38 states served by Consumers have until Jan. 31 to sign up, but must do so by Dec. 15 to obtain coverage starting on Jan. 1.

The Rigging of the American Market - Robert Reich - Much of the national debate about widening inequality focuses on whether and how much to tax the rich and redistribute their income downward.  But this debate ignores the upward redistributions going on every day, from the rest of us to the rich. These redistributions are hidden inside the market.  The only way to stop them is to prevent big corporations and Wall Street banks from rigging the market. For example, Americans pay more for pharmaceuticals than do the citizens of any other developed nation. That’s partly because it’s perfectly legal in the U.S. (but not in most other nations) for the makers of branded drugs to pay the makers of generic drugs to delay introducing cheaper unbranded equivalents, after patents on the brands have expired. This costs you and me an estimated $3.5 billion a year – a hidden upward redistribution of our incomes to Pfizer, Merck, and other big proprietary drug companies, their executives, and major shareholders.   We also pay more for Internet service than do the inhabitants of any other developed nation. The average cable bill in the United States rose 5 percent in 2012 (the latest year available), nearly triple the rate of inflation. Why? Because 80 percent of us have no choice of Internet service provider, which allows them to charge us more.Add it up – the extra money we’re paying for pharmaceuticals, Internet communications, home mortgages, student loans, airline tickets, food, and health insurance – and you get a hefty portion of the average family’s budget. Democrats and Republicans spend endless time battling over how much to tax the rich and then redistribute the money downward. Yet as long as the big corporations, Wall Street banks, their top executives and wealthy shareholders have the political power to do so, they’ll keep redistributing much of the nation’s income upward to themselves.

Fat is the new normal in America -  '"Fat" may be the new normal in America," declares WalletHub in its latest report. More than three-quarters of American adults are now overweight or obese, according to a study by JAMA Internal Medicine, cited by WalletHub. Moreover, that same study showed that for the first time ever, there are more obese people than overweight people in the country. And on top of that, in 2014, nearly 83 million Americans were "completely inactive, the highest number reported since 2007," according to data cited by WalletHub. For what it's worth, that's 26% of the total population doing virtually zero physical activity. With that in mind, WalletHub calculated the states with the biggest weight problems in 2015, based on "obesity and overweight prevalence" and several "unhealthy habits and consequences." You can see in the map below, which states have the biggest weight problems (not to be confused with the most obese states in the country.) The darker the blue, the worse the problem is.

A group of middle-aged whites in the U.S. is dying at a startling rate -- A large segment of white middle-aged Americans has suffered a startling rise in its death rate since 1999, according to a review of statistics published Monday that shows a sharp reversal in decades of progress toward longer lives. The mortality rate for white men and women ages 45-54 with less than a college education increased markedly between 1999 and 2013, most likely because of problems with legal and illegal drugs, alcohol and suicide, the researchers concluded. Before then, death rates for that group dropped steadily, and at a faster pace. An increase in the mortality rate for any large demographic group in an advanced nation has been virtually unheard of in recent decades, with the exception of Russian men after the collapse of the Soviet Union. The rising death rate was accompanied by an increase in the rate of illness, the authors wrote in the Proceedings of the National Academy of Sciences. “Drugs and alcohol, and suicide . . . are clearly the proximate cause,” said Angus Deaton, the 2015 Nobel laureate in economics, who co-authored the paper with his wife, Anne Case. Both are economics professors at Princeton University. “Half a million people are dead who should not be dead,” “High school graduates [and] high school dropouts [are] 40 percent of the population,” he added. “It’s not just the 10 percent who didn’t finish high school. It’s a much bigger group.”

Quiet 'epidemic' has killed half a million middle-aged white Americans -- Despite advances in health care and quality of life, white middle-aged Americans have seen overall mortality rates increase over the past 15 years, representing an overlooked "epidemic" with deaths comparable to the number of Americans who have died of AIDS, according to new Princeton University research. The results are published in a new paper in the Proceedings of the National Academy of Sciences from Anne Case, the Alexander Stewart 1886 Professor of Economics and Public Affairs, and Angus Deaton, the 2015 Nobel laureate in economics and the Dwight D. Eisenhower Professor of International Affairs and professor of economics and international affairs. With data from a variety of surveys and reports, the paper reports a sharp increase in the death rate for middle-aged whites after 1998, which the researchers tie to drugs and alcohol, suicide, chronic liver disease and cirrhosis. This turnaround in mortality reverses decades of progress, the researchers write, and the same pattern is not seen in other rich countries, nor is it seen among African Americans or Hispanics in the United States. Although death rates related to drugs, alcohol and suicides have risen for middle-aged whites at all education levels, the largest increases are seen among those with the least education, the researchers found. For those with a high school degree or less, deaths caused by drug and alcohol poisoning rose fourfold; suicides rose by 81 percent; and deaths caused by liver disease and cirrhosis rose by 50 percent. All-cause mortality rose by 22 percent for this least-educated group. Those with some college education saw little change in overall death rates, and those with a bachelor's degree or higher actually saw death rates decline. In terms of lives lost, had the white mortality rate held at its 1998 value, 96,000 lives would have been saved between 1998 and 2013. If it had continued to fall at the rate of decline seen from 1978-1998, 488,500 deaths would have been avoided between 1999 and 2013. This figure is comparable to the number of deaths caused by the AIDS epidemic in America.

A Shocking Rise in White Death Rates in Midlife—and What It Says about American Society: Drugs, alcohol, and suicide have taken an unparalleled toll on middle-aged whites, especially those with a high school degree or less. In a reversal of earlier trends, death rates among white non-Hispanic Americans in midlife increased sharply between 1999 and 2013, according to a new study by economists Anne Case and Angus Deaton, winner last month of the Nobel Prize for economics. The increased deaths were concentrated among those with the least education and resulted largely from drug and alcohol “poisonings,” suicide, and chronic liver diseases and cirrhosis. This midlife mortality reversal had no parallel in any other industrialized society or in other demographic groups in the United States. Case and Deaton’s analysis, published today in the Proceedings of the National Academy of Sciences, also shows increased rates of illness, chronic pain, and disability among middle-aged whites. Between 1979 and 1999, Case and Deaton show, mortality for white Americans ages 45 to 54 had declined at nearly 2 percent per year. That was about the same as the average rate of decline in mortality for all people the same age in such countries as France, Germany, the United Kingdom, and Sweden. (See figure below.) After 1999, the 2 percent annual decline continued in other industrialized countries and for Hispanics in the United States, but the death rate for middle-aged white non-Hispanic Americans turned around and began rising half a percent a year.

Middle-aged, white Americans’ death rate is up. Alcohol and drugs are to blame. -- As Gina Kolata reported, the death rate for middle-aged, white Americans has risen in the last 15 years or so, while that of many other groups here and in other wealthy nations fell. The rising death rates are concentrated in less educated, middle-aged whites. (Here on TIE, we’ve posted before about rising mortality rates for women in certain counties, for white women without a high school diploma, and for white men and women with fewer years of education.) That finding was reported Monday by two Princeton economists, Angus Deaton, who last month won the 2015 Nobel Memorial Prize in for Economic Science, and Anne Case. Analyzing health and mortality data from the Centers for Disease Control and Prevention and from other sources, they concluded that rising annual death rates among this group are being driven not by the big killers like heart disease and diabetes but by an epidemic of suicides and afflictions stemming from substance abuse: alcoholic liver disease and overdoses of heroin and prescription opioids.  The original study is here.  And, here’s your periodic reminder that, at the moment, Medicaid and Medicare records pertaining to substance use disorder are not included in certain research files, hampering our ability to study these issues.

“Stunning” Rise in Death Rate, Pain Levels for White Middle-Aged, Less Educated Whites -  Yves Smith -  One of the long standing patterns in economies showing economic growth is longer life spans, and falls are see the result of severe distress and dislocation, as took place in the period right after the fall of the Soviet Union, when the expectancies of adult men fell by over seven years.  The US has just become the first country to approach this appalling record. A stark warning about the level of distress in America comes from an important study by Angus Deaton, the 2015 Nobel prize winner in economics, and his wife Anne Case. We’ve embedded their short and readable article at the end of this post. The authors found that from 1999 to 2013, the death rate among non-Hispanic whites aged 45 to 54 with a high school education or less rose, while it fell in other age and ethnic groups. This is an HIV-level silent epidemic: AIDS killed an estimated 650,000 from the mid-1980s to present, while an estimated close to half-million died in half that time period who would have lived had their mortality rates fallen in line with the rest of the population. It is hard to overstate the significance of these findings. From the New York Times: “It is difficult to find modern settings with survival losses of this magnitude,” wrote two Dartmouth economists, Ellen Meara and Jonathan S. Skinner, in a commentary to the Deaton-Case analysis that was published in Proceedings of the National Academy of Sciences. This cross-country comparison from the study shows how extreme an outlier these middle aged whites are:  The big culprits are linked to despair, namely “poisoning” which is opoid abuse first and alcoholism second, and suicides. Case and Deaton dug into the underlying statistics, and found distressingly high levels of pain and impaired health in this age group, so pain and physical impairment may well be bigger culprits than economic distress: And the rise in death rates took place among men and women, in all of the four major regions of the country the authors examined, and obesity rates were not a driving factor.  And unlike chaotic post-Soviet Russia, the US does not have a good excuse as to why this has been happening in a period of supposed growth, and even worse, with no one noticing until now. Yes, there have been warning signs of distress, such as the fact that US life expectancy has stopped rising, that death rates among white women had risen (and over the same time period examined in the Case-Deaton study), and that the US is alone among developed countries in having an increasing maternal mortality rate.

The Economic Roots of the Climbing Death Rate for Middle-Aged Whites - The death rate among middle-aged white Americans has soared in recent years, driven by an epidemic of prescription drug overdoses, as well as rising liver disease and suicide, according to a new report from economists Anne Case and Angus Deaton at Princeton University. The report has generated a heavy flurry of coverage due to the shocking nature of its finding—that amid a world of improving medical care, the death rate of a major demographic group is surging, due to overdoses from opioids and other prescription painkillers. Perhaps because of their economics background, Ms. Case and Mr. Deaton theorized that this overdose epidemic may be tied—at least in part—to “economic insecurity.” This claim is hard to establish but, seeing how Mr. Deaton won the Nobel Prize in economics less than a month ago, worth considering in detail. “After the productivity slowdown in the early 1970s, and with widening income inequality, many of the baby-boom generation are the first to find, in midlife, that they will not be better off than were their parents,” they wrote. “Growth in real median earnings has been slow for this group, especially those with only a high school education.” As their paper shows, the surge in death rates is highly concentrated among whites ages 45 to 54 with a high school education or less; death rates have dropped for the college educated and Hispanics. The overall death rate among blacks is higher than among whites, but has declined over the past 15 years. In 1999, blacks were more likely to die from drug overdoses. Today, whites are.

Know your risks, but meat still isn’t the enemy --  Smoking tobacco causes cancer. So does eating salted fish, drinking alcohol, breathing polluted air and being exposed to the sun. All of these things are classified as cancer-causing by the World Health Organization. This week, processed meat has been added to that list, meaning that the world’s attention has been focused on whether everyone should stop eating bacon, sausage or various charcuterie. The short answer is no, you’re probably fine. As with many pronouncements about food, this one is being overhyped by the news media, and potentially over-interpreted by scientists. I wrote about red meat here at The Upshot back in March, focusing mostly on the cardiovascular risks, rather than the cancer risks. But I still highlighted and discussed some key studies, including one that found that eating meat, especially processed meat, was associated with increased cancer and mortality in people age 50-65. As I said, it also found that the opposite was true in people over 65 years, but that gets mostly ignored. Based on epidemiologic data like these, 700 studies on red meat and cancer and 400 more on processed meat, the International Agency for Research on Cancer felt comfortable making the declaration that processed meat causes cancer and that red meat probably causes cancer. As Geoffrey Kabat pointed out, it’s worth noting that 25 years ago, the I.A.R.C. ruled that coffee was “possibly carcinogenic”. Despite the massive amount of evidence to the contrary that has been published since, they haven’t changed their minds. In fact, of the 985 agents the I.A.R.C. has classified, only one has been labeled “probably not carcinogenic to humans”.

Pregnant women in Brooklyn have highest levels of certain preservatives used in cosmetics: Researchers at SUNY Downstate Medical Center and Arizona State University have published the first study of levels of parabens - antibacterial substances commonly used as preservatives in cosmetics and other products - in human cord blood samples. The researchers found that a cohort of pregnant women in Brooklyn predominantly of Caribbean- and African-American descent had the highest level worldwide of methyl paraben and propyl paraben. The results were published online in the journal Environment International, in an article titled, "Maternal and fetal exposure to parabens in a multiethnic urban U.S. population." The article notes that parabens have been used for decades and, at recommended levels, are "generally recognized as safe" by the U.S. Food and Drug Administration and the European Union. However, parabens have the potential to disrupt the expression of hormones during influential times of development, possibly affecting fetal, child, and even adult health. The authors point out that recent studies have raised awareness for potential health effects, particularly during fetal development and in children younger than six to 12 months of age, a period when detoxification systems are still immature, "and thus leaving the exposed more vulnerable," notes senior author Rolf Halden, PhD, professor and director of the Biodesign Center for Environmental Security at Arizona State University.

Black lung debated during federal oversight hearing -- House Democrats called for strengthening health and safety protection for miners to prevent black lung disease during a recent oversight hearing. They want the addition of tools needed to enforce safety standards and making it faster for miners to file a claim. During the hearing, two witnesses testified in support of legislative reforms to parts of the Robert C. Byrd Mine Safety Protection Act. Mike Wright of the United Steelworkers Union and Steve Sanders of the Appalachian Citizen’s Law Center highlighted the need to help miners who are afflicted with black lung disease and are overmatched by coal companies who can hire medical experts and a bevy of lawyers to fight the miners’ claims. Additionally, the two men told the U.S. House of Representatives Education and Workforce Committee that coal companies have been able to game the system by withholding evidence that would allow miners to provide eligibility for benefits. ‘The black lung benefits program is an adversarial system,” said Sanders, director of the law center. “But an adversarial system only works to deliver justice when both parities have equal resources. Too often miners do not have legal representation and, being disabled and not working, they do not have the financial ability to pay for sophisticated medical testing to support their claim.

Senate blocks legislation to undercut EPA clean water rules - (AP) — Democrats have blocked a Senate bill that would have forced the Obama administration to withdraw new federal rules to protect smaller streams, tributaries and wetlands from development and pollution. Supporters of the legislation — and opponents of the rules — did not get the 60 votes needed Tuesday to stop debate and consider the bill. The vote was 57-41, meaning Democrats have blocked the bill, for now. Most Democrats argue that the Obama administration rules will safeguard drinking water for 117 million Americans and say they should remain in place. The White House threatened a veto of the bill, saying the regulations are "essential to ensure clean water for future generations." Republicans and a handful of Democrats from rural states say they fear a steady uptick in federal regulation of every stream and ditch. Senate Majority Leader Mitch McConnell, R-Ky., said on the Senate floor that the regulations are "a cynical and overbearing power grab dressed awkwardly as some clean water measure." The Senate bill, similar to legislation passed by the House earlier this year, would force the Environmental Protection Agency to withdraw and rewrite the rules. Four Democrats voted with Republicans on the measure — Sens. Heidi Heitkamp of North Dakota, Claire McCaskill of Missouri, Joe Manchin of West Virginia and Joe Donnelly of Indiana. Opponents of the rules said they would continue to fight them. Shortly after Democrats blocked the bill, the Senate voted to proceed to a so-called "resolution of disapproval" sponsored by Iowa Sen. Joni Ernst that would scrap the rules if signed into law. Only a simple majority is needed to pass the resolution, which could be approved as soon as Wednesday.

Just Hours After A Separate Attack Failed, The Senate Voted To Overturn The EPA’s Clean Water Rule  -- Almost immediately after failing to pass a bill that would have required the EPA to rewrite its Waters of the United States rule, the Senate voted to advance a measure that would block the rule entirely under the Congressional Review Act. The resolution, put forward by Sen. Joni Ernst (R-IA), passed with a simple majority vote of 55-43. The resolution earned the support of all Senate Republicans — with the exception of Susan Collins (R-ME) — and three Senate Democrats: Sens. Joe Donnelly (D-IN), Heidi Heitkamp (D-ND), and Joe Manchin (D-WV). The vote came just an hour after the Senate failed to pass a separate bill, sponsored by Sen. John Barrasso (R-WY), which would have nulified the Waters of the United States rule — also known as the Clean Water Rule — and set strict parameters for the EPA and Army Corps of Engineers in rewriting the rule. Under Barrasso’s bill, the EPA would have been required to consult with private industry, as well as local and state governments, in redrafting the rule. Ernst’s resolution, under the Congressional Review Act, would kill the rule entirely, but it’s unlikely to get much further than the president’s desk, as the Obama administration has already threatened to veto it. Finalized in May, the Clean Water Rule seeks to clarify the waters that can be regulated by the EPA under the Clean Water Act. The rule, if implemented as written, would expand protection to two million miles of streams and 20 million acres of wetland. Previous court decisions made it unclear whether or not these waters, which supply drinking water to a third of the country, could be regulated under the Clean Water Act.

Senate repeal falls short, EPA clean water survives - The Senate Tuesday fell short of advancing legislation to repeal proposed environmental regulations aimed at bringing more waterways and wetlands under federal protection, handing the Obama administration a victory on rules that have faced a number of legal and political setbacks since being introduced this summer. With 57 senators — all the GOP and four Democrats — voting to repeal the measure, 41 Democrats voted against the elimination of the Waters of the United States (WOTUS) falling short of the 60 votes needed to begin debate on the bill. “West Virginia’s farmers, small businesses, energy producers and agriculture community have shared their concerns with me about the burdens and uncertainty this regulation would impose. Protecting our drinking water sources and precious natural resources is a goal we all support, but the WOTUS rule would lead to a massive expansion of costly permitting requirements, hampering farmers and rural communities and subjecting small puddles and ditches to the same regulations as large lakes and rivers. These are costs West Virginia’s already struggling economy cannot afford,” said Sen. Shelley Moore Capito, R-W.Va. Sen. Joe Manchin was one of the Democrats to vote to advance a resolution of disapproval under the Congressional Review Act to reverse the WOTUS rules. “The EPA wrote and finalized this rule without consulting some of the people who care about clean water the most: everyday West Virginians and Americans,” Manchin said. “This overreaching rule would impose a heavy financial burden on all of us and would lead interruptions on myriad of economic activities in West Virginia, including highway and road construction, farming, and a variety of public works projects.

TPP Details Released, And It's Worse than We Thought - Food and Water Watch  - The public finally has a chance to see what is really in the biggest and most ominous trade deal in history — and contrary to the chipper public relations push by the White House, the TPP contains provisions that are even worse than critics expected. Most of the agreement is really about giving international corporations the ability to trump commonsense environmental, food safety, public health and other regulations as illegal trade barriers. Some of the most dangerous provisions are concealed behind arcane trade jargon that can be used to challenge U.S. standards as illegal trade barriers. The very premise of the TPP puts trade ahead of protecting people and the environment.  The parts of the TPP that cover food safety are especially troubling. It would let shippers challenge individual border inspection decisions, second-guessing U.S. inspectors and discouraging rigorous oversight of imported foods. It also encourages the use of private food safety certifications for imported food instead of government inspection, potentially relying on corporate assurances that our imports were safe. We have already experienced some significant foodborne illness outbreaks from domestic companies who had received the same kind of food safety certifications. And it would let corporations sue the United States over local, state or federal rules that frustrate their business plans and threaten to undermine expected profits. That means, for instance, that a foreign oil and gas company could demand monetary penalties from the United States if a town in Ohio passed an ordinance against fracking.   We knew the TPP would rubber-stamp the export of fracked natural gas, especially to Japan, the world’s biggest natural gas importer. But the TPP’s environmental chapter falls far short of the trade agreements negotiated at the end of the Bush administration. TPP countries would not have to enforce all the core international environmental agreements they had signed.   Just one of seven is actually included in the TPP text. Only the Convention on International Trade in Endangered Species is included, which deals with trading illegal rhinoceros horns. The rest of the TPP conservation provisions are toothless and unenforceable and cannot effectively stop the illegal wildlife and timber trade, illegal fishing, shark finning or commercial whaling.

TPP Text Reveals Broad New Powers for Corporations to Attack Food Labeling Laws -- Today, the Obama administration released the long-secret text of the proposed Trans-Pacific Partnership (TPP) trade deal that would weaken consumer protections, undermine U.S. food safety standards and prevent commonsense food labeling. The language included in the TPP is more aggressive than previous trade deals and provides broad new powers for other countries and foreign corporations to challenge U.S. food safety and food labeling measures.  The TPP is a giveaway to big agribusiness and food companies that want to use trade deals to attack sensible food safety rules, weaken the inspection of imported food and The so-called Rapid Response Mechanism allows companies to challenge border inspection procedures that companies claim cause unnecessary delay—like holding suspect shipments while awaiting laboratory test results—and demand that a TPP panel of experts review and provide guidance on the inspection. This would create a chilling-effect on rigorous border inspection that would be especially dangerous for problems that are not obvious, like chemical or drug residues that would only appear after more thorough examination and testing. The TPP will increase the volume of imported and potentially risky foods coming into the U.S., but tie the hands of the border inspectors who are the last line of defense between the shipper and the supermarket. The TPP gives companies new powers to second guess inspectors and push uninspected food onto the market.

Native Bees Foraging in Fields Are Exposed to Neonicotinoid Insecticides and other Pesticides -- According to the first-ever study of pesticide residues on field-caught bees, native bees are exposed to neonicotinoid insecticides and other pesticides. This report was conducted by the U.S. Geological Survey and published in the journal Science of the Total Environment. This research focused on native bees, because there is limited information on their exposure to pesticides. In fact, little is known about how toxic these pesticides are to native bee species at the levels detected in the environment. This study did not look at pesticide exposure to honey bees.   “We found that the presence and proximity of nearby agricultural fields was an important factor resulting in the exposure of native bees to pesticides,” said USGS scientist Michelle Hladik, the report’s lead author. “Pesticides were detected in the bees caught in grasslands with no known direct pesticide applications.”   Although conservation efforts have been shown by other investigators to benefit pollinators, this study raises questions about the potential for unintended pesticide exposures where various land uses overlap or are in proximity to one another.

South Dakota scientist says USDA censored pesticide research and its affect on bees  -- A highly regarded federal scientist filed a whistleblower complaint Wednesday against the U.S. Department of Agriculture (USDA), charging that he was punished for publicizing research showing a link between pesticides and the decline in bees and other pollinators.Jonathan Lundgren, a USDA entomologist in Brookings, S.D., said in civil service documents that while the agency did not stop publication of the research, supervisors harassed him, tried to stop him from speaking out, and interfered with new projects.His complaint caps months of speculation among beekeepers and other scientists who have been following his case. It was filed within the federal civil service system with support by Public Employees for Environmental Responsibility (PEER), a national nonprofit that defends government scientists on controversial environmental issues.“We think the USDA is reflecting complaints from corporate stakeholders,” said Jeff Ruch, the group’s executive director. “This research is drawing consternation, which flows down the USDA chain of command to the researchers doing the work.”Officials from the Agricultural Research Service, the USDA branch where Lundgren works, declined to answer questions about the case. In a prepared statement, spokesman Christopher Bentley said the agency is committed to scientific integrity.“The USDA has implemented a strong scientific integrity policy to promote a culture of excellence and transparency,” he said. “That includes procedures for staff to report any perceived interference with their work, seek resolution, and receive protection … for doing so.”

Why Andrew Cuomo’s Pollinator Task Force Won’t Save New York’s Bees --  As in other parts of North America, beekeepers in New York have been experiencing unsustainable losses of honeybee colonies. In 2014-15, annual colony losses in New York reached 54 per cent, according to the Bee Informed Partnership survey. And though losses were lower in preceding years, they consistently exceeded the economic threshold of 15 percent loss. At great expense, beekeepers have been able to recoup their winter and summer losses, but for declining native bee species the prospects are even less rosy. For example, the rusty-patched bumblebee (Bombus affinis), once common in New York and the Northeastern US, is now a candidate for the endangered species act. An impressive worldwide body of scientific evidence implicates neonicotinoids as a major contributor to the decline of honeybee and wild bee populations (e.g. Lu et al., 2014). This is due to a combination of their acute toxicity, sub-lethal, intergenerational, neurotoxic, and immune system effects, their systemic behavior in plants and their persistence in soil and water [See the IUCN's Worldwide Integrated Assessment of the Impacts of Systemic Pesticides on Biodiversity and Ecosystems, 2015 (1)]. This relatively new family of insecticides is now believed to be the most commonly used global pesticide.  But at the first meeting of the New York State's Pollinator Task Force (Aug 6 2015), commercial beekeeper Jim Doan was flabbergasted to learn that state officials had appointed two representatives of the national pesticide industry to the 12-member panel. "It's very difficult for a beekeeper to think he can get a fair shake," he commented.

EPA Used Monsanto’s Research to Give Roundup a Pass -- The Environmental Protection Agency concluded in June that there was “no convincing evidence” that glyphosate, the most widely used herbicide in the U.S. and the world, is an endocrine disruptor. On the face of it, this was great news, given that some 300 million pounds of the chemical were used on U.S. crops in 2012, the most recent year measured, and endocrine disruption has been linked to a range of serious health effects, including cancer, infertility, and diabetes. Monsanto, which sells glyphosate under the name Roundup, certainly felt good about it. “I was happy to see that the safety profile of one of our products was upheld by an independent regulatory agency,” wrote Steve Levine on Monsanto’s blog.. But the EPA’s exoneration — which means that the agency will not require additional tests of the chemical’s effects on the hormonal system — is undercut by the fact that the decision was based almost entirely on pesticide industry studies. Only five independently funded studies were considered in the review of whether glyphosate interferes with the endocrine system. Twenty-seven out of 32 studies that looked at glyphosate’s effect on hormones and were cited in the June review — most of which are not publicly available and were obtained by The Intercept through a Freedom of Information Act request — were either conducted or funded by industry. Most of the studies were sponsored by Monsanto or an industry group called the Joint Glyphosate Task Force. One study was by Syngenta, which sells its own glyphosate-containing herbicide, Touchdown.

Monsanto Wins 2015 Rubber Dodo Award  -- Monsanto, producer and seller of Roundup and its toxic active ingredient glyphosate, is the recipient of the Center for Biological Diversity’s 2015 Rubber Dodo Award, given annually to those who have done the most to destroy wild places, species and biological diversity. Glyphosate is now used in more than 160 countries, and more than one billion pounds are applied each year. It has been classified as a “probable human carcinogen” by the World Health Organization and its heavy use, particularly on herbicide-resistant GMO crops, also developed by Monsanto, is considered a leading cause of the recent, drastic 80 percent decline in monarch butterflies. Previous Rubber Dodo winners include U.S. Department of Agriculture’s Wildlife Services (2014), the Koch brothers (2013), climate denier James Inhofe (2012), the U.S. Chamber of Commerce (2011), former BP CEO Tony Hayward (2010), massive land speculator Michael Winer (2009), Alaska Gov. Sarah Palin (2008) and Interior Secretary Dirk Kempthorne (2007). “The science is increasingly clear that glyphosate is damaging wildlife and putting people at serious risk, yet Monsanto continues to aggressively peddle the stuff to farmers and really any customer it can find,” said Kierán Suckling, the Center for Biological Diversity’s executive director. “It’s hard to fathom the depth of the damage that glyphosate is doing, but its toxic legacy will live on for generations, whether it’s through threatening monarchs with extinction or a heightened risk of cancer for people where it’s spread.”

Millions of Dog-Coyote-Wolf Hybrids Now Roam Eastern U.S. -- A new species combining wolves, coyotes and dogs is evolving before scientists’ eyes in the eastern U.S.   Wolves faced with a diminishing number of potential mates are lowering their standards and mating with other, similar species, reported The Economist. The interbreeding began up to 200 years ago, as European settlers pushed into southern Ontario, clearing the wolf’s habitat for farming and killing a large number of the wolf families who lived there. This also allowed coyotes to spread from the prairies, and the farmers brought dogs into the region. Over time, wolves began mating with their new, genetically similar neighbors. The resulting offspring—which has been called the eastern coyote, or to some, the coywolf—now number in the millions, according to researchers at North Carolina State University. Interspecies-bred animals are typically less vigorous than their parents, the Economist reported, if the offspring survive at all. That’s not the case with the wolf-coyote-dog hybrid, which has developed into a sum greater than the whole of its parts. At about 55 pounds, the hybrid animal is about twice as heavy as a standard coyote, and its larger jaws, faster legs and muscular body allows it to take down small deer and even hunt moose in packs in both open terrain and dense woodland. An analysis of 437 hybrid animals found that coyote DNA dominates its genetic makeup, with about one-tenth of its DNA from dogs, usually larger dogs such as Doberman pinschers and German shepherds, and a quarter from wolves.

Slow adaptation in the face of rapid warming leads to collapse of the Gulf of Maine cod fishery - – A new scientific study says that rapidly warming waters off the New England coast have had a severe consequence — the collapse of a cod fishery that saw too many catches even as overall cod numbers declined due to warmer seas. It’s just the latest in a series of findings and occurrences — ranging from gigantic snows in Boston last winter, which scientists partly linked with warm seas, to a sudden and “extreme” sea level rise event in 2009-2010 — suggesting that this particular stretch of water is undergoing profound changes.  “2004 to 2013, we ended up warming faster than really any other marine ecosystem has ever experienced over a 10 year period,” The paper reports that during the decade-long period in question, the Gulf of Maine, the ocean region extending from Cape Cod northeast to the southern tip of Nova Scotia, warmed up by a stunning 0.23 degrees Celsius per year (0.41 degrees Fahrenheit). That’s faster warming than occurred in 99.9 percent of the rest of the world ocean, the scientists say.  During the same time period, this fishery’s managers did reduce cod quotas, but not enough — presumably because of a lack of realization about the rapidly warming waters and their stark effects on fish. As a consequence, the overall cod stock now stands at just 4 percent of its optimum size.  Last November, the National Oceanic and Atmospheric Administration announced sharp restrictions on cod fishing in the area, with harsh consequences for fishing dependent communities like Gloucester, Mass. “The Gulf of Maine cod stock, a historic icon of the New England fishery, is in the worst shape we have seen in the 40 years that we have been monitoring it,”

Rupert Murdoch Takes Over National Geographic, Then Lays Off Award-Winning Staff The memo went out, and November 3rd 2015 came to the National Geographic office. This was the day in which Rupert Murdoch’s 21st Century Fox took over National Geographic. The management of National Geographic sent out an email telling its staff, all of its staff, all to report to their headquarters, and wait by their phones. This pulled back every person who was in the field, every photographer, every reporter, even those on vacation had to show up on this fateful day. As these phones rang, one by one National Geographic let go the award-winning staff, and the venerable institution was no more.  The name now belongs to Rupert Murdoch, and he has plans for it. The CEO of National Geographic Society, Greg Knell, tried to claim back in September that there “there won’t be an [editorial] turn in a direction that is different form the National Geographic heritage.” Murdoch’s move today only served to prove Knell’s words hollow, with hundreds of talented people now served their pink slips. And with the recognition that Murdoch’s other enterprises do not reflect the standards held by National Geographic, and with Murdoch’s history of changing the editorial direction of purchased properties, today’s move indicates that we can expect a similar shift for National Geographic.

Saudi Wells Running Dry — of Water — Spell End of Desert Wheat - For decades, only a few features punctuated the vastness of the Saudi desert: oil wells, oases -- and wheat fields. Despite torrid weather and virtually no rain, the world’s largest oil producer once grew so much of the grain that its exports could feed Kuwait, United Arab Emirates, Qatar, Bahrain, Oman and Yemen. The circular wheat farms, half a mile across with a central sprinkler system, spread across the desert in the 1980s and 1990s, visible in spring to anyone overflying the Arabian peninsula as green spots amid a dun sea of sand. The oilfields remain, but the last wheat farms have just disappeared to save the aquifers supplying them. For the first time, Saudi Arabia will rely almost completely on wheat imports in 2016, a reversal from its policy of self-sufficiency. It will become a full member of the club of Middle Eastern nations that, according to the commodity-trade adage, "sell hydrocarbons to buy carbohydrates." The shift toward imports, which started eight years ago, is reverberating beyond the kingdom, providing business opportunities for grain traders such as Cargill Inc and Glencore Plc as well as for farmers in countries such as Germany and Canada. "The Saudis are the largest new wheat buyer to emerge,"

Early 2016 to bring 'wave' of crop selling, says Bunge CEO: The floodgates may break early next year on crops that farmers are hoarding in hope of higher prices, Bunge said, flagging the potential for presidential elections to provoke a particular pick-up in Argentine sales. Soren Schroder, the Bunge chief executive, speaking after the agribusiness giant unveiled a drop in earnings, said that the appetite for farmers to withhold crop sales had been unexpectedly strong. "I would say that the biggest overall surprise is probably the amount of farmer retention we have globally," Mr Schroder said. "It's not just North America. It is pretty predominant throughout most of the world," with the exception of Brazil, where a weaker real has protected growers from declines in dollar-denominated crops values. "Farmers don't like lower prices. They're putting the grain away, the seeds away."  The hoarding "has had probably more of an impact in compressing margins than we would have expected", with merchants and consumers needing to pay more than they might have expected to obtain supplies.

Malawi's hydropower dries up as river runs low, menacing forests: - Dwindling water levels are hobbling Malawi's hydroelectric power supply and putting more pressure on the country's already stressed forests, officials say. The Electricity Supply Corporation of Malawi (ESCOM), a public utility, says the amount of power it generates through three plants on the Shire River has fallen by 66 percent due to Lake Malawi's declining water level, which experts blame on erratic rains made worse by climate change. This year, the southern African nation suffered a late start to the rainy season, followed by severe flooding in its southern half and then prolonged dry spells in many parts, causing maize production to fall around 30 percent. ESCOM first revealed the dramatic drop in water at its hydro plants in August. It now says water flow on the river, the country's largest, is some 20 percent below what is needed to operate the Nkula, Tedzani and Kapichira turbines at their full combined capacity of 355 megawatts (MW). "During peak hours we are losing 40MW and the daily average loss is 25MW," ESCOM spokeswoman Kitty Chingota said by email.Joseph Kalowekamo of the Department of Energy noted fears customers will compensate for a decrease in their electricity supply by turning to wood for fuel. Malawi's forests are already disappearing at an alarming rate. According to the Department of Forestry, the country loses between 1.6 and 2.8 percent of its forests every year. "People are now using charcoal and firewood more because power is intermittent due to massive load shedding," Kalowekamo said. The shift could exacerbate Malawi's power problems, as deforestation in Lake Malawi's catchment areas may further reduce rainfall and, in turn, power generation. "It is a vicious cycle," said Kalowekamo.

Two Dams Collapse at Brazilian Mine, Village Engulfed in ‘Thick, Red Toxic Mud’ --Two dams collapsed at the Germano iron ore mine in Brazil’s state of Minas Gerais yesterday, unleashing “a deluge of thick, red toxic mud that engulfed a village,” according to RTE News. Dozens are missing, but the exact number of injured and dead are unknown. Reuters currently reports 30 injured and two dead, while RTE News reports 50 injured and 17 dead. The death toll is expected to rise as recovery efforts have been hampered by the mudslides, which knocked out roads and cell towers.“In reality there are a lot more [dead], but we can’t confirm any more than that. We don’t even know that we’ll find everybody,” “The organization is mobilizing every effort to prioritize care for people and the mitigation of environmental damage,” Samarco, the company that runs the mine, told GloboNews. An employee for Samarco told GloboNews that there were reports of seismic activity in the area leading up to the incident, however the company’s press representatives said, “We can not at this time confirm the causes and extent of the incident.” “The collapse paralyzed operations at the mine, a joint venture between Vale and BHP Billiton, the world’s top iron ore miners and raised fears of an expensive cleanup,” said Reuters. Television footage showed a torrent of muck several hundred meters long that had swamped houses and ripped off their roofs. The mud reached the intact roofs of some houses, atop of which stranded people waited to be rescued. Some homes appeared to have been swept hundreds of meters by the rushing wall of mud.  The village of Bento Rodrigues near the dam is practically buried, the fire chief said.

Brazil, land of water, goes thirsty - The sign -- "risk of drowning" -- outside one of Rio de Janeiro's freshwater reservoirs looks like a joke: there's no water here left to drown in. Instead, the Saracuruna reservoir near Duque de Caxias, outside Rio, is an expanse of sand, mud and vegetation. Four stray dogs scamper and cattle come to drink from a stream still running through the middle. "It's been a long time since there was any water here," said a security guard walking up the dry bed to order AFP journalists away on Friday. The scene at Saracuruna is repeated across much of eastern Brazil between Rio and the megacity of Sao Paulo, with reservoirs and rivers running dry and authorities scrambling to avoid having to impose rationing. Rio de Janeiro state's environmental department blames "the worst drought in 85 years" for the crisis, while independent activists say decades of bad policy is equally culpable. Scale that havoc up on a national level and you get the picture of what's happening along the huge system of reservoirs stretching through Sao Paulo and Rio states. The Paraibuna reservoir, biggest in the chain serving Rio de Janeiro, is heading inexorably to dead pool status, meaning the remaining water is not usable. In all, the four main reservoirs of the Paraiba do Sul network dipped this month to less than six percent of active volume. The Cantareira system feeding Sao Paulo is in only slightly better shape, with 16 percent of active water left. A graphic on the water authority's website shows the dial hovering above the red danger zone. And the southeast is not the only area suffering. The biggest reservoir of the northeast, Sobradinho, is reported to have fallen to less than six percent active capacity. - Crisis? No, it's worse -

New NASA data shows Brazil's drought deeper than thought: - New satellite data shows Brazil's drought is worse than previously thought, with the southeast losing 56 trillion liters of water in each of the past three years - more than enough to fill Lake Tahoe, a NASA scientist said on Friday. The country's most severe drought in 35 years has also caused the Brazil's larger and less-populated northeast to lose 49 trillion liters of water each year over three years compared with normal levels, said NASA hydrologist Augusto Getirana. Brazilians are well aware of the drought due to water rationing, power blackouts and empty reservoirs in parts of the country but this is the first study to document exactly how much water has disappeared from aquifers and reservoirs, Getirana said. "It is much larger than I imagined," Getirana told the Thomson Reuters Foundation. "With climate change, this is going to happen more and more often." The Cantareira water reservoir system providing water for 8.8 million residents of Sao Paulo, Brazil's largest city, for example, was filled to less than 11 percent of its capacity last year, local officials reported. Getirana's research, published this week in the Journal of Hydrometeorology, relies on 13 years of data from NASA's Gravity Recovery and Climate Experiment (GRACE) satellites which circle the earth detecting changes in the gravity field caused by movements of water on the planet.

Vast Amazon wildfire destroys forest in Brazil and threatens uncontacted tribe – ‘We will suffer greatly without our forest’ – Brazilian rangers, firefighters and indigenous communities are battling against a wildfire that has blazed for two months and devastated some of the last Amazonian forest in the northern state of Maranhão, including part of the territory of an uncontacted tribe. The fire – which has spread across 100km at its peak – is thought to be the biggest in Indian territory for decades and has prompted the local government to declare a state of emergency. It comes amid rising tension between indigenous “forest guardians” and illegal loggers, prompting speculation among officials and environmentalists that the blaze may have been started deliberately.  According to Greenpeace, the fire has already consumed 45% of the 413,000-hectare (1m acre) Indigenous Territory of Arariboia, despite the efforts of 250 firefighters.Worst affected are the 12,000 people from the Guajajara ethnic group, whose communities have been surrounded by flames. There are also fears for the approximately 80 members of the Awá-Guajá, an uncontacted tribe.

One-Third of World’s Orangutans at Risk From Fires in Sumatra and Borneo  -- Despite some rainfall in the last few days, thousands of fires continue to burn on the main islands of Sumatra and Borneo. Unlike previous years, when fires mainly impacted agricultural land, these fires, fueled by a particularly dry season due to El Nino, have swept into national parks and primary forests, the last refuges for so many iconic endangered species, such as orangutans, rhinoceros and tigers. All these animals hover on the brink of extinction and now the odds have been tipped even further against them. It is estimated that a third of the world’s orangutan population is under threat with many already dying and orphans flooding into rescue centers. Data released last week by Guido van der Werf on the Global Fires Emissions Database estimate emissions generated every day from the fires exceeds that of the average daily emissions for the entire U.S. economy. The U.S economy is 20 times the size of Indonesia’s. Van der Werf estimates that over just 3 weeks of burning, the fires in Indonesia exceeded the entire annual CO2 emissions of Germany. These are staggering statistics and illustrate just how critical it is that the world pays attention, supports the Indonesian government to enforce a fire moratorium, provides sophisticated fire fighting equipment, and holds palm oil corporations and companies using palm oil in their products to account over plantation practices. These figures are even more disturbing because the fires are in peatlands. Not only are tropical peatlands significant carbon storage areas but when they burn they emit up to 10 times more methane than fires in non-peat lands. Nancy Harris and others, including the World Resources Institute, suggest that when the emissions from both the draining of peatlands for plantations and the fires are taken into account the methane released is 200 times more than that emitted from fires in any other land areas.

Malaysia environment minister: ‘Unless there is rain, there is no way human intervention can put out the Indonesia fires’ (AFP) – International efforts to douse raging Indonesia fires will fail and Southeast Asia could face several more weeks of choking smoke until the rainy season starts, Malaysia's environment minister warned on Monday, October 19. Facing growing pressure, Indonesia earlier this month agreed to accept international help after failing for weeks to douse the fires from slash-and-burn farming that have shrouded angry neighbors Malaysia and Singapore in smoke for weeks. But Malaysia was forced once again to close schools in several areas Monday due to unhealthy air, and Natural Resources and Environment Minister Wan Junaidi Tuanku Jaafar said the crisis could continue for another month.   "Unless there is rain, there is no way human intervention can put out the fires," he told AFP on the sidelines of Malaysia's parliament session, warning that the blazes were spread across "huge areas" of Indonesia.   Even the multi-nation effort now under way "is not enough to put out the fires," he added.   "We hope the rains will come in mid-November. It will be able to put out the fires," Wan Junaidi said. […]  The fires and resulting region-wide haze are an annual dry-season problem, but experts warn the current outbreak is on track to become the worst ever, exacerbated by tinder-dry conditions from the El Nino weather phenomenon.  The acrid air has sparked health alerts, sent thousands to hospitals for respiratory problems, and caused the cancellation of scores of flights and some major international events across the region.  Sutopo said satellite data indicated Indonesia now had more than 1,500 "hotspots", which are loosely defined as areas where fires are either burning or where conditions are ripe for blazes to break out.

Photo gallery: Satellite views of smoke and fires in Indonesia, October 2015 - Heavy smoke continued to pour from peat fires in Borneo, Indonesia, when the Moderate Resolution Imaging Spectroradiometer (MODIS) on NASA’s Aqua satellite captured this image on 19 October 2015. Red outlines indicate hot spots where the sensor detected unusually warm surface temperatures associated with fires. Gray smoke hovers over the island and has triggered air quality alerts and health warnings in Indonesia and neighboring countries. Small cumulus clouds are visible along Borneo’s southern coast. The lower image shows a more detailed view of some of the fires.  Fires are a common occurrence in Borneo in September and October because farmers engage in “slash and burn agriculture,” a technique that involves frequent burning of rainforest to clear the way for crops or grazing animals. In southern Borneo, the intent is often to make room for new plantings of oil palm and acacia pulp.  Many of the fires are burning in areas with soils underlain with peat—a soil-like mixture of partly decayed plant material formed in wetlands. Peat fires tend to be difficult to extinguish, often smoldering under the surface for months.  In comparison to other types of fires, peat fires release unusually large amounts of certain pollutants. For instance, peat fires release three times as much carbon monoxide and ten times as much methane as savanna fires, according to emission factors used by Vrije Universiteit Amsterdam scientist Guido van der Werf to quantify the amount of pollution released by the fires. According to Van der Werf, the fires in Indonesia have emitted an estimated 1.1 billion tons of carbon dioxide equivalents so far this year. That is more than the average annual emissions of Germany.  MODIS sensors on the Terra and Aqua satellites have detected fires burning in southern Sumatra since early September. Scientists monitoring the fires expect the fires to continue burning until the monsoon rains arrive at the end of October. However, they caution that the dry season could be unusually long in Indonesia this year because of the strong El Niño present in the Pacific Ocean.

How Indonesia's fires became one of the world's biggest climate disasters - Vox: One of the worst eco-disasters on the planet is currently unfolding in Indonesia. Over the past two months, thousands of forest and peatland fires have been raging out of control, choking the entire region in a thick, toxic haze. The enormous smoke columns can be seen from space. NASA snapped this satellite pic of peat fires in Borneo on October 19:    The fires themselves have been a public-health nightmare, forcing multiple evacuations, killing at least 19, and triggering respiratory illnesses in more than half a million people. Noxious haze and harmful particulate pollution has stretched as far as Malaysia and Singapore. It's also terrible for climate change. So far this year, these fires have released more greenhouse gases into the atmosphere than all the fossil fuels burned annually in Germany. On at least 38 days in September and October, Indonesia's fires were spewing more daily emissions than the entire United States economy.**  Calamitous fires in Indonesia are nothing new.   But this year is on track to be one of the worst ever recorded, with nearly 120,000 active fires detected already. So what's going on?  For decades, Indonesia's farmers have been intentionally setting fires to clear away rainforest for farmland and produce commodities like palm oil, a popular ingredient in processed foods and cosmetics. The country's small farmers are legally allowed to burn up to 2 hectares, though enforcement is lax, and experts say many people set fires illegally to grab extra land. The real problems start when these fires occur in areas rich in peat, a dense, soil-like mixture of partially decayed leaves and branches. Fires in these peatlands can proliferate uncontrollably, smoldering underground for weeks, feeding off the soil, releasing toxic pollutants and vast quantities of carbon dioxide and methane all the while. Peat fires often don't stop until heavy rains come along to extinguish them.

Global warming, increasing aridity and rapidly expanding human population will lead to drylands covering half of the Earth’s land surface by the end of this century − If global greenhouse gas emissions continue to rise, the outlook for at least half the inhabited planet looks arid. By 2100, according to new research, at least half − and perhaps as much as 56% − of the land surface of the planet will be classified as dryland. Dryland, to a geographer, is not desert: it is terrain on which rain certainly falls, but rainfall is balanced by evaporation and transpiration through plant tissues. That is, dryland offers a precarious living to a sparse population. It doesn’t take much – overgrazing, erosion, ambitious cropping − to tip the balance and turn the land into desert. Right now, 38% of humanity makes a living on the drylands.  So the report in Nature Climate Change by atmospheric scientist Jianping Huang and colleagues at Lanzhou University in China that under global warming scenarios, drylands are to expand is very bad news for those who are already among the poorest in the world. That is because 78% of expansion of drylands – and 50% of the planet’s population growth – will occur in the developing countries. Climate scientists have already predicted that, in a warming world, arid regions are likely to get even less rain, while humid ones could be at greater risk of flooding.  Professor Huang and his colleagues took two climate simulations and projected them backwards in time, and forwards − the first to check the simulation against recorded data from the period 1961-1990, and then to fine-tune the future projections. They found that climate models so far have underestimated the global trends in drying regions. Temperatures will rise, and so will levels of aridity. But as population will also rise, along with pressure on existing farm and rangeland, so will the risk that ever greater areas of the drylands will become degraded and, in effect, desert lands.

The Free Trade agreement between the EU and Canada threatens water management -- During the secret negotiations of the free trade agreement between the European Union and Canada (know as CETA), the European Commission always maintained that water would be excluded from the treaty, and that the choice on how to manage Services of General Economic Interest (SGEI) related to water (production and distribution of drinking water and sanitation, among others) by the public authorities would not be questioned. But a careful reading of the consolidated text of CETA, released the 26th of September of 2014 shows that the reality is different. The article "Rights and Obligations Relating to Water" is written in fuzzy legal terms, sometimes even in contradiction with EU and national legislation. No doubt the vagueness and loopholes in this article will facilitate a corporate capture of water by multinational companies in Europe and Canada. The article states that "water in its natural state [...] is not a good or a product and therefore [...] is not subject to the terms of this Agreement." But almost all water uses (drinking water, sanitation or agricultural irrigation) involves water extracted from its natural environment. It could, therefore, be considered as a good and a product, and could be treated as a commodity and therefore subject to CETA. The article adds: " Where a Party permits the commercial use of a specific water source, it shall do so in a manner consistent with the Agreement" without clearly defining what is a "commercial use” for water or a "specific water source." Currently it is up to Member States in Europe to allocate water abstraction rights and they do so by different criteria, but not with criteria based on trade and investment that can be found in free trade agreements. Under these conditions there is no other way to read this article as anything but one additional tool to move towards an increased water commodification.

It’s been Australia’s hottest ever October, and that’s no coincidence - This has been Australia’s hottest October on record.  New record highs have been set for monthly and seasonal average temperatures across Australia at 12 times the rate of new record lows. Global warming is the cause.To understand the role of human-caused global warming in the new records we compare simulations of the Earth’s climate from nine different models from around the world. We only select climate models that do a good job of simulating the natural year-to-year variability of Australian temperatures. We then compare simulations for the current climate (with human influence) and for the climate without human influence. This approach has been used already to show the important role of global warming in record high Australian temperatures in 2013. Using this method we can figure out the chances of breaking a record even before it happens. The previous hottest October in Australia was in 2014 with a temperature of 32.9°C. Our analysis shows an increase by at least a factor of six in the chances of setting the new October record maximum temperature for Australia due to global warming.  But we also have to factor in El Niño. As noted by the Bureau of Meteorology, such hot and dry spells are typical for the strong El Niño that is currently occurring in the Pacific Ocean.

El Niño Could Push CO2 Permanently Above Milestone - El Niño has its fingers in a lot of pies this year: Not only is it helping to boost 2015 toward the warmest year on record, but it is also a major factor in blockbuster hurricane activity in the Pacific and is contributing to a major worldwide coral die-off.  By this time next year we’ll probably be able to add another effect to that list: This El Niño is likely to tip us over into a world with carbon dioxide concentrations permanently above 400 parts per million.  “Will daily values at Mauna Loa ever fall below 400 ppm again in our lifetimes? I’m prepared to project that they won’t, making the current values the last time the Mauna Loa record will produce numbers in the 300s,” Ralph Keeling, the director of the CO2 Program at the Scripps Institution of Oceanography, said in an Oct. 21 blog post.  Because of unabated manmade emissions, the levels of carbon dioxide in Earth’s atmosphere are rising every year, which is, in turn, driving up the planet’s temperature.  Since measurements began atop Hawaii’s Mauna Loa volcano in 1958 (an effort begun by Keeling’s father, Charles Keeling), atmospheric CO2 concentrations have risen from about 315 ppm to nearly 400 ppm. The graph showing that continuous uptick was dubbed the Keeling Curve. (Before the Industrial Revolution began, CO2 was around 280 ppm.) Embedded in the overall rise of CO2 on the graph are the annual wiggles that show the change of CO2 with the seasons. The rise and fall trails the spring bloom and fall die-off of plants in the Northern Hemisphere, as they suck up and then release CO2. Levels usually peak in May and bottom out in September.

Deadly 60°C days will come to the Persian Gulf | Science/AAAS  - Late in this century, some regions along the coast of the Persian Gulf may experience heat waves that are literally intolerable, climate simulations suggest. If increases in emissions of carbon dioxide continue unabated, concentrations of the planet-warming gas will reach about 940 parts per million (ppm) at the end of the century, researchers estimate. (For comparison, before the Industrial Revolution began in the late 1700s, natural concentrations of CO2 were about 280 ppm.) Under such conditions, high temperatures in Kuwait City will top 60°C (140°F) during the summer months in some years between 2071 and 2100, the researchers report online today in Nature Climate Change. Moreover, temperatures exceeding 45°C (113°F) will be routine for many of the low-lying cities around the Persian Gulf. These sweltering conditions, when combined with the relatively high humidity typically found in coastal areas surrounding the gulf, can easily be fatal, the researchers say: In many cities of the region, including Dubai, United Arab Emirates (skyline shown); Doha; and Bandar Abbas, Iran, one measure of mugginess (which considers a combination of heat and humidity measured over a 6-hour period) will become so high outdoors that even young, healthy people will have difficulty sweating to shed body heat, never mind the threat to children and elderly people with lower heat tolerance. Another way to look at this region’s future climate, the team notes: Extreme temperatures that are now seen only three times per summer, on average, will become normal and occur, on average, every other day in the summers between 2071 to 2100.

Cyclone Chapala Could Bring Eight Years Worth of Rain to Yemen and Oman - Over the past 36 hours, Cyclone Chapala has rapidly intensified and is now the equivalent of a category four hurricane. The storm appears especially formidable in satellite photos, and now almost assuredly will become the first hurricane-strength storm to strike Yemen in recorded history. The latest computer models and official forecasts have become more confident of a landfall in Yemen near the key port city of Al Mukalla—with population of about 300,000 and an Al Qaeda stronghold in the current civil war—on Monday. Though drier air from the Arabian Peninsula will cause Chapala's winds will weaken as it nears landfall, catastropic flooding—prompted by several years' worth of rain in just a day or two—still seems likely for parts of Yemen and Oman. An epic deluge is on the way to one of the driest parts of the world. Coastal parts of Yemen and Oman receive, on average, only 4 or 5 inches each year. This weekend, thanks to Cyclone Chapala, some spots could get eight years worth of rain in just two days.

Cyclone Chapala Still Looking Nasty as it Advances on Yemen - Yemen is in for a mess as last week’s rapidly-growing Cyclone Chapala continues to hold it together while approaching the dry desert air. If it makes landfall, it’s anticipated to be the largest storm to hit the country since we started recording them.  Based on the latest reports from the Joint Typhoon Warning Center, the storm is currently experincing maximum sustained winds of just under 200 kilometers per hour (120 miles per hour) with gusts up to 240 kilometers per hour (150 miles per hour). Although the storm is maintaing its tight cyclone structure with a distinct eye, the winds are slowing compared to Friday and the forecasters are anticipating the storm will quickly disintegrate in the dry desert air after making landfall near Mukalla on Tuesday. Seas are already rising with the storm surge, with local residents reporting up to 9 meters (29 feet) of sea level rise along the Mukalla waterfront.  We usually see a handful of tropical cyclones in the Indian Ocean every year—they’re more common on the other side of India—but storms that form in the Arabian Sea usually don’t get this strong and they usually don’t make it to landfall. Only Cyclones Gonu (2007) and Phet (2010) are recorded to have made landfall on the Arabian Peninsula with winds equivalent to those of a hurricane, but those were both in Oman, and there are no records of a cyclone this strong making ever landfall in Yemen.

Tropical cyclone dumping years' worth of rain on war-torn Yemen in one day -- Ravaged by months of war, Yemen is now being battered by the first tropical storm on record to make landfall in the impoverished Arab country. Tropical Cyclone Chapala slammed into Yemen's central coast early Tuesday, lashing the area with maximum sustained winds of around 140 kph (85 mph). But the major concern is the extraordinary volume of rain the storm is expected to dump on the country's dry, rugged terrain, bringing a severe threat of mudslides. Yemen typically gets around 100 millimeters (4 inches) of rain per year. Chapala is forecast to unleash two to three times that amount in the space of just one day. The deluge is likely to cause "massive debris flows and flash flooding," CNN meteorologist Tom Sater warned. The storm made landfall not far from Al Mukalla, a port that al Qaeda in the Arabian Peninsula seizedearlier this year amid the chaotic conflict engulfing Yemen. 'We have no one to help us'The country isn't used to finding itself in the path of tropical cyclones. Reliable records, which only go back about 30 years, show no landfalls by hurricane-strength tropical cyclones in Yemen. Chapala, which was the equivalent of a Category 1 hurricane early Tuesday, had at one point been the second strongest storm ever recorded in the Arabian Sea

Cyclone Chapala 'live': 10 years of rain in 2 days; 22ft high waves -- A rare tropical cyclone has slammed into Yemen, triggering heavy flooding and causing ‘enormous’ damage, a senior official said Tuesday. Packing winds of more than 100km per hour, Cyclone Chapala made landfall in the southeastern provinces of Hadramawt and Shabwa, Minister of Fisheries Fahd Kafain said. "The damage is enormous and we fear human losses," said the minister, part of a commission set up to deal with the cyclone that brewed in the Arabian Sea. The storm earlier wreaked havoc on the island of Socotra located 350km off the Yemeni mainland. More than 200 people were injured and dozens of houses and hamlets were severely damaged or washed away, said Salem Zaher, mayor of the island's main district Hadibo. Images posted on social media showed heavy floods hitting the streets of Mukalla, the provincial capital of Hadramawt. Cars were half-submerged in muddy water while seafront roads were badly damaged by high waves. "The rainfall from Chapala is far beyond anything ever witnessed in this arid area which is not used to cyclones," the UN weather agency said on Monday. The ‘very severe cyclonic storm’ brought maximum sustained winds of 130km per hour with gusts of up to 145km per hour when it made landfall, it said in a joint update on Tuesday with India's meterological agency. But the cyclone had since lost strength and was expected to weaken into a tropical depression during the next 12 hours, it added.

Cyclone Chapala Ravages Yemeni Coast, Residents Unlikely to See Meaningful Help: Cyclone Chapala made a historic landfall along the coast of Yemen early on Tuesday, becoming the first hurricane-strength storm to make landfall there since reliable records began. The cyclone came ashore near Al Mukalla, an Al Qaeda-controlled city that’s home to more than 100,000 people. While Chapala had winds equivalent to a category one hurricane at landfall, the major story with this storm is rainfall. Most of Yemen lies in a true desert climate, only seeing a few inches of rain every year. Some spots can go several years without seeing any rain at all. Weather models indicated that up to a foot of rain was possible as the storm moved inland, and heavy rain falling on extremely arid ground has the same effect as spraying a garden hose on concrete. The Weather Channel reports that three people died on the Yemeni island of Socotra after Chapala’s eye grazed the beautiful island in the Arabian Sea. The island’s rough terrain allowed for flash floods and landslides as the storm dumped many times its annual rainfall in short order. Socotra is famous for its unique flora and fauna, including its instantly recognizable dragon blood trees.  Pictures posted to Twitter from mainland Yemen show devastating flooding throughout Al Mukalla after heavy rain turned roads to rivers and floodwaters inundated just about every building in sight.

New report finds human-caused climate change increased the severity of many extreme events in 2014 - NOAA -- Human activities, such as greenhouse gas emissions and land use, influenced specific extreme weather and climate events in 2014, including tropical cyclones in the central Pacific, heavy rainfall in Europe, drought in East Africa, and stifling heat waves in Australia, Asia, and South America, according to a new report released today. The report, “Explaining Extreme Events of 2014 from a Climate Perspective” published by the Bulletin of the American Meteorological Society, addresses the natural and human causes of individual extreme events from around the world in 2014, including Antarctica. NOAA scientists served as three of the five lead editors on the report.   "For each of the past four years, this report has demonstrated that individual events, like temperature extremes, have often been shown to be linked to additional atmospheric greenhouse gases caused by human activities, while other extremes, such as those that are precipitation related, are less likely to be convincingly linked to human activities,” said Thomas R. Karl, L.H.D., director of NOAA’s National Centers for Environmental Information. In this year’s report, 32 groups of scientists from around the world investigate 28 individual extreme events in 2014 and break out various factors that led to the extreme events, including the degree to which natural variability and human-induced climate change played a role. When human influence for an event cannot be conclusively identified with the scientific tools available today, this means that if there is a human contribution, it cannot be distinguished from natural climate variability. 

Miami Beach’s battle to stem rising tides - This foundation for Miami Beach’s future is actually a complicated and expensive experiment: As much as $500 million to install 80 pumps and raise roads and seawalls across the city. A first phase appears to be working, at least for now. But just one year into a massive public works project that could take six more, it’s way too soon to say whether and for how long it can keep the staggeringly valuable real estate of an international tourist mecca dry — especially in the face of sea level rise projections that seem to only get scarier with every new analysis. "We don’t have a playbook for this," said Betsy Wheaton, assistant building director for environment and sustainability in Miami Beach. But in many ways, Miami Beach is writing just that — the first engineering manual for adapting South Florida’s urban landscape to rising seas. The entire southern tip of the peninsula tops climate change risk lists but Beach leaders have acted with the most urgency, waiving competitive bidding and approving contracts on an emergency basis to fast-track the work. Tidal flooding lapping at posh shops and the yards of pricey homes makes a persuasive argument that climate change isn’t only real, but a clear and present threat.

Abrupt Climate Change Can Occur Even Before a 2-Degree Rise in Warming - ——Climate change could arrive with startling speed. New research has identified at least 37 “tipping points” that would serve as evidence that climate change has happened—and happened abruptly in one particular region. And 18 of them could happen even before the world warms by an average of 2°C,  the proposed “safe limit” for global warming. Weather is what happens, climate is what people grow to expect from the weather. So climate change, driven by global warming as a consequence of rising carbon dioxide levels, in response to more than a century of fossil fuel combustion, could be—for many people—gradual, imperceptible and difficult to identify immediately.  But Sybren Drijfhout, of the University of Southampton in the UK and his collaborators in France, the Netherlands and Germany, are not so sure.  They report in the Proceedings of the National Academy of Sciences that they “screened” the massive ensemble of climate models that inform the most recent reports from the Intergovernmental Panel on Climate Change, and found evidence of abrupt regional changes in the ocean, the sea ice, the snow cover, the permafrost and in the terrestrial biosphere that could happen as average global temperatures reached a certain level.  The models did not all simulate the same outcomes, but most of them did predict one or more abrupt regional shifts.

Climate change could have a significant impact on our economy ---  Climate change may have many economic impacts, including loss of crops, changes in water supply, increased incidence of natural disaster, and spikes in health care costs related to infectious diseases and temperature-related illnesses. However, hard evidence about the effects of climate change on economic activity has been inconsistent. A new paper published in Nature takes on the ambitious task of connecting micro- and macro-level estimates of climate costs. The study finds that climate change can be expected to reshape the global economy by reducing average global incomes roughly 23 percent by the year 2100. This study is important because it solves a problem that has existed in prior models of climate change effects on economics: discrepancies between macro- and micro-level observations. This study presents the first evidence that economic activity in all regions is coupled in some way to global climate. The study also sets up a new empirical paradigm for modeling economic loss in response to climate change.   The main results from this analysis show that there is an overall non-linear pattern in the relationship between temperature and economic development. Instead of a linear relationship, the productivity rises steadily and slowly until it reaches a peak at the ideal average annual temperature for productivity (55 degrees Fahrenheit or 15 degrees Celsius). Then, past this peak ideal temperature, there is a very sharp and steady decline in productivity as temperatures continue to rise. This relationship is partially due to geographic effects, as most low-income countries are in warmer regions and therefore likely to suffer stronger effects from climate change. By contrast, richer and more industrialized countries tend to be in more temperate areas, so climate change will have a less severe effect on their economies.

Abrupt changes in food chains predicted as Southern Ocean acidifies fast: study: The Southern Ocean is acidifying at such a rate because of rising carbon dioxide emissions that large regions may be inhospitable for key organisms in the food chain to survive as soon as 2030, new US research has found. Tiny pteropods, snail-like creatures that play an important role in the food web, will lose their ability to form shells as oceans absorb more of the CO2 from the atmosphere, a process already observed over short periods in areas close to the Antarctic coast. Ocean acidification is often dubbed the "evil twin" of climate change. As CO2 levels rise, more of it is absorbed by seawater, resulting in a lower pH level and reduced carbonate ion concentration. Marine organisms with skeletons and shells then struggle to develop and maintain their structures. Using 10 Earth system models and applying a high-emissions scenario, the researchers found the relatively acidic Southern Ocean quickly becomes unsuited for shell-forming creatures such as pteropods, according to a paper published Tuesday in Nature Climate Change. "What surprised us was really the abruptness at which this under-saturation [of calcium carbonate-based aragonite] occurs in large areas of the Southern Ocean,"  "It's actually quite scary." Since the Southern Ocean is already close to the threshold for shell-formation, relatively small changes in acidity levels will likely show up there first, Professor Timmermann said: "The background state is already very close to corrosiveness."

Scientists confirm that East Antarctica’s biggest glacier is melting from below -- Earlier this year, we learned some worrisome climate news. Although Antarctic scientists have been most concerned about loss of ice in the western part of Antarctica, a study in Nature Geoscience suggested a vulnerability in the much larger ice sheet of East Antarctica, as well. East Antarctica’s enormous Totten Glacier, you see, has a key similarity with the glaciers of West Antarctica — namely, it is rooted deep below sea level. This means that it is potentially exposed to warm ocean waters, and the study in March uncovered a deep and 5-kilometer wide subsea valley beneath the glacier’s oceanfront ice shelf that, the authors said, could be a route for warm offshore water to reach its base. This might explain why the glacier has been observed to be thinning and lowering, or losing elevation, over time, they noted. Located along East Antarctica’s Sabrina Coast, Totten glacier is the ice sheet’s largest. It holds back 3.9 meters of potential sea level rise, or over 12 feet, and connects with the very deep and vast Aurora Subglacial Basin, which is also rooted well below sea level. So the results were treated as being of enormous consequence. But they’re not the end of the story, as there is vastly more to learn about Totten glacier.  A new study out in Geophysical Research Letters reaffirms some of these core concerns about Totten’s melt — while also appearing to partly alleviate others.  The research found that between 1996 and 2013 Totten’s grounding line retreated as much as 3 kilometers in some places. That’s fast, but it’s not nearly so fast as what has been happening in West Antarctica, where the retreat in some areas has been as much as one to two kilometers per year.

NASA Study: Mass Gains of Antarctic Ice Sheet Greater than Losses -- A new NASA study says that an increase in Antarctic snow accumulation that began 10,000 years ago is currently adding enough ice to the continent to outweigh the increased losses from its thinning glaciers. The research challenges the conclusions of other studies, including the Intergovernmental Panel on Climate Change’s (IPCC) 2013 report, which says that Antarctica is overall losing land ice. According to the new analysis of satellite data, the Antarctic ice sheet showed a net gain of 112 billion tons of ice a year from 1992 to 2001. That net gain slowed   to 82 billion tons of ice per year between 2003 and 2008.  “We’re essentially in agreement with other studies that show an increase in ice discharge in the Antarctic Peninsula and the Thwaites and Pine Island region of West Antarctica,” said Jay Zwally, a glaciologist with NASA Goddard Space Flight Center in Greenbelt, Maryland, and lead author of the study, which was published on Oct. 30 in the Journal of Glaciology. “Our main disagreement is for East Antarctica and the interior of West Antarctica – there, we see an ice gain that exceeds the losses in the other areas.”  Zwally added that his team “measured small height changes over large areas, as well as the large changes observed over smaller areas.” Scientists calculate how much the ice sheet is growing or shrinking from the changes in surface height that are measured by the satellite altimeters. In locations where the amount of new snowfall accumulating on an ice sheet is not equal to the ice flow downward and outward to the ocean, the surface height changes and the ice-sheet mass grows or shrinks.

What’s up with Antarctica gaining ice? -- A new NASA study found that Antarctica is gaining more ice than it’s losing. But that isn’t a sign that climate change is slowing down. A team of researchers from NASA’s Goddard Space Flight Center, the University of Maryland in College Park, and Maryland-based engineering firm Sigma Space Corporation analyzed satellite data and found that the continent gained 112 billion tons of ice per year from 1992 to 2001. But then that rate slowed down, to 82 billion tons of ice per year between 2003 and 2008. If the trend continues, it would take only 20 or 30 years for the ice melt in Antarctica to outweigh the ice gains, according to Jay Zwally, a NASA glaciologist and the lead author on the study. “I don’t think there will be enough snowfall increase to offset these losses,” Zwally said in a statement on Friday. In other words, we’re not in the clear. Zwally’s team’s findings conflict with other studies on ice levels in East Antarctica. “We’re essentially in agreement with other studies that show an increase in ice discharge” in other parts of the continent, Zwally said. “Our main disagreement is for East Antarctica and the interior of West Antarctica; there, we see an ice gain that exceeds the losses in the other areas,” he said. Specifically, the discrepancy stems from the fact that other scientists assumed increased land elevation in East Antarctica was due to increased snowfall in the region, rather than thicker ice. But Zwally’s team found that snow accumulation in the region has actually been declining — leaving only the possibility that the elevation is due to the presence of more ice.

Q&A: Is Antarctica gaining or losing ice? -- A new study from scientists at NASA has whipped up a storm in the media by claiming that gains in East Antarctica ice have been outweighing losses in the West Antarctic and the Antarctic Peninsula.  The research has been covered widely by newspapers and websites, prompting a range of headlines, from, “Antarctica is gaining ice. Here’s why that’s not actually good news”, in Newsweek to, “Expanding Antarctica eases threat from rising sea levels”, in the Times.  A Daily Express headline even suggested the research questioned the fundamentals of climate change: “What global warming? Antarctic ice is INCREASING by 135 billion tonnes a year, says NASA.”  With other outlets reporting that scientists are disputing the new study’s results, confusion is rife. So, what did the study actually find? How does it fit with other research? What does it mean for sea levels? Carbon Brief answers some of the questions the new research raises.

Concern for Earth must be priority, cardinal from Ghana tells central Ohioans -- A Roman Catholic cardinal who helped Pope Francis write a wide-ranging environmental document said on Monday that humankind must experience an ecological conversion to save not only the Earth, but also its poorest and most vulnerable inhabitants. Cardinal Peter Turkson of Ghana told a packed auditorium at Ohio State University’s Wexner Center for the Arts that the way we treat the Earth and the way we treat one other — including the poor, the elderly and the disabled — are inextricably linked. “The Earth, our mother, is crying badly from abusive treatment, just as the poor in our midst are also crying,” Turkson said. “So, in this encyclical, two elements are crying, two fragile elements — the Earth abusively treated and segments of our society, which according to Pope Francis are excluded.” Turkson, president of the Pontifical Council for Justice and Peace, has been in Columbus for several days to spread the word about the pope’s Laudato Si, On Care for Our Common Home. The 191-page encyclical, or teaching document, has received support from climate-change experts and environmental advocates from various religious and academic backgrounds.

Russian media take climate cue from skeptical Putin – ‘There is no global warming, this is a fraud to restrain the industrial development of several countries, including Russia (Reuters) – Wildfires crackled across Siberia this summer, turning skies ochre and sending up enough smoke from burning pines to blot out satellite views of the 400-mile-long Lake Baikal.  To many climate scientists, the worsening fires are a consequence of Siberia getting hotter, the carbon unleashed from its burning forests and tundra only adding to man-made fossil fuel emissions. Siberia's wildfire season has lengthened in recent years and the 2015 blazes were among the biggest yet, caking the lake, the "Pearl of Siberia", in ash and scorching the surrounding permafrost. But the Russian public heard little mention of climate change, because media coverage across state-controlled television stations and print media all but ignored it. The indifference reflects widespread public doubt that human activities play a significant role in global warming, a tone set by President Vladimir Putin, who has offered only vague and modest pledges of emissions cuts ahead of December's U.N. climate summit in Paris.   Russia's official view appears to have changed little since 2003, when Putin told an international climate conference that warmer temperatures would mean Russians "spend less on fur coats" while "agricultural specialists say our grain production will increase, and thank God for that".  The president believes that "there is no global warming, that this is a fraud to restrain the industrial development of several countries including Russia," says Stanislav Belkovsky, a political analyst and critic of Putin. "That is why this subject is not topical for the majority of the Russian mass media and society in general."

Paris climate deal to ignite a $90 trillion energy revolution - Telegraph: The fossil fuel industry has taken a very cavalier bet that China, India and the developing world will continue to block any serious effort to curb greenhouse emissions, and that there is, in any case, no viable alternative to oil, gas or coal for decades to come. Both assumptions were still credible six years ago when the Copenhagen climate summit ended in acrimony, poisoned by a North-South split over CO2 legacy guilt and the allegedly prohibitive costs of green virtue. At that point the International Energy Agency (IEA) was still predicting that solar power would struggle to reach 20 gigawatts by now. Few could have foretold that it would in fact explode to 180 gigawatts - over three times Britain’s total power output - as costs plummeted, and that almost half of all new electricity installed in the US in 2013 and 2014 would come from solar.Any suggestion that a quantum leap in the technology of energy storage might soon conquer the curse of wind and solar intermittency was dismissed as wishful thinking, if not fantasy. Six years later there can be no such excuses. As The Telegraph reported yesterday, 155 countries have submitted plans so far for the COP21 climate summit to be held by the United Nations in Paris this December. These already cover 88pc of global CO2 emissions and include the submissions of China and India. Taken together, they commit the world to a reduction in fossil fuel demand by 30pc to 40pc over the next 20 years, and this is just the start of a revolutionary shift to net zero emissions by 2080 or thereabouts. “It is unstoppable. No amount of lobbying at this point is going to change the direction,” said Christiana Figueres, the UN’s top climate official.

The Tough Realities of the Paris Climate Talks - - IN less than a month, delegates from more than 190 countries will convene in Paris to finalize a sweeping agreement intended to constrain human influence on the climate. But any post-meeting celebration will be tempered by two sobering scientific realities that will weaken the effectiveness of even the most ambitious emissions reduction plans that are being discussed.The first reality is that emissions of carbon dioxide, the greenhouse gas of greatest concern, accumulate in the atmosphere and remain there for centuries as they are slowly absorbed by plants and the oceans. This means modest reductions in emissions will only delay the rise in atmospheric concentration but will not prevent it. Thus, even if global emissions could be reduced by a heroic average 20 percent from their “business as usual” course over the next 50 years, we would be delaying the projected doubling of the concentration by only 10 years, from 2065 to 2075.  The second scientific reality, arising from peculiarities of the carbon dioxide molecule, is that the warming influence of the gas in the atmosphere changes less than proportionately as the concentration changes. As a result, small reductions will have progressively less influence on the climate as the atmospheric concentration increases. The practical implication of this slow logarithmic dependence is that eliminating a ton of emissions in the middle of the 21st century will exert only half of the cooling influence that it would have had in the middle of the 20th century.

EPA plans natural gas plant toxic release rule - If a proposed EPA rule is ultimately approved, 27 natural gas processing plants in the state — and hundreds more around the U.S. — will have to alert the federal government of any toxic chemicals they release. Answering a petition and subsequent lawsuit filed by the Washington D.C.-based Environmental Integrity Project and 16 other environmental and open government groups, the U.S. Environmental Protection Agency last month proposed adding natural gas processing facilities to the list of entities that report each year to the agency’s Toxic Release Inventory, or TRI. Created by Congress in 1986 as a way to provide the public information about the presence of toxic chemicals at facilities near residences, the TRI currently does not include facilities that process natural gas like ConocoPhillips’ San Juan Gas Plant in Bloomfield and the Enterprise Field Services LLP’s Chaco Gas Plant in the Chaco area. In an Oct. 22 letter to the environmental groups that filed the 2012 petition, EPA Administrator Gina McCarthy said that of the more than 500 natural gas processing facilities in the U.S., the agency estimated that “over half of these facilities would annually meet TRI reporting thresholds and, if covered by the reporting requirements of TRI, be required to submit TRI information to EPA.”

Will Global Warming Legislation Actually Kill Americans? -- A recent analysis by the Institute for Energy Research looks at the potentially high human cost of the American "Clean Power Plan" for the nation's existing power plants.  In this plan, the Obama Administration has set "strong but achievable standards" for power plants and "customized goals" for states to cut the level of carbon pollution that is leading to global climate change.  Through this plan, the EPA hopes to cut carbon pollution to show the world that the United States is serious about addressing climate change.   Let's look at what the Environmental Protection Agency has to say about the benefits of implementing the Clean Power Plan.  The EPA projects that implementation of the Clean Power Plan will result in the following health and financial benefits:

  • 1.) climate benefits of $20 billion
  • 2.) health benefits of $14 to $34 billion
  • 3.) net benefits of $26 to $45 billion
  • 1.) annual reduction of 3,600 premature deaths by 2030
  • 2.) annual reduction of 1,700 heart attacks
  • 3.) annual reduction of 90,000 asthma attacks
  • 4.) annual reduction of 300,000 missed work and school days

Now, let's look at what the Institute for Energy Research (IER) has to say about the Clean Power Plan.  The analysis begins by noting that there will a significant cost to implementing the Plan, totalling $479 billion over the 15 year period from 2017 to 2031 if only the first two building blocks are implemented (as noted above) according to a study completed for the coal industry (among others) by NERA Economic Consulting.   Consumers and businesses would pay $41 billion or more for electricity annually and residents in 43 states would see 12 to 17 percent increases in their electricity bills over the 15 year period. IER and NERA estimate that the health-wealth connection to the implementation of the Clean Power Plan could result in 35,000 premature deaths in total by 2030 meaning that implementation of the Plan would cause 14,000 more premature deaths than it prevents. Just in case you wondered, Freedom Partners Chamber of Commerce is the funding arm of the political network backed by the Koch Brothers.

U.S. Says VW’s Cheating Software Also Used On Audis And Porsches -- When you think Porsche, you think small, sleek, speedy two-seaters. In fact, Volkswagen, which makes Porsches, has been marketing the Porsche Cayenne SUV for 13 years. Now the aero-looking vehicle is caught up in the scandal involving VW’s use of software in diesel models that tricks emission-testing equipment into thinking its engine is cleaner than it actually is. This adds Porsche and Audi vehicles to VW’s diesel-powered Beetles, Golfs, Jettas and Passats already known to carry the “defeat device,” as it is called. The new revelation by the U.S. Environmental Protection Agency (EPA) raises further questions about how honest senior VW management has been about the problem. When news of the cheating first broke in September, the German automaker promptly admitted to the use of the software in 11 million cars sold globally, all with the VW brand. Nearly 500,000 of these vehicles were sold in the United States. Now, according to the EPA, that number has grown by more than 10,000 in the United States alone. Globally, the number could be significantly higher, given VW’s relatively small footprint in the U.S. market.

Arms-control lessons from the Volkswagen scandal | Bulletin of the Atomic Scientists: In September, the German automaker Volkswagen admitted that it had secretly programmed the computers in its diesel-engine cars to cheat mandatory pollution emission tests. Volkswagen got away with this legerdemain for years because, like most carmakers, it uses proprietary software to control its engines and other systems, software that still is not available to vehicle inspectors or independent analysts. Those concerned about international security should pay attention to the Volkswagen case, since arms-control verification relies on similarly complex combinations of software and hardware, and verification tools often use proprietary or export-controlled technology that prevents transparency and independent scrutiny. Without such transparency, it is very difficult to exclude future incidents of cheating. As long as nations take the trouble and risks to construct clandestine facilities for weapon production, what would stop them from manipulating verification devices? The range of verification tools is large, from specific codes used for modeling atmospheric transport or nuclear reactors to general software for communication and signal processing; from measurement devices, such as gamma spectrometers and neutron detectors, to common computer systems and cameras. The tools are used by both individual states and international organizations.

A DOJ Lawsuit Against Exxon, a “Slam Dunk” to Win, Would Threaten Investors and Possibly Executives --- Gaius Publius -- Bernie Sanders and Sheldon Whitehouse in the Senate, and Ted Lieu and Mark DeSaulnier in the House, have called on the Department of Justice to investigate ExxonMobil for possibly perpetrating fraud, and if warranted, launch a RICO investigation of the company (and other fossil fuel companies) similar to the tobacco industry lawsuit it launched, and won, more than a decade ago. In addition, four House members including Ted Lieu have also called on the SEC to investigate Exxon for fraud, perhaps under the Sarbanes-Oxley law. From Sen. Sanders’ letter (quoted here): “I am writing regarding a potential instance of corporate fraud – behavior that may qualify as a violation of federal law.” I’ve written about this a number of times, as have others, notably Bill McKibben. So many damaging Exxon documents have already been made public, that according to Seeking Alpha, a Department of Justice lawsuit would be a “slam dunk” to win. Duane Bair at Seeking Alpha: On October 20, 2015, Vermont Senator Bernard Sanders sent a letter to Attorney General Loretta Lynch asking the Department of Justice to investigate allegations made public through an in-depth expose by InsideClimate News. The reporters spoke with hundreds of former Exxon scientists and executives, combed through thousands of pages of scientific studies and thousands of in-house memos. Their findings are astonishing. […] Here Bair details why those findings are “astonishing.” I urge you to click through if you want a fast summary of the extend of the wrong done by Exxon executives, and how far back that wrong-doing goes. After detailing the many ways this lawsuit would be identical to the tobacco case — the comparison, as Bair lays it out, is striking — he then concludes (my emphasis): If the DOJ opts to take up the case, as Senator Sanders and several members of Congress have suggested they do, it would appear to be a slam dunk case for the Justice Department. At this point, it would be almost corrupt (though not in the money sense) for the Justice Department not to investigate.

Hillary Clinton Demands Probe of Exxon After Oil Giant Stops Funding Clinton Foundation --Hillary Clinton is now supporting a federal investigation of ExxonMobil following the latest disclosures that the giant oil company worked to hide the effects of climate change. Her call for an investigation comes only months after the company decided to stop sponsoring her family’s foundation.  The Clinton Foundation has accepted at least $1 million from ExxonMobil, despite the company’s history of financing challenges to climate science. And Clinton's State Department touted ExxonMobil as an example of how America should look at Iraq as “a business opportunity.” Clinton’s new call for a Justice Department investigation into ExxonMobil follows a similar call made by her Democratic presidential rivals Martin O’Malley and Bernie Sanders. She declared in New Hampshire Thursday that a probe was now justified because “there’s a lot of evidence that they misled” the public on the effects of climate change. There has long been ample evidence of ExxonMobil's role in promoting "skeptics" who challenge widely accepted climate science.

Fossil Fools - Well before one hottest-year-ever was followed by yet another record-breaker, before Arctic ice vanished in real time and Pope Francis made a plea to save our troubled home, the world’s largest private oil company discovered that its chief product could cause global havoc.  It’s not surprising, given its army of first-rate scientists and engineers, that Exxon was aware as far back as the 1970s that carbon dioxide from oil and gas burning could have dire effects on the earth. Nor is it surprising that Exxon would later try to cast doubt on what its experts knew to be true, to inject informational pollution into the river of knowledge about climate change. But what is startling is how a deliberate campaign of misinformation — now disavowed by even Exxon Mobil itself — has found its way into the minds of the leading Republican presidential candidates.  You can see the origin of this web of duplicity in stories done by the Pulitzer Prize-winning InsideClimate News and The Los Angeles Times. Kudos to both. They found that Exxon’s board of directors was fully briefed by its own scientists, decades ago, on the emerging consensus that burning oil and gas may cause sea levels to rise, glacial ice to melt and a host of other “generally negative consequences.” Their reaction was to fund the kind of counter-information campaigns that Soviet-era propagandists would be proud of. So, even as one in-house memo stated that “fossil fuels contribute most of the CO2” that was turning the earth into an overheated greenhouse, another memo showed that the company would seek to “emphasize the uncertainty in scientific conclusions.”

Scientists warned the US president about global warming 50 years ago today -- Fifty years ago today, as the American Association for the Advancement of Science highlighted, US president Lyndon Johnson’s science advisory committee sent him a report entitled Restoring the Quality of Our Environment. The introduction to the report noted: Pollutants have altered on a global scale the carbon dioxide content of the air and the lead concentrations in ocean waters and human populations. The report included a section on atmospheric carbon dioxide and climate change, written by prominent climate scientists Roger  Revelle, Wallace Broecker, Charles Keeling, Harmon Craig, and J Smagorisnky. Reviewing the document today, one can’t help but be struck by how well these scientists understood the mechanisms of Earth’s climate change 50 years ago. The report noted that within a few years, climate models would be able to reasonably project future global surface temperature changes. In 1974, one of its authors, Wallace Broecker did just that in a paper titled Climatic Change: Are We on the Brink of a Pronounced Global Warming?.. You can read the details about this paper and Broecker’s modeling here and in my book Climatology versus Pseudoscience. His model only included the effects of carbon dioxide and his best estimates of natural climate cycles. It didn’t include the warming effects of other greenhouse gases, or the cooling effects of human aerosol pollution, but fortunately for Broecker those two effects have roughly canceled each other out over the past 40 years. Broecker’s model predicted the global warming anticipated by 2015 both from carbon pollution alone, and when including his best estimate of natural climate cycles. In the figure below, the carbon-caused warming is shown in blue, and in combination with natural cycles (which Broecker turns out not to have represented very accurately) in green, as compared to the observed global surface temperatures from NOAA in red. As you can see, the climate model predictions from over 40 years ago turned out to be remarkably accurate.

Vast energy value in human waste: UN University - Biogas from human waste, safely obtained under controlled circumstances using innovative technologies, is a potential fuel source great enough in theory to generate electricity for up to 138 million households - the number of households in Indonesia, Brazil, and Ethiopia combined. A report today from UN University's Canadian-based Institute for Water, Environment and Health (UNU-INWEH) estimates that biogas potentially available from human waste worldwide would have a value of up to US$ 9.5 billion in natural gas equivalent. And the residue, dried and charred, could produce 2 million tonnes of charcoal-equivalent fuel, curbing the destruction of trees. Finally, experts say, the large energy value would prove small relative to that of the global health and environmental benefits that would accrue from the safe treatment of human waste in low-resource settings. "Rather than treating our waste as a major liability, with proper controls in place we can use it in several circumstances to build innovative and sustained financing for development while protecting health and improving our environment in the process," according to the report, "Valuing Human Waste as an Energy Resource."

Why Has Carbon Capture And Storage Not Taken Off Yet? -- naked capitalism Yves here. Notice how this article points out the need for setting a price for carbon. The Financial Times, in CO2 needs a price but taxes are the best way to set it, called for that in 2007. And the problem, as the editorial explained, is that the price of fossil fuels does not reflect the cost of the externality of greenhouse gases. The underpricing of carbon is the reason that renewables can appear to be more costly than they are (although their prices need to reflect the use of any scarce or environment-damaging inputs) and that carbon capture schemes look to be too costly. By Michael McDonald at OilPrice: For all of the talk about green energy one fact still remains clear; fossil fuels are going to continue to be used in enormous quantities for decades to come. From China and India to the U.S. and Canada, the world is flooded with growing markets looking for new sources of fossil fuels and developed markets coming up with new ways to extract those fossil fuels. India, for instance, is on track to double its use of coal as a main source of energy over the next 20 years.  It is certainly true that solar power in particular is growing rapidly in importance but that has very little to do with the fact that hundreds of millions of cars and homes still rely on oil and natural gas for power and heat. Retrofitting an asset base that large would require trillions in investments. Given these realities, carbon capture and storage (CCS) is an intriguing proposition and one that pragmatic environmentalists ought to give more credence to. Yet, CCS has not really gotten off the launch pad at this stage despite the fact that a new report from an industry group highlights the necessity of the technology in helping to mitigate carbon emissions across the world economy. There are a variety of criticisms against the technology, yet it may be the best of a bad set of options.

Hydropower Will Undermine COP21 as ‘False Solution’ to Climate Change  - Hydropower has been called a “methane factory” and “methane bomb” that is just beginning to rear its ugly head as a major source of greenhouse gas emissions that have so-far been unaccounted for in climate change discussions and analyses.  Scientific studies indicate that methane emissions from hydropower dams and reservoirs can vary dramatically. In northern subarctic climates, methane emissions have been measured as a small fraction of greenhouse gas emissions as compared to coal-fired power plants. In temperate climates like much of the U.S. and Europe, methane emission measurements vary by sub-climate, size of reservoir and vegetation growth, but have been measured from small to large as compared to the emissions from coal-fired power plants. In tropical environments, hydropower methane emissions have been measured as high as double those of the greenhouse emissions of a coal-fired power plant that generates the same amount of electricity. Hydropower is almost always greenwashed and sold to the public and policymakers as “clean energy” and “carbon-free.” Even though the IPCC lists hydropower’s methane emissions as a greenhouse gas source, and over a decade of science refutes the claim that hydropower is clean energy, the myth of carbon-free hydropower is embedded in the Kyoto Protocol’s “Clean Development Mechanism” to address planetary climate change and is increasingly being implemented by countries in attendance at COP 21 in Paris. Even worse, the World Bank still lists, promotes and funds hydropower as “clean energy,” and nearly every country in the world is building hydropower plants under the same auspices. Even the U.S. government still perpetuates the anti-science myth of clean hydropower.

Largest Hydro Project in Patagonia Gets Green Light, But the Fight Is Far From Over -- Chile’s Council of Ministers, in a decision the national press declined to cover, issued a critical decision on Monday to uphold the Resolution of Environmental Qualification (RCA) for what will now become the largest hydroelectric project in Patagonia. Despite Chile’s efforts to improve its regulatory process and put new safeguards into place, this case serves as another example of how the country’s environmental framework is continuing to be exploited in the absence of regional policies for protecting Patagonia’s wild and scenic rivers. The Mediterraneo hydrolectric project, which would carve a 40-mile path into the heart of the Andes Mountains and open up the Patagonia region to a new wave of hydro development, has Chilean environmental leaders crying foul. Meanwhile, the press is looking the other way in a move that raises questions about Chile’s commitment to transparency in its environmental permitting system.The council’s decision to reject all 27 oppositions was heavily criticized by environmental groups, who cited irregularities and financial ties to high-ranking government officials. The 210 megawatt hydro project will cost $400 million to build and is the brainchild of a group of investors led by Jose Cox, a close friend and advisor to former President Sebastian Piñera. Among other major investors is Ricardo Bachelet, cousin of current President Michele Bachelet. The approval of Mediterraneo’s RCA marks a sharp reversal for the Council of Ministers, which last year won praise for revoking the permit for Endesa and Colbún’s joint HidroAysen project in Patagonia, following a hard-fought citizen-led campaign.

World set to use more energy for cooling than heating - The world faces a looming and potentially calamitous “cold crunch”, with demand for air conditioning and refrigeration growing so fast that it threatens to smash pledges and targets for global warming. Worldwide power consumption for air conditioning alone is forecast to surge 33-fold by 2100 as developing world incomes rise and urbanisation advances. Already, the US uses as much electricity to keep buildings cool as the whole of Africa uses on everything; China and India are fast catching up. By mid-century people will use more energy for cooling than heating.And since cold is still overwhelmingly produced by burning fossil fuels, emission targets agreed at next month’s international climate summit in Paris risk being blown away as governments and scientists struggle with a cruel climate-change irony: cooling makes the planet hotter. “Most people tend to think of energy in terms of heat and light and transport,” said Toby Peters, visiting professor of power and the cold economy at the University of Birmingham. “But more and more, it’s going to be about cold. Demand for cold is already huge, it’s growing fast, and we’re meeting it in basically the same way we’ve been doing for a century. Cold is the Cinderella of the energy debate. If we don’t change the way we do it, the consequences are going to be dramatic.”

Covering the deserts with solar will also change the climate - Currently, the Earth's inhabitants are, on average, consuming about 17.5TeraWatts of power. It's estimated that an aggressive rollout of solar panels could generate at least 400TW, and possibly much, much more. But that would involve paving over a lot of the Earth's surface with solar panels, in many cases covering relatively reflective sand with dark black hardware. Could this have its own effects on the climate? The answer turns out to be remarkably complex. That's in part because the panels don't simply absorb the energy of the light—a fraction of it gets converted to electricity and shipped elsewhere. A team of US and Chinese scientists decided to account for all of this and found out that massive solar installations would cause changes in the climate, but the changes would be minor compared to what we'd see from continued greenhouse gas emissions.  In the authors' model runs, desert regions cooled by nearly 2 degrees Celsius. This actually causes the deserts to dry out further, leading to global shifts in precipitation and wind patterns. Meanwhile, the energy that's being harvest pumps 800TW into the environments around urban areas, raising temperatures by over a degree Celsius. The net result is a slight rise in global temperatures (about 0.6 degrees Celsius), along with the wind and precipitation changes.

WIND: Federal judge tosses out BLM approval of Nev.'s largest project -- A federal judge in Nevada has thrown out the Obama administration's approval of what was projected to be the Silver State's largest wind power project, ruling that the Interior Department did not properly evaluate potential impacts to golden eagles and Mojave Desert tortoises.  U.S. District Judge Miranda Du's seven-page order issued late Friday is a sharp rebuke of the final environmental impact statement (EIS) for the 200-megawatt Searchlight Wind Energy Project conducted by the Bureau of Land Management and a biological opinion conducted by the Fish and Wildlife Service. Former Interior Secretary Ken Salazar signed a record of decision formally approving the project in March 2013. Legal experts say this is the first time a court has formally ruled invalid a final EIS, biological opinion and record of decision for a renewable energy project. The order is based on a lawsuit filed in April 2013 in U.S. District Court for the District of Nevada in Las Vegas by two groups -- Basin and Range Watch and Friends of Searchlight Desert and Mountains -- and three residents who live near the proposed wind project against Salazar, BLM and FWS (Greenwire, April 17, 2013). They claim the federal agencies failed to properly analyze the full impacts of the project on sensitive wildlife species and nearby residents. The 87 proposed wind turbines, as tall as 428 feet, would be visible from the Lake Mead National Recreation Area to the east, as well as the town of Searchlight, Nev., where the plaintiffs say the light and noise from the spinning turbines likely would negatively affect property values and quality of life.

Is there really a 'moral case for coal'? The answer is about far more than money: Coal’s advocates say it lifts poor people out of poverty by supplying them with cheap and reliable energy. This argument is what philosophers call “utilitarian”: the reasoning being that coal boosts enough people’s well-being, by a significant enough amount, to outweigh the harm it does to the environment. According to utilitarianism, morally “good” actions are those which maximise the overall amount of well-being and minimise harm. So a good utilitarian argument must take into account all harms and benefits – including those affecting future generations. Coal’s detractors think that a conscientious application of utilitarian reasoning tells against coalmining. Fraser and those who agree with him are concerned about the large contribution that coal makes to global warming, which in turn will disproportionately harm the poor. Climate campaigner and former US vice-president Al Gore, in his own assessment of the coal question, emphasises the harm to health caused by pollution from power stations, and the destruction of farmland and water supplies caused by coalmining.  Gore, like other opponents of coal, believes that renewable sources of energy will be better at lifting people out of poverty than coal-fired power stations. Whether present solar and wind technologies are capable of giving poor people the standard of living to which they aspire is open to doubt.. But even if coal can still provide cheaper, more reliable energy than renewables, it is hard to avoid the conclusion that utilitarian morals do not make a positive case for coal.

Note On Chinese Coal Consumption - The New York Times reports that Chinese coal consumption has been 17% higher than official statistics suggested in the period 2000-2013 [image left]. And thus China's CO2 emissions, already the highest in the world, have been much higher than previously thought. What this means in effect is that every important metric associating global economic growth and energy use (and thus emissions growth) must now be revised—in the wrong direction from a climate change point of view. Complicating this picture is ongoing uncertainty regarding China's actual GDP growth numbers. It is clear enough that the official number, which was 6.9% in the latest report, is a political number. Most other guestimates say that China has recently overstated its GDP growth. All this suggests that China has consistently under-reported emissions while overstating economic performance. These trends make a mockery of happy talk about the "decoupling" of growth and emissions at the global level. At the Council on Foreign Relations, a veteran China-watcher delivers the bad news.

  • Assuming that Chinese industrial production and manufacturing statistics are accurate, the dramatic increase in coal consumption that is now reported suggests that the gains in Chinese energy efficiency, as well as the reductions in energy intensity (the amount of energy consumed per unit of GDP), that have been touted over the past decade are much less than assumed—or perhaps they are nonexistent.
  • China’s pledge that its CO2 emissions will peak around 2030 is suddenly much less significant than it was one year ago—and even then many analysts argued that it wasn’t significant enough. After all, we are now dealing with a baseline of CO2 emissions that is substantially higher than we originally believed. The question now is whether China will adjust its commitment to meet its newly revealed contribution to the problem.

China Recalculates Its Coal Consumption: Why This Really Matters: It seems like a distant memory now, but just one month ago, the international community was lauding China for stepping up its commitment to address climate change by pledging to initiate a cap-and-trade system for CO2 by 2017 and contributing $3.1 billion to a fund to help poor countries combat climate change. Now, however, the talk is all about the release of a new set of game-changing Chinese statistics on coal consumption. A New York Times blared: “China burns much more coal than reported, complicating climate talks.”  And the Guardian reported: “China underreporting coal consumption by up to 17%, data suggests.” What does all this mean? The short answer is nothing good. Here are just a few of the implications:

  1. Chinese statistics are as unreliable as ever. China analysts, myself included, often say, “We don’t necessarily trust the statistics, we just look at the trend line.” This coal consumption recalculation, however, means that even this somewhat weak effort at analytical credibility no longer holds. Seriously, how does one ignore six hundred million tons of coal consumed in just one year?
  2. Assuming that Chinese industrial production and manufacturing statistics are accurate, the dramatic increase in coal consumption that is now reported suggests that the gains in Chinese energy efficiency, as well as the reductions in energy intensity (the amount of energy consumed per unit of GDP), that have been touted over the past decade are much less than assumed—or perhaps they are nonexistent.
  3. China’s pledge that its CO2 emissions will peak around 2030 is suddenly much less significant than it was one year ago—and even then many analysts argued that it wasn’t significant enough. After all, we are now dealing with a baseline of CO2 emissions that is substantially higher than we originally believed.

'Worse Than We Thought': TPP A Total Corporate Power Grab Nightmare -- 'President Obama has sold the American people a false bill of goods,' says Friends of the Earth.  As expert analysis of the long-shrouded, newly publicized TransPacific Partnership (TPP) final text continued to roll out on Thursday, consensus formed around one fundamental assessment of the 12-nation pact: It's worse than we thought. "From leaks, we knew quite a bit about the agreement, but in chapter after chapter the final text is worse than we expected with the demands of the 500 official U.S. trade advisers representing corporate interests satisfied to the detriment of the public interest," said Lori Wallach, director of Public Citizen's Global Trade Watch.  In fact, Public Citizen charged, the TPP rolls back past public interest reforms to the U.S. trade model while expanding  problematic provisions demanded by the hundreds of official U.S. corporate trade advisers who had a hand in the negotiations while citizens were left in the dark. On issues ranging from climate change to food safety, from open Internet to access to medicines, the TPP "is a disaster," declared Nick Dearden of Global Justice Now. "Now that we’ve seen the full text, it turns out the job-killing TPP is worse than anything we could’ve imagined," added Charles Chamberlain, executive director of Democracy for America. "This agreement would push down wages, flood our nation with unsafe imported food, raise the price of life-saving medicine, all the while trading with countries where gays and single mothers can be stoned to death." Major climate action groups, including and the Sierra Club, were quick to point out that the text was notable as much for what it didn't say as what for what it did. "The TPP is an act of climate denial," said 350 policy director Jason Kowalski on Thursday. "While the text is full of handouts to the fossil fuel industry, it doesn’t mention the words climate change once." What it does do, however, is give "fossil fuel companies the extraordinary ability to sue local governments that try and keep fossil fuels in the ground," Kowalski continued. "If a province puts a moratorium on fracking, corporations can sue; if a community tries to stop a coal mine, corporations can overrule them. In short, these rules undermine countries’ ability to do what scientists say is the single most important thing we can do to combat the climate crisis: keep fossil fuels in the ground."

FirstEnergy substation to benefit customers  - FirstEnergy is building a new substation that will not only benefit the oil and gas industry, but will improve service for customers in three counties. This substation will be built in Smithfield, and Todd Meyers, a Mon Power spokesman, said it will enhance service reliability for more than 6,000 Mon Power customers in Wetzel, Marion and Tyler counties. The project will cost about $63 million. Meyers said the project is similar to a substation that was built in Harrison County in 2014. He said there isn’t enough infrastructure there, so the company is building more support for the oil and gas industry. “We wouldn’t be building it if it weren’t for the need,” Meyers said. “It helps support the Marcellus shale, but it also benefits other customers.” This 138,000-volt substation will be located on 50 acres of land, but Meyers said it will only take up about 3.3 acres. Meyers said currently prices are low so there isn’t as much drilling with the oil and gas industry, but he expects that to change.

Gates Mills voters pass charter amendment requiring referendum for fracking on village land - — Voters approved a charter amendment intended to give residents more say over potential fracking in the village, according to unofficial election results from the Cuyahoga County Board of Elections. About 52 percent approved. The amendment, drafted with the help of defeated council candidate Charles Belson, would require voters to approve any new leases for horizontal oil and gas wells on village property or changes to existing gas and oil wells. There are multiple vertical wells in the village, but none of the larger, more-invasive horizontal wells. Villagers petitioned to have the issue placed on the ballot in an effort to gain more local control over drilling, since state laws regulate wells. Gates Mills is one of several Northeast Ohio communities that have been grappling with ways to prohibit drilling. Last November, Gates Mills voters rejected a proposed bill of rights intended to, among other things, give residents more control over drilling. The issue was a response to a controversial proposal by former Mayor Shawn Riley to form a land trust in hopes of building negotiating power with oil and gas companies. Riley did not seek re-election this year.

Youngstown voters reject an anti-fracking charter amendment for the fifth time: Backers of the anti-fracking Community Bill of Rights charter amendment in Youngstown lost for a fifth time, but it was, by far, the closest margin of defeat. The proposal lost by less than 3 percentage points, according to unofficial but final results from Tuesday’s election. “It’s great we came so close,” said Susie Beiersdorfer, a member of Frackfree Mahoning Valley. “I can’t say we’ll put another initiative on the Youngstown ballot. It’s very close. We may want to look into a recount.” The proposal that called for fracking to be banned in the city, which opponents and state officials say isn’t enforceable, hasn’t been close in the previous four attempts either. It lost by 13.7 percent in May 2013, 9.3 percent in November 2013, 8.3 percent in May 2014, and 15.4 percent in November 2014. Mayor John A. McNally, who opposed the proposal, said, “I’m happy that the charter amendment was defeated for the fifth time even though it was less than 3 percent. Voters stated that they don’t need this time of legislation in our charter.”

4 hatches found open in sunken barge in Lake Erie— The sunken tanker barge Argo is not leaking now, but when it sank 78 years ago during a Lake Erie gale it may have lost some of its 200,000-gallon cargo into the lake bottom. A Coast Guard contractor is scheduled to start taking 20-foot-deep samples today from the lake bottom around the wrecked barge, which was lost about eight miles east of Kelleys Island in 1937 and discovered in August by a shipwreck hunter. Lt. Ryan Junod, a spokesman for the Marine Safety Unit in Toledo, said an assessment by contractor T&T Marine Salvage, of Roseville, Mich., found eight of 12 hatch covers in place on the sunken barge, but the four forward hatches were open and their contents “had free communication with the water.” Test samples have been taken from sediment inside the open hatches, Lieutenant Junod said, and T&T took some preliminary sediment samples from the lake floor near the barge. But to get more information about how deeply any contaminants may have seeped into the lakebed, he said, a sonic drill had to be sent to the wreck site. It’s scheduled to start work today, and sample-taking could be a multiday task, depending on how far from the barge officials decide samples are necessary. The work also is weather dependent. Petroleum still could be inside the eight hatches that haven’t breached, the Coast Guard spokesman said. “There’s the potential for those tanks to be intact,” Lieutenant Junod said. But until officials know the condition of the surrounding lakebed, no attempt will be made to do anything of consequence with the sunken vessel, he said.

Feds consider fracking plan in Wayne forest - Columbus Dispatch - The federal government is considering, again, 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. In the meantime, though, the bureau also has scheduled three public meetings to see what the public thinks about those plans. For environmental groups and residents throughout southeastern Ohio, though, it is a battle that has been fought before. 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. Roxanne Groff, a township trustee in Athens County who has opposed oil and gas drilling in the Wayne, said her concerns from the 2011 proposal haven’t gone away. “The concerns have even multiplied, because we know that fracking is problematic,” Groff said. “ And even though the industry continues to say it hasn’t caused any problems, we know that to not be true.” 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 documents are public records, but the bureau did not make them available on Tuesday.

US looks at proposed fracking in national forest in Ohio — A federal agency is again considering requests to open Wayne National Forest in southeastern Ohio to oil and gas drilling. The Columbus Dispatch ( ) reports that oil and gas companies formally expressed interest to the U.S. Bureau of Land Management in drilling about 31,900 acres of the forest through hydraulic fracturing, or fracking. The bureau says it’s reviewing to see if the government owns mineral rights beneath those forest sections and to assess potential environmental risks. A bureau official says the agency has scheduled public meetings to discuss the industry’s interest and proposed leasing. Oil and gas companies told the bureau in 2011 that they wanted to drill beneath the forest. The proposal was dropped after opposition from southeastern Ohio residents and groups concerned that it would cause environmental problems.

BLM schedules hearings on fracking in national forest -- As the lead federal agency for federally owned minerals across the United States, the Bureau of Land Management (BLM) will begin Environmental Assessments (EAs) to consider whether or not to lease parcels on approximately 31,900 acres of the Wayne National Forest for potential oil and gas development. However, some environmentalists are charging that insufficient information about the proposal has been available in advance of the scheduled public meetings. Meanwhile, a pro-drilling group – LEASE – issued a release Monday praising the BLM for scheduling public scoping meetings in Athens and other small cities near the Wayne National Forest. Following the completion of each EA, according to a news release from the BLM, a decision will be made by the agency’s Northeastern States District to either approve leasing parcels, not approve leasing parcels, or complete an Environmental Impact Statement (EIS) to address leasing. As part of the process, public meetings will be held in Marietta, Ironton and Athens – all small Ohio cities near separate districts of the Wayne National Forest. The Athens meeting is set for 6:30-8:30 p.m. on Wednesday, Nov. 18, at the Athens Community Center. The meetings are intended to receive public comments on leasing federally owned minerals beneath the Wayne forest. Acres of interest by unit are included below, followed by time and location of the public meeting for each specified unit. Being considered for oil and gas development are 18,800 acres in the Marietta Unit of the Athens Ranger District (in Washington County); 9,975 acres in the Ironton Unit of the Ironton Ranger District (in Gallia County); and 3,150 acres in the Athens Unit of the Athens Ranger District (some in York Township, Athens County, and some in Monroe Township in Perry County).

Ohio's oil boom - The shape of things to come for the nation, maybe - Without even realizing it, presidential hopeful Donald Trump's swipe at fellow contender Gov. John Kasich (R-Ohio) may have unwittingly given all the GOP candidates another topic to use against their Democratic competition. As reported by Jeremy Pelzer of the Cleveland Plain Dealer updated on Oct. 30, 2015, The Donald's assertion that the economic upturn in the Buckeye State has nothing to do with Kasich's abilities, but instead just dumb luck due to geologists recently discovering shale oil and natural gas may not be 100 percent true. Yet the attempted zinger has brought the employment boon of hydraulic fracturing, or "fracking," to the forefront.  While many Americans have at least heard the phrases "shale oil" and "fracking," few are aware just how much shale oil and natural gas the United States is sitting on top of. In Colorado, Utah, and Wyoming's Greater Green River Basin alone, there are an estimated 1.82 trillion barrels of recoverable shale oil. Unbeknownst to most citizens is that the Green River Basin is one of the smaller shale gas regions in the country. Trillions of more barrels of oil and natural gas are in the East Texas Basin which stretches from the panhandle of Florida all the way to outskirts of Dallas. Then there's the staggeringly oil-rich Williston Basin which encompasses half of North Dakota, much of northeastern Montana, a sizable chunk of South Dakota and also stretches into neighboring Canada. Many more of our fellow citizens are completely unaware of such job generating areas such as the Fayetteville Shale Play that stretches the width of Arkansas. The Western Mountain states have literally millions of acres worth of shale gas plays and basins ranging from the Permian Basin in West Texas to the Montana Thrust Belt on the Canadian border. Then there's the massive Appalachian Basin. In what many have described as a figurative ocean of oil and natural gas, the Appalachian Basin stretches from the New York-Vermont border all the way to Alabama. Within the Appalachian Basin are three of the richest shale gas plays in the world, the Marcellus, Utica and Devonian. 

Plenty of room to hike frack tax - Columbus Dispatch  -- A handful of state legislators spent part of their summer doing research only to conclude what was obvious to begin with: Ohio has a low severance tax on fracking compared with the rates in other states. This data was already available, since Gov. John Kasich has been saying this for three years and Ernst & Young has produced two similar studies for the Ohio Business Roundtable since 2012.  The report clearly states: “Ohio’s total tax burden on the oil and gas industry is lower than or as low as every other state with a severance tax.” This is another way of calling Ohio’s tax rate a “total and complete rip-off to the people of this state,” as Kasich has. Yet even after confirming this fact on their own, lawmakers are in no rush to fix this and give Ohioans a fair return on the extraction of the state’s nonrenewable natural resources.  Many lawmakers have reaped generous political donations from oil and gas companies and have offered a variety of excuses for their unwillingness to raise the fracking tax. First, it was that Ohio would scare off hundreds of thousands of good-paying jobs if it raised taxes just as the boom in fracking began a few years ago. Then it was “requires more study.” Now? The data don’t bear out this doom and gloom, though. According to the most recent report released by the Ohio Department of Natural Resources, the second quarter of 2015 continued to see “ record numbers” in oil and gas production in the state. The first half of the year saw a 125 percent increase in oil production and a 160 percent increase in natural gas production, compared with the same period in 2014. They may be getting less for their product for the moment, but that doesn’t sound like an industry in dire straits ... nor in imminent danger of pulling out of Ohio.  Meanwhile, Ohio’s oil and gas resources are being drained at bargain-basement rates, and Ohioans are the losers.

Oil and Gas report, October 25-31  Drilling operations in the Marcellus and Utica shales slowed down considerably from October 25 to 31. Compared to Pennsylvania’s total of 58 permits approved in the previous week, the state’s Department of Environmental Protection issued only 31 permits.  Natural gas inventories just took a hit nationwide, which most likely was a result of decreased demand. Prices might have seen a slight rise, but National Fuel reported the lowest demand in the past 19 years.  Meanwhile, it’s been a pretty quiet week on the oil and gas front for Ohio. The state’s Department of Natural Resources reported zero permits for the state’s Marcellus formation and only one permit for its Utica formation between October 25 and 31. Despite the slow oil and gas week, Ohio’s Utica Shale-dominant acreage may give it a leg-up on other neighboring states’ energy industries. EQT CEO David Porges said his company plans to drill 10 to 15 wells in the Utica formation in Southwestern Pennsylvania and West Virginia. “If the deep Utica works, it is likely to be larger than the Marcellus over time,” he said. “We’re highly encouraged by the success we have seen in the Utica to date and over the next two to three years expect the dry Utica to become the primary focus of our development plan,” said Tim Dugan, chief operating officer for gas at Consol, which announced good initial results from a well in Monroe County, Ohio. Consol is fracking and completing wells but has stopped all drilling until 2017.”

Like Ohio, Pennsylvania embroiled in political fight over fracking taxes -  -- —Ohio's not the only state to have a high-stakes battle over oil and gas severance taxes, with hundreds of millions of dollars on the line. In neighboring Pennsylvania, the governor and state lawmakers are battling over creating the state's first-ever severance tax. Drilling for natural gas – and oil, to a lesser extent – has ramped up in both Ohio and Pennsylvania in recent years. Both states show how efforts to increase taxes on growing drilling activity in the areas have been resisted by the oil and gas industry and conservative lawmakers worried about smothering a potential energy boom in its infancy.  Pennsylvania and Ohio are responsible for 83 percent of the increase in U.S. natural gas production since 2009, according to federal statistics. Government forecasters predict the Marcellus Shale formation, which runs under eastern Ohio and much of Pennsylvania, will yield up to 147 trillion cubic feet of natural gas by 2040. And the Utica Shale formation, a few thousand feet below the Marcellus, may be even more promising. Pennsylvania Gov. Tom Wolf and Ohio Gov. John Kasich are each pushing to make shale drillers pay more to their states. But a severance tax has been a sticking point in a four-month-long budget impasse in Pennsylvania. And in Ohio, lawmakers removed Kasich's severance tax plan from the budget and have worked in vain for more than a year to find a compromise between the governor's office and the oil and gas industry, which opposes any tax increase.

Gas drillers to wait and see on Utica shale's promise - Big results from recently drilled Utica shale wells have several Marcellus producers eyeing a possible push into the deeper rock, though not every driller is sold on its promise.   Executives at Downtown-based EQT Corp. and Consol Energy Inc. in Cecil spent a chunk of time during quarterly earnings calls in the past two weeks discussing the potential of the layer, pegged by some to be more prolific than the Marcellus, which runs above it.  “If the deep Utica works, it is likely to be larger than the Marcellus over time,” “We're highly encouraged by the success we have seen in the Utica to date and over the next two to three years expect the dry Utica to become the primary focus of our development plan,” The Utica is less explored in Pennsylvania — development has centered on Ohio — but could hold as much or more recoverable gas than the Marcellus, a government report found this year. Companies pinched by the lowest gas prices in three years and extra costs for pulling low-priced liquids from so-called wet gas are lured by the possibility of getting more bang for their buck in the dry gas gushers, industry leaders and analysts say.  “Eventually, when we have a place to take it, it's going to be very good,” retired U.S. Steel CEO John Surma told financial and industry leaders during an energy summit in Pittsburgh last week, acknowledging the pipeline constraints that have contributed to depressed prices. Surma, a onetime Marathon Oil executive, serves on the boards of driller Concho Resources and Marathon Petroleum's pipeline partnership. Given the wells' costs, though, committing to their development likely will hinge on how they compete with cheaper Marcellus wells.

New law to give greater freedom for use of treated mine water in fracking process - Gov. Tom Wolf recently signed into law a bill that will give greater freedom to oil and gas companies to use treated mine water in the fracking process. The law, sponsored by freshman state Sen. Camera Bartolotta, R-46, Carroll Township, Washington County, could also result in a significant reduction in the demand for fresh water in Pennsylvania’s lakes and streams being used for fracking. Bartolotta said Friday that some oil and gas companies have already been using treated mine water for fracking, but added that certain liability issues prevented a large majority of companies from pursuing that option. Her bill, which attracted bipartisan support and support from the state Department of Environmental Protection, clearly defines who is liable during the process of transferring treated mine water from coal companies to fracking sites run by oil and gas companies. Specifically, the bill protects coal companies from being liable regarding the use of the water once it leaves their possession, and it protects oil and gas companies from liability in treating the mine water before it is in their possession. The issue is important for Bartolotta because her district, which includes parts of Beaver, Greene and Washington counties, is the “heart and soul” of both the oil and gas and coal industries in the region.

More than 1,500 file to intervene in PennEast pipeline project -- More than 1,500 people, organizations, municipalities and counties have signed on to get involved in the PennEast pipeline case, including Luzerne County Council and several local people. When PennEast Pipeline Co. LLC filed its application with the Federal Energy Regulatory Commission on Sept. 24, it started a 30-day period for interested parties to comment or intervene that ended on Thursday. As of Monday, when FERC posted the last of these on the docket, approximately 1,520 residents, landowners, organizations and municipalities filed to intervene. Interveners have legal standing in the case, and are also put on email lists to receive information. PennEast plans to construct a $1 billion, 114-mile, 36-inch diameter pipeline that would start in Dallas Township at the Transco interstate pipeline, run through Kingston Township, West Wyoming, Wyoming, Jenkins Township, Laflin Township, Plains Township and Bear Creek Township in Luzerne County, then go through Carbon, Northampton and Berks counties, cross into New Jersey and terminate in Mercer County, New Jersey. Many municipalities and counties along the route have filed to intervene, including Luzerne County, Plains Township and Dallas Township. The county’s request, filed Wednesday, states: “As representatives of persons residing in the areas where the pipeline is tentatively slated to be built, the members of the Luzerne County Council have concerns (that) the construction and completion of the pipeline will endanger the health, safety and welfare of the citizens and visitors of Luzerne County as well as deter the use and enjoyment of County recreational lands.”

Pennsylvania Township Passes Bill of Rights Banning Fracking Wastewater Injection Wells -- Last night, the people of Grant Township adopted the country’s first municipal charter establishing a local bill of rights. The Grant Bill of Rights codifies environmental and democratic rights, and bans fracking wastewater injection wells as a violation of those rights.  Grant joins growing numbers of communities across Pennsylvania and the U.S. that are coming together in a community rights movement to stand up to a system of law that forces fracking waste wells and other practices into communities, and protects corporations over people, communities and nature.  The passage of the Grant charter comes fourteen months after the township was sued by Pennsylvania General Energy Company (PGE) and the Pennsylvania Independent Oil and Gas Association (PIOGA). PGE proposed a fracking wastewater injection well for the community against the wishes of township residents. Injection wells have polluted drinking water and triggered earthquakes in several states.

"Abandoned" by EPA, Landowners from Dimock, Pavillion, Parker County Demand Inclusion in EPA National Fracking Study --  For the past five years, the EPA has undertaken a highly-consequential national study on the impacts that hydraulic fracturing (fracking) can have on American drinking water supplies. This June, the national study's draft assessment was released to the public, and while hundreds of spills, accidents, and even cases where fracking itself directly contaminated underground aquifers were reported by EPA, it was a phrase from the agency's press release that drew the attention of the national media: “hydraulic fracturing activities in the U.S. are carried out in a way that have not led to widespread, systemic impacts on drinking water resources.” It was a line that outraged those living on the front lines of the shale gas rush, where rural homeowners are no longer able to drink from their wells after the water turned odd colors, became laced with chemicals, or even could be lit on fire.A group of these individuals — all tied to some of the highest-profile multi-year battles over fracking and water contamination nationwide — arrived at a meeting of the EPA's Scientific Advisory Board (SAB) last Wednesday, Oct. 28th, to ask why the pollution at their homes and in their communities had been left out of EPA's draft assessment. Ray Kemble brought a yellowish-green jug of water from his home in Dimock, PA, and pre-tests showing that there was nothing wrong with his water before drilling and fracking. “I'd love to know why Dimock wasn't even included in this new study you did,” Mr. Kemble told the SAB. “I still don't have water at my house.” “All I want is you to come back and do your damn job and tell us the truth,” he told the assembled scientists.

Casey asks oil trains to slow down in Pennsylvania cities (AP) — A Pennsylvania senator is asking two freight railroad companies to reduce the speed of trains carrying flammable crude oil. Democratic U.S. Sen. Bob Casey wants CSX and Norfolk Southern to reduce speeds to 35 mph for oil trains traveling through major urban areas like Philadelphia and Pittsburgh. His letter to the railroads Wednesday called it a common sense stop to reduce the threat of derailment. Gov. Tom Wolf made the same request earlier this year. Neither railroad has agreed to slow their trains, saying their current safety approaches work. Pennsylvania has seen a huge increase in the number of oil trains from North Dakota. As many as 70 trains rumble across Pennsylvania each week. BNSF Railway has committed to a 35 mph limit in cities with populations greater than 100,000.

Weekly Natural Gas Storage Report - EIA: Working gas in storage was 3,929 Bcf as of Friday, October 30, 2015, according to EIA estimates. This represents a net increase of 52 Bcf from the previous week. Stocks were 371 Bcf higher than last year at this time and 147 Bcf above the 5-year average of 3,782 Bcf. In the East Region, stocks were 9 Bcf below the 5-year average following net injections of 32 Bcf. Stocks in the Producing Region were 145 Bcf above the 5-year average of 1,223 Bcf after a net injection of 16 Bcf. Stocks in the West Region were 11 Bcf above the 5-year average after a net addition of 4 Bcf. At 3,929 Bcf, total working gas is above the 5-year historical range.

Natural gas inventories fall short of expectations, but prices rise -- Projections for U.S. national gas storage inventory grew less than expected this week, but Market Realist says that industry isn’t suffering too much. In its weekly natural gas update, the U.S. Energy Information Administration indicated that natural gas storage inventories increased by 63 billion cubic feet, falling short of the 69 billion cubic feet mark that was originally predicted. As of October 29, U.S. inventories store a total of 3,977 billion cubic feet of natural gas. When natural gas inventories dip, it can mean one of two things: there was either more demand or less supply than expected. In this case, it seems as though it was demand that took a hit last week. From October 21 to 28, total U.S. consumption fell 0.4 percent, led by a 2.2 percent loss in the residential and commercial sector and 0.1 percent in the industrial sectors. The power sector, however, saw a rise of 1.1 percent. Though Market Realist says loss of demand usually results in lower natural gas prices, it later reported an 11 percent jump in prices, driving the price up to $2.26 per million British thermal units as of October 29. Ascending prices result in increased revenue not only for natural gas producers, but also Master Limited Partnerships (MLPs), which usually deal with energy infrastructure like pipelines, processing plants and terminals.

Frackers Fail To Challenge New York Frack Ban! - Giving a new meaning to ‘fracking chicken hawks,’ who threatened to sue towns, sue the state, sue the Governor, sue the DEC, harass individuals, frack with propane, secede from the state and have just generally made nuisances of themselves over fracking in New York for the last 10 years or so. Time has officially run out on any legal challenges to New York’ frack ban. After years of fracking hype, the oil and gas industry has left New York with nothing but a lot of hot air.  I don’t suppose they plan to secede now either, huh ? Think that was just a fracking crock too ? Like that napalm clusterfrack. ALBANY — The oil-and-gas industry will let a key deadline pass without challenging New York’s ban on large-scale hydraulic fracturing.  API New York, the state chapter of the American Petroleum Institute, will not file what’s known as an Article 78 challenge against the state’s fracking ban, according to executive director Karen Moreau.Tuesday was the deadline to file an Article 78 claim, a legal process used to challenge an official state action or determination.  Instead, Moreau said the trade organization — which has long been assessing its legal options related to the ban — is weighing other potential legal remedies. And the group is “closely watching” a challenge to the ban filed earlier this year by East Rochester-based attorney David Morabito, on his own behalf, representing himself. The lawsuit from Morabito, who owns land in Allegany and Monroe counties, seeks to force the state Department of Environmental Conservation to allow high-volume fracking on his property. It is based largely on a January letter from a DEC official informing him the state’s ban applies to his property. He argues that the state’s research, detailed in part in a health report released last December, doesn’t justify the ban.

Letter: Kinder-Morgan pushing a dying energy source - The pictures in a recent Berkshire Eagle article displayed a stark reality: Kinder-Morgan hired a "security" force to protect themselves from an informed public, not to protect the public. Indeed, if they were building a solar panel production site, there would be no need for a security force at all. Unfortunately, Kinder-Morgan is greedily prolonging the life of a dinosaur paradigm: extraction of energy from fossil fuels.  In Western Mass., we must fight against another terrible aspect of the accelerating fossil fuel colonization of America — the potential building of a fracked gas pipeline and a poisonous compressor station in Windsor. If one thinks about it, Kinder-Morgan's "Northeast Energy Direct" pipeline proposal (and many others) enables and exacerbates the fracking of gas and oil in states such as Pennsylvania, Ohio, Colorado, California etc. The citizens in fracked sites are suffering from this pillaging and are fighting fossil fuel companies for their health, safety, environment and property. The rest of the world is racing ahead of America by ending its reliance on fossil fuels and is in a rapid transition to renewable energies, energy conservation and efficiency. We don't need this fracked gas and we don't want it in Windsor or anywhere else. Get on the right side of history and tell your elected officials to oppose the "Northeast Energy Direct" pipeline proposal before it's too late.

Fracking rules for coastal Virginia focus of 2 hearings - (AP) — Hearings are scheduled this week on proposed new rules for oil and gas drilling in Virginia’s coastal plain. The Virginia Department of Mines, Minerals and Energy has scheduled hearings Monday and Tuesday in the Fredericksburg area and in Richmond. The hearings will focus on proposed changes in so-called fracking, a drilling process that uses a cocktail of water and chemicals to free natural gas from shale. Among the changes in proposed rules is the greater disclosure of those chemicals used in hydraulic fracking. Energy companies have indicated an interest in drilling in areas east and south of Fredericksburg where large reserves of natural gas are located.

Customer groups to PSC: Stop allowing gas hedging -- Customers of Florida Power & Light Co. and the state’s three other investor-owned electric utilities have lost more than $6 billion since 2002 because the utilities have purchased natural gas to run their plants through hedging rather than on the open market. On Monday, the Office of Public Counsel, which advocates for ratepayers, the Florida Industrial Power Users Group, the Florida Retail Federation and phosphate producer PCS Phosphate called for the Florida Public Service Commission to stop allowing hedging on natural gas by the utilities. FPL, Duke Energy Florida, Gulf Power and TECO don’t dispute the losses, but say that hedging has been successful because it has reduced price volatility for customers. Customers pay for fuel as a “pass-through” charge on their bills, meaning the utilities do not make a profit on the fuel. Collectively, the four power companies have 7.8 million customer accounts. “FIPUG members would rather pay at the pump,” said FIPUG attorney Jon Moyle at the PSC meeting in Tallahassee. “Hedging has not worked to our liking. We ask you to discontinue it.

Texas regulator maintains gas company permits despite earthquakes -— The regulatory agency overseeing the oil and gas industry in Texas has voted to maintain the wastewater injection permits for two companies whose North Texas wells are believed to have caused a series of small earthquakes. The Texas Railroad Commission decided Tuesday to allow the permits. The commission previously ordered hearings after a university study suggested the companies’ wells were responsible for quakes that shook Reno. The study concluded that rumblings in the shallow Ellenburger formation that migrated down the fault into the deepest layer of rock triggered the quakes. But the commission determined in September that seismicity was likely not caused by injection wells, which store briny wastewater from hydraulic fracturing. Commission staff testified Tuesday that the study established a correlation “too small to imply a causal relationship.”

Sub-$50: When ‘fracking does not work’  -- The downturn shows no signs of reversing for the oilfield services industry, and now these businesses that represent some of the top private employers in Odessa face a deepening pain, particularly those that frack wells. Today, about half of the fracking companies who were bidding on new work in the Permian Basin at this time last year continue to do so today. And the major public companies show signs of stress, announcing new rounds of layoffs in recent earnings calls. These developments suggest the smaller companies face what one analyst described in an interview as the “point of maximum pain” after dropping their prices in an estimated range of 30 to 60 percent. Halliburton executives, for example, recently revealed that they laid off another 4,000 jobs worldwide during the three-month period ending Sept. 30, bringing the total job losses to about a fifth of the service giant’s workforce, not layoffs could lie ahead. Revenue dropped from $8.7 billion to $5.6 billion, and in North America, operating income has fallen to about breakeven levels, company officials said. The rest of the year, they forecast, looks worse. “Literally U.S. fracking does not work at this pricing — it’s uneconomic,” said Joseph Triepke, a financial analyst from Odessa and the managing director of “The operators have pressed these guys so much that they margins they are making, they might be able to pay their people, they might be able to keep fuel in the tanks, but the equipment will start to deteriorate and they won’t have money to repair it.”

Iowa landowners hope regulators hear their pipeline concerns — The Iowa landowners who oppose a proposed pipeline to carry North Dakota oil to Illinois hope state regulators will consider their concerns about the project. Rancher Jack Montgomery tells the Sioux City Journal that the pipeline Dakota Access has proposed has started to seem like a done deal.  “If it does go through, I just don’t want it to go through my land. Go around me,” Montgomery said.  The Iowa Utilities Board is scheduled to begin pipeline hearings on Nov. 12 after a judge ruled that landowners should take their concerns to regulators before filing a lawsuit. Dakota Access is storing pipe for the project near Newton and Keokuk in Iowa and just over the border near Canton, South Dakota. An appraisal firm has also contacted landowners about inspecting land along the route Don Tormey, who is a spokesman for state regulators, said the board hasn’t made any decision on the 348-mile pipeline route across Iowa. “The storing of pipe does not have any impact on the board’s decision in this case,” Tormey said. “The stockpiling of pipe would be a Dakota Access business decision, and they do so at their own risk.”

Rand Paul opposes eminent domain for Bakken line — Kentucky Sen. Rand Paul lent his ear and voice Saturday to the plight of farmers balking at the possible use of eminent domain to take their land for the Bakken crude oil pipeline. Paul, who is seeking the Republican nomination for president, visited the Van Gorp 1,400-acre livestock and crop farm here about 10 miles south of Newton. “There are times we have to use eminent domain for roads and things like that, but for this, if it is going to another private property owner, I don’t think the government should be taking property through eminent domain,” Paul said. The proposed pipeline would pump up to 570,000 barrels of oil per day from the Bakken and Three Forks region of North Dakota through South Dakota and diagonally across Iowa to a terminal in Patoka, Ill. Each state will need to grant permission separately. Multiple generations of the Van Gorps, who farm several properties in the area, and other local farmers came to discuss issues of the pipeline and eminent domain. “They try to scare you into cooperating,” said Jim Strover, of Newton. Strover said he receives regular mailings signed by lawyers that he feels are attempts to scare him into agreeing. Strover said he hasn’t and won’t be willing to grant an easement for Dallas-based Dakota Access LLC to build the pipeline. “If the pipe breaks and the oil leaks out on the ground, it takes 10 years before you can grow anything again,” Strover said. “You ruin the soil.” The Van Gorps signed an easement early at a “very good price” but did so because of the threat of eminent domain, said son Bryce Van Gorp and father Carroll Van Gorp.

Midwest's frac sand industry falters as oil prices drop - "We opened on Memorial Day weekend, and a few weeks after that, they started laying people off and shutting plants down," Tom Bischel said. "You can't plan for that. Nobody could." The dramatic change is the result of sand shipments plummeting in response to lower oil prices. The price of a barrel of U.S. West Texas Intermediate crude oil closed at $44.60 on Oct. 23, down 47 percent from $84.40 a year ago and down nearly 60 percent from June 2014 when Eau Claire gasoline pump prices peaked at $3.74 a gallon. As oil prices have fallen, so has the demand for energy produced by the nation's shale oil industry and for the Wisconsin sand -- much of which is mined in the region within a 60-mile radius of Eau Claire -- that has become a key ingredient in America's recipe for domestic oil.  Wisconsin is the nation's leading producer of sand used in hydraulic fracturing -- the drilling technique commonly known as fracking that involves injecting a mixture of sand, water and chemicals deep into underground wells to force oil and natural gas to the surface. Wisconsin sand, prized by frackers for its ideal size, shape and durability, is shipped to drilling sites in states including North Dakota, Pennsylvania and Texas.  The latest fallout came last month when Hi-Crush Services revealed in a filing with the state Department of Workforce Development that it was laying off 27 workers and suspending production at its site at S11011 Highway M in Augusta.   Similar shutdowns have occurred throughout the region. In Chippewa County, only one of the six operational mines, the Chippewa Sands property in the town of Cooks Valley, is still mining, said county conservationist Dan Masterpole.

U.S. propane exports increasing, reaching more distant markets - Today in Energy - U.S. (EIA)  As U.S. propane production has increased and domestic demand has remained relatively flat, the United States has transitioned from being a net propane importer to a net exporter. Facilitated by rapid expansion in the capacity to export domestic supply, propane exports from the United States are changing traditional propane trade patterns across the globe.The initial growth in U.S. propane production, between 2008 and 2010, led to a reduction in dependence on propane imports, with net imports falling from an average of 109,000 barrels per day (b/d) in 2008 to a near-balance of 16,000 b/d in net exports in 2010. By 2011, only Canada remained as a major supplier of propane into the United States, with imports from other countries relegated to deliveries to Hawaii and occasional shipments into the Northeast.  On the international market, propane prices are typically set by the Saudi Aramco monthly contract price (ACP). Saudi Aramco generally bases its propane price on naphtha, a light petroleum product created through refining crude oil, because naphtha competes with propane as a petrochemical feedstock. In 2005, when the United States was still a net importer of propane, the U.S. price of propane at Mont Belvieu, Texas, averaged a 3 cent per gallon (gal) premium to ACP. Growing U.S. propane exports began to approach the capacity of export terminals, resulting in Mont Belvieu prices that were lower than the international market, averaging an 89 cent/gal discount in 2012. The wide price differential prompted the construction of new export terminal capacity, and as export capacity in the United States grew, the spread between international and U.S. propane prices gradually narrowed.

LETTERS: Fracking doesn't affect water? Visit North Dakota - Las Vegas Review-Journal -  In my 70 years of life in this desert I have learned one thing: Without clean water you can't make beer. Even more important than making beer, water is essential to life. Without clean water you can't have a healthy life. Heck, you can't even have a decent shower. I recently got to go to a wedding in Bakersfield, Calif. My nephew flew in from the oil fields in North Dakota. Over the course of the wedding I got to talking to him, and he would tell us about how bad it is in North Dakota. The guys on the oil crews can't even take a shower without the oil company trucking in water. And in the places where they are going after methane, the crews can literally light the water from their faucets on fire, a result of built-up methane gas. To top it all off, he told us about the work sites around him being closed down because it's not economically viable to go after what's there. In its Tuesday editorial, the Las Vegas Review-Journal cites a lot of claims that fracking doesn't hurt groundwater without delving into the funding sources of the scientists who conducted the studies to ensure there is no conflict of interest. The Review-Journal also claims that this type of development is sustainable. I invite the editorial page staff of the Review-Journal to take a trip and shadow my nephew for a day.

What Does Exxon Know About Fracking That It's Not Saying? -  Wenonah Hauter: Corporations have a long and shady track record of hiding critical information from the public. For years, tobacco companies hid the science that showed cigarettes caused cancer. Now, the Los Angeles Times and Inside Climate News are reporting that oil giant ExxonMobil sat on decades worth of studies that indicated fossil fuels were killing the planet -- and then spent millions to cover it up. According to the Times one of Exxon's scientists told company executives in 1992 that "potential global warming can only help lower exploration and development costs" in the Arctic region. Maybe that's why ExxonMobil has spent $31 million since 1998 to fund climate denier think tanks and politicians, while keeping its research out of the hands of the concerned public. It's no leap to wonder if the company -- the largest fracking company in the U.S. -- is doing the same thing to mislead and deceive the public around fracking safety. The oil and gas industry's spin machine has worked for years to ensure that fracking -- an extreme form of fossil fuel extraction -- has a place in the future energy mix. The industry spent at least $721 million in 2014 pushing its fossil fuel agenda in Washington, D.C. The industry's aggressive lobbying and the inclusion of fossil fuels in the Obama administration's climate action plan cannot be a coincidence.

Audit finds railroad safety lacking during high oil traffic — Montana’s oversight of railroad safety falls short at a time when volatile crude oil train traffic from the Bakken region, already high, is only expected to increase, a new audit found. Montana has no active rail safety plan and employs only two inspectors to cover the vast state, the Montana Legislative Audit Division report released Wednesday said. In addition, there is a lack of statewide emergency planning and hazardous-material response capability should an oil spill occur, the report found. That’s a potentially precarious situation with oil a new crude oil transfer station in North Dakota coming online that should boost oil traffic crossing Montana from about 10 trains a week to up to 15 cars per week. One out of every five Montanans lives in an evacuation zone for an oil-train derailment, which is within a half-mile of a rail line, the report said. Trains carrying Bakken crude have been involved in fiery derailments in six states in recent years. In 2013, a runaway train hauling crude from the Bakken derailed and exploded in downtown Lac-Megantic, Quebec, killing 47 people. More recently, a train hauling Bakken crude derailed and spilled 35,000 gallons near the remote northeastern Montana town of Culbertson in July. That area was highlighted in the audit for its lack of equipment and trained manpower to respond to a spill.

Buffett's BNSF helped lead fight to delay train safety technology | Reuters: When an Amtrak passenger train derailed in Philadelphia in May, killing eight people and injuring scores more, the railroad industry's campaign to delay a Dec. 31 deadline to install technology to prevent such disasters appeared to be finished. Not, as it turned out, if billionaire investor Warren Buffett and Sen. John Thune, a South Dakota Republican, had anything to do with it. Thune chairs the Senate Commerce Committee, which oversees the rail industry. Last week, under pressure from companies including Buffett's BNSF Railway Co, which has spent more money lobbying Congress this year than any other railroad, U.S. legislators passed, and President Obama signed, a law that delays the so-called positive train control mandate for at least three years, with the possibility of an additional two-year delay. That means railroad operators can put off having to buy and install equipment that safety advocates say would have prevented accidents that have claimed more than 245 lives and caused over 4,200 injuries since the National Transportation Safety Board began calling for the technology in 1969. Railroad advocates presented a blunt argument: Unless the mandate to install positive train control technology was delayed, the railroads would attempt to cripple the economy.  Railroads that missed the deadline to install systems that automatically slow or stop a train under dangerous circumstances claimed that they would face heightened liabilities by operating outside of federal law, and that therefore they would decline to carry passengers, including commuters. They wouldn't deliver commodities that are classified as hazardous, but are also vital to the economy – including chemicals like chlorine and ammonia needed to run city water treatment plants, refine oil and keep farms and factories running.

With Cancellation Of Spiritwood Fertilizer Plant, MDU Cancels 96-Mile Pipeline -- - Natural Gas Intel is reporting: With a collapse of plans for a highly promoted multi-billion-dollar fertilizer plant in the state, North Dakota-based MDU Resources Group's pipeline unit on Wednesday pulled its application at FERC for a 96-mile, 20-inch diameter natural gas pipeline that would have served the proposed plant. The prospects for MDU's WBI Wind Ridge Pipeline became doubtful last August when St. Paul, MN-based agricultural cooperative conglomerate CHS Inc. decided to drop its plans to develop a major natural gas-based fertilizer plant (see Shale Daily, Aug. 17). On Wednesday, WBI Energy withdrew its pre-filing application at the Federal Energy Regulatory Commission for the proposed pipeline extension and a related compressor station near Spiritwood, ND.  Originally touted three years ago, the project was endorsed by North Dakota Gov. Jack Dalrymple as the largest single private investment ever proposed in the state. The plant was slated for 200 acres in Spiritwood and was expected to add 100-150 new jobs.

U.S. oil refiners look abroad for crude supplies as North Dakota boom fades – PBF Energy Inc, one of the largest independent oil refiners in the United States, spent heavily in recent years to build the rail terminals at its Delaware City complex that it needed to take delivery of large loads of crude coming from North Dakota’s Bakken oil fields. But now it is considering eliminating those deliveries altogether, and replacing them with foreign crude imports, according to two sources familiar with the situation. It has even closed its small Oklahoma City office that was only opened in 2013 and had served as a hub for the company’s trading in North Dakota’s oil, the sources said. The sudden lack of interest in Bakken crude by PBF, which is run by Thomas O’Malley, one of the biggest names in the U.S. oil refining industry, reflects a dramatic recent change in the way East Coast refineries are sourcing the crude that they turn into everything from gasoline to heating oil and jet fuel. The boom in the output of oil from North Dakota’s shale has ebbed as producers have begun to cut back in the face of the plunge in prices by nearly 60 percent since the summer of 2014. North Dakota’s Bakken production peaked at 1.153 million barrels per day in June, and had fallen to 1.13 million barrels per day by August, according to state data. The supply restraint has made Bakken crude relatively more expensive after transport costs than oil shipped from Latin America, the Middle East and Africa, prompting East Coast refiners to return to a foreign crude diet they derided as unprofitable five years ago.

Hoeven requests updated oil & gas reserve estimates for Williston Basin - U.S. Sen. John Hoeven (R-ND) has requested that the U.S. Geological Survey (USGS) complete an updated study assessing the amount of recoverable oil and gas reserves locked away in the Williston Basin. As reported by the Forum News Service (FNS), Hoeven made the request to Dr. Suzette Kimball, who was nominated to become the director of the USGS. She said that if confirmed, she would work with Hoeven to secure an update. Hoeven said, “USGS released its last estimate for the Bakken and Three Forks in 2013. That assessment more than doubled the previous estimate and has been tremendously helpful in attracting infrastructure investment along with energy development.” The April 2013 report conducted by the USGS stated that the amount of technically recoverable oil was an estimated 7.4 billion barrels, more than double the previous recoverable reserve estimates for the Williston Basin. The report also estimated that there is 6.7 trillion cubic feet of recoverable natural gas. Although North Dakota production decreased slightly from the steady 1.2 million barrels per day sustained over the summer months, there remain an estimated 1,000 wells that have been drilled but uncompleted. With improved drilling and hydraulic fracturing techniques being employed in the field, operators are witnessing increasingly higher rates of return. As technology continues to advance, the amount of recoverable oil in the Bakken formation could continue to increase.

Only 1 Percent Of Bakken Shale Is Profitable At These Prices -- Only 1 percent of the Bakken Play area is commercial at current oil prices based on my analysis that follows. Only 4 percent of horizontal wells drilled since 2000 meet the EUR (estimated ultimate recovery) threshold needed to break even at current oil prices, drilling and completion, and operating costs. The leading producing companies evaluated in this study are losing $11 to $38 on each barrel of oil that they produce, the very definition of waste. Although NYMEX prices are about $46 per barrel, realized wellhead prices in the Bakken are only $30 per barrel according to the North Dakota Department of Mineral Resources. At that price, approximately 125,000 acres of the drilled play area of 10,500,000 acres is commercial (green areas in Figure 1).  Bakken Shale Play commercial area map at $30 per barrel wellhead price. Contours are in barrels of oil estimated ultimate recovery. Contour interval = 200,000 barrels of oil. Source: Drilling Info, North Dakota Department of Natural Resources & Labyrinth Consulting Services, Inc.  (click image to enlarge)  The break-even per-well EUR is 700,000 barrels at a $30 oil price. The underlying economic assumptions are shown in Table 1. There has been much debate about the break-even price for tight oil plays in the U.S. This discussion is largely meaningless because there is no single break-even price for any play.

Bakken crude-by-rail: Montana train derailments caused by heat, tracks -- BNSF Railway has determined that the cause of two July train derailments in eastern Montana were the result of tracks that buckled in the summer heat, reports the Forum News Service (FNS). One of the incidents, which occurred on July 16, caused 22 oil tankers to derail 5 miles east of Culbertson, releasing 35,000 gallons of Bakken crude. The derailment was caused by what is known as a sun kink, or “thermal misalignment,” which happens when rail tracks expand with heat and then buckle. The same cause has been attributed to the July 14 derailment, which occurred about 10 miles west of Culbertson, but didn’t involve a spill. Although BNSF has reported the cause of the derailments, the Federal Railroad Administration (FRA) said it is still conducting its investigation. As reported by FNS, BNSF has reported to the FRA that both incidents resulted in about $3.2 million worth of damages to both equipment and tracks. A BNSF spokesman said the company inspects bridges and tracks more often than what the FRA requires. The derailments prompted the Montana Legislature to perform an audit on the state’s rail safety and inspection program. A report released last week points to weaknesses in the state’s ability to provide oversight of rail safety and bemoaned the lack of emergency response teams in the northeast region. The closest hazmat team is located in Billings, nearly 300 miles from where the derailments occurred.

Agriculture secretary: Cancel leases on sacred land— U.S. Agriculture Secretary Thomas Vilsack has recommended the cancellation of long-suspended oil and gas drilling leases near Glacier National Park, federal officials disclosed Monday. The 18 leases are on land considered sacred to the Blackfoot Indian tribes of the United States and Canada. A drilling suspension has been in place since the early 1990s. The owner of one of the leases had challenged that prohibition in federal court, hoping to extract natural gas from the area. But lifting the drilling ban would have “adverse effects” on the site in the Badger Two-Medicine area of northwestern Montana, Vilsack wrote in a Friday letter to Interior Secretary Sally Jewell. “I find that the balance of considerations weigh in favor of not lifting the suspension of operations and production,” Vilsack wrote. He added that the leases themselves should be terminated. Jewell’s agency will have the final say.

The Heroic Resistance of a Latino Community Besieged by Fracking -- This siege takes place in hundreds of Latino communities across the country, and one of these heroes is Juan , an organizer with the Center on Race, Poverty and the Environment, in Kern County, California. Flores's fight is nothing short of heroic.  Kern County generates over 75 percent of California's oil output, including 95 percent of the fracking that occurs in the state, more than any other county in the nation. And the price the overwhelmingly Latino population pay for this is heartbreaking. "We have one of the highest asthma rates in the country, especially among our children," says Flores. "It is sad for a kid to live with the reality of having an asthma attack every other day. They cannot catch a break. That's why we are putting up a fight." According to a 2014 National Resources Defense Council study, close to 2 million Californians, who already put up with very high levels of other kinds of pollution, are living within a mile of an oil and gas development. Of them, a breathtaking 92 percent are communities of color. The report also found that in Kern County, 64 percent of people living within one mile of an oil or gas well and in areas facing the worst environmental health threats are Latino.

Gov. Jerry Brown had state workers research oil on family ranch: Gov. Jerry Brown last year directed state oil and gas regulators to research, map and report back on any mining and oil drilling potential and history at the Brown family's private land in Northern California. After a phone call from the governor and follow-up requests from his aides, senior staffers in the state's oil and gas regulatory agency over at least two days produced a 51-page historical report and geological assessment, plus a personalized satellite-imaged geological and oil and gas drilling map for the area around Brown's family ranchland near the town of Williams.Ultimately, the regulators told the governor, prospects were “very low” for any commercial drilling or mining at the 2,700-acre property, which has been in Brown's family for more than a century. Through the state's open records law, the Associated Press obtained the research that state regulators carried out for Brown, and the emails among senior oil and gas regulators scrambling to fulfill the governor's request. Brown spokesman Evan Westrup declined to discuss the work for the governor, referring the AP to California's Division of Oil, Gas and Geothermal Resources. That agency said the work was a legal and proper use of public resources — and no more than the general public would get. But oil industry experts said they could not recall a similar example of anyone getting that kind of state work done for private property.

Congressional Energy Chairs Form Fundraising Committee, Rake In Oil, Gas Cash As They Push Bills For Fossil Fuel Industry: The fossil fuel industry had already managed to shape a bill moving rapidly through Congress last summer, gaining provisions to ease its ability to export natural gas. But one key objective remained elusive: a measure limiting the authority of local communities to slow the construction of pipelines because of environmental concerns. Then, U.S. Rep. Fred Upton, a Michigan Republican who chaired the House Energy Committee, gave the industry an opportunity to amplify its influence. Joining forces with Sen. Lisa Murkowski, the Alaska Republican who chaired the Senate Energy Committee, he launched a so-called joint fundraising committee, a campaign war chest that would accept donations from a range of contributors, with the proceeds divided between the two lawmakers. Executives at one of the nation’s largest natural gas pipeline companies soon deposited more than $80,750 into the joint fund’s coffers. The very next day, Upton delivered on the industry’s aspirations: He rushed a bill through his legislative panel that would not only streamline the approval process for new pipelines but also empower federal officials to impose tight deadlines on state and local governments seeking to review their potential environmental impacts.

KunstlerCast 271 – A Conversation with Gail Tverberg of -  Kunstler - Original audio source.   A conversation with Gail Tverberg of Gail Tverberg is an analyst who has been researching the connection between oil limits and the economy for nearly 10 years.  She writes a widely-followed blog called Our Finite World. Her background is as an actuary, working as a consultant to insurance companies. She also has a foot in the academic world, where she has lectured and written academic articles. Gail was in China in March-April of this year lecturing at China University of Petroleum in Beijing and is scheduled to return next spring, to teach another class.

New Bill Would Keep Fossil Fuel Reserves On Public Lands In The Ground --  Over the past year, environmentalists have called for keeping significant stores of the world’s remaining fossil fuel stores in the ground in order to curb climate change — a call that’s backed up by science. Now, a new bill aims to do just that.  Sen. Jeff Merkley (D-OR), along with Senator and presidential candidate Bernie Sanders, is introducing a bill Wednesday that would bar new leases on coal, gas, oil, and tar sands extraction on public lands in the U.S. The bill, titled the Keep it in the Ground Act, would also prohibit offshore drilling in the Arctic and the Atlantic Ocean and prohibit the renewal of leases that haven’t yet produced fossil fuels.   “This bill is about recognizing that the fossil fuel reserves that are on our public lands should be managed in the public interest, and the public interest is for us to help drive a transition from fossil fuels to a clean energy future,” Merkley said on a press call Tuesday. Merkley referenced findings from earlier this year that 80 percent of coal reserves — along with a third of global oil reserves and half of global natural gas reserves — should stay in the ground between now and 2050 in order to keep warming to 2°C, the limit that many scientists agree we need to stay below in order to avoid the worst effects of climate change. Banning new oil and gas leases on public lands, as the bill would do, would be a step towards this target. “Many leases are exploited for decades — you have leases for gas that can go 30 years and leases for coal that can go 40 to 50 years, so doing new leases locks in fossil fuel extraction for decades to come,” Merkley said. “That’s not in the public interest.”

Keep it in the ground: Bernie Sanders wants to ban new fossil fuel development -- On Wednesday, presidential hopeful Bernie Sanders announced his support for a new bill that would ban all new fossil fuel development on United States’ federal lands while cancelling the current leases which aren’t producing, reports Mother Jones.. The bill, titled the “Keep It In The Ground Act,” would also prohibit offshore oil and gas drilling in both the Arctic and Atlantic, in addition to halting the issue of new leases for offshore drilling in the Pacific and the Gulf of Mexico. At a rally at the Capitol in Washington D.C., Sanders told the audience, “I believe all of us have a moral responsibility. That’s just the simple truth.” He added that if the US doesn’t become more proactive about reducing the amount of carbon emissions created by burning fossil fuels, “the planet that we’re going to be leaving for our kids is something we should be ashamed of.” As reported by Mother Jones, the Vermont senator made the announcement alongside Oregon Senator Jeff Merkley (D). A statement released by Merkley’s office stated that the new legislation was constructed to leave “over 90 percent of the potential carbon emissions from oil, gas and coal on our federal lands and federal waters underground forever.” In addition to condemning the burning of fossil fuels, Sanders also admonished the opposing Republican Party and its members’ reluctance to take action on climate change. He indicated that many Republicans ignore the scientific facts regarding climate change, but wouldn’t dispute the fact that smoking tobacco can lead to cancer. He said, “But somehow – somehow! – when it comes to climate change there are massive attacks on scientists who tell us the truth about climate change.”

Stone Energy Corporation Announces Third Quarter 2015 Results -  -- Stone Energy Corporation today announced financial and operational results for the third quarter of 2015.  Stone had a third quarter of 2015 adjusted net loss of $8.4 million, or $0.15 per share, on oil and natural gas revenues of $128.4 million, before a pre-tax non-cash impairment charge of $295.7 million related to the impairment of oil and gas properties.  The non-cash impairment of oil and gas properties is primarily due to lower oil and gas prices, widening basis differentials and increased transportation, processing and gathering expenses in Appalachia, which reduced the future net cash flows from proved reserves.  If the net capitalized costs of proved oil and gas properties exceed the estimated discounted future net cash flows from proved reserves, an impairment occurs. After the non-cash impairment charge, the reported net loss was $292.0 million for the third quarter of 2015.  Please see "Non-GAAP Financial Measures" and the accompanying financial statements for a reconciliation of adjusted net income, a non-GAAP financial measure, to net loss.

Noble Energy, Weld County’s second largest oil and gas producer, reports $283 million third-quarter loss -- Noble Energy on Monday reported a third-quarter loss of $283 million. “Noble Energy delivered tremendous performance in the third quarter,” said David Stover, Noble Energy’s chairman, president and CEO in a news release. “This was highlighted by material reductions in our quarterly capital and controllable unit costs, which were driven by continued operational efficiency gains throughout the business.” The news is not surprising in today’s commodities markets, and especially since Weld County’s No. 1 producer, Anadarko Petroleum, posted a $2.2 billion loss on the quarter just last week. Company officials will have a conference call this morning to discuss results further. Just last week, officials confirmed the company would “adjust its workforce,” but did not elaborate on planned layoffs. Noble operates across the globe but focuses its U.S. drilling in the Denver-Julesburg Basin in Colorado, and in fields in Texas and Pennsylvania. In the DJ Basin, the company reported sales volumes averaged a record 116,000 barrels of oil equivalent per day in the third quarter, up 13 percent from the same time last year. During the quarter, the company operated with four drilling rigs, but has since dropped that to three, and has plans to leave 40 wells uncompleted, or hydraulically fracked. Companies have increasingly chosen to not finish their well drilling until commodity prices return to more favorable levels. When that time comes, they can finish the wells, but spend less, since half of the job has been done.

Pioneer Natural Resources records strong bottom line - Pioneer Natural Resources bolstered its bottom line in the third quarter by selling its midstream operations in the Eagle Ford Shale and implementing aggressive cost-cutting measures in its oil and gas drilling operations. The Irving-based energy company on Monday said net income rose to $646 million, or $4.27 per diluted share, compared with $374 million in last year’s third quarter. And despite lower oil prices, revenues climbed $705 million — to $2.2 billion from $1.5 billion — thanks to asset sales and derivative trading. Pioneer profited by selling its oil and gas transportation system in the Eagle Ford for $2.15 billion — pumping about $530 million into its accounts in the third quarter with the rest to be paid in 2016, the company reported. It also realized savings by cutting its costs on drilling and services by 25 percent compared with 2014, the company reported. But excluding derivative market-to-market gains and other unusual items, its adjusted results came to a loss of one cent per diluted share.

Apache's quarterly loss widens on $3.7 bln charge - (Reuters) - Apache Corp reported a much bigger quarterly loss as it took a $3.7 billion writedown due to a slump in oil prices. Net loss attributable to Apache's common shareholders widened to $5.56 billion, or $14.95 per share, in the third quarter, from $1.33 billion, or $3.50 per share, a year earlier. The latest quarter also included a $1.5 billion charge related to deferred tax assets.

US Oil Producer Apache Raises Production Forecast  (Reuters) - Apache Corp reported a much smaller-than-expected quarterly loss and joined a growing list of U.S. oil producers in raising full-year production forecast even as many of them cut spending. Increased efficiencies, a drop in service costs and low break-even levels in core U.S. shale fields are all helping U.S. oil companies increase production on reduced budgets. U.S. producers ranging from Oasis Petroleum Inc to Devon Energy Corp have forecast higher production in their latest quarterly reports. Apache on Thursday raised its full-year North American onshore production forecast to 307,000-309,000 barrels of oil equivalent per day (boepd), from 305,000-308,000 boepd. The company also increased its international and offshore production forecast to 172,000-174,000 boepd, from 164,000- 168,000 boepd. "As we turn to 2016, prudent capital allocation will continue to be our primary focus...," Chief Executive John Christmann said in a statement. Oil producers are keeping a tight leash on spending to cope with a near-60 percent drop in global oil prices since June last year that has sapped profitability. The net loss attributable to Apache's common shareholders widened to $5.56 billion, or $14.95 per share, in the third quarter ended Sept. 30, from $1.33 billion, or $3.50 per share, a year earlier. The latest quarter included a $1.5 billion charge related to deferred tax assets and a $3.7 billion writedown due to the oil slump.

Chesapeake cuts budget again on weak oil and gas prices - Chesapeake Energy Corp cut its 2015 capital budget for the second time this year to cope with low oil and gas prices and swung to a large quarterly net loss as the second largest U.S. producer of natural gas wrote down the value of assets. The Oklahoma City, Oklahoma company’s shares fell 5 percent to $7.25 in morning New York Stock Exchange trading, as third-quarter cash flow fell short of Wall Street estimates. U.S. oil and gas producers are slashing budgets, costs and streamlining operations as a near 60 percent drop in global oil prices since June last year saps profitability. In response, Chesapeake has so far cut about 15 percent of its workforce and suspended its dividend. Now, the company cut its 2015 capital expenditure target by $100 million to $3.4 billion to $3.9 billion. And further reductions are on the way.  Chesapeake said on Wednesday it wrote down the value of some oil and gas assets by $5.42 billion, adding to the $10 billion in impairment charges it has already booked this year. Excluding the impairment charge and other items, Chesapeake reported a loss of 5 cents per share, compared with the loss of 13 cents estimated by analysts, according to Thomson Reuters I/B/E/S. Net loss was $4.69 billion or $7.08 per share in the third quarter, compared with a year-ago profit of $169 million or 26 cents per share a year earlier. Chesapeake had cash flow from operations of $219 million in the third quarter, well below the consensus estimate of $369 million, according to analysts at Simmons & Company International in Houston.

Gulfport Energy reports 3Q loss - Gulfport Energy Corp. (GPOR) on Wednesday reported a third-quarter loss of $388.2 million, after reporting a profit in the same period a year earlier. The Oklahoma City-based company said it had a loss of $3.59 per share. Losses, adjusted for one-time gains and costs, came to 8 cents per share. The results exceeded Wall Street expectations. The average estimate of 15 analysts surveyed by Zacks Investment Research was for a loss of 15 cents per share. The independent oil and gas company posted revenue of $230.6 million in the period, also surpassing Street forecasts. Eight analysts surveyed by Zacks expected $160.4 million. Gulfport Energy shares have fallen 25 percent since the beginning of the year. In the final minutes of trading on Wednesday, shares hit $31.38, a drop of 34 percent in the last 12 months.

Gulfport to cut oil and gas production - Gulfport Energy is voluntarily cutting production of oil and natural gas through early 2016, citing low commodity prices and a faster-than-expected drilling pace. CEO Michael G. Moore said slowing production is the sensible thing to do. “Our hope is that our peers, by choice rather than by necessity, will do the same,” Moore said during a conference call Thursday to discuss the company’s third-quarter earnings. Oklahoma City-based Gulfport has drilled 209 wells in Ohio’s Utica Shale. That’s the second-highest number of any company. The company lost $388.2 million or $3.59 per share during the third quarter. Oil and natural gas revenue was $230.4 million. Gulfport produced 647.1 million cubic feet equivalent of natural gas per day during the quarter. Utica Shale wells accounted for 97 percent of production. The company’s production mix was 81 percent natural gas, 12 percent natural-gas liquids and 7 percent oil. Gulfport started curtailing production by 100 million cubic feet equivalent per day at the beginning of the month. The company is running four horizontal rigs in the Utica. It drilled 15 gross wells and began production from 16 gross wells during the quarter. Well costs have decreased between 5 and 8 percent. In light of oil and natural gas prices, Gulfport won’t add a fifth Utica rig in early 2016. The company also will idle a fracking crew.

EOG Resources Reports Third Quarter 2015 Results; Increases Delaware Basin Net Resource Potential by 1.0 BnBoe - EOG Resources, Inc. today reported a third quarter 2015 net loss of $4.1 billion, or $7.47 per share. This compares to third quarter 2014 net income of $1.1 billion, or $2.01 per share. Adjusted non-GAAP net income for the third quarter 2015 was $13.5 million, or $0.02 per share, compared to the same prior year period adjusted non-GAAP net income of $720.6 million, or $1.31 per share. Adjusted non-GAAP net income is calculated by matching realizations to settlement months and making certain other adjustments in order to exclude one-time items. (Please refer to the attached tables for the reconciliation of non-GAAP measures to GAAP measures.) During the third quarter 2015, proved oil and gas properties and related assets were written down to their fair value resulting in non-cash impairment charges of $4.1 billion net of tax. The impairments were due to declines in commodity prices and were primarily related to legacy natural gas and marginal liquids assets. Significant reductions in operating expenses were more than offset by lower commodity price realizations, resulting in decreases in adjusted non-GAAP net income, discretionary cash flow and adjusted EBITDAX during the third quarter 2015 compared to the third quarter 2014

Devon Energy has $3.5 bln quarterly loss on writedowns | Reuters: (Reuters) - Devon Energy Corp on Tuesday reported a quarterly loss compared with a year-earlier profit, as low prices prompted the onshore U.S. oil and gas company to write down the value of some assets. Crude oil prices have prompted shale companies like Devon to cut spending and costs, yet drilling efficiencies and improved well completion techniques are helping to push output higher in fields including the Permian Basin in west Texas. Devon said it was raising its full-year production growth outlook for the second time this year. "We are delivering this incremental production growth with significantly lower costs," Dave Hager, Devon's chief executive said in a statement. "We are now on pace to save around $1 billion of capital and operating costs in 2015 versus original expectations." The Oklahoma City, Oklahoma company had a third-quarter loss of $3.5 billion, or $8.64 per share, compared with a profit of $1 billion, or $2.47 per share in the same period a year earlier. Excluding one-time items including about $6 billion to write down the value of oil and gas properties, Devon had a profit of $316 million, or 76 cents per share. Analysts on average had expected Devon to report a per-share profit of 52 cents, according to Thomson Reuters I/B/E/S.

Continental Resources reports $82 million loss in third quarter | News OK: Continental Resources Inc. on Wednesday reported a net loss of 82.4 million, or 22 cents a share, in the third quarter as low commodity prices offset increased production. The net loss was down from a profit of $534 million, or $1.44 a share, in the year-ago period. Adjusted for one-time expenses, the Oklahoma City-based oil company recorded a net loss of $43.5 million, or 12 cents a share. Earnings before interest taxes, depreciation, amortization and drilling expenses was $472 million, down from $948 million one year ago. "This was another solid quarter's performance," CEO Harold Hamm said in a statement. "As expected, we continue to deliver on cost controls and operating efficiencies while maintaining our exploration focus. We continued in the third quarter to improve across the board in the key metrics we control — faster drill times, lower completed well costs, and strong well results from enhanced completions. On the financial side, we remain focused on balancing capital expenditures with cash flow." Total revenues slipped to $683 million, down from $1.6 billion one year ago. Continental produced more than 147,000 barrels of oil per day, up from almost 123,000 barrels per day in the year-ago period. Total production was 228,000 barrels of oil equivalent in the third quarter, up 25 percent from the year-ago quarter.

Continental Resources boosts crude output forecast (Reuters) - Continental Resources Inc, North Dakota's second-largest oil producer, boosted its production forecast on Wednesday despite posting a quarterly loss, betting technological advancements and cost cuts will help it extract more oil at a cheaper price. The bold bet, just as the company's credit line was increased, matches an evolving industry trend. Companies have been raising output projections, banking on efficiency gains to help offset the steepest oil price crash in six years. "We continue to deliver on cost controls and operating efficiencies, while maintaining our exploration focus," Harold Hamm, Continental's chief executive and largest shareholder, said in a statement. The Oklahoma-based company now expects to pump 24 percent to 26 percent more oil than last year's output of roughly 174,000 barrels of oil equivalent per day (boepd). Previous guidance had called for a boost of 16 percent to 20 percent. While Hamm canceled Continental's oil hedges last fall, much of his confidence stems from the company's increasing ability to use innovative ways to extract oil from the 1 million acres of North Dakota shale it controls. In the past 11 months, Continental said it has cut its drilling and completion costs for new wells by 25 percent. Still, Continental slashed its 2015 capital budget two months ago for the third time this year, saying it planned to temporarily end fracking of its North Dakota wells, a strategy it did not alter on Wednesday.

Halcon Resources Announces Third Quarter 2015 Results - Halcón Resources Corporation (today announced its third quarter 2015 results. The Company generated revenues of $129.9 million for the three months ended September 30, 2015. In addition, Halcón realized a net gain on settled derivative contracts of $114.9 million during the quarter. The Company produced an average of 40,739 barrels of oil equivalent per day (Boe/d) during the period. Third quarter 2015 production was 80% oil, 10% natural gas liquids (NGLs) and 10% natural gas. Including the impact of hedges, Halcón realized 168% of the average NYMEX oil price, 15% of the average NYMEX oil price for NGLs and 111% of the average NYMEX natural gas price during the period. Total operating costs per unit, after adjusting for selected items (see Selected Operating Data table for additional information), decreased by 27% to $17.04 per Boe in the third quarter of 2015, compared to the third quarter of 2014. After adjusting for selected items primarily related to a non-cash gain on the extinguishment of debt and a non-cash pre-tax full cost ceiling impairment charge (see Selected Item Review and Reconciliation table for additional information), net income available to common stockholders was $21.2 million, or $0.04 per diluted share, for the three months ended September 30, 2015. The Company reported net income available to common stockholders of $123.5 million, or $0.18 per diluted share for the quarter.

Crescent Point reports 3Q loss - Crescent Point Energy Corp. (CPG) on Thursday reported a third-quarter loss of $154.1 million, after reporting a profit in the same period a year earlier. On a per-share basis, the Calgary, Alberta-based company said it had a loss of 31 cents. Earnings, adjusted for non-recurring costs, came to 2 cents per share. The results met Wall Street expectations. The average estimate of four analysts surveyed by Zacks Investment Research was also for earnings of 2 cents per share. The oil producer posted revenue of $559 million in the period. Crescent Point shares have declined 38 percent since the beginning of the year. The stock has fallen 53 percent in the last 12 months.

SM Energy misses Street 3Q forecasts - SM Energy Co. (SM) on Tuesday reported third-quarter earnings of $3.1 million. On a per-share basis, the Denver-based company said it had profit of 5 cents. Losses, adjusted for non-recurring gains, came to 34 cents per share. The results fell short of Wall Street expectations. The average estimate of 10 analysts surveyed by Zacks Investment Research was for a loss of 27 cents per share. The independent oil and gas company posted revenue of $371.2 million in the period, which also did not meet Street forecasts. Seven analysts surveyed by Zacks expected $406.9 million. SM Energy shares have dropped 22 percent since the beginning of the year. In the final minutes of trading on Tuesday, shares hit $30.01, a decline of 47 percent in the last 12 months.

PetroQuest reports 3Q loss - PetroQuest Energy Inc. (PQ) on Monday reported a third-quarter loss of $50.6 million, after reporting a profit in the same period a year earlier. On a per-share basis, the Lafayette, Louisiana-based company said it had a loss of 80 cents. Losses, adjusted for non-recurring costs, were 18 cents per share. The results topped Wall Street expectations. The average estimate of five analysts surveyed by Zacks Investment Research was for a loss of 22 cents per share. The independent oil and gas company posted revenue of $26.9 million in the period, also beating Street forecasts. Four analysts surveyed by Zacks expected $24.1 million. In the final minutes of trading on Monday, the company's shares hit $1.13. A year ago, they were trading at $4.70.

Parsley Energy misses Street 3Q forecasts - Parsley Energy Inc. (PE) on Wednesday reported third-quarter earnings of $909,000. On a per-share basis, the Austin, Texas-based company said it had net income of 1 cent. Losses, adjusted for non-recurring gains, came to 8 cents per share. The results missed Wall Street expectations. The average estimate of 10 analysts surveyed by Zacks Investment Research was for a loss of 5 cents per share. The independent oil and gas company posted revenue of $64.2 million in the period, which also fell short of Street forecasts. Nine analysts surveyed by Zacks expected $74.2 million. Parsley Energy shares have risen 9.5 percent since the beginning of the year. In the final minutes of trading on Wednesday, shares hit $17.48, a rise of 13 percent in the last 12 months.

C&J reports 3Q loss - C&J Energy Services Inc. (CJES) on Wednesday reported a third-quarter loss of $455 million, after reporting a profit in the same period a year earlier. On a per-share basis, the Houston-based company said it had a loss of $3.89. Losses, adjusted for non-recurring costs, came to 65 cents per share. The results fell short of Wall Street expectations. The average estimate of 10 analysts surveyed by Zacks Investment Research was for a loss of 63 cents per share. The provider of services to the oil and natural gas industries posted revenue of $427.5 million in the period, which also did not meet Street forecasts. Seven analysts surveyed by Zacks expected $430.5 million. C&J shares have dropped 57 percent since the beginning of the year. In the final minutes of trading on Wednesday, shares hit $5.66, a fall of 67 percent in the last 12 months.

Sandridge Energy reports 3Q loss - Sandridge Energy Inc. (SD) on Wednesday reported a third-quarter loss of $640.4 million, after reporting a profit in the same period a year earlier. On a per-share basis, the Oklahoma City-based company said it had a loss of $1.23. Losses, adjusted for non-recurring costs, came to 7 cents per share. The results surpassed Wall Street expectations. The average estimate of eight analysts surveyed by Zacks Investment Research was for a loss of 11 cents per share. The independent oil and gas company posted revenue of $180.2 million in the period. In the final minutes of trading on Wednesday, the company's shares hit 40 cents. A year ago, they were trading at $3.56.

PDC Energy reports 3Q loss - PDC Energy Inc. (PDCE) on Thursday reported a third-quarter loss of $41.5 million, after reporting a profit in the same period a year earlier. The Denver-based company said it had a loss of $1.04 per share. Earnings, adjusted for one-time gains and costs, came to 38 cents per share. The results missed Wall Street expectations. The average estimate of 13 analysts surveyed by Zacks Investment Research was for earnings of 47 cents per share. The independent oil and gas company posted revenue of $231.1 million in the period, topping Street forecasts. Nine analysts surveyed by Zacks expected $160.4 million.

Large losses in tar sands and the Arctic drag down Shell’s earnings - Royal Dutch Shell reported weak third quarter earnings last Thursday morning, hobbled by a triple whammy of low oil prices and losses related to suspended projects in the Arctic and Canadian tar sands. The company lost $6.1 billion overall in the quarter, compared with a gain of $5.3 billion a year earlier. The oil giant took a staggering $7.9 billion in write-offs, including $2.6 billion for the dry hole drilled in Alaska’s Arctic waters, $2 billion related to the suspension of the Carmon Creek oil sands project and $3.7 billion due to lower oil and gas price forecasts, including $2.3 billion related to shale oil properties in the United States. Shell’s results reflect not only the company’s frustrations but broader trends across the oil and gas industry, which is grappling with lower oil prices and disappointments in frontier areas that have been the repositories of hopes for future oil production. Excluding items, the company made $ 1.8 billion in the quarter, versus $ 5.8 billion a year ago, when crude oil prices were nearly twice as high. In the Chukchi Sea, Shell noted, it drilled the Burgher J well which was “considered a dry-hole, with minor oil and gas shows, and the result renders the Burger Prospect as uneconomic. This, combined with the current economic and regulatory environment, has led Shell to cease further exploration activity offshore Alaska for the foreseeable future.”In a conference call with analysts, Shell’s CEO Ben Van Beurden said that this was “a very expensive dry hole” and that while there was an “unbelievably complex regulatory environment,” he said the company would look back and “try to learn from this as much as possible.” Van Beurden said that suspending the Carmon Creek oil sands project was done because of the “economic environment” as well as “uncertainty about the evacuation route,” a reference to continuing controversy over the construction of pipelines that would carry bitumen from the project to distant refineries. “There were too many things coming together conspiring against the project,” he added. But he said that Shell would continue operations at existing oil sands developments and said that cash costs at its open pit oil sands mines were about $25 a barrel.

Giant Sucking Sound of Capital Destruction in US Oil & Gas -- Chesapeake Energy is a good example. The second largest natural gas producer in the US, after Exxon, reported its debacle yesterday. Revenues plunged 49% from the quarter a year ago, when the oil bust had already set in. The company has been slashing costs and capital expenditures. In June, it eliminated its dividend. And yesterday, it recognized $5.4 billion in impairment charges, bringing impairments for the nine months to a staggering $15.4 billion. Impairment charges are a sudden accounting recognition of accumulated capital destruction. These impairments pushed its losses from operations to $5.4 billion in Q3 and to $16 billion for the nine months.  Chesapeake currently gets 72% of its production from natural gas, 17% from oil, and 11% from natural gas liquids. The oil bust has been going on since the summer of 2014. The US natural gas bust has been going on since 2009! Two natural gas producers have already gone bankrupt this year: Quicksilver Resources and Samson Resources.  Its annual free cash flow has been negative since 1994, even during good times, with only two tiny exceptions (Bloomberg chart). After living off borrowed money, it’s now trying to hang on by selling assets and lowering its mountain of debt. But it still owes $16 billion, much of which QE-besotted, ZIRP-blinded, yield-hungry investors had handed it over the years, based on hype and false hopes. In terms of capital destruction, Chesapeake is in good company, and not even the leader. A new report by Evaluate Energy, which covers Oil & Gas companies around the globe, examined the financial statements of the 48 US oil & gas companies that have reported earnings for the third quarter so far. The amounts and the speed of deterioration are just stunning. Turns out, what started in Q4 last year is getting worse relentlessly. On a quarterly basis, the losses in Q3 jumped 58% from Q2 and 70% from Q1 to $25.5 billion. This fiasco, which has been spiraling down at a breath-taking pace, looks like this: Of the 48 companies, 38 recognized impairment charges totaling $32.8 billion in Q3 alone, a 79% jump from Q2, when impairments hit $18.4 billion. Since Q4 2014, these 48 companies recognized impairments of $84.6 billion; 39% of that in Q3. Devon Energy was king of the hill, with $5.9 billion in impairments in Q3, after having recognized impairments every quarter this year, for a total of about $15.5 billion.

Bankruptcy becomes a way of life for oil and gas companies - RAAM Global Energy Co. is just the latest oil and gas company to file for bankruptcy protection, but it certainly won't be the last. The Lexington, Ky., debtor submitted its Chapter 11 petition in the U.S. Bankruptcy Court for the Southern District of Texas in Houston on Oct. 26, at the end of a 12-month span that's been abysmal for the sector. For a sense of just dismal things are looking for the space, consider the fact that two industry experts The Deal spoke to Thursday both said the exact same thing: "Things will get worse before they get better." Nearly two dozen large oil and gas companies have ended up in bankruptcy in the past year. Exploration company Endeavour International Corp.  kicked off the string of petitions, on Oct. 12, 2014. The debtor had plans to implement a restructuring support agreement that soon fell apart due to falling oil and gas prices. Other relatively large companies followed suit soon after, including Quicksilver Resources Inc. (March 17), Sabine Oil & Gas Corp.(July 15) and Hercules Offshore Inc. (Aug. 13). Smaller companies like Cal Dive International Inc. March 3), Dune Energy Inc.(March 8), BPZ Resources Inc. (March 9), ERG Intermediate Holdings LLC (April 30) American Eagle Energy Corp.  (May 8), Saratoga Resources Inc. (June 16), Milagro Oil & Gas Inc. (July 15) and Miller Energy Resources Inc. (Oct. 1) also ended up in bankruptcy court. Canadian companies have also not been immune to distress in the sector. Verity Energy Ltd. on April 29 sought protection under Canada's Companies' Creditors Arrangement Act. Well-fracturing service provider Gasfrac Energy Services Inc. (Jan. 15), oil sands exploration company Southern Pacific Resource Corp. (Jan. 21), crude oil producer Laricina Energy Ltd. (March 30) and exploration company Shoreline Energy Corp. (April 9) have also done the same.

Despite gloom, four U.S. shale oil firms lift output views - A handful of U.S. shale oil producers are pushing up their production forecasts, saying efficiency gains from drilling in prime rock are helping them eke out more crude in the middle of the worst price crash in six years. The slightly bolder outlooks this week from Oasis Petroleum Inc, Devon Energy Corp, Pioneer Natural Resources Co and Diamondback Energy Inc show that the confident swagger that typified the U.S. shale boom’s early days has yet to be fully tempered by the more than 50 percent drop in oil prices since last year. Though the consensus view is that rig productivity in U.S. shale basins is stalling to portend a drop in national output as companies struggle to pump more with less, some firms appear to still be finding new ways to drill wells faster and frack them more intensively at a lower price. “Over time, we continue to think we’ll need less rigs than we’re even saying now,” Pioneer Chief Executive Officer Scott Sheffield told investors on Thursday. Shares of Oasis, Devon and Pioneer rose more than 2 percent after their respective forecasts were announced. Shares of Oasis and Devon have lost about a quarter of their value this year, while those of Pioneer have held mostly steady.

California Consumers Drive Chevron To Record Refining Profits In First Nine Months, Says Consumer Watchdog -- Chevron today reported its highest U.S. refining profits for the first nine months of the year—a whopping $2.6 billion as compared to $1.7 billion for the same period last year. Since 54 percent of the company's refining takes place in California, California drivers paid the price, Consumer Watchdog said today. "Chevron's results reinforce the fact that our gasoline market is stacked against consumers by oil companies that routinely manipulate the supply and price of gasoline," said Consumer Advocate Liza Tucker. "Instead of passing through savings from tanking crude oil prices, these companies keep a larger and larger share of the profit because they can." Chevron reported a U.S. refining profit of $1.2 billion for the three months ended September 30, beating the highest quarterly earnings from downstream operations that the company ever reported of $1.03 billion for the 4th quarter of 2008. Valero and Tesoro, two refiners that just reported California-specific profits, this week also reported their most lucrative California quarters ever. Their quarterly reports for July through September help explain why Californians have paid a dollar per gallon over the US average during 2015.

Total beats expectations thanks to record refining margins - (Reuters) - French oil and gas company Total's reported better than expected third-quarter profit on Thursday after high margins in its European refining business and increased production softened the blow of prolonged low oil prices. A lower-for-longer outlook for oil prices took its heaviest toll yet as oil companies reported a dramatic drop in income in the third quarter, with some even falling to a loss. Total, however, appeared to fare better than its peers, even though net adjusted profit tumbled by 23 percent year on year to $2.756 billion. Analysts had expected $2.391 billion in net adjusted profit, according to Thomson Reuters I/B/E/S estimates. The French group, Europe's biggest refiner, benefited from record-high refining margins in Europe, which helped its downstream division to post an 82 percent profit jump. "In a context where the oil price has fallen by 50 percent in one year, Total was able to demonstrate its resilience by limiting to 23 percent the decrease in its third-quarter adjusted net income," Chief Executive Patrick Pouyanne said in a statement. The company also made an upward revision to its production growth target to more than 9 percent this year, from 8 percent previously, after a 10 percent jump in output in a third quarter boosted by new projects.

TransCanada asks U.S. to suspend Keystone XL pipeline application: TransCanada, the company behind the controversial Keystone XL pipeline from Canada to the U.S Gulf Coast, has asked the U.S. State Department to pause its review of the project. TransCanada said Monday it had sent a letter to Secretary of State John Kerry requesting that the State Department suspend its review of the pipeline application. The pipeline company said such a suspension would be appropriate while it works with Nebraska authorities for approval of its preferred route through the state that is facing legal challenges in state courts. The move comes as the Obama administration was widely expected to reject the pipeline permit application. "We have just received TransCanada's letter to Secretary Kerry and are reviewing it. In the meantime, consideration under the Executive Order continues," State Department spokeswoman Elizabeth Trudeau said. The White House declined to comment, referring all questions to the State Department. The State Department review is mandated as part of the application process because the pipeline crosses an international border. The State Department does not have to grant TransCanada's request for a pause in the review process and instead can continue the review process. Ahead of TransCanada's announcement Monday, White House spokesman Josh Earnest said President Barack Obama intended to make a decision on the pipeline before his presidency ends in January 2017, although he declined to elaborate on the timeline. Hillary Rodham Clinton and her main challengers for the Democratic nomination are already on record as opposing it. All of the leading Republican presidential candidates support the pipeline. Some pipeline opponents contend that TransCanada hopes to delay the review process in hopes that a more sympathetic Republican administration will move into the White House in 2017.

TransCanada Asks State Department To Suspend Review Process For Keystone XL Pipeline - Canadian oil company TransCanada has asked the State Department to suspend the review process for the controversial Keystone XL pipeline. The company announced Monday that it had sent a letter to Secretary of State John Kerry, asking him to pause the permit application review process for the tar sands pipeline.  “We are asking State to pause its review of Keystone XL based on the fact that we have applied to the Nebraska Public Service Commission for approval of its preferred route in the state,” Russ Girling, TransCanada’s president and chief executive officer, said in a statement. “I note that when the status of the Nebraska pipeline route was challenged last year, the State Department found it appropriate to suspend its review until that dispute was resolved. We feel under the current circumstances a similar suspension would be appropriate.” In the letter, TransCanada notes that an ongoing review process in Nebraska is expected to take seven to 12 months, and that during that time, it would make sense for the State Department to pause its federal review. “In order to allow time for certainty regarding the Nebraska route, TransCanada requests that the State Department pause in its review of the Presidential Permit application for Keystone XL,” the company writes in the letter. “This will allow a decision on the permit to be made later based on certainty with respect to the route of the pipeline.”

New twist in Keystone controversy: Pipeline owner TransCanada asks for a delay -- The company that hopes to build the Keystone XL pipeline to carry crude oil from Canada to the Gulf Coast asked the Obama administration Monday to delay its review of the proposal — a striking turn that adds further uncertainty to a project that has generated bitter debate since it was proposed seven years ago. The company, TransCanada, made its request in a three-paragraph letter to Secretary of State John F. Kerry, citing legal challenges it said had prompted it to change tactics. The State Department must review the project because it would cross an international border. President Obama had said that he would make the final decision. “TransCanada believes that it would be appropriate at this time for the State Department to pause in its review of the presidential permit application for Keystone XL,” the company wrote. Spokesman Mark Cooper said TransCanada was not withdrawing its application. Instead, he said, “We are asking the State Department to suspend a decision.” A State Department official said the agency was reviewing the request. The move by TransCanada appeared to confirm speculation that the company hopes to push off a decision until the next administration because it fears Obama will reject the pipeline. Hours before TransCanada announced its request, the White House said it expected Obama to make a decision about the pipeline “before the end of his administration,” though it did not specify when. The request also reflects a remarkable turnabout by TransCanada, which has spent years complaining of delays in the process only now to request one itself.

Transcanada Just Killed The Keystone XL Pipeline -- In an ironic twist, just hours after we discussed the record capital outflow from Canada, resulting from the plunge in oil prices and the mothballing of Canada's energy industry, Obama's long-desired goal of killing the Keystone XL pipeline has finally come true.  Moments ago, the WSJ reported that Alberta-based Transcanada asked to suspend its U.S. permit application, "throwing the politically fraught project into an indefinite state of limbo, beyond the 2016 U.S. elections."  Calgary, Alberta-based TransCanada Corp. sent a letter to the State Department, which reviews cross-border pipelines, to suspend its application while the company goes through a state review process in Nebraska it had previously resisted. “In order to allow time for certainty regarding the Nebraska route, TransCanada requests that the State Department pause in its review of the Presidential Permit application for Keystone XL,” the company said in the suspension request reviewed by The Wall Street Journal. “This will allow a decision on the Permit to be made later based on certainty with respect to the route of the pipeline.” The WSJ correctly notes that "the move comes in the face of an expected rejection by the Obama administration and low oil prices that are sapping business interests in Canada’s oil reserves." Clearly the former was never an issue before, however the collapse in oil prices and the resultant plunge in CapEx spending means that the pipeline no longer made much economic sense.

Keystone XL Pipeline Stopped by Eminent Domain Opposition --  This win becomes Exhibit A in why fighting condemnation is the best strategy. Always was, always will be. No eminent domain for private gain.   The Keystone XL pipeline is nothing more that a gigantic privately owned hot tar line from Canada to a refinery on the Gulf Coast- it is not a utility.Since it is not a utility, it should not have the power of eminent domain over private land. It is not only your right as a US citizen to fight it, if you are a landowner in its way, you have a public obligation to oppose it – in court.  Congratulations to Bold Nebraska and all those courageous American’s who fought this corrupt, illegal expropriation of their land.

Editorial: Keystone XL delay is a setback for public safety in Minnesota --The triumphant but misguided e-mail landed in inboxes just hours after the Canadian company pushing to build the Keystone XL pipeline announced it wants the U.S. government to suspend review of the pipeline’s construction permit application. “We made our voices heard that we would stand up to protect our planet for future generations,” trumpeted a Democratic National Committee missive that urged climate-change activists to double down on their advocacy and share their personal e-mail with the DNC — likely for fundraising purposes. But the latest delay for the oil pipeline shouldn’t inspire political victory dances. Particularly in Minnesota, the snag should spur a sense of alarm. This is a serious setback for public safety in a state where more than 425,000 people live within half-mile wide blast zones along heavily traveled oil train routes. Pipelines certainly aren’t a fail-safe way to transport crude, but they are widely considered the least risky way to move this volatile energy source. The alternatives are rail, trucks and tanker ships. Because of geography, Minnesota is one of the major railroad routes for transporting crude oil from North Dakota and Canada’s western provinces to refineries in the southern and eastern parts of the U.S. An estimated 35 to 59 oil trains, some more than 100 tank cars long, roll through Minnesota each week. Many go through the Twin Cities metro area, and a recent letter written by Gov. Mark Dayton spotlighted a new oil train route that comes through west-metro communities and skirts Target Field.

Keystone XL's builder faced darkening prospects | Reuters: Faced with dimming prospects for approval, the Canadian company behind the proposed Keystone XL pipeline chose to plead with the U.S. government for a delay on its fate, signaling that prolonged uncertainty is preferable to rejection of the $8 billion project. Monday's appeal by Calgary-based TransCanada Corp has been widely interpreted as an attempt to avert an impending "no" from President Barack Obama to the nearly 1,200-mile (2,000-km) cross-border pipeline. Keystone XL would carry heavy crude oil from Alberta to Nebraska and on to Gulf Coast refineries, and has become the symbolic heart of a struggle between environmentalists opposed to oil sands development and defenders of fossil fuels. The U.S. State Department said it had received a letter from TransCanada asking for the delay but a spokesperson said the review would continue for now. TransCanada spokesman Mark Cooper said the company would not speculate on what the decision may be or when it may come. But the Obama administration has become more vocal and active on climate change issues as it closes in on its final year in office, and the president has repeatedly expressed doubts about the merits of the pipeline. TransCanada's request for a delay came amid a darkening political outlook for the project on both sides of the border.

The KXL is Dead! (But that’s irrelevant) -- Sorry to burst your bubble….A couple of weeks ago, as Hillary Clinton was making stump speeches, she famously “came out against Keystone XL pipeline”, after years of silence and fence-sitting (as she was selling Fracking to European nations).Now today, the news is that Enbridge will suspend its application.Guess what? It doesn’t mean … much.This is mostly election year politics, and a re-alignment for the pipeline companies. Deals have been made.  KXL Northern Leg can be killed now. I predicted it would when Hillary came out against it. They’ve already got another plan, and a backup plan.Recall the KXL southern leg renamed the Gulf Coast Pipeline is already built. (red dotted line, bottom).  Image: Existing KXL Southern leg already is built Cushing OK to Port Arthur TX.  Proposed ETC Dakota Access. Notice how it conveniently bypasses  the Nebraska problem area (Ogallala Aquifer and Sand Hills region) to the East:  It’s about 200 miles from either of these to pick up tar sands from existing Enbridge pipelines in Canada, e.g., Regina, SK, CA. Oh, and let’s not forget Line 78 to Flannagan IL.  So it’s hard for this observer to call this a win. OK, so it IS a win for Bold Nebraska, as these proposed re-routes avoid the state altogether. However the Ogallala Aquifer is still at risk by the Enterprise pipeline, and Tar Sands Development moves forward…

Keystone backers look to Obama's successor to make the call - The company pleading for permission to build the Keystone XL pipeline looked beyond President Barack Obama on Tuesday in apparent hopes a future Republican president would greenlight the project. But the administration signaled it was in no mood to hand off the decision to the winner of the 2016 election. TransCanada insisted its request for the U.S. to suspend its review of the proposed project had nothing to do with presidential politics even though a delay could thrust the decision a year or more into the future, likely putting it in the hands of Obama’s successor. Questioning the motivation for the Canadian energy giant’s request, the White House said “there might be politics at play” and Obama still intended to make the decision. It was an unusual reversal of roles for TransCanada, which complained bitterly for years about Obama’s delays before suddenly requesting one of its own. Likewise, Obama’s administration, after seven years of delay, seemed to discover a newfound sense of urgency when faced with the prospect of letting the next president make the call. The State Department, the official arbiter of the pipeline permit, said it was considering TransCanada’s new request but in the meantime the pipeline review would move forward unabated. “We’d like to finish this review process as swiftly as possible,” spokeswoman Elizabeth Trudeau said Tuesday. That was 2,601 days after TransCanada first proposed the $8 billion project. For TransCanada, a delay into 2017 might improve the prospects for approval — if a Republican wins the White House. The GOP presidential field is unanimous in its support for Keystone, while Obama has downplayed its benefits and emphasized environmental risks, setting up a high bar for approval.

Obama Won’t Yield to Company’s Bid to Delay Keystone Pipeline Decision - — The White House on Tuesday said President Obama had no intention of bowing to a request from the company behind the Keystone XL oil pipeline to delay a decision on the project, saying he wanted to take action before his tenure ends. The State Department is reviewing a request made on Monday by the company, TransCanada, to pause its yearslong evaluation of the proposed 1,179-mile pipeline, which has become part of a broader debate over Mr. Obama’s environmental agenda. Josh Earnest, the White House press secretary, said on Tuesday that “there’s reason to suspect that there may be politics at play” in TransCanada’s request. He strongly suggested that the review, which has been widely expected to result in a rejection of the pipeline as soon as this month, remained on track. “Given how long it’s taken, it seems unusual to me to suggest that somehow it should be paused yet again,” Mr. Earnest said about the evaluation at the State Department, which reviews proposed cross-border projects that require a presidential permit. The president, Mr. Earnest added, “would like to have this determination be completed before he leaves office.” Environmental protection advocates say Mr. Obama is poised to reject the pipeline project in large part to make a bold statement about his commitment to curb climate change in advance of a United Nations summit meeting in Paris. He will seek to broker an accord at the December gathering, committing every nation to enacting new policies to counter global warming.

TransCanada request for Keystone XL delay rejected — The Obama administration says it is continuing a review of the proposed Keystone XL oil pipeline, despite a request by the project’s developer to suspend the review. State Department spokesman John Kirby says the department advised TransCanada on Wednesday of its decision to continue the review. The State Department has jurisdiction over the pipeline because it crosses a U.S. border. Kirby says there is no legal requirement for officials to suspend the review, adding that “a lot of interagency work” has gone into the review so far. He says Secretary of State John Kerry believes that it’s most appropriate to keep the process in place. TransCanada asked the U.S. to delay consideration of the pipeline, which could put off a decision until the next president takes office in 2017.

Obama Rejects Construction of Keystone XL Oil Pipeline - — President Obama on Friday announced that he had rejected the request from a Canadian company to build the Keystone XL oil pipeline, ending a seven-year review that had become a flash point in the debate over his climate policies.  Mr. Obama’s denial of the proposed 1,179-mile pipeline, which would have carried 800,000 barrels a day of carbon-heavy petroleum from the Canadian oil sands to the Gulf Coast, comes as he is seeking to build an ambitious legacy on climate change. “The pipeline would not make a meaningful long-term contribution to our economy,” the president said. Mr. Obama hopes to help broker a historic agreement committing the world’s nations to enacting new policies to counter global warming. While the rejection of the pipeline is largely symbolic, Mr. Obama has sought to telegraph to other world leaders that the United States is serious about acting on climate change. The once-obscure Keystone project became a political symbol amid broader clashes over energy, climate change and the economy. The rejection of a single oil infrastructure project will have little impact on efforts to reduce greenhouse gas pollution, but the pipeline plan gained an outsize profile after environmental activists spent four years marching and rallying against it in front of the White House and across the country. Republicans and the oil industry had demanded that the president approve the pipeline, which they said would create jobs and stimulate economic growth. Many Democrats, particularly those in oil-producing states like North Dakota, also supported the project. In February, congressional Democrats joined with Republicans in sending Mr. Obama a bill to speed approval of the project, but the president vetoed the measure.

Obama rejects Canada-to-U.S. Keystone pipeline – U.S. President Barack Obama on Friday rejected the proposed Keystone XL oil pipeline from Canada in a victory for environmentalists who have campaigned against the project for more than seven years. “The pipeline would not make a meaningful long-term contribution to our economy,” Obama told a press conference. He said Keystone XL would not reduce gasoline prices for drivers, and that shipping “dirtier” crude from Canada would not increase U.S. energy security. The denial of TransCanada Corp’s more than 800,000 barrels per day project will make it more difficult for producers to develop the province of Alberta’s oil sands. It could also put the United States in a stronger position for global climate talks in Paris that start on Nov. 30 in which countries will aim to reach a deal to slow global warming. Secretary of State John Kerry, who determined that the pipeline was not in the country’s interest before Obama’s final decision, said approving Keystone “would significantly undermine our ability to continue leading the world in combating climate change.” Keystone XL would have linked existing pipeline networks in Canada and the United States to bring crude from Alberta and North Dakota to refineries in Illinois and, eventually, the Gulf of Mexico coast. TransCanada first sought the required presidential permit for the cross-border section in 2008 but the proposal provoked a wave of environmental activism that turned Keystone XL into a rallying cry to fight climate change. Blocking Keystone became a litmus test of the green movement’s ability to hinder fossil fuel extraction in Canada’s oil sands.

Obama rejects Keystone pipeline -- President Obama on Friday rejected the application to build the Keystone XL Pipeline, ending the seven-year saga over the controversial plan to transport oil sands from Canada to the Gulf Coast. "The State Department has decided that the Keystone XL pipeline would not serve the national interest of the United States. I agree with that decision,” Obama said at the White House.  With Vice President Biden and Secretary of State John Kerry at his side, Obama lamented the intense partisan warfare over the pipeline, arguing that both sides had exaggerated the importance of the project. "For years, the Keystone pipeline has occupied what I, frankly, consider an overinflated role in our political discourse. It became a symbol too often used as a campaign cudgel by both parties, rather than a serious policy matter," Obama said. "All of this obscured the fact that this pipeline would neither be a silver bullet for the economy, as was promised by some, nor the express lane to climate disaster proclaimed by others." Still, the president said, the pipeline would not do enough to create jobs, and he argued it would damage American energy security and “undercut” the country’s leadership on preventing climate change. “The pipeline would not make a meaningful, long-term contribution to our economy,” he said.

Obama Rejects Keystone XL!  -- Acting on the best scientific advice and mindful of the fact that the proposed pipeline is not a common carrier in the US, so not entitled to the power of eminent domain, President Obama has rejected the Keystone XL pipeline.  President Obama rejected a presidential permit Friday for the controversial Keystone XL pipeline, citing concerns about its impact on the climate. “America’s now a global leader in taking serious action to fight climate change,” Obama told reporters, standing in the Roosevelt Room beside Vice President Biden and Secretary of State John F. Kerry. “And frankly, approving this project would have undercut that global leadership. And that’s the biggest risk we face, not acting.” He said now was the time to act to “protect the one planet we’ve got while we still can.” In the roughly seven-minute statement, Obama rejected the idea that the project, which would bring Canadian tar sands oil to the United States, would either lower oil prices or improve America’s energy security. “The point is the old rules said we couldn’t promote economic growth and protect our environment at the same time,” he said, “but this is America and we have come up with new ways and new technologies to break down the old rules.” The decision to deny TransCanada Corp. a cross-border permit for a 1,179-mile pipeline between Hardisty, Alberta, and Steele City, Neb. puts an end — at least for now — to a seven-year fight over a project that came to symbolize what Obama could do unilaterally to keep fossil fuels in the ground.

Statement by the President on the Keystone XL Pipeline -- Several years ago, the State Department began a review process for the proposed construction of a pipeline that would carry Canadian crude oil through our heartland to ports in the Gulf of Mexico and out into the world market. This morning, Secretary Kerry informed me that, after extensive public outreach and consultation with other Cabinet agencies, the State Department has decided that the Keystone XL Pipeline would not serve the national interest of the United States. Now, for years, the Keystone Pipeline has occupied what I, frankly, consider an overinflated role in our political discourse. It became a symbol too often used as a campaign cudgel by both parties rather than a serious policy matter. And all of this obscured the fact that this pipeline would neither be a silver bullet for the economy, as was promised by some, nor the express lane to climate disaster proclaimed by others. To illustrate this, let me briefly comment on some of the reasons why the State Department rejected this pipeline.  First:  The pipeline would not make a meaningful long-term contribution to our economy.  So if Congress is serious about wanting to create jobs, this was not the way to do it.  If they want to do it, what we should be doing is passing a bipartisan infrastructure plan that, in the short term, could create more than 30 times as many jobs per year as the pipeline would, and in the long run would benefit our economy and our workers for decades to come.   Second:  The pipeline would not lower gas prices for American consumers.  In fact, gas prices have already been falling -- steadily.  The national average gas price is down a dollar over two years ago.  Third:  Shipping dirtier crude oil into our country would not increase America’s energy security.  What has increased America’s energy security is our strategy over the past several years to reduce our reliance on dirty fossil fuels from unstable parts of the world.

Obama’s Keystone XL decision irks North Dakota US lawmakers — Members of North Dakota’s congressional delegation say President Barack Obama’s rejection of the Keystone XL pipeline is disappointing. Obama says he’s rejecting the pipeline because he does not believe it serves the national interest. Republican Sen. John Hoeven and Democratic Sen. Heidi Heitkamp both think the decision is political. Republican Rep. Kevin Cramer says Obama’s decision is “anti-growth, anti-American jobs.” North Dakota Sierra Club spokesman Wayde Schafer applauded Obama’s move, saying it “sent a clear message that he is serious about addressing climate change.” TransCanada Corp.’s proposed pipeline would carry more than 800,000 barrels of Canadian crude a day to refineries along the Gulf Coast. It wouldn’t go through North Dakota but it would move about 100,000 barrels of oil daily from North Dakota’s oil patch.

Keystone rejection expected to spur more crude-by-rail shipping into the U.S. - Rejection of the Keystone XL pipeline will complicate and add cost to getting western Canadian oil to U.S. markets but it isn’t expected to actually prevent any shipments reaching south of the border, observers say. The decision announced Friday by U.S. President Barack Obama was greeted with disappointment by Calgary oil producers, industry insiders and local businesspeople who observed that Canadian crude is being singled out by the United States with a trade impediment while other countries have free rein. Suncor Energy Inc. president and chief executive Steve Williams said in a statement that the U.S. decision, made seven years after Calgary-based pipeline firm TransCanada Corp.’s initial application, hurts Americans as much as it does Canadians. “Clearly we’re disappointed in today’s decision. Keystone XL is important infrastructure not only for producers in the U.S. Bakken (centred on North Dakota) and Canada as it would provide expanded connectivity to the Gulf Coast, but also for U.S. refiners as it would provide security of supply from a longtime energy provider and trading partner,” he said. The Calgary-based company, Canada’s largest oil producer by market capitalization, says it has 600,000 barrels per day of current access to world markets, including 80,000 bpd of rail loading capacity, as an alternative to the 830,000-bpd Keystone XL.

The Next Great Scandal For The Oil Industry? --U.S. President Barack Obama rejected the Keystone XL pipeline today, issuing a statement at the White House. The decision will end a process that has stretched more than seven years. Not only are environmental groups achieving their goal of blocking the project, but they have seemingly convinced the President to do so on climate change grounds. Environmental groups hope to parlay the success into other areas of energy development, seeking to elevate climate change criteria as a means to scrutinize all sorts of oil, gas, and coal projects. Readers will most likely be inundated with post-mortems on the Keystone XL, but suffice it to say that the decision is a momentous shift from years ago when the administration had looked favorably upon the project.  The allegations that ExxonMobil covered up its climate science and lied to the public about the dangers of climate change has rapidly moved from a small news story into a full-fledged scandal. That is because the New York Attorney General launched an investigation into potential wrongdoing this week. It is early days for this probe, which could widen to ensnare other oil companies that peddled climate misinformation. It will take time to fully grasp the ramifications of what might stem from this, but it is important for investors to keep an eye on it. To be sure, proving some sort of criminal wrongdoing is going to be extremely difficult, but it could balloon into a significant problem for the energy industry.

Diamond Offshore says 2 rig contracts with Petrobras terminated -- Diamond Offshore Drilling Inc, one of the world’s top-five offshore rig contractors, said contracts for two rigs with Brazil’s Petrobras had ended ahead of schedule. The company said it had secured an 875-day extension on another rig working for the Brazilian oil and gas producer in exchange for the terminations. Diamond, which also reported a better-than-expected quarterly profit on Monday, said the extension of term will add $333 million to the company’s revenue backlog. The terminated contracts will reduce revenue backlog by about $91 million, the company said. While one of the rigs terminated will be cold-stacked, the other will be scrapped. Diamond, like most of its rivals, has been scrapping rigs and cutting costs in the face of weak demand due to a steep fall in global crude prices. However, the company also said on Monday it booked a one-year contract for a rig in the UK North Sea at $220,000 per day, starting March 2016. Diamond’s third-quarter profit more than doubled to $136.4 million, or 99 cents per share, helped mainly by lower expenses and improved rig dayrates.

Upton anti fracking camp: Violence predicted as court date for eviction order set - The battle between anti-frackers and frackers over the future of a protest camp on the outskirts of Chester is hotting up with predictions of a possible violent ending. Campaigners established the camp in a field off Duttons Lane, Upton, in 2014 to prevent an energy firm drilling a coal bed methane borehole fearing it could lead to the controversial extraction method known as fracking.  But there were recent clashes when warning notices were issued by Dart Energy and IGas requesting campaigners leave the camp because they were trespassing. A 29-year-old man was arrested and charged on suspicion of assaulting an enforcement officer.  The warning notice issued to anti-fracking camp residents by IGas bailiffs  Now a formal eviction notice is being sought with a High Court hearing due to take place at Manchester County Court next Friday (November 6) where a demonstration will be held outside with banners and placards. The action has been brought by farmers Tim and Piers Dutton, the freehold owners of the land, along with Dart Energy (West England) Ltd and IGas Energy Plc who are now the leaseholders. Kevin Lee, a partner in law firm Hill Dickinson, who represents the claimants, anticipates trouble at the camp once proceedings are served because he expects protester numbers to swell as calls for support go out on social media.

Fracking could be delayed for up to two years across UK after Lancashire council rejects test drilling -- Government plans to roll out fracking across Britain face delays of up to two years following a surprise decision to reject exploration for shale gas in Lancashire. Ministers are concerned by the implications of the decision by Lancashire County Council last month to reject planning applications from the shale gas company Cuadrilla to drill eight wells at two sites on the Fylde coastal plain. The Government had been expecting councilors to give their go-ahead to exploratory drilling on sites. But instead they turned down Cuadrilla’s application on the grounds that it would have an unacceptable visual impact and create too much noise. Cuadrilla has now appealed but that process, regardless of the outcome, is likely to take 16 months. Senior Government sources said they feared other companies were now unlikely to submit further fracking applications – that were not already underway - until they saw the outcome in Lancashire. A Government source said: “It is incredibly frustrating. These are temporary exploratory wells so how on earth Lancashire County Council can turn them down on the basis of visual impact makes no sense at all.

Corbyn congratulates Lancashire for standing up to fracking -  New Labour leader Jeremy Corbyn has congratulated the people of Lancashire for standing up to fracking. Mr Corbyn, along with deputy Labour leader Tom Watson and a raft of the UK’s most influential Labour politicians, are attending the North West Labour party conference in Blackpool. He said that he was “worried” about fracking and congratulated the people of Lancashire, along with the county council, for standing up to the government’s efforts to force through permission to drill for shale gas.Corbyn also told the conference that he will fight the Trade Union bill and cuts to tax credits for working families.

Fracking rules to protect national parks from surface drilling -  Fracking wells would not be drilled from the surface in national parks and areas of outstanding natural beauty under new proposals from the Department for Energy and Climate Change. Sites of special scientific interest would also see a ban on surface drilling under the plan, which has been put out for consultation by ministers. Greenpeace said the announcement would do little to combat pollution from wider fracking activity and insisted the move was aimed at calming potentially rebellious MPs and not protecting the landscape. Announcing the consultation, Energy Minister Andrea Leadsom said: "The UK has one of the best track records in the world when it comes to protecting our environment while developing our industries. "We have the right protections in place to ensure that fracking can go ahead safely without risk to our most beautiful and important natural sites. "People should have confidence in these protections and in this vital industry which could create over 60,000 jobs and be worth billions of pounds to our economy - that is why we are providing further reassurance for our most valued areas." Greenpeace campaigner Hannah Martin said: "This announcement might have banned drilling rigs from littering the landscape, but the Government isn't banning fracking pollution spilling over into our most fragile and treasured countryside. "Some of England's special scenery and nature reserves could still be ringed by fracking rigs bringing light, air, water and noise pollution to areas that should be completely protected.

Firm ‘no’ to fracking in KwaZulu–Natal: A company wanting to explore the province for natural gas has admitted that “fracking is a possible end goal”. Environmental consultant Matthew Hemming, of SLR Consulting and acting on behalf of Rhino Oil and Gas Exploration South Africa, made the statement at a heated meeting at Ashburton Community Hall in the first of 11 public consultation meetings being held throughout the Midlands. Rhino, a Texas-owned company with its corporate offices in the tax haven of the British Virgin Islands, has applied to the Petroleum Agency of South Africa to explore 1.5 million hectares, including 10 000 farms, near Pietermaritzburg, Ladysmith and Nkandla, looking for natural gas deposits in the main, and minerals. But in order for the company to proceed, it needs to present the agency with an environmental impact assessment which includes public consultation. The 100-strong crowd that attended the first hearing included landowners, developers, business owners, farmers, councillors, environmentalists and a “spiritualist”, and gave a resounding “no” to any exploration.

Gazprom Neft undertakes first cluster fracking using high-silica “frac sand” - Gazprom Neft has successfully completed cluster fracking* using high-silica “frac sand” at the ;Yuzhno-Priobskoye Gazpromneft-Khantos field. This new technology, delivering greater oil recovery, was tested at the field with the support of specialists from the Gazprom Neft Research and Development Centre. The application of cluster fracking with the use of frac sand is expected to result in a 20-percent reduction in fracking costs, while maintaining full efficiency.  Cluster-fracking technology has already been in use throughout Gazprom Neft fields for several years, and differs from traditional hydraulic fracking insofar as ceramic proppant** is injected into the strata. The process typically involves continuous injection of proppant throughout the fracking process, completely filling the fissures created under hydraulic fracturing. The use of cluster-fracking technology involves the injection, in rotation, of a proppant agent (proppant) and a special synthetic fibre, allowing channels to form within these fissures. In this way, the use of cluster-fracking technology reduces the volumes of proppant necessary in hydraulic fracking by 40 to 50 percent. The method involving the use of frac sand in place of proppant (the cost of which is two to three times lower) which has been tested at Gazpromneft-Khantos fields demonstrates still higher production efficiency and cost effectiveness.

Worst Petrobras Strike In 20 Years Endangers Debt Plan -- A four-day strike against Petrobras gathered steam on Wednesday, cutting crude and natural gas output from the No. 2 South American oil producer and threatening to become the most disruptive walkout at the state-run oil company in 20 years. Petroleo Brasileiro SA, as Petrobras is formally known, is expected to continue to report significant output cuts after new offshore units were affected by the strike, which began on Sunday. On Monday Petrobras said it had lost 273,000 barrels a day of crude output, or about 13 percent of its Brazilian output. It has made no formal estimate for output since then. The cuts have already caused the biggest strike-induced hit to Petrobras' crude output since a 32-day strike in 1995 that led to lines at gas stations and military occupation of refineries. The latest strike is also likely to increase pressure on a company hobbled by a vast corruption scandal and struggling under $130 billion of debt, the largest in the world oil industry. "This is serious because it is happening in the midst of Brazil's worst economic crisis in decades and in the middle of Petrobras' worst crisis ever," said Adriano Pires, head of the Brazilian Infrastructure Institute, a Rio de Janeiro Energy research company.

Libya Oil Output Drops as Factions Fight Over Energy Assets - Rigzone: -- Libya’s oil output dropped below 400,000 barrels a day after the divided country’s internationally recognized government in the east closed a port run by a rival administration in the west, in a push to assert control over more energy assets and exports. Production fell after crude exports halted at the port of Zueitina, Mohamed Elharari, a spokesman for the National Oil Corp.’s management in the western city of Tripoli, said Wednesday by phone. Libya pumped 430,000 barrels a day in October, data compiled by Bloomberg show. Zueitina will be closed until further notice, and tankers seeking to load crude there must now register with a rival NOC management loyal to the internationally recognized government based in eastern Libya, according to a Petroleum Guard spokesman Ali al-Hasy. Vessels registered with the NOC administration in Tripoli, seat of an Islamist-backed government, are “illegitimate” and won’t be permitted to load at Zueitina, he said. “This is clearly an escalation” by the eastern government to make buyers deal directly with its NOC management rather than continue working with the Tripoli authorities and thus gain more control over oil revenue, “The more interesting question is whether there’s a risk of the same action being repeated at the other terminals under the control of the eastern government,” he said, referring to the ports of Hariga and Brega.  Libya, with Africa’s largest oil reserves, pumped about 1.6 million barrels a day of crude before a 2011 rebellion ended Muammar Qaddafi’s 42-year rule.

Indonesia to Process More of its Oil as Southeast Asian Supplies Fall (Reuters) - Indonesia's state-owned energy firm Pertamina plans to process more domestic crude oil in a bid to limit the impact on the country of declining production, a plight that is also affecting oil-rich neighbours Malaysia and Brunei. All three countries, which rely heavily on energy revenues, are running out of oil. Reuters research based on government, industry and consultancy data shows they could run dry within the next 25 years. "Pertamina intends to maximise domestic crude processing to reduce dependence on the market," said Daniel Purba, vice president for integrated supply chain at Pertamina, outlining plans to buy more locally produced supplies. It would also use more biofuels and liquefied petroleum gas (LPG) to limit diesel imports, he said. The three Southeast Asian nations are heavily dependent on oil revenues, with oil rent - the value of oil production after costs - equal to about 15 percent of the national budget in Indonesia, rising to 40 percent in Malaysia and almost 100 percent in Brunei. While production estimates can change with new discoveries and technology, many of the big fields that have propped up their budgets in recent decades are declining, with low oil prices limiting the prospect of increased recovery or finding new sources. Governments are facing losing hundreds of millions of dollars in revenues, with annual production output declining at between 1.5 percent and 4 percent, while oil and gas prices have more than halved since 2014.

Amnesty accuses Shell of failing to clear Nigeria oil spills – Shell has failed to fulfill its legal obligations to clear up oil spills that it has caused in Nigeria’s oil-rich Niger Delta region, Amnesty International said on Tuesday. Oil pollution caused by corroded pipelines and crude theft has longed plagued the southwestern Delta, an impoverished region despite being home to much of Nigeria’s oil and gas wealth. Amnesty said the findings of a 38 page report were based on research conducted in the Boobanabe, Bomu Manifold, Barabeedom swamp and Okuluebu areas of Niger Delta’s Ogoniland region, between July and September this year. Spills in those areas date back several years. Researchers said they found waterlogged areas with an oily sheen, “patches of oil-blackened soil at several locations” and, in some cases, pollution “spreading into neighboring land and waterways.” The human rights organization called on Shell to change its approach to the way in which it cleans up after oil spills and urged the government to publish detailed information relating to such operations.

What The Oil And Gas Industry Is Not Telling Investors - Oil prices crashed because of too much supply, but will rebound as production shrinks and demand rises. But what if long-term demand for oil ends up being sharply lower than what the oil industry believes? That is the subject of a new report from The Carbon Tracker Initiative, which looks at a range of scenarios that could blow up oil industry projections for long-term oil demand. Historically, Carbon Tracker says, energy demand has been driven by population, economic growth, and the efficiency (or inefficiency) of energy-using technologies. Carbon Tracker looks at a couple possible future scenarios in which those parameters are altered, resulting in dramatically lower rates of oil consumption. Carbon Tracker has been a pioneer in the concept of “stranded assets,” the notion that fossil fuel assets will lose their value as the world moves to restrict carbon emissions. If an oil field cannot be produced profitably in a carbon-constrained world – or cannot legally be produced because of certain regulations – then it ceases to have value. That puts investors’ dollars at risk, a risk that financial markets have not fully grappled with. However, in a new report, Carbon Tracker expands upon the possible scenarios in which oil demand may not live up to industry predictions. For example, if the world population hits only 8.3 billion by 2050 instead of the 9.7 billion figure typically cited by the UN, fossil fuel consumption could end up being 17 percent lower in 2050 than the oil industry thinks. Coal would be affected the most, with 25 percent reduction in demand compared to the business-as-usual case.

Oil slides on slower Chinese factories, record Russian output – Oil prices fell on Monday as weak Chinese economic data fueled concerns about demand slowing there and record-high production in Russia exacerbated the global supply glut. Brent crude futures, the global benchmark, traded down 50 cents at $49.06 a barrel at 1428 GMT, down 1.1 percent. U.S. futures were trading at $45.98 a barrel, down 60 cents or 1.3 percent on Friday’s close. “High OPEC production, record-high production in Russia and weak China data are driving prices lower,” said Carsten Fritsch, senior oil analyst at Commerzbank in Frankfurt. China’s factory activity fell for an eighth straight month in October, a survey showed, pointing at continued sluggishness in the world’s second-largest economy. The global oil supply glut, which has more than halved oil prices since a peak in June last year, was emphasized on Monday when Russia reported that its October oil production hit a post-Soviet record of 10.78 million barrels per day. The data reflected Russia’s strategy of defending its market share as rivals from the Gulf start supplying Moscow’s traditional markets.

WTI oil futures rally above $47 ahead of API weekly supply report - West Texas Intermediate oil futures rallied sharply on Tuesday, as market players looked ahead to fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of demand in the world’s largest oil consumer. Crude oil for delivery in December on the New York Mercantile Exchange jumped 96 cents, or 2.08%, to trade at $47.10 a barrel during U.S. morning hours. It earlier rose to $47.28, the highest since October 19. The American Petroleum Institute will release its inventories report later in the day, while Wednesday’s government report could show crude stockpiles rose by 2.7 million barrels in the week ended October 30. According to industry research group Baker Hughes (N:BHI), the number of rigs drilling for oil in the U.S. decreased by 16 last week to 578, the ninth straight weekly decline and the lowest level since June 2010. Over the prior nine weeks, drillers in the U.S. have cut 97 rigs. A lower U.S. rig count is usually a bullish sign for oil as it signals potentially lower production in the future. However, U.S. oil production has held around 9.0 million barrels a day, close to the highest level since the early 1970's. Meanwhile, total U.S. crude oil inventories stood near levels not seen for this time of year in at least the last 80 years. Elsewhere, on the ICE Futures Exchange in London, Brent oil for December delivery tacked on 93 cents, or 1.9%, to trade at $49.72 a barrel.

API Reports Larger-Than-Expected Total Crude Inventory Build For 6th Consecutive Week, Cushing Draw -- For the sixth week in a row, API reports a larger than expected 2.8mm inventory build (though that is lower than the last few week's build). Cushing stocks, however, saw a 508k draw, easing some storage concerns. Crude oil prices remain confused for now having pumped and dumped to unch. Sixth weekly build in a row...Crude popped and dropped... Charts: Bloomberg

Kuwait oil minister says believes oil prices have bottomed out  -- Kuwait’s oil minister said on Wednesday he believed oil prices had bottomed out. Asked whether he agreed with recent remarks by Qatar’s energy minister that oil prices had bottomed, Ali al-Omair told reporters on the sidelines of a carbon conference in Riyadh: “Yes I agree with him, because now for two to three months, the prices don’t go down. So maybe yes, they are at the bottom.” As he spoke, Brent oil was trading around $50.70 per barrel. Omair also said: “Now we can see that several rig rates have declined as a number and the high-cost production started to withdraw from the market. For about six months we can see a decline in the rig rates. Of course this would help the prices. “But the other point which would help the prices is economic growth, so we have to wait and see how the economic growth in south Asia, in Europe, in America proceeds. If this is going to increase, as economic growth, this would improve the prices.” Asked whether OPEC should stick at its meeting in December to its current oil market strategy of not reducing production, Omair replied: “OPEC should not cut production alone, yes…I think OPEC should stick to its unity. OPEC now has been targeted by the non-OPEC countries…but if there is any cost or cutting in production, this should not be only for OPEC countries, we have to share together the cost of reduction.”

U.S. crude oil stocks build on strong output despite import drop – EIA - – U.S. crude oil inventories rose for a sixth straight week as domestic production increased, outweighing a drop in imports to the lowest level since 1991, data from the Energy Information Administration showed on Wednesday. Crude inventories rose 2.8 million barrels in the week to Oct. 30, in line with analysts’ expectations in a Reuters poll. U.S. crude imports fell last week by 89,000 barrels per day to 6.4 million bpd, the lowest since 1991. Crude production rose 48,000 bpd to 9.16 million bpd, the highest level since Oct. 2. “The part of the report that continues to amaze is the domestic production number, which showed a small rise, despite the ever-plunging rig count,” said John Kilduff, partner at New York hedge fund Again Capital. Oil services company Baker Hughes Inc said drillers removed 16 oil rigs in the week ended Oct. 30, bringing the total rig count down to 578, the least since June 2010. U.S. oil prices, already down about 1 percent before the EIA report, extended losses after the data and were down more than 3 percent, or $1.45, at $46.45 a barrel by 11:22 a.m. EST (1522 GMT). Crude stocks at the Cushing, Oklahoma, delivery hub for U.S crude futures fell 212,000 barrels, EIA said. Refinery crude runs rose 21,000 bpd as refinery utilization rates rose by 1.1 percentage points to 88.7 percent of capacity.

Jack Kemp's Weekly Energy Tweets -- November 4, 2015:

  • US refinery throughput essentially unchanged from prior week as refineries pass midpoint of maintenance season; throughput remains above 10-year high, but just barely.
    US propane stocks hit new record of 102 million bbls; up 22.2 million bbls above prior-year level. This year's propane stocks are so much higher than the 10-year range, the graph is simply staggering. The 10-year graph no longer has any relevance. The entire US crude oil and natural gas metrics will have to be re-set, perhaps starting with 2013 or 2014.
    US distillate stocks fell 1.3 million bbls; the 7th consecutive week of decline. Total draw of 13.2 million but still up 9.2 million above average. Sits about in the middle of the 10-year range -- actually looks a bit lower than the mid-point of that range.
    US gasoline stocks fell 3.3 million bbls, the 4th consecutive week of declines, though still 12.1 million bbls above the 10-year seasonal average. The graph is staggering.
    US commercial crude stocks rise 2.8 million bbls and are now 103 million bbls above 2014. The graph at the tweet is amazing, to say the least. The ten-year high was around 350 million blls; the ten-year low was about 250 million bbls. Most recently, about 475 million bbls. US commercial crude stocks are in the stratosphere and will make new 10-year graphs completely meaningless.
    US total refined product stocks fells 5.2 million bbls last week, the 7th consecutive decline.  Again, the same comments regarding the 10-year history as noted above.
    US total commercial oil stocks fell 2.3 million bbls last week, second consecutive decline. The graph is staggering. This year's number is so far above the 10-year range, the 10-year graph has become meaningless.
    US diesel very cheap compared with gasoline as market enters winter with unusually large stocks. The interesting thing is that distillate fuel oil stocks are right in the middle of the 10-year history grapha nd trening down, for several weeks now.
    Over the past four weeks, US gasoline demand is trending up; diesel is trending down, but choppy.

Crude Prices Pump'n'Dump After 6th Consecutive Inventory Build & Surge In Production -- Crude oil algos traders are buying WTI despite DOE reporting the 6th consecutive weekly inventory build in US crude stocks (confirming API's build at 2.8mm barrels). Furthermore, for the 3rd week in a row, US crude production rose (back to one-month highs)... and thenthe humans appeared to read the DOE report and the selling began.  Another weekly build in US crude inventories... And for the 3rd week in a row production rose... And crude rallies... And then the humans read the report... Charts: Bloomberg

U.S. refineries start to return from maintenance – Total stocks of crude oil and refined products in commercial storage across the United States dropped for the second week running last week, the first back-to-back fall since May, according to the U.S. Energy Information Administration (EIA). More than 1.4 million barrels per day (bpd) of refinery capacity is still offline for routine maintenance and upgrades after the end of the summer driving season. Turnarounds have contributed to the accumulation of crude inventories but resulted in a big draw down in stocks of refined products including gasoline and distillate fuel oil. Stocks of crude rose by 2.8 million barrels in the week ending on Oct. 30, and have increased in each of the last six weeks, by a total of almost 29 million barrels. Crude stocks are now nearly 103 million barrels, about 27 percent, higher than they were at the same point last year (“Weekly Petroleum Status Report” published on Nov. 4). But the stock of refined fuels has fallen for seven consecutive weeks by a total of 25 million barrels, or about 500,000 bpd. Gasoline stocks have fallen more than 8 million barrels over the last four weeks while distillate stocks have been down for seven consecutive weeks by a total of more than 13 million barrels. At the end of the summer there were widespread predictions that the United States was headed for a glut of refined products once the driving season finished. But the threatened oversupply has not materialized as refineries have successfully matched runs with lower seasonal demand.

U.S. crude overtakes Brent in S&P commodity index rebalance - A widely watched commodity index is returning the U.S. crude benchmark to the top of its weightings table, just a year after allowing Europe’s Brent oil benchmark to dominate, the firm managing the index said on Thursday. The elevation of the U.S. West Texas Intermediate (WTI) crude benchmark within the 24-commodity S&P GSCI index comes amid higher liquidity for the contract, index manager S&P Dow Jones Indices said. WTI’s weighting will rise by 2.13 percentage points to 23.04 percent in the 2016 rebalancing of the S&P GSCI that will take effect in January, the company said in a statement. Brent’s weighting will drop by 1.1 percentage points to 20.43 percent, it said. “The WTI volume and prices drove the change in the percentage weights,” Miriam Hespanhol, a spokeswoman for S&P Dow Jones Indices, said in an email. Reuters charts show daily volumes in WTI averaging about 416 million contracts now versus about 370 million a year ago and around 225 million in November 2013.

U.S. rig count declines by 4 this week to 771 | The Salt Lake Tribune: The number of rigs exploring for oil and natural gas in the U.S. this week declined by four to 771, oilfield services company Baker Hughes said Friday. The company's weekly report showed that 572 rigs were seeking oil and 199 explored for natural gas. A year ago, with oil prices about double the prices now, 1,925 rigs were active. Among major oil- and gas-producing states, New Mexico lost five rigs, California and Wyoming two, and Louisiana and Oklahoma one apiece. Colorado gained three rigs while Kansas, North Dakota and Texas each increased by one. Utah was unchanged, along with Alaska, Arkansas, Ohio, Pennsylvania and West Virginia.   The U.S. rig count peaked at 4,530 in 1981 and bottomed at 488 in 1999.

U.S. Oil-Rig Count Falls by Six - WSJ: The U.S. oil-rig count dropped by six to 572 in the latest week, the 10th- consecutive week of declines, according to Baker Hughes Inc. BHI 4.41 % The number of U.S. oil-drilling rigs, which is viewed as a proxy for activity in the oil industry, has fallen sharply since oil prices started falling last year. After a streak of modest growth, the rig count has now declined for 10 consecutive weeks. There are now about 64% fewer rigs from a peak of 1,609 in October 2014. According to Baker Hughes, the number of gas rigs rose by two to 199. The U.S. offshore-rig count was 32 in the latest week, down one from last week and 21 from a year ago. For all rigs, including natural gas, the week’s total fell by 4 to 771. Earlier in the week, weekly U.S. inventory data showed a sixth-straight increase in crude supplies and an unexpected uptick in production. Persistent concern about the global glut of crude has sent prices plunging to below $50 a barrel from over a $100 just over a year ago. Major oil producers such as Saudi Arabia and Russia have continued to produce at a high pace in a bid to defend and extend their market share.

Brazil oil strike cuts output 25 percent, union says – A strike that began on Sunday at Brazil’s state-run oil producer Petroleo Brasileiro SA has slowed daily oil output by around 25 percent, the country’s largest union FUP said on Tuesday. FUP’s general coordinator José Maria Rangel said in a video published online that in the first 24 hours since the union’s members joined the strike, they had prevented around 450,000 barrels of oil from being extracted in the offshore Campos Basin, and nationwide around 500,000 barrels. Petrobras, as the company is known, produced around 2 million barrels of oil per day in September. News of the strike in the ninth biggest global producer helped push oil prices back up towards $50 per barrel on Tuesday. The production hit comes as Petrobras is particularly strapped for cash, amid the country’s largest-ever corruption scandal and low oil prices. The lost oil production could cost Petrobras some $25 million per day in foregone revenue, analysts said.

The Earth is not running out of oil and gas, BP says - (BP video) The world is no longer at risk of running out of oil or gas, with existing technology capable of unlocking so much that global reserves would almost double by 2050 despite booming consumption, BP has said. When taking into account all accessible forms of energy, including nuclear, wind and solar, there are enough resources to meet 20 times what the world will need over that period, David Eyton, BP Group head of technology said. "Energy resources are plentiful. Concerns over running out of oil and gas have disappeared," Mr Eyton said at the launch of BP's inaugural Technology Outlook.Oil and gas companies have invested heavily in squeezing the maximum from existing reservoirs by using chemicals, super computers and robotics. The halving of oil prices since last June has further dampened their appetite to explore for new resources, with more than $200bn-worth of projects scrapped in recent months. By applying these technologies, the global proved fossil fuel resources could increase from 2.9 trillion barrels of oil equivalent (boe) to 4.8 trillion boe by 2050, nearly double the projected 2.5 trillion boe required to meet global demand until 2050, BP said. With new exploration and technology, the resources could leap to a staggering 7.5 trillion boe, Mr Eyton said.

BP sees technology nearly doubling world energy resources by 2050 - The world is no longer at risk of running out of oil or gas for decades ahead with existing technology capable of unlocking so much that global reserves would almost double by 2050 despite booming consumption, oil major BP said on Monday. When taking into account all accessible forms of energy including nuclear, wind and solar, there are enough resources to meet 20 times what the world will need over that period, David Eyton, BP Group Head of Technology said. “Energy resources are plentiful. Concerns over running out of oil and gas have disappeared,” Eyton said at the launch of BP’s inaugural Technology Outlook. Oil and gas companies have invested heavily in squeezing the maximum from existing reservoirs by using chemicals, super computers and robotics. The halving of oil prices since last June has further dampened their appetite to explore for new resources, with more than $200 billion worth of mega projects scrapped in recent months. By applying these technologies, the global proved fossil fuel resources could increase from 2.9 trillion barrels of oil equivalent (boe) to 4.8 trillion boe by 2050, nearly double the projected 2.5 trillion boe required to meet global demand until 2050, BP said. With new exploration and technology, the resources could leap to a staggering 7.5 trillion boe, Eyton said.

"Earth Is An Oil-Producing Machine — We're Not Running Out" -- Investor's Business Daily.  Ever since M. King Hubbert in the 1950s convinced a lot of people with his "peak oil" theory that production would collapse and we'd eventually exhaust our crude supplies, the clock has been running. And running. And it will continue to run for some time, as technology and new discoveries show that there's still an ocean of oil under our feet. Engineering and Technology Magazine reported this week that BP — the company that once wanted to be known as "Beyond Petroleum" rather than "British Petroleum" — is saying "the world is no longer at risk of running out of resources." Things are so good, in fact, that Engineering and Technology says "with the use of the innovative technologies, available fossil fuel resources could increase from the current 2.9 trillion barrels of oil equivalent to 4.8 trillion by 2050, which is almost twice as much as the projected global demand."  That number could even reach 7.5 trillion barrels if technology and exploration techniques advance even faster.

 "Peak demand" means world may never see oil at $100 a barrel again – Just as the energy industry has brushed aside concerns that the world could run out of oil, industry executives now say they believe it is demand, rather than supply, that is nearing its apex.  Ian Taylor, today the chief executive of the world’s largest oil trader Vitol, was part of a team at Royal Dutch Shell that forecast oil prices would rise five fold to $125 a barrel in 2015 as global reserves were expected to become more scarce. Now he says it is unlikely to ever reach those levels again. Oil today stands at around $50 a barrel, having more than halved since June 2014 after global supplies dramatically rose due in large part to the U.S. shale oil boom but also due to the unlocking of huge offshore reserves in Brazil, Africa and Asia. “We all talk about ‘peak supply’ and maybe with shale that is becoming a disabused concept. I have begun feeling that… we are coming to peak demand towards 2030,” Taylor said on Wednesday at The Economist Energy Summit in London. “I believe we may not see $100 (a barrel) ever again,” Taylor said. Such forecasts come at a time when oil companies have slashed billions off their budgets and scrapped more than $200 billion of oil and gas projects to cope with the sharp price drop. Lower future demand for fossil fuels could wreck the finances of producing countries like Saudi Arabia, Russia and Venezuela that depend on high oil prices to fund public spending, but would be an overall boon for the world. The overwhelming majority of people live in countries – whether rich like the United States, middle-income like China or poor like Bangladesh – that consume more energy than they produce.

OPEC October oil output falls led by Saudi, Iraq, survey says – OPEC oil output has fallen in October from the previous month, a Reuters survey found last week, as declines in top producers Saudi Arabia and Iraq outweighed higher supply from African members. The drops are not indicative of deliberate supply cuts to prop up prices, sources in the survey said, and the Organization of the Petroleum Exporting Countries is still pumping close to a record high as major producers focus on defending market share. OPEC supply has fallen in October to 31.64 million barrels per day (bpd) from a revised 31.76 million in September, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants. With one day left in October, the final figures could be revised. Even so, OPEC has boosted production by almost 1.5 million bpd since the November 2014 switch to defending market share. Despite the decline this month, output is not far below July’s 31.88 million bpd, the highest since Reuters records began in 1997. The OPEC increase has added to ample supplies, which have helped cut prices by more than half from June 2014 to below $50 a barrel. Still, with reductions in capital spending by oil companies expected to curb future supply, analysts see signs that OPEC’s strategy will deliver.

OPEC proves fracking is no panacea - November marks the one-year anniversary of Organization of the Petroleum Exporting Country’s (OPEC) decision to continue its excessive rate of production despite spiraling oil prices on international markets. The result was easily predicted by anyone with only a rudimentary understanding of economics: Over-supply in the face of stagnant demand led to an even more precipitous fall in the price of oil. Nearly a full year later, West Texas Intermediate benchmark crude oil is trading around $43 per barrel – about half its price a year ago. And as reported by E&E’s Energywire, analyst John Dennis of WoodRock & Co. says, "$40-to-$45 oil is overpriced,” with others suggesting oil could drop to the $30 range.Meanwhile, the prices of other energy dependent commodities have become destabilized across the board, with experts uncertain where the bottom lies. While generally good news for consumers, the drop has been dizzying for the producers of those commodities. But it has been particularly devastating for the oil and gas sector. Early in 2014, the U.S. oil economy was riding high. Many trumpeted hydraulic fracturing – fracking – as the great American liberator of the Middle East’s stranglehold on energy markets. Enthusiastic drillers would flood the markets with domestic oil, the theory goes, driving down the price of oil and saving drivers at the pump. “Just let the free market system do the work,” they chimed. Of course those predictions were wildly optimistic. Only OPEC has the supply and thus the ability to turn on – or off – the floodgates that affect the price of oil. Further, as a result of much higher costs associated with their drilling, the domestic fracking industry has contracted to the point that foreign oil is once again flowing across our shores.

Gulf oil producers delay field work, see weaker 2016 prices - sources – Gulf oil producers are delaying some field maintenance until next year to keep production high and reduce costs as they forecast weaker oil prices in 2016, industry sources said. It was not possible to clarify which fields were affected – information which is highly sensitive. But it showed that Gulf oil producers aim to keep pumping hard as they expect weak oil prices next year when sanctions on Iran are lifted allowing it to export more to an oversupplied market, the sources said. They told Reuters that OPEC members Saudi Arabia, United Arab Emirates and Qatar are rescheduling non-essential maintenance work at oilfields originally planned for the last quarter of this year later into 2016 due to low oil prices. “The non-urgent maintenance is definitely being pushed. We see huge focus on production in Qatar, Abu Dhabi and Saudi Arabia,” said one industry source. “They are delaying to keep production high, if they shut down now they will not produce, and they also have to preserve cash,” the source said. Two more sources also said that Gulf oil producers are pushing forward some of their maintenance plans for oil rigs, wells and pipes that are not critical to production or safety of operations, but declined to give details. “There is delay. The reason is low oil prices, they are trying to have some control over the cost,” another industry source said of Saudi Aramco’s maintenance plans this year.

Exclusive: OPEC confidential report sees market share squeeze to 2019 -- Global demand for OPEC’s crude oil will remain under pressure in the next few years, the producer group said in an internal report, potentially fuelling a debate on its strategy of defending market share rather than prices. The draft report of OPEC’s long-term strategy, seen by Reuters, forecasts crude supply from OPEC – which has an output target of 30 million barrels per day (bpd) – falling slightly from 2015’s level until 2019, unless output slows faster than expected in rival producers. OPEC governors, official representatives of the 12 members of the Organization of the Petroleum Exporting Countries, met at the group’s Vienna headquarters on Wednesday to approve the final draft of the report. The 44-page report, marked “CONFIDENTIAL,” includes an annex containing comments from two members, Iran and Algeria, suggesting OPEC return to its old policy of propping up prices at a desired level by adjusting supplies. “Reaching agreement on a fair and reasonable price of oil for the next six to 12 months” is one of the steps that Iran recommends OPEC take. “OPEC production ceiling should be set for six or 12 months intervals.” OPEC oil ministers meet on Dec. 4 to decide whether to extend the strategy of allowing prices to fall to slow higher-cost rival supply. Since November 2014, when the group adopted that policy, OPEC production has risen but prices have deepened their collapse, hurting oil revenue.

Saudi CDS Soars To 6 Year Highs -- This weekend we saw an important action in the downgrade of Saudi Arabia, highlighting just how far the EM crisis has carried. As Ice Farm Capital's Michael Green notes, in response, Saudi CDS continues to climb, reaching its highest since 2009 (amid both default risk and devaluation concerns).  Now clearly Saudi’s distress is largely a byproduct of oil weakness. I create an “adjusted” Saudi CDS by netting out Germany and as you would expect this fairly closely tracks oil prices: But this is what is perhaps concerning – because even with oil prices undercutting the 2009 lows, Saudi adjusted CDS remains well below the levels briefly achieved in that period. Combined with the additional risks of a war in Yemen, Saudi succession challenges (which we have highlighted previously) and the emergence of ISIS, it’s perhaps surprising that the world’s view of Saudi Arabia has not deteriorated even more. As discussed in the weekly, theEmerging Market pain trade seems to be a fairly direct outcome of the European desire to weaken its currency to capture global growth. With Draghi continuing to push, and Yellen still not acting to turn the US into the extreme global consumer by strengthening the dollar, the rising risks in Saudi Arabia are a reminder that growth weakness has its own feedback mechanism – if oil prices stay at these levels for an extended period of time, it appears unlikely that Saudi Arabia will remain the reliable source that the world is currently counting on.

BofA Sees Saudi Rating Risks Another S&P Cut Amid Oil Slump -- Saudi Arabia faces an “elevated” risk of another credit rating downgrade by Standard & Poor’s as the world’s biggest oil exporter grapples with the slump in crude prices, Bank of America Merrill Lynch said. The rating agency on Friday lowered Saudi Arabia’s credit rating one level to A+, the fifth-highest classification, saying the oil rout will increase the budget deficit in a country that relies on energy exports for more than 80 percent of its revenue. The International Monetary Fund expects Saudi Arabia to post a fiscal shortfall of more than 20 percent of economic output this year. "Based on planned fiscal consolidation measures, we think the risk of another downgrade" is elevated, Jean-Michel Saliba, Bank of America Merrill Lynch’s Middle East and North Africa economist, said in an e-mailed report on Tuesday. S&P’s expectation of a budget deficit of 10 percent of economic output next year and 5 percent in 2018 is optimistic, he said. The slump in oil prices by more than 40 percent over the last year is slowing growth in the kingdom’s non-oil economy and pushing the government to search for savings, contemplate project delays and sell bonds for the first time since 2007. The Emirates NBD Purchasing Managers’ Index for Saudi Arabia, a measure of growth in the non-oil economy, fell in October to its lowest level in six years, driven by weaker expansion in new business. Finance Minister Ibrahim al-Assaf said the kingdom was working on attracting foreign investment as part of efforts to reduce its reliance on oil revenue. Saudi Arabia is ready for the challenges posed by the oil price decline and will overcome them, he said.

Mideast money - Cheap oil eats into Saudi corporate profits, more pain ahead -- Saudi Arabian corporate earnings shrank during the third quarter of this year as low oil prices began hurting the wider economy, and are unlikely to achieve anything more than modest growth while the energy market languishes. The slowdown comes at an awkward time for the world’s top crude exporter, which has so far made little headway in attracting more international money to the bourse since opening it to direct purchases by foreign institutions in June. Combined net income at 166 listed companies for which data was available dropped 14.0 percent from a year earlier to 27.6 billion riyals ($7.4 billion) in the July-September quarter, Reuters calculated after the firms finished issuing earnings statements last week. As expected, petrochemical producers’ earnings, a big chunk of the stock market, fell sharply as cheap oil pushed down selling prices for their products, hurting profit margins. But earnings in some other sectors such as construction and banking also shrank or rose only modestly, suggesting cheap oil is now making itself felt throughout the economy in the form of tighter monetary conditions and less generous state spending. Standard & Poor’s cut Saudi Arabia’s long-term foreign and local currency sovereign credit rating last Friday, citing a “pronounced negative swing” in the government’s budget balance. Riyadh criticized the one notch drop to ‘A-plus/A-1′ as unjustified.

Saudis Bring Oil War To Europe With Largest Price Discount Since 2009 --- With oil exports to Europe having slipped from 13% of Saudi's total to just 10% in the last six months, The FT reports, the de facto leader of OPEC has slashed its Official Selling Price (OSP) to Europe in an effort to regain market share. Saudi lowered its OSP for its Arab light crude grade in Europe by $1.30 a barrel for December, taking its discount to the weighted average of the North Sea Brent benchmark to $4.75 a barrel - the largest discount since February 2009. The move, as we detailed previously, is basically going after Russia's customer base, has raised heckles in Moscow, with Rosneft CEO Igor Sechin complaining last month about Saudi "dumping" after he revealed the kingdom was selling oil to refineries in Poland. As The FT reports, the de facto leader of Opec, which produces more than one in every ten barrels of oil in the world, has been squeezed in Europe over the past year as rival producers have sent more oil to the region. Rising shipments from Iraqi Kurdistan that are delivered into the Mediterranean via the Turkish port of Ceyhan have displaced some Saudi shipments this year, traders and analysts said, while more crude from west Africa is also flowing to Europe. Saudi Arabia has responded by trying to find new customers, including targeting refineries that have traditionally taken the majority of their supplies from Russia and the North Sea.

What’s the big deal between Russia and the Saudis? -- Despite so many degrees of separation, the Saudis are still talking to the Russians. Why? A key reason is because a perennially paranoid House of Saud feels betrayed by their American protectors who, under the Obama administration, seem to have given up on isolating Iran. The Saudis can’t intellectually understand the see-saw of incoherent Beltway policies due to the power struggle between Zionist neocons and the old establishment. No wonder they might be tempted to move to the Russian side of the fence. But for that to happen there will be many a price to pay. So let’s talk about oil. In energy terms, an oil deal with the House of Saud would mean a lot to Russia. A deal could produce incremental oil revenue for Moscow of around $180 billion a year. The rest of the GCC does not really count: Kuwait is a US protectorate; Bahrain is a Saudi resort area; Dubai is a glitzy heroin money-laundering operation. The UAE itself is a wealthy group of pearl divers. And Qatar, as ‘Bandar Bush’ famously remarked, is “300 people and a TV station,” plus a decent airline that sponsors Barcelona. Riyadh – paranoia included - fully took note of the Obama administration’s supposed “policy” of dumping Saudi Arabia over an alleged Iranian natural gas bonanza, which would supposedly replace Gazprom in supplying Europe. That won’t happen, however, because Iran needs at least $180 billion in long-term investment to upgrade its energy infrastructure.

Is Iran Opening A "Secret Passage" To Asia For Russian Crude? -- Russia is looking to expand its influence through oil trade. And a little-reported deal this week may give it access to an entirely new part of the planet when it comes to crude exports. That's the Persian Gulf. Where reports suggest Russia is close to negotiating a "secret passage" for its oil shipments. The move is coming through a deal with Iran, which that government says could open the door for crude oil swaps between the two countries -- facilitating exports of "Russian" oil out into Asia and beyond. Iran's Deputy Petroleum Minister Amir Hossein Zamaninia told local press Monday that Russian energy company representatives will be arriving in Iran this week to discuss such a swap deal. Russia lacks access to ocean shipping routes beyond the Pacific and Arctic. Iran has better access, through its ports on the Persian Gulf. But Russia does have ports on the Caspian Sea. And as the map below shows, that provides a short shipping route into Iran.  Russia and Iran can exchange crude oil shipments along the Caspian Sea The swap scheme would see Russian crude oil sent to Iran, in exchange for equal shipments of Iranian crude flowing to Russia. And from there, it will be interesting to see what happens. Officials said that Russian oil would likely be used within Iran's northern provinces. But the swaps agreement opens up another possibility -- Russian crude could be sent further south, and even exported through Persian Gulf ports. That would give Russia unprecedented access to markets around the Indian Ocean -- including go-to crude buyers in Asia, greatly changing the dynamics of oil markets in this part of the world.

OPEC Infighting Reaching Critical Levels: OPEC members are fighting over long-term strategy, with many countries far apart on how best to coordinate oil production. According to an internal strategy document, and reported on by Reuters, OPEC members Iran, Algeria, Iraq, and others put forward a variety of strategies, including a return to the quota system, production cuts, and a price target. Iran wanted a return to country-specific limits on production, which was backed by Algeria. Iraq wanted more autonomy for countries to set their own policies. But, despite all of the suggestions, Saudi Arabia maintains that the market should determine oil prices. The internal squabbles suggest that the December 4 meeting in Vienna will likely be contentious, with expectations of no change in policy. Saudi Arabia holds enough sway to ensure OPEC stays the course, but it is also feeling the pain from the market share strategy. S&P downgraded Saudi Arabia’s credit rating last week to A+, arguing that oil prices are causing a widening budget deficit. The IMF expects Saudi Arabia’s deficit to reach 20 percent of GDP this year, and Bank of America Merrill Lynch said this week that the country was at risk of further credit downgrades if oil prices do not rebound.  The cutback in production from the Bakken has led refineries on the East Coast to turn to imported oil from abroad. Oil from Latin America, the Middle East, and Africa has become cheaper than North Dakota crude. Several refining companies, including PBF Energy, are set to purchase the least amount of Bakken crude since 2013.

Iran to announce oil output rise at next OPEC meeting - Shana – Iran will officially notify producer group OPEC in December of its plans to raise its crude oil output by 500,000 barrels per day (bpd), the Iranian oil minister said on Saturday. “We…ask them to respect the 30-million-barrel ceiling which they have agreed,” Bijan Zanganeh was quoted as saying by Shana, the ministry’s news agency. “Iran is prepared to supply at least 500,000 bpd of crude oil to global markets,” he added. The Organization of the Petroleum Exporting Countries (OPEC) will meet in Vienna in early December. OPEC is pumping close to a record high as major producers focus on defending market share. This has added to amply supplies, which have helped cut prices by more than half from June 2014 to below $50 a barrel. Under a deal reached with six major powers in July, Iran agreed to curb its nuclear program in exchange for an end to economic sanctions imposed on the country in 2012 over its disputed nuclear work. The country’s oil production is down one million bpd since the start of 2012 at 2.7 million bpd, depriving it of billions of dollars in oil revenue. Iran has repeatedly said it will ramp up crude oil production and reclaim its lost share of exports shortly after international sanctions are lifted. The OPEC member aims to raise oil output by 500,000 bpd as soon as sanctions are lifted in early 2016 and by one million bpd in March.

Crude Supertanker Rates Collapse As VLCC 'Traffic' To China Lowest In 13 Months -- A few days ago we warned, confirming Goldman Sachs' earlier analysis that the world was running out of space to store crude distillate products, that China was running out of storage space for crude oil as it dramatically ramped up its Strategic Petroleum Reserve 'buy low' plan. While the brightest indicator at the time was "about 4 million barrels of crude oil stranded in two tankers off an eastern port for nearly two months," this week, the dial went to 11 on the oil-demand-fear-o-meter, as Bloomberg reports supertankers sailing to Chinese ports plunged to its lowest in 13 months, sending the daily rate for shipping crashing.The marginal demand-er of last resort just left the market.  As a reminder, this is what Goldman said: "the build in Atlantic distillate inventories this year has been large, following near-record refinery utilization in both the US and Europe, only modest demand growth, especially relative to gasoline, and increased imports from the East on refinery expansion and rising Chinese exports." As a result, and despite a cold winter in both Europe and the US last year, European and US distillate storage utilization is reaching historically elevated levels, driving a sharp weakening in heating oil and gasoil time spreads.

China burns much more coal than it claims: China, the world's leading emitter of greenhouse gases from coal, is burning far more annually than previously thought, according to new government data. The finding could complicate the already difficult efforts to limit global warming. Even for a country of China's size and opacity, the scale of the correction is immense. China has been consuming as much as 17 per cent more coal each year than reported, according to the new government figures. By some initial estimates, that could translate to almost a billion more tons of carbon dioxide released into the atmosphere annually in recent years, more than all of Germany emits from fossil fuels. Officials from around the world will have to come to grips with the new figures when they gather in Paris this month to negotiate an international framework for curtailing greenhouse-gas pollution. The data also pose a challenge for scientists who are trying to reduce China's smog, which often bathes whole regions in acrid, unhealthy haze. The Chinese government has promised to halt the growth of its emissions of carbon dioxide, the main greenhouse pollutant from coal and other fossil fuels, by 2030. The new data suggest that the task of meeting that deadline by reducing China's dependence on coal will be more daunting and urgent than expected, said Yang Fuqiang, a former energy official in China who now advises the Natural Resources Defence Council.

Is China Cooking the Books on Economic Expansion? - US News: One of China's most senior government officials over the weekend said his country's economy should expect to see "at least 6.5 percent" gross domestic product growth each year between 2016 and 2020, despite a growing pool of evidence suggesting China is in the midst of a historic economic slowdown. But whether Chinese GDP numbers actually paint a clear economic picture is another question entirely. "We propose to achieve the goal of creating a 'moderately prosperous society' by 2020, which requires annual economic growth of at least 6.5 percent over the next five years," Chinese Premier Li Keqiang said Sunday during a speech in Seoul, according to the Associated Press. He said the economy is operating within a "reasonable range" and that the government has "the confidence and ability" to hit its growth target of "about 7 percent" this year.  Rumors had floated around in the days and weeks leading up to Sunday's announcement that the government would eventually lower its expansion goals for the next several years following a slew of recently underwhelming economic indicators suggesting Asia's financial giant was beginning to cool. Exports and imports have plummeted in recent months, and the Chinese government announced in October that GDP expanded by only 6.9 percent in the third quarter – which represents the worst three-month period for the Chinese economy since the world was just emerging from the global financial crisis in 2009. But even that 6.9 percent growth – the worst China had posted in more than half a decade – sounded too good to be true. "We don't have total confidence in the numbers, and we are surprised by the acceleration in services output given the collapse in the equity market," a team of Bloomberg economists wrote in a research note at the time.

China’s Factory Activity Shrinks for an Unexpected Third Month - Activity in China's manufacturing sector unexpectedly shrank for a third straight month in October, an official survey showed on Sunday, fueling fears that the economy may be cooling further in the fourth quarter despite a raft of stimulus measures. The official Purchasing Managers' Index (PMI) was at 49.8 in October, the same pace as in previous month and lagging market expectations of 50.0. To shore up growth, the government has cut interest rates six times since November and lowered the amount of cash that banks must hold as reserves four times this year. The latest cut in interest rates and banks' reserve requirement came in late October. Beijing has also ramped up infrastructure spending and eased restrictions on home purchases to revive the flagging property market.

China's October factory, services surveys show economy still wobbly | Reuters: Activity in China's manufacturing sector unexpectedly contracted in October for a third straight month, an official survey showed on Sunday, fuelling fears the economy may still be losing momentum in the fourth quarter despite a raft of stimulus measures. Adding to those concerns, China's services sector, which has been one of the few bright spots in the economy, also showed signs of cooling last month, expanding at its slowest pace in nearly seven years. As the first major indicators of business conditions in China released each month, the PMIs reinforced the view that the economy remains in the midst of a gradual slowdown which will require Beijing to roll out more support in coming months. "While the PMI has stabilized, it is too early to confirm a bottoming out," economists at ANZ Bank said in a note. "As deflation risks intensify, a further RRR cut before end of this year is still possible," ANZ said, referring to reducing the amount of reserves that banks must hold in order to free up more funds for new loans. The official Purchasing Managers' Index(PMI) was at 49.8 in October, the same pace as in previous month and lagging market expectations of 50.0, according to the National Bureau of Statistics(NBS). A reading below 50 points suggests an contraction. New export orders contracted for a 13th straight month, though the sub-index for new orders - a proxy for both domestic and foreign demand - edged up marginally to 50.3, compared with September's 50.2.

China’s manufacturers try to rise up value chain - Hyde Xu, sales manager at GKO, a Chinese maker of aluminium products, has come to the Canton Fair — the country’s biggest trade show — not so much to do deals but to show customers “we are still alive”. “Exports are not good and the domestic market is also bad,” says Mr Xu, throwing his hands up in resignation. “The price of shipping containers for export has fallen by half . . . and now freight companies as well as factories are worried about going bust.” While they are accused of dumping on international markets, many Chinese metals producers have already gone out of business themselves because of massive oversupply, a slowdown at home and an uncertain global outlook. GKO, based in Zhejiang province, has responded by pushing its suppliers to cut costs and developing new, higher value products. After riding China’s construction and car market booms, the company is now trying to tap into another part of the world’s second-biggest economy, one that is still growing: tourism. GKO has recently started producing lightweight aluminium suitcases, similar in appearance to the luxury models made by Samsonite and Rimowa and adored by Chinese travellers, but at half the price. Having specialised in producing huge rolls of aluminium sheet, which were later made into car parts and building decorations, GKO invested in new machines to press its raw material into suitcases.

Over 40% Of Chinese Goods Sold Online Are Counterfeit -- Following a recent report documenting the surge in empty malls littering China, many suggested that this is indicative of a shift to online shopping and migration to platforms such as Alibaba. That may well be the case, but unlike in the US where one is assured at least some quality control and has a rational expectation that what was ordered online is what will be delivered, in China the reality is far different. According to China's official news agency, Xingua, more than 40% of goods sold online in China last year were either counterfeits or of bad quality, illustrating the extent of a problem that has bogged down the fast-growing online sector. According to the report, which was delivered to China's top lawmakers on Monday, just under 59 percent of items sold online last year were "genuine or of good quality", Xinhua said as cited by Reuters. China has been trying to shake off a notoriety for pirated and counterfeit goods, long a major headache for global brands targeting the Chinese market from iPhone maker Apple Inc to luxury retailer LVMH. Chinese e-commerce giant Alibaba Group has been lobbying to stay off a U.S. blacklist for fakes after coming under renewed pressure this year over suspected counterfeits sold on its shopping platforms. As Reuters adds, the report called for "accelerated legislation in e-commerce, improved supervision and clarification of consumers' rights and sellers' responsibilities". It added these were needed due to the rapid emergence of online sales, which grew 40 percent last year to 2.8 trillion yuan ($441.84 billion).

China’s Economy Is Worse Than You Think - The unreliability of Chinese official economic data has become almost a cliche. A few years before he became China's premier, Li Keqiang said that the country's numbers were "man-made" and "for reference only." If the top economic policy maker of a country says that the numbers aren't reliable … well, you believe him. But how unreliable? The fudge factors might only be a few tenths of a percentage point. It's very hard to fake economic numbers in the same direction for a very long time -- eventually, it becomes obvious to everyone that your economy is either much bigger or much smaller than the cumulative growth rates would have indicated. Something a bit like this happened to China back in 2007, when the Asian Development Bank reported that China's gross domestic product was much smaller than believed. Chinese inflation had been understated, leading to real (inflation-adjusted) growth numbers that had been too high for too long. China's Pain PointsIn the current economic environment, the big question is whether China is suffering a deeper slowdown than is generally believed. The latest official numbers show a 6.9 percent growth rate -- barely down from the recent 7 percent range. Those are year-on-year numbers, of course, so quarter-to-quarter annualized growth -- which is the way you usually hear U.S. economic numbers reported -- is going to be a bit lower than 6.9 percent. But only a bit. The real question, for investors and policy makers alike, is whether the numbers have been cooked.

EXPOSED: Beijing's Covert Global Radio Network: (Reuters) - In August, foreign ministers from 10 nations blasted China for building artificial islands in the disputed South China Sea. As media around the world covered the diplomatic clash, a radio station that serves the most powerful city in America had a distinctive take on the news. Located outside Washington, D.C., WCRW radio made no mention of China's provocative island project. Instead, an analyst explained that tensions in the region were due to unnamed "external forces" trying "to insert themselves into this part of the world using false claims." Behind WCRW's coverage is a fact that's never broadcast: The Chinese government controls much of what airs on the station, which can be heard on Capitol Hill and at the White House. WCRW is just one of a growing number of stations across the world through which Beijing is broadcasting China-friendly news and programming. A Reuters investigation spanning four continents has identified at least 33 radio stations in 14 countries that are part of a global radio web structured in a way that obscures its majority shareholder: state-run China Radio International, or CRI. Many of these stations primarily broadcast content created or supplied by CRI or by media companies it controls in the United States, Australia and Europe. Three Chinese expatriate businessmen, who are CRI's local partners, run the companies and in some cases own a stake in the stations. The network reaches from Finland to Nepal to Australia, and from Philadelphia to San Francisco.

China aids eurozone QE drive with sales of German bonds - FT -- Eurozone central bankers, struggling to boost the currency area’s flagging recovery, have received help from Beijing in delivering their €1.1tn quantitative easing plan thanks to sales of German government debt by the People’s Bank of China. The PBoC’s reserve management wing, the State Administration of Foreign Exchange, has been selling some of its German government bonds since the ECB began buying them in March, say two sources close to central banks in China and Europe. Safe does not deal directly with eurozone central banks, which purchase bonds from investors via banks’ bond trading desks. But its sales of bonds are making life easier in the dealing rooms of Europe’s monetary powers, where traders have been handed the difficult task of finding €60bn of mostly government debt to buy each month as part of the QE package. Concerns over the whether the Bundesbank, Germany’s central bank, could find enough German bonds to buy have long surrounded the €1.1tn programme. The Bundesbank must purchase around €10bn of bonds a month as part of QE — a potentially problematic amount due to low levels of debt issuance by the German state, although ECB officials have repeatedly downplayed these concerns. The Bundesbank has scoured the world for likely sellers, according to one person familiar with the matter, including Safe. Under pressure to make a return on its reserves portfolio, Safe has agreed to take advantage of the high prices on offer for the low-yielding German bonds. “Chinese sales of German Bunds would certainly facilitate the ECB’s quantitative easing operations, so this is an instance where the interests of the ECB and PBoC are congruent,” said Eswar Prasad, an economist at Cornell University and former head of the China division at the International Monetary Fund. Sales by Safe, thought to hold hundreds of billions of euros-worth of European government debt, would also help the ECB should an emerging market slowdown threaten the single-currency area’s recovery and force a more aggressive package of monetary easing.

Taiwan and China to hold historic summit in Singapore - BBC News: Taiwan's President Ma Ying-jeou will meet his Chinese counterpart Xi Jinping in Singapore on Saturday - the first ever meeting between leaders of the two sides. Both said the talks would focus on relations across the Taiwan Straits. China claims sovereignty over Taiwan and views the island as a breakaway province which will one day be reunited with the mainland. But ties have improved since President Ma took office in 2008. The Chinese government threatens to use military force against Taiwan if it ever attempts to gain outright independence. Taiwanese spokesman Chen Yi-hsin said President Ma's aim was "to promote peace cross the Taiwan Strait and maintain status quo". This meeting, less than three months before Taiwan's elections, is a sign of how concerned China is that the significantly improved ties of recent years could be jeopardised if the pro-independence opposition party's candidate becomes president. Opinion polls show Tsai Ing-wen is leading - a big worry for Beijing.

South Korea's manufacturing sector logs first ever negative growth --A warning light is flashing for South Korea’s manufacturing sector, a major pillar propping up the country’s economy. The manufacturing sector saw sales fall last year, logging its first ever negative growth. What caused the retrogression in a sector that has long hauled the country’s economy forward, and what kind of solutions does it need? Today, we’ll discuss this issue with Dr. Kim Gwang-suk of Hyundai Research Institute. First, let’s take a look at the Bank of Korea’s annual corporate analysis report for 2014. The Bank of Korea releases a corporate analysis data every quarter, on some 530,000 commercial enterprises excluding finance and insurance businesses. Of those, about 120,000 are manufacturing firms. As you can see, the manufacturers’ sales grew by 0.5% in 2013, but grew by -1.6% in 2014. It’s not unusual for the size of the growth rate to contract, but in this case, it was a reduction in scale. I think the minus 1.6% growth for the manufacturing sector may be as shocking for the economy as the likes of the IMF row or the 2008 global financial turmoil. The fact is, this is the first time the country’s manufacturing industry has suffered negative year-on-year growth since 1961, when the government began compiling relevant data. In particular, machinery, electro-mechanics and electronics saw sales slide 5.5 percent in 2014, after growing 3.8% in 2013. Nonmetallic minerals producers posted a 3.1 percent drop, compared to a 0.6% drop in the previous year, while the decline was even more clearly visible in petrochemicals and chemicals, which contracted 1.6 percent after expanding 0.7% in 2013. It may be time for us to be on our toes.

Japan PM calls for steps to achieve a $5 trillion economy | Reuters: Japanese Prime Minister Shinzo Abe instructed the government on Wednesday to come up with an action plan by the end of the month to help achieve his goal of expanding the economy by a fifth to 600 trillion yen ($4.95 trillion) over five years. Abe hopes that the measures should encourage Japanese firms to spend their record cash piles to boost investment on plants and equipment and raise wages in a bid to generate a cycle of growth led by the private sector. "In order to achieve the biggest GDP in the postwar era, the business circles need to tackle capital spending and wage hikes. The government will quickly consider steps to support it," Abe told a meeting of his top economic advisory panel. "I want (Economics) Minister (Akira) Amari to compile urgent measures needed to realize GDP worth 600 trillion yen." The four private-sector members of the 11-member Council on Economic and Fiscal Policy reckon that Japan needs a potential growth rate of around 2 percent to meet Abe's GDP target. Currently, Japan's potential growth rate is around zero due to decades of economic stagnation and a declining population, making achieving 2 percent a tough task.

BOJ policymakers fret over hit from China slowdown: October minutes | Reuters: Many Bank of Japan policymakers warned of the damage a prolonged slowdown in emerging economies could have on exports even as they held off on expanding monetary stimulus on Oct. 6-7, minutes of the rate review showed on Thursday. The minutes offered no sign the nine-member board actively debated monetary easing, with many of them echoing Governor Haruhiko Kuroda's view that inflation is steadily accelerating when excluding the effect of slumping energy costs. But they agreed that they must be vigilant to slumping currencies and stock prices of emerging economies, as well as weak commodity prices, the minutes showed. "A few members said the outlook for China's economy was highly uncertain and that the risk of it slowing for longer than expected warranted attention," according to the minutes. "Some members pointed to falling exports to East Asia ... as a matter of concern," it showed. Markets had been rife with speculation the BOJ could expand its already massive stimulus program at either of the two rate reviews last month, as soft exports and consumer spending threatened to tip the economy in recession. The BOJ decided to forgo easing at both meetings - one on Oct. 6-7 and another on Oct. 30 - on hope that the world's third-largest economy will sustain a moderate recovery and help accelerate inflation to its ambitious 2 percent target.

BOJ needs to adapt QQE for a long struggle to raise wages (Reuters) – The Bank of Japan’s former top economist said it should modify its stimulus programme to suit a protracted battle against deflation because companies will take much longer than expected to substantially raise wages. The BOJ held off on expanding its “quantitative and qualitative easing” (QQE) programme last week even as it cut its rosy inflation forecasts, clinging to the hope a tightening job market will boost wages and help accelerate price growth. But Hideo Hayakawa, well-versed in the bank’s economic analysis and policy drafting, said companies were unlikely to raise basic wages next year any more than this year’s feeble 0.6 percent increase, given the murky economic outlook. The boost to inflation from a weak yen, which has pushed up imported food and grocery prices, will also peak by around the middle of next year, keeping inflation distant from the BOJ’s 2 percent target for years to come, he added. “QQE is a programme typically designed to run for a short period of time. It was initially a success, shocking markets with a huge blow of stimulus,” said Hayakawa, now a senior analyst at the Fujitsu Research Institute think tank. “With wages taking so long to rise and its tool kit nearly empty, the BOJ should shift to a policy designed for a prolonged fight” to boost inflation, he told Reuters on Thursday.

Japan economy likely fell into technical recession in third quarter -- Japan's economy probably slipped into technical recession in July-September due to a drop in capital spending and soft external demand and private consumption, a Reuters poll showed. The world's third largest economy is seen to have contracted at an annualized rate of 0.2 percent in the third quarter, following a 1.2 percent contraction in April-June, the poll of 19 economists showed. A technical recession is defined as two consecutive quarters of economic contraction. This would translate into a quarterly contraction of 0.1 percent, keeping policymakers under pressure to deploy monetary and fiscal stimulus in the coming months to firms up the flagging economy. Despite slowing growth and inflation, the Bank of Japan is in no mood to ease policy further anytime soon, arguing that the economy remains on track for a moderate recovery although a China-led global slowdown poses large risks to the economy. Analysts are closely watching the third-quarter gross domestic product (GDP) data for clues on the possible size of any additional fiscal stimulus. Prime Minister Shinzo Abe's government is considering compiling an extra budget for the current fiscal year to shore up demand.

U.S., Japan push for inclusion of South China Sea in defense forum statement | Reuters: The United States and Japan are pushing to get concerns about the South China Sea included in a statement to be issued after regional defense talks in Malaysia despite Chinese objections to any mention of the disputed waterway, officials said. A senior U.S. defense official said Beijing had made clear as early as February that it didn't want the South China Sea discussed at the meeting between Southeast Asian defense ministers and their counterparts from across the Asia-Pacific in Kuala Lumpur on Wednesday. "We've been very clear along with many other like minded countries that South China Sea language should be included but there are members who feel differently," said the U.S. defense official, adding China was the main obstacle. A draft of the concluding statement being prepared by host Malaysia makes no mention of the South China Sea, said a separate source familiar with the discussions, focusing instead on terrorism and regional security cooperation. Wednesday's gathering brings together the 10 defense ministers from the Association of South East Asian Nations (ASEAN) along with ministers from countries such as the United States, Japan, China, India and Australia. It is taking place a week after a U.S. warship challenged territorial limits around one of Beijing's man-made islands in the Spratly archipelago with a so-called freedom-of-navigation patrol.

TPP text released, sparking study of its implications | The Japan Times - Prime Minister Shinzo Abe on Friday hailed the Trans-Pacific Partnership free trade pact, saying it showcased a bid by Japan and the United States to set rules for the global economy. His comments come a day after the text of the huge Pacific Rim free-trade deal was finally released. The massive document, posted online by several governments, offered the first detailed look at the world’s biggest free trade area, which aims to break down barriers to commerce and investment between a dozen countries comprising about 40 percent of the global economy. The U.S. and Japan are the proposed bloc’s two biggest economies. “Rules should not be something that are imposed on you — you make them,” Abe told an economic forum in Tokyo. “The TPP is the structure where Japan and the U.S. can lead in economic rule-making.” Abe also said he would “enthusiastically welcome” South Korea and Indonesia, which have signaled interest in joining the zone, so long as they “accept the rules” that Tokyo helped to write. The pact, agreed a month ago, comprises Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam. The deal now awaits approval by each of the dozen members’ legislatures — a potentially contentious and lengthy process. The U.S. government began its process on Thursday, with President Barack Obama notifying lawmakers of his plan to sign the U.S.-led initiative. Some provisions in the 1,500-page document allow for nations to renegotiate terms and rules in some cases after a certain period of time. Such conditional arrangements helped them to conclude more than five years of intensive talks last month.

Pacific trade deal targets Chinese hacking -- Pacific Rim countries will be required to criminalise hacking attacks on companies under a new regional trade pact that shows Washington’s determination to clamp down on Chinese cyber theft and ban new forms of digital protectionism. The US, Japan and 10 other economies concluded five years of negotiations last month on the Trans-Pacific Partnership, covering roughly 40 per cent of the global economy. Although the pact does not include China, US officials are selling the TPP as a crucial component in Washington’s efforts to write the rules of the global economy before Beijing can. The deal will reduce trade barriers on everything from beef and dairy products to textiles, with new standards for environmental protection, investment disputes and the behaviour of state-owned enterprises. The TPP agreement — details of which will be released as soon as Thursday — will also include new rules governing the free flow of data, privacy and cyber security, showing how the US intends to use a trade deal to set new benchmarks that it hopes will become global standards. The growing number of cyber attacks on US companies blamed on Chinese hackers looking to steal commercial secrets has become a key point of friction between the world’s two biggest economies. Washington has threatened to level financial sanctions against Chinese companies linked to such attacks. In an interview with the Financial Times, Mike Froman, the US trade representative, said the TPP’s new digital rules were not only aimed at China, which is years away from joining the pact. “The area of localisation [laws for data], forced technology transfer [and] forced [intellectual property] transfer is an issue that has been a central concern in our relationship with China,” he said. “But it is not limited to China.”

Me Too! Do S Korea & Indonesia Want to Join TPP? -- It appears as though the United States is gaining the upper hand in signing FTAs in the Asia-Pacific after the TPP enlargement. With China's pan-Pacific equivalent not gaining any traction, the undecideds--countries that sat out the TPP negotiations to see how matters progress--appear to be more favorably disposed now to the American effort. Chalk this one up to the "bandwagon" effect: non-participants in the TPP negotiations fear being left out will cause their exports to be less competitive as those within the FTA benefit from lower tariffs. Make no mistake that the US swaying Japan greatly involved the former playing up the latter's fears about China: [Former US trade negotiatior Ira Shapiro] believes that it was the rise of China that ultimately convinced Japanese Prime Minister Shinzo Abe to pursue TPP. If the TPP becomes reality, "China will have a choice of either making the changes necessary to join TPP or intensify its leadership of competing arrangements, as we've seen with the Asian Infrastructure Investment Bank," he said. "For the U.S. and Japan, it is important to set a model." Let's begin with South Korea. Like Japan, it has traditionally been very careful about the terms of FTAs given the mandate not to offend domestic agricultural interests. However, with Japan making such concessions already with TPP, the Koreans are now more willing to do the same--at least slightly. In particular, the Japanese seek more automobile exports to Korea. In a manner of speaking, Japan got a head start over Korea and can now help dictate the terms for the latter's entry to its advantage:

Indonesia Stares at Fiscal Déjà Vu as Deficit Nears Legal Limit - Jakarta Globe -- Indonesia stands on the brink of breaching a legally mandated cap on the state budget deficit, but the consequences remain unknown. “It’s likely that the state budget deficit this year will exceed Rp 300 trillion [$2.2 billion],” Sigit Priadi Pramudito, the Finance Ministry’s director general of taxation, said in Jakarta on Thursday. That would push the deficit to 2.7 percent of projected gross domestic product for 2015 and beyond the government’s own estimate in September of 2.2 percent. Under a 2003 law, drafted to prevent the conditions that led to the 1997-98 financial meltdown, the deficit may not exceed 3 percent of GDP. However, the law, and a follow-up government regulation, makes no provisions for this contingency. The closest it comes is to state that any state officials, including ministers and possibly even the president, failing to abide by the provisions in the law face possible, unspecified criminal charges. Darmin Nasution, the coordinating minister for the economy, said the issue of the rising deficit would be discussed at a cabinet meeting. The Finance Ministry, meanwhile, said earlier that it would take out loans from the International Monetary Fund, the World Bank and the Asian Development Bank to finance this year’s budget shortfall.

Abe, Canada's Trudeau agree on TPP, China maritime issues in telephone talks | The Japan Times - Prime Minister Shinzo Abe and Canada Prime Minister-designate Justin Trudeau agreed Friday that the Trans-Pacific Partnership free trade pact will bring benefits to the region. In their telephone talks, Abe and Trudeau also agreed to reject any attempt to change the status quo by force — an apparent reference to China’s maritime assertiveness in the East and South China seas. While congratulating Trudeau on his Liberal Party’s election win, Abe said that he hopes the new leader will make use of his youth to exercise strong leadership.

Forget China: This Extremely "Developed" Country Just Suffered Its Biggest Money Outflow Ever -- While understandably all eyes have been fixed on every monthly capital outflow update from China (even the ones that the Politburo is clearly massaging), few have noticed that one of the biggest total outflows currently in the global developed economy is taking place right in America's own back yard. According to BofA's Kamal Sharma, Canada’s basic balance - a combination of the capital and the current account: a measure of national accounts that spans everything from trade to financial-market flows - swung from a surplus of 4.2% of GDP to a deficit of 7.9% in the 12 months ending in June. That’s the fastest one-year deterioration among 10 major developed nations.

Ontario’s deficit target at ‘significant risk,’ budget watchdog warns - Ontario’s budget watchdog is warning there is “significant risk” the province will miss its target to balance the budget in two years if economic growth continues to be slower than expected and the province does not drastically curb spending. In a report Wednesday, Financial Accountability Officer Stephen LeClair projected the province could be in line for a $5.2-billion deficit next year and a $3.5-billion deficit in fiscal year 2017-18, the year the Liberals have promised to balance the budget. The economy may grow by only 3 per cent this year, down from the 4.3 per cent projected at the time of last spring’s budget, Mr. LeClair said. In order to balance the books, the province would have to reduce annual spending growth to one-third its current rate, well below the amount needed to keep up with inflation and population growth in Canada’s most populous province. As it is, spending growth is already lean, an average of 1.4 per cent over the past four years. “To meet fiscal projections in future years, government must realize an even more aggressive restraint target of an average of 0.5 per cent in each year,” Mr. LeClair said at a Queen’s Park press conference. “Population growth plus inflation, generally a good proxy for spending growth, is expected to average 3 per cent per year. Add into this mix that spending restraint gets more difficult in each subsequent year, as there are less and less opportunities for efficiencies.”

Global Commodity Deflation Strikes Due North: Canadian Slump Triggers Huge Capital Flight - While understandably all eyes have been fixed on every monthly capital outflow update from China (even the ones that thePolitburo is clearly massaging), few have noticed that one of the biggest total outflows currently in the global developedeconomy is taking place right in America’s own back yard. According to BofA’s Kamal Sharma, Canada’s basic balance – a combination of the capital and the current account: a measure of national accounts that spans everything from trade to financial-market flows – swung from a surplus of 4.2% of GDP to a deficit of 7.9% in the 12 months ending in June. That’s the fastest one-year deterioration among 10 major developed nations. Citing Sharma’s data Bloomberg writes that “money is flooding out of Canada at the fastest pace in the developed world as the nation’s decade-long oil boom comes to an end and little else looks ready to take the industry’s place as an economic driver.” In fact, based on the chart below, the outflow is the fastest on record.  Earlier today, Canada’s manufacturing sector got even more bad news when the latest RBC Canadian Manufacturing PMI survey dropped to a record low in October, with output, new orders and employment all declining since the previous month. Moreover, new export sales dropped for the first time since April, with survey respondents noting that weaker global economic conditions had weighed on new business volumes. In other words, not even the tumbling loonie is helping boost exports: a bedrock assumption of modern monetary policy.

Top Economists Warn Modi's India of Negative Impact of Hindu Intolerance -- Top economists have now joined the rapidly growing ranks of Indian writers, historians and other intellectuals warning Modi government of the negative consequences of rising intolerance for the entire nation.  The Wall Street Journal reported that India's chief central banker Raghuram Rajan "made an unusual appeal for tolerance in a speech Saturday, triggering a debate about whether he was trying to send a message to the country’s leaders". “The first essential is to foster competition in the market place for ideas,” Gov. Rajan told students at his alma mater, the Indian Institute of Technology in New Delhi. “Without this competition for ideas, we have stagnation.”  Arun Shouri, BJP leader who has previously served as a federal minister and worked as World Bank economist, joined the criticism of the Modi government when he said: "there is clearer belief (in the Modi government) that managing the economy means managing the headlines and this is not really going to work.” He said the NDA government was essentially “the Congress plus a cow”, in an apparent reference to the violence against minorities and killings of Muslims accused by the Sangh Parivar activists of consuming beef. Ratings agency Moody's has also weighed in with its own warnings saying that "in recent times, the government also hasn't helped itself, with controversial comments from various BJP members. While Modi has largely distanced himself from the nationalist jibes, the belligerent provocation of various Indian minorities has raised ethnic tensions.

Wholesale Reform of Indian Insolvency Law - On Wednesday of this week, the Indian Ministry of Finance released a draft of a watershed Insolvency and Bankruptcy Bill, 2015. The proposed reform covers all of Indian insolvency law, both corporate and personal. A summary of the key proposals is here. While reform efforts earlier in the year concentrated on business recovery, at least 50% of this latest bill concerns a total revamp of the personal debt relief process. These provisions are long overdue. In a fabulous case study a few years ago, Adam Feibelman described both the growth of the personal lending sector in India, as well as the serious structural deficiencies of the century-old Indian regime of personal debt relief (bankruptcy). Among the biggest problems: multi-year delays as cases wind through the civil judicial system, brought on in part by excessive judicial discretion with respect to case administration, including admission of debtor petitions, stays of enforcement, and ultimate debt discharge relief. The bill makes significant progress on several fronts, though it leaves much to be desired.

Bringing in 1.5 million Bangladeshi workers due to need - Zahid | Astro Awani: Deputy Prime Minister Datuk Seri Ahmad Zahid Hamidi refuted claims that the government's aim to bring in 1.5 million Bangladeshi workers is profit-oriented. On the other hand, he said the decision was made based on the demand from the employers' association itself who were prompted to opt for foreign workers from Bangladesh. "To date, from the worker profile, no prejudice, loyalty of Bangladeshi workers much better than workers from other countries, more trustworthy, for example, looking after counters and petrol stations. "Let's not be too easy to accuse that this is about money, this is about modern slavery... the government always endeavour to find means so that these situations do not take place," he said when winding up the debate on the 2016 Supply Bill at the Dewan Rakyat here, Wednesday. He also told the Dewan that the entry of 1.5 million foreign workers from Bangladesh had yet to take place because the government had not signed any agreement related to the matter. On June 25, Ahmad Zahid, who is also Home Minister, was reported to have said that 1.5 million foreign workers from Bangladesh would be brought to Malaysia in stages in the next three years to meet the needs of employers from numerous sectors. He was also reported to have said the move would only be made after illegal foreign workers here were deported.

The big-box game | The Economist -- SINCE the financial crisis, the tide of recovery has not lifted all boats equally. But in few industries is that more true than in shipping. Demand for oil tankers has boomed: a combination of weak spot prices and higher futures prices, driven by the assumption that supply and demand for crude will eventually rebalance, has encouraged traders to hire tankers to store oil at sea and cash in on the price gap. Meanwhile, bulk carriers, which carry such things as iron ore and coal, have been hit by massive overcapacity, as Chinese demand for such commodities has collapsed (see article). Until the start of this year, the container-shipping business—which carries around 60% by value of all seaborne trade in goods—looked more like that for oil tankers. Rising global trade volumes, and firm steel prices that made it worthwhile for owners to scrap old ships, had kept capacity in check, and container-freight rates seemed to be steadying. As recently as August last year, demand for container shipping was so high that BIMCO, an industry association, was warning of a capacity shortage. And at the start of this year Drewry, a shipping consultant, forecast a bumper year: owners of boxships would rake in profits of up to $8 billion in 2015, they thought, helped by low fuel costs.  But since then the industry has been rattled by renewed weakness in freight rates, prompted by a fall in the volume of seaborne trade. The cost of sending a container from Shanghai to Europe, for instance, has almost halved since March, according to the Chinese city’s shipping exchange (see chart). And the absence of the usual pre-Christmas pick-up is worrying both analysts and investors,

Box Markets are in an Over-Capacity Crisis, Next Year Will be Worse -- Credit managers may well be keeping an even closer eye on box carriers next year, following a warning from Drewry that the sector is set to face even tougher times in 2016 as the in-balance of supply and demand slides to its worst since financial crisis hit 2009. And the research agency says the slump could last for several years.  "The container shipping industry is in the midst of an over-capacity crisis which will worsen next year," Neil Dekker, director of container shipping research at Drewry said in an emailed note accompanying the release of its 2015 edition of the Container Market Annual Review and Forecast 2015/16. Drewry says it has now slashed its container shipping growth forecast for 2015 to just 2.2 percent, while the 1.6 million TEU of extra capacity that has been added this year is the equivalent of a growth rate of 7.7 percent.  As a result, the firm says its Global Supply/Demand Index indicating the relative balance of vessel capacity and cargo demand in the market (where 100 equals equilibrium) has fallen to a reading of 91 in 2015, its lowest level since 2009. Last week Ship & Bunker reported that Maersk Line was forced to idle one of its 18,000-TEU Triple-E containerships, and has cooled on an option to order another eight 14,000-TEU containerships.

It's Official: The Baltic Dry Index Has Crashed To Its Lowest November Level In History  -- 2015 has been an 'odd' year. Typically this time of year sees demand picking up amid holiday inventory stacking and measures of global trade such as The Baltic Dry Index rise from mid-summer to Thanksgiving. This year, it has not. In fact, it has plummeted as the world's economic engines slow and reality under the covers of global stock markets suggests a massive deflationary wave (following a massive mal-investment boom). At a level of 631, this is the lowest cost for Baltic Dry Freight Index for this time of year in history.. and within a small drop of an all-time historical low.

Explaining Trade Weakness (Wonkish) - Paul Krugman -- I have been keeping my eye on the ongoing debate over the world trade slowdown, and wanted to weigh in on one issue. For those who don’t know about it, there seems to have been a break in the trend of world trade. Between 1990 and the 2008 crisis, trade grew much more rapidly than world GDP; this “hyperglobalization” brought trade shares of income to levels unprecedented in previous history. Trade then plunged, as was to be expected, in the slump — most trade these days consists of durable goods, which are very cyclical. It bounced back when the world started to recover. But while it’s more or less at the pre-crisis level relative to GDP, it hasn’t gone beyond, suggesting that hyperglobalization has reached some kind of limit. And many of us are talking about things like supply chains, logistics, and so on to explain why. But a new piece from the Bank of England suggests a seemingly simpler explanation: it’s just a composition effect, as world output shifts toward countries that have relatively low income elasticities of demand for imports. So is that really the story? I’d say no, because I don’t believe that the income elasticity of imports is a structural parameter. You need to look underneath to the underlying economic logic — and this pushes you back to stories about supply chains etc.. The notion that income elasticities in trade aren’t structural is one I’ve been pushing for a very long time. Way back when I noted that there seems to be a systematic relationship between estimated income elasticities and national growth rates, what I called the 45-degree rule, which suggested that we were really looking at supply-side, not demand-side effects; a lot of later research seems to support that suggestion.

Maersk cutting slashing 4,000 jobs on falling demand - — Maersk Line, the shipping branch of the Danish conglomerate A.P. Moller-Maersk, says it will reduce its network capacity, postpone investments and reduce its global headcount by at least 4,000 jobs by the end of 2017. Maersk Line says it was speeding up already announced plans to simplify the organization in the light of lower demand. Company CEO Soeren Skou said Wednesday in a statement that the decisions were "necessary steps to transform our industry." Maersk Line has 23,000 land-based workers globally. Last month, the group's oil unit, Maersk Oil, said it would cut 1,250 jobs this year, reducing its workforce by 10 to 12% because of the slump in oil prices.

Global factories struggle as stimulus fails to spur - Massive monetary stimulus from Chinese and European central banks has done little to spur factory growth, moving a debate over more easing up the agenda and raising doubts over whether U.S. interest rates will rise this year. A crop of industry surveys out on Monday pointed to October as another subdued month. Activity in China's colossal factory sector shrank as global demand stuttered while euro zone factories again resorted to slashing prices to drum up trade. "We do think there is more easing to come in China. They are in the midst of a long-running easing cycle that is probably going to go on until late next year," said Andrew Kenningham at Capital Economics. "The ECB is likely to announce something further in December. The concerns there are not so much about growth but about the prospects for inflation." More than half a year after the ECB started pumping in 60 billion euros a month of new money through its quantitative easing program, the currency bloc's relatively downbeat manufacturing survey may make disappointing reading for policymakers. The central bank has failed to lift inflation anywhere near its target of just below 2 percent, and data on Friday showed prices were unchanged last month, heaping more pressure on the bank to act.

$20 Trillion In Government Bonds Yield Under 1%: The Stunning Facts How We Got There -- Last week we wrote that in the latest bout of European NIRP panic, "Over Half Of European 2-Year Bonds Trade At Record Negative Yields" with Italy now paid to issue debt, with a follow-up in which even very serious banks are now looking at the Eurozone's record €2.6 trillion in negative-yielding debt, and finding that the lower yields drop, the greater the savings rates across the continent... ... here are some shocking statistics on how we got there, and which we all take for granted, courtesy of BofA:

  • There have been 606 global rate cuts since LEH
  • $12.4 trillion of central bank asset purchases (QE) since Bear Stearns
  • The Fed is operating a zero rate policy for the longest period ever (even exceeding the WW2 Aug’37-Sep’42 zero rate period)
  • European central banks operating negative rate policies (Swiss policy rate currently -0.75%; Sweden’s policy rate currently -0.35
  • Just this month, the PBoC cut rates, the ECB confirmed QE2, Sweden announced additional QE, and the BoJ promised additional easing if necessary "without hesitation"
  • $6.3 trillion global government bonds currently yielding <0%
  • $20.0 trillion global government bonds currently yielding <1%
  • For every 1 job created in the US this decade, US corporations have spent $296,000 on stock buybacks
  • An investment of $100 in a portfolio of global stocks & bonds (60:40) since the onset of QE1 would now be worth $205; in contrast, a wage of $100 has risen to just $114 over the same period
  • US prime (“CBD”) office real estate has appreciated 168% this decade; in contrast, the value of US residential property across America has risen just 16% (see Chart 5)

Welcome to the ZLB global economy - Interest rates are near zero – or moving towards it – in major economies worldwide. This column introduces a new theoretical framework that helps to organise thinking on how liquidity traps and slow growth spread across the world. It stresses the role of capital flows, exchange rates, and the shortage of safe assets. Once rates are at the ZLB, the imbalance between the supply and demand of safe assets is redressed by lower global output. Liquidity traps emerge naturally and countries drag each other into them.

Bonds Send Same Ominous Signs No Matter Where in World You Look -- A quick scan across government debt markets suggests that investors are pricing in the likelihood that growth and inflation around the world will remain tepid for years to come. In Europe, bonds yielding less than zero have ballooned to $1.9 trillion, with the average yield on securities in an index of euro-area sovereign notes due within five years turning negative for the first time. Worldwide, the bond market’s outlook for inflation is now close to levels last seen during the global recession. And even in the U.S., the bright spot in the global economy, 10-year Treasury yields are pinned near 2 percent -- well below what most on Wall Street expected by now. “Where are the animal spirits to turn us around?” What you see in the bond market is “a lack of confidence in the future.” With the risk of deflation lingering in Europe, China slashing interest rates to combat flagging growth and a raft of indicators fueling concern the U.S. economy is losing steam, it’s not hard to understand why many investors are pessimistic. And the persistent demand for the safety of government bonds also raises thorny questions about whether the Federal Reserve should be raising interest rates when central banks in Europe, Asia and many emerging markets are struggling to revive their own economies. Appetite for safe assets is so strong in Europe that about 30 percent of the $6.3 trillion of sovereign bonds in the euro area have negative yields, index data compiled by Bloomberg show. That means buyers who hold to maturity are willing to accept small losses in return for the promise that most of their money will be returned..

CEOs wary of economic conditions worldwide: Survey: Chief executive officers are less confident about economic conditions in every major region across the globe, according to a quarterly survey of top business executives. The U.S., while the strongest market globally, is not immune. Confidence in the U.S. dropped for the third consecutive quarter, according to the latest Young Presidents' Organization (YPO) Global Pulse survey. The erosion in confidence results from the belief among CEOs that the global economy has softened in the past six months and will continue to weaken six months from now. In July, 37 percent of CEOs said that the economy had improved in the previous six months. In the just-completed October survey, it slipped to 31 percent. Looking ahead, the dip in confidence is similar. In July, 44 percent of survey respondents thought the economy would improve in the next six months. By October, 9 percent fewer CEOs thought that was likely to happen.

Global growth – malaise, but no recession --In this month’s regular report card on global activity growth rates, we conclude that the downward momentum identified by our “nowcasts” a month ago seems to have been arrested during October. The risk of a global recession has therefore declined recently, but growth in the emerging markets remains well below trend, and global spare capacity is continuing to rise. Furthermore, the growth rate in activity in the US has dropped since mid year, and is now slightly below trend. Other advanced economies, especially the euro area, continue to record reasonably healthy, above trend growth rates, with some signs of a recent acceleration. Overall, we therefore conclude that the risk of a global hard-landing has diminished in the past month. However, while not in recession, the global economy does appear to be in the midst of a growth malaise, in which the “miracle” of the 2000s in the emerging world is unraveling, and productivity growth in the advanced economies has maintained its long term downtrend.In this month’s report, we will examine the main sources of the global growth malaise in more detail. (Full results of all the latest global nowcasts are attachedhere. Last month’s report card, with explanations of the regular graphical layout, is attached here.)

Austerity’s Grim Legacy, by Paul Krugman - In 2010, more or less suddenly, the policy elite on both sides of the Atlantic decided to stop worrying about unemployment and start worrying about budget deficits instead. This was very much at odds with basic economics. Yet ominous talk about the dangers of deficits became something everyone said because everyone else was saying it, and dissenters were no longer considered respectable... Yet there’s growing evidence that we critics actually underestimated just how destructive the turn to austerity would be. Specifically, it now looks as if austerity policies didn’t just impose short-term losses of jobs and output, but they also crippled long-run growth.  The idea that policies that depress the economy in the short run also inflict lasting damage is generally referred to as “hysteresis.” It’s an idea with an impressive pedigree: The case for hysteresis was made in a well-known 1986 paper by Olivier Blanchard, who later became the chief economist at the International Monetary Fund, and Lawrence Summers, who served as a top official in both the Clinton and the Obama administrations. But I think everyone was hesitant to apply the idea to the Great Recession, for fear of seeming excessively alarmist. At this point, however, the evidence practically screams hysteresis. Even countries that seem to have largely recovered from the crisis, like the United States, are far poorer than precrisis projections suggested they would be at this point. And a new paper by Mr. Summers and Antonio Fatás, in addition to supporting other economists’ conclusion that the crisis seems to have done enormous long-run damage, shows that the downgrading of nations’ long-run prospects is strongly correlated with the amount of austerity they imposed.

I'll eat my hat if we are anywhere near a global recession - Telegraph: The damp kindling wood of global economic recovery is poised to catch fire. For the first time in half a decade of stagnation, government policy has turned expansionary in the US, China and the eurozone at the same time. Fiscal austerity is largely over. The combined money supply is surging. Such optimistic claims are perhaps hazardous, given record debt ratios in most areas of the world and given that we are six-and-a-half years into an aging economic cycle that might normally be rolling over at this stage. It certainly feels lonely.Citigroup's Willem Buiter has issued a global recession alert. Professor Nouriel Roubini from New York University joined him this week, warning that the odds of a fresh slump have doubled to 30pc. Mr Roubini's gloom is unsettling for me. We saw the world in almost exactly the same way in the lead-up to the Lehman crisis, when it seemed obvious to both of us that sharply rising interest rates would prick the US housing bubble and the EMU credit bubble. This time I dissent. Years of fiscal retrenchment and balance sheet deleveraging have prevented the current global economic recovery from gathering speed, and have therefore stretched the potential lifespan of the cycle. The torrid pace of worldwide money growth over recent months is simply not compatible with an imminent crisis. A combined gauge of the global money supply put together by Gabriel Stein at Oxford Economics shows that the "broad" M3 measure grew by 8.1pc in August, and by almost as much in real terms. This is the fastest rate in 25 years, excluding the final blow-off phase of the Lehman boom.

Deflation Risks May Warrant Radical New Central-Bank Thinking, the IMF’s Chief Economist Says - The Bank of Japan and other central banks around the world may need to try radical new easy-money policies to stave off the rising specter of deflation and revive sickly economic prospects, the International Monetary Fund’s new chief economist warns. “I worry about deflation globally,” new IMF Economic Counselor Maurice Obstfeld said in an interview ahead of an annual IMF research conference that focuses this year on unconventional monetary policies and exchange rate regimes. “It may be time to start thinking outside the box.” Weak—and in some cases falling—price growth has plagued Japan, Europe, the U.S. and other major economies since the financial crisis. Plummeting commodity prices are exacerbating the so-called “lowflation” and deflation problems that curb investment, spending and growth. Surveying several dozen of the largest economies around the world, Mr. Obstfeld said the number of countries experiencing low inflation is rising. Combined with slowing emerging market output, ballooning government debt and monetary policy constrained by the lower limits of interest rates, the deflation risk is fueling fears the global economy could be fast stuck into a deep low-growth mire.

Inflation eases worldwide in September: OECD -  Global inflation rates declined in September, sliding further below desired levels despite a wave of stimulus being provided by some leading central banks, which are now considering fresh measures. The Organization for Economic Cooperation and Development Tuesday said the annual rate of inflation in its 34 members fell to 0.4% from 0.6% in August, well below the 2.0% regarded by most central bankers in developed economies as consistent with healthy economic growth. The Paris-based research body said inflation across the Group of 20 largest economies fell to 2.4% from 2.5%, its lowest level since November 2014. The G-20 accounts for 85% of estimated global economic output. The persistence of very low rates of inflation is a worry for central bankers, since it threatens to permanently alter consumer expectations and make it more difficult to attain their targets in the future. Over recent decades, policy makers have placed great store by "anchoring" inflation expectations at their target rates as a means of ensuring shocks to the economy such as sharply rising or falling commodity prices don't prove disruptive. The OECD's figures indicate that a wave of fresh stimulus measures enacted by central banks around the world since late last year has yet to achieve its main goal--eliminating the risk of a slide into deflation, an outcome that policy makers regard as unlikely, but highly damaging should it occur. Even without a period of falling consumer prices, policy makers fear low inflation rates are hindering the economic recovery. When inflation is low, companies, households and even governments have a harder time cutting their debt loads, a particular problem for a number of highly indebted nations in the eurozone. And while very low inflation or falling prices can help boost real incomes, it can also discourage households and businesses from spending and investing.

Snapshots of Well-Being Across High-Income Countries - Well-being is a multidimensional concept, for countries as well as for individuals. Thus, in the recent OECD report  "How's Life 2015: Measuring Well-Being," the emphasis goes well beyond basic one-dimensional measures of well-being like per capita GDP and offers comparisons across a range of measures of well being for the countries that are members of the OECD.  The OECD membership includes 34 countries. It  includes the US and Canada, many countries across western and eastern Europe, Japan and Australia, and a few others additions like Korea, Israel, Mexico, and Chile. Thus, it would be fair to say that it includes mostly the high-income countries of the world. The OECD is a combination think-tank and forum: it collects a wide range of data and publishes reports, but it has no power beyond its own reputation for accuracy and even-handedness. In the calculations shown here, each measure of well-being is expressed in "standard deviations," which in case your statistics is a little rusty, can be used to look at how far a value is from the average. If you plot each of these statistics for the 34 countries of the OECD, most of the countries will tend to bunch fairly near the average value, while a few countries will be higher or lower. The OECD notes that for these statistics, about two-thirds of 34 countries will be between -1 and +1 standard deviations of the mean value. Thus, about five countries will be above +1 and another five will be below -1.

Sharing a husband may lead to greater wealth and health, study says: - Children can thrive in polygamous families and are often better off than those from monogamous households in poor communities, researchers said on Monday, calling for greater cultural sensitivity among campaigners seeking to ban polygamy. In Tanzania, polygamous families owned more cattle and farmed more land than monogamous ones in the same villages, according to a study involving 3,500 households in the Proceedings of the National Academy of Sciences journal. There was no evidence that children whose fathers had more than one wife were less healthy or hungrier than those in monogamous households. "Children in polygamous households either do better or just as well as children in monogamous households within the same village," the lead researcher, David Lawson of the London School of Hygiene and Tropical Medicine, told the Thomson Reuters Foundation. First wives, who tend to live with their husbands, had significantly better nutrition and less stunting among their children than monogamous families. The children of later wives, who usually live in separate homes adjacent to the first wife, were as healthy as monogamous families, although their food security was slightly lower.

Venezuela in worst recession in over 70 years -- Assessing the extent of Venezuela's economic meltdown is no easy task. After all, this is a country that has stopped releasing even the most basic economic data on a timely basis. Gross domestic product figures haven't been published since the third quarter of last year. No inflation numbers have been released since December 2014 and other key measures such as balance of payments statistics haven't been updated in well over a year. In this context, economists have been filling the void with their own DIY economic models. Last year, Nomura introduced its "Venezuela screwed-up index" and on Monday Capital Economics published its latest Venezuela GDP Tracker. It's pretty grim reading. Crushed by falling oil prices, Venezuela, which generates 96 per cent of its foreign income from crude exports, is seen by Capital Economics to be contracting 10 per cent this year. The consultancy's GDP proxy measure, compiled by combining the small amount of official data available with independent figures from local agencies on the ground, suggests that Venezuela is currently in the midst of its worst recession in over 70 years. All the anecdotal evidence suggests that Venezuela is trapped in a classic EM balance of payments crisis. The trigger is obvious enough – oil accounts for 95% of the country's exports and the collapse in prices over the past 18 months has led to a loss of export income equivalent to 20% of GDP. However, the current crisis has deeper roots that lie in years of macroeconomic mismanagement. Whereas other large oil exporters (mainly in the Gulf) have been able to draw down savings to sustain consumption as oil incomes have fallen, Venezuela has no such option. Instead, the adjustment has had to come via a contraction in domestic demand and imports. The result has been a collapse in economic output.

Who Benefits From Sovereign Debt Crises?  - naked capitalism - Yves here. Even though the struggle over Greece’s bailout has receded from the news, with many countries carrying large debt burdens, the need to restructure sovereign debts is not going away. But as Greece illustrates, the recent pattern has been to try to get blood from stones, and to be indifferent to the very real risk of turning fragile economies with weak governments into failed states (it must also be pointed out that Greece actually has gotten a lot of debt relief, but in the form of lowering of interest rates and extensions of maturities, but is being held to such unrealistic government budget and labor market “reform” targets as to virtually that the debt to GSP ratio will continue to worsen). This Real News Network interview with Jayati Ghosh, whose posts we’ve featured from time to time, touches only briefly on the role of vulture investors in derailing what had been a successful sovereign debt restructuring by Argentina. For more detail, see Why Has Vulture Fund King Paul Singer, Picked Rubio To Be President? at DownWithTyrrany.

Advanced economies are so sick we need a new way to think about them -- Larry Summers -- Blanchard Cerutti and I look at a sample of over 100 recessions from industrial countries over the last 50 years and examine their impact on long run output levels in an effort to understand what Blanchard and I had earlier called hysteresis effects. We find that in the vast majority of cases output never returns to previous trends. Indeed there appear to be more cases where recessions reduce the subsequent growth of output than where output returns to trend. In other words “super hysteresis” to use Larry Ball’s term is more frequent than “no hysteresis.” ... In subsequent work Antonio Fatas and I have looked at the impact of fiscal policy surprises on long run output and long run output forecasts using a methodology pioneered by Blanchard and Leigh. ... We find that fiscal policy changes have large continuing effects on levels of output suggesting the importance of hysteresis. ... Towards a New Macroeconomics My separate comments in the volume develop an idea I have pushed with little success for a long time. Standard new Keynesian macroeconomics essentially abstracts away from most of what is important in macroeconomics. To an even greater extent this is true of the DSGE (dynamic stochastic general equilibrium) models that are the workhorse of central bank staffs and much practically oriented academic work.

Africa’s Migrants Form a Second Wave - WSJ: —A new chapter of the migrant crisis is building on Africa’s Mediterranean coast.As the world watches hundreds of thousands of Syrians crossing into Europe from the east, territories north of the Sahara are filling with comparable numbers of Africans determined to make their own entrance.Migrants from more than a dozen African nations are descending on Morocco, Algeria and Libya in unprecedented numbers, sleeping in abandoned apartments, derelict warehouses and on city streets. Thousands are living in fast-expanding forest encampments, surviving off garbage and stolen water.Here in Morocco’s capital, some 50 West Africans en route to Europe live in a derelict squat known to residents as The Titanic because it is large and full of travelers who might not make it. The housemates include multilingual university graduates, former army officers, and even a successful pop singer, who now dine nightly on 50-cent meals of eggs and stale bread. Some have been stuck here for years: robbed and tortured by smugglers, shunned by neighbors and sliced by barbed wire on border fences they have tried to scale. “Here, we’re like ghosts. Nobody sees us or considers us, and we’re not productive,” said 23-year-old Bamba, a university dropout from Ivory Coast, who has failed four times to reach Spain on a blowup boat. “We can’t advance and we can’t go home.…For us, it’s Europe or die.”Behind the wave of migrants crashing into Europe lurks another story. The Mediterranean shore of Africa is becoming a vast waiting room for the record numbers who fall short.

Moscow creates vast new bank from Post Office - Russia’s government approved the establishment of a massive new bank based on the country’s postal service, a move that will eventually create an institution with more retail branches than all other Russian banks combined. The new entity, called Post Bank, is a joint venture between Russian Post and one of the country’s largest lenders, state-owned VTB Bank. Post Bank is being established in part to provide banking services across Russia’s far-flung, near-empty regions, and to target pensioners. VTB will fuse one of its subsidiaries, Leto Bank, into the new institution. The partners say the new institution will begin giving out loans as early as January 2016, with a pilot project to be launched in Moscow this fall. Over the next three years, the bank will open outlets in no less than 15,000 Russian Post offices. After this initial rollout, the bank should start operating in all the 42,000 offices of the national operator. The current leader, Sberbank, has more than 17,000 outlets. Once it is completed, Post Bank will have more retail locations than all other Russian banks combined, according to the Russian banking portal

Albanian central bank cuts rate, promises 2016 stimulus  (Reuters) - Albania's central bank cut its benchmark interest rate by a quarter of percentage point to a record low 1.75 percent on Wednesday to "strengthen the lending channel" and spur demand. The bank, which has brought the rate down from 6.5 percent at end-2008, also promised to apply a relaxed monetary policy throughout 2016. Its last cut was to 2 percent in January. "A fresh monetary impulse will back consumption, investments and lending activity," central bank governor Gent Sejko told reporters after the bank's supervisory board meeting, announcing the first cut since he took over in February. "The supervisory board believes that meeting the goals of the Bank of Albania requires an increase of the monetary stimulus and maintaining a stimulative policy for a longer period than we earlier thought," Sejko added. The bank had promised to keep monetary policy easy until early 2016, but said growth and lending were below expectations even though the economy grew 2.5 percent in the second quarter and is expected to expand at the same rate in the second half of 2015. Thanks to the stimulus, lending in the Albanian lek currency had kept growing at the annual rate of 5.2 percent in August, Sejko said, accounting now for 41 percent of total lending. The rest is in hard currency, mainly euros.

Europe on the Verge - The biggest displacement of persons since World War II poses a far more serious threat to the European Union than the Euro-crisis ever did. The migrant crisis is putting severe strain on domestic politics in every member nation, especially the biggest and most important one. I don’t often travel to Germany, but Philip Stephens does, in his capacity as associate editor and columnist of the Financial Times. On Friday, he wrote: It is more accurate to call it panic than plotting. This week I spent time in the company of members of Angela Merkel’s Christian Democrat party. Startlingly for an outsider, the conversations turned on whether the German chancellor would survive the refugee crisis. Some thought she had just weeks to turn things around. Never mind that only yesterday she had towered above any other European leader. Overnight, the unthinkable has become the plausible — for some in her party, the probable. As recently as September, The Economist celebrated the German chancellor as “Merkel the Bold.”  In throwing open the doors of her nation to new waves of migrants seeking shelter from Middle Eastern and African strife, she was “brave, decisive and right,” the editors said, Two months later, the situation has reversed. Germany is expecting that more than a million migrants will have arrived by year end, with no clear end in sight. Demonstrations have begun occurring in major cities, especially Dresden.  Stories are proliferating like the one today  by Andrew Higgins in The New York Times: “German Village of 102 Braces for 750 Asylum Seekers.  What we see on the rise, in other words, is not the anger of a classic loony fringe, but rather mainstream people striking out at elites who they believe have lost touch with reality and common sense. To many here, the refugee crisis, the euro crisis, the Ukraine crisis and the threats seen in an unleashed global capitalism have converged in a fundamental question: Do the mighty still know what they are doing?

Migrant Crisis: October Arrivals Nearly Equal 2014 Total, UNHCR Says - NBC News: A record-breaking number of migrants and refugees arrived in Europe in October — a number nearly equaling the total for all of last year, according to the United Nations refugee agency. Adrian Edwards, a spokesman for UNHCR, said 218,394 migrants and refugees reached Europe by sea last month — compared with around 23,000 in October a year earlier. The total number of arrivals in 2014 was around 219,000, according to UNHCR.Edwards told NBC News that UNHCR had initially predicted around 700,000 crossings for this year, but numbers have already exceeded that figure with the agency estimating more than 744,000 arrivals so far in 2015. Greece has borne the brunt of arrivals and struggled to cope with an influx of refugees and migrants reaching the shores of islands such as Lesbos. The Greek coast guard said Monday it rescued more than 1,400 people in 39 separate search-and-rescue operations in the eastern Aegean over the weekend — and the onset of winter weather appears to have done little to stem the tide, according to the mayor of Lesbos. "Throughout last week the weather was really bad but the influx did not decline," Mayor Spyros Galinos, told NBC News, saying the numbers of arrivals are 20 times higher than last year. He called it "pure luck" that anyone could survive crossing the sea in overloaded dinghies and rotten wooden boats — "floating caskets" — given the rough conditions.

Sweden to house refugees in Wild West theme park - Telegraph: Few fleeing the civil war in Syria would have imagined they would end up spending the winter in a Wild West theme park complete with potted cacti, mock 19th century furniture, and cowboy murals. But Sweden’s Migration Agency is now so desperate for rooms in which to house this autumn’s unexpected surge in refugees that it has signed a deal with High Chaparral, an amusement park in rural southern Sweden, to house 400 people. Emil Erlandsson, the park’s manager and co-owner, said that the park had initially refused to lease out its accomodation for fear of damaging its brand. “They have asked us five times and I have constantly turned them down,” he said. “But when we saw on the TV that refugees are now supposed to live in tents in Malmo, we took a decision that we should help.” The refugees will arrive at the end of this month and stay at the park until it opens again in May.  Mr Erlandsson said he aimed to make the refugees’ stay as enjoyable as possible, and had already started hiring Arabic speakers to show them around. “They will like what we are going to do,” he said. “They can learn to ride horses. Maybe they can look for jobs in the summer. We will see.” He said many of the rooms where refugees would be housed had been decorated in a Wild West theme. “They have Wild West sofas, and the rest of the furniture is in an authentic, old-fashioned style. The wall painting is also authentic,” he said.

The horror of the Calais refugee camp: ‘We feel like we are dying slowly‘ - A five-minute taxi ride from central Calais, past the seafront restaurants serving moules and chips to tourists, past the Majestic wine cash and carry, and just beyond the neat back gardens at the edge of the town, suddenly there is a devastating vision of Europe’s refugee crisis. One minute, you are driving through placid suburbia; the next minute, you are deposited at the entrance to a sprawling shantytown, where conditions appear worse than in the slums of Mumbai, a camp that is now home to more than 6,000 people, many of them vulnerable and unwell. In the wasteland behind the red-roofed houses, the unofficial family section of the camp sprang up in October. First there were a couple of tents, then a few shacks thrown up by charity workers, made from cheap wood with plastic sheets tacked on to them. Now, a few weeks later, there are more than 50 huts and tents, home to families from Iraq, Iran and Syria, with dozens of children playing in the mud. Unfortunately, in the rush to accommodate the hundreds of families who have arrived in the past month, tents were put up in an unoccupied area of sandy wasteland previously used as an informal toilet by several thousand people. “Many of the children are suffering from infections now,” François Guennoc, a coordinator with the main local charity, L’auberge des Migrants, notes wearily, supervising as volunteers bang together wooden huts so families can be moved out of sagging tents. They can’t build them fast enough to accommodate the flow of new arrivals.

Greek Island Runs Out Of Burial Ground Amid Flood Of Dead Refugees -- A surge in the number of bodies of refugees whose boats capsized as they desperately tried to reach Europe has filled the burial grounds of the Greek island of Lesbos to capacity, the island’s mayor said, adding that over 50 bodies remain unburied. As RT reports, The island’s morgues, cemeteries and emergency services have been overwhelmed with a record number of bodies of migrants who died trying to cross the Mediterranean in October. According to the latest UN data, over 218,000 people arrived in the EU during the month, beating the total annual number for the whole of 2014. Some 744,000 migrants and refugees have arrived in Europe in 2015 alone, of which at least 3,300 died while making the journey. Mayor Spyros Gallons told the Greek media that, while five funerals were held this weekend, 55 bodies remain at the morgue and the island is having a hard time finding burial ground for them. Lesbos, with a population of 86,000, lies in the Aegean Sea near Turkey’s cost. It has served as one of the main destinations for refugees and other migrants trying to escape violence and poverty in Syria and other conflict zones in the Middle East and Africa. On Monday, the tragic situation was exacerbated, as 11 refugees, most of them children, drowned in the Aegean Sea while trying to reach Lesbos. Moreover, on Sunday another 15 people, including six children, died in the Aegean after their boat capsized off the Greek island of Samos.

The Worst Refugee Crisis Since World War II In One Stunning Infographic --A week ago, we brought you drone footage which vividly demonstrates the scope of Europe’s worsening migrant crisis.  The people flows into Germany alone are expected to top 1 million this year as desperate asylum seekers flee the war-torn Middle East where the West and Russia are busy taking opposite sides of the Sunni-Shiite divide on the way to facilitating a regional conflict that looks set to spill across the Iraq-Syria border and possibly into Afghanistan.  Indeed, the influx of refugees threatens to destabilize the EU as Germany's insistence on the bloc-wide adoption of an open door policy has infuriated the likes of Hungary's Viktor Orban who insists that if Europe's cultural heritage is to be protected and preserved, a mandatory settlement arrangement simply isn't a viable option.  Meanwhile, Alexis Tsipras - who everyone promptly forgot about once China replaced Greece as the market's focal point - has weighed in from the front lines, expressing shame that the West is at least partially responsible for the migrant crisis due to its role in intentionally destabilizing Mid-East governments.  Now, Helsinki-based Lucify is out with a fascinating, interactive infographic on the refugee flow into Europe which we present below and which should help to illustrate just how dramatic a demographic shift this truly is.

Germany’s opposition slams Berlin refugee deal -- Robert Habeck, a member of Germany's opposition Green Party, lambasted a migrant deal struck on Thursday by leaders of the ruling Christian Democratic Union (CDU), its Bavarian sister-party the Christian Social Union (CSU) and its coalition partner the Social Democrats (SPD). "In other countries, most people have to wait a year before they can even apply for asylum. In this context, it is a complete mystery how the Federal government intends to conclude the process at special registration centers within a few weeks," Habeck told DPA news agency. Top Left Party politician, Bernd Riexinger, further pointed to the plan creating new problems. "There's the danger that these people won't receive a fair asylum procedure," Riexinger said. The deal - announced by Chancellor Angela Merkel, Vice Chancellor Sigmar Gabriel and Bavarian premier Horst Seehofer on Thursday - purports to set up three to five reception centers where asylum seekers must wait until a decision is made on their application. It would also penalize those who would leave the centers' grounds multiple times.

Greek PM Tsipras says shamed by Europe's handling of migrant crisis: (Reuters) - Greece's prime minister said on Friday he was ashamed to be a member of a European Union that he said was sidestepping responsibilities over the migrant crisis and crying hypocritical tears for children who have drowned trying to reach its shores. In some of the hardest-hitting comments yet on a crisis resonating throughout Europe, Alexis Tsipras told parliament Greece didn't want a "single euro" for saving lives as thousands of refugees continued to arrive daily on its shores, and the EU remained at odds on how to deal with the influx. At least 35 people drowned trying to cross the sea between Turkey and Greece this week. Authorities fear the death toll will rise as more people attempt the short but dangerous passage to Greece before the onset of winter. "I feel ashamed as a member of this European leadership, both for the inability of Europe in dealing with this human drama, and for the level of debate at a senior level, where one is passing the buck to the other," Tsipras told parliament. Impoverished Greece has been a transit point for more than 570,000 refugees and migrants fleeing conflict in the Middle East and beyond since January, triggering bickering among European nations. Speaking during prime ministers' question time, Tsipras also said any suggestion that Greece was not effectively safeguarding the EU's outermost borders - he referred to leaders of "certain European countries" - was borne of ignorance of international law dictating protection of the lives of people in distress at sea.

Bad loans pile pressure on capital-strapped Greek banks - Greece's four biggest banks, which suffered severe losses when they were shuttered this summer as the country veered toward economic collapse, must raise nearly $16 billion in new money to withstand any new crisis, the European Central Bank said on Saturday.   The central bank's assessment was eagerly awaited by the financial world as a crucial step in determining how much money the Greek banks would require to achieve stability as the country tries to claw its way out of its deep economic hole.  One of the biggest problems for the Greek banks is the high number of loans to businesses and consumers that are at risk of not being repaid — nearly 50 percent of the loans outstanding. The central bank report put a figure — 14.4 billion euros, or about $15.9 billion — on what it would take to address the bad-loan problem and enable the Greek banks to operate once again as fully functioning lenders. Without healthy banks to provide the lending and liquidity an economy requires, Greece would struggle to resume economic growth.  Though large, the number announced by the European Central Bank is lower than some experts had feared. And it means that as the banks move to meet their shortfall, it is less likely that bank depositors will be required to take losses. Instead, the money is expected to be raised from bank investors in some combination with funds from the €86 billion package of bailout loans that Greece agreed to this summer with eurozone creditors.

€238 Billion Nonperforming Loans at Spanish Banks Despite ECB ZIRP Policy - Via translation, El Confidential comments on the Banking Drag of €238 Billion Nonperforming Loans at Spanish Banks. The profitability of banks has plummeted. And only the loose monetary policy of the ECB has improved the results. That is underscored by a report on the performance of Spanish banks by International Financial Analyst (AFI). The report estimates the Spanish banking sector accumulated €238 Billion poor credit and foreclosed assets (8.8% of the balance), with coverage average of 44%.  Only the ECB's monetary policy, its strategy of zero interest rates and asset purchase, keeps the banks alive. The ROE of the banking sector, has been reduced by 6.8 points, reaching levels of 5.3%, mainly due to higher capital requirements.  As the report makes clear, higher capital requirements (to maintain solvency) are here to stay, so it is difficult for the results of the fixed income portfolios in recent years to be repeated in the short term. In fact, unrealized gains associated with these portfolios have declined more than 50% in 2015. This means that banks are eating the benefits associated with the decline in interest rates. In the words of AFI, ECB monetary policies have contained the fall in the profitability of the sector in recent years, and this has benefited "substantially" the peripheral countries including the Spanish banking system.  Non-performing assets could be reducing the annual profitability of the sector up by 5.4 percentage points according to the report.

Big banks cut euro, German yield outlook as ECB easing looms (Reuters) - Big investment banks are cutting their forecasts for the euro and euro zone bond yields as the divergence between U.S. and euro zone monetary policy looks set to widen, potentially in dramatic fashion next month. Morgan Stanley on Monday said it now expects the single currency will fall to $1.03 early next year, and Citi said 10-year the German Bund yield could go as low as 0.1 percent. The forecasts assume the European Central Bank will expand its quantitative easing bond-buying programme next month and cut its deposit rate further below zero. Both U.S. banks expect the ECB to cut its deposit rate 10 basis points at its Dec. 3 meeting to -0.3 percent and increase its monthly asset purchases by 15 billion euros to 75 billion euros. By contrast, the U.S. Federal Reserve is widely expected to raise rates in coming months. The chances are 50-50 it will move at its next meeting, on Dec. 15-16, according to current market pricing. "We expect the euro to come under renewed selling pressure going into the end of the year and early next year as a result of the increased potential for further easing from the ECB," Morgan Stanley currency strategist Ian Stannard said. Morgan Stanley forecasts the euro at $1.03 by the end of the first quarter of next year, compared with $1.11 previously, and ending next year at $1.00. On Monday it was at $1.10.

Nowotny says low inflation forces ECB to act -newspaper | Reuters: The European Central Bank must take action given inflation that is well below its target of just under 2 percent, Governing Council member Ewald Nowotny said in a newspaper interview published on Monday. "The ECB must act," Nowotny was quoted as saying by the Kleine Zeitung newspaper when asked why the ECB was considering expanding its bond-buying programme. "But there are no decisions. There are discussions. I would advise more towards caution and a steady-hand policy." The ECB is ready to do what it takes to keep its medium-term inflation target on course, its head Mario Draghi said in a newspaper interview published on Saturday.

Eurozone needs independent fiscal oversight, says Dijsselbloem -- The eurozone needs an independent committee to ensure members stick to its fiscal rules, the head of the bloc’s finance ministers has urged. Jeroen Dijsselbloem, the Dutch finance minister who chairs the eurogroup, said an independent oversight body was necessary to remove fears that decisions on national budgets are being made by a “politicised” European Commission. Responding to worries that the increased politicisation of the EU’s executive arm has allowed for larger countries to bend the bloc’s strict deficit rules, Mr Dijsselbloem said the new committee would ensure that assessments of national budgetary proposals were fair and above suspicion of favouritism. “I am a little worried that people feel that not just the final opinion of the commission is a political decision, but also the [budget] assessment is becoming politicised,” he said. “As president of the eurogroup . . . I don’t want countries to get the impression that ‘you are more strict on me than on my big neighbour.’ And that is the debate we are getting.” The eurogroup brought in tougher rules governing public deficits and debt following the 2008 financial crisis so that public finances were in better shape to cope with future meltdowns. In theory, they provide for more rigorous assessment of national budgetary plans and streamlined enforcement. But some smaller member states have complained that more powerful countries such as France and Italy have at times been given special leeway by the commission to delay their deficit reduction plans. Germany has become increasingly frustrated at what it sees as persistent bending of the rules and lax oversight by Brussels.

Draghi: ECB will consider how to step up stimulus program - The European Central Bank president, Mario Draghi, said the ECB’s governing council would consider how to intensify its stimulus program if it concludes the monetary easing it has taken so far is insufficient to produce a return to price stability amid a weakening of the world economy. “We are facing a situation in which price dynamics is very weak and the macroeconomic scenario still uncertain,” said Draghi, speaking at the Universita’ Cattolica in Milan. For this reason, the ECB’s governing council would assess in its December meeting the degree of monetary easing it has undertaken, he said.   The remarks echo comments made earlier in the week by the ECB president and underscore concern the top levels of ECB policy makers have about the potential for external developments to weigh on eurozone growth and inflation. Speaking in Frankfurt on Tuesday, Draghi said that “concerns over growth prospects in emerging markets and other external factors are creating downside risks to the outlook for growth and inflation.”

Secret "Diaries" Show ECB Board Members Met With Banks, Hedge Funds "Days" Before Policy Meetings - Back in May, the ECB's Benoit Coeure told a non-public audience of hedge funds in London that "the central bank would moderately front-load its purchases in its quantitative easing program because of the seasonal lack of market liquidity in the summer." The reaction was a 50 pips drop in EURUSD. The problem: this was inside information. It wasn’t released to the trading public until around 8am the next day (London time) when it resulted in a further 150 pip plunge.  Now, As FT reports, "some of the European Central Bank’s top decision-makers met banks and asset managers days before major policy decisions, and on one occasion just hours before, copies of their diaries reveal." Here's more:  The diaries show two members of the ECB’s executive board, Benoît Cœuré and Yves Mersch, met UBS bank the day before a two-day policy meeting of the central bank’s rate-setting governing council on September 3 and 4 2014. Mr Cœuré also met BNP Paribas bank on the morning of September 4, the day the ECB’s governing council surprised markets by cutting interest rates. It also announced it would begin buying private sector assets to save the eurozone’s economy from the threat of deflation. UBS and BNP Paribas declined to comment. Ok, so was it just banks they met with?  Mr Cœuré met asset manager BlackRock the day before a policy meeting in March this year, when the council unveiled the details of how it would carry out its €1.1tn asset purchase, or quantitative easing, programme. BlackRock declined to comment. The ECB’s vice-president, Vítor Constâncio, and its chief economist, Peter Praet, met Algebris, a hedge fund, at the height of this summer’s Greek crisis, when the governing council held daily conference calls on whether to continue sanctioning emergency loans to keep Greece’s banks afloat.

EU Asks Whether Some National Antitrust Agencies Lack Teeth -  Do some European governments need to toughen their competition rules to better target companies engaging in illegal activities? That’s the question the European Commission – the bloc’s executive arm—is seeking to answer in a public consultation launched Wednesday. The EU said it’s concerned that competition rules in some European countries prevent regulators from doling out fines high enough to deter crimes.  Meanwhile, competition laws in other member states hinder agencies from gathering information from digital devices— such as cellphones and laptops – vastly shrinking the pool of evidence authorities can draw from in their antitrust investigations. “There’s no reason to believe that cartels only use snail mail,” the EU’s antitrust chief Margrethe Vestager said. The concern is that companies can get away with more wrongdoing in some countries due to their looser enforcement and patchier investigations. Since starting the job a year ago, Ms. Vestager has made a name for herself in and outside of Brussels by taking a hard line on corporate behavior in the bloc.  With the consultation launched Wednesday, the commission says it wants to ensure that competition law in the region is as modern as it should be. Ms. Vestager said there was concern that national competition authorities in Austria, Germany, Finland, Estonia, France, Ireland, Sweden and Slovakia couldn’t gather evidence from digital devices, while rules in Belgium, Bulgaria, the Czech Republic and Slovenia allowed companies to side-step paying fines.

Stress tests will finally acknowledge that banker misconduct is a threat on par with credit or market risk -- Bank stress tests have got a bad rap. In recent years, these periodic regulatory assessments have given banks a clean bill of health that subsequently blew up, or found their capital cushions unable to withstand relatively mild stress. And that’s despite criticism—on both sides of the Atlantic—that those worst-case scenarios devised to gauge the resilience of bank balance sheets are not nearly stressful enough.  But since the financial system’s near-death experience in 2008, the combination of tougher capital requirements, investor unease, and regular stress testing has pushed banks to boost their capital to levels that have made supervisors relatively comfortable about their ability to withstand a future downturn. As a result, regulators are rethinking their rules for next year’s set of tests. And at least one of the proposed tweaks—from the European Union’s banking supervisor—won’t be very kind to the industry. The European Banking Authority (EBA) wants banks to forecast specific costs related to their “conduct risk.” That is, the fines, settlements, and provisions that they will face for past and future misdeeds.  This acknowledges that legal trouble is now as serious a danger to bank balance sheets as economic downturns and market turmoil. Since 2009, big banks in Europe and the US have paid out some $260 billion in legal penalties, according to Morgan Stanley. Over that time, as loan-loss provisions have fallen, conduct-related costs have risen—fines, settlements, and the like now account for 7.5% of the average bank’s operating cost base (pdf, p. 21).

France to miss agreed deficit targets - EU Commission | Reuters: France will have a headline budget deficit above the limits set by EU ministers in 2017 although its fiscal outlook will improve over the next two years, European Commission's economic forecasts showed on Thursday. The euro zone's second biggest economy will also miss all its structural budget improvement targets set by EU finance ministers under a disciplinary procedure against Paris, the Commission forecast. France's deficit will be at 3.8 percent of gross domestic product in 2015, confirming its downward path from the 5 percent average in the years between 2007 and 2011, when the financial crisis first hit the euro zone. Helped by accelerating economic growth, France's deficit will further decrease to 3.4 percent next year, in line with the target set by EU finance ministers. But unless Paris changes policies, its headline budget deficit in 2017 will only fall to 3.3 percent, compared with a 2.8 percent target, the EU executive forecast. Apart from the headline deficit, EU rules put emphasis on the structural adjustment of a government's budget, because it shows improvement or deterioration after stripping out the effects of the business cycle and one-off flows.

Steep drop in German industrial output raises questions over euro zone growth - German industrial output posted its steepest drop in more than a year in September, raising some concerns that Europe's biggest economy may feel a year-end chill from a slowdown in emerging markets. The second straight fall in production, on the back of a sharp decline in industrial orders in September, prompted several economists to scale back their forecasts for German growth last quarter. Following the 1.1. percent drop in industrial production in Germany, economists at J.P. Morgan also cut their third-quarter growth forecasts for the broader euro zone. Other data for September published on Friday showed France's trade deficit widened further, but Spain reported a bigger rise in industrial output than any analyst polled by Reuters had forecast. Despite the drop in output in Germany, several economists remained upbeat, noting that business surveys suggested recent weak data may mark just a temporary summer blip rather than the start of a prolonged slowdown.

Swedish regulator considering debt-to-income ceiling for mortgages | Reuters: Sweden's Financial Supervisory Authority is considering capping mortgages relative to households' disposable income as a way to cool down a red-hot housing market, its director general said on Thursday. High and rapidly rising levels of household debt levels in the Nordic country have worried many, including the central bank. Newly appointed FSA chief Erik Thedeen said authorities needed to act now and be ready to do more if needed. "One measure close at hand if the FSA would need to take further action is to introduce a so called debt-to-income cap, a limit on how much a bank is allowed to lend in relation to the borrower's income," Thedeen said in a signed article in daily Dagens Nyheter. Debt levels could be capped at around 600 percent of a household's disposable income for new loans, with some exceptions, Thedeen said, but added that the exact levels would need to be investigated further. Another possibility was to regulate how big a part of the income a household is allowed to spend on interest and amortization on mortgages, he wrote. Authorities in Sweden are worried about a bubble in the housing market which could derail the AAA-rated economy.

Don Quijones: US Threatens UK over Brexit Vote -- naked capitalism - Yves here. The spectacle of the US attempting to influence UK domestic politics through having the US Trade Representative Michael Froman issue a threat is pathetic, overreaching, and unconvincing. Froman has a history of being insensitive and inept, so this is par for the course (see Clive for a long-form discussion regarding Japan; the reason Japan nevertheless is on board with the TPP is that it got something it wanted badly, which is US permission to rearm, and had the TPP watered down to almost nothing on the provisions it cared about). It’s neither appropriate nor pretty to see the US try to influence UK votes.   But more important, anyone who is paying attention won’t regard this threat as credible. The US and UK are so tightly bound up in each other in their surveillance state activities that they are a classic example of Ambrose Bierce’s definition of partners: “When two thieves have their hands so deeply plunged into each other’s pockets that they cannot separately plunder a third party.” The US is highly unlikely to threaten such a special relationship, assuming excluding the UK from toxic, sovereignty-reducing “trade” deals is even a bad thing. And a new President, and thus a new Trade Representative with new marching orders, will be in place before a Brexit vote; it’s to take place by the end of 2017 and inertia argues for later rather than sooner.  The spectacle of the EU increasingly divided over the refugee crisis is far more likely to have an impact on the Brexit vote than anything the US would say. So if the US really is worried that the UK will leave the EU, it might consider ending its policy of turning countries in the Middle East into failed states. 

Iceland PM: We dodged the EU bullet – Iceland’s prime minister breathes a sigh of relief that his country never joined the European Union. “I am pretty sure our recovery couldn’t have happened if we had been part of the EU,” Sigmundur Davíð Gunnlaugsson said in an interview last week. Gunnlaugsson argues that if his country’s application, made in the midst of an economic collapse in 2009, had succeeded, then Iceland might have suffered the fate of Greece, with its long-running economic collapse, or Ireland, which saw its public debt skyrocket as the government took on the bad debts of the banking sector. “We might have even gone the other way and become a bankrupt country,” he said. “If all these debts had been in euros, and we had been forced to do the same as Ireland or Greece, and take responsibility for the debts of the failed banks. That would have been catastrophic for us economically.” Instead, Iceland is a post-crisis success story. After growing by 1.9 percent last year, the economy is expected to expand by 3.5 percent this year. National debt is down to 64 percent of GDP, falling from a peak of 86 percent in 2012, and making it back down towards the pre-crisis level of 37 percent. Unlike most EU countries, as well as the U.S., Iceland has actually been jailing the bankers who grew the country’s financial sector to 10 times larger than the economy before the 2008 banking crisis that sent the broader economy into a tailspin.

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