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

Saturday, December 12, 2015

week ending Dec 12

Fed Watch: And That's A Wrap -- If you had any doubt about the outcome of next week's FOMC meeting, Friday's employment report set you straight. When I try to think about what could stay the Fed's hand at this point, I am down to zombie apocalypse or act of God. I am not betting on either. By next week, we will be wrapping up our coverage of ZIRP, quietly filing away everything we learned for the next recession. That we return to ZIRP in the future remains my long-run view. But that is a concern for a future date. The employment report was solid, with the economy adding 211k jobs in November while October was revised up to 298k. Some momentum has been lost since the 2014 as the cycle transitioned from late-spring to summer: This pace of job growth remains sufficient to eat away at remaining underemployment; the Fed believes that even 150k a month would still do the job. The unemployment rate held steady and labor force participation ticked up. Even if unchanged, unemployment at 5% hovers near the Fed's estimates of the natural rate: It is reasonable to assume that at these job growth rates, unemployment will fall toward 4.5% in the months ahead, pushing wage growth higher. I suspect the Fed would accept unemployment stabilizing near 4.5% in the second half of next year. Optimally, it would stabilize because labor force participation picked up. Alternatively, the job growth could slow to 100k/month naturally or at the hand of the Fed. In practice, I expect some combination.

With One Week Left Until The Fed's Rate Hike, Nobody Knows If The Fed Can Actually Do It -- One month ago, when the market was getting excited about the imminent Fed rate hike, now due less than one week from today, Jefferies analysts flagged a red flag about the imminent rate liftoff: few, if anyone, know precisely how it will take place in practice. We cited Jefferies economists Ward McCarthy and Thomas Simons who in their December 16 note wrote that "indeed the liftoff date, the Fed is running out of time to be 'well before' raising rates." They added that as per the July 29-30 minutes, FOMC participants agreed the committee should provide additional information to the public regarding details of normalization well before first steps in reducing policy accommodation. And yet, aside from some vague reassurance that the Reverse Repo - IOER corridor "should" work, and an extensive profile by the WSJ of the person tasked with conducting the liftoff, Simon Potter, there has been no detail on the topic. To Jefferies this is a glaring problem: "The lack of any discussion of liftoff logistics is puzzling to us and a potentially significant communication snafu." Jefferies added that the Fed has never attempted to raise fed funds rate under "IOER regime" so lack of confidence "is not unreasonable." In the note, the authors write that still unresolved issues about liftoff logistics and normalization process include:

  • Issues include how to communicate liftoff, spread between IOER and RRP, as well as spread between RRP rate and fed funds
  • FOMC members still struggling with risks associated with RRP facility, including “appropriate size” that would limit Fed’s role in financial intermediation

Hilsenrath: "Fed Plans to Signal Gradual, Cautious Path on Rate Hikes"  -- The Fed will raise rates next week, and now the attention will shift to the path of future rate hikes. From Jon Hilsenrath at the WSJ: Fed Plans to Signal Gradual, Cautious Path on Rate Hikes. A few excerpts:  Fed officials want to signal they expect to proceed slowly and cautiously before raising rates again. Ms. Yellen has emphasized in recent speeches that the economy won’t be able to bear very high interest rates in the years ahead. ...The median forecast among 17 officials in September showed they expected the rate to reach 1.375% in December 2016 and 2.625% in late 2017. That would put them on track to raise rates four times next year and five times in 2017. Futures markets point to a shallower trajectory. For instance, futures contracts indicate traders expect a 0.85% rate by December 2016.  Right now I expect 3 or 4 rate increases next year, but it could be less.

Fed case for tightening remains unproven - Every commentator now seems convinced the Fed will begin tightening next week. Tim Duy, who as usual gives the best exegesis of Fed thinking, explains why. At the same time, market participants don’t seem to take it for granted: futures prices still suggest more than a one-fifth chance that the Fed could hold fire again. And still, the case for tightening remains unproven if not outright flimsy. The main arguments for tightening are two: first, that as the labour market tightens, inflation should rise; second, that low nominal rates are a source of financial instability. As we have mentioned many times before, the underemployment of the US workforce is such that it is hard to believe wage pressures are imminent, and there are certainly not much sign on them. Nick Bunker has again provided some useful analysis of the low employment rates, showing how little of the drop since the boom has to do with demographic change. Put simply, the American economy is not growing anywhere near enough to attract back into work all those who lost or left their jobs in 2008-9. One wonders, therefore, where the inflationary pressures are going to come from. The more intriguing argument is that near-zero rates somehow lead to risk-taking. In part this is a feature not a bug — one big point of stimulative monetary policy is to coax funding into investments that people are otherwise too scared to undertake. It is in the nature of the beast that in depressed times, the risk-reward trade-off is worse for a given investment project than in good times — but also that if enough of that investment is pursued anyway, that will boost growth and improve that trade-off. Poor investment prospects are in part a self-fulfilling co-ordination problem that it is the role of economic policy to solve.

BIS Warns That "Uneasy Calm" In Markets May Be Shattered By Fed Hike Imperiling $3.3 Trillion In EM Debt -- Claudio Borio has been pounding the table on complacency and mounting market risk for quite some time.  It was exactly one year ago that the BIS’ Head of the Monetary and Economic Department, penned the following warning about the market’s dependence on central bank omnipotence:  Then, in March, he spoke out about the dangers of increasingly illiquid secondary markets for corporate bonds: Finally, in September, Borio delivered the following rather dramatic assessment of an overleveraged world hooked on central bank stimulus:  Well, perhaps because the market thinks there’s something unsavory and altogether disingenuous about the BIS criticizing the same people who make up its board of directors, or perhaps investors are just clueless and complacent, but whatever the case, no one has listened to poor Claudio. But that doesn’t mean the BIS is set to rein in the doom and gloom and in the bank’s latest quarterly review, Borio and co. are back at it and coincidentally, one of the key topics is EM debt, which we covered on Saturday in “Will 2017 Be The Year Of The EM Corporate Debt Crisis?.” Unlike Deutsche Bank, the BIS doesn’t see anything “benign” about the situation. “In general, the leading indicators of economic activity [in EM] pointed to weakness ahead [as] countries in the throes of a severe recession, such as Brazil and Russia, struggled on [and] activity in China showed little signs of strengthening,” Borio says, concurring with our assessment from Saturday. “And, as the period wore on, commodity prices, including those for oil, copper and iron ore, plunged towards new depths,” he adds.  That would be bad enough on its own, but set against that rather abysmal backdrop is a USD-denominated debt pile that amounts to some $3 trillion. “The financial vulnerabilities in EMEs have not gone away,” Borio continues. “The stock of dollar-denominated debt, which has roughly doubled since early 2009 to over $3 trillion, is still there [and] in fact, its value in domestic currency terms has grown in line with the US dollar's appreciation, weighing on financial conditions and weakening balance sheets.”

BIS Warns The Fed Rate Hike May Unleash The Biggest Dollar Margin Call In History -- Over the past several months, one of the biggest conundrums stumping the financial community has been the record negative swap spread which we profiled first in September,  and which as Goldman most recently concluded, "has been driven by funding and balance sheet strains, especially since August." Today, in its latest quarterly report, the Bank of International Settlement focused precisely on this latest market dislocation.  According to the central banks' central bank, "recent quarters have witnessed unusual price relationships in fixed income markets. US dollar swap spreads (ie the difference between the rate on the fixed leg of a swap and the corresponding Treasury yield) have turned negative, moving in the opposite direction from euro swap spreads (Graph A, left-hand panel)." Given that counterparties in derivatives markets, typically banks, are less creditworthy than the government, swap rates are normally higher than Treasury yields because of the additional risk premium. Hence, the negative spreads point to a possible dislocation. One set of factors relates to supply and demand conditions in interest rate swap and Treasury bond markets. In the swap markets, forces that can compress swap rates include credit enhancements in swaps, hedging demand from corporate bond issuers, and investors seeking to lock in longer durations (eg insurers and pension funds) by securing fixed rates via swaps. In cash markets, in turn, upward pressures on yields stemmed from the recent sales of US Treasury securities by EME reserve managers. The market impact of these Treasury bond sales may have been amplified by a second set of factors that curb arbitrage and impede smooth market functioning. First, the capacity of dealers’ balance sheets to absorb rising inventory may have been overwhelmed by the amount of US Treasury bonds reaching the secondary market in the third quarter (Graph A, centre panel), causing dealers to bid market yields above the corresponding swap rates. Second, balance sheet constraints may have made it more costly for intermediaries to engage in the speculative arbitrage needed to restore a positive swap spread. Such arbitrage is sensitive to balance sheet costs because it requires leverage, with a long Treasury position funded in the repo market.

BIS Points Finger at Yellen, Draghi: Warns About "Unthinkably" Low Interest Rates, Bond Market "Dislocations" -- In it latest quarterly report, the BIS (Bank of International Settlements), pointed a direct finger at Fed chair Janet Yellen with an even bigger point at ECB president Mario Draghi. Specifically, the BIS cited unthinkably low interest rates, bond market dislocations, and more taper tantrums in its Quarterly Review, December 2015, released today, Uneasy Calm Awaiting Lift-Off. The BIS is sometimes refereed to as the central banker's bank. Inquiring minds may with to read the "BIS About Page" for details.  Much of the BIS quarterly report is a recap of the the volatility earlier this year when the Fed signaled a potential hike in September then backed off. Here are a few other highlights: There have also been signs that EM local currency yields are increasingly sensitive to developments in the United States. The post-crisis era has been characterised by strong international spillovers from US bond  yields to emerging markets, even when those countries were at different stages of the business cycle. And this effect seems to have strengthened over time. A simple rolling regression of an EME bond  index on US 10-year Treasury yields suggests that the potential for spillovers is larger now than it was during the taper tantrum. Tighter financial conditions may also increase financial stability risks in EMEs. Credit growth in EMEs has been strong over recent years, owing to favourable growth prospects and very easy global financial conditions. For example, the average credit-to-GDP ratio in the BRICS has rise n by close to 25% since 2010. Despite low interest rates, rising debt levels have pu shed debt service ratios for households and firms above their long-run averages, particularly since 2013, signalling increased risks of financial crises in EMEs

"The Fed Doesn't Get It" A Rate-Hike Means People "Will Be Carried Out On Stretchers" -- While the US equity market has 'recovered' from its Fall fall, seemingly unconcerned about the prospect of increasiongly tighter monetary policy, the credit market is in full crisis mode.Investor alarm at the riskier end of the US corporate bond market is mounting, as The FT notes, borrowing costs for the lowest-rated companies climbing to their highest level since the financial crisis. Concerns over the possible impact of a US interest rate increase on more vulnerable borrowers has been exacerbated by rising indebtedness and shrinking revenues among companies, leaving one bond manager to exclaim, "people are going to be carried out on stretchers." As The FT reports, typically, when bond and stock markets point in different directions, a drop in the former augurs a correction in the latter - as happened this summer. Safer corporate bonds judged “investment grade” by Standard & Poor’s, Moody’s or Fitch have been reasonably steady, with average yields dipping slightly again after a faltering start to November. But debt rated below that threshold has had a bad autumn, particularly debt issued by companies in the struggling energy industry. UBS estimated in a note last week that as much as $1tn of US corporate bonds and loans rated below investment grade could be in the danger zoneas borrowing conditions become tougher just as many face repayments. Much of the pain is in the energy sector but the Swiss bank argues the problems are wider than this.  The bottom of the corporate bond food chain suffered an especially savage period. The price of US company debts rated “CCC”, one of the lowest rating agency rungs, has slid to the lowest since 2013, according to Bank of America Merrill Lynch indices, catapulting the average yields to a six-year high of 16.69 per cent.

Hiring, Firing and Quitting Have Finally Gotten Close to Where Janet Yellen Wants Them - In March 2013, then-Federal Reserve Vice Chairwoman Janet Yellen said she was going to be closely monitoring the labor market’s churn—the millions of monthly hirings and firings and quits and retirements that underlie the net job gains reported by the Labor Department each month. Slowly but surely, the three indicators have improved the way now-Chairwoman Yellen hoped. Layoffs have not risen, the rate of hiring has accelerated, and the share of people voluntarily quitting has climbed, according to an update today from the Labor Department’s monthly Job Openings and Labor Turnover Survey, known as Jolts. The progress of the labor market along these dimensions underscores the central bank’s confidence that the economy is finally healthy enough for the Fed to raise its target interest rate for the first time in nearly a decade.  In March of 2013, about 2.1 million workers quit their jobs, a rate of about 1.5%. Those numbers have improved slowly enough that the improvement is hard to notice from one month to the next (in this month’s report, all the key measures were “little changed”). But over the course of the past two and a half years, the improvement has been considerable. In October, 2.8 million people quit their jobs, a rate of 1.9%—roughly the same as in December 2007, the month the economy began to decline into recession. Ms. Yellen had said in her speech “a pickup in the quit rate, which also remains at a low level, would signal that workers perceive that their chances to be rehired are good–in other words, that labor demand has strengthened.” Put another way, just under half of the people who left a job in March 2013 did so voluntarily. The majority of job separations were still involuntary layoffs or departures due to retirement, death or disability. Among people who left a job in October, by contrast, 57% did so voluntarily.

Unconventional monetary policy through the Fed's rear-view mirror — On December 16, the Federal Open Market Committee is poised to hike interest rates, putting an end to the near-zero interest rate policy that began in December 2008. So, it’s natural to step back and ask what this episode has taught us about monetary policy at the near-zero lower bound for nominal interest rates. This is not merely some academic exercise. The euro area and Japan are still constrained by the zero bound. And, in this era of low inflation and low potential growth, policy rates in advanced economies are likely to hit that lower bound again (see, for example, here). How the Fed and other central banks respond when that happens will depend on the lessons drawn from recent experience. While policies that utilize the central bank’s balance sheet to manage the quantity of money and credit are as old as central banks themselves, there is something different about what is now commonly known as “unconventional monetary policy.” First, a number of the tools on which leading central banks have come to rely since the Great Financial Crisis (and earlier for Japan) were introduced precisely because policymakers could no longer reduce short-term nominal interest rates further. Second, despite the experience gained recent years, uncertainty about how these policy actions affect financial conditions and the economy remains much greater than it is for short-term interest rate policy.

Central bankers do not have as many tools as they think -  Larry Summers -  While debate about the relevance of the secular stagnation idea to current economic conditions continues to rage, there is now almost universal acceptance of a crucial part of the argument. It is agreed that the “neutral” interest rate, which neither boosts nor constrains growth, has declined substantially and is likely to be lower in the future than in the past throughout the industrial world because of a growing relative abundance of savings relative to investment. The idea that real interest rates — that is, adjusted for inflation — will be lower than they have been historically is reflected in the pronouncements of policymakers such as Federal Reserve chair Janet Yellen, the medium-term forecasts of official agencies such as the Congressional Budget Office and the International Monetary Fund and the pricing of government bonds whose payments are tied to inflation.   While recession risks may seem remote.., no postwar recession has been predicted a year ahead... History suggests that when recession comes it is necessary to cut rates more than 300 basis points..., the chances are very high that recession will come before there is room to cut rates enough to offset it. ... Central bankers bravely assert that they can always use unconventional tools. But there may be less in the cupboard than they suppose. The efficacy of further quantitative easing ... is highly questionable. There are severe limits on how negative rates can become. A central bank forced back to the zero lower bound is not likely to have great credibility if it engages in forward guidance.  The Fed will in all likelihood raise rates this month. ... But the unresolved question that will hang over the economy is how policy can delay and ultimately contain the next recession. It demands urgent attention from fiscal as well as monetary policymakers.

Strange Cases for Fed Rate Hikes: The Poor Savers Story - Dean Baker - To get an idea of how many older people might be hurt by low interest rates and to what extent; we analyzed data from the Federal Reserve Board’s 2013 Survey of Consumer Finance (SCF). The   The first cut is for people who have less than $10k in stocks, bonds, or other longer term assets. Just under half (14.3 million) of the 28.9 million older households in the SCF fall into this category. Of this group, under one-third (4.7 million households) had at least $6k more in short-term assets than in stocks bonds and other longer term assets. One and a half million had a gap between short-term and long-term assets of at least $40k, and 570,000 had a gap of at least $100k. These people can be thought of as losers from the Fed's zero interest rate policy. To get an idea of how much they lose assume, very generously, that the short-term interest rate on deposits would be 3.0 percentage points higher with a different Fed policy. In this case, the 4.7 million households with a gap of at least $6k between their short term holdings and long-term holdings are losing at least $180 a year. The one and a half million households with a gap of $40,000 or more would be losing over $1,200 a year as a result of the Fed's policy. Households with a gap of more than $100,000 between holding in short-term and longer term assets would be losing more than $3,000 a year. If we move up to households with between $10,000 and $50,000 in stock and other long-term assets, 26.1 percent, or 865,000 households have a gap of at least $6,000 between thier short-term deposits and their long-term assets. Only 345,000 households have more than $40,000 just 206,000 have a gap of more than $100,000 between their short-term assets and longer term assets. In the range of households with $50,000 to $100,000 in stock and other long-term holdings, 18.5 percent, or 401,000 households have a gap of more than $6,000, but only 191,000 have a gap between short-term deposits and long-term holdings of more than $40,000. For those with longer term assets of more than $100k, only 283,000 had a gap of at least $40,000 between their short-term holding and longer term holdings. The overall picture is shown in the table below.

Could Higher Interest Rates Lead to Higher Inflation? Explaining ‘Neo-Fisherism’ - Greg Ip -- The most commonly cited argument against the Federal Reserve raising interest rates after keeping them near zero for seven years is that inflation is still well below its 2% target. There’s a new school of thought that argues this reasoning is backward. Its adherents argue that inflation is too low precisely because rates have been at zero for so long and that raising interest rates will actually push inflation back up. James Bullard, president of the Federal Reserve Bank of St. Louis, has been pushing this theory since 2010. On Friday, he told a conference at the Federal Reserve Bank of Philadelphia that while the theory remains “untested,” it could be “quite important” for the U.S and the rest of the Group of Seven major economies. Mainstream macroeconomic models hold that reducing interest rates stimulates borrowing and spending.   This process can take time, though, because wages and prices are sticky. One reason is expectations: If workers and firms expect inflation of 2%, that will affect how they set prices and wages.   In theory, the central bank can set the nominal interest rate. But the real rate is in the long run determined by the public’s appetite for risk, by investment, the return on capital, and saving. According to neo-Fisherism, this must mean that if the long-run real rate (dubbed the “equilibrium rate”) is 2%, and the Fed fixes the nominal rate at zero, inflation must eventually fall to minus 2%.

JPMorgan Warns Of "Eye-Catching" 76% Probability Of Recession -- Just days ago Citi pronounced, much to the chagrin of the status-quo-hugging Fed faithful, that given the turn in corporate profits (and concerns over margin sustainability) that the chance of a recession in the US had risen to 65% (and on that basis had a bearish outlook for US equities). Now, as other major sell-side shops jump on the equity un-bullish narrative, JPMorgan's Michael Feroli warns that in the past, a low unemployment rate, rising compensation, falling margins, and elevated durables investment have historically signaled an elevated risk that an expansion is nearing its end... and puts the probability of a US recession within 3 years at 76%. Of course, you do not need to worry, because Janet Yellen said this is not true (though failed to provide here reasoning). As Citi recently noted the cumulative probability of a recession in the next year rises to 65%. In the US our chief concern is margin sustainability. Corporate profits as a share of GDP have been at all-time highs, which is just another way of saying the rewards to labour have been at all-time lows. But change may be afoot in the form of modest labour market tightening in the US.

November 2015 CBO Monthly Budget Review: Receipts Up 3% - The federal budget deficit was $200 billion for the first two months of fiscal year 2016, CBO estimates. That deficit was $22 billion larger than the one recorded during the same period last year. Revenues and outlays were both higher than last year's amounts, by 3 percent and 6 percent, respectively. Receipts through November totaled $416 billion, CBO estimates—$12 billion more than the amount for the same period last year. The largest year-over-year changes were the following:

  • Individual income taxes and payroll (social insurance) taxes together rose by $19 billion (or 6 percent).
    • Increases in amounts withheld from workers' paychecks—$16 billion (or 5 percent)—accounted for the bulk of that gain. Total wage and salary income and withheld taxes have both grown at about that same rate in recent quarters.
    • Nonwithheld receipts, mainly from filings of tax returns for 2014 by people who had received filing extensions, rose by $4 billion (or 13 percent). Those increases were slightly offset by income tax refunds that were up by $1 billion (or 9 percent).
  • Corporate income taxes decreased by about $5 billion (from $13 billion in the first two months of fiscal year 2015 to $7 billion so far this year). Corporate income tax receipts in October and November generally represent a small percentage of the year's total, so the results for those two months are not a significant indicator of the receipts for the fiscal year as a whole. The first quarterly estimated payment of those taxes in the current fiscal year, for most corporations, is not due until December 15.

U.S. budget deficit widens in November to $65 billion - The U.S. government ran a budget deficit of $65 billion in November, an increase of $8 billion, or 14%, from a year ago, the Treasury Department said Thursday. For the second month of the fiscal year, the government spent $270 billion, up 9% from November 2014. Total receipts were $205 billion, an increase of 7%. The November deficit would have been $126 billion if not for the shifts in the timing of some payments, Treasury said. Certain benefit payments, for example, were made in October instead of November. For the fiscal year to date, the deficit is $201 billion, up 13% from the same period a year ago. The federal government’s budget year runs from October through September.

Ryan: Congress might not finish this week | TheHill: Speaker Paul Ryan (R-Wis.) indicated Monday that Congress might not hit the Friday deadline to pass a catch-all government spending bill and renew a package of tax breaks. "It might take us more than just this week to get these issues put together correctly," Ryan told a radio station in his hometown of Janesville, Wis. Congress has until this Friday, Dec. 11, to pass a spending bill to avert a government shutdown.Optimism had grown on Capitol Hill over the last week that lawmakers could finish all their work for the year by Friday and depart Washington for the holiday season. Some GOP aides even have travel plans for Friday but are now making backup plans for Sunday. Ryan's comments raise the prospect of a rare weekend session, something the House hasn't done since the last Congress. Negotiators are still trying to agree on policy riders in the $1.1 trillion spending bill, known as an omnibus. Controversial riders range from dealing with refugee resettlement programs in the aftermath of the terrorist attacks in Paris to overturning environmental rules and rolling back financial regulations. Appropriators had hoped to release the text of the massive spending bill by Monday, but that goal may not be in sight given the state of negotiations.

Possible tax deal would give big wins to both parties — White House and congressional negotiators searched for compromise Thursday on huge tax and spending bills with a combined price tag of well over $1 trillion, with leaders hoping to clinch agreements and let Congress adjourn next week for the year. “Not everybody gets what they want when you negotiate in divided government,” House Speaker Paul Ryan, R-Wis., told journalists, a nod toward the tough bargaining so far between President Barack Obama and the GOP-controlled Congress. “But I think we will complete this.” On the spending side, lawmakers were seeking a deal on a $1.1 trillion measure financing federal agencies in 2016. Agreement was close on the numbers, but flashpoints included GOP efforts to weaken Obama attempts to reduce air and water pollution and loosen travel restrictions to Cuba, and to ease laws regulating the financial industry. With talks continuing and current spending expiring on Saturday, Congress planned to pass legislation Friday averting a government shutdown, keeping agencies open through next Wednesday. Negotiators were also hoping to strike a deal on a separate revenue bill that could cost $700 billion or more over 10 years by extending dozens of mostly obscure tax cuts. That package could also deliver major political victories for Obama and Ryan. With little more than a year left in office and facing a frequently hostile GOP-led Congress, Obama was hoping an agreement would burnish his legacy by making permanent some expiring tax cuts for millions of families with lower-to middle incomes, younger children and college students. Many congressional Democrats would revel in achieving that, especially with uncertainty about which party will control both ends of Pennsylvania Avenue in 2017.

Obama, Congress avert fed shutdown, focus on taxes, spending - (AP) — Avoiding the high drama of recent year-end budget fights, President Barack Obama signed legislation Friday keeping government agencies open into next week, giving White House and congressional bargainers more time to complete sweeping deals on taxes and federal spending. Facing a midnight deadline, Obama signed the measure keeping government afloat through Wednesday just hours after the House used a voice vote to send it to him. The Senate approved the bill a day earlier, its easy sojourn through Congress underscoring that neither party saw reason to risk a government shutdown battle. Talks were likely to stretch at least into the weekend over the environment, Syrian refugees, guns and dozens of other disputes sprinkled across two major bills. One would provide $1.1 trillion to finance government for 2016; the other would renew around 50 expiring tax cuts for businesses and individuals that, with additions, could swell to a 10-year price tag of $700 billion or more. Disagreements remained but show-stopping, partisan quarrels were already resolved, lowering the decibel level of this year's budget endgame. The overall $1.1 trillion spending total was previously cemented in place, leaving only spending details to finalize, and Republicans decided to avoid shutdown brinkmanship with Obama by omitting provisions dismantling his 2010 health care law and halting Planned Parenthood's money. Republicans wanted to insert language into the bills ending the four-decade ban on U.S. oil exports and curbing Syrian refugees from entering the U.S., a response to last month's deadly attacks in Paris. They also wanted to roll back legal curbs on the financial industry, prevent Obama from easing ties with Cuba and block his efforts to fight air and water pollution.

House Moves 'Few Inches' Closer to Omnibus: Members of Congress will likely get their first look at a year-end omnibus spending bill on Monday, as negotiators work over the weekend after buying themselves more time through a series of legislative moves Thursday. “I think it’ll take us at least until Monday,” House Appropriations Chairman Harold Rogers, R-Ky., said of posting the omnibus text. Senate Majority Whip John Cornyn shared that sentiment. The Texas Republican said late Thursday afternoon there is still no deal, but it’s his “hope and expectation” the House will post the text Monday, which would set it up for a final passage vote Wednesday. He said he hopes there will be enough cooperation in the Senate to also pass the catchall Wednesday without the need for another short term CR. He also said at this point that a deal on extending expired tax provisions is still linked to the omnibus. The comments came after the Senate passed by voice vote Thursday a five-day continuing resolution that extends government funding past Friday’s deadline to Dec. 16. The chamber used an amended bill the House had passed earlier this spring, the fiscal 2016 Legislative Branch Appropriations measure. The maneuver enables the Senate to lob the funding fight over the House and gives rank-and-file senators the ability to head home for the weekend, as negotiators hammer out a final deal on the omnibus. Earlier Thursday, Rogers said negotiators had only moved a “few inches” closer to a deal on an omnibus spending measure in the past day. The Kentucky Republican said the new Dec. 16 funding deadline that will be set with passage of a five-day continuing resolution won’t be easy to meet — but when asked about the possibility of a second extension being necessary, Rogers dismissed the idea.

Farm groups welcome Highway Bill with crop insurance fix: — After Senate approval a day before funding would have expired, the Fixing America’s Surface Transportation (FAST) Act, more familiarly known as the Highway Bill, headed to President Barack Obama for signature Dec. 4. According to a news release from the American Soybean Association, providing funding certainty for road and bridge construction and maintenance was a priority in the legislation, as well as reversing the $3 billion in cuts to crop insurance that were included in the bipartisan budget deal passed in October. “The cut to crop insurance was a deal breaker for soybean farmers and we're very relieved to see these cuts reversed,” said Wade Cowan, ASA’s president and a farmer from Brownfield, Texas. “Soybean farmers across the country rely on crop insurance in times of extreme weather to ensure they can stay in business to farm in the coming year. An ill-advised $3 billion in cuts would have severely hobbled the program, and we're happy to see them reversed.” Sen. Heidi Heitkamp, D-N.D., said in a statement that crop insurance “is a lifeline for jobs and families across rural America,” and Sen. John Hoeven, R-N.D., said it gives farmers “the certainty of knowing there is a safety net in place.” Farm-state lawmakers and agricultural groups were angered by the budget deal, saying the cut to crop insurance would hurt farmers and possibly increase the need for emergency disaster aid. They also said it would undermine improvements in the 2014 farm bill to crop insurance, which costs more than $9 billion annually.

The Economy Is Improving, So Washington Has Decided It’s Time To Screw You - Congress appears to think the U.S. economy has improved so much that it’s time to turn the screws on American households. Convinced that consumers and household borrowers needed more protection from the financial industry in the aftermath of the financial crisis, Congress and the Obama administration restricted the use of so-called “gotcha” credit card fees and created a new federal agency devoted to protecting consumers from unscrupulous financial companies. But with the U.S. economic expansion in its seventh year and the unemployment rate poised to drop below 5 percent, Washington policymakers are discontinuing aid to household borrowers and paring back key protections -- much to the delight of creditors.  Consider three recent examples:

  • On Nov. 2, President Barack Obama signed into law a bill that allows Department of Education loan contractors to bombard federal student loan borrowers’ cell phones with texts, pre-recorded messages and autodialed calls without borrowers’ consent, gutting a key consumer protection.
  • On Dec. 4, Obama signed into law a provision that forces the Internal Revenue Service to use private debt collectors to largely recoup uncollectible delinquent tax bills from low-income Americans. The IRS ended a similar program in 2009 after concluding that the federal government spent more money administering the program than it actually collected.
  • Now, lawmakers may be on the verge of enacting a provision that would bail out for-profit college chain Education Management Corporation in a dispute with some of its creditors, just one month after the company settled federal and state allegations that it had cheated taxpayers out of at least $11 billion in a years-long scheme. Yet not one cent of relief for EDMC's allegedly defrauded former students would accompany that bailout.

Drone Pilots have Bank Accounts and Credit Cards Frozen by Feds for Exposing US Murder - For having the courage to come forward and expose the drone program for the indiscriminate murder that it is, 4 vets are under attack from the government they once served. The U.S. Government failed to deter them through threats of criminal prosecution, and clumsy attempts to intimidate their families. Now four former Air Force drone operators-turned-whistleblowers have had their credit cards and bank accounts frozen, according to human rights attorney Jesselyn Radack. “My drone operators went public this week and now their credit cards and bank accounts are frozen,” Radack lamented on her Twitter feed (the spelling of her post has been conventionalized). This was done despite the fact that none of them has been charged with a criminal offense – but this is a trivial formality in the increasingly Sovietesque American National Security State.

Connecting American Foreign Policy to Economic Policy -  Yves Smith - This is a thoughtful discussion of the how US foreign policy affects economic policy, both in the US and abroad. Some readers may consider the objectives to be quixotic, in that the aim of the conversation is to envision how the US could shift its policies for the betterment of US citizens economically, as well as, needless to the say, to the benefit of people abroad.  The speakers are all insiders and readers will notice that they drifted into bloodless insider-esee. You will need to translate what they said out of that mode of discourse, since they do present some grim facts, such as the high cost of our Middle Eastern misadventures to veterans, and the eventual high cot to citizens (assuming, of course, that The Powers That Be don’t go full neoliberal and renege on their promises to the troops) and the fact the TPP negotiators made a show of soliciting views of NGOs and other “stakeholders”.   The participants are Robert Johnson of theInstitute for New Economic Thinking, Brad DeLong, Professor of Economics at UC Berkeley, Linda Bilmes of Harvard Kennedy School, Steve Clemons of the Atlantic and Emira Woods, of the Institute for Policy Studies.

US Air Force Running Out Of Bombs To Drop On ISIS -- Things must be going well in the "war on terror," as the US Air Force just admitted that it is fast running out of bombs to drop on ISIS after "B-1s have dropped bombs in record numbers." As ZeeNews reports, Air Force chief of staff General Mark Welsh said as America ramps up its military campaign against the Islamist terror group, the Air Force is now "expending munitions faster than we can replenish them." The US Air Force is fast running out of bombs to drop on ISIS targets in Syria and Iraq after its pilots fired off over 20,000 missiles and bombs since the US bombing campaign against the terror group began 15 months ago, its chief has said. As ZeeNews reports, "B-1s have dropped bombs in record numbers. F-15Es are in the fight because they are able to employ a wide range of weapons and do so with great flexibility. We need the funding in place to ensure we're prepared for the long fight," Welsh said in the statement.

Don’t Force Taxpayers to Bail Out Health Insurance Companies -- Both the House and Senate versions of the budget reconciliation bill moving through Congress would repeal several key provisions of the Affordable Care Act (ACA). This piece focuses on the ACA’s so-called “risk corridors,” which the Senate majority also attempted to repeal though failing on a point of order. The reconciliation process will continue to feature a larger debate about the ACA that is unlikely to change many minds. But while the parties remain at loggerheads over the ACA as a whole, they nevertheless retain certain joint responsibilities concerning the law. One of them is to prevent the ACA’s risk corridors from becoming a taxpayer-financed bailout of health insurance companies. This shared responsibility exists for reasons of both policy substance and public accountability. Substantively, it would be fiscally irresponsible to give private insurers such a tap on public funds. But doing so would also break faith with the public interest. The voting public has never approved transfers to insurance companies through this risk corridor program at public expense; to the contrary, they have repeatedly been assured this will not happen. This piece provides background on the risk corridor provisions and describes ways policy makers can ensure they do not become a public burden.

20 U.S. Billionaires Now Own as Much Wealth as Half of All Americans -- A new report from the Institute for Policy Studies shows that the richest 400 Americans have a combined net worth of $2.34 trillion, which is equal to that of the bottom 61 percent of the U.S. population, or about 194 million people.  According to the report, “Billionaire Bonanza: The Forbes 400 and the Rest of Us,”  a mere 20 individuals now control more wealth than the bottom half of the population: 152 million people living in 57 million households. Explaining that the distribution of wealth in America no longer resembles a pyramid, but is more like Seattle’s Space Needle, the report states, “the higher up you go up our contemporary wealth ladder, the greater the imbalance.”  From The Nation: And there’s a stark racial divide at the top. The 100 richest households own more assets than the entire African-American community (there are just two black people on the Forbes 400 list, one of whom is Oprah Winfrey). And just 182 individuals on the Forbes list have more assets than America’s entire Hispanic population.But Chuck Collins, director of IPS’s Program on Inequality and the Common Good and a co-author of the report, tells The Nation that their study likely underestimates the scope of the problem. “Our wealth data is a tip of the iceberg,” he says. “So much wealth among the über-rich is hidden, either in offshore tax havens or in these loophole trusts where money is shuffled around into private corporate accounts or between different family members, and it disappears from taxation or any sort of oversight or accountability. So there’s a huge amount of escaped wealth that isn’t even factored into these statistics.”

What are Real Estate Provisions Doing in the Latest Tax Extenders Bill? -- In the latest chapter of the tax extenders saga, House Ways and Means Chairman Kevin Brady has introduced a bill to renew all fifty-plus expiring tax provisions until the end of 2016. Last week, lawmakers had been negotiating on a deal to make some of the extenders permanent – which would remove considerable business uncertainty about these perpetually precarious provisions. However, Brady’s bill signals that Congress may just do the same thing it has done year after year: renew the tax extenders for a short period of time and wait for them to expire again. That being said, the latest tax extenders bill has a few interesting nuggets in it. For instance, thirty-eight pages of the bill have nothing at all to do with tax extenders; instead, they lay out a set of new rules for the tax treatment of real estate investment trusts (or REITs). To understand what these rules are and what they’re doing in the tax extenders bill, it’s important to understand what REITs are and why they’ve been in the news lately.

Private Equity's Private Bill to Amend the Trust Indenture Act -- One of the many creatures attempting to crawl its way onto the back of the omnibus appropriations bill is an amendment to the Trust Indenture Act.  The Trust Indenture Act is the 1939 securities law that is the major protection for bondholders. Among other things, the Trust Indenture Act prohibits any action to "impair or affect" the right of bondholders to payment or to institute suit for nonpayment absent the individual bondholder's consent. This legislation was passed in the wake of extensive study by the SEC of the unfair and abusive practices in bond restructurings in the 1920s and '30s, when ma and pa retail bondholders were regularly fleeced in corporate reorganizations. The amendment in question is being pushed by the private equity firms that own Caesar's Entertainment Corporation (CEC), which is attempting to unburden itself from the guaranty of $7 billion of bond debt issued by its (now bankrupt) subsidiary, Caesar's Entertainment Operating Company (CEOC).  There are several problems with the proposed Trust Indenture Act Amendment, ranging from political unseemliness to ineffective drafting to unintended consequences on capital markets. There might be good reason to amend the Trust Indenture Act, but not through a slapdash job intended to bail out some private equity firms from their own sharp dealings.

No Way to Run a Railroad: Scholars' Letter on the Trust Indenture Act Amendment - A large number of bankruptcy and corporate finance scholars, including several Slipsters, signed on to a letter to Congressional leadership regarding the proposed omnibus appropriations bill rider to amend the Trust Indenture Act. We don't all agree on how to interpret the Trust Indenture Act, on whether it should be amended, or on what amendments should look like, but we are all agreed that it shouldn't be done through this sort of backroom process. As Professor Douglas Baird of Chicago put it, "This is no way to run a railroad." Any amendment of the Trust Indenture Act should proceed with the customary procedural checks of legislative hearings and opportunity for public comment.  The Trust Indenture Act is simply too important a statute to amend on the fly.

The Trust Indenture Act Rider Is Not a "Clarifying Amendment" -- Ken Klee has argued that the Trust Indenture Act rider to the omnibus appropriations bill is just a "clarifying amendment": The primary objection being made by those opposed to this amendment is that Congress needs to hold extensive hearings. But this is just a correction to a recent misinterpretation of the statute – not a wholesale revision of the Trust Indenture Act. That's just not right. This isn't just a "clarifying amendment". The proposed amendment neuters the Trust Indenture Act as a protection for bondholders.  Let's start with this. The "misinterpretation of the statute" alleged by Klee is that the Trust Indenture Act in some cases prevents the stripping of guaranties from bonds without bondholder consent. How do we know this is a misinterpretation? We don't have a lot to work with. We've got the statutory language, but little else with the Trust Indenture Act. There's little caselaw (none of it controlling), and it goes both ways, and the legislative history isn't very illuminating on specific issue. Just because guaranties had in other prior restructurings been stripped before without bondholder consent does not mean that there's any misinterpretation of the statute. It could simply mean that previous bondholders weren't well counseled or had reasons not to litigate. There's never been a solid legal basis for assuming that the Trust Indenture Act allows majoritarian stripping of guaranties. 

Distrust Fuels Outrage at House Financial Services Committee - Pam Martens - Paranoia is rampant among Republicans on the House Financial Services Committee and was on display throughout its hearing yesterday. Unfortunately for the nation, much of that paranoia is well founded. Just take a look at the photo above. The panel of witnesses that testified yesterday represent just eight of the ten voting members of the Financial Stability Oversight Council (FSOC; which is pronounced F-Sock), another layer of oversight imposed by the Dodd-Frank financial reform legislation of 2010 to monitor an ever sprawling octopus of a financial system that looks to most Americans as if it is still out of control, seven long years after the greatest financial collapse since the Great Depression. Behind each of the regulators on the panel (see list and testimony below), with the exception of S. Roy Woodall, the independent member of FSOC with insurance expertise, there is a regulatory agency eating up more and more taxpayers’ dollars while the financial system itself continues to exhibit dangerous and erratic behavior; books continue to be published showing the stock market is rigged and Wall Street is a parasitic wealth transfer operation; commodity prices plummet; junk bond defaults double year over year; derivative exposures remain in the dark; community banks continue to go out of business or are gobbled up; and the holdings of the mega Wall Street banks become ever more concentrated, with just six banks now controlling over 90 percent of derivatives (still housed on the books of their insured, taxpayer-backstopped commercial bank) and 40 percent of deposits.Repeatedly yesterday, Congress members complained that FSOC members ignore their requests for documents or the documents are so redacted they make no sense, as well as condemning the secrecy in which FSOC operates.

Banks Said to Face SEC Probe Into Possible Credit Swap Collusion - U.S. regulators are examining whether banks colluded in setting prices in the derivatives market where investors speculate on credit risk, according to a person with knowledge of the matter. The U.S. Securities and Exchange Commission is probing whether firms acted in unison to distort prices in the $6 trillion market for credit-default swaps indexes, said the person, who asked not to be identified because the investigation is private. The regulator is trying to determine if dealers have misrepresented index prices, the person said. The credit-default swaps benchmarks allow investors to make bets on the likelihood of default by companies, countries or securities backed by mortgages. Judy Burns, an SEC spokeswoman, declined to comment. The probe comes after successful cases brought against Wall Street’s illegal practices tied to interest rates and foreign currencies. Those cases showed traders misrepresented prices and coordinated their positions to push valuations in their favor, often through chat rooms -- practices that violate antitrust laws. The government has used those prosecutions as a road map to pursue similar conduct in different markets. Credit-default swaps, which gained notoriety during the financial crisis for amplifying losses and spreading risks from the U.S. housing bust across the globe, have since come under more scrutiny by regulators. Trading in swaps index contracts has increased in recent years as investors look for easy ways to speculate on, say, the health of U.S. companies, or the risk that defaults will increase as seven years of easy-money policies come to an end.

Even Bank Supporters Arguing for Restoration of Glass Steagall -  Yves Smith - The week before last, John Dizard, one of the Financial Times’ most original and insightful columnists, penned an important piece, In the shadow of quantitative easing, party like it is 1788, in which he pointed out that the meant-to-be-stealthy part of the bank bailouts, ZIRP and quantitative easing, had served to shift the risk of the next crisis off the regulated parts of the financial system and onto investors, particularly long-term investors like life insurers and pension funds. His piece last weekend, The US financial industry should listen to leftwing reformers, builds on his observations about where risks sit to argue that the financial services industry would do far better to listen to critics and go back to a clearer separation between commercial banking and trading activities* than we have now.   Dizard chooses to depict the case for breaking up big banks as a pinko argument, when the Bank of England has also fought fiercely for it; it had to settle for ring-fencing because the UK Treasury campaigned hard. And the arguments that the Bank of England made are sound. For instance, Andrew Haldane has pointed out that one of the results of deregulation has been homogeneity in strategies, and even in how banks model risk, ranging from approaches like VaR to the pervasive use of FICO in the US. The result resembles an ecological system with a dominant species. They are much more prone to collapse than ones with more diversity. I’m in favor of Glass-Steagall type reforms too, but for different reasons. I’ve regarded from my very first days working with commercial banks that the managerial requirements for investment banks and commercial banks are diametrically opposed. And what has developed over time is a Rube Goldbergian compromise which results in the worst of all possible worlds (well, save for the inmates): it leaves the foxes, as in the “producers” running the henhouse, with the nominal leaders of these organizations regularly pleading ignorance as to the fact that there is gambling taking place in their ranks.  Here are the key sections from the first leg of Dizard’s argument:

Fixing bankers’ pay: punish bad risk management, not bad risk outcomes -- Post-crisis, a number of jurisdictions have introduced remuneration regulations in order to reduce bankers’ incentives to take excessive risks.  The UK is pioneering the use of bonus clawbacks under which bankers are asked to pay back their bonuses if certain circumstances materialise at a future date.  In our latest paper, we show that clawback can encourage better incentives as long as bankers believe that they will be held liable for failures of risk management, and not simply for poor outcomes.  Having a transparent mechanism in place to apply clawbacks is therefore critical.  If bankers fear that clawback will be wielded too generally upon bad business outcomes, then it could end up making them excessively risk averse. The idea of bonus clawback for bankers has been mooted soon after the onset of the global financial crisis (for example, by Raghuram Rajan’s FT article in 2008).  But what’s actually wrong with privately-agreed pay packages, and why might they incentivise excessive risk-taking from society’s perspective?  There are at least three different types of agency problems – or conflicts of interest between a firm’s management and its stakeholders – which might lead to remuneration contracts that incentivise excessive risk-taking:

Energy Sector’s Junk-Bond Pain Spreads - WSJ: Losses in the energy sector’s junk-bond market are spreading beyond oil-and-gas producers amid a prolonged slump in commodity prices, further rattling investors who are now preparing for a wave of defaults next year. Bonds from electric utilities including Dynegy Inc., DYN,  AES Corp. and NRG Energy Inc. have declined in recent days, reflecting concerns that falling natural-gas prices will drag down electricity prices as well. A Dynegy bond is down 10.9​ cents on the dollar over the past week to 85.6 cents, an AES Corp. bond is down 4.8 cents to 85.3 cents and a bond from NRG Energy is down 8.9 cents to 84 cents, according to trading data from MarketAxess Holdings Inc.  “Sentiment is awful,” said Henry Peabody, who helps oversee the $1 billion Eaton Vance Bond Fund. “We’re flirting with credit-crisis energy prices, and we’re probably flirting with credit-crisis bond prices to some degree in these sectors.” Debt from low-rated oil-and-gas producers continued to drop Tuesday. Bonds from Oasis Petroleum Inc. were down 6.2 cents

Year of Distress for Debt-Burdened Oil Firms Just Got Even Worse -  Just when it seemed things couldn’t get worse for debt-laden energy companies, a renewed rout in oil prices is deepening their distress. As crude plunged to the lowest in more than six years, the average yield on the debt of speculative-grade oil and gas borrowers climbed to 13.4 percent, the highest since the waning days of the global financial crisis in 2009 and the widest divergence ever relative to the broader U.S. junk bond market, Bank of America Merrill Lynch index data show. That’s likely to push more companies to ask their bondholders to restructure debt to avoid bankruptcy, according to corporate-turnaround adviser Stroock & Stroock & Lavan LLP. Bonds of Chesapeake Energy Corp. led the declines on Monday with the biggest drop, with Oasis Petroleum Inc. also sliding. “It’s bad and it’s going to get worse,” . “There’s a lot of confusion over the path of energy prices and the illiquidity of high yield is exacerbating that confusion.” Because high-yield borrowers make up such a large portion of junk bonds issued in recent years, the fresh turmoil is compounding what is poised to be the market’s first annual loss since 2008. Speculative-grade bonds lost 2.74 percent through Monday, the Bank of America Merrill Lynch index data show. Yields in the $1.35 trillion U.S. junk bond market have risen to about 8.4 percent -- a four-year high. “Investors will have to be realistic about the alternatives unless they think they have a magic wand to change the oil price,”

Oil's plunge hammers U.S. funds, humbles even savviest investors - The plunging price of crude oil is causing pain at every kind of U.S. mutual fund this year, humbling even the industry’s best portfolio managers as their mistimed bets in the energy sector continue to cause losses for investors. The sector’s bottom has been more of a trap door for many fund managers. On Tuesday, for example, U.S. crude futures fell below $37 a barrel for the first time since early 2009. The oil price recovery that many predicted for 2015 is now being forecast for 2016, though investment bank Goldman Sachs has said prices could drop as low as $20 a barrel. Last week, a policy meeting at the Organization of the Petroleum Exporting Countries resulted in no decision to cut output, fanning fears of a growing global crude oil glut. The $11 billion Energy Select Sector SPDR ETF , used by mutual funds and hedge funds alike, is off 10 percent in the past month. Even when fund managers point to optimistic signs in the oil market their message sounds somewhat pessimistic. “Nothing fixes low oil prices like low oil prices,” says John Dowd, who runs Fidelity’s $2 billion Select Energy Portfolio, describing how the industry is usually self correcting with lower production and rising demand. Dowd’s total return this year is minus 17.77 percent, but that’s better than most of his energy fund peers who average a nearly 20 percent negative return.

Junk Bond Prices Tumble To 2009 Levels  --With the biggest single-day drop in over 4 years, US High-Yield bond prices have collapsed to their lowest levels since July 2009. Crucially, it's not just energy companies as the painful illqiuidty has careened across the entire space, not helped by fund liquidations and the biggest outflows since August 2014. As we warned here, and confirmed here, something has blown-up in high-yield...With the biggest discount to NAV since 2011... The carnage is across the entire credit complex... with yields on 'triple hooks' back to 2009 levels... As fund outflows explode.. And here's why equity investors simply can't ignore it anymore... It is getting harder to ignore that this isn’t just about crude oil prices and the death of “transitory.”

High-yield debt fund blocks investors from withdrawing funds as junk bonds swoon - A high-yield mutual fund is blocking investors from withdrawing their money, in a rare and jarring move amid a severe downturn in below-investment-grade and distressed debt. The move at Third Avenue Focused Credit Fund is intended to facilitate an orderly liquidation of the fund, which recently had $789 million in assets, down from more than $2.4 billion earlier this year. It comes amid redemption requests at the fund and reduced liquidity in some parts of the bond market. Those two factors made it “impractical” for the fund to pay off departing investors without selling holdings at fire-sale prices “that would unfairly disadvantage the remaining shareholders,” David Barse, chief executive of Third Avenue Management LLC, wrote in a letter to shareholders dated Wednesday. “Most mutual-fund investors are under the presumption that their money is available for them at a moment’s notice,” says Jeff Tjornehoj, head of Americas research at Thomson Reuters Lipper. While investors understand that the higher yields of junk bonds come with risks, he said, “I don’t think many of them ever plan on a fund blowing up like this.” The move at the Third Avenue mutual fund comes at a time of widespread uneasiness about holdings of hard-to-sell securities in funds that trade daily or intraday.

Is This The Beginning of the Crackup in High-Yield Corporate Debt? - David Dayen: I wasn’t entirely sure if the implosion this week of Third Avenue Management’s Focused Credit Fund was an elaborate advertisement for the release of The Big Short or what, but it certainly feels like a familiar early data point, not for mortgages this time but for something we’ve been tracking for a while: the high-yield bond sector. Here are just the facts from Bloomberg:A $788 million mutual fund is blocking clients from pulling their money so its holdings can be liquidated in an orderly fashion. Martin Whitman’s Third Avenue Management put some of the assets in the Third Avenue Focused Credit Fund in a liquidating trust that will seek to sell them over time, the New York-based firm said in a statement on its website dated Dec. 9. The step is unusual for a mutual fund, which typically offers daily liquidity to investors, and comes after regulators raised concerns that some mutual funds are investing in assets that could be hard to sell in a market rout. David Barse, Third Avenue’s chief executive officer, said blocking redemptions was necessary to avoid fire sales. The fund, which had $3.5 billion in assets as recently as July of last year, suffered almost $1 billion in redemptions this year through November. The buried lede is the 77 percent drop in assets in just 18 months, from $3.5 billion to $788 million. That’s kind of the very fire sale that Third Avenue belatedly took evasive action to prevent. I think I first wrote about the corporate debt time bomb in February 2014 for Pacific Standard. Here’s another one a month later for Salon.

Beware The “Massive Stop Loss” – JPM’s Head Quant Warns This Unexpected Downside Catalyst Looms Next Week -- The uncanny ability of JPM’s head quant, Marko Kolanovic – the man Bloomberg recently called “Gandalf” due to his predictive success – to call key market inflection points has been extensively documented on these pages, most recently a month ago when we showed that just after he said the “rally drivers are gone with downside risk ahead”, the market proceed to swoon, two months after the same Kolanovic correctly predicted that the “technical buying begins.” We bring up Kolanovic because earlier today he released a new note in which he together with JPM’s Global Equity Strategy team lays out both the longer-term, as well as the immediate risks facing the market. First, we lay out JPM’s longer-term concerns for the S&P500, starting with the same one noted previously by everyone from Zero Hedge, to Goldman, to Credit Suisse to Citi: profit margins, and specifically their lack of future growth as a result of relentless dollar strength.  [...] Then there is the question of the what a rising rate environment will do to equity returns. Here, JPM tries to walk a fine line and spin a contraction in financial conditions as if not bullish for stocks than hardly bearish… [...] Which brings us to another topic covered extensively here previously: the possible inversion of the yield curve as the Fed hikes the short-end while the long-end prices in policy error, or a failure to stoke inflation. Indicatively, the 2s30s is now the flattest it has been since February. And then it gets interesting: Kolanovic’ first prediction – expect not only higher volatility but higher levels of tail risk.

Special Report: Buybacks enrich the bosses even when business sags | Reuters: When health insurer Humana Inc reported worse-than-expected quarterly earnings in late 2014 – including a 21 percent drop in net income – it softened the blow by immediately telling investors it would make a $500 million share repurchase. In addition to soothing shareholders, the surprise buyback benefited the company’s senior executives. It added around two cents to the company’s annual earnings per share, allowing Humana to surpass its $7.50 EPS target by a single cent and unlocking higher pay for top managers under terms of the company’s compensation agreement. Thanks to Humana hitting that target, Chief Executive Officer Bruce Broussard earned a $1.68 million bonus for 2014. Most publicly traded U.S. companies reward top managers for hitting performance targets, meant to tie the interests of managers and shareholders together. At many big companies, those interests are deemed to be best aligned by linking executive performance to earnings per share, along with measures derived from the company’s stock price. But these metrics may not be solely a reflection of a company’s operating performance. They can be, and often are, influenced through stock repurchases. In addition to cutting the number of a company’s shares outstanding, and thus lifting EPS, buybacks also increase demand for the shares, usually providing a lift to the share price, which affects other performance markers. As corporate America engages in an unprecedented buyback binge, soaring CEO pay tied to short-term performance measures like EPS is prompting criticism that executives are using stock repurchases to enrich themselves at the expense of long-term corporate health, capital investment and employment.

The arbitration epidemic: Mandatory arbitration deprives workers and consumers of their rights - In the past three decades, the Supreme Court has engineered a massive shift in the civil justice system that is having dire consequences for consumers and employees. The Court has enabled large corporations to force customers and employees into arbitration to adjudicate practically all types of alleged violations of countless state and federal laws designed to protect citizens against consumer fraud, unsafe products, employment discrimination, nonpayment of wages, and other forms of corporate wrongdoing. By delegating dispute resolution to arbitration, the Court now permits corporations to write the rules that will govern their relationships with their workers and customers and design the procedures used to interpret and apply those rules when disputes arise. Moreover, the Court permits corporations to couple mandatory arbitration with a ban on class actions, thereby preventing consumers or employees from joining together to challenge systemic corporate wrongdoing. As one judge opined, these trends give corporations a “get out of jail free” card for all potential transgressions. These trends are undermining decades of progress in consumer and labor rights. This report tracks these developments and presents the most recent research findings, summarized here:

  • It is common for employees to be presented with terms of employment that include both a clause that obligates them to arbitrate all disputes they might have with their employer and one that prohibits them from pursuing their claims in a class or collective action in court.
  • Employees subject to mandatory arbitration can no longer sue for violations of many important employment laws, including rights to minimum wages and overtime pay, rest breaks, protections against discrimination and unjust dismissal, privacy protection, family leave, and a host of other state and federal employment rights.
  • On average, employees and consumers win less often and receive much lower damages in arbitration than they do in court.
  • Employers tend to win cases more often when they appear before the same arbitrator in multiple cases, indicating that they have a repeat-player advantage over employees from regular involvement in arbitration.

Fed Finds Fault With Its Own Stress Tests - WSJ: —The Federal Reserve is revamping the way it oversees its annual bank stress tests, after internal reviews found the regulator wasn’t handling the exams with the same rigor it demands from financial institutions. The changes, disclosed in a report by the Fed’s internal watchdog, demonstrate how the tests are still a work in progress even though, six years after their birth amid the financial crisis, they have become a pillar of the central bank’s supervision of large financial firms. The report is also a reminder of how the tests are designed and run at the Fed’s discretion, a source of controversy and tension with the industry. The changes affect implementation and administration of procedures—such as how the Fed staffs the tests—not core policy questions like how strict or how accurate the tests are. But the problems exposed do involve a central and controversial part of the testing program: The computer models the Fed uses to simulate how banks would perform during a hypothetical recession. The output of the models effectively sets capital requirements for the largest banks in the U.S., benchmarks that in turn affect banks’ profitability and flexibility to conduct their business. Specifically, the internal reviews found deficiencies in the Fed’s system for double checking, or “validating,” the models. They found the Fed didn’t always have enough staff on hand, relied too heavily on certain key personnel, and lacked clear procedures and policies about certain aspects of the validation process.

Should the Fed Subsidize Banks? -- The Federal Reserve pays US and foreign banks about $2.2 billion more each year than needed to maintain the current level of average interest rates. Congress and the Fed should take steps to end these unnecessary subsidies. Last week’s transportation funding bill redirected a portion of these dividends into the Highway Trust Fund.1  US banks opposed [pdf] the reduction in their dividends, but a reasonable case can be made that the high dividend rate was a subsidy from the Fed and that Congress was justified in using some of that money for other purposes. However, a much larger subsidy from the Fed to the banks has gotten little attention. The Fed is currently paying 0.25 percent on $2.5 trillion of bank reserves, which is a higher rate than the 0.05 percent it pays on reverse repurchase agreements (RRPs).  Both reserves and RRPs are safe, short-term investments in the Fed. A wide range of institutions can hold Fed RRPs, including banks, money market mutual funds, government-sponsored entities, and securities brokers. However, only banks can hold reserves that pay the higher interest rate. Relative to what other institutions receive, banks are getting excess payments of about $5 billion per year, or ten times what they are losing to the Highway Trust Fund. Why does the Fed pay banks more than other institutions? Historically, the Fed paid banks less on their reserves (actually zero) than it paid on RRPs. Banks held the reserves to meet legal requirements and to conduct payments. But the zero interest rate meant that reserves were effectively a tax on banks. It never made sense to tax banks on reserves, but it also does not make sense to subsidize reserves either.

Ally Returns to Mortgage Business Two Years After Total Exit - - Ally Financial Inc. is reentering the mortgage business just two years after it stopped making new home loans. Ally, whose defunct GMAC Mortgage unit was one of the biggest lenders of subprime mortgages in the run-up to the 2008 housing bust, will inch back into direct home loan originations next year, the bank’s Chief Executive Officer Jeffrey Brown said this week at a Goldman Sachs Group Inc. financial conference in New York. “Don’t think of this as Ally going down the road of the old GMAC,” Brown said, referring to the home lending unit that brought Ally to the brink of collapse. The bank has no plans to securitize its originations, and it won’t keep any servicing rights or build out a servicing operation, Ally spokeswoman Gina Proia said in an e-mail. The bank will detail new product offerings, including a new credit card, at its investor conference in February. At the height of the housing boom in 2006, GMAC’s Residential Capital, ranked 12th among U.S. subprime lenders, according to trade publication Inside Mortgage Finance. When Ally exited home lending in 2013, former CEO Michael Carpenter said mortgages were in its “rear-view mirror.” That ended an almost 30-year foray that led to more than $10 billion in losses and a $17.2 billion U.S. bailout. Its decision to return to the market also comes as the mortgage industry looks for ways to revive various forms of home lending, including subprime, that all but disappeared in the immediate aftermath of the housing crisis.

A Revolving Door Helps Big Banks’ Quiet Campaign to Muscle Out Fannie and Freddie - Seven years after their dubious lending practices helped push the United States economy to the brink of disaster, the nation’s largest banks are closing in on a long-sought goal: to unseat Fannie Mae and Freddie Mac, the mortgage finance giants, and capture their share of the profits in the country’s $5.7 trillion home loan market.Taking place largely behind the scenes, the movement to take over the mortgage market has been propelled in part by a revolving door between Washington and Wall Street, an investigation by The New York Times has found.While the big banks’ effort to enshrine their vision into law has failed so far, plans to replace Fannie and Freddie — which have long supported the housing market by playing a unique role as so-called government-sponsored enterprises, or G.S.E.s — are still very much alive. The Obama administration has largely embraced the idea, and government regulators are being pushed to put crucial elements into effect.A review of lobbying records, legal filings, and internal emails and memorandums, as well as housing officials’ calendars and White House and Treasury visitor logs, illuminates the banks’ effort. Assisting in this work, the documents show, is a group of high-level housing finance specialists who have moved back and forth between public service and private practice in recent years.The charge began under Michael D. Berman, who has served not only as chairman of the Mortgage Bankers Association, one of the industry’s most influential lobbying organizations, but also as a senior adviser to Shaun Donovan, who was the secretary of Housing and Urban Development from 2009 to 2014.

'Bankrupt' Mortgage Lenders Unveil The Zero-Money-Down "Friends-And-Family" Mortgage -- Ripping straight from the pages of the "those who failed to learn from history are doomed... period" book of centrally-planned desperation to maintain American Dream 'wealth' by unsustainably levitating home prices, the government's bankruptcy mortgage guarantors have just announced "HomeReady Mortgages." These so-called 'enhanced affordable lending products - provided by the US taxpayer - enable 97%-plus Loan-to-Value loans to borrowers based not on their income (which is too low) but on "non-borrowers" like extended family or children! " In its latest 'offering' letter for HomeReady Mortgages, Fannie Mae offers what it calls 'innovative underwriting flexibility'...

  • Offers an innovative new feature that supports extended family households: will consider income from a non-borrower household member as a compensating factor in DU to allow for a debt-to-income (DTI) ratio >45% to 50%.
  • Allows non-occupant borrowers, such as a parent.
  • Permits rental income from an accessory dwelling unit (such as a basement apartment).
  • Allows boarder income (updated guidelines provide documentation flexibility).

In other words, as KARE11 tries to defend..."It could be a credit problem, it could be an income problem, it could be an employment history problem, it could be a debt-ratio problem. There are a number of things that can affect a person's situation," said Chris O'Connell, a licensed mortgage loan officer with Nations Reliable Lending in Edina. Mortgage giant Fannie Mae recognizes these hardships, and in response will soon offer a new kind of mortgage with new rules designed to add flexibility for borrowers. "They've recognized that households have changed and our guidelines need to change with it," said O'Connell. HomeReady will consider incomes from others planning to live in the house without being a borrower on the loan.This means, if you live with parents, siblings, working children or maybe a roommate, as long as they make 30 percent of the household income, Fannie will include their money to help you qualify for a loan.

Black Knight October Mortgage Monitor -- Black Knight Financial Services (BKFS) released their Mortgage Monitor report for October today. According to BKFS, 4.77% of mortgages were delinquent in October, down from 4.87% in September. BKFS reported that 1.43% of mortgages were in the foreclosure process.  This gives a total of 6.20% delinquent or in foreclosure. Press Release: Black Knight’s October Mortgage Monitor: Despite New GSE Products, FHA/VA Still Dominate High-LTV Lending; Cash Share of Residential Sales Hits 7-Year Low Today, the Data & Analytics division of Black Knight Financial Services, Inc. (NYSE: BKFS) released its latest Mortgage Monitor Report, based on data as of the end of October 2015. This month, Black Knight looked at high loan-to-value (LTV) products – greater than 95 percent LTV – in light of the GSEs’ reintroduction of high-LTV products at the end of 2014, coupled with the 50-basis-point reduction in FHA annual mortgage insurance premiums earlier this year. Despite the renewed availability of GSE products, the data shows that high-LTV lending is still primarily the province of the FHA/VA. As Black Knight Data & Analytics Senior Vice President Ben Graboske explained, the FHA/VA has been the primary driver in what is an expanding segment of the purchase origination market. “High-LTV purchase mortgage originations are up 20 percent in the third quarter over last year,” said Graboske. “That’s compared to an approximately 13 percent increase for the purchase market overall. High-LTV products now account for 23 percent of all purchase originations. What’s particularly interesting is how heavily this market is dominated by FHA/VA. Back in 2007, the GSEs made up over 45 percent of high-LTV purchase originations, while FHA/VA lending made up roughly one-third. Since 2009, FHA/VA products have made up over 90 percent of high-LTV purchase originations every year, and the same is true in 2015, even with the GSEs having reintroduced their own 97 percent LTV products. In fact, those products have accounted for less than 3 percent of all high-LTV originations so far this year.This graph from Black Knight shows the purchase origination distribution by LTV and investor (FHA, GSE and portfolio).

MBA: Mortgage Applications Increase in Latest MBA Weekly Survey, Purchase Applications up 29% YoY - From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey Mortgage applications increased 1.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 4, 2015. The previous week’s results included an adjustment for the Thanksgiving holiday. ..The Refinance Index increased 4 percent from the previous week. The seasonally adjusted Purchase Index increased 0.04 percent from one week earlier. The unadjusted Purchase Index increased 36 percent compared with the previous week and was 29 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 4.14 percent from 4.12 percent, with points decreasing to 0.43 from 0.50 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.

Mortgage News Daily: Mortgage Rates Move Lower - From Matthew Graham at Mortgage News Daily: Mortgage Rates Lower as Markets Grow Anxious Ahead of Fed Mortgage rates recovered yesterday's losses in many cases, and moved even lower in many other cases. The mortgage sector was one of the tamer performances of the day when it comes to financial markets. Even if we focus solely on the mortgage-backed-securities (MBS) that most directly affect mortgage rates, we see a lot more movement in the marketplace than we see on lender rate sheets.  This dichotomy between market movement and rate sheets is fairly common when volatility increases or on the approach to a significant economic event. That's especially true of Friday afternoons. With a big increase in volatility on this Friday before next week's big Fed announcement, today meets all the conditions. Still, rates did drop--just not as much as we might like. The most prevalently-quoted conventional 30yr fixed rate moved back down to 3.875% for some of the more aggressive lenders, though most remain at 4.0%. Among the lenders quoting the same rates as yesterday, upfront costs would be slightly lower (or lender credit slightly higher). Here is a table from Mortgage News Daily:

What comparing single family vs. multi-unit housing tells us about the economy:   The bottom line is, single family housing is more responsive to changes in interest rates, and typically peaks first in an expansion. Multi-unit housing is to some extent an "alternative good." People who really want to buy a single family home may settle for a condominium (or even an apartment) instead if the single family home is too expensive. Thus we should expect an increase in interest rates to hit single family homes first, and multi-unit dwellings only later. This what we see in the historical record. Let me look at this two ways. First, here is the YoY change in single family permits (blue) vs. multi-unit permits (red) from 1964 through 1985: And here they are from 1986 to the present: The change in single family units is typically larger than that of multi-unit condos or apartments. Another way to look at this is to subtract multi-unit permits from single family permits. A positive number means that YoY changes in single family permits is better than the YoY change in multi-unit permits:Notice that multi-family permits always do worse than single family permit in the run-up to a recession -- i.e., single family building had already turned down, and now the alternative product, condos or apartments, had also turned down. That permits for single family homes just hit a new post-recession high makes me think that the positive housing trend underlying this expansion is not over.  As I have said a number of times, in 2015 the expansion has been all about housing and cars (which also set another post-recession record last month), the two most leading segments of the consumer economy.  Together with November's record monthly vehicle sales, housing is telling me that the Doomer chorus is still wrong.

America's Road To Serfdom - 51% Of Renters Are Over-40 Years Old -- Today’s story from the Associated Press perfectly illustrates how millions of Americans were reduced to neo-feudal serfs by the financial crisis, and how those who ruined the economy profited handsomely from the process.  While popular perception holds that debt-ridden, broke millennials are the ones driving the rental market, the truth is far more nuanced. As the AP reports: — The majority of U.S. renters are now older than 40, a fundamental shift over the past decade that reflects the lasting damage of the housing crash and an aging population.This finding in a report released Wednesday by Harvard Unive rsity’s Joint Center for Housing Studies overturns the assumption that the rental boom is only the result of twenty-somethings flocking to hip urban centers. Single-family houses are a growing share of rentals. And affordability problems are mounting as rents rise faster than wages, while apartment construction increasingly targets tenants with six-figure incomes.Nearly 51 percent of renters have celebrated their 40th birthday, according to the report’s analysis of Census Bureau data. That amounts to 22.4 million households.A decade ago when the housing bubble peaked in 2005, 47 percent of renters — or 16.4 million households — were older than 40. Their share was 43 percent in 1995.

Fed's Flow of Funds: Household Net Worth Declined in Q3  --The Federal Reserve released the Q3 2015 Flow of Funds report today: Flow of Funds.  According to the Fed, household net worth decreased in Q3 compared to Q2: The net worth of households and nonprofits fell to $85.2 trillion during the third quarter of 2015. The value of directly and indirectly held corporate equities decreased $2.3 trillion and the value of real estate rose $482 billion.  Household net worth was at $85.2 trillion in Q3 2015, down from $86.4 trillion in Q2.  The decline was due to the decline in the stock market in Q3. The Fed estimated that the value of household real estate increased to $21.8 trillion in Q3 2015. The value of household real estate is still $0.7 trillion below the peak in early 2006 (not adjusted for inflation). The first graph shows Households and Nonprofit net worth as a percent of GDP. Household net worth, as a percent of GDP, is higher than the peak in 2006 (housing bubble), and above the stock bubble peak. This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations. This ratio was increasing gradually since the mid-70s, and then we saw the stock market and housing bubbles. This graph shows homeowner percent equity since 1952. Household percent equity (as measured by the Fed) collapsed when house prices fell sharply in 2007 and 2008. In Q3 2015, household percent equity (of household real estate) was at 56.7% - up from Q2, and the highest since Q2 2006. This was because of an increase in house prices in Q3 (the Fed uses CoreLogic).

Household wealth falls $1.2 trillion in the third quarter -  The third quarter saw the lowest growth in borrowing in over four years, as businesses slowed their breakneck accumulation of debt, while the downturn in the stock market wiped away over $1 trillion in household wealth. Domestic nonfinancial debt grew at a seasonally adjusted annual rate of 2%, the Federal Reserve said Thursday in its voluminous Financial Accounts of the United States report. Business debt grew 4.7% in the third quarter, compared to 8.4% growth in the second quarter. That was the slowest pace of growth since the fourth quarter of 2013 and comes ahead of a likely rise in interest rates next week. Short-term debt — the borrowing most affected by what the Federal Reserve does — accounted for 27.6% of corporate debt in the third quarter. The corporate buildup of cash has basically stopped as well. It didn’t fall much, to $1.94 trillion from $1.96 trillion, but is showing no signs of surpassing the $1.97 trillion peak in the fourth quarter of 2014. Liquid assets can cover a bit less than half of all short-term liabilities. Households, meanwhile, expanded their debt at a slim 1.5% rate. A category called “other loans and advances” — which includes margin accounts at broker/dealers — fell during the quarter and helped offset the 1.6% growth in mortgage debt and the 7.2% advance in consumer credit, which encompasses auto, student and credit-card debt. Households and nonprofits lost $1.23 trillion of wealth in the quarter, as a $2.3 trillion tumble in the value of corporate equities offset a $482 billion rise in real estate.

Household Net Worth: The "Real" Story – dshort - Let's take a long-term view of household net worth from the latest Z.1 release. A quick glance at the complete data series shows a distinct bubble in net worth that peaked in Q4 2007 with a trough in Q1 2009, the same quarter the stock market bottomed. The latest Fed balance sheet shows a total net worth that is 55.1% above the 2009 trough and 25.9% above the 2007 peak but off the all-time high set in Q2. The nominal Q3 net worth is down 1.4% from the previous quarter but up 2.9% year over year. But there are problems with this analysis. Over the six decades of this data series, total net worth has grown about 8137%. A linear vertical scale on the chart above is misleading because it fails to provide an accurate visual illustration of growth over time. It also gives an exaggerated dimension to the bubble that began in 2002. But there is another more serious problem, one that has to do with the data itself rather than the method of display. Over the same time frame that net worth grew over seven-thousand-plus percent, the value of the 1950 dollar shrank to about nine cents. The Federal Reserve gives us the nominal value of total net worth, which is significantly skewed by money illusion. Here is a log scale chart adjusted for inflation using the Consumer Price Index.Here is the same chart with an exponential regression through the data. The regression helps us see the twin wealth bubbles peaking in Q1 2000 and Q1 2007, the Tech and Real Estate bubbles. The trough in real household net worth was in Q1 2009. The recovery from that trough took us above the regression earlier this year, but this indicator is now fractionally below the trend. The next chart gives us a more intuitive sense of real net worth. Here we've divided the inflation-adjusted series above by the Bureau of Commerce's mid-month population estimates, which have been recorded since January 1959.

Credit Card Debt Barely Rises In October As Both Student And Auto Loans Surpass $1 Trillion - After September's record surge in total consumer credit, when non-revolving credit soared by $22 billion while credit card jumped by a whopping $6.7 billion, something appears to have snapped in October when according to the Fed, just $16 billion of new credit was created, almost half the prior month, and far below the consensus estimate of a $20 billion increase.More concerning is that while the spigot for student and car loans was flowing, and $16 billion in new non-revolving credit was issued... ... revolving credit ground to a halt with just $178 million in new loans created. The dramatic slowdown in new revolving credit, which was the lowest since February of 2015, may explain why holiday spending just suffered its first decline since the recession, as we reported previously. That said, thanks to the generosity of the government... ... there is little risk that spending on the two staples that have kept the US credit machine chugging along, namely student and car loans, both of which have just surpassed a total of $1 trillion in notional debt outstanding. Indicatively, there is $924 billion in credit card debt. Finally, before anyone expresses concerns that debt-funded spending on cars ot colleges is about to hit a brick wall, fear not: presenting the full history of total nonrevolving credit in the US: about as exponential as they get.

October 2015 Consumer Credit Growth Slows: The headlines say consumer credit rate of growth declined - and came in well below market expectations. Our analysis shows year-over-year consumer credit growth rate decelerated. Still consumer credit growth remains well above economic growth. The headline said: In October, consumer credit increased at a seasonally adjusted annual rate of 5-1/2 percent. Revolving credit increased at an annual rate of 1/4 percent, while nonrevolving credit increased at an annual rate of 7-1/2 percent. Overall takeaways from this month's data:

  • Student loan year-over-year growth rate has been decelerating gradually since the beginning of 2013 - although this month there was a 0.1% acceleration of student loan growth year-over-year.
  • Student loans were a negligible influence again this month, as its year-over-year rate of growth is about the same rate as the consumer credit in general - the effect of student loans is becoming less noticeable in the trends. This month specifically, student loans growth rate accelerated 0.1 % month-over-month and year-over-year growth is now 12.9 % year-over-year.
  • Revolving credit (credit cards and this series includes no student loans) which had been slightly accelerating for most of 2014, is now decelerating in 2015.

The market expected consumer credit to expand $12.7 B to $25.6 billion (consensus = $20.0 billion) versus the seasonally adjusted headline expansion of $16.0 billion reported.

Consumer Credit, Oil comment - Revolving credit barely made it into the plus column in October, up $0.2 billion for what is, however, an eighth straight gain. Non-revolving credit, which in contrast to revolving credit hasn’t posted a decline since April 2010, rose an intrend $15.8 billion, once again boosted by vehicle financing and also by student loans which are tracked in this component. But the gain on the non-revolving side couldn’t offset the flat result for revolving credit as total consumer credit rose a lower-than-expected $16.0 billion in October. The slowing in the revolving component may not be pointing entirely to consumer caution but may reflect a lack borrowing demand given the strength in the jobs market and the savings rate and also of course low gas prices which are leaving more money in consumer pockets. Still, the pause for revolving credit won’t be lifting expectations for holiday spending. No telling how low prices will go before Saudi sells their entire output capacity estimated at 12 million bpd. Right now they are at 10 million bpd and prices have to go low enough for other suppliers to cut back or demand to increase. And here comes Iran: “It is going to be 12 to 18 months before they see any relief,”. “We think oil stocks will continue to build in the first half of next year and we don’t think they will draw down to normal levels until well into 2017.” Mr Fyfe said Iran has 40m to 50m barrels floating on tankers offshore that will flood onto the market as soon as sanctions are lifted. It will then crank up extra output to 500,000 b/d by the end of next year.

Credit Card Data Reveals First Core Retail Sales Decline Since The Recession - While we await the government's retail sales data on December 11, the last official economic report the Fed will see before its December 16 FOMC decision, Bank of America has been kind enough to provide its own full-month credit card spending data. And while a week ago the same Bank of America disclosed the first holiday spending decline since the recession, in today's follow up report BofA reveals that if one goes off actual credit card spending - which conveniently resolves the debate if one spends online or in brick and mortar stores as it is all funded by the same credit card - the picture is even more dire. According to the bank's credit and debit card spending data, core retail sales (those excluding autos which are mostly non-revolving credit funded) just dropped by 0.2% in November, the first annual decline since the financial crisis!

When Undercover Credit Card Buys Go Bad - Krebs - Law enforcement officials and bank anti-fraud specialists sometimes purchase stolen cards from crime forums and “carding” markets online in hopes of identifying a pattern among all the cards from a given batch that might make it easy to learn who got breached: If all of the cards from a given batch were later found to be used at the same e-commerce or brick-and-mortar merchant over the same time period, investigators can often determine the source of the card breach, alert the breached company and stem the flow of stolen cards. Of course, such activity is not something the carding shops take lightly, since it tends to cut into their criminal sales and revenues. So it is that one of the more popular carding shops — Rescator — somehow enacted a system to detect purchases from suspected law enforcement officials. Rescator and his crew aren’t shy about letting you know when they think you’re not a real criminal. My law enforcement source said he’d just placed a batch of cards into his shopping cart and was preparing to pay for the goods when the carding site’s checkout page was replaced with this image: The shop from which my source attempted to make the purchase — called Rescator — is the same carding store that was the first to move millions of cards on sale that were stolen in the Target and Home Depot breaches, among others. I’ve estimated that although Rescator and his band of thieves stole 40 million credit and debit card numbers from Target, they only likely managed to sell between 1 and 3 million of those cards. Even so, at a median price of $26.85 per card and the median loss of 2 million cards, that’s still more than $50 million in revenue. It’s no wonder they want to keep the authorities out.

U.S. Satisfaction Falls to 13-Month Low - Although well above the 2008 low of 7%, Gallup reports After Terror Attacks, U.S. Satisfaction Falls to 13-Month Low of 20%After the recent terrorist attack in San Bernardino, California, Americans' satisfaction with the way things are going in the U.S. dropped seven percentage points to 20%. This is the lowest level of satisfaction recorded since November 2014, but still above the all-time low of 7% in October 2008.  A seven-point month-to-month drop in satisfaction is rare but not unprecedented. Satisfaction dropped seven points in 2013 during the October partial government shutdown. It plummeted 12 points in the fall of 2008 as the economy crumbled, falling to the all-time low of 7% in mid-October of that year. The recent high point in satisfaction is 32% in January and February of this year, the highest since the end of 2012. Satisfaction levels have been lower for the rest of this year. But despite month-to-month fluctuations, at least 25% of Americans have been satisfied each month until the December reading.

Gallup US Consumer Spending Measure December 7, 2015: Americans' daily self-reports of spending averaged $92 in November for a second month and roughly matches the November spending averages found since 2013, though it is among the highest for the month since 2008. While the November 2015 spending average is slightly below the $95 found in November 2014, it is similar to the $91 in November 2013. Other November averages since 2008 have been lower, between $66 and $87. Gallup found that average daily spending increased significantly this year during the last few days of November and on Black Friday specifically. This spending increase could be a good sign as the U.S. enters the December holiday shopping period. Historically, spending increases by about $5 between November and December, although smaller increases were seen in 2008 and 2014. In 2010, 2013 and 2014, spending increased from October to November, but it was stable or even decreased slightly in all other years. Last year, there was a large increase, $6, from October to November, but then a smaller one, $3, from November to December. Other than 2015, 2012 was the most recent year when spending was level between October and November. That same year saw a $10 jump between November and December, the largest jump Gallup has found between these two months.

Chain Store Sales Collapse Following Already Disappointing Black Friday - Just as we warned, based on credit card data, this holiday spending period is a disaster. Following disappointing sales over the Black Friday to Cyber Monday weekend, there has been absolutely no follow-through momentum as is usually seen. Chain Store same-store-sales crashed 6.3% week-over-week...  This should not be a surprise with a mere 1.7% YoY gain that fits with credit card data... Well, if this year the annual comps are solidly negative then applying the same delta, it would mean that the "seasonally adjusted" retail sales data will be about 1.2%, a 70% drop from last year. Not sure how one can spin that. The Retail Economist-Goldman Sachs Chain Store Sales Index was down 6.3% week-over-week for the period ending December 5. It appears that shoppers were sated after the hefty promotions offered in the prior week associated with Black Friday. There may also have been a drop off in brick-and-motor shopping activity while many on-line retailers were offering deals for Cyber Monday. Charts: Bloomberg

Look Who’s Spending Less: Higher-Earning, Older Americans - Americans who have money to spend aren’t doing so, a factor that is depressing consumer outlays despite low gasoline prices and steady hiring. Recently, the pace of consumer spending, outside of big-ticket items such as cars and homes, has eased. That’s puzzled economists who expected solid hiring, improving wage gains and cheap gasoline to drive improved spending. Data released Wednesday by the JPMorgan Chase & Co. Institute sheds new lights on what’s happening. The report found mid- and upper-income Americans, and those older than 65, pulled back on spending sharply from mid 2014 through June, while outlays among those younger than 35 and those with lower incomes held up fairly well. The institute taps into anonymized data from 48 million JPMorgan customers in 15 U.S. metro areas to reveal spending patterns. The report found overall spending on “everyday” products and services—the type of purchases you would put on your credit or debit card—rose just 0.5% in the second quarter of 2015, from a year earlier. For the prior year, before gas prices dipped and hiring accelerated, spending rose a robust 5%. The data is not inflation adjusted, and price increases were stronger in late 2013 and early 2014.

Retail Sales increased 0.2% in November - On a monthly basis, retail sales were up 0.2% from October to November (seasonally adjusted), and sales were up 1.4% from November 2014. From the Census Bureau report: The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for November, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $448.1 billion, an increase of 0.2 percent from the previous month, and 1.4 percent above November 2014. ... The September 2015 to October 2015 percent change was unrevised from +0.1 percent.  This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales ex-gasoline increased 0.3%. The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Retail and Food service sales ex-gasoline increased by 3.7% on a YoY basis (1.4% for all retail sales including gasoline). The increase in November was below expectations of a 0.3% increase. This was a a somewhat weak headline report, however sales ex-gasoline are still up a decent 3.7% YoY.

Retail Sales: November Retail Sales Show a Modest Improvement -- The Census Bureau's Advance Retail Sales Report released this morning shows that seasonally adjusted sales in November increased 0.2% month-over-month and are up 1.4% year-over-year. Core Retail Sales (ex Autos) came in at 0.4% MoM and are up only 0.7% YoY.  The forecasts were 0.3% for both Headline and Core Sales. The chart below is a log-scale snapshot of retail sales since the early 1990s. The two exponential regressions through the data help us to evaluate the long-term trend of this key economic indicator.  The year-over-year percent change provides another perspective on the historical trend. Here is the headline series. Here is the year-over-year version of Core Retail Sales. Retail Sales: "Control" Purchases The next two charts illustrate retail sales "Control" purchases, which is an even more "Core" view of retail sales. This series excludes Motor Vehicles & Parts, Gasoline, Building Materials as well as Food Services & Drinking Places. Here is the same series year-over-year. Note the highlighted values at the start of the two recessions since the inception of this series in the early 1990s. For a better sense of the reduced volatility of the "Control" series, here is a YoY overlay with the headline retail sales. Bottom Line: The November Retail Sales were relatively modest, and YoY Core Retail Sales are lower than they were at the start of the last two recessions. Similarly, Control Sales YoY are hovering at levels seen at the onset of the last two recessions.

Retail Sales Perk Up In Nov, But Annual Trend Continues To Slide - US retail sales rose 0.2% in November, the Census Bureau reports. The increase is a touch higher than the previous month’s 0.1% gain. But the uptick in the monthly data masks the ongoing deceleration in the year-over-year trend. Spending eased to a weak 1.4% annual pace, a seven-month low that’s close to the softest gain since the recession ended in mid-2009. The bad news: it’s no longer about the falling dollar value of gasoline sales due to a bear market in energy. The yearly rise in retail spending ex-gasoline dipped to 3.7%, the lowest pace of growth in nearly two years. In other words, consumption is trending lower for reasons that appear to be unrelated to falling prices at the pump. That’s a worrisome sign, and a change from previous reports. As long as retail spending ex-gasoline was holding steady at an annual pace there was a case for arguing that the softer headline trend was noise. Unfortunately, today’s report throws cold water on that narrative. Granted, the recent monthly comparisons point to a pick-up in spending, inspiring some economists to paint an upbeat profile. “It’s a pretty solid across-the-board increase from electronics to apparel to restaurants to online buying.” Maybe so, but the slide in the year-over-year data suggests that the trend is looking tired. Barry Ritholtz of Ritholtz Wealth Management observed yesterday that “retail looks meh, unless you’re selling cars.”The slowdown in consumer spending is showing up in other data sets, including personal consumption expenditures (PCE) via the Bureau of Economic Analysis. The annual rate of growth for PCE through October slipped to just 2.9%–the lowest since January 2014. As I discussed last month, however, the fading trend in spending growth appears to be a self-imposed bout of austerity. Note the relatively firm and modestly rising annual trend for disposable personal income (DPI), which edged up to a 4.1% year-over-year increase in October–a nine-month high. A key question now is whether the firm DPI trend will hold up in the November income report that’s due later this month?

Retail Sales Soft Again (Unless You Exclude Everything Weak); How to Uncover the Hidden Consumer Strength! -- Retail sales disappointed once again today. And for the second month in a row, autos led the decline.  Last month retail sales rose 0.1%. This month retail sales rose 0.2% vs. a Bloomberg Consensus Estimate of a 0.3% rise. Nonetheless, Bloomberg analysts cite hidden strength. Once again the headline for the retail sales report understates underlying strength. Total retail sales rose only 0.2 percent in November which is just under the Econoday consensus. But weakness here came from vehicles of all places which otherwise have been one of this year's standout component for this report. Excluding vehicles, sales rose 0.4 percent which is 1 tenth above expectations. Excluding both vehicles and gasoline, core sales rose a very solid 0.5 percent which is 2 tenths above expectations. A key discretionary category, restaurants, shows yet another very strong gain, this at 0.7 percent in the month. Also showing sizable gains are electronics & appliances, clothing & accessories, non-store retailers (once again), and the general merchandise category where, despite a deflationary pull from falling import prices, sales jumped 0.7 percent in the month.Year-on-year rates show nonstore retailers out in front, at plus 7.3 percent to confirm acceleration for online sales. Restaurants are right behind at plus 6.5 percent year-on-year followed by furniture and by sporting goods, both at plus 5.4 percent. All together, core retail sales are up a moderate 3.6 percent year-on-year held down by contraction in electronics & appliances and soft readings for grocery stores and general merchandise. Outside the core, motor vehicles are still in the thick of things, at plus 4.0 percent year-on-year, with gasoline stations down 19.9 percent. Total retail sales are up only 1.4 percent but the gain goes up to 3.6 percent (the same as the core) when excluding just gas. Taken together, rates of growth are no more than moderate but certain areas are posting eye-catching results, results that point to what must have been a successful Black Friday sales push. The consumer, boosted by a solid labor market and having more money to spend because of low gas prices, is definitely alive and spending going into the final weeks of the holiday season.

Retail Sales Growth Tumbles To Weakest In 6 Years As Auto Sales Drop -- Despite all the industry's exuberance over auto sales in America, the government's retail sales data shows vehicle sales dropped 0.4% in October (in other words, automakers are channel-stuffing). This rolled through the various headline data leaving a 4th miss in a row MoM and the weakest YoY growth for retail sales since Nov 2009 - deep in recession territory.  This is the 4th miss in a row for the headline retail sales data...And sends the annual growth rate well into recession territory... And even Ex-Autos the annual change is awkwardly low for a rate hike... The full breakdown has something for everyone... Charts: Bloomberg

Preliminary December Consumer Sentiment increases to 91.8 - The preliminary University of Michigan consumer sentiment index for December was at 91.8, up from 91.3 in November."While the preliminary December reading was largely unchanged from last month, consumers evaluated current economic conditions more favorably and expected future prospects less favorably. In a repeat of last month's findings, all of the early December gain was recorded among households with incomes in the bottom two-thirds (+2.7%), while the Sentiment Index among consumers with incomes in the top third declined (-4.4%). Importantly, the survey recorded persistent strength in personal finances and buying plans, while the largest loss was in how consumers judged prospects for the national economy during the year ahead. Overall, the Sentiment Index has averaged 92.9 during 2015, the highest since 2004, with only 10 higher yearly averages in the past half century. The data continue to indicate that real consumer expenditures will grow by 2.8% in 2016 over 2015. " This was slightly below the consensus forecast of 92.0.

Update: Framing Lumber Prices down Sharply Year-over-year - Here is another graph on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs. The price increases in early 2013 were due to a surge in demand (more housing starts) and supply constraints (framing lumber suppliers were working to bring more capacity online).  Prices didn't increase as much early in 2014 (more supply, smaller "surge" in demand). In 2015, even with the pickup in U.S. housing starts, prices are down year-over-year.  Note: Multifamily starts do not use as much lumber as single family starts, and there was a surge in multi-family starts.Overall the decline in prices is probably due to more supply, and less demand from China. This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through November 2015 (via NAHB), and 2) CME framing futures.  Right now Random Lengths prices are down about 15% from a year ago, and CME futures are down around 26% year-over-year.

US wholesale inventories weak, may hit Q4 GDP: U.S. wholesale inventories fell in October as businesses stepped up efforts to reduce the stockpile of unsold merchandise, suggesting inventories would again be a drag on growth in the fourth quarter. The Commerce Department said on Wednesday wholesale inventories slipped 0.1 percent as stocks of both durable and nondurable goods fell. Inventories increased a downwardly revised 0.2 percent in September. Economists polled by Reuters had forecast wholesale inventories ticking up 0.1 percent in October after a previously reported 0.5 percent increase the prior month. Inventories are a key component of gross domestic product changes. The component of wholesale inventories that goes into the calculation of GDP—wholesale stocks excluding autos—also dipped 0.1 percent.A record back-to-back increase in inventories in the first two quarters of this year left warehouses bulging with unsold merchandise and businesses with little incentive to restock. Inventories subtracted 0.56 percentage point from GDP growth in the third quarter. That restricted GDP growth to an annualized rate of 2.1 percent. The drop in wholesale inventories in October could prompt economists to trim their fourth-quarter growth estimates, currently around a 2 percent rate.

Weak U.S. inventories seen weighing on fourth quarter growth – U.S. wholesale inventories fell in October as businesses stepped up efforts to reduce stockpiles of unsold merchandise, suggesting inventories would again be a drag on growth in the fourth quarter. The Commerce Department said on Wednesday wholesale inventories slipped 0.1 percent as stocks of both durable and nondurable goods fell. September inventories were revised down to show them increasing only 0.2 percent instead of rising 0.5 percent as previously reported. Inventories help drive changes in gross domestic product. The component of wholesale inventories that goes into the calculation of GDP, wholesale stocks excluding autos, also dipped 0.1 percent. A record back-to-back increase in inventories in the first two quarters of this year left warehouses bulging with unsold merchandise and businesses with little appetite to restock. Inventories subtracted 0.56 percentage point from GDP growth in the third quarter. That restricted GDP growth to an annualized rate of 2.1 percent. The drop in wholesale inventories in October prompted economists to trim their fourth-quarter growth estimates by as much as two-tenths of a percentage point to a 1.7 percent rate. “We think that the drag from inventories in the fourth quarter will be more severe than we had previously believed,”

Wholesale Trade: Another Bad Report, Inventories Decline, Prior Month Revised Way Lower; Expect Negative Revisions to 3rd and 4th Quarter GDP; What About Autos? -- Economists missed the wholesale trade numbers by a mile. The Econoday Consensus Estimate for today's trade numbers was +0.2% in a range of 0.0% to 0.4%. The actual report (for October) came in at -0.1%.  That's bad enough, but some of the much touted inventory build for 3rd quarter (See Wholesale Trade Inventories Surge Led By Autos) did not happen. Today, September was revised from +0.5% to +0.2%. Wholesale inventories fell 0.1 percent in October against no change for sales, keeping the stock-to-sales ratio for this sector unchanged at 1.31. Wholesale inventories are on the heavy side as this ratio is well up from 1.22 this time last year. Year-on-year, inventories are up 3.6 percent which is well ahead of a 3.7 percent decline for sales.  Inventory builds reflecting falling sales include metals and autos, though strong sales of the latter at the retail level point to a bounce back for related wholesale sales. Inventory draws reflecting rising sales include furniture, apparel, and farm products.  Businesses including wholesalers watch their inventory levels carefully, limiting unwanted overhang as much as they can especially when sales are slow. The decline in October inventories, together with a sizable 3-tenth downward revision to September to plus 0.2 percent, may be negatives for third-quarter GDP but are positives for the production and employment outlooks. Watch Friday for the business inventories report which will include data from the retail sector.  Bloomberg comments "[Wholesale trade inventories] may be negatives for third-quarter GDP but are positives for the production and employment outlooks." Let's investigate that claim with a dive into the actual Census Report on Wholesale Trade for a chart and more details.

Wholesale Inventories Sink Q4 GDP Hope, Sales-Ratio Signals Looming Recession --- Q4 GDP expectations are off to a bad start as October wholesale inventories dropped 0.1% (missing expectations of a 0.2% rise and well down from the September surge of 0.5%). Wholesale inventories rose only 3.7% YoY, the lowest since Sept 2013 but sales have now been negative YoY since December. This leaves the crucial inventories-to-sales ratio at 1.31 - post-crisis highs, and deep in recession territory.

U.S. Business Inventories Unexpectedly Flat In October - - Business inventories in the U.S. unexpectedly came in flat in the month of October, according to a report released by the Commerce Department on Friday. The report said business inventories were virtually unchanged in October after ticking up by a downwardly revised 0.1 percent in September. Economists had expected inventories to inch up by 0.1 percent compared to the 0.3 percent increase that had been reported for the previous month. The flat reading on business inventories came as a 0.1 percent uptick in retail inventories was offset by 0.1 percent drops in manufacturing and wholesale inventories. Meanwhile, the Commerce Department said business sales edged down by 0.2 percent in October after coming in unchanged in September. The modest decrease reflected a 0.5 percent drop in sales by manufacturers, while retail and wholesale sales came in flat. Reflecting the drop in sales, the total business inventories/sales ratio inched up to 1.38 in October from 1.37 in September. The ratio came in at 1.31 a year ago. The Commerce Department also said business inventories in October were up by 2.0 percent year-over-year, while business sales fell at an annual rate of 2.7 percent.

US business inventories excluding autos rise in October: U.S. business inventories excluding automobiles rose in October, suggesting inventories could be less of a drag on fourth-quarter growth than previously thought. Inventories are a key component of gross domestic product. Business inventories excluding autos, which go into the calculation of GDP, increased 0.4 percent in October after an unrevised 0.5 percent gain in September, the Commerce Department said on Friday. Overall business inventories were unchanged in October after ticking up 0.1 percent the prior month. Economists polled by Reuters had forecast inventories edging up 0.1 percent in October after a previously reported 0.3 percent increase in September. October's increase in business inventories excluding autos could see economists raise their fourth-quarter GDP growth estimates, currently around a 1.9 percent annual pace. A record back-to-back increase in inventories in the first two quarters of this year left warehouses bulging with unsold merchandise and businesses with little appetite to restock. This industry may feel the most heat from rate hikeInventories subtracted 0.56 percentage point from GDP in the third quarter, holding the economy to a 2.1 percent growth pace. However, data earlier this month showed downward revisions to September manufacturing and wholesale inventories, suggesting the third-quarter GDP growth estimate could be lowered when the government publishes its second revision later this month.

The ratio of inventories to sales climbs to highest since recession - The ratio of inventories to sales rose slightly in October to the highest level since the recession, a potentially worrying sign that companies are having trouble selling what they are producing. The ratio of inventories to sales rose to 1.38 from 1.37, the highest since 2009, the Commerce Department reported on Friday. Generally speaking, a rising ratio is not healthy, unless companies foresee an acceleration in demand. Business inventories were flat in October, as manufacturers and wholesalers slightly reduced stockpiles while retailers added to them. The Commerce Department reported that inventories stayed at a seasonally adjusted level of $1.81 trillion. September’s gain was revised to a 0.1% increase from a previously estimated 0.3% rise. Other economic reports don’t look as gloomy — the Commerce Department separately reported a rise in retail sales during November, and jobs growth has been strong. However, manufacturers have been hurt by the combination of a strong dollar, tumbling oil prices and tepid international demand.

Business Inventories-To-Sales Surge To Cycle Highs, Deep In Recession Territory -- Following the wholesale inventories-to-sales jump, business inventories-to-sales just shifted once again to cycle highs, deep in recessionary territory. With inventories unchanged in October, slightly lower than the expected 0.1% increase, Q4 GDP will start to be affected (and Q3 as prior data was revised lower). Nevertheless, with sales dropping 0.2%, with manufacturers tumbling 0.5% MoM, the looming production cuts set up The Fed for an epic policy error.Charts: Bloomberg

How to Uncover Hidden Economic Weakness! - Having just written How to Uncover the Hidden Consumer Strength!, I think it's only fair to see if there is a way to uncover hidden weakness. Business inventories provide a method. The consensus estimate for month-over-month changes in inventories was +0.1% but the actual change was 0.0%.   To see if we can spot the weakness, let's once again start with analysis from a Bloomberg Econoday report, this time on inventories.  Businesses appear to be putting the brakes on inventories which however are still rising a bit relative to sales. Business inventories were unchanged in October with September revised down 2 tenths to plus 0.3 percent in readings that will pull down the GDP outlook slightly. Sales came in unchanged which is just enough to drive up the stock-to-sales ratio to 1.38 from 1.37. This time last year, this reading was at 1.31. All three components show only the most minimal change in inventories, up 0.1 percent for retailers and down 0.1 percent for both manufacturers and for wholesalers. And sales tell the story, unchanged in October for both retailers and wholesalers and down 5 tenths for manufacturers. The lack of punch in the economy, the result of weak foreign demand, continues to put upward pressure on inventories. But businesses are successfully keeping their stocks as low as possible, thereby limiting future corrections in production and employment.

Producer Price Index: A Surprising Increase in November - dshort - Today's release of the November Producer Price Index (PPI) for Final Demand came in at 0.3% month-over-month seasonally adjusted, up from -0.4% in October. It is down -1.2% year-over-year, the eleventh consecutive month of YoY shrinkage. Core Final Demand (less food and energy) came in at 0.3% MoM, up from -0.3% the previous month and is up 0.4% YoY. The forecasts were for -0.1% headline and 0.1% core. Here is the summary of the news release on Final Demand: The Producer Price Index for final demand increased 0.3 percent in November, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices decreased 0.4 percent in October and 0.5 percent in September. On an unadjusted basis, the final demand index fell 1.1 percent for the 12 months ended in November, the tenth consecutive 12-month decline.  The November rise in the final demand index can be traced to prices for final demand services, which advanced 0.5 percent. In contrast, the index for final demand goods moved down 0.1 percent. More… The BLS shifted its focus to its new "Final Demand" series in 2014, a shift we fully support. Since our focus is on longer term trends, we continue to track the legacy Producer Price Index for Finished Goods, which the BLS also includes in their monthly updates. As this overlay illustrates, the Final Demand and Finished Goods indexes are highly correlated. The Headline Finished Goods for November came in at 0.1% MoM and is down -3.3% YoY. Core Finished Goods were up 0.1% MoM and up 1.7% YoY. Now let's visualize the numbers with an overlay of the Headline and Core (ex food and energy) PPI for finished goods since 2000, seasonally adjusted. The plunge since mid-2014 in headline PPI is, of course, energy related — now off its interim low set in April. Core PPI has remained relatively stable since early 2014.

Producer Prices Rises Most In Five Months, Service Inflation Highest In Over A Year Following a miss in retail sales (if slight beat in core spending), the final key economic update the Fed will look at before its "first rate hike in nine years" meeting next week is today's Producer Price Inflation report which rose 0.3%, above the expected unchanged print and even higher compared to October's -0.4% decline. The report showed that while the decline in energy prices continued as expected, sliding 0.6% in the Final Demand Goods category, there was a surprising pickup in final demand services, which rebounded by 0.5% driven by Trade which rose 1.2% from the prior month, driven by an unexpected pickup in margins for apparel, jewelry, footwear, and accessories retailing. However, while on a monthly basis the rebound was solid and matched the PPI growth seen in June, on a year over year basis, final demand continues to trend in negative territory, where it has been throughout 2015.

Import and Export Price Year-over-Year Deflation Continues in November 2015. -  Trade prices continue to deflate year-over-year, and energy / agriculture prices drove this month's decline. Import Oil prices were down 2.5 % month-over-month, and export agricultural prices decreased 1.1 %. with import prices down 0.4 % month-over-month, down 9.4 % year-over-year; and export prices down 0.6 % month-over-month, down 6.3 % year-over-year..There is only marginal correlation between economic activity, recessions and export / import prices. Prices can be rising or falling going into a recession or entering a period of expansion. Econintersect follows this data series to adjust economic activity for the effects of inflation where there are clear relationships. Econintersect follows this series to adjust data for inflation.   According to the press release: All Imports: Overall import prices decreased 0.4 percent in November, after falling 0.3 percent in October and 1.1 percent in September. Import prices have trended down throughout 2015, declining each month with the exception of May and June. Prices for imports fell 9.4 percent for the year ended in November, and have not increased on a 12-month basis since the index rose 0.9 percent in July 2014. All Exports: Prices for U.S exports declined 0.6 percent in November, following a 0.2-percent decline in October and a 0.6-percent decrease in September. Lower prices for both agricultural and nonagricultural exports contributed to the November decline in overall export prices. The price index for overall exports only recorded 1 monthly advance over the past year and declined 6.3 percent between November 2014 and November 2015.

U.S. import prices extend decline on cheaper oil - – U.S. import prices fell in November as the cost of petroleum and several goods continued to decline, suggesting that cheaper crude oil and a strong dollar will keep imported inflation pressures subdued for a while. The Labor Department said on Thursday import prices dropped 0.4 percent last month after a revised 0.3 percent decrease in October. Import prices have declined in 15 of the last 17 months. Economists had forecast import prices falling 0.7 percent after a previously reported 0.5 percent drop in October. In the 12 months through November, prices tumbled 9.4 percent. Dollar strength and a sharp decline in oil prices have dampened inflation, leaving it running well below the Federal Reserve’s 2 percent target. But given tightening labor market conditions, tame price pressures are unlikely to prevent the Fed from raising interest rates next week for the first time in nearly a decade. Labor market tightness is expected to spur faster wage growth and gradually push inflation toward its target. Last month, imported petroleum prices fell 2.5 percent after rising 0.4 percent in October. Further weakness is likely following a recent slump in oil prices to seven-year lows.

China Exports Most Deflation To The US Since The Financial Crisis --  Today's import price index report from the BLS showed a modest improvement at the headline level: declining by 0.40% this was half the expected decline of -0.80% and a modest pick up from last month's -0.50%. A big reason for this continues to be oil, which saw a -2.5% drop in November after a 0.1% increase the prior month, with import prices for non-fuel products down -0.2%, the highest since June.  Annually, the pace of declines also picked up modestly dropping "only" -9.4% from a year ago, higher than the -10.50% slide in October. Import prices have now seen an annual decline for 16 consecutive months starting in July 2014. Some more details from the report:   Fuel prices resumed a downward trend in November, declining 2.5 percent following a 0.1-percent uptick the previous month. The price index for import fuel decreased 24.9 percent between June and September. A 2.5-percent drop in petroleum prices and a 4.6-percent decline in natural gas prices both contributed to the November decline in overall import fuel prices. Prices for overall fuel fell 43.2 percent over the past 12 months, after decreasing 15.9 percent between November 2013 and November 2014. Petroleum prices declined 44.5 percent over the past year, while prices for natural gas fell 32.3 percent.   The price index for nonfuel imports also decreased in November, falling 0.2 percent following 0.3-percent declines in each of the previous 4 months. Lower prices for nonfuel industrial supplies and materials;foods, feeds, and beverages; capital goods; and automotive vehicles all factored into the November decline in nonfuel import prices. Prices for nonfuel imports decreased 3.2 percent for the year ended in November. Prices for nonfuel industrial supplies and materials; foods, feeds, and beverages; and each of the major finished goods categories all fell over the past 12 months.   

Import/Export Price Deflation: Export Prices -0.6% Way More Than Estimates, Import Prices -0.4% Way Less Than Consensus --Import/export price deflation continues in November. The kicker this month is a decline in exports prices greater than the decline in import prices with agricultural products leading the way, down a steep 1.1%. The Bloomberg Econoday consensus estimate was for export prices to dip -0.3% and import prices to dip -0.8%.  The actual result was a dip in export prices twice as big as economists expected and export prices half as much as economists expected. oops.  Moreover, the decline in export prices was outside the -0.4% to 0.0% range of any individual estimate. Year-over-year export prices are down 6.3% and import prices down 9.4%. With that, let's check out the Econoday ReportCross-border price pressures remain negative with import prices down 0.4 percent in November and export prices down 0.6 percent. Petroleum fell 2.5 percent in the month but is not an isolated factor pulling prices down as non-petroleum import prices fell 0.3 percent in the month. Agricultural exports are the wildcard on the export side and they fell a sizable 1.1 percent but here too, the deflationary pull is widespread with non-agricultural export prices down 0.6 percent. Import prices are down a year-on-year 9.4 percent with non-petroleum import prices at minus 3.4 percent. Import prices from Canada are down the heaviest, at minus 18.0 percent on the year, with Latin America next at minus 12.7 percent. Showing the least price weakness are imports from China at minus 1.5 percent. Export prices are down 6.3 percent on the year with non-agricultural prices down 5.7 percent.. Federal Reserve policy makers have been waiting for an easing drag from low import prices, not to mention oil prices as well, with neither yet to appear. Contraction in import prices not only reflects low commodity prices but also the strength of the dollar which has been giving U.S. buyers more for their dollars.

US Exports & Manufacturing Debacle Covered up by Oil --Wolf Richter - It got somewhat lost in the hoopla of the jobs report and the blistering rally in the stock market on Friday. But the US trade deficit worsened by 3.4% in October to $43.9 billion, according to the Commerce Department, once again disappointing soothsayers who’d hoped for an improvement in the trade deficit. But as bad as the overall trade deficit is, the trade deficit in goods (without services) is much worse, and even then, the oil trade covers up just how terrible the underlying trade of non-petroleum goods really is, how far and how fast non-petroleum exports have plunged, and how much US manufacturing is getting whacked.The worsening trade deficit was a nasty “surprise” – nasty because it dings US economic growth; and surprise because it appears inexplicably difficult for Wall Street economists to predict a downhill slope. Exports add to GDP, and imports reduce GDP. So when imports exceed exports, the sacred US GDP figures get hit as they have been since the 1990s. But October was bad: exports of goods plunged 10.4% year-over-year to $123.8 billion, the worst level since June 2011.The culprits: the strong dollar that makes US goods more expensive in other currencies, and tepid economic growth in the rest of the world, with some major markets in a recession, or a deep recession, such as Russia, or even worse, such as Brazil. The China slowdown isn’t helping. But in the case of exports to China, the dollar can’t be blamed since the yuan is pegged to the dollar, and the recent devaluation was tiny compared to the moves of other currencies. Imports of goods fell 6.6% year-over-year to $186.8 billion – despite the strong dollar, though a strong dollar, in theory, should have caused imports to rise. This testifies to tepid demand in the US. Imports of petroleum products were blamed. The US is – despite the oil bust – pumping so much oil for domestic consumption that imports of petroleum products have been falling for years. And in October, the value of petroleum imports hit the lowest level since 2003!

Q&A: What’s Next for the U.S. Export-Import Bank? -- President Barack Obama signed legislation on Friday that reauthorizes the U.S. Export-Import Bank for four more years. Fred Hochberg, the chairman of the agency, which finances American exports, spoke to The Wall Street Journal about the bank’s latest political brawl with Republican critics in Congress. The agency was forced to stop accepting new loan and insurance applications after its charter lapsed in July because key lawmakers wouldn’t bring up for a vote legislation to reauthorize the bank. The following transcript has been condensed and lightly edited for clarity:

US Faces $1 Billion in Trade Penalties for Meat Labels - ABC News The World Trade Organization ruled Monday that Canada and Mexico can slap more than $1 billion in tariffs on U.S. goods in retaliation for meat labeling rules it says discriminated against Mexican and Canadian livestock.At issue were U.S. labels on packaged steaks and other cuts of meat that say where the animals were born, raised and slaughtered.The WTO has previously found that the so-called "country of origin" labeling law put Canadian and Mexican livestock at a disadvantage. It ruled Monday that Canada could impose $780 million in retaliatory tariffs and Mexico could impose $228 million. "We are disappointed with this decision and its potential impact on trade among vital North American partners," said Tim Reif, general counsel for the Office of the U.S. Trade Representative. The labels are supported by some U.S. ranchers and by consumer groups. They are opposed by meatpackers who say they require costly paperwork.

Rail cargo decline points to weak spots in economy - A sharper decline in U.S. railroad cargo this quarter points to weak spots in the U.S. economy as a strong dollar crimps exports, retailers whittle down excess inventory and energy investment stalls. Union Pacific, Warren Buffett's BNSF Railway Co. and other large U.S. railroads have posted a 5.1 percent drop in carloads since the beginning of October, topping decreases of 1.6 percent in the third quarter and 1.8 percent in the second. A decline in consumer-related cargo this quarter is adding to weakness in industrial and energy traffic. While it's too early to tell if something "drastic" is happening to the economy, "it does feel kind of like a soft, flat, sort of wait-and-see environment," The rail industry provides detailed weekly carload reports with only a three-day lag, giving one of the most current looks at shipping demand. The railroad weakness adds to U.S. economic indicators that have been sending mixed signals. The Institute for Supply Management's index showed November manufacturing contracted at the fastest pace since 2009 while factory orders in October rose 1.5 percent. Consumers are buying autos at a record pace and November payrolls increased by 211,000, more than economists' estimates. Railroad intermodal traffic, which rose in the previous two quarters, has fallen 1.3 percent since the beginning of October. Intermodal consists mostly of consumer goods that are moved in containers that can be switched between ships, trains and trucks, and accounts for almost half of the industry's carloads. The excess inventory that's dragging on intermodal carloads is also hurting U.S. growth,

Rail Week Ending 05 December 2015: The Good News Is That Is Week Is Not As Bad As Last Week: Week 48 of 2015 shows same week total rail traffic (from same week one year ago) declined according to the Association of American Railroads (AAR) traffic data. Intermodal traffic squeaked into expansion year-over-year, which accounts for approximately half of movements and weekly railcar counts continued deeply in contraction.A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 542,050 carloads and intermodal units, down 6.6 percent compared with the same week last year. Total carloads for the week ending Dec. 5 were 271,774 carloads, down 12.9 percent compared with the same week in 2014, while U.S. weekly intermodal volume was 270,276 containers and trailers, up 0.8 percent compared to 2014. Two of the 10 carload commodity groups posted an increase compared with the same week in 2014. They were miscellaneous carloads, up 15.5 percent to 9,063 carloads; and motor vehicles and parts, up 1.8 percent to 19,025 carloads. Commodity groups that posted decreases compared with the same week in 2014 included metallic ores and metals, down 24.6 percent to 21,318 carloads; coal, down 21.8 percent to 92,820 carloads; and petroleum and petroleum products, down 14.4 percent to 13,589 carloads. For the first 48 weeks of 2015, U.S. railroads reported cumulative volume of 13,318,535 carloads, down 5.3 percent from the same point last year; and 12,801,015 intermodal units, up 1.8 percent from last year. Total combined U.S. traffic for the first 48 weeks of 2015 was 26,119,550 carloads and intermodal units, a decrease of 1.9 percent compared to last year.

Pains For Trains From Automobiles --With global freight costs collapsing, as China trade dries up, status-quo-hugging talking heads have point to America's car sales and picture some islandic isolation that means investors in US equities are immune. Well that little dream just burst. Rail freight carloads tumbled 5.1% in October, dramatically accelerating the 1.6% drop in Q3 as a strong dollar crimps exports, retailers whittle down excess inventory and energy investment stalls. Until recebtly, the one bright spot in rail traffic was auto shipments... but even that just plunged and is now at the seasonally weakest since 2008.Everything was awesome... then October hit and a decline in consumer-related cargo this quarter is adding to weakness in industrial and energy traffic. As Bloomberg reports, While it’s too early to tell if something “drastic” is happening to the economy, “it does feel kind of like a soft, flat, sort of wait-and-see environment,” said Union Pacific Chief Financial Officer Rob Knight at a Credit Suisse Group AG conference last week. The rail industry provides detailed weekly carload reports with only a three-day lag, giving one of the most current looks at shipping demand. The railroad weakness adds to U.S. economic indicators that have been sending mixed signals. Railroad intermodal traffic, which rose in the previous two quarters, has fallen 1.3 percent since the beginning of October. Intermodal consists mostly of consumer goods that are moved in containers that can be switched between ships, trains and trucks, and accounts for almost half of the industry’s carloads.

Truck Rates Plunge; What About Actual Shipping Volumes? Strong Case for Recession - Here's an interesting chart and commentary courtesy of James Jaillet who writes Truckload Rates Sunk Again in November. Average per-mile rates on the spot market fell again for all three major truckload segments in November, according to data from loadboard This is the fourth straight month that rates dipped in all three segments, continuing a now year-long downward trend spurred by both a major drop in diesel prices and market conditions. Paid rates, verified averages of rates paid to carriers, fell 4 cents from October in reefer and flatbed segments and 7 cents in flatbed. Paid reefer [refrigerated] rates in the month averaged $2.14, down 43 cents from last November. Rates in the segment have fallen 26 cents since May. Fuel Costs Let's dive into Freight Rate Index Data to see the reason for the plunge. The index includes the following costs: Fuel, Wages, Equipment, Depreciation, Financing, Admin, Compliance, and Insurance. Nearly all of the volatility pertains to fuel and wages. For August through November the downward trend is nearly all due to lower fuel costs. In the December 2 report a nearly 3 cent drop in fuel was nearly offset by a 3 cent rise in wages.  For shipments, let's look elsewhere starting with the Cass Freight Index.This was the worst October for shipments since 2011 and the worst September since 2010. In addition, Every month this year except January and February were worse than the same month a year ago. Cass Freight Index Report Following the trend observed in the last four years, both total spend and the number of shipments for North American freight declined in October. The indexes have been below 2013 levels for the last several months. The first reading on third quarter GDP was a disappointing 1.5 percent annual growth rate, compared to 3.9 percent in the second quarter.

Dow Chemical and DuPont Announce Mega-Merger: DuPont and Dow Chemical Co. this morning announced a $130 billion mega-merger that will shake up the global chemical and agriculture markets. The deal is expected to close in the second half of next year, pending regulatory approvals.Within two years after completing the all-stock merger, DowDuPont (which is what the two sides are calling it) would split the combined company into three independent, publicly traded entities via tax-free spin-offs. One of the new companies would be “pure-play agriculture,” another material sciences and another specialty products like nutrition and health.Current DuPont CEO Ed Breen would lead advisory committees to spin out the agriculture and specialty products units, while Dow CEO Andrew Liveris would lead the material sciences advisory committee. While the two larger companies remain merged, Liveris would serve as executive chairman, while Breen would serve as CEO. A chief financial officer has not yet been named.

Oil crash adds to steelmakers' woes: The oil industry isn't the only one reeling from the plunge in crude prices, which hit new seven-year lows this week. Steelmakers are suffering their worst downturn in at least 15 years, partly because oil producers have drastically cut drilling activity and so have less need for steel pipes. This week's drop in oil prices below $40 a barrel could intensify the pain for steel manufacturers by delaying a rebound in energy investment, says Barclays analyst Matthew Korn. Yet the oil slump only partly explains the steel industry's woes. Steel producers have been hit by a global nose-dive in commodity prices exacerbated by a massive glut of Chinese steel that the industry says is being illegally unloaded below cost around the world, including in the U.S.  Industry officials have asked the Commerce Department's International Trade Administration to impose hefty tariffs on Chinese and other countries' steel in the hope of avoiding a wave of bankruptcies and consolidation that would rival the sector's punishing shake-up in the late 1990s and early 2000s. "If we can't stop this dumping into the country, that could be fatal for the industry," U.S. Steel CEO Mario Longhi said in an interview. "The situation is now worse than what it was in the early 2000s."

Crushing The Auto-Makers' Dreams (In 2 Depressing Charts) --Earlier this morning we got another glimpse of reality behind the smoke-and-mirrors, mainstream-media-sponsored last-pillar-standing lovefest that is US auto sales when thebusiness sales data showed a disheartening tumble in sales in October. So where are all the sales going that automakers report? The answer is simple... (and painful). As Alhambra Investment Partners' Jeffrey Snider notes, a good part of the national imbalance (of inventories to sales) has been the sudden, and very sharp, surge in the accumulation of unsold motor vehiclesIf there were to be a final nail in the recovery and the narrative that tries to support it still, it would be a shutdown in auto production and sales that have been perhaps the largest single element boosting the economy to this point (which tells you how bad the rest of the economy has been since it “needed” dramatic auto gains, via debt debasement, just to eke out a plausible upward track). The inventory-to-sales ratio in autos in October was 1.77, seasonally-adjusted. That is above the 1.76 in August, thus now the highest since July 2008 (on the way down).

Don’t Confuse Manufacturing With The Broad Macro Trend - Last week’s news that the ISM Manufacturing Index dipped below the neutral 50.0 mark in November for the first time in three years has inspired some folks to declare that the US economy is on the verge of slipping into a new recession. Perhaps, but letting one indicator drive your analysis of the business cycle is a dangerous game that’s prone to a high degree of error. On the other hand, seeing a new contraction on a semi-regular basis makes for exciting TV interviews.  A sober reading of history, by contrast, is dull (and enlightening). Consider the facts. The ISM Manufacturing Index has fallen below the neutral 50.0 mark 38 times since 1948. (Note: any dip below 50.0 is considered separate and distinct by way of at least one subsequent rise to 50.0 or higher.) Over the same period, the US economy has tumbled into recession 11 times, according to NBER data. In other words, using the ISM Manufacturing Index in isolation to gauge recession risk has a dismal record as a tool for deciding if the economy is in an NBER-defined downturn. That doesn’t mean that it the ISM is worthless—far from it. But like every other indicator, context is critical. Using one indicator (or even two or three) for business-cycle analysis is like driving with one eye closed.  Markit’s Manufacturing PMI, another survey-based data set, tells us that the sector is still expanding as of November. But rushing to judgment has a long history in the dark art of analyzing the business cycle—“The Endless Parade of Recession Calls,” as Bill McBride at Calculated Risk labels the habit. Eventually the pessimists will be right a la the broken-clock phenomenon. But seeing a recession behind every weak number is akin to practicing a type of religion. Fortunately, there are more reliable ways to monitor macro risk. But there’s a catch, and one that won’t win you any plaudits on TV: You’ll have to be willing to look at more than one factor at a time.

The consequences of unskewed U.S. business growth - Equitable Growth: Over the past couple of years, economists, analysts, and policymakers have started paying more attention to declining business dynamism—the rate at which new American businesses are started—in the United States. This decline has come among a variety of other downturns in the creation, destruction, and growth of American businesses. The consequences of these trends can be pretty unsettling for anyone concerned about the growth of the U.S. economy—and we now have new concerns to add to that list. Recent research shows that the fastest-growing firms that were at the root of U.S. job creation in recent decades have slowed down since 2000. And this trend is very much present in the high-tech, “Silicon Valley” industries that are often heralded as the future of the U.S. economy. This new research comes from a National Bureau of Economics Research working paper released yesterday. The paper covers a wide ground, but its main contribution is focusing on the changing distribution of growth among U.S. businesses.  For several decades, the distribution of firm growth was positively skewed—the gap between the growth rates for the 90th percentile and the median was larger than the gap between the median and the 10th percentile. In other words, the firms leading in job growth were far ahead of the pack. But according to Decker and his team, in 1999, the 90th percentile to 50th percentile gap was 16 percent larger than the 50th to 10th gap. By 2007, the last year before the Great Recession, this gap was only 4 percent. And by 2011, the last year under study, essentially all the skewness was gone. Furthermore, the decline in the gap between the 90th percentile and the median was due to a large decline in the speed at which firms at the 90th percentile grew. The “gazelle” firms don’t run as quickly as they once did. The decline is partly due to a declining number of startups, but it’s also because the young firms that do exist aren’t growing as fast as previous startups did.

NFIB: Small Business Optimism Index declined in November -  From the National Federation of Independent Business (NFIB): Small Business Optimism Collapses in November After Three Stagnant Months - The Index of Small Business Optimism was fell 1.3 points in November, dropping the Index to 94.8, this after three months of no change of any significance. ... A seasonally adjusted net 11 percent plan to create new jobs, unchanged. A seasonally adjusted net 23 percent of owners reported raising worker compensation, up 2 points and at an expansion high. ...  This graph shows the small business optimism index since 1986.  The index declined to 94.8 in November.  Hiring plans are solid, and it appears there is growing wage pressure.

NFIB: Small Business Index Declined in November - The latest issue of the NFIB Small Business Economic Trends is out today. The update for November came in at 94.8, down 1.3 from the previous month's 96.1. The index has dropped to the 25th percentile in this series. Today's number came in below the forecast of an increase to 96.6. Here is an excerpt from the opening summary of the news release. "During this holiday season, small business owners are finding little to be hopeful or optimistic about including the economy in the New Year. This month’s Index continues to signal a lackluster economy and shows that the small business sector has no expansion energy whatsoever." — The first chart below highlights the 1986 baseline level of 100 and includes some labels to help us visualize that dramatic change in small-business sentiment that accompanied the Great Financial Crisis. Compare, for example the relative resilience of the index during the 2000-2003 collapse of the Tech Bubble with the far weaker readings following the Great Recession that ended in June 2009.

November 2015 Small Business Optimism Index Has Significant Decline: The National Federation of Independent Business's (NFIB) optimism index collapses in November after three stagnant months. The Index had no significant changes in the three months prior. . The market was expecting the index between 95.6 to 96.6 with consensus at 96.0 - versus the actual at 94.8. NFIB chief economist Bill Dunkelberg states: During this holiday season, small business owners are finding little to be hopeful or optimistic about including the economy in the New Year. This month's Index continues to signal a lackluster economy and shows that the small business sector has no expansion energy whatsoever." Uncertainty in DC, federal agencies playing politics and a President that is willing to punish the current economy for inconsequential environmental benefits in the future indicates that business conditions will not be revived anytime soon. Even though there is talk that the Fed will be raising rates this month, it will hardly signal that they are feeling more optimistic about the economy. Overall, the outlook remains the same with a slow 2 percent-ish growth and there is still not much pressure on prices from Main Street. All we can do at this point is hope for a more business friendly New Year."

Unemployment Report Shows Steady As She Goes Again -- (21 FRED graphs) The November unemployment report is another OK type of report.  Less people were dropped out of the labor force for the month and the labor participation rate did tick up a tenth of a percentage point from the October 1977 record low.  The official unemployment rate did not change and is 5.0%.  Overall, this month's report is on the positive side.  This article overviews and graphs the statistics from the Employment report Household Survey also known as CPS, or current population survey.  The household survey has large swings on a monthly basis as well as a large margin of sampling error.  This part of the employment report is not about actual jobs gained but people and their labor status. Those employed increased by 244,000 this month and stands at 149,364,000.  From a year ago, the ranks of the employed has increased by 2.03 million.  This has been the annual gain for some time.  Those unemployed increased by 29,000 to stand at 7,937,000.  From a year ago the unemployed has decreased by -1.134 million.  Below is the month change in unemployed which typically has wild swings from month to month.  Those not in the labor force decreased for a consecutive month by -67,000 to 94.45 million.  The below graph is the monthly change of the not in the labor force ranks.  Those not in the labor force has increased by 2,004,000 in the past year.   While there is now two consecutive months ofdeluge abatement, those not in the labor force have grown more than those employed in the last year. The labor participation rate finally ticked up by 0.1 percentage points to 62.5%, which is still in lows not seen since the 80's.  Below is a graph of the labor participation rate for those between the ages of 25 to 54.  The rate is 80.8%, which is a 0.1 percentage point increase from last month.  Using the prime working years participation rate proves the record lows cannot be explained away by retirement and higher educational pursuits. The civilian labor force, which consists of the employed and the officially unemployed, increased by 273 thousand this month, negating last month's decline.  The civilian labor force has grown by 899,000 over the past year.  The annual growth rate increased from last month but is still low.  New workers enter the labor force every day from increased population inside the United States and immigration, both legal and illegal.  The small annual figure also implies people are dropping out of the labor force.  Notice how those not in the labor force has grown much bigger than the civilian labor force.

326,000 Native-Born Americans Lost Their Job In November: Why This Remains The Most Important Jobs Chart -- Friday's release of a "just right" jobs report, in which the US economy reportedly added 211,000 jobs, more than the 200,000 expected, solidified its position as the "most important" one in recent years, after it was broadly interpreted by economists as the sufficient condition for the Fed to hike rates on December 16, 7 years to the day after the same Fed cut rates to zero. We first laid out what that is three months ago when we said that "the one chart that matters more than ever, has little to nothing to do with the Fed's monetary policy, but everything to do with the November 2016 presidential elections in which the topic of immigration, both legal and illegal, is shaping up to be the most rancorous, contentious and divisive." We were talking about the chart showing the cumulative addition of foreign-born and native-born workers added to US payrolls according to the BLS since December 2007, i.e., since the start of the recession/Second Great Depression. Curiously, it is precisely this data that got absolutely no mention following yesterday's job report, about which the fawning mainstream media only noted, in passing, one negative aspect to the report: the fact that 319,000 part-time jobs for economic reasons were added in November. However, with Trump and his anti-immigration campaign having just taken the biggest lead in the republican primary race, we are confident that the chart shown below will soon be recognizable to economic and political pundits everywhere.And here is why we are confident this particular data should have been prominently noted by all experts when dissecting yesterday's job report: according to the BLS' Household Survey, while 375,000 foreign-born workers found jobs in November, a whopping 326,000 native-born Americans lost theirs.

November Employment Report: Good Enough « U.S. Economic Snapshot (12 graphs) The Bureau of Labor Statistics establishment survey for November shows an employment increase of 211,000 jobs, with an upward revision of 27,000 jobs for October and down 5,000 jobs for September. Average weekly hours fell slightly, from 34.6 to 34.5 and average hourly earning were essentially flat. Since 2009 the BLS also produces data for all private workers, evidently higher than for just production and non-supervisory workers; however, the same basic pattern emerges. The recent climb in real hourly earning stems almost entirely from the decline in inflation as nominal earnings growth has hovered around 2% for the last five years or so.  The household survey reveals very little significant change over the past few months. The unemployment rate ticked up ever so slightly…from 5.036 to 5.046, but who’s splitting hairs. The participation rate also ticked up slightly and the employment to population ratio was essentially unchanged. The number of people working part time for economic reasons popped up by 319,000 but it has been declining steadily for months. The composition of the unemployed changed slightly with more more new-entrants to the labor force and more re-entrants. The over all picture is of a recovered labor market with some continuing longer term structural issues.

Does lower labor force participation mean the 5% US unemployment rate is a phony number? -- The current 5%  unemployment rate is half its worst level of the Great Recession. But the jobless rate would be 10.1% if the labor force participation rate — which feeds into the unemployment rate — were back at pre-recession levels. So what is the “real” unemployment rate? The other day, I quoted a new Goldman Sachs study on the LFPR issue: What about the 3.6pp decline in the labor force participation rate since 2007? While it’s true that the unemployment rate would be much higher if participation had remained stable, we now believe most of the decline since that time should be considered structural. By far the largest contribution to the decline in participation has been an increase in retirees—mostly a natural consequence of the aging of the workforce. Rising disability rates—a trend mostly driven by demographics—and a tendency for young people to remain in school have also played a role.The remaining cyclical component is a relatively modest share of the labor force, and broadly captured by the U6 unemployment rate, in our view. And now the San Francisco Fed offers a similar perspective: As for the area of concern, we’re emerging from the deepest, longest recession since the Great Depression. And it’s true that a lot of people did give up looking for work. A key indicator is the somewhat unfairly named “prime-age males” cohort, who are 25–54. This group has historically been a constant in the American workforce, but in the wake of the recession, its participation fell sharply. However, as the labor market has improved, that number has largely stabilized over the past two years, as has the overall participation rate.

These Ain't Your Grandfather's "Jobs" - Why Friday's Rip Should Be Sold - David Stockman - The "“Jobs Friday" ritual is getting truly absurd. So it can’t be repeated often enough: These artifacts of the BLS’ seasonally maladjusted, trend-cycle modeled, heavily imputed/crafted and five times revised “jobs” numbers have precious little to do with the real health of the main street economy. Indeed, the six-year run of job gains since early 2010 primarily represent “born-again jobs” and part-time gigs. In economic terms, they do not remotely resemble your grandfather’s industrial era economy when a “job” lasted 40 to 50 hours per week all year round; and most of what the BLS survey counted as “jobs” paid a living wage. Not now. Not even close. The Wall Street fools who bought the dip still another time on Friday do not have the slightest clue that the US jobs market is actually quite dead. The chart below is also generated by the BLS but it measures actual labor hours employed, not job slots. It self-evidently puts the lie to the establishment survey fiction upon which the robo-machines and day traders are so slavishly focussed.The fact is, labor hour inputs utilized by the US nonfarm business economy have “grown” at the microscopic annualized rate of 0.08% since the turn of the century. That’s as close as you can get to zero even by the standards of sell-side hair splitters, and it compares to a 2.02% CAGR during the 17 years period to Q3 2000.

A Closer Look At Underemployment - One of the big success stories in the labor market this year has been the progressive decrease in the discouraged and the underemployed. The below graphs both add together those "not in the labor force but who want a job now" and "part time for economic reasons." Here is the big picture since the beginning of the modern series in 1994. Note that the low occurred at the height of the tech boom in 1999 at 7.483 million. I have subtracted that so that you can see how much of an increase there has been since then: At its post-recession worst, an additional 8 million people had been thrown into this category. That is equivalent to over 5% of the workforce! The big decline has taken place beginning with the 3rd Quarter of 2014, which I've zoomed in to show below: Even so, at present we are 2 million or more above the tepid levels of 1996 and 2004-05. At our 2015 rate, it will take another 5 quarters for us just to get to that level. And with the Fed raising rates, I am not confident at all that we will sustain our recent pace.

A Rising Share of Working Women Had Full-Time Jobs Last Year - Americans who worked last year were more likely to have full-time jobs than in 2013, and more likely to hang onto them for most of the year, according to new data the Labor Department released Wednesday. The proportion of workers who had full-time jobs at some point in 2014 rose modestly to 79.6% in 2014, from 79% the previous year. Most of the gain appeared to benefit women: 72.7% of them had full-time employment, compared with 71.8% in 2013, a 0.9 percentage-point bump. Men were still more likely than women to have full-time work, but the share of men working full time barely ticked up in 2014, to 85.7%. While the change in the share of men working full time varied across race and ethnicity—from a 1.7 percentage-point increase for Asian men, to no change for African-American men—the improvements for women were broad-based.The share of workers with full-time jobs rose 0.9 percentage point for white and black women, 1 percentage point for Hispanic women and 1.2 percentage point for Asian women. Overall, more Americans had full-time work year-round. In 2014, 73.9% of men worked full time for at least 50 weeks of the year, up from 72.7% the prior year. For women, that share totaled 61.2% last year, compared with 60.5% in 2013.

Factors in long-term unemployment - The BLS reported on Friday that the U.S. unemployment rate was down to 5% in October and November, its lowest level since 2008. The dramatic surge in unemployment during the Great Recession and its stubborn persistence in coming back down were both dominated by a tremendous increase in the number of people who spent longer than six months looking for a job. If we only counted individuals searching for six months or less, the unemployment rate today would be 3.7%, near the lowest levels for that measure over the last half century.One of the best predictors of whether an individual who is unemployed today will still be unemployed next month is how long that individual has already been looking for a job. For most of the last 50 years, if you considered an individual who has only been looking for work for one month, more likely than not you would find that individual was no longer unemployed the following month. But in every year of the sample, if you looked at an individual who had already been looking for work for longer than six months, there would be a better than an 80% chance that individual would still be unemployed the following month.  One possibility is that the process of being unemployed for longer than a month actually changes an individual through some kind of scarring effect. For example, employers may start to discriminate against those who have been out of work for longer. Another possibility is that there are important differences across individuals that began in their very first month without a job, with some people having less favorable skills and opportunities. If you follow those individuals over time, the ones who are still looking after six months will be selectively drawn from those who had a much lower probability of finding a job from the very beginning.

The Labor Market Conditions Index for October: Back Above Zero with Revisions - The Labor Market Conditions Index (LMCI) is a relatively recent indicator developed by Federal Reserve economists to assess changes in the labor market conditions. It is a dynamic factor model of labor market indicators, essentially a diffusion index subject to extensive revisions based on nineteen underlying indicators in nine broad categories (see the table at the bottom for details). Today's release of the November data came in at 0.5, down from a revised 2.2 in October. Negative revisions were made to twelve of the last eighteen months and only four months of upward revisions.  The indicator, designed to illustrate expansion and contraction of labor market conditions, was initially announced in May 2014, but the data series was constructed back to August 1976. Here is a linear view of the complete LMCI. We've highlighted recessions with callouts for its value the month recessions begin and for the latest index value.  As we readily see, with the exception of the second half of the double-dip recession in the early 1980, sustained contractions in this indicator is a rather long leading indicator for recessions. It is more useful as a general gauge of employment health. Note that in the most recent FOMC minutes for October 27-28, the phrase "labor market conditions" was used eleven times. Maximum employment, after all, is one of the Fed's twin mandates. Interestingly enough, the FEDS Notes article announcing the indicator doesn't chart the complete series with monthly granularity. Instead, the authors use a column chart to show blocks of six-month averages for the two halves of each calendar year since 1977. This approach further supports the use of the indicator as a general gauge of health. Here is our larger version of the same graphic model.

Weekly Initial Unemployment Claims increase to 282,000 --  The DOL reported: In the week ending December 5, the advance figure for seasonally adjusted initial claims was 282,000, an increase of 13,000 from the previous week's unrevised level of 269,000. The 4-week moving average was 270,750, an increase of 1,500 from the previous week's unrevised average of 269,250. There were no special factors impacting this week's initial claims. The previous week was unrevised at 269,000.  The following graph shows the 4-week moving average of weekly claims since 1971.

BLS: Jobs Openings "little changed" in October -- From the BLS: Job Openings and Labor Turnover Summary The number of job openings was little changed at 5.4 million on the last business day of October, the U.S. Bureau of Labor Statistics reported today. Hires and separations were little changed at 5.1 million and 4.9 million, respectively. Within separations, the quits rate was 1.9 percent for the seventh consecutive month, and the layoffs and discharges rate was 1.2 percent. ....Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. ... There were 2.8 million quits in October, little changed from September. The number of quits has held between 2.7 million and 2.8 million for the past 14 months. The quits rate remained unchanged in October, measuring 1.9 percent for the seventh consecutive month  The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.  Jobs openings decreased in October to 5.383 million from 5.534 million in September. The number of job openings (yellow) are up 11% year-over-year compared to October 2014. Quits are up slightly year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

Job Openings & Labor Turnover: Clues to the Business Cycle --The latest JOLTS report (Job Openings and Labor Turnover Summary), data through October, is now available. The first chart below shows four of the headline components of the overall series, which the BLS began tracking in December 2000. The time frame is quite limited compared to the main BLS data series in the monthly employment report, many of which go back to 1948, and the enormously popular Nonfarm Employment (PAYEMS) series goes back to 1939. Nevertheless, there are some clear JOLTS correlations with the most recent business cycle trends. The chart below shows the monthly data points four of the JOLTS series. They are quite volatile, hence the inclusion of six-month moving averages to help identify the trends. For the last nine months, there have been more job openings than hires as seen in the chart below. The most closely watched series is the one for Total Nonfarm Job Openings, the blue line in the chart above. The moving average peaked in mid-2007 and began rolling over to its trough a couple of months after Great Recession ended. The Hires series is roughly similar in its trend. Quits were trending higher and have more or less flatlined since the beginning of the year; they are generally thought to show an economy that supports the flexibility to leave or change jobs. The Layoffs and Discharges series, the red line, has been been essentially flat since early 2013. The chart above is based on the actual numbers in the JOLTS report. A better way to view the numbers is as a percent of Nonfarm Employment, which essentially gives us a population-adjusted version of the data. Here is that adjustment for four of the JOLTS series. Note that the vertical axis for each is optimized for the high-low range to facilitate an understanding of the individual trends.

There Were 1.5 Unemployed Per Job Opening in October 2015 -  The BLS JOLTS report shows very high job openings, just slightly down from September.  Actual hiring overall did improve slightly from the previous month and is finally just barely at prerecession levels.  The Job Openings and Labor Turnover Survey shows there are now 1.5 official unemployed per job opening for October 2015.  Job openings were 5.4 million while hires were 5.1 million.  The soaring job openings give an illusion of a red hot jobs market, but openings exceeding hires levels paints a different picture. There were 1.8 official unemployed persons per job opening at the start of the recession, December 2007.  Below is the graph of the official unemployed per job opening, currently at 1.47 people per opening.  This ratio rivals June 2001 levels. If one takes the U-6 broader measure of unemployment that includes people who are forced into part-time work and the marginally attached, the ratio is 2.9 people needing a job to each actual job opening.  In December 2007 this ratio was 3.2.  Here too we see great ratios regarding job openings.  This is the lowest ratio since September 2007. Job openings are soaring past pre-recession levels and for the past year have exceeded hire levels. Currently job openings stand at 5,383,000. Below is the graph of actual hires, currently 5,137,000. Since the June 2009 trough, actual hires per month have increased 41%. Recession hiring really didn't cliff dive like layoffs, firings and openings did, yet for months now openings have soared. Now in October the ratio to hires vs. openings did slightly improve. In the private sector alone, hires are now 1.3% below their November 2007 prerecession level. None of these levels and figures are adjusted for population growth, which shows how badly the labor pool has really shrunk. Also, Businesses can say there have job openings, but if they do not hire an American and fill it, so what about the reported opening? The tech industry is notorious to put out false job ads with no intention of hiring an actual American worker. Tech companies and now other sectors put out fake job openings to claim they have a labor shortage in order to demand more guest worker Visas in order to import cheap labor.

October 2015 JOLTS Number of Job Openings Unchanged, And Year-over-Year Growth Rate Declined: The BLS Job Openings and Labor Turnover Survey (JOLTS) can be used as a predictor of future jobs growth, and the predictive elements show that the year-over-year growth rate of unadjusted private non-farm job openings declined from last month. The growth rate trends are decelerating in the 3 month averages, decelerating in the 2015 averages, and decelerating in the year-over-year averages. There was no market expectations published by Bloomberg this month. The trend lines now are now declining for 2015 however the the three month trend is now up.

  • the number of unadjusted PRIVATE jobs openings - which is the most predictive of future employment growth of the JOLTS elements - shows the year-over-year growth decelerated. The year-over-year growth of the unadjusted non-farm private jobs opening rate (percent of job openings compared to size of workforce) also declined.
  • The graph below looks at the year-over-year rate of growth for job opening levels and rate.

It Doesn't Seem Hard to Get Good Help: The JOLTS Data -- Dean Baker - Yesterday the Labor Department released October data from its monthly Job Openings and Labor Turnover Survey (JOLTS). The release got surprisingly little attention in the media. While there were no big surprises, it does not paint a picture of a robust labor market. The number of job opening was down 150,000 from the September level and was almost 300,000 below the peak hit in July. That is not necessarily a big deal; the monthly data are erratic and a monthly change of this size could just be sampling error. Nonetheless, the number of opening has been essentially flat since April, which means that the relatively strong growth reported in the establishment survey does not seem to be making it difficult for firms to find workers. Consistent with this story, the quit rate remained at a relatively low 1.9 percent. This is a measure of workers' confidence that they can leave a job they don't like and either quickly get a new job or survive on savings or the earnings of other family members. The 1.9 percent rate is well above the 1.3 percent rate at the bottom of the downturn, but low relative to pre-recession levels. In fact, in the weak labor market following the 2001 recession (we continued to lose jobs until September of 2003) the quit rate never fell below 1.8 percent. The current reading looks much more like a recession than a strong labor market. (The series only goes back to the end of 2000, so we don't have long experience with it.)

JOLTS, Labor Market Conditions Index continue to show a maturing expansion --(graphs) Two jobs-related releases yesterday and today continue to show decelerating improvement. Yesterday the Labor Market Conditions Index was released. This has an excellent long term record of forecasting the direction of YoY job growth. Here is the long term view: Here is the short-term view over the last 10 years: While the Index improved in the last month, the rate of change was the worst in 3 years bar 2 months earlier this year: The YoY% change in jobs growth also declined to a new low after its likely February 2015 cycle high. Turning to this morning's JOLTS report for October, it was something of a mirror image of last month: openings declined, but actual hires and quits improved. Here is the long term view since the inception of the series: The pattern looks increasingly like that of ~2006 in the last cycle. There was some limited good news in that both hires and quits turned ever so slightly positive YoY: But this YoY level is well below that of the last 2 years. Quits did tie a record for this expansion: And hires seem to have a slight improving trend, although this month's level did not set a record. Although - barring another upward surge in the US$ - I do not see any recession in the near future, the jobs market shows accumulating signs of a maturing expansion.

November Retail Hiring Falls To 4-Year Low - 5% Fewer Than One Year Ago: After adding a record number of workers in October, the pace of hiring among the nation's retailers dropped to a four-year low in November. The latest non-seasonally adjusted data from the Bureau of Labor Statistics show that retail employment increased by 394,100 in November. That is 5.0 percent lower than the 414,300 retail jobs added to the economy in November 2014. Last month was the lowest November retail hiring total since 2011, when retail jobs grew by 390,600.In addition to the November slowdown, retail hiring in October was adjusted downward from 214,500 to 210,400. That still represents a record high for October retail hiring, but it suggests that overall seasonal hiring may very well shrink from 2014 levels.Last year, retail employment increased by 755,000 from October 1 through December 31. That was down 4.0 percent from the previous year, when the holiday period saw employment grow by 786,800. Said Challenger. Foot traffic and retail sales are increasing, but retailers apparently feel that they are able to meet the increased demand with fewer overall workers.

A Conservative Estimate of ‘The Wal-Mart Effect': Wal-Mart’s growing trade deficit with China has displaced more than 400,000 U.S. jobs - In the long history of false promises made by trade negotiators, the claim that China’s entry into the World Trade Organization (WTO) in 2001 would reduce the U.S. trade deficit with China and create good U.S. jobs stands out. The total U.S. goods trade deficit with China reached $324.2 billion in 2013. Between 2001 and 2013, this growing deficit eliminated or displaced 3.2 million U.S. jobs (Kimball and Scott 2014). As the world’s largest retailer, U.S.-based Wal-Mart is a key conduit of Chinese imports into the American market. This paper updates earlier work (Scott 2007) to provide a conservative estimate of how many jobs have likely been displaced by Chinese imports entering the country through Wal-Mart:

  • Chinese imports entering through Wal-Mart in 2013 likely totaled at least $49.1 billion and the combined effect of imports from and exports to China conducted through Wal-Mart likely accounted for 15.3 percent of the growth of the total U.S. goods trade deficit with China between 2001 and 2013.
  • The Wal-Mart-based trade deficit with China alone eliminated or displaced over 400,000 U.S. jobs between 2001 and 2013.
  • The manufacturing sector and its workers have been hardest hit by the growth of Wal-Mart’s imports. Wal-Mart’s increased trade deficit with China between 2001 and 2013 eliminated 314,500 manufacturing jobs, 75.7 percent of the jobs lost from Wal-Mart’s trade deficit. These job losses are particularly destructive because jobs in the manufacturing sector pay higher wages and provide better benefits than most other industries, especially for workers with less than a college education.
  • Wal-Mart has announced plans to create opportunities for American manufacturing by “investing in American jobs.” To date, very few actual U.S. jobs have been created by this program, and since 2001, the growing Wal-Mart trade deficit with China has displaced more than 100 U.S. jobs for every actual or promised job created through this program.

Walmart’s Imports From China Displaced 400,000 Jobs, a Study Says - Imports from China by Walmart, the nation’s largest retailer and biggest importer, eliminated or displaced over 400,000 jobs in the United States between 2001 and 2013, according to an estimate by the Economic Policy Institute, a progressive research group that has long targeted Walmart’s policies. The jobs, mostly in manufacturing, represent about 13 percent of the 3.2 million jobs displaced over those same years that the study attributes to the United States’ goods trade deficit with China. Walmart’s Chinese imports amounted to at least $49 billion in 2013, according to the study, which was based on trade and labor data. Over all, the United States’ trade deficit with China hit $324 billion that year.Continue reading the main story  “Walmart is one of the major forces pulling imports into the United States,” said Robert E. Scott, an economist at the institute and the study’s author. “And the jobs we’re losing are good-paying manufacturing jobs, which pay higher wages and provide better benefits.”Walmart disputed the conclusions of the study, which is an update of estimates that the institute released in 2007. For one, many of the numbers used in the study rely on guesswork, because retailers do not generally release a breakdown of their imports.Some economists also point out that studies like these do not properly account for the jobs that imports can create in industries like transportation, wholesale and retail.

CBO: 2 million jobs' worth of hours lost under ObamaCare - ObamaCare will force a reduction in American work hours — the equivalent of 2 million jobs over the next decade, Congress’s nonpartisan scorekeeper said Monday. The total workforce will shrink by just under 1 percent as a result of changes in worker participation because of the new coverage expansions, mandates and changes in tax rates, according to a 22-page report released by the Congressional Budget Office (CBO).  “Some people would choose to work fewer hours; others would leave the labor force entirely or remain unemployed for longer than they otherwise would,” the agency said in its latest analysis of the now five-year-old law. The CBO is not predicting that employers will fire millions of workers or reduce hours because of the law, but that the law changes incentives over the years for the workers themselves both in part-time and full-time positions. That could mean that older Americans who wish to retire but have remained in the workforce solely for employer health benefits could opt to leave their jobs. Republicans were quick to seize on the report, which provides an update through 2025.

No, Obamacare Isn't Forcing People to Work Less - Kevin Drum - Here is Sarah Ferris writing in The Hill today: ObamaCare will force a reduction in American work hours — the equivalent of 2 million jobs over the next decade, Congress’s nonpartisan scorekeeper said Monday. That's an unfortunate choice of words, especially since three paragraphs later Ferris herself says it's not true: "The CBO is not predicting that employers will fire millions of workers or reduce hours because of the law, but that the law changes incentives over the years for the workers themselves both in part-time and full-time positions."  Obamacare isn't forcing anyone to do anything. According to the CBO it has three general effects:

  • It includes some tax increases, which modestly reduce incentives to earn more income.
  • It allows more people to buy health insurance even if they aren't employed, which modestly reduces incentives to work.
  • Its benefits decline as income goes up, which reduces incentives to work (in some cases) or to work more (in other cases).

CBO's specific estimates of reduced work incentives may be wrong—they strike me as a bit high— but their general conclusion is both correct and well-known. Tax increases do reduce incentives to work. There's nothing new here. Obamacare does change work incentives in certain ways, though the effect is small: about 1-2 percent of the workforce by 2025. But it doesn't force anything. There are no "broken promises" or "catastrophic failures" to rant about. Just some small marginal effects that shouldn't surprise anyone who's been paying attention.

America’s Middle Class Is No Longer the Majority - The middle class is no longer the majority in America. That’s the finding of a Pew Research Center report released Wednesday detailing how incomes and wealth have changed in the U.S. over more than four decades. There were 120.8 million adults in middle-income households in early 2015, compared with 121.3 million in lower- and upper-income households combined. It’s the first year since the nonpartisan research entity began tracking this data around 1970 that the latter total dwarfed the middle-income figure. Pew dubbed this a possible tipping point in the long erosion of the U.S. middle class, but in reality the division of Americans’ income pie has looked roughly the same for the last five years. Behind the decadeslong shift is the increasing concentration of income and wealth among the affluent. Pew’s study of data from the U.S. Census Bureau and the Federal Reserve Board of Governors found that the share of U.S. adults living in the upper-income tier grew more than the slice of those living in lower-income households. “High-skilled workers are increasingly favored, and if you’re of low skill, lesser education, you’re very likely to be left behind,”

Income inequality has squeezed the middle class out of the majority  -  After more than four decades of economic realignment and creeping inequality, the U.S. middle class is no longer the nation’s majority. The number of households that are middle class is now matched by those that are either upper or lower income, according to a report released Wednesday by the Pew Research Center. The nation has arrived at this tipping point in part because more Americans are moving up the income ladder. In 1971, just 14 percent of Americans were in the upper income tier, which Pew defined as more than double the nation’s median income. Now, 21 percent of American households are in that upper earning category -- at least $126,000 a year for a three-person household. But at the same time, many Americans are falling behind, helping to deplete the middle. In 1971, a quarter of American households fell into the bottom earning tier, which Pew defined as less than two-thirds of the nation’s median income. By 2015, 29 percent of American households fell into that category, which for a three-person household meant they earned $42,000 a year or less. Overall, the share of Americans living in middle-class households has declined from 61 percent in 1971 to 50 percent. The hollowing out of the middle class has been a source of consternation among many economists, politicians and the public at large. They say as Americans move toward the economic extremes it is harder to find common ground, and a common sense of what it means to be an American.

Demise of the US Middle Class Now Official --Yves Smith - The lead story at the Financial Times is based on a study by the Pew Research Center, on the dramatic decline of the US middle class. This is particularly noteworthy because while Pew plays straight up the center in its research on reporting, it is known among pollsters for skewing its questionnaires on economic issues to support conservative viewpoints (mind you, it’s subtle; Pew is no Rasmussen). The Pew study, The American Middle Class Is Losing Ground is more anodyne than the Financial Times writeup, and the pink paper seems to have made very good use of its embargo period. I’m relying on its account more heavily than I would normally, even though the underlying report is out, in part because (as you’ll see below) the FT supplemented the Pew report with some useful short profiles of Americans who are doing well and less well. But it is also instructive to see how the FT has spun the Pew report.  The underlying data is so bad as to be beyond remedy by porcine maquillage. And even traditional conservatives may recognize that the rise of His Trumpness and the popularity of Bernie Sanders are telling them that conditions for most Americans are worse than they realize in their upper-income echelons, and it might behoove them to understand what is going on. The Financial Times headline is uncharacteristically dramatic: America’s Middle Class Meltdown: core shrinks to half of US homes. And I find their infographic that charts the the shrinkage of the middle class cohort over time to be more informative than the Pew charts that presented the same information; we are partially replicating it by showing the starting and end shots:

For Immigrants, America Is Still More Welcoming Than Europe -- The United States has some of the most hostile policies toward an immigrant population found in the developed world.  Start with the special police forces dedicated to persecuting and deporting over a quarter of the nation’s immigrants, the estimated 11 million who entered the country without authorization. Then there is the lack of labor laws to shield them from wage theft and perilous jobs.  And don’t get me started on America’s stingy social insurance: even legal permanent residents are barred from a host of government programs, including Medicaid, food stamps and other welfare programs.So why is it that immigrants in the United States — including those here illegally — have managed to integrate far more successfully into the American economy and social fabric than foreigners arriving to the relatively coddled states of the European Union, where they often enjoy access right away to a panoply of rights and benefits?The difference is worth pondering.There is no question that citizens across the West are gripped by anxiety about immigration. It entwines a fear of imported terrorism with the older xenophobia of natives threatened by ethnic diversity.But closing the door to Muslims or building a wall across the southern border, Donald Trump notwithstanding, is not going to stop the many immigrants from impoverished fringes of the globe from continuing to make their way toward the wealthy and relatively secure societies of Europe and the United States.

What really improves the economic condition of immigrant farmworkers - There are few roles in the U.S. food system as tough as being an immigrant farmworker ... especially one without documentation. There has been enormous advocacy in recent years to improve farmworker wages and working conditions. Yet, in addition to advocacy, it is worthwhile to stay informed about the economic fundamentals that even more strongly influence working conditions for immigrant laborers. Consider the consequences of several recent years of economic recovery (which increases job opportunities outside of agriculture), combined with the failure of sensible immigration reforms (which would have included a compromise with farmers, designed to stabilize their labor supply). Economic growth and (perhaps pardoxically) nativist conservative grass-roots opposition to immigration reform have combined to raise wages for immigrant farmworkers. University of Florida researchers this week write about labor conditions for strawberries and other specialty crops in Choices MagazineSpecialty crop growers generally depend on a large number of farm workers to grow, harvest, and pack their tender fresh crops. Consequently, growers are sensitive to both the cost and availability of farm labor. Working conditions in agriculture are often physically challenging and hourly earnings are relatively low compared to other employment opportunities for U.S. residents. Thus, a large portion of agricultural labor needs have been met by immigrant workers. A high percentage of these immigrants are working in the United States without legal authorization. In recent years grower concerns over cost and availability have intensified as the rhetoric over comprehensive immigration reform continues to harden

Macy’s Imprisons Minority Customers and Extorts Them for Bogus Fines: Suit -- Cinthia Carolina Reyes Orellana had just finished trying on a set of shirts at Macy's Herald Square one evening last summer, when a Macy’s security guard grabbed her, seized her purse, accused her of planning to steal the shirts and forcibly escorted her to a holding cell in the basement, according to a lawsuit. Over the next three hours, she was searched, questioned, denied access to her phone to contact a lawyer or her family and ordered to admit her guilt by signing legal papers and forced to pay a $100 fine in cash before the security staff turned her over to the NYPD, according to the suit. Macy's then continued to harass her via mail, demanding additional fines even after the initial fee, in what her lawyer describes as a continuing policy by Macy's to shake down minority customers. “This coercive collection practice or scheme has become so profitable that Macy’s … has dedicated an entire unit within its existing store, which operates like a typical jail, equipped with holding cells, where alleged shoplifters are held for hours on end, and are pressured, threatened, and often harassed until they find no reprieve but to make civil penalty payments to [Macy’s],” according to the lawsuit filed last month in Bronx Supreme Court, but which has since been transferred to Manhattan Supreme Court. The class-action lawsuit estimates that thousands of customers have been targeted using a similar “money collection scheme” that lawyers say preys upon black, Hispanic and other minority customers using a “shopkeeper’s privilege” rule in New York's General Business Law that allows retailers to detain customers they believe tried to shoplift and ask them to pay a civil penalty without proving them guilty. "What the lawsuit aims to do, is to finally put an end to this practice, and bring justice to past victims, whom we encourage to come forward and join Cinthia,"

The War on Drugs Has Cost Taxpayers Over 1 Trillion Dollars - Despite increasing recognition of its usefulness as a medicine and increasingly state-level legalization, someone in the U.S. is arrested for marijuana possession about once every minute.The “war on drugs” costs Americans a staggering amount of money every year that it persists. Despite the billions they receive, federal, state and local law enforcement have a proven inability to stem the flow of drugs on the nation’s streets.  Since Richard Nixon declared a war on drugs in June 1971, the cost of that “war” had soared to over $1 trillion by 2010. Over $51 billion is spent annually to fight the drug war in the United States, according to Drug Policy Alliance, a nonprofit dedicated to promoting more humane drug policies. It’s also taken a massive toll on human lives. In 2013, at least 2.2 million people were incarcerated in the U.S., with some estimates reaching 2.4 million, making the U.S. home to the world’s largest prison population. A vast number of those prisoners are victims of the war on drugs, reported Alejandro Crawford in U.S. News and World Report in March“Still, we should take comfort in the fact that these are mostly violent criminals and hardened drug kingpins, right? Not so. About half the inmates in the federal prison system are there for nonviolent drug crime – up from 16 percent in 1970 – and the leading drug involved is marijuana. Of course, none of this seems to have made marijuana remotely difficult to procure for those who want it.” Although four states and Washington, D.C., have legalized marijuana, and 23 states allow at least limited use of medical marijuana or cannabidiol (CBD) oil, someone is arrested about once every minute for marijuana possession in the U.S., according to the Washington Post’s Christopher Ingraham:

The age of ‘pre-crime’ has arrived -- The headline reads, “LA City Council Considers Sending ‘Dear John’ Letters To Homes Of Men Who Solicit Prostitutes,” but what they’re considering is quite a bit worse than that. Los Angeles is considering sending “Dear John” letters to the homes of men who solicit prostitutes hoping the mail will be opened by mothers, girlfriends or wives. Privacy advocates are slamming the idea. The plan would use automated license plate readers to generate the letters, which would be aimed at shaming “Johns,” the Los Angeles Daily News reported. The city council voted Wednesday to ask the City Attorney’s office to examine sending so-called “John Letters,” the Daily News reported. Council member Nury Martinez, who represents a San Fernando Valley district that has a thriving street prostitution problem, introduced the plan.  I’m personally of the “what consenting adults do on their own time is none of the government’s business” camp. . We’re now to the point where we’re passing laws aimed at potential johns suspected of soliciting prostitutes, simply because they were seen in an area where prostitutes are known to work, all because it’s possible that the theoretical prostitutes those suspected johns might have been soliciting are potentially underage or might have been forced in to sex work involuntarily.

New report on Illinois budgeting: Yes, it really is that bad (Reuters) — Illinois has bent or broken every sound budgeting practice and should adopt reforms to help dig its way out of a huge pile of debt, according to a report released by the University of Illinois on Monday. The report by the Fiscal Futures Project at the university's Institute of Government & Public Affairs said the fifth-largest U.S. state "is badly in need of reform." Illinois has the lowest credit ratings and worst-funded pensions among all 50 states. An impasse between the Republican governor and Democrats who control the legislature has left Illinois without a budget halfway through fiscal 2016. The state's unpaid bill backlog, a barometer of its chronic structural budget deficit, is projected to hit $8.5 billion by the end of this month. The report slammed the state for faulty budget forecasting, not calculating the potential cost of new legislation,  insufficient funding for pensions and retiree healthcare costs, and the lack of a meaningful rainy day fund. "(Illinois') balanced budget requirement is one of the weakest you can imagine,"

Alaska predicts sharp oil tax decline amid low prices - US News: (AP) — The state of Alaska is projecting revenue from oil and gas production taxes at $172 million this year, a dramatic drop from two years ago when production taxes totaled $2.6 billion. Continued low oil prices contributed to the decline. "Nobody's making any money on oil," deputy Revenue Commissioner Jerry Burnett said. In a report released Tuesday, the state Revenue department said production taxes for fiscal year 2015, which ended June 30, totaled nearly $390 million. Alaska relies heavily on oil revenues to fund state government and is currently grappling with an estimated $3.5 billion budget deficit amid chronically low prices. In recent years, petroleum revenue provided about 90 percent of the money available for spending. Last year, that dropped to 75 percent, and it's not projected to provide more than 72 percent during the rest of the decade, the report said. Gov. Bill Walker is expected to release his budget proposal for fiscal year 2017 on Wednesday.

Gov: Puerto Rico default likely on upcoming bond payments - (AP) - Puerto Rico's governor said Wednesday that it's probable the U.S. territory will be unable to make more upcoming debt payments because it has no more money amid a worsening economic crisis. Gov. Alejandro Garcia Padilla spoke during a trip to Washington to meet with Republican legislators and others before a vote by Congress that might include a provision giving Puerto Rico public agencies access to Chapter 9 bankruptcy provisions. Puerto Rico faces more than $900 million in bond payments in January, including a $357 million general obligation bond payment due Jan. 1. It would be the island's first major default if the payment is not made. Puerto Rico's Public Finance Corporation already missed a $58 million bond payment in August. "If I have to choose on Jan. 1 between paying the salary of Puerto Rico workers or paying bondholders, I will pay the Puerto Ricans," Garcia said. "It's that simple. They will have to go to court to force me to do the opposite." Garcia did not directly answer a question about whether the government could make the Jan. 1 payment if Congress approved the bankruptcy measure. He said only that it would give Puerto Rico flexibility in talking with creditors out how to make upcoming payments. Puerto Rico recently made a $354 million bond payment even though officials said they were running out of money and warned of a possible government shutdown. Some investors have accused Garcia's administration of exaggerating the financial crisis to evade payment.

Shelters for immigrant children to open in Texas, California — Federal officials plan to open three shelters in Texas and California to accommodate up to 1,400 unaccompanied immigrant children as the number of people crossing from Mexico into the United States continues to rise. After a decline in crossings following last year’s surge of children entering the United States, border crossings rose again this summer. In October and November, 10,588 unaccompanied children have crossed the U.S.-Mexico border, according to the federal Border Patrol. That’s more than double the number for October and November last year. The increase led the U.S. Department of Health and Human Services to expand the number of beds it has for children, the agency said in a statement Thursday. The agency said it was acting “out of an abundance of caution.” The number of families crossing the border also has gone up significantly. Figures released last month for October indicated the number of family members crossing together tripled compared to October 2014, from about 2,100 to more than 6,000. Local officials in Texas were notified this week that unaccompanied children were about to arrive.

Pennsylvania schools borrow $900 million to survive state budget impasse - School districts across Pennsylvania have borrowed about $900 million altogether since July 1 to stay open because of the state's budget impasse, State Auditor General Eugene DePasquale told Reuters on Wednesday. That amount is more than double DePasquale's last estimate in October. The total will top $1 billion if there is no state budget by January, he said. "The longer it goes, the worse it gets," he said. Lawmakers in the state's Republican-led legislature are still hashing out a spending plan after a political stalemate with Democratic Governor Tom Wolf that has made Pennsylvania's fiscal 2016 budget late by 161 days. In the meantime, funding is not flowing to school districts and social service agencies that rely on state aid, forcing many to borrow and suffer. Lawmakers got closer this week to a budget deal they could present to Wolf, who is overseeing his first state budget since taking office in January. Republicans balked at Wolf's original proposals to hike taxes to pay for increased education funding. Wolf ran for office on a plan to restore education cuts made by his predecessor.

School Districts May Keep Schools Closed After Break  – Some Western Pennsylvania school districts say they may not reopen after the Christmas break if the state budget impasse continues. Officials from the Greenville Area and Sharpsville area school districts they’re running out of money because state subsidies are tied up while Gov. Tom Wolf and state lawmakers spar over a budget now more than five months overdue. Both districts say at least 60 percent of their budgets comes from state funds. Greenville Superintendent Mark Ferrara says his district is in “a very precarious position.” The school board is planning a special meeting next week to discuss closing the schools instead of borrowing money that could cost the district six figures in interest and other fees. Sharpsville administrators are also discussing a possible closure.

I gave my students iPads — then wished I could take them back -- I placed an iPad into the outstretched hands of each of my third-grade students, and a reverent, tech-induced hush descended on our classroom. We were circled together on our gathering rug, just finished with a conversation about “digital citizenship” and “online safety” and “our school district bought us these iPads to help us learn, so we are using them for learning purposes.” They’d nodded vigorously, thrilled by the thought of their very own iPads to take home every night and bring to school every day. Some of them had never touched a tablet before, and I watched them cradle the sleek devices in their arms. They flashed their gap-toothed grins — not at each other but at their shining screens. That was the first of many moments when I wished I could send the iPads back.Some adult ears might welcome a room of hushed 8-year-olds, but teachers of young children know that the chatter in a typical elementary classroom is what makes it a good place to learn. Yes, it’s sometimes too loud. These young humans are not great conversationalists. They are often hurting someone’s feelings or getting hurt, misunderstanding or overreacting or completely missing the point. They need time to learn communication skills — how to hold your own and how to get along with others. They need to talk and listen and talk some more at school, both with peers and with adults who can model conversation skills. The iPads subtly undermined that important work. My lively little kids stopped talking and adopted the bent-neck, plugged-in posture of tap, tap, swipe.

Our Own Private Disaster -- In August 2015 Kristen McQueary published an op-ed in the Chicago Tribune wishing that a Hurricane Katrina would wash away Chicago’s teachers unions and public housing: That’s what it took to hit the reset button in New Orleans. . . . A new mayor slashed the city budget, forced unpaid furloughs, cut positions, detonated labor contracts. . . . An underperforming public school system saw a complete makeover. A new schools chief, Paul Vallas, designed a school system with the flexibility of an entrepreneur. No restrictive mandates from the city or the state. No demands from teacher unions to abide. Instead, he created the nation’s first free-market education system. McQueary later apologized, but she was only repeating the beliefs of many of the country’s elite, who wish to do away with teachers unions and dispossess the long-term residents of American cities who trenchantly resist efforts to privatize social services. Former Tulane University president Scott Cowen’s new book, The Inevitable City, demonstrates how one member of the white New Orleans elite took it upon himself to subject his city to disaster capitalism post-Katrina, which he sees as model leadership to guide others seeking to do the same in their cities.

U.S. Senate Votes to Replace ‘No Child Left Behind’ Law - WSJ: The Senate on Wednesday voted to replace the 13-year-old No Child Left Behind law, returning to the states significant powers to determine how poorly performing schools should be improved and curbing the authority of the secretary of education. The Senate in a 85-12 vote cleared legislation that will guide about $26 billion federal in spending annually from preschool through 12th grade. Already approved by the House last week, the bill now goes to President Barack Obama. The White House said he would sign the bill on Thursday. The legislation maintains annual testing to identify groups of students who are failing, but empowers states to come up with their own standards and determine how to revamp schools that don’t make the grade. It comes after years of complaints from critics who argued No Child Left Behind spurred excessive testing in public schools and used unrealistic goals to label too many schools as failing.

Google Spying on 40 Million K-12 Students, Privacy Advocates Call for Federal Sanctions - Unlike its website declaration, Google’s “Apps for Education” isn’t a tool that “schools can trust,” because it is spying on 40 million K-12 students and compiling all their online activities even though it pledged not to do that, according to online privacy advocates. "Google is violating the Student Privacy Pledge in three ways,” said the Electronic Frontier Foundation (EFF), in a complaint filed with the Federal Trade Commission. “First… student personal information in the form of data about their use of non-educational Google services is collected, maintained, and used by Google for its own benefit, unrelated to authorized educational or school purposes.” “Second, the “Chrome Sync” feature of Google’s Chrome browser is turned on by default on all Google Chromebook laptops – including those sold to schools as part of Google for Education – thereby enabling Google to collect and use students’ entire browsing history and other data for its own benefit,” EFF continues. “And third, Google for Education’s Administrative settings, which enable a school administrator to control settings for all program Chromebooks, allow administrators to choose settings that share student personal information with Google and third-party websites.”

Millions of teens are using a new app to post anonymous thoughts, and most parents have no idea -- Millions of teenagers in high schools nationwide are using a smartphone app to anonymously share their deepest anxieties, secret crushes, vulgar assessments of their classmates and even violent threats, all without adults being able to look in. The After School app has exploded in popularity this school year and is now on more than 22,300 high school campuses, according to its creators. Because it is designed to be accessible only to teenagers, many parents and administrators have not known anything about it. Envisioned as a safe space for high schoolers to discuss sensitive issues without having to reveal their names, After School has in some cases become a vehicle for bullying, crude observations and alleged criminal activity, all under a cloak of secrecy. Similar to Yik Yak — an open app that has become popular on college campuses — After School allows teens to post comments and images on message boards associated with individual high school campuses but carries nothing identifying the students who post there.

Liberty University president urges students to carry guns, ‘end those Muslims’ - The president of the Liberty University is urging students to carry concealed weapons on campus in order to “end those Muslims” who would attack the campus. “Let’s teach them a lesson if they ever show up here,” President Jerry Falwell, Jr., told students at convocation Friday, according to the News & Advance. “It just blows my mind when I see that the President of the United States [says] that the answer to circumstances like that is more gun control,” he said. “I’ve always thought if more good people had concealed-carry permits, then we could end those Muslims before they walked in.” Students reportedly erupted into applause at the call to arms.

Divided Supreme Court Confronts Race-Based College Admissions - WSJ: A divided Supreme Court on Wednesday confronted for the second time whether policies at the University of Texas at Austin meet the strict standards it has set out for the use of racial preferences in school admissions. As in prior affirmative-action cases, the court appeared conflicted. Conservative justices sharply questioned the school’s use of racial factors to add to its minority student body, while liberals appeared supportive of the flagship university’s practice. Rather than produce a long-expected reckoning for racial preferences, the argument became mired in factual questions surrounding the UT case. Justice Anthony Kennedy, who two years ago wrote a compromise opinion that sent the suit to a lower court, expressed frustration it had returned without additional data that could point the way to a decision. “We’re just arguing the same case,” Justice Kennedy said. “It’s as if nothing had happened.” He suggested that a second remand, this time for trial proceedings that would scrutinize UT’s actual practices, might be appropriate. Most minority applicants accepted by UT enter through a program guaranteeing admission to Texas students who graduate in the top 10% or so of their high-school class. Because many schools in Texas are segregated by race, the approach ensures some minority students will get in. The university also rounds out its class with a supplementary “holistic” admissions program that considers race and other personal attributes.

U.S. top court divided over affirmative action in college admissions - Conservative justices expressed deep doubt on Wednesday about a university student admissions policy that gives preferences to racial minorities during a testy U.S. Supreme Court session in a case that could decide the fate of programs aimed at fostering racially diverse campuses. But conservative Anthony Kennedy, who often casts the deciding vote in close cases, raised the possibility of sending the closely watched case back to a trial judge to let the University of Texas submit more evidence to defend its consideration of race among other factors in picking applicants. This suggested Kennedy might be unwilling to throw out the school's affirmative action policy entirely. It was the second time the justices considered whether the affirmative action policy at the University of Texas at Austin violated the U.S. Constitution's guarantee of equal treatment under the law, and the oral argument lasted about 90 minutes, 30 longer than usual. The justices in 2013 sent the case back to a lower court. Some of the court's conservatives voiced skepticism about the success of affirmative action, its long-term value and even whether it is harmful to some minority students. If those conservatives prevail, the Texas program, challenged by a white applicant named Abigail Fisher who was denied admission in 2008, and others like it could be in jeopardy. The court appeared split ideologically, with liberals voicing support for affirmative action programs. A ruling is due by the end of June.

Argument analysis: Now, three options on college affirmative action : SCOTUSblog - The mystery of why the Supreme Court chose to take a second look at the challenge to the University of Texas at Austin’s consideration of race in choosing new students was partly solved in a prolonged hearing on Wednesday morning.  The case, it would appear, now comes down to three options: kill affirmative action nationwide as an experiment that can’t be made to work, kill just the way it is done at the Texas flagship university because it can’t be defended, or give the university one more chance to prove the need for its policy.  The Court bored deeply into the details of the Texas policy, in a hearing lengthened by more than a half-hour beyond the scheduled sixty minutes, and marked by heated exchanges and deep emotions, especially when discussing the academic skills of blacks and Hispanics as university candidates. Because the first two options that seemed to emerge would be momentous rulings, it may be that the Court would not want to do either with only an eight-member Court.  Justice Elena Kagan, because of her past involvement with this very case while a government lawyer, is not taking part, and a shortened bench might not want to act so boldly.  But even the Justice who talked most about another chance for the university — Anthony M. Kennedy — did not seem entirely convinced that it would make a difference. If the Court, after weeks of private deliberation, ultimately cannot assemble a clear five-Justice majority among the eight who will decide, that could lead to a simple order by an evenly divided Court with no opinion but with the practical effect of upholding the Texas program as is.  That would provide no guidance for other public colleges and universities.  Because no faction among the Justices would seem to want that, there is likely to be a strenuous effort to find a common ground — as there was last time, two years ago, when a seven-to-one decision returned the case to lower courts for another look, with modest new guidance.

Squandered Resources on College Education -- Most college students do not belong in college.   Richard Vedder, professor emeritus of economics at Ohio University, reports that “the U.S. Labor Department says the majority of new American jobs over the next decade do not need a college degree. We have a six-digit number of college-educated janitors in the U.S.” Vedder adds that there are “one-third of a million waiters and waitresses with college degrees.” More than one-third of currently working college graduates are in jobs that do not require a degree, such as flight attendants, taxi drivers and salesmen. College was not a wise use of these students’, their parents’ and taxpayer resources. What goes on at many colleges adds to the argument that college for many is a waste of resources. Some Framingham State University students were upset by an image of a Confederate flag sticker on another student’s laptop. They were offered counseling services by the university’s chief diversity and inclusion officer. Campus Reform reports that because of controversial newspaper op-eds, five Brown University students are claiming that freedom of speech does not confer the right to express opinions they find distasteful. A Harvard University student organization representing women’s interests now routinely advises students that they should not feel pressured to attend or participate in class sessions that focus on the law of sexual violence and that might therefore be traumatic. Such students will be useless to rape victims and don’t belong in law school.

Obama to cancel millions in student loans swindled by Rubio-supported Corinthian Colleges -- Corinthian College Inc. is the bankrupted and criminal organization that Marco Rubio was defending just this past year, probably because he got a boatload of money from them in campaign organizations. Over the past 10 years it has come to light—through numerous lawsuits and state and federal investigations—that untold billions of dollars has been swindled out of student and taxpayers’ pockets by this private educational company. Earlier this year the Obama administration forgave almost half a billion dollars in federal student loans that were fraudulently acquired and today it’s being reported that further cancelations of federal student loans are coming. The move marks the first recent use of a little-utilized provision in federal law that gives student debtors the right to petition the Education Department to discharge their debt in cases where they were defrauded into taking out loans. The debt forgiveness plan only affects 1 percent of the roughly 125,000 student debtors who are eligible for expedited debt cancellation. That comes to about 2 percent of the students' nearly $1.3 billion in combined loan balances. The department said in June and November that those borrowers were eligible for immediate loan relief after determining that Corinthian had likely defrauded the former students by advertising false job placement rates. The move is symbolic at best right now. As the Huffington Post points out, Massachusetts is being pressured to do six times that number in their state alone.

Calstrs under pressure to reveal private equity fees - Calstrs, the second-largest US public pension plan, is under growing pressure to end its silence regarding unreported performance fees paid to some of Wall Street’s largest money managers. US public pension schemes have paid tens of billions of dollars to private equity managers in performance fees, known as “carried interest”, but only a tiny fraction has ever been disclosed. California’s state treasurer, John Chiang, is in the process of carrying through legislation to require full fee disclosures by private equity managers working with any Californian public pension fund. He says: “Pension funds and other [investors] pay excessive fees to private equity firms and do not have sufficient visibility into the nature and amount of those fees. “Because fees paid to private equity [managers] reduce returns, [pension fund] trustees should be able see and understand all of the fees they are charged.” California-based Calstrs, which manages $188bn on behalf of 880,000 current and retired teachers, is one of the world’s largest private equity investors. Calstrs’ private equity programme, which began in 1988, holds $20.3bn in assets. The pension scheme says it has generated $21.8bn in profits for its members by investing in private equity, but it has never revealed how much carried interest has been paid to private equity managers. Ludovic Phalippou, a finance professor at the University of Oxford’s Saïd Business School, estimates that Calstrs has paid around $2.5bn in carried interest since 1988.

How CalPERS Violated California Open Meeting Laws to Stifle Private Equity Skeptics and Keep the Board in the Dark by Yves Smith - Please see the preceding posts in our CalPERS Debunks Private Equity series:

Executive Summary
* Investors Like CalPERS Rely on ILPA to Advance Their Cause, When It is Owned by Private Equity General Partners
* Harvard Professor Josh Lerner Gave Weak and Internally Contradictory Plug for Private Equity at CalPERS Workshop
* CalPERS Used Sleight of Hand, Accounting Tricks, to Make False “There is No Alternative” Claim for Private Equity
How CalPERS Lies to Itself and Others to Justify Investing in Private Equity
* More on How CalPERS Lies to Itself and Others to Justify Investing in Private Equity

We’ve documented past instances of how the giant California pension fund CalPERS has operated as if can ignore the Bagley-Keene Open Meeting Act. That law is designed to assure that state official receive input from interested members of the public before making decisions. We’ve already documented two long-standing violations of Bagley-Keene by CalPERS. One was in having the board approve bonuses and salary increases for CalPERS’ top executives in “closed session” which is California-speak for private meetings. CalPERS redid its 2014-2015 awards in “open session” after we alerted the board members of this flouting of the law.

How CalPERS Fails to Use its Leverage in Private Equity -  Yves Smith - Please see the preceding posts in our CalPERS Debunks Private Equity series: A major undercurrent of the private equity workshop that CalPERS held in November was how little ability it had to change the rules of the game in private equity. We’ll discuss today how CalPERS’ learned helplessness has more to do with intellectual capture than with the reality of the power relationships. We’ve taken issue in past posts with many of the assumptions that CalPERS and other investors have made, the most important being that they have to invest in private equity due to its allegedly superior returns. We’ve debunked that notion.

Former California Official Blasts CalPERS CEO Anne Stausboll for “Betrayal of Trust” in Hiring Scandal-Ridden Fiduciary Counsel -- Yves Smith - By way of background, Tony Butka was California’s Presiding Conciliator of its State Mediation & Conciliation Service and is now a CalPERS beneficiary. That means he is well qualified to judge the competence and propriety of the actions of state officials, since he had the opportunity to observe disputes across a large range of agencies and activities in his role as arbitrator. Butka has issued a second blistering critique the (mis)conduct of CalPERS’ CEO, Anne Stausboll, mere months after he wrote Treasurer John Chiang, who is a CalPERS board member, to alert him that the Chief Investment Officer, Ted Eliopoulos, the head of private equity, Réal Desorchers, and private equity professional Christine Gogan had been so dishonest with the board that they all have should have received a notice of intent to discharge. Butka eviscerates Anne Stausboll’s latest power grab, this in the form of a detailed analysis of how the processes for selecting the sensitive role of fiduciary counsel, was made through a slipshod, self-serving manner. We’ve written separately and at considerable length as to how the winner, Robert Klausner, has been mired in scandal for over a decade, has refused to produce records and is now ducking a subpoeana in Jacksonville, Florida, where he has been accused by the city of helping set up an illegal super-lucrative pension fund for the trustees and top employees of its Police and Fire Pension Fund. Even worse, that “Senior Staff” pension fund, which was kept secret for ten years, effectively loots the regular police and fireman pension fund.

Corruption, Again? CalPERS Keeping Lobbying Records SECRET From its Board Members -- One of the 13 members of the CalPERS Board of Director’s was NOT allowed to get copies of reports made by the agencies’ Washington lobbyists. So, he filed an Open Record Act, to get the information. What does CalPERS think of this? “Robert Klausner, CalPERS fiduciary counsel, told the board that “external” action by a member can undermine a decision or policy adopted by a majority of the board. “To go through the Public Records Act, or ask somebody else to do it, I think it undermines again the effectiveness of the mission of the board as a whole,” Klausner said, “and I don’t think that’s consistent with good fiduciary practice.” In other words, telling the Board, which has a fiduciary responsible, how the agency works and what it is doing could ruin the “effectiveness” of the staff. Guess this is a priori evidence of corruption—the staff is hiding what it is doing from the Board of Directors and public—only a crooked government agency would do that. Remember, CalPERS has been caught recently involved in corruption—looks like the staff has no respect for the law or its Board. It is time for the Board to fire every staff member involved in the hiding of the lobbyist reports. What do you think?

Our Bloomberg Op-Ed on CalPERS’ Plan to Get Rid of Private Equity Risk by Ignoring It -- Yves Smith - As we said at the start of our Bloomberg op-ed, Calpers Can’t Eliminate Risk by Ignoring It, which ran yesterday:  What would you think if a pension fund responsible for 1.7 million beneficiaries said it was going to stop considering the the riskiness of one of its biggest investments?   Incredibly, that’s what the board of the California Public Employees’ Retirement System, America’s biggest public pension fund, might do on Dec. 14. One item on its meeting agenda would eliminate the strategic objective to “maximize risk-adjusted rates of return” on private equity, which involves using large amounts of debt to buy out companies with the aim of reselling them at a profit. This is a major policy change, engineered by the people who manage Calpers’s private equity investments. Pay attention, because this is a case study in how CaLPERS’ staff manipulates the board to its own advantage.  CalPERS is apparently making this change in response to its poor performance in private equity over the last ten years. So CalPERS is acting like a fat person who decides to throw out the scale rather than look at its weight problem. And its enabler, its private equity consultant Pension Consulting Alliance (“PCA”) hasn’t even attempted to muster an intellectual justification to the board for this change. In a September board meeting at CalPERS’s Sacramento sister, CalSTRS, another PCA client, the account manager for both funds, Mike Moy, blandly acknowledged that private equity investors have a performance problem but then blamed the benchmarks!

Illinois Pension Liability Now $111 Billion - Cash-strapped Illinois has seen the unfunded liability of its pension systems rise yet again. Illinois Public Radio's Amanda Vinicky reports. Politicians continually skipped putting the state's employers' share of workers' retirement benefits in the bank --- instead using the money to go on government spending sprees. So last year, Illinois' long-term pension debt came in at more than $104 billion. This fiscal year, that's ticked up to $111 billion. Dan Long is director of the state's forecasting agency, which just issued these updated figures. "We're significantly underfunded. We have the largest underfunded pension systems in the country and of course the dollar amount is quite significant at $111 billion." Long says that means next year, Illinois will have to put about $7 billion dollars into pensions. He says were Illinois to have paid its part in the past, and was left only paying the regular, annual tab -- known as "normal cost" -- that figure would fall to a couple billion. Court decisions have hindered Illinois' ability to minimize costs by cutting retirees' benefits.

Discharge Of Soldiers With Mental Health Issues Questioned | Here & Now: Last month NPR revealed that the Army has kicked out tens of thousands of soldiers who came back from the wars with mental health problems, on controversial grounds that they committed misconduct. As a result, those soldiers lost crucial benefits. Today we take a look at how important those military benefits can be to someone suffering the after-effects of war. As Michael de Yoanna of Here & Now contributor Colorado Public Radio explains in a collaboration with NPR, the kind of mental illness that the military decides those vets have can make all the difference. Here & Now’s Eric Westervelt then speaks with Daniel Zwerdling in NPR’s Investigations Unit.

Corporate Psychopaths Housing Senior Citizens: A Personal Editorial - A new report released today by the American Association for Justice (AAJ) illustrates how the civil justice system is the most effective force in uncovering abuses by corporate nursing homes and insurance companies that target elderly Americans. There are 1.5 million elderly Americans currently residing in nursing homes -- facilities that are now operated by mostly large corporate chains banking on the upcoming influx of baby boomers. Many of these vulnerable residents have suffered abuse by staff members and even died from dehydration or infection caused by inadequate care. The report explains how litigation has revealed this neglect and abuse and allowed residents and their families to hold offending corporations accountable. "Corporate nursing homes and insurance companies have continually chosen to put profits ahead of the well-being of our most vulnerable population," said AAJ President Gibson Vance. "Where regulatory and legislative bodies have been unable to cope with this distressing rise of neglect and abuse of our elderly, the civil justice system has stepped into the breach." A common theme in the report is abuse by insurance companies taking advantage of senior citizens. It highlights the story of a South Dakota farmer named Rudy, who was one of a flood of patients that companies signed up for long-term care insurance in the 1990s. Rudy moved into a nursing home at his doctor's suggestion, only to have his benefits cut after three years when the company declared his care was no longer "medically necessary," despite faithfully paying his monthly premium.

1 in 5 Americans Expects to Die With Debt - US News: Although recent indicators suggest monthly job growth is solid, wages are on the rise and the overall trajectory of the U.S. economy is headed in the right direction, debt is still a primary source of anxiety for millions across the country. In fact, more than 1 in 5 indebted Americans believes his or her debts are unpayable in the long run, according to a report published Wednesday by That study, which surveyed more than 4,000 Americans to determine how they felt about their current levels of personal debt, found that 21 percent of respondents believed they would die before they could pay off their credit card bills, car payments, student loans, mortgages or other types of debt. That's up from 18 percent last year and just 9 percent the year before.Nearly a third (32.2 percent) of respondents in this year's report said they would be more than 70 years old before they'd be able to pay up. But there was some good news: More than 22 percent said they didn't have any debt to speak of – a significant improvement from just 14 percent last year. "While it's great to see more people freeing themselves from debt, the fact that more and more people still feel trapped and hopeless means that Americans still have a major problem with debt," Matt Schulz, senior industry analyst at, said in a statement accompanying the report.

The Biggest Blow To Obamacare Yet Could Come From Democrats - Democratic leaders in Congress have been trying to do something about the Cadillac tax for quite a while. The end of the year has provided an opportunity to act, because of a much larger package of tax cuts that the White House and congressional leaders have been discussing for several weeks. That package would make permanent some unrelated tax breaks -- some (favored strongly by Republicans) for corporations and some (favored strongly by Democrats) for the working poor. In just the last few days, Democratic leaders -- and, in particular, Senate Minority Leader Harry Reid -- insisted that any package include a two-year delay of the Cadillac tax, so that it takes effect in 2020 rather than 2018. And while Republican leaders are in no rush to do the Democrats or the unions any favors, they are hearing from business supporters who share labor's antipathy for the tax. The GOP leaders have signaled their support for the Cadillac tax delay as part of the big tax package -- as long as it comes with a similar, two-year "pause" in a tax on the medical device industry. That's no problem for the Democrats, since many of them represent states or districts with large device makers -- and have been joining the GOP in its calls to delay or repeal it. In the past, the White House has fought hard to defend both the Cadillac tax and medical device tax. But the president would have a difficult time vetoing a bill that includes tax relief for the working poor, given political circumstances. Among other things, the intense political opposition to the Cadillac tax means that it is unlikely to survive, in current form, past this administration anyway. Just last week, an amendment to eliminate Cadillac tax repeal as part of a broader proposal to repeal the Affordable Care Act passed by a vote of 90 to 10.

Health insurance and medication is growing more expensive in the US - Health care costs saw significant growth in 2014, according to the Centers for Medicare and Medicaid Services. The federal agency has noted that health care expenditures are accelerating, with consumers and businesses spending a great deal of money on insurance coverage. As costs continue to grow, consumers are beginning to feel significant financial pressure. Finding a way to reduce health insurance costs is beginning to become a priority for the country, but an effective solution has yet to be found. According to the Centers for Medicare and Medicaid Services, total health care spending in the United States reached $3.031 trillion in 2014. This is approximately $9,523 per person with health insurance coverage. This represents a 5.3% increase in health care costs over what they had been in 2013. One of the reasons health care costs have grown so much is because of the expansion of health insurance coverage. The Affordable Care Act has made insurance coverage much more available to consumers throughout the country, which has lead to increased costs.Approximately 5.4 million people, which had initially been uninsured, have managed to find coverage through insurance exchanges and other channels. The majority of consumers that found coverage recently also receive subsidies from the federal government, which help lower the cost of health insurance coverage.

Health care costs are out of reach for one in four working adults with private insurance: Health care costs are out of reach for one in four working adults with private insurance and many go without needed medical care as a result, new research shows. “More Americans than ever have health insurance,” said Dr. David Blumenthal, president of the Commonwealth Fund, which conducted the study, “but these findings show that too many people with all types of coverage aren’t getting care because of high costs.” The report looked at premiums, deductibles and out-of-pocket expenses as a share of income. About nine in 10 people in the survey had employer-sponsored insurance while about 6 percent had Obamacare coverage and 5 percent had an individual plan. With the advent of the Affordable Care Act, also known as Obamacare, the focus has been on those who have no insurance at all. But as health care costs rise, businesses in recent years have been shifting more costs to employees in the form of higher deductibles, copayments and premiums, all at a time when wages have been stagnant. The study found that high deductibles are one of the top reasons people can’t afford health care. About 43 percent of those in the survey ─ and 51 percent of low- and moderate-income people ─ said their deductible is difficult or impossible to afford. “We are seeing deductibles rise among employers,” said Cheryl Parcham, private insurance program director for the nonprofit health care consumer group Families USA. “It is a really huge problem for many consumers.”

Thanks Obamacare—-Health Care Spending Hits Record 17.5% Of GDP - - U.S. health-care spending jumped 5.3 percent last year, the biggest increase since President Barack Obama took office, as millions of people gained insurance coverage under Obamacare. Spending on hospitals, doctors, drugs and other health-care expenses hit $3 trillion in 2014, or 17.5 percent of the economy, according to a study released Wednesday by government actuaries. Enrollment in private health plans increased by 2.2 million people to 189.9 million, while 7.7 million more people were covered by Medicaid, the U.S.-funded, state run program for the poor, bringing the total to 65.9 million. The U.S. had seen years of slow health-care cost growth after the economic downturn that ended in 2009. The 2.9 percent rise in 2013 was the slowest in the 55 years that the U.S. has studied the figure. Actuaries at the Centers for Medicare and Medicaid Services, or CMS, estimated in July that spending will rise an average of 5.8 percent a year over the decade through 2024. “Today’s report reminds us that we must remain vigilant in focusing on delivering better health care outcomes, which leads to smarter spending, particularly as costs increase in key care areas, like prescription drugs,” CMS Acting Administrator Andy Slavitt said in a statement. Spending on retail prescription drugs was among the fastest-growing categories, rising 12.2 percent, as new treatments for hepatitis C and some cancers were introduced, according to the report. Drug spending accounted for $297.7 billion, just under 10 percent of the total.

Why the U.S. should pay Irish drug prices if Pfizer wants to pay Irish tax rates -- Last week, the drug giant Pfizer announced its plan to become an Irish drug company, moving its corporate headquarters abroad as part of a complex business maneuver that would allow it to skirt billions in U.S. taxes. That came on top of more general outrage over the soaring prices of many drugs — made by Pfizer and other companies — which are often many fold higher in America than overseas.‎ Pharmaceutical companies often claim that the profits they earn from high U.S. prices fuels U.S. innovation. But that’s not the whole story. Non-U.S. drug companies also benefit from our high prices, and that would be true for the new Ireland-based Pfizer too. So how about this approach instead? If Pfizer becomes an Irish drug company, paying Irish taxes, then surely it wouldn't mind charging Irish drug prices to the nation it left behind. I'll be the first to say this idea has no future. But it's worth considering the math. After all, there is a lot of money at stake on each side of the ledger. The federal government stands to lose a large portion of annual taxes Pfizer pays, which totaled $1.2 billion in 2014. It would also lose perhaps as much as $48 billion in deferred taxes the company will eventually pay if it repatriates dollars that are already overseas. On the other side, Pfizer’s drug prices are way higher here than they are in Ireland. One pill of the lowest dose (25 mg) of muscle pain medication Lyrica, the company’s biggest seller, costs $2.36 in the famously frugal U.S. Veterans Administration pharmacy. But it costs only.47 euros ($0.53) in Ireland, according to the Irish National Formulary.

How Pfizer Set the Cost of Its New Drug at $9,850 a Month - WSJ: Days before Pfizer Inc. PFE 0.22 % was to set the price for a new breast-cancer drug called Ibrance, it got a surprise: A competitor raised the monthly cost of a rival treatment by nearly a thousand dollars. Three years of market research—a stretch that started almost as soon as the new treatment showed promise in the laboratory—was suddenly in doubt. After carefully calibrating the price to be close to rivals and to keep doctors and insurers happy, Pfizer was left wondering if its list price of $9,850 a month for the pills was too low.It was a tricky issue. Drug companies have been reaching for new heights of pricing. They routinely raise the cost of older medicines and then peg new ones to these levels. Yet Pfizer knew setting a price too high for Ibrance might backfire. It could antagonize doctors and prompt health insurers to make prescribing the pills a cumbersome process with extra paperwork that doctors dislike. A look at Pfizer’s long journey to set Ibrance’s price—a process normally hidden from view—illuminates the arcane art behind rising U.S. drug prices that are arousing criticism from doctors, employers, members of Congress and the public. A Senate committee is holding a drug-price hearing on Wednesday, focusing on sudden large increases imposed by companies that purchased the rights to drugs developed by others. Pricey options The average cost of a branded cancer drug in the U.S. is around $10,000 a month, double the level a decade ago, according to data firm IMS Health. IMS -0.50 % Cancer doctors say high costs are unavoidable because all of the options are pricey. “I think that says something about where we all are in terms of drug costs: We’ve gotten used to something that is pretty outrageous,”

Health Check: the low-down on trans fats: When you buy commercially baked goods such as pies, pastries, cakes and biscuits, there’s a good likelihood they’ll contain one of the nastier types of fatty acids: trans fats. These unsaturated fats have been chemically altered to give them a longer shelf life and withstand repeated re-heating. Trans fats are produced through hydrogenation, a manufacturing process where hydrogen is added into the fatty acid structure of fats. This stabilises the oil, allowing it to remain solid at room temperature and to be turned into margarine and cooking fat. Small amounts of trans fatty acids (trans fats) are also found naturally in dairy and meat products. Trans fats were initially thought to be a healthy alternative to saturated fat, particularly after the 1950s, when alarms were raised about saturated fats. But by the 1990s the evidence indicated otherwise. Trans fats were linked with elevated LDL (bad cholesterol) and reduced HDL (good cholesterol), leading to an increased risk of heart disease. The World Health Organisation recommends less than 1% of a person’s total energy intake be derived from trans fats. The United States introduced mandatory labelling of trans fat content in foods in 2006. In June 2015, the FDA determined that partially hydrogenated oils were not “generally regarded as safe” for use in human food.The evidence for the determination came from four large population-based studies that found trans fat increases the risk of heart disease.

This is why Americans are overweight and broke -- Down to your last belt loop and your last penny? These seemingly unrelated phenomena may have more in common than you think, a new survey shows.  Dining out is the No. 1 thing that Americans blow their budgets on, according to the Principal Financial Group’s annual Financial Well Being Index, which will be released Wednesday (MarketWatch got an early look at the data). The company surveyed more than 1,100 employed American adults. Those restaurant meals are also adding to our growing waistlines: On days when people dine out, they tend to consume 200 more calories than when they eat at home, according to a study of more than 12,500 people published by Public Health Nutrition last year, and government research shows that “when eating out, people either eat more or eat higher calorie foods — or both — and that this tendency appears to be increasing.” Other studies show that eating out more frequently is associated with obesity and higher body fat.  And the problem is getting worse. While 22% of Americans blew their budgets on dining out in 2014, this year, 24% did so.

US life expectancy flat for third year  - US life expectancy flat for third year Life expectancy in the United States has stalled for three straight years, the government announced Wednesday. A child born last year can expect to make it to 78 years and 9 1/2 months — the same prediction made for the previous two years. In most of the years since World War II, life expectancy in the U.S. has inched up —- thanks largely to medical advances, public health campaigns and better nutrition and education. The last time it was stuck for three years was in the mid-1980s. What does this mean for the future solvency of Social Security? Beats the crap out of me. But it sure casts doubt on all those who preach “demography is destiny” and “we are all living longer so work until you are 70″. On a more mathy note small changes in input into Social Security models can have amazing effects on output, particularly over 75 year actuarial projections. Tweak some mortality and immigration assumptions and results change dramatically. We don’t even have to go the MJ.ABW. Though More Jobs. At Better Wages would itself have some outsized effects.

US Life Expectancy Flat for Third Year - naked capitalism Yves here. This is a short but deceptively important post. The fact that life expectancy in the US is no longer rising, in a time of economic growth, is yet another sign of underlying societal decay.  There are underlying factors that should in theory lead to longer life expectancies, such as fewer smokers in the population. Similarly, cancer rates are falling. And we have supposedly better access overall to health care thanks to Obamacare.  But offsetting that are the rise of diabetes, and most important, rising income disparity and weakening social bonds. As we’ve pointed out repeatedly, income disparity has high health costs, even for the rich. From one of our very first posts, in 2007, quoting Michael Prowse in the Financial TimesThose who would deny a link between health and inequality must first grapple with the following paradox. There is a strong relationship between income and health within countries. In any nation you will find that people on high incomes tend to live longer and have fewer chronic illnesses than people on low incomes. Yet, if you look for differences between countries, the relationship between income and health largely disintegrates. Rich Americans, for instance, are healthier on average than poor Americans, as measured by life expectancy. But, although the US is a much richer country than, say, Greece, Americans on average have a lower life expectancy than Greeks. More income, it seems, gives you a health advantage with respect to your fellow citizens, but not with respect to people living in other countries…. Once a floor standard of living is attained, people tend to be healthier when three conditions hold: they are valued and respected by others; they feel ‘in control’ in their work and home lives; and they enjoy a dense network of social contacts. Economically unequal societies tend to do poorly in all three respects: they tend to be characterised by big status differences, by big differences in people’s sense of control and by low levels of civic participation….

When Inequality Kills - Joseph E. Stiglitz --This week, Angus Deaton will receive the Nobel Memorial Prize in Economics “for his analysis of consumption, poverty, and welfare.” Deservedly so. Indeed, soon after the award was announced in October, Deaton published some startling work with Ann Case in the Proceedings of the National Academy of Sciences – research that is at least as newsworthy as the Nobel ceremony. Analyzing a vast amount of data about health and deaths among Americans, Case and Deaton showed declining life expectancy and health for middle-aged white Americans, especially those with a high school education or less.  America prides itself on being one of the world’s most prosperous countries, and can boast that in every recent year except one (2009) per capita GDP has increased. And a sign of prosperity is supposed to be good health and longevity. But, while the US spends more money per capita on medical care than almost any other country (and more as a percentage of GDP), it is far from topping the world in life expectancy. France, for example, spends less than 12% of its GDP on medical care, compared to 17% in the US. Yet Americans can expect to live three full years less than the French.  The racial gap in health is, of course, all too real. According to a study published in 2014, life expectancy for African Americans is some four years lower for women and more than five years lower for men, relative to whites. This disparity, however, is hardly just an innocuous result of a more heterogeneous society. It is a symptom of America’s disgrace: pervasive discrimination against African Americans, reflected in median household income that is less than 60% that of white households. The effects of lower income are exacerbated by the fact that the US is the only advanced country not to recognize access to health care as a basic right.

Psychiatric Drugs Are Being Prescribed to Infants - Andrew Rios’s seizures began when he was 5 months old and only got worse. At 18 months, when an epilepsy medication resulted in violent behavior, he was prescribed the antipsychotic Risperdal, a drug typically used to treat schizophrenia and bipolar disorder in adults, and rarely used for children as young as 5 years.When Andrew screamed in his sleep and seemed to interact with people and objects that were not there, his frightened mother researched Risperdal and discovered that the drug was not approved, and had never even been studied, in children anywhere near as young as Andrew.“It was just ‘Take this, no big deal,’ like they were Tic Tacs,” said Genesis Rios, a mother of five in Rancho Dominguez, Calif. “He was just a baby.”Cases like that of Andrew Rios, in which children age 2 or younger are prescribed psychiatric medications to address alarmingly violent or withdrawn behavior, are rising rapidly, data shows. Many doctors worry that these drugs, designed for adults and only warily accepted for certain school-age youngsters, are being used to treat children still in cribs despite no published research into their effectiveness and potential health risks for children so young.

Rio Olympic water worse than thought, viral equivalent of raw sewage – Athletes who ingest three teaspoons of water have 99 percent chance of infection -  Heil, 26, was treated at a Berlin hospital for MRSA, a flesh-eating bacteria, shortly after sailing in an Olympic test event in Rio in August. But his strategy to avoid a repeat infection won't limit his risk. A new round of testing by The Associated Press shows the city's Olympic waterways are as rife with pathogens far offshore as they are nearer land, where raw sewage flows into them from fetid rivers and storm drains. That means there is no dilution factor in the bay or lagoon where events will take place and no less risk to the health of athletes like sailors competing farther from the shore. "Those virus levels are widespread. It's not just along the shoreline but it's elsewhere in the water, therefore it's going to increase the exposure of the people who come into contact with those waters," said Kristina Mena, an expert in waterborne viruses and an associate professor of public health at the University of Texas Health Science Center at Houston. "We're talking about an extreme environment, where the pollution is so high that exposure is imminent and the chance of infection very likely." In July, the AP reported that its first round of tests showed disease-causing viruses directly linked to human sewage at levels up to 1.7 million times what would be considered highly alarming in the U.S. or Europe. Experts said athletes were competing in the viral equivalent of raw sewage and exposure to dangerous health risks almost certain. […] "The levels of viruses are so high in these Brazilian waters that if we saw those levels here in the United States on beaches, officials would likely close those beaches," Mena said. […]

What Happens If Someone Uses This DIY Gene Hacking Kit to Make Mutant Bacteria? - The revolutionary gene-editing technology CRISPR/Cas9 has the potential to eradicate disease or invite a new wave of eugenics, depending on who you ask. Now, through an Indiegogo campaign, anyone can purchase their own kit to try the science themselves at home.  For a donation of $130 or more, backers are promised a  "DIY CRISPR Kit, Learn Modern Science By Doing" that includes "everything you need to make precision genome edits in bacteria": a laboratory grade pipette, media and plates; bacteria and DNA; and detailed written and video instructions. For a donation of $160, you can edit the genome of yeast. And for $5,000, Zayner will work with you to create "a unique desired trait for your own, personal, original, unique, genetically engineered organism."  The use of CRISPR/Cas9 is becoming a contentious topic, however. Some scientists are worried that modifying the genome in a way that passes to the next generation could cause unintended, irreversible mutations. CRISPR/Cas9 could also theoretically be used to modify embryos and create what some have billed as biologically superior super humans, raising ethical concerns that are still playing out.  The National Institutes of Health announced in April that it will not fund any use of gene-editing technologies in human embryos due to safety and ethical concerns. In March, a group of scientists published an editorial in March in Nature calling for a moratorium on research using the technique to modify human reproductive cells, or making genetic changes that could then be inherited.  The kits won't going to allow people to genetically modify humans, but Zayner is still getting some heat for the project. One medical doctor emailed him with “grave concerns” about putting the technology in the hands of lay people.  “Reprogramming bacteria or fungi could have serious ramifications, such as inadvertent or intended multi-drug resistance, faster multiplication, toxin production, and persisting potency when aerosolized,” the doctor wrote.

Scientist Who Discovered GMOs Cause Tumors in Rats Wins Landmark Defamation Lawsuit in Paris: Was French Prof. Gilles-Eric Séralini correct when he discovered that scientific feeding experiments past 90 days with GMO food and rats can cause serious health problems including tumors? The answer to that question has been debated ever since the initial publication of his study, culminating in a republication of the study in another peer-reviewed journal that wasn’t nearly as well covered as the initial retraction was by the mainstream media. Now, Prof. Séralini is in the news again – this time for winning a major court victory in a libel trial that represents the second court victory for Séralini and his team in less than a month. On November 25, the High Court in Paris indicted Marc Fallous, the former chairman of France’s Biomolecular Engineering Commission, for “forgery” and the “use of forgery.” The details of the case have not been officially released. But according to this article from the Séralini website, Fallous used or copied the signature of a scientist whose name was used, without his agreement, to argue that Séralini and his co-workers were wrong in their studies on Monsanto products, including GM corn. A sentencing for Fallous is expected in June 2016.

Monsanto to Be Put on Trial for ‘Crimes Against Nature and Humanity’  - The Organic Consumers Association, IFOAM International Organics, Navdanya, Regeneration International (RI) and Millions Against Monsanto, joined by dozens of global food, farming and environmental justice groups announced last week that they will put Monsanto, a U.S.-based transnational corporation, on trial for crimes against nature and humanity and ecocide, in The Hague, Netherlands, next year on World Food Day, Oct. 16, 2016. The announcement was made at a press conference held in conjunction with the COP21 United Nations Conference on Climate Change in Paris. “The time is long overdue for a global citizens’ tribunal to put Monsanto on trial for crimes against humanity and the environment,” Ronnie Cummins, international director of the Organic Consumers Association and Via Organica, said. “We are in Paris this month to address the most serious threat that humans have ever faced in our 100-200,000 year evolution—global warming and climate disruption. Why is there so much carbon dioxide, methane and nitrous oxide in the atmosphere and not enough carbon organic matter in the soil? Corporate agribusiness, industrial forestry, the garbage and sewage industry and agricultural biotechnology have literally killed the climate-stabilizing, carbon-sink capacity of the Earth’s living soil.” Vandana Shiva, physicist, author, activist and founder of Navdanya agrees. “Monsanto has pushed GMOs in order to collect royalties from poor farmers, trapping them in unpayable debt and pushing them to suicide,” she said. “Monsanto promotes an agro-industrial model that contributes at least 50 percent of global anthropogenic greenhouse gas emissions. Monsanto is also largely responsible for the depletion of soil and water resources, species extinction and declining biodiversity and the displacement of millions of small farmers worldwide.”

3 Ways Monsanto Contributes to Climate Chaos and World Hunger -- Monsanto claims that GMO farming will support farmers while fighting climate change and drought, but they are in fact a major cause of the problem. Their products are creating the very problem they seek to solve and no amount of denial or PR will hide this from the public for much longer. GMOs are genetically engineered with DNA from foreign species, bacteria, promoters or silencers of RNA. GMO crops are nearly 90 percent engineered to resist herbicides and pesticides. More and more chemical cocktails are being sprayed on our food than ever.These chemicals often do not dry, wash or cook off. They have not been tested for safety in conjunction with each-other and the “safety studies” presented to the regulatory agencies are paid for by the chemical companies who stand to profit from them.When I requested a Freedom of Information Act from the U.S. Environmental Protection Agency’s (EPA) studies in 2014, I was stunned to see many of the studies claimed to show safety. I can personally verify that many of these studies show serious risk of harm to life.The EPA is in fact ignoring the harm that has been proven by these chemicals, many of which are on restricted use lists, have been deemed a probable carcinogen or are banned from other countries altogether. Hundreds of studies show serious harm from these chemicals to gut health, IQ, autoimmune disorders, mental issues and fertility. GMO crops increase the ingestion of chemicals which wreak havoc on life. This does not benefit humans. It only benefits the chemical companies who want to make a profit for their shareholders.

DuPont and Dow Talks Put Spotlight on Agricultural Industry - WSJ: The potential merger of DuPont Co. and Dow Chemical Co. could spur agricultural rivals to forge their own partnerships, further shrinking the handful of companies that dominate the global seed and pesticide business. The two U.S. chemical giants are considering a combination that would lead to a three-way split of their businesses post merger, The Wall Street Journal reported this week. Uniting Dow and DuPont’s agricultural units would create a deeper pesticide portfolio against weeds, bugs and fungi and a stronger franchise in genetically modified seeds, ratcheting up competition with Monsanto Co., the top global seller of seeds, and Syngenta , the world leader in pesticides. Dow and DuPont get most of their revenue from sales of chemicals and materials, but a combination wouldn’t sharply shift the competitive landscape in that relatively fragmented industry. A deal would, however, be the first major shake-up in more than a decade for the seed-and-pesticides business currently led by six firms including Germany’s Bayer and BASF SE. Those companies are contending with weak crop prices world-wide that have pinched farmers’ wallets and forced them to curtail spending on everything from seeds to fertilizer and tractors. “It is just the beginning” of consolidation in that area, said Mark Gulley, principal of New York-based chemicals consultancy Gulley & Associates LLC. “The industry’s overdue.”

Russia Wants to Be World’s Top Exporter of Non-GMO Food -- Russia—which largely opposes genetically modified food (GMOs) and is stamping out GMOs in its entire food production—wants to be world’s largest exporter of non-GMO food, according to RT. In a speech given to Russian Parliament last week, President Vladimir Putin announced his intention to be the world’s biggest supplier of “ecologically clean and high-quality food” and criticized GMO food production in western countries even though demand for organic food has soared exponentially in recent years. “We are not only able to feed ourselves taking into account our lands, water resources—Russia is able to become the largest world supplier of healthy, ecologically clean and high-quality food which the Western producers have long lost, especially given the fact that demand for such products in the world market is steadily growing,” he said. Putin also said that in the last decade, Russia has gone from importing half of its food to becoming a net exporter. Putin claims that Russia now makes more money from selling food than from selling weapons and fuel. “Ten years ago, we imported almost half of the food from abroad, and were dependent on imports. Now Russia is among the exporters. Last year, Russian exports of agricultural products amounted to almost $20 billion—a quarter more than the revenue from the sale of arms, or one-third the revenue coming from gas exports,” he said.

How Can Farming Help Solve Climate Change? - by k.m. - The subjects of farming, agriculture, forestry, soil, meat, crops, growing methods, and land use are finally being recognized as important contributors and mitigators of greenhouse gases. The Paris COP21 talks have spurred discussion and many articles from numerous sources related to how agriculture can or might contribute to carbon sequestration. This includes producing and feeding global populations in the most CO2 efficient ways possible. I thought it would be valuable to do a round up of some of the articles that address agriculture as it relates to climate change, and that is the purpose of this post.

Carbon Farming Gets A Nod At Paris Climate Conference - This week, world leaders are hashing out a binding agreement in Paris at the 2015 U.N. Climate Change Conference for curbing greenhouse gas emissions. And for the first time, they've made the capture of carbon in soil a formal part of the global response to the climate crisis. "This is a game changer because soil carbon is now central to how the world manages climate change. I am stunned," says André Leu, president of IFOAM — Organics International, an organization that promotes organic agriculture and carbon farming worldwide. Leu is referring to the United Nations Lima-Paris Action Agenda, a sort of side deal aimed at "robust global action towards low carbon and resilient societies." On Dec. 1, countries, businesses and NGOs signed on to a series of new commitments under the agenda, including several on agriculture. Currently, the Earth's atmosphere contains about 400 parts per million of carbon dioxide. Eric Toensmeier, a lecturer at Yale and the author of The Carbon Farming Solution, a book due out in February, says the atmosphere's carbon dioxide levels must be cut to 350 parts per million or lower to curb climate change. Toensmeier and Leu are among a growing number of environmental advocates who say one of the best opportunities for drawing carbon back to Earth is for farmers and other land managers to try to sequester more carbon in the soil.

Earth has lost a third of arable land in past 40 years, scientists say - The world has lost a third of its arable land due to erosion or pollution in the past 40 years, with potentially disastrous consequences as global demand for food soars, scientists have warned. New research has calculated that nearly 33% of the world’s adequate or high-quality food-producing land has been lost at a rate that far outstrips the pace of natural processes to replace diminished soil. The University of Sheffield’s Grantham Centre for Sustainable Futures, which undertook the study by analysing various pieces of research published over the past decade, said the loss was “catastrophic” and the trend close to being irretrievable without major changes to agricultural practices.  The continual ploughing of fields, combined with heavy use of fertilizers, has degraded soils across the world, the research found, with erosion occurring at a pace of up to 100 times greater than the rate of soil formation. It takes around 500 years for just 2.5cm of topsoil to be created amid unimpeded ecological changes. “You think of the dust bowl of the 1930s in North America and then you realise we are moving towards that situation if we don’t do something,”“We are increasing the rate of loss and we are reducing soils to their bare mineral components,” he said. “We are creating soils that aren’t fit for anything except for holding a plant up. The soils are silting up river systems – if you look at the huge brown stain in the ocean where the Amazon deposits soil, you realise how much we are accelerating that process.

Fear at the tap: Uranium contaminates water in the West: (AP) — In a trailer park tucked among irrigated orchards that help make California's San Joaquin Valley the richest farm region in the world, 16-year-old Giselle Alvarez, one of the few English-speakers in the community of farmworkers, puzzles over the notices posted on front doors: There's a danger in their drinking water. Uranium, the notices warn, tests at a level considered unsafe by federal and state standards. The law requires the park's owners to post the warnings. But they are awkwardly worded and in English, a language few of the park's dozens of Spanish-speaking families can read. "It says you can drink the water — but if you drink the water over a period of time, you can get cancer," said Alvarez, whose working-class family has no choice but keep drinking and cooking with the tainted tap water daily, as they have since Alvarez was just learning to walk. "They really don't explain." Uranium, the stuff of nuclear fuel for power plants and atom bombs, increasingly is showing in drinking water systems in major farming regions of the U.S. West — a naturally occurring but unexpected byproduct of irrigation, of drought, and of the overpumping of natural underground water reserves. An Associated Press investigation in California's central farm valleys — along with the U.S. Central Plains, among the areas most affected — found authorities are doing little to inform the public at large of the growing risk.

Chennai floods devastate India’s fourth-largest city. -- Right now, Chennai—India’s fourth-largest city with a metro area the size of Chicago—is paralyzed. Flooding from record rainfall—the heaviest in more than a hundred years—has cut off more than 3 million people from basic services for days. At least 270 people have died, and what’s happening should provide a cautionary tale to the world: Chennai is a new type of “natural” disaster, a preview of the Anthropocene, the idea that humans have become a geological-scale force of nature. November was Chennai’s rainiest calendar month in history: An unimaginable 47 inches fell. Then, this week, things got worse. Wednesday’s rains brought an additional 11 inches—34 times the normal amount. More rain is expected in the coming days, linked to an enhanced northeast monsoon boosted by a record-strong El Niño in the Pacific Ocean and the record-warm Indian Ocean. Flooding is nothing new in Chennai—major floods have occurred there in 1903, 1943, 1978, 1985, 2002, and 2005—but it’s very likely that enhanced evaporation linked to climate change has contributed to this week’s tragedy, making heavy rains more likely. The country’s lead meteorologist as well as its prime minister, Narendra Modi, have both endorsed this linkage.

Chinese Glacier’s Retreat Signals Trouble for Asian Water Supply - Over the years, Qin Xiang and his fellow scientists at a high and lonely research station in the Qilian Mountains of northwest China have tracked the inexorable effects of rising temperatures on one of China’s most important water sources.“The thing most sensitive to climate change is a glacier,” said Dr. Qin, 42, as he slowly trod across an icy field of the Mengke Glacier, one of the country’s largest. “In the 1970s, people thought glaciers were permanent. They didn’t think that glaciers would recede. They thought this glacier would endure. But then the climate began changing, and temperatures climbed.” Beneath Dr. Qin’s feet, the cracking ice signaled the second-by-second shifting of the glacier. The extreme effects predicted of global climate change are already happening in western China. Glacier retreat here and across the so-called Third Pole, the glaciers of the Himalayas and related mountain ranges, threatens Asia’s water supply. Towns and villages along the arid Hexi Corridor, a passage on the historic Silk Road where camels still roam, have suffered floods and landslides caused by sudden summer rainstorms. Permafrost is disappearing from the Tibet-Qinghai Plateau, jeopardizing the existence of plants and animals, the livelihoods of its people and even the integrity of infrastructure like China’s high-altitude railway to Lhasa, Tibet.

Emperor Weather, Turning Up the Heat on History -- In the last imperial age, the two superpowers made “end times” a human possession for the first time in history. The U.S. and then the USSR took the super power of the atom and built nuclear arsenals capable of destroying the planet several times over. (These days, even a relatively modest exchange of such weapons between India and Pakistan might plunge the world into a version of nuclear winter in which a billion people might die of hunger.) And yet while an instant apocalypse loomed, a slow-motion version of the same, also human-made, was approaching, unrecognized by anyone. That is, of course, what the Paris Summit is all about: what the exploitation of fossil fuels has been doing to this planet. Keep in mind that since the industrial revolution we’ve already warmed the Earth by about 1 degree Celsius. Climate scientists have generally suggested that, if temperatures rise above 2 degrees Celsius, a potentially devastating set of changes could occur in our environment. Some climate scientists, however, believe that even a 2-degree rise would prove devastating to human life. In either case, even if the Paris pledges from 183 nations to cut back on greenhouse gas emissions are agreed upon and carried out, they would only limit the rise in global temperatures to between an estimated 2.7 and 3.7 degrees Celsius. If no agreement is reached or little of it is actually carried out, the rise could be in the 5-degree range, which would be devastating. Over the coming decades, this could indeed give Emperor Weather his global realm. Of course, his air power -- his bombers, jets, and drones -- would be superstorms; his invading armies would be mega-droughts and mega-floods; and his navy, with the total or partial melting of the Greenland and Antarctic ice sheets, would be the rising seas of the planet, which would rob humanity of its coastlines and many of its great cities. His forces would occupy not just one or two countries in the Greater Middle East or elsewhere, but the entire planet, lock, stock, and barrel.

Global warming could cause extinction of oxygen-producing ocean phytoplankton – ‘This would likely result in the mass mortality of animals and humans’ – Falling oxygen levels caused by global warming could be a greater threat to the survival of life on planet Earth than flooding, according to researchers from the University of Leicester. A study led by Sergei Petrovskii has shown that an increase in the water temperature of the world’s oceans of around six degrees Celsius – which some scientists predict could occur as soon as 2100 - could stop oxygen production by phytoplankton by disrupting the process of photosynthesis. Professor Petrovskii explained: “About two-thirds of the planet’s total atmospheric oxygen is produced by ocean phytoplankton – and therefore cessation would result in the depletion of atmospheric oxygen on a global scale. This would likely result in the mass mortality of animals and humans.” The team developed a new model of oxygen production in the ocean that takes into account basic interactions in the plankton community, such as oxygen production in photosynthesis, oxygen consumption because of plankton breathing, and zooplankton feeding on phytoplankton. While mainstream research often focuses on the CO2 cycle, as carbon dioxide is the agent mainly responsible for global warming, few researchers have explored the effects of global warming on oxygen production. The paper ‘Mathematical Modelling of Plankton–Oxygen Dynamics Under the Climate Change’ published in the Bulletin of Mathematical Biology is available here:

New Data Suggest Period of Soaring Global Emissions May Have Peaked - Industrial emissions of greenhouse gases rose only slightly in 2014 and appear to be on track to decline in 2015, according to new data that raise the possibility that a period of rapid global emissions growth may be coming to an end.The decline of 0.6 percent projected for this year, should it come to pass, would be highly unusual at a time when the global economy is growing. The projection contrasts sharply with emissions growth that averaged 2.4 percent a year over the last decade, and sometimes topped 3 percent. The new figures were released at the climate conference here by the Global Carbon Project, a collaboration that studies emissions, and published simultaneously in the journal Nature Climate Change.Past emissions declines have usually been linked to economic distress, such as the global financial panic of 2009 and the Russian economic meltdown of the late 1990s.The new figures suggest that there is a chance that global emissions have already peaked and may be starting a long-term decline, experts said Monday, which would be an important inflection point for the international effort to limit the risks of global warming.

Global carbon emissions growth to stall in 2015 -research – Growth in global carbon dioxide emissions is expected to slow for a second year running in 2015, in spite of economic growth, after typically rising by around 2 to 3 percent since the turn of the century, according to research published on Monday. Global carbon emissions edged up by 0.6 percent last year, compared to 2.4 percent annual growth from 2004-2013, said the study by Britain’s University of East Anglia (UEA) and the Global Carbon Project, which compiles data from research institutes worldwide. In 2015, however, the researchers expect global carbon emissions to decline by 0.6 percent to 35.7 gigatonnes – their central projection from a range of -1.6 percent to +0.5 percent. “These figures are certainly not typical of the growth trajectory seen since 2000 where the annual growth in emissions was between 2 and 3 percent,” said Corinne Le Quéré, of the UEA and one of the authors of the study in the journal Nature Climate Change. “What we are now seeing is that emissions appear to have stalled and they could even decline slightly in 2015,” she added.

China’s Coal Cuts Are Driving A Plateau In Global Carbon Emissions  -- Today’s stunning news from Paris: Global CO2 emissions growth has halted in the last two years, while GDP growth continues. In fact, 2015 is headed toward the first drop in CO2 emissions during a period of economic growth. The well-respected international Global Carbon Project announced Monday the key findings of their detailed survey of global carbon dioxide emissions. The group’s Nature Climate Change article, “Reaching peak emissions” concludes:  Rapid growth in global CO2 emissions from fossil fuels and industry ceased in the past two years, despite continued economic growth. Decreased coal use in China was largely responsible, coupled with slower global growth in petroleum and faster growth in renewables.”  More specifically, “CO2 emissions from fossil fuels and industry grew +0.6% in 2014, and are projected to decline by 0.6% in 2015.” Here is the key chart — a major contender for chart of the year:

The Latest: Virgin CEO calls for bold action on climate -- Richard Branson has renewed a call by business leaders for leaders to include a goal of reducing global emissions to "net zero" by 2050, meaning no more than the planet can absorb. In an interview with The Associated Press, the Virgin Group chief executive said a failure to include such a commitment in the Paris climate talks underway until Dec. 11 would result in "an alternative too horrible to contemplate."Branson spoke after a meeting of business leaders who met to discuss the status of the week-old climate talks aimed at keeping global warming below 2 degrees Celsius (3.5 degrees Fahrenheit) above pre-industrial times. Branson said he's confident that government leaders "will bring in an agreement, but it most likely won't go as far as the business world would like it to go."

Paris COP21: Is India the Main Stumbling Block at Climate Talks?: By some measures India has offered a lot to the talks. Its national pledge on future emissions includes perhaps the most ambitious renewable energy program in the world, with 175 gigawatts of green power, including 100 megawatts of solar panels, by 2022. But many here nonetheless see India as the biggest single threat to curbing CO2 emissions in the next few decades. The problem is coal. The speed of India's current industrialization is so fast that, even with a huge surge in solar energy, the country still plans the world's fastest rate of construction of coal-fired power stations — another 110 gigawatts of capacity by 2022. "India is very far from a two-degree pathway," Priyadarshi Shukla, a recently appointed co-chair of the Intergovernmental Panel on Climate Change, told a side meeting. Its current pledges "won't deliver [Indian emissions] peaking before 2050."  India invokes "climate justice” — a favorite phrase here — in saying it is entitled to industrialize with coal in the same way the rich world once did. But small island states at risk of disappearing beneath the waves as warming raises sea levels don't buy that. The president of the Pacific island state of Kiribati, Anote Tong, also demanded "climate justice" when calling for a global moratorium on new coal mines to limit warming to 1.5 degrees Celsius and help save his nation.

COP21: Delhi bans cars on alternate days to cut pollution - -- Delhi will become the latest megacity to impose drastic restrictions on cars in an attempt to limit air pollution, with the government of India’s largest city banning cars from roads on alternate days from January 1 based on their number plates. The decision was made at an emergency meeting on Friday under chief minister Arvind Kejriwal a day after the Delhi High Court compared being in the Indian capital to “living in a gas chamber” and ordered remedial action. Other cities have introduced similar restrictions, including Lagos, Athens, Manila and Beijing, but one perverse effect has been to encourage the rich to buy new cars. If one car has an even number plate and the other one an odd number plate, owners can take to the roads on any day of the week. India has been shrouded in hazardous smog for the past month, with particles from diesel exhaust, coal-fired power stations, construction dust, burning crop waste and cow dung used for cooking fuel typically reaching 10 times the level considered safe by international standards. On bad days, admissions to hospital for respiratory ailments increase, visibility is sharply reduced and the American Embassy School suspends outdoor sports for pupils. By some measures, Delhi now has the dirtiest air of any city in the world — worse even than Beijing. According to the World Health Organisation, India has 13 of the 20 cities in the world most polluted by dust composed of tiny, cancer-causing particulates known as PM2.5. “Every year the pollution level increases in winter,” said Delhi chief secretary K.K. Sharma. “From January 1, 2016, odd and even numbered vehicles will run on alternate days. Alternate arrangements are being made to bolster public transport.”

Read Arnold Schwarzenegger’s delightful response to climate deniers - Former California Gov. and human bicep Arnold Schwarzenegger has a message for climate deniers. “I don’t give a **** if we agree about climate change,” he wrote in a message on Facebook. The entire note is worth reading, but we especially enjoyed this analogy: There are two doors. Behind Door Number One is a completely sealed room, with a regular, gasoline-fueled car. Behind Door Number Two is an identical, completely sealed room, with an electric car. Both engines are running full blast. I want you to pick a door to open, and enter the room and shut the door behind you. You have to stay in the room you choose for one hour. You cannot turn off the engine. You do not get a gas mask. I’m guessing you chose the Door Number Two, with the electric car, right? Door number one is a fatal choice — who would ever want to breathe those fumes? This is the choice the world is making right now. To use one of the four-letter words all of you commenters love, I don’t give a damn if you believe in climate change. I couldn’t care less if you’re concerned about temperatures rising or melting glaciers. It doesn’t matter to me which of us is right about the science. I just hope that you’ll join me in opening Door Number Two, to a smarter, cleaner, healthier, more profitable energy future.

Climate talks enter next phase, toughest decisions ahead: (Reuters) - Global climate change talks in Paris moved into a new, tougher phase on Saturday as negotiators agreed on a draft accord, albeit one that still leaves hundreds of points of dispute for ministers to resolve next week. While a largely procedural step in the four-year quest for a binding deal to slow global warming, the fact that senior officials from almost 200 nations agreed on a draft marks an advance over the last, failed summit in Copenhagen six years ago. French Foreign Minister Laurent Fabius warned that much work lay ahead to reach an accord by the end of the conference on Dec. 11 that will bind both rich and poor nations to combat global warming beyond 2020. "We are not discussing just the environment, the climate. It's life," he told delegates. "We have to succeed here." The top delegate from China, Su Wei, said the first week of the talks "though very difficult, have produced very good results and provide a strong foundation for next week". Even so, the new text highlights how much work remains to be done for ministers including U.S. Secretary of State John Kerry, in finding consensus on issues that have bedevilled talks for four years. Negotiators have left them 939 pieces of bracketed text representing varying options for resolving disagreements. Some developing nations want to phase out fossil fuels by 2050, for instance, but China, the biggest emitter of greenhouse gases, is among those preferring to promise merely to shift to a low-carbon economy this century.

"Economists agree: economic models underestimate climate change" -- It's fairly well-established at this point that there's a robust scientific consensus about the threat of climate change. But analysts and journalists often say (or imply) that there's less of an economic consensus, that economists are leery of the actions recommended by scientists because of their cost. Is it true? It turns out there have been very few systematic surveys of economists' opinions on the subject, and the few that have been done suffer from methodological shortcomings. Now the New York–based Institute for Policy Integrity has tried to remedy that situation with just such a large-scale survey of economists who have published work on climate change. The conclusion? There is broad consensus on some questions, a wider spread on others, but in every case the median opinion of climate economists supports more vigorous action against climate change, sooner. Like scientists, economists agree that climate change is a serious threat and that immediate action is needed to address it.

World’s climate response could ‘strand’ Canada's carbon assets, Al Gore says - The global financial system faces a growing risk from the world’s response to climate change that will “strand” fossil-fuel assets, including much of Canada’s oil-sands reserves, former U.S. vice-president Al Gore said on Thursday. Mr. Gore was speaking at a session at the Paris climate summit on the long-term carbon-asset risk. The British financial think tank Carbon Tracker released a report there that concluded $2-trillion (U.S.) in coal, oil and natural-gas reserves will be uneconomical if the world succeeds in keeping the temperature increase to two degrees Celsius. Canada’s industry is particularly vulnerable because it has high-cost production, Carbon Tracker said. It forecast that about $220-billion worth of the country’s fossil-fuel reserves would be “stranded” in a two-degree world. Oil-sands producers and companies proposing to build liquefied natural gas plants in British Columbia will find it difficult to compete with low-cost suppliers around the globe as climate policies drive down demand for fossil-based energy, James Leaton, co-author of the report, said in an interview. Mr. Gore said the financial community has yet to adequately assess the climate risk, even as the world is moving more quickly than many realize to reduce the demand for fossil fuels and expand the investment in renewable energy that will cut the demand for coal and oil, in particular. “Investors need to look at the pattern that is unfolding, lest they be trapped holding stranded assets,” he said.

Paris Climate Negotiations Won’t Stop the Planet Burning - The much-vaunted COP21 negotiations in Paris are, despite the claims of world leaders, dead on arrival. Emissions reductions targets are not up for discussion. Those pledges are already on the table, having been put forward voluntarily by each country. Government negotiators in Paris are instead looking at banal details of how and when countries should commit to improving their voluntary pledges, and ensuring "transparency" and "accountability".  But current emissions pledges already guarantee disaster. A report by the United Nations Framework Convention on Climate Change (UNFCC) released in October calculated that: “Compared with the emission levels consistent with the least-cost 2 °C scenarios, aggregate GHG emission levels resulting from the INDCs [intended nationally determined contributions] are expected to be higher by 8.7 (4.7–13.0) Gt CO2 eq (19 percent, range 10–29 percent) in 2025 and by 15.1 (11.1–21.7) Gt CO2 eq (35 per cent, range 26–59 percent) in 2030.” The targets set in stone before Paris, in other words, are already insufficient to avoid a global average temperature rise of 2 degrees Celsius – accepted by policymakers as the safe limit beyond which the planet enters the realm of dangerous climate change. According to the UNFCC report, “much greater emission reductions effort than those associated with the INDCs will be required in the period after 2025 and 2030 to hold the temperature rise below 2 °C above pre-industrial levels.”

Effect of climate deal on Texas is up in the air  -- All eyes are on Paris this week as the United Nations climate summit finalizes worldwide targets to reduce greenhouse gas emissions. The plan is expected by the conclusion of the two-week summit on Friday, and it is already having a special resonance in Texas, the nation’s largest energy producer. President Barack Obama laid out the U.S. position in a speech at the summit’s opening: “I’ve come here personally, as the leader of the world’s largest economy and the second-largest emitter, to say that the United States of America not only recognizes our role in creating this problem, we embrace our responsibility to do something about it.” Many of the industry critics of Obama’s ambitious plans to reduce carbon dioxide proposed before the summit say regulations such as in the Clean Power Plan will drive up costs. But Texas isn’t just an oil-producing state; the energy industry in other sectors, especially natural gas, and including wind and solar, have a strong base in Texas, which leads the country in wind energy and is 10th in solar power. “There’s a debate over what will come out of this (summit),” said Howard Feldman, senior director of regulatory and scientific affairs at the American Petroleum Institute, speaking from Paris. “We think there are regulations in place that meet what the U.S. has on the table of a 26 percent to 28 percent reduction in carbon dioxide by 2025.”

Politicization of climate change hinders adaptation in cities – report -  – Portland, Oregon, gets it -- adapting to climate change, that is. Local decision makers in the liberal city, with a bustling population of just over 600,000 people, reported very high levels of concern about climate change and advanced adaptation plans, according to an analysis undertaken by researchers at George Washington University (GW).  Published this month in the journal Global Environmental Change, the six-city case study looked at the levels and types of climate planning in Portland; Boston; Los Angeles; Tucson, Ariz.; Raleigh, N.C.; and Tampa, Fla. At the bottom of the list fell Tampa. Despite having a high climate risk -- with thousands of people below sea level and the increased possibility of being hit by a hurricane -- the city of about 350,000 has very little in the way of adaptation plans.  In Los Angeles, which ranked third in the study, officials expressed concern over natural disasters like wildfire, drought and earthquakes, which prompted them to take action. In Tampa, where more than 125,000 residents live below sea level and are in jeopardy of being affected by a hurricane, the fact that one had not occurred in nearly a century served as evidence that hurricanes were normal, despite modeling that indicates a storm surge would be deadly.  The study found that officials in Florida remain largely unconcerned about climate change, many denying the science. Nongovernmental organizations that would advocate for action felt stymied because there was little political openness on the subject. "Interviewees in Tampa overwhelmingly claimed that, mainly due to lack of political buy-in regarding climate change, their city remains one of the most vulnerable and least prepared cities in the country," the authors wrote.

Doubts about the rich-poor nation divide loom over U.N. climate debate – Among the stumbling blocks for a global climate deal in Paris is a decades-old U.N. view that divides the world into two camps — wealthy countries that bear the financial responsibility for climate change and developing nations that do not. From the outset, one of the biggest issues has been moving money from those rich nations that have produced most of the world’s greenhouse gas emissions since the industrial revolution to developing nations that want funds to help shift their growing economies to a lower-carbon future. But the breakdown stems from 1992 when countries agreed on the United Nations Framework Convention on Climate Change — and much has changed over the past two and a bit decades, including the rapid rise of Asian economies. Back then, China was one-third its current economic size and it has seen its greenhouse gas emissions grow almost three-fold between 1990 and today, according to the International Energy Agency. And until the past year or so, a prolonged energy boom bolstered exporting nations in the Gulf. As a result, a re-reckoning is in order, richer nations argue. They want a new climate agreement in Paris to recognize a more diverse pool of climate finance “donor countries” who will contribute to the goal of raising $100 billion a year by 2020 and more in the years beyond to help developing nations grow and cope with the effects of climate change.

The Trojan Horse in Paris -- Leaders of the climate meeting in Paris would like us to believe that it is a global effort to reach a global climate agreement on emission reductions, national plans to achieve them, support for clean energy, and wealth transfers to developing countries. This is an illusion. The media has overlooked that the Paris meeting is a Trojan Horse hiding the religious zealotry of environmentalism, the quest for power, and the blackmail by developing countries to get $100 billion given to them annually.  Ever since Rachel Carson’s Silent Spring there has been a gradual melding of religion and environmentalism. The late author, student of anthropology, and physician Michael Crichton addressed this in a speech at the Commonwealth Club in San Francisco in 2003. He made the point that in a secular society people have to believe in something to give meaning to life. He explained why “one of the most powerful religions in the Western World is environmentalism. Environmentalism seems to be the religion of choice for urban atheists. … just look at the beliefs, ... you see that environmentalism is in fact a perfect 21st century remapping of traditional Judeo-Christian beliefs and myths.”  The reality is that the Paris Conference of Parties 21 meeting, as it is officially known, is a conclave of environmental evangelists whose orthodoxy is intended to reshape societies and economies. Viewing it in religious terms goes a long way in explaining why its leaders and many delegates are immune to scientific and economic evidence that pursuing the objective of controlling climate change is a fools’ errand and will result in serious economic damage, especially in the developing world.

The Insanity of the COP: We Must Adopt a Different Vision - Well, we have to decide, are these people stupid or are they just uninformed? Are they badly advised? I think that Obama really believes he’s doing something. You know, he wants to have a legacy, a legacy having done something in the climate problem. But what he is proposing is totally ineffectual. I mean, there are some small things that are talked about here, the fact that they may have a fund for investment and invest more in clean energies, but these are minor things. As long as fossil fuels are dirt cheap, people will keep burning them. Interview on Democracy Now!, December 4, 2015Thus spoke climate scientist James Hansen after listening to the statements of the heads of state at the Paris COP 21 negotiations last week.  He went on to say: “What I am hearing is that the heads of state are planning to clap each other on the back and say this is a very successful conference. If that is what happens, we are screwing the next generation, because we are doing the same as before…. we hear the same old thing as Kyoto [in 1997]. We are asking each country to cap emissions, or reduce emissions. In science when you do a well conducted experiment you expect to get the same result. So why are we talking about doing the same again? This is half-arsed and half-baked.” We are now entering the second and final week of the talks, and there is considerable discussion in much of the world press about the growing possibility of a historic agreement.  Ministers will settle down to resolve the many parts of the treaty text still in brackets, with diametrically opposed competing proposals still very much found across the still sizable forty-plus page document.

The Paris Climate Talks Are Sponsored In Part By The Fossil Fuel Industry - Engie, formally known as GDF Suez, is a massive energy company — according to the Brand Finance Brandirectory, it is the most valuable utilities company in the world, bringing in more than $80 billion in annual revenue. A lot of that value comes from its fossil fuel operations — more than 70 percent of the company’s energy output comes from natural gas and coal, compared to 13 percent from renewable energy. As a single entity, Engie emitted as much greenhouse gases in 2014 as the entire country of Belgium.  Engie is also a prominent sponsor of the current U.N. climate talks taking place in Paris, present everywhere from a wind-power installation outside of the negotiating complex at Le Bourget to a large stall at the Solutions COP21 exhibit at Le Grand Palais in downtown Paris. And Engie isn’t the only company with ties to fossil fuels to be included as a sponsor at the Paris talks — corporations like Électricité de France (EDF), which operates 16 major coal plants worldwide, and BNP Paribas, one of the world’s top banks for financing coal production, are also prominent sponsors of the event. “These are actors that are still driving the climate crisis, and meanwhile they are sponsoring the very forum that is supposed to create the solution,” Katherine Sawyer, international organizer for Corporate Accountability International, told ThinkProgress. “We are at a critical juncture where we have no time to waste, and we need this agreement to work for people around the world whose livelihoods and cultures are at risk of being taken from them from climate change.”

Jeremy Grantham Urges "Easily Manipulated" Americans To "Become More Realistic" About World's Demise - It takes little experience in the investment business to realize that investors prefer good news. Similarly, we environmentalists were shocked to realize how profoundly the general public preferred to believe good news on our climate, even if it meant disregarding the National Academies of the world. The fossil fuel industry, not surprisingly, encouraged this positive attitude. They had billions of dollars to protect. If the realistic information were to be widely believed, most of their assets would be stranded. When dealing with realistic limits to growth it is also obvious how reluctant everyone is to accept the natural mathematical limits: There simply cannot be compound growth in a finite world. A modest 1% growth compounded for the 3,000 years of Ancient Egypt’s population would have multiplied its economic output by nine trillion times!1 Yet, the improbability of feeding ten billion or so global inhabitants in 50 years is shrugged off with ease. And the entire economic and political system appears eager to encourage optimism on resources for it is completely wedded to the virtues of quantitative growth forever. Hard realities in these three fields are inconvenient for vested interests and because the day of reckoning can always be seen as “later,” politicians can always find a way to postpone necessary actions, as can we all: Having realized the seriousness of this bias over the last few decades, I have noticed how hard it is to effectively pass on a warning for the same reason: No one wants to hear this bad news. So a while ago I came up with a list of propositions that are widely accepted by an educated business audience. They are widely accepted but totally wrong. It is my attempt to bring home how extreme is our preference for good news over accurate news. When you have run through this list you may be a little more aware of how dangerous our wishful thinking can be in investing and in the much more important fields of resource (especially food) limitations and the potentially life-threatening risks of climate damage. Wishful thinking and denial of unpleasant facts are simply not survival characteristics.

John Kerry Pledges New Support to Vulnerable Countries at COP21 -- This afternoon at the COP21 negotiations at Le Bourget in Paris, Sec. of State John Kerry addressed the conference. Sec. Kerry announced he would double the U.S. commitment to support efforts in nations and communities to more than $800 million. Sec. Kerry’s important announcement is another example of American leadership helping bring nations around the world together to tackle the climate crisis. This support helps fulfill the moral obligation we have to aid those directly affected by the carbon pollution disproportionately created in developed countries that is disproportionately affecting developing countries. It is both the right thing to do and the smart thing to do, as extreme weather generates instability and insecurity in communities at home and abroad. We’ve seen that in our backyards, with thousands of American families displaced by extreme storms like Katrina and Sandy. The American people have made it clear that they have the Obama Administration’s back as they lead the way to secure an agreement in Paris, so Sec.Kerry and our negotiating team are absolutely right to ignore the pointless posturing of Congressional Republicans and their fossil fuel industry allies. The Obama Administration’s leadership on climate is growing more steadfast by the day and we are confident that this pledge will be delivered. That’s what the American people have made clear that they want and what the world needs.

Naomi Klein: Sane Climate Policies Are Being Undermined by Corporate-Friendly Trade Deals (video) The COP21 Paris Climate Summit has seen some very positive developments in the global effort to combat climate change. But a new wave of international trade deals—deals that are being pushed between the US and the EU, and between Canada and the EU—threaten to undermine the actual implementation of any smart and sane climate policies.  In this dispatch from Paris, Naomi Klein explains how companies like Exxon and Shell are pushing for these trade deals because they see them as ways to create new markets for fossil fuels—which is exactly what we cannot do if we are to save our planet.

Paris, climate change and the UK government - In a recent column, Paul Krugman bemoans the consensus view among Republican politicians that we should do nothing about climate change, and that many of the Republican nominees for president actually deny the science. He also complains about how the conventions of political journalism mean that public perceptions about the science become distorted as a result. He says that this situation - where parties on the right deny the need to take action on climate change - is unique to the US and Australia.What about the UK? While everyone remembers Cameron promising to make his 2010 government the ‘greenest ever’, three and a half years later the Sun reported him as ordering aides to "get rid of all the green crap" from energy bills. Of course actions speak larger than words. The Conservative’s hostility to onshore wind farms is well known, and subsidies are due to be phased out soon. Subsidies for solar also face severe cuts. The government has passed legislation ‘to maximise economic recovery of UK oil’. A scheme to encourage home owners to improve energy efficiency is to end, the aim to make all new homes ‘zero carbon’ is to be scrapped, the Green Investment Bank is to largely sold off, tax breaks for buyers of ‘green cars’ ended. Now all this might be understandable if the UK was well ahead in the amount of power produced by renewables. In fact, among EU members, only 3 have a smaller proportion. The government expects its EU target of 15% by 2020 will be missed by a wide margin.

Choking on it - The Economist - Europe’s air is less corrosive than it once was, and much less foul than China’s or India’s. Industrial decline and clean-air policies since the 1950s have brought levels of many pollutants, such as sulphur dioxide, fine particulate matter (a dust that can irritate lungs), and nitrogen oxides down over the past few decades. Yet more than 400,000 Europeans still die prematurely each year because of air pollution, according to the European Environmental Agency. In 2010 the health-related costs were thought to be between €330 billion ($437 billion) and €940 billion, or 3%-7% of GDP. Nine out of ten European city-dwellers are exposed to pollution in excess of guidelines produced by the World Health Organisation (WHO). Some of the highest levels of nitrogen dioxide are found in London; several cities in Turkey are choked with high levels of PM10 (particulate matter of at most 10-micron diameter). But some of the worst pollution is in Eastern Europe (see map). Coal-fired power stations are still common there, and some pollutants blow in from the rest of Europe. The commission is prosecuting 18 governments for infringing pollution limits. Researchers at King’s College London have found that a child born in London in 2010 can expect to have his life cut short by nine months as a result of breathing its high levels of PM2.5—the very finest particulate matter—if pollution levels do not change.

China issues first pollution ‘red alert’ Financial Times -  -- Beijing has issued its first “red alert” for pollution following widespread outrage for failing to respond to off-the-charts pollution a week ago. The knee-jerk move highlights the politicised nature of Beijing’s response to its pollution problem, even as negotiators meeting in Paris try to hammer out an agreement that commits nations to reducing emissions of greenhouse gases that contribute to climate change. China’s plan for reining in carbon emissions envisions moving polluting power plants and heavy industry away from wealthy cities in the east, where pollution is a major source of public discontent, while promoting the development of coal-fired industry in poorer regions, especially the arid north and west where rapid gross domestic product growth is the priority. On Tuesday morning, official air quality index levels in Beijing hovered around 260 — or “heavily polluted” — a far cry from hourly readings that exceeded 600 reached early last week when the Chinese capital was blanketed by a yellow-brown pall of fog and coal smoke. Beijing’s failure to raise the “red alert” last week was widely criticised by China’s netizens. “The government underestimated the impact of the heavy smog and misjudged the social mood last time,” said Shi Lei, an environmental economist at Renmin University in Beijing. ”They now have learnt the lesson and decided to use the strictest standard possible to reduce the impact of smog.” Under a system instituted several years ago, a “red alert” requires closing schools, factories and construction sites and limiting the number of cars on the street, while under “orange alert” children are not allowed to play outside in school yards but may still attend classes. City authorities have been reluctant to declare a “red alert” because of the disruption to work and family life. Average pollution levels have been higher than Tuesday’s level for nine days since November 1 this year according to data from the US embassy, which sometimes diverges from official Beijing government data. Air quality is significantly worse in the industrialised cities in Hebei and Henan, to the south of Beijing.

China Chokes As Beijing Issues "Red Pollution Alert" For First Time Ever -- Just a week after Beijing's major literally had his head saved, thanks to a cold front which swept away some of the worst pollution ever, the city has raised the alarm once again.. but this time to a record level. For the first time ever, the municipal government has issued a so-called red pollution alert - imposed car bans and suspending schools - after acrid-smelling haze returned to the Chinese capital. As Bloomberg reports, Local authorities upgraded the air pollution alert to red from orange, effective from 7 a.m. Dec. 8 to noon Dec. 10, according to a statement on Beijing Municipal Environmental Protection Bureau’s official Weibo Monday. Some industrial companies must stop or limit production, outdoor construction work will be banned and primary schools and kindergartens are advised to cancel classes, the statement said. Even healthy people should try to avoid outdoor activity and choose public transportation. “The red alert shows the local government has stepped up efforts to protect citizens from pollution,” said Dong Liansai, climate and energy campaigner at Greenpeace East Asia. “It’s probably because of pressure from the central government.” Clear skies aren’t expected again until after the smog peaks Wednesday,according to the China National Environment Monitoring Center.

Why Pollution is Good for China - On Tuesday, Mr. Zhao wasn’t smiling. Around two, one of the children sent out a message on China’s most popular social media site, WeChat, asking if anyone was going to the park. Mr. Zhao sent out a quick reply: “None of you are to go to the park! The air is poisoned! Stay home! Wait for clearer air toward the weekend.” This was a change. Over the past years our group has always practiced, no matter how bad the air. The city’s first major “airpocalypse” was in 2013, when Beijing’s Air Quality Index hit 755 on a scale of zero to 500. In an infamous Twitter post, the US embassy called it “crazy bad.” But it wasn’t so crazy that Mr. Zhao cancelled martial arts practice. Last month was no different. On November 30, it reached 611 but they practiced. On some of these days I would make excuses and not show up. On others I would wear a face mask and then take it off before I arrived–no one else, of course, was wearing a mask and I self-consciously felt like the foreign know-it-all to show up with one on. So what is different this time? I think the answer is a gradual awakening to the fact that becoming the world’s factory has made people richer, but poisoned the environment. Think of it as another example of China’s slow-motion rising consciousness—the cumulative effect of better education, more money, and more awareness. The government can gloss over rights abuses. It can conduct secretive trials of prominent activists. But it cannot easily hide this kind of air, or blame it on foreigners. And it realizes that if it is seen to be dealing with the issue, the political fallout will be minor.

Australia riding coal train despite climate pleas - - It is a battle being played out around resource-rich Australia. In one corner ecologists, and climate change campaigners, who warn coal mines are ticking "carbon bombs"; in the other, mining giants and politicians, who argue they are vital for economic success. Coal is the nation's second most valuable export, adding almost $30 billion to the economy in 2013-14, and supports 150,000 jobs, according to the Minerals Council of Australia (MCA). But the country is also one of the world's worse per capita greenhouse gas polluters, due to heavy use of coal-fired power -- it provides around 75 percent of the country's electricity -- and a relatively small population of 23 million. These tensions between the environment and economy are something the residents of Bulga in New South Wales know all too well. They have been engaged in a six-year David versus Goliath fight against the state government and mining giant Rio Tinto to halt the expansion of a nearby coal mine, which has involved court cases and protests.  Last week (Nov 27) New South Wales approved the extension of the long-standing Mount Thorley Warkworth mine, despite fears it would result in wildlife habitat destruction, reduced air quality, and through the burning of the coal, release even more of the greenhouse gases blamed for climate change. . "Here we are announcing that there will be another massive coal expansion, producing more of that stuff that the world doesn't seem to think should be produced," . But Rio Tinto said receiving approval to expand the mine, which employs 1,300, was a "great relief for thousands". It estimated that over the lifetime of the mine, the New South Wales economy would be boosted by $1.1 billion in wages, royalties and taxes.

India’s New Paris Pledge: We’ll Cut Back On Coal If We Get Help With Renewables Now -- Until now, India’s position at the Paris climate talks had been that it will massively increase coal production and use without limit. As a result, the country has not been willing to embrace a peak in carbon pollution, even though that will ultimately be crucial if India and the world are going to avoid simultaneous, catastrophic impacts.  But now, senior Indian negotiator Ajay Mathur “says his country will cut back its use of coal, if sufficient cash for renewables emerges from a Paris deal,” the BBC has reported. Mathur said, “We look forward to an agreement that enables financial support from the countries that have developed on the backs of cheap energy, to those who have to meet their energy with more expensive but low carbon energy.” India’s original Paris pledge announced in October — its Intended Nationally Determined Contribution (INDC) — had no absolute CO2 target in at all, no cap on total emissions. The country did pledge to boost non-carbon power sources (renewables and nuclear) to 40 percent, up from 30 percent today. That would require some 200 gigawatts of new non-fossil-based power by 2030.  India had previously set a goal of 175 GW of power renewable power by 2022. A report this year from their Ministry of New and Renewable Energy concluded, “India has an estimated renewable energy potential of about 900 GW from commercially exploitable sources.” That is compared to 34 GW of solar, wind, biomass and small hydropower installed capacity at the end of 2014. So India can do much more, and it’s clear that it will — with financial assistance. Mathur said it was “absolutely” the case that India would replace coal with any additional renewables it was able deploy following a Paris deal:

Saudi Arabia accused of trying to wreck Paris climate deal - Saudi Arabia stood accused on Tuesday of trying to wreck the Paris climate summit in order to protect its future as one of the world’s largest oil producers. As the talks entered the home stretch, developing country negotiators and campaigners became increasingly vocal in their complaints that the kingdom was getting in the way of a deal. “They are seeing the writing on the wall,” said Wael Hmaidan , director of Climate Action Network, the global campaign group. “The world is changing and it’s making them very nervous.” Those concerns about the future for an economy almost entirely dependent on fossil fuels was reflected in the negotiations, other observers said. “Anything that would increase ambition or fast forward this energy transition that is already taking place is something that they try to block,” Hmaidan said. Saudi Arabia did not immediately respond to requests for comment. Until it was eclipsed by the US, the Saudi kingdom was the world’s largest oil producer and currently ranks as the 10th largest polluter, according to Enerdata . Saudi Arabia has long played a high-profile presence at annual climate summits operating from the luxuriously appointed pavillions of the Gulf Co-operation Council – and over the years has regularly been accused of blocking action on climate change.

Despite Push for Cleaner Cars, Sheer Numbers Could Work Against Climate Benefits - The number of automobiles on the world’s roads is on pace to double — to more than two billion — by the year 2030. And more likely than not, most of those cars will be burning carbon-emitting gasoline or diesel fuels. That’s because much of the expansion will be propelled by the rise of the consumer class in industrializing parts of the globe, especially in China and India, as hundreds of millions of new drivers discover the glory of the open road. Those populous and geographically sprawling countries might be hard pressed any time soon to assemble the ubiquitous electricity grid required for recharging electric vehicles; and much of the electricity China and India will produce in coming decades will come from coal-fired power plants that are some of the planet’s biggest emitters of carbon dioxide.Given the limitations of electric cars so far — including their limited range between charges — many experts predict that most of the billion additional cars predicted to be on the road in 2030 will have internal combustion engines that spew greenhouse gases.The United Nations conference will not deal directly with cars or with what countries should do about them or other major sources of carbon emissions, like factories and power plants. Rather, the conference is meant to get countries to commit to reducing their carbon footprints, leaving the details about how to achieve their goals to each individual nation.

Lured by low pump prices, U.S. motorists care less about fuel efficiency – The average fuel economy of new cars sold in the U.S. in November dropped by 0.1 mile per gallon, continuing a trend that began in August of last year when pump prices began to fall, according to new data by the University of Michigan Transportation Research Institute. New cars sold in November got an average of 25 miles per gallon (mpg), down 0.8 from the peak reached in August of 2014, but still up from 4.9 mpg since October of 2007, when the university began tracking sales. The U.S. government is requiring car makers to achieve a fleet average of 54.5 mpg by 2025. Various studies have suggested that U.S. gasoline demand was undergoing a structural shift, pointing to consumers gobbling up more fuel efficient vehicles as one of the underlying reasons. But that shift has been put on a pause in the past 18 months as consumers have cared less about fuel efficiency and began purchasing more “gas-guzzling” SUVs and pick-up trucks. Mercedes Benz reported record sales of SUVs in November and Ford expects SUV sales to continue to grow, projecting they will account for 40 percent of all sales by 2020. “Overall SUV sales continue to trend higher — both in North America and around the world,”   In a report issued this week, analysts at Credit Suisse said the shift to larger cars is one of the reasons it’s bullish about U.S. gasoline demand in 2016 and even 2017. The U.S. consumes about 10 percent of global gasoline, so shifts in demand are closely watched by traders. “The “SUV” effect should not be underestimated. Yes, efficiency gains will eventually drive negative momentum in US gasoline demand but the sales weighted efficiency of new car sales has flattened out and is below its recent peak as consumers have bought larger cars and as the auto industry has tried to make these larger cars perform with zip,” the analysts wrote.

Germany, UK to ban petrol and diesel vehicles by 2050: Up to 13 European and North American governments have announced that they will introduce a ban on all petrol and diesel-powered vehicles by year 2050. The news has been widely reported following the ongoing United Nations Climate Change Conference in Paris. As part of an ambitious strategy to prevent negative climate change and promote green mobility, a zero-emissions alliance was formed earlier in August 2015. It aimed to speed-up acceptance and adoption of zero-emissions vehicles (ZEV) around the world – particularly battery-electric and fuel-cell vehicles. The international alliance consists of countries such as Germany, the Netherlands, Norway and the United Kingdom. From the US, several states have individually signed up for the cause. These include, California, Connecticut, Maryland, Massachusetts, New York, Oregon, Rhode Island and Vermont. Canada’s Quebec is also involved. All of these listed countries and states have agreed to enforce a new law that would ban all petrol and diesel-powered vehicles by year 2050. According to NGT News, a full ban on these vehicles would reduce “more than 1 billion tonnes of CO2 emissions per year, lowering global vehicles emissions by 40%.”

Denmark, a Green Energy Leader, Slows Pace of Its Spending - Not long ago, Denmark was making headlines for harvesting so much wind power that it was leading the way in generating renewable energy, while becoming a center of innovation and growth for green and clean technology.Then, in June, a center-left government was replaced by a right-wing, minority coalition determined to tighten spending and balance the budget in a program to grow the economy. The budget cuts include a key fund that was used to seed green technology projects — a government subsidy that environmental advocates said had paid itself off many times over.“This funding has proven instrumental for Danish advances in clean tech for many years, and it is incomprehensible why it is being cut now,” Mette Abildgaard, a spokeswoman for green energy affairs for the opposition Danish Conservative People’s Party, said the timing of the cuts was disappointing.“I believe this is a very bad signal to be sending the world, for Denmark to be taking a step backwards just before the Paris climate summit,” she said last month. The debate going on in Denmark may serve as a cautionary tale for leaders of the 195 countries now meeting in Paris and trying to reach a global deal to rein in dangerous greenhouse gases that have been linked to climate change. Should the negotiators be able to put aside their conflicting agendas, and sign an accord when the talks end this week, they will then face another challenge: meeting their national goals.

Chile plans hydropower plant—in desert - Building a $400-million hydroelectric power plant in the world's most arid desert may seem like an engineering debacle, but Chile sees it as a revolutionary way to generate green energy.  The idea is to take advantage of the Atacama Desert's unique geography to solve one of the most sticky problems of renewable energies like solar and wind power: inconsistency. The sun is not always shining and the wind is not always blowing, but in long and narrow Chile, there are always mountains next to the sea. Chilean energy company Valhalla wants to use solar power to pump water from the Pacific Ocean into two reservoirs high in the Andes mountains. Then it will be allowed to rush back down into a hydroelectric plant with a capacity of 300 megawatts—enough to power three provinces in Chile, a net energy importer that relies mainly on fossil fuels. "This is the only place in the world where a project of this kind can be developed," said Francisco Torrealba, the company's strategy manager. The two mountaintop reservoirs will hold as much water as approximately 22,000 Olympic swimming pools, enough to generate electricity around the clock. "The technology has been super well tested around the world. It's this particular combination that has never been tried,"

The 11 countries that haven't made pledges for climate deal — Some are at war, others recovering from natural disasters and some are simply ideologically opposed to the climate deal taking shape in U.N. talks outside Paris. Only 11 countries haven’t submitted pledges for the envisioned agreement, including conflict-ridden Syria, reclusive North Korea and socialist Latin American countries who say it’s up to the West to clean up the world’s carbon pollution. “Those who caused the problem need to solve the problem,” said Paul Oquist, Nicaragua’s U.S.-born climate envoy. U.N. officials say they have received pledges covering 184 of the 195 countries that are parties to the U.N. convention on climate change, representing nearly all of the world’s carbon emissions. (The U.N. counts the European Union as a separate party in addition to its 28 members so the total number of parties is 196). Even though the proposed targets collectively don’t add up to what scientists say is needed to avoid dangerous levels of warming, the fact that so many countries, including some of the poorest, have made pledges represents a sea-change in the U.N. talks, which previously only asked rich countries to take action against climate change.

Latest Draft of COP21 Climate Agreement: A Slap in the Face - The latest version of the draft COP21 agreement that came out yesterday was a slap in the face of even the most pragmatic optimists. With most of the crucial elements now bracketed (i.e. uncertain), the agreement has been almost reduced to empty rhetoric and far from what is needed to prevent global temperature rise beyond the catastrophic 2 degree level, let alone 1.5 degrees.  The new draft presents two options for mitigation, a not very ambitious quantitative target and a qualitative target which would either be carbon neutrality or decarbonization—neither of which is very ambitious. There is also a bracketed goal for a very ambitious goal which is most likely to be rejected. However, these options will allow countries to keep emitting. With regards to finance, the agreement is equally disappointing. While it says financial assistance would be provided to vulnerable countries, the options do not promise much and the key words and specifics are all bracketed. “This is a reflection of the resistance of developed country parties to describe finance that is in anyway meaningful,” says Lidy Nacpi, regional coordinator of WECAN. Moreover, no new funding has been added to the table as of now, but rather, existing commitments have been rephrased and packaged in a new way, such as the much hyped about commitment by U.S. to provide $800 million in adaptation finance. “This is consistent with their pathway anyway, it is not additional money,” says Oscar Reis from the Institute of Policy Studies.

The Paris Climate Accords Will Cause the Planet to Burn: The Paris agreement, according to Pablo Solón, a veteran of climate negotiations, “will be an agreement that will burn up the planet.”The result of the COP21 (Twenty-first United Nations Climate Change Conference), which began on Monday, Nov. 30 and will end on Dec. 11, “can already be announced, because we already know what it will be,” he said in an interview with the Americas Program.“Here in Paris, the reduction of greenhouse gas emissions is not being negiotiated under criteria of climate justice or climate science. All that’s being done is taking note of the promises of each country and adding them up,” said the former Bolivian ambassador. Nearly all of the world’s countries– about 186 to date– have promised to reduce emissions. The official report of these promises, when seen as a global plan, constitutes an announcement of disaster. The official report would mean an increase in global temperature of between 2.7 and 3.9 degrees Celsius. In other words, actual warming could reach double of what was established as the maximum limit. “And 2 degrees Celsius was the roof of the roof, because many countries have warned that even with a 1.5 degree warming their countries could disappear, especially many island nations.  But there is another report that says: careful, it could be even 5 degrees Celsius. Many think that we are negotiating contributions to emissions reductions, but that is not the case. That is not being negotiated. This is a farce, a scam. I can’t think of another way to say it.”

What will not be addressed at the climate change conference in Paris - This week, the governments of more than 190 nations meet in Paris in order to discuss a global agreement on climate change. According to Hollande, if equitable goals on the climate can be met, it will be a triumph for international cooperation, for our well-being and security and for faith in the future. But the top in Paris will not be a triumph. The most important factor is power relations, specifically those that are behind Article 3.5 of the U.N. Framework Convention on Climate Change of Rio de Janeiro in 1992 (see here). This article states that there can be no question that ‚measures taken to fight climate change (…) constitute any means of imposing arbitrary or unjustifiable discriminations in international trade or disguised restrictions to trade.‘ We can work out an agreement on climate change, but economic orthodoxy and neo-liberal globalisation cannot be questioned. At COP21, negotiators will focus on legal instruments to replace the Kyoto Protocol and on a ratchet mechanism that requires countries to revisit their emissions pledges every five years. None of the major countries or blocs – the US, Russia, China or the EU – are willing to accept an agreement that will bind their hands in any way. The Paris agreement will therefore not amount to anything more than the smallest common denominator that the major powers are willing to accept. The sum total of all national measures will constitute global action.

COP21: Climate deal 'final draft' reached in Paris - Organisers of the climate talks in Paris say a final draft text has been reached after nearly two weeks of intensive negotiations. An official in the office of French Foreign Minister Laurent Fabius told the AFP news agency the draft would be presented to ministers at 10:30 GMT. No details of the proposed agreement have been released so far. The tentative deal was reached nearly 16 hours after the talks had been scheduled to close. "We have a text to present," the official said, adding that the draft would be now translated into the UN's six official languages. Analysts say that this is not a done deal - it will only be finally adopted if there are no objections raised at Saturday morning's ministerial meeting, and even this is unlikely to come before afternoon in the French capital. Mr Fabius, who has presided over the talks, had said earlier that the "conditions were never better" for a strong and ambitious agreement. COP21 Live: Final push for climate deal Significant progress had been reported on a range of issues, with evidence of real compromise between the parties, the BBC's environment correspondent Matt McGrath in Paris reported earlier. He added that countries supported a goal of keeping global temperature rises to 2C but agreed to make their best efforts to keep it to 1.5C. However, the language on cutting emissions in the long term was criticised for significantly watering down ambition.

Historic Climate Deal On The Brink Of Adoption In Paris -  French President Francois Hollande, left, United Nations Secretary-General Ban Ki-moon, center left, Christiana Figueres, 2nd right, Executive Secretary of the UN Framework Convention on Climate Change and Foreign Affairs Minister and President-designate of COP21 Laurent Fabius, right, speak together at the end of a plenary session at Le Bourget, near Paris, France, Saturday, Dec. 12, 2015 . After more than two weeks of negotiations, delegates appear to be on the brink of approving a final deal on international climate action. The U.N. climate conference, which began on November 30, has brought representatives from nearly 200 nations to Paris in the hope of hammering out an international agreement on climate action. Many, from environmental organizations to politicians, have referred to the talks as historic, or the planet’s best chance at limiting the dangers of global warming. Without international action, scientists predict that the world could warm by more than 3°C by the end of the century — a threshold that could usher in, among other things, increased mega-droughts, sea-level rise, and food insecurity. Foreign Minister Laurent Fabius of France — who has been presiding over the talks for the past week — called the draft of an agreement “ambitious and balanced” in an announcement on Saturday, and urged participating nations to swiftly ratify the document.

House passes Customs Bill: climate change deniers embarrass U.S. delegation in Paris - As world leaders seek to negotiate a global agreement on climate change in Paris, the U.S. House of Representatives today passed a Customs Bill that undermines effective U.S. action in response to global warming. The Trade Facilitation and Enforcement Act of 2015 (H.R. 644) would explicitly prevent the United States Trade Representative from seeking to address climate change in trade agreements. Earlier this year environmental organizations sent up a letter opposing the provisions.  Bill Waren, senior trade analyst at Friends of the Earth - U.S., issued the following statement:  The Republican leaders of the U.S. Congress, with the help of President Obama, are expediting passage of a Customs Bill that explicitly excludes consideration of climate change when the United States negotiates international trade agreements. Contrary to his stated goals for the Paris climate agreement, President Obama’s push for trade deals like the Trans Pacific Partnership would encourage more fossil fuel extraction. President Obama must stop allowing trade to trump effective action on climate change. He should reverse course and veto the climate-denying Customs Bill when it comes to his desk.

Sanders: Energy industry ‘hell-bent’ on climate change apathy --  Sen. Bernie Sanders (I-Vt.) on Monday outlined the climate policy he would implement as president, slamming the fossil fuel industry for using its wealth to prevent action. “Right now, we have an energy policy that is rigged to boost the profits of big oil companies like Exxon, BP and Shell at the expense of average Americans,” he wrote. “CEOs are raking in record profits while climate change ravages our planet and our people — all because the wealthiest industry in the history of our planet has bribed politicians into complacency in the face of climate change,” Sanders continued. “It’s time for a political revolution that takes on the fossil fuel billionaires, accelerates our transition to clean energy and finally puts people before the profits of polluters,” the 2016 Democratic presidential candidate added. “Let’s be clear: The reason we haven’t solved climate change isn’t because we’re not doing our part, it’s because a small subsection of the one percent are hell-bent on doing everything in their power to block action.” Sanders wrote that climate change is “the single greatest threat facing our planet.”  His plan calls for reducing carbon emissions, creating a clean energy workforce, banning fossil fuel lobbyists from the White House and gradually shifting the nation’s infrastructure toward clean energy resources. The Sierra Club praised Sanders’s new climate policy in a statement issued Monday.

Abengoa: Another Story Of Sudden Insolvency - Throughout this current year, 99 companies across the world have defaulted, the second highest figure in the decade after the 2009 crisis, according to S&P. Spanish firm Abengoa could be added to the list.  Besides being involved in renewable electricity generation and converting biomass into biofuel, it is also one of the world’s leading power lines builders and a top engineering and construction firm. It employs 24,000 people worldwide. The Andalucian company has amassed dozens of very important infrastructure projects in the past few years all over the world, from the U.S. to China and Latam. The problem is that with a gross debt pile of some €8.9 billion, and exposure to Spanish and international banks of around €20.2bn, Abengoa has found, and continues to find it difficult to get them off the ground. Abengoa had no problem in getting Citi to lead a €100 million (£70million) share sale in July to raise funds for the group at a price of €2.80 a share (now they are worth €0.44). A particularly embarrassing situation for the US bank. Another person who didn’t expect such a terrible outcome is Obama. His administration awarded the company about $2.7 billion for two majors projects — the Solana Generating Station in Arizona and the Mojave Solar Project in California. Republicans and other critics of renewables were short of time to remind Obama of his previous failure with Solyndra in 2011. This left taxpayers responsible for more than $530 million. These people reminded the President that the administration’s meddling in the energy sector leads to disaster for taxpayers capital.

Renewable Energy Bankruptcy Threatens Spanish Banks - In another sign of the turbulent times for the renewable energy sector, Spain’s Abengoa has declared bankruptcy. The bankruptcy is notable for several reasons. First, it suggests how difficult the transition from conventional energy firms to solvent and stable renewable energy companies will be. Second, it shows how connected the economy is and how turbulence in the energy sector could easily spread to other sectors of the economy creating a broader economic slowdown at any point going forward. . Abengoa’s bankruptcy is significant given the size of the company; the firm employs 24,000 people and is involved in a range of renewables businesses from biomass conversion to seawater desalinization. U.S. investment bank Citi led a secondary shares offering earlier this year which looks like a major embarrassment for the firm as this point. While Abengoa’s shares have had a tough year thus far, investors still appeared to be caught by surprise to some extent by the bankruptcy filing as its Spanish shares plunged by more than half after the filing.Abengoa’s financing has been something of a black box according to analysts and that certainly has led to greater confusion among investors.  Broadly speaking Abengoa’s bankruptcy suggests the renewables space is still more dependent on subsidies than many firms would like to admit. It’s unclear what it will take to get many firms operating on their own in a stable and solvent fashion. Renewables in general tend to require large amounts of upfront investment and hence often require significant amounts of debt investment. The problem is that debt becomes an anchor anytime a subsector becomes oversupplied with output or when demand falls due to recessions or secular changes in energy consumption.

If Climate Change Is a Problem Then Lunar Helium-3 Fueled Fusion Is the Solution --MarkWhittington writes: With the Paris Climate Conference apparently ending in failure and experts such as Matt Ridley suggesting that, in any case, global warming is not a cause for immediate concern, the private sector is casting about to fund “green” energy solutions. Bill Gates and Mark Zuckerberg are starting a renewable energy research and development fund, for example. The Chicago Tribune pointed to a possible area of investment that Gates and Zuckerberg might look into if they would like to get out of the solar and wind box that many green energy enthusiasts find themselves in. The key to evolving from a fossil fuel energy economy, perhaps, is fusion energy powered by helium-3 from the moon.

Cuomo Sends Investigators After Blackout Forces Shutdown Of Nuclear Reactor Near NYC - Almost 2 years after being fined for falsifying safety records, and 7 months after a transformer exploded at the Indian Point Nuclear Reactor (just 30 miles from midtown Manhattan), Entergy - the plant's operator - has 'safely' shutdown the Unit 2 reactor due to a major outage cut power  to several control rods. Despite the company's reports that no radioactivity was released to the environment, NY Governor Cuomo has sent investigators to the site to 'monitor' the situation. As AP reports, officials say one of the Indian Point nuclear power plant's reactors in suburban New York has been shut down because several control rods lost power. Plant owner Entergy says control room operators safely shut down the Indian Point 2 reactor around 5:30 p.m. Saturday. The reactor's designed to make a safe shutdown if the control rods lose electricity. Gov. Andrew Cuomo says the company reports no radiation was released into the environment. State Department of Public Service workers are headed to the plant in Buchanan, about 30 miles north of midtown Manhattan. The Indian Point 3 reactor is running. Together, the two reactors supply about one-quarter of the power used in New York City and Westchester County. Indian Point 3 was shut down in July after a water pump problem.

TEPCO Admits Fukushima Radiation Leaks Have Spiked Sharply -- Just weeks after the completion (and failure) of one supposed 'containment' wall (and as the construction of the "ice wall" begins), TEPCO, the operator of the crippled Fukushima nuclear plant, has admitted that the levels of radioactivity in underground tunnels has risen sharply (4000x last year's levels). As NHKWorld reports, TEPCO officials have stated that they plan to investigate what caused the spike in radiation... yes, that would seem like a good idea.  With the newly constructed 780-meter 'containment' wall "already leaning," news that the radiation leaks are growing is a grave concern. As NHKWorld details, Tokyo Electric Power Company has detected 482,000 becquerels per liter of radioactive cesium in water samples taken from the tunnels on December 3rd. That's 4000 times higher than data taken in December last year. The samples also contained 500,000 becquerels of a beta-ray-emitting substance, up 4,100 times from the same period. Around 400 to 500 tons of radioactive water, including seawater washed ashore in the March 2011 tsunami, is still pooled in the tunnels. The tunnels lie next to a structure used to temporarily store highly radioactive water, which cooled melted nuclear fuel inside the damaged reactors. TEPCO officials say it is unlikely the wastewater stored in the building has seeped into the tunnels. They say the water level in the tunnels is higher than that in the building and measures are in place to stop the toxic water from leaking out. They plan to investigate what caused the spike in radiation.

Declassified U.S. Government Report from a Week After Fukushima Accident: “100% of The Total Spent Fuel Was Released to the Atmosphere from Unit 4”  - We reported in 2011 that the International Atomic Energy Agency knew within weeks that Fukushima had melted down … but failed and refused to tell the public. The same year, we reported in 2011 that the U.S. knew within days of the Fukushima accident that Fukushima had melted down … but failed to tell the public. We noted in 2012: The fuel pools and rods at Fukushima appear to have “boiled”, caught fire and/or exploded soon after the earthquake knocked out power systems. See this, this, this, this and this. Now, a declassified report written by the U.S. Nuclear Regulatory Commission on March 18, 2011 – one week after the tidal wave hit Fukushima – statesThe source term provided to NARAC was: (1) 25% of the total fuel in unit 2 released to the atmosphere, (2) 50% of the total spent fuel from unit 3 was released to the atmosphere, and (3) 100% of the total spent fuel was released to the atmosphere from unit 4.

How much of the world's fossil fuel can we burn? -- The world is gradually waking up to the true nature of the climate change conundrum, and not a moment too soon. The situation boils down to this: fossil fuel is immensely useful, valuable and politically important, yet if we want to avoid taking unacceptable risks with the planet we need to leave most of that fuel in the ground – either forever or at least until there’s an affordable and scalable way to stop the exhaust gases building up in the atmosphere. Many of us have been saying this for years (I co-wrote a book about it) but much of the credit for the increased awareness of the need to ‘leave the fuel in the ground’ goes to Bill McKibben, whose brilliant and much-read article in Rolling Stone clarified for many readers the simple and crucial fact that there is far more carbon in existing fossil fuel reserves than we can safely burn. So far so good, but McKibben’s article has been so influential that the very specific numbers it contains are now often cited as a kind of unchanging gospel truth. Those numbers are as follows. Limiting global warming to the agreed global target of 2C means staying within a ‘carbon budget’ of 565 GT (gigatonnes or billion tonnes). That is a fifth of the 2,795 GT that would be released if all the world’s proven oil, coal and gas reserves were burned. Therefore four-fifths of the fossil fuel must stay in the ground. But other estimates differ. For example, a recent paper in Nature stated that although we’ll need to leave most of the coal in the ground, we can burn half the gas and two-thirds of the oil – a major difference given oil’s key role in the world economy. So whose figures should we believe?

Fracking is still not the answer: Gas will not solve the climate-warming problem -   Will gas replace coal? Will oil from shale gas extend the fossil fuel era for transport? And will cheap gas delay the adoption of renewables in energy generation? Shale gas already accounts for 40 per cent of US natural gas production and 29 per cent of oil. As of 2014, most shale gas reserves were being drilled in the US. The sale of condensates alone provides a profit when the resource is exploited, so the gas can then be sold for next to nothing. This cheap gas has not only driven coal from the market, but helped rejuvenate the American economy, laying the basis for energy independence and the return to the US of large-scale chemical and manufacturing industries that had been moving offshore for decades. But the question of how big the future of gas might be remains. In the early 2000s, at the start of the shale gas boom, gas was seen as a temporary energy bridge to a renewables-based future. Yet some analysts now believe that gas is here to stay. Oxford University’s Dieter Helm, for one, sees a huge future for gas. In his 2012 book “The Carbon Crunch” he argues that gas will provide a bridge to a distant renewables future that is at least decades away. His basic message is that gas will remain cheap and abundant in many parts of the world, while renewables such as wind and solar will remain expensive and constrained by their intermittent nature. New energy technologies are developing so fast that it’s already possible to test some of Helm’s claims. First, is ‘tight’ gas (gas that typically requires fracking or a similar intervention to recover, of which shale gas is one type) widely available, and will it stay cheap? Wells drilled to exploit shale gas remain productive for only one to three years. The regular drilling of new wells adds to cost. Then there is the impact of the slump in oil prices, paradoxically created in part by fracking. As we’ve seen, it may threaten some fracking, and thus the expansion of production of this kind of gas. In addition, public resistance to fracking, particularly

Natural Gas Worse Than Coal For Environment -- Says one of the world’s top natural gas producer. Statoil Admits Gas Worse for Climate than Coal Margaret Mistry, Head of Sustainability Communication at Statoil, appeared to admit that gas, once you count methane leaks from extraction and transportation, is currently actually worse for the climate than coal:  “Methane emissions and reducing those, I think that the goal there that we’re all working towards as an industry is to demonstrate that natural gas can compete with coal when it comes to climate effects.” The context for this is key. The oil industry is desperately trying to argue that gas is key to solving the climate crisis. They’ve taken out ads across the press to argue as much. However, their wording is always very careful. They say gas is “the cleanest burning fossil fuel” (my italics). What they don’t mention is that there is some evidence that the leaking of gas at the point of extraction and during transportation wipes out any ‘clean’ advantage: methane is a very potent greenhouse gas. Of course the industry could invest more in stopping leakages. But the suggestion that gas is currently struggling to show itself to be better for the climate than coal blows a huge hole in the oil industry’s second main message at COP21.

How Utah quietly made plans to ship coal through California -- The embattled United States coal industry has said for years that its future is in Asia. The question has been how to get there. New coal export facilities proposed for the West Coast have met stiff and sometimes fatal resistance. City councils have passed defiant resolutions saying coal terminals would increase local pollution and global greenhouse gas emissions. Environmental groups have filed lawsuits. Native American tribes have invoked historic treaty rights. So when a group of state and county officials in southern Utah came up with an unusual plan to invest $53 million in public money to help build an export terminal in San Francisco Bay, they decided to tell as few people as possible what Utah commodity they planned to export. “The script,” as Jeffrey Holt, the chairman of the Utah Transportation Commission and a central figure in arranging the $53-million loan, put it in an email last spring, “was to downplay coal.” Now, more than six months after Holt sent his email, the state loan has yet to be finalized and the proposed terminal — which is being developed on city property in Oakland with the help of a longtime friend and investment partner of Gov. Jerry Brown— faces sharp new questions. Instead of stealthily helping shepherd the project, Holt appears to have inadvertently stoked opposition to it after his email was released as part of a public records request. “All he did was make people aware,”

ExxonMobil Warns of ‘Catastrophic’ 7°F to 12°F Global Warming Without Government Action - It’s a Through-The-Looking-Glass world. The Washington Post reports Sunday that ExxonMobil has a far saner view of global warming than the national Republican party. Fred Hiatt, the paper’s centrist editorial page editor, drops this bombshell:  With no government action, Exxon experts told us during a visit to The Post last week, average temperatures are likely to rise by a catastrophic (my word, not theirs) 5 degrees Celsius, with rises of 6, 7 or even more quite possible. This is indeed basic climate science. Of course, thanks to excellent reporting by InsideClimate News, we now know ExxonMobil had been told by its own scientists in the 1970s and 1980s that climate change was human-caused and would reach catastrophic levels without reductions in carbon emissions. Yes, this is same ExxonMobil that then became the largest funder of disinformation on climate science and attacks on climate scientists until they were surpassed by the Koch Brothers in recent years — but that is a different (tragic) story.Hiatt’s point is to show “how dangerously extreme the Republican Party has become on climate change,” and that that “Republicans’ ideologically based denial is dangerous and cowardly.” After all, the oil giant ain’t Greenpeace. Yet unlike the national GOP leadership and its presidential candidates, “the company believes climate change is real, that governments should take action to combat it and that the most sensible action would be a revenue-neutral tax on carbon,” that taxes fossil fuels like coal and oil and returns the money to taxpayers.

How Electricity Markets Could be Upended by this Supreme Court Decision - The Supreme Court may shortly decide an obscure case entitled Federal Energy Regulatory Commission v. Electric Power Supply Association (FERC v EPSA). The issue before the court is whether FERC can compel regional power markets to pay consumers who reduce their electricity usage at critical peak periods. And if so, at what price? Consumers have adopted a panoply of energy saving technologies known collectively as Demand Response (DR). Demand-responders argue that a megawatt saved is financially equal to a megawatt produced by a power generator. The power generators who comprise EPSA recognize that DR will hurt them, reducing both power prices and their profitability, to the benefit of consumers. Adding DR to a power market is the competitive equivalent of adding more generators. Either way, added competition lowers prices. If our pro-business Supreme Court rules in favor of EPSA and the power generators, electricity prices could rise tens of billions of dollars. More electricity generated by fossil-fueled power stations will produce more pollution. High power prices might even tempt generators to build more fossil-fueled power stations at considerable cost. Plants that could soon be rendered economically irrelevant by weak demand for power and loss of market share to renewable energy competitors. And lastly, taking DR out of the market might increase the fragility of our electrical network because DR technologies reduce power demand on the grid precisely at those moments when system resources are the most stretched.

AEP Dumps ALEC to Help States Implement Clean Power Plan, Expedite Renewable Energy - It appears that nearly everybody wants to disassociate itself from the American Legislative Exchange Council (ALEC), a conservative lobbying group that fights climate change policies. Its latest departure? American Electric Power (AEP), one of the nation’s largest utilities. If that wasn’t bad enough for ALEC, AEP said in it’s announcement it will be shifting its focus to working with states to comply with the Obama Administration’s landmark climate rule, the Clean Power Plan. “AEP will not be renewing its ALEC membership in 2016,” AEP spokeswoman Melissa McHenry told The Guardian. “We reviewed our memberships and decided to reallocate resources to other areas of focus including working directly with the states and other stakeholder groups on issues like the Clean Power Plan.” The power company said that “there are a variety of reasons for the decision,” but at least part of the decision stems from the lobbying group’s controversial stance on climate change. “We have long been involved in the reduction of greenhouse gas emissions,” AEP said. While AEP was originally critical of the U.S. Environmental Protection Agency’s (EPA) proposed Clean Power Plan, a spokeswoman told The Guardian that “AEP supports the EPA’s amended plan and the expansion of renewables in general.”

OU, county looking at doing more injection well monitoring -- Employees at Ohio University conducting water-quality monitoring near injection wells under contract with the Athens County Commissioners have finished their first round of baseline testing and have asked the commissioners to approve testing at additional locations. Baseline water testing has been a primary goal for area residents concerned about the potential impact of the oil-and-gas horizontal hydraulic fracturing waste being dumped in the county via deep underground injection. Jennifer Bowman, environmental project manager at the OU Voinovich School for Public Affairs, said the commissioners provided enough funding to baseline test nine different locations with 10 samples, one being a duplicate. The county contracted with the school to do the testing for $15,637.  “But we really need to have additional sites. We can’t just have one sample around an injection well and make any sort of conclusion about the water quality.” The school is working with property owners in the area of the injection wells to conduct the sampling studies, and Bowman said residents expressed interest from all over the place but there was only funding for so many tests. OU is now approaching outside organizations for funds to do additional groundwater samples, she said.  “Who knows where or if and when any contamination will happen to drinking groundwater sources, right? So we wanted to do a baseline sampling of groundwater,” she said, pointing out that these aquifers go about 200 feet deep while fracking wastewater is injected down 2,000 feet. “That’s one of the big questions, if or when or how this water that’s being injected deep underground will contaminate drinking water at the surface.” This is why establishing a baseline now is important, she said.

Waterless fracking: is it worth the cost? - Traditional fracking techniques include injecting a mixture of water and sand, commonly referred to as “brine,” at a high pressure into the earth to fracture the rock, which then allows the oil or natural gas to flow to the surface.The large quantity of water used during the fracking process has raised public concerns, but a number of companies have recently experimented with alternative fracking techniques. Chesapeake Energy Corporation collaborated with EV Energy Partners, GasFrac Energy Services, and others to experiment fracking an Ohio oil well using liquid butane and mineral oil, instead of the traditional water technique.The waterless fracking technique injects a mixture of 75% liquid butane and 25% mineral oil into the pipes at a high pressure in hopes to release the oil and gas deep underground. The alternative fracking technique sparked optimism that the liquid butane method would substitute the millions of gallons of water used during the hydraulic fracturing process and an opportunity to maximize Ohio’s Utica shale play. However, the test has yet to be proven successful and has a high price tag of $22 million compared to the typical costs of well drilling at $7 million.Although the waterless technique was not an instant success, the industry is looking for advancements that not only reduce the amount of water used, but also optimizes and increases Ohio’s oil and gas production.

Ohio's Harrison County is No. 1 for Utica oil; Belmont County is tops for natural gas, new report says  - Harrison County is Ohio’s top oil-producing county from the Utica Shale in the third quarter of 2015, according to new production data from the Ohio Department of Natural Resources. Ohio really has four counties producing oil: Harrison, Carroll, Guernsey and Noble. Production falls off dramatically after those four counties. Locally, Stark County produced 1,785 42-gallon barrels of oil and Portage County produced 51 barrels of oil. For natural gas, Belmont County is No. 1 in Ohio. The state’s 10 top-producing natural gas wells are all in Belmont. Eight belong to Rice Energy and two to Ascent Resources Utica. The Belmont total for the quarter is 76.5 billion cubic feet of natural gas. Stark County produced 40 million cubic feet and Portage County produced 10 million cubic feet. Drilling in the Utica Shale is starting to decline because of low commodity prices, said Shawn Bennett of the Ohio Oil and Gas Association.  Oil production grew by only 2 percent from the previous quarter and natural gas grew by 10 percent, he said.

Broad Run Expansion Brings Record Marcellus And Utica Production -- In fall of 2014, in an elevator in downtown Denver, I overheard two energy professionals lamenting at the time what they thought were weak oil, gas, and NGL prices. One commented to the other, "keep calm and frac on," and I thought to myself: "This will not end well."  Here we are, more than a year later, and -- as this week has demonstrated, with every energy equity and commodity screen bleeding red -- the correction is not over. Too much fracking on has only contributed to the problem of oversupply.  Last Thursday, December 3, 2015 total Marcellus and Utica shale production hit a new all-time high at 18.7 Bcf/d using a Genscape interstate pipeline flow sample for PA, WV, and OH. As has been the case in 2015, Northeast production has mostly moved sideways as the market has been waiting for new pipeline capacity. New capacity is what ushered in this new record as the Momentum Midstream Stonewall gathering system went into service on December 1 and is now delivering about 700 MMcf/d into Columbia Gas (TCO) in Braxton County, WV. At the same time, the TCO Broad Run meter flipped from receiving 100 MMcf/d from Tennessee Gas Pipeline (TGP) to TCO and is now delivering about 300 MMcf/d to TGP as shown below. As the Broad Run meter shows, there has been a swing of about 400 MMcf/d in flows at that meter. While the Stonewall meter shows 700 MMcf/d delivered to TCO, several other production meters on TCO dropped when Stonewall started service. In addition, the ETC Northeast gathering system started service the same day as Stonewall and is moving incremental volume to TCO and Dominion in WV. If we look at TCO production receipts we see about a 400 MMcf/d increase week-over-week as a result of Stonewall and Broad Run coming into service - see below.

Drilling's down in Pa. as natural gas supplies mount — A “perfect storm” of plentiful oil and natural gas, falling prices and forecasts for a warmer-than-average winter is taking a toll on the oil and gas industry in Pennsylvania. Production from the Marcellus Shale continues to increase, but demand isn’t keeping pace, and falling prices are discouraging new investments and new jobs in what has been a booming industry in Pennsylvania. Natural gas production in the state has grown from more than 977 billion cubic feet in 2008 to more than 2.1 quadrillion cubic feet in 2014. “Production actually may be down a little bit this year. There are companies that are deciding that there’s no use giving their products away,” said Lou D’Amico, president and executive director of the Wexford-based Pennsylvania Independent Oil & Gas Association, representing more than 950 oil and gas producers, drillers, support companies and others. The price for 1,000 cubic feet of gas in September was $3.53, compared with more than $13 in 2008, according to the U.S. Energy Information Administration. “Some of us wonder why anybody is still drilling anything,” said D’Amico, of Saegertown. Producers are still drilling new wells, but not as many as during the early Marcellus boom. So far this year, 745 new oil and gas wells have been drilled into the Marcellus or Utica shales in Pennsylvania, compared with 1,372 in 2014 and 1,960 in 2011, the peak year for new wells, according to the Pennsylvania Department of Environmental Protection.

Pennsylvania sues gas driller over 'deceptive' leases - Pennsylvania's attorney general sued one of the nation's largest producers of natural gas on Wednesday over claims it cheated at least 4,000 landowners who signed drilling leases with the company. Oklahoma City-based Chesapeake Energy Corp. tricked landowners into signing industry-friendly leases in the early years of the Marcellus Shale drilling boom and then improperly deducted post-production expenses from their royalty checks, according to the lawsuit filed in Bradford County. Chesapeake, the nation's No. 2 gas producer, engaged in a "bait and switch scheme" with landowners, said the lawsuit, which seeks tens of millions of dollars in restitution as well as civil penalties. Chesapeake denied the claims."We strongly disagree with Attorney General (Kathleen) Kane's baseless allegations and will vigorously contest them in the appropriate forum," Chesapeake spokesman Gordon Pennoyer said. Landowners in the Marcellus Shale - a deep rock formation that holds the nation's largest known reservoir of natural gas - have been complaining for years about Chesapeake's business practices, and a settlement agreement between the driller and thousands of landowners is pending. Kane is seeking to modify the civil settlement so that her own lawsuit can go forward. A landowners group hailed the lawsuit.  "It looks like it's going to provide relief to a lot of lessors, people who have been cheated out of what was due them, and hopefully without attorneys' fees and without having to fight for it."

Attorney General Sues America’s Biggest Frackers For Scamming Land Owners - The frackers are getting sued again, this time by the Pennsylvania Attorney General, for scamming lease holders on their royalty payments. Why are we not surprised ? Have you sued a gashole lately ? What are you waiting for ? Pennsylvania’s attorney general sued one of the nation’s largest producers of natural gas on Wednesday over claims it cheated at least 4,000 landowners who signed drilling leases with the company. Oklahoma City-based Chesapeake Energy Corp. tricked landowners into signing industry-friendly leases in the early years of the Marcellus Shale drilling boom and then improperly deducted post-production expenses from their royalty checks, according to the lawsuit filed in Bradford County. Chesapeake, the nation’s No. 2 gas producer, engaged in a “bait and switch scheme” with landowners, said the lawsuit, which seeks tens of millions of dollars in restitution as well as civil penalties.

Attorney general files royalties lawsuit against Chesapeake Energy - The state attorney general has filed a lawsuit that seeks millions of dollars in restitution from Chesapeake Energy Corp. after the company allegedly underpaid gas royalties to landowners. Attorney General Kathleen Kane alleged the company “engaged in deceptive conduct in securing fracking leases” from landowners in the state “as part of a rush to lock up acreage in the Marcellus shale region.” As of the end of 2014, the company had 835 active wells in Pennsylvania, including 12 in Beaver County, according to the Department of Environmental Protection. The lawsuit is the result of an extensive investigation by the attorney general and seeks restitution for thousands of landowners in the state who signed leases with Chesapeake. Kane alleged that Chesapeake has been accused of similar tactics in other states, as well. “This lawsuit should serve as notice that we will not allow our residents to be exploited,” she said. According to Kane, Chesapeake representatives obtained gas leases and promised landowners a certain amount in royalties but then delivered a lower amount once the wells started producing gas. The company also allegedly took deductions for post-production expenses from royalty checks even though landowners’ contracts contained language prohibiting those deductions.

One Of The Country’s Largest Fracking Companies Cheated Landowners Out Of Millions, Lawsuit Alleges -  If allegations put forward this week are true, one of the nation’s largest fracking companies may have to pay millions in Pennsylvania for underpaying royalties to landowners.Chesapeake Energy Corporation and others connected with their operations in Pennsylvania allegedly defrauded thousands of landowners, including seniors, Pennsylvania’s Attorney General Kathleen G. Kane charged in a lawsuit filed Wednesday. The attorney general is seeking restitution for at least 4,000 victims, mostly from northeastern counties of Bradford, Sullivan, and Cayuga — rural communities located on top of the Marcellus Shale, the largest producing shale gas basin in the United States. The number of affected parties could grow as many more victims are likely to come forward, said Jeffrey Johnson, deputy press secretary for the state attorney general. “We expect that number to grow significantly,” because any Pennsylvania resident “who has signed [a lease] with Chesapeake … would be covered under this lawsuit,” he told ThinkProgress.Chesapeake Energy, based in Oklahoma, denies the allegations. “We strongly disagree with Attorney General Kane’s baseless allegations and will vigorously contest them in the appropriate forum,” said Gordon Pennoyer, Chesapeake Energy director of strategic communications, via email.The state attorney general accuses Pennsylvania’s largest producer of natural gas of negotiating leases promising royalties that then went underpaid, according to court documentation, which alleges that defendants took deductions from landowners’ royalties even though leases contained language prohibiting those deductions. Johnson said fines could be in the “tens of millions.”

Royalty Pain: Pennsylvania AG Sues Chesapeake, Contends Landowners Underpaid - The Pennsylvania attorney general’s office filed suit against Chesapeake Energy Corp. on Dec. 9, accusing the Oklahoma company of deceptive conduct in securing fracking leases and later underpaying Marcellus Shale royalties.The suit says Chesapeake engaged in a self-dealing scheme that resulted in reduced royalty payments to landowners. Under the terms of landowners’ leases, Chesapeake could only make deductions from royalties for costs paid to non-affiliated third parties. The suit contends that Chesapeake failed to disclose that its deductions, which lowered royalty payments, were actually for expenses paid to affiliated companies.  “This alleged conduct amounts to a ‘bait-and-switch,’” said Pennsylvania Attorney General Kathleen G. Kane. “Pennsylvania landowners were deceived in thousands of transactions by a company accused of similar conduct in several other states. This lawsuit should serve as notice that we will not allow our residents to be exploited.”  Chesapeake has repeatedly faced royalty-related suits, including cases filed in Texas, Pennsylvania, Ohio, Oklahoma and Arkansas. The company has also been served subpoenas by the U.S. Department of Justice, U.S. Postal Service and various states seeking information on its royalty practices. The suit seeks civil penalties of $1,000 for every violation of the state’s Unfair Trade Practices and Consumer Protection Law and $3,000 for violations involving anyone 60 years of age or older.  The suit does not specify an overall dollar amount it is seeking. The attorney general also wants Chesapeake frozen out of the Marcellus—including exploring, drilling, extracting, gathering, transportation or sale of gas—until the company makes good on any court-ordered awards and penalties. “The gas gathering agreements between Chesapeake Energy and its midstream unit were not negotiated at arm’s length,” the suit says. “Thus resulting in a scheme of artificially inflated and/or unreasonably excessive post-production costs to be passed on to Pennsylvania landowners.”

Billions of Barrels of Oil Vanish in a Puff of Accounting Smoke -- In an instant, Chesapeake Energy Corp. will erase the equivalent of 1.1 billion barrels of oil from its books. Across the American shale patch, companies are being forced to square their reported oil reserves with hard economic reality. After lobbying for rules that let them claim their vast underground potential at the start of the boom, they must now acknowledge what their investors already know: many prospective wells would lose money with oil hovering below $40 a barrel. Companies such as Chesapeake, founded by fracking pioneer Aubrey McClendon, pushed the Securities and Exchange Commission for an accounting change in 2009 that made it easier to claim reserves from wells that wouldn’t be drilled for years. Inventories almost doubled and investors poured money into the shale boom, enticed by near-bottomless prospects. But the rule has a catch. It requires that the undrilled wells be profitable at a price determined by an SEC formula, and they must be drilled within five years. Time is up, prices are down, and the rule is about to wipe out billions of barrels of shale drillers’ reserves. The reckoning is coming in the next few months, when the companies report 2015 figures. The rule change will cut Chesapeake’s inventory by 45 percent, regulatory filings show.

Pittsburg: Proposed WesPac oil-by-rail shipping terminal is dead — A controversial plan that had generated fierce local opposition to convert a moribund PG&E tank farm into a massive regional oil storage facility is dead after the company proposing the project backed out, company officials confirmed Wednesday. WesPac Midstream LLC’s proposed Pittsburg Terminal Project no longer makes economic sense, a company official said, because of the major drop in oil prices nationally and a glut in the oil market. It’s a situation uncertain to reverse in the future, said Art Diefenbach, WesPac’s Pittsburg project manager. “With the lower oil prices, we couldn’t finalize potential agreements with customers, and we couldn’t drag things out,” Diefenbach said. There was a huge demand when the project was first proposed in 2011, he said, with higher oil prices as recently as June 2014. But that demand has leveled out, and a quick turnaround is considered unlikely, Diefenbach said. Others agree. At the ongoing United Nations climate conference in Paris, Fatih Birol, executive director of the International Energy Agency, said, “When we look at 2016, I see very few reasons why we can see growth in the prices.” The end of the project was cheered by opponents; there were many, including the local Pittsburg Defense Council, other local individuals and regional environmentalists. Reasons for opposition were myriad, critics said, ranging from the threat of an explosion at the terminal to prospective ground pollution issues to the vapors from the storage tanks, as well as promoting fossil fuels over greener forms of energy.

Researchers work to fingerprint hydrofracking water quality:  Project SWIFT (Shale-Water Interaction Forensic Tools) was launched during spring 2012 by researchers in the Department of Earth Sciences in SU's College of Arts and Sciences in response to the public debate over hydraulic fracturing in New York State. Project SWIFT is the first project of its kind in the state. "Last fall, there seemed to be daily news stories focused on the public debate over fracking and water quality," says Gregory Hoke, assistant professor of earth sciences and co-founder of Project SWIFT. "Lacking in the debate was independent data about natural water quality. I thought we could help fill the void, by collecting water quality data and putting it on the web so that communities can make informed decisions based on an independent, objective data source." Hoke and Associate Professor Laura Lautz worked with their colleagues Professor Donald Siegel, and Assistant Professor Zunli Lu to launch the project, which is jointly funded by The College of Arts and Sciences and SU's Office of the Provost. The project aims to:

  • establish a baseline for groundwater quality across New York State's Southern Tier before hydrofracking begins;
  • determine chemicals typically found in fracking waste water by testing samples of flow-back water obtained from Pennsylvania;
  • develop geochemical fingerprinting tools and a model protocol that can be used to analyze and monitor water quality in areas with potential for shale gas drilling; and
  • create a publicly available water quality database that communities and stakeholders can use to make informed decisions about hydrofracking.

New York State AG pushes for oil train restriction — State Attorney General Eric Schneiderman wants a federal agency to close a loophole that he says allows highly flammable crude oil to be shipped by rail. He filed a petition for rulemaking this week with the federal Pipeline and Hazardous Materials Safety Administration that would require all crude oil transported by rail in the United States to achieve a vapor pressure — a measurement of the oil’s explosiveness and flammability — of less than 9 pounds per square inch. The crude-oil trains pass through the North Country on their way from North Dakota to the Port of Albany, where the oil is stored and shipped out. Ticonderoga was the site of a massive oil-train protest this past summer, when hundreds of demonstrators from Vermont environmental groups occupied the Amtrak Station in memory of victims of the horrific Lac-Mégantic, Quebec, catastrophe, where a derailed train burst into flames, destroyed the downtown and killed 47 people.

Top New Hampshire officials oppose pipeline -- Opposition to a proposed pipeline that would cross 17 New Hampshire towns is growing, at least among the state’s top elected officials. New Hampshire Public Radio reports that Republican Sen. Kelly Ayotte told constituents Tuesday that she opposes the project because her questions haven’t been adequately answered. The next day, Democratic Gov. Maggie Hassan told the station the project should not move forward if the company doesn’t address the concerns of affected communities. U.S. Rep. Annie Kuster, also a Democrat, went further, calling the pipeline a “bad deal for New Hampshire.” U.S. Rep. Frank Guinta, a Republican, followed with his opposition on Thursday. Democratic Sen. Jeanne Shaheen has called for more transparency in the process. The pipeline would carry natural gas into the region from Pennsylvania.

FERC accepts application for controversial natural gas pipeline - A federal commission will begin looking in earnest at a plan for a natural gas pipeline that’s drawn controversy in southern New Hampshire, after officials ruled that the application is complete. The Federal Energy Regulatory Commission issued the notice Monday formally accepting a Nov. 20 application for the Northeast Energy Direct project, which it must do for a project to continue in the review process. FERC is the sole federal commission responsible for approving or rejecting the project based on factors including need. The review process is expected to take about a year. Anyone wishing to become an intervenor in FERC’s review of the project has until Jan. 6 to file a request with FERC, according to the notice. Being an intervenor gives a person or group a legal status to be recognized as a party in the proceedings, the notice said. People may also participate without party status by filing comments on the project with FERC on its website, and referring to docket number CP16-21-000, according to the notice.

Does the US Government Actually Regulate Pipelines? - While global leaders meet in Paris at the COP21 climate talks in an effort to rein in global greenhouse gas emissions, the fossil fuel industry continues with business as usual. In far west Texas, that means a proposal for a controversial high-pressure natural gas transmission pipeline in a state that already boasts 431,997 miles of pipelines - enough to stretch to the moon and most of the way back to earth. The additional 143-mile-long, 42-inch-diameter Trans-Pecos pipeline will be built right through the heart of Texas' starkly beautiful and remote Chihuahuan Desert, as Truthout previously reported. The aim of the pipeline is purportedly to deliver natural gas from Texas to Mexico, where it is, in theory, in high demand. Plans are currently in the works for the pipeline, which would be larger in diameter than the infamous Keystone XL pipeline. Construction supplies are stockpiled, and in some areas, trenches for the pipeline have already been dug.  However, those in opposition to the pipeline say the Federal Energy Regulatory Commission (FERC) is not complying with the National Environmental Policy Act in relation to pipeline construction. Advocates also assert that FERC is not giving thorough consideration to the prospect of not allowing the pipeline to be constructed - particularly in the fragile ecosystem where it is currently proposed. FERC has a reputation of effectively rubber-stamping every pipeline that comes its way, and that reputation is well earned, given that it has, technically, never disallowed a pipeline. The FERC "process [is] designed to produce a 'yes' in the end," Excelerate Energy CEO Rob Bryngelson said. "You may have to tweak your project ... [but] it's designed to get a 'yes.'"

Pipeline operator won’t be penalized for explosion - Energy Transfer Company will not be fined for a pipeline explosion that occurred in DeWitt County in June. A 46-page report from the Railroad Commission of Texas attributes the cause of the pipeline rupture to a bending overload that placed the bottom of the 42-inch pipeline under pressure, causing a fracture along the weld. No violations were identified by the state oil and gas regulator, according to the report. The Texas Commission on Environmental Quality did not find any violations on the company’s part either, said commission spokeswoman Andrea Morrow. The explosion occurred about 8 p.m. June 14 and shot flames hundreds of feet into the air. The fire could be seen from 50 miles away. The heat from the flames melted electric lines, cutting off power to 130 homes. Sixteen people were evacuated from homes near the explosion, according to the report. No one was injured in the incident, which caused $500,000 in damage. Energy Transfer Company reported to the Texas Commission on Environmental Quality that as much as 165,732 pounds of volatile organic compounds may have burned before the company was able to isolate the line. The natural gas released resulted in an estimated $900,000 loss.

High seas would thwart Straits oil spill response -- Imagine an oil slick quickly growing through the Straits of Mackinac from a rupture of the 62-year-old, twin pipelines known as Line 5 traversing the bottom of where Lakes Michigan and Huron connect. Now imagine oil spill response boats from the pipeline operator and U.S. Coast Guard moored at the docks, taking no action for hours, or even a day or more as the slick mixes and spreads in the often turbulent waves. That scenario is a real possibility if a Line 5 spill were to occur in bad weather, according to the U.S. Coast Guard and the pipeline owner’s contracted spill responder. Under high wave conditions, crucial offshore spill containment response might have to be put off for hours, or even days because of unsafe boating conditions, the responders say. That would delay the deployment of spill-containing boom, or the use of skimmers to remove oil from the water’s surface. And that would allow the ecological calamity to spread. “When you get above 3-, 4-, 5-foot seas — definitely at 5 feet — you are beyond where you can safely deploy these things and have them do any good,” said Jerry Popiel, incident management adviser for the Coast Guard’s 9th District, which includes the Great Lakes. And those conditions aren’t infrequent in the Straits of Mackinac. Weather records from the National Oceanic and Atmospheric Administration’s Great Lakes Environmental Research Laboratory indicate that from 2010 through 2014, the straits area averaged wave heights of 3 to 4 feet about 24 days per year — as an entire day’s average. Waves exceeded 4 feet as an entire day’s average 8 days of the year.

Virginia groups want stronger safeguards on fracking — Environmental and public interest groups are urging officials to halt any new fracking efforts in Virginia until they complete a thorough review of the state’s standards. The groups say Virginia’s current safeguards on fracking are inadequate and outdated. They’re urging Gov. Terry McAuliffe to conduct a comprehensive review before approving any new permits for oil and gas drilling that would require fracking. Fracking, or hydraulic fracturing, is a high-pressure technique for extracting oil and gas from shale deposits. The groups pushing for the review are the Virginia Organizing Washington County Chapter, Clean Water Action, Virginia Sierra Club and Shenandoah Riverkeeper. Virginia’s Department of Mines Minerals and Energy has proposed changes to some aspects of the state’s fracking laws. But the groups say more are needed.

Days of Revolt: The Revolution Will Be Local - The Real News Network - I'm Chris Hedges. Welcome to Days of Revolt. Today we're going to talk about the grassroots movement across the United States to rise up against the fracking industry, what that resistance looks like, how it can become effective, and what the industry, and in particular the state, is doing to stop it. With me are two anti-fracking activists: one, Thomas Linzey, the executive director and senior legal counsel for Community Environmental Legal Defense Fund, or CELDF. CELDF has assisted close to 200 communities in ten states to ban certain corporate projects and nullify corporate constitutional, quote-unquote, rights at the municipal level. I'm also joined by Mark Clatterbuck. He's an associate professor of religion at Montclair State University. He lives in Lancaster County, Pennsylvania. He's a member of LAP, or Lancaster Against Pipelines. This works with a large coalition of community members to keep the proposed Atlantic Sunrise project from being installed through five Pennsylvania counties. Thank you very much for joining us.

Florida Supreme Court questions Florida Power & Light on fracking deal - The Florida Supreme Court on Tuesday drilled into the state’s largest utility on whether it should be allowed to charge customers for a fracking deal that may or may not save them money on electricity. The plan by Florida Power and Light to invest in a natural gas fracking project in Oklahoma was approved by the Public Service Commission last December. But consumer advocates say that approval wasn’t within the PSC’s authority. FPL insists that the fracking deal will result in cheaper electricity for its customers in the long term — as much as $49.2 million in savings in the next 50 years. Yet, so far, the drilling project has cost more than it would have to buy natural gas at a market rate. This year, the project lost $5 million, and it is projected to lose even more money next year. The justices’ questions Tuesday focused on two key points: whether FPL is allowed to charge its customers for a deal that may or may not result in savings, and whether the PSC was empowered to approve it.

Natural Gas Price Rises on Larger-Than-Expected Demand - The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks decreased by 76 billion cubic feet for the week ending December 4. Analysts were expecting a storage withdrawal of around 60 billion cubic feet. The five-year average for the week is a withdrawal of around 79 billion cubic feet, and last year’s withdrawal for the week totaled 51 billion cubic feet. Natural gas futures for January delivery traded down less than 0.1% in advance of the EIA’s report, at around $2.05 per million BTUs, and traded at $2.08 after the data release, compared with Wednesday’s closing price of $2.06. Last Thursday natural gas closed at $2.18 per million BTUs, and over the past five trading days natural gas futures posted a high of $2.21 on Friday and a new 52-week low on Tuesday. The 52-week range for natural gas is $2.01 to $4.02. One year ago the price for a million BTUs was around $3.94. For the rest of this week and well into next, temperatures across the United States are expected to be well above normal. This weather pattern cuts the demand for heating and with it the demand for natural gas. Temperatures are likely to be 10 to 25 degrees warmer than usual for the next several days and demand for natural gas is expected to remain lower than normal. Stockpiles are about 15% above their levels of a year ago and about 6.5% above the five-year average. The EIA reported that U.S. working stocks of natural gas totaled about 3.88 trillion cubic feet, around 236 billion cubic feet above the five-year average of 3.644 trillion cubic feet and 514 billion cubic feet above last year’s total for the same period. Working gas in storage totaled 3.366 trillion cubic feet for the same period a year ago.

Natural Gas Retreats to New Three-Year Low - WSJ: Natural gas prices flopped to their lowest point in more than three years as a historically warm December keeps limiting expectations for demand. Temperatures across the East and in most of the country’s biggest markets for natural-gas heating will be more than 15 degrees above normal through Monday, said MDA Weather Services in Maryland. Winter heating demand is usually the biggest driver for gas consumption and prices, but this December is likely to be one of the warmest five on record, MDA said. That prediction comes on top of a fall that has already been warm. Stockpiles kept building up in November, a time when colder weather usually causes rising demand to prompt draining storage. Instead, they are still at near-record highs, 15% above levels from a year ago and 6.5% above the five-year average despite a larger-than-expected draw last week, the U.S. Energy Information Administration said Thursday. “The idea that we have tons of gas in storage and more mild weather in the foreseeable future, (gas prices) can’t overcome…those two overwhelming facts,”

2 new natural gas facilities proposed for Louisiana - Two companies are looking at building large facilities along the Mississippi River south of New Orleans where they can export natural gas to the world market, another sign of the expanding footprint of the natural gas industry in Louisiana. Until now, the area around Lake Charles has been the center of a boom in the market to import and export natural gas with 10 projects in various stages of development there. Two large facilities — Cheniere Energy’s Sabine Pass LNG and Sempra Energy’s Cameron LNG — are under construction. Cheniere plans to make its first overseas shipment of LNG in January. Now companies are looking to Plaquemines Parish as an alternative hub. Venture Global LNG, a Washington, D.C.-based energy firm, wants to build a large facility near Pointe-a-la-Hache on the west bank of the Mississippi River while Louisiana LNG Energy LLC. is working to construct a smaller facility on the east bank of the river near Davant. Louisiana LNG is a Houston-based venture. The projects in Plaquemines are an outgrowth of the nation’s boom in natural gas production that has resulted from developments in hydraulic fracturing to reach gas stored deep inside the earth. Natural gas is then turned into liquid form and exported by ship. In related news, Initial unemployment claims drop in Louisiana. “We’ve got a lot of LNG available or coming available,”

Texas Frack Zone Is World’s Biggest Methane Leaker!  - Producing more climate cooking gases than all the coal burning plants in the US. Thanks frackers. Texas Fracking Zone Emits 90% More Methane Than EPA Estimated The Barnett Shale’s emissions have been vastly underestimated, sweeping study finds. And the study itself does not include leaks during the drilling, completion and early production stages – in other words, it underestimates the known sources of leaks. A sprawling, aggressive effort to measure the climate footprint of natural gas production has yielded striking results: methane emissions from the Barnett Shale in North Texas are at least 90 percent higher than government estimates. That conclusion comes from a peer-reviewed study published Monday in Proceedings of the National Academy of Sciences. The paper is the the most sweeping study to emerge from the Environmental Defense Fund’s $18-million project to quantify methane leaks from the natural gas industry. It was written by 20 co-authors from 13 institutions, including universities, government labs, EDF and private research firms. Overall, the two-year study found that methane emissions from the Barnett Shale are nearly twice as much as estimated by the Environmental Protection Agency’s Greenhouse Gas Inventory, and 5.5 times the number from a separate global database. Co-author Amy Townsend-Small, an environmental studies professor at the University of Cincinnati, said peer-reviewed papers often find larger emissions than EPA estimates. The EPA’s databases are often based on decades-old methodology, Townsend-Small said, adding that the federal agency knows it has “a long way to go.”

Oil below $40 forces Texas driller into bankruptcy -- A Fort Worth oil company became the 18th driller in Texas to succumb to the oil slump. Energy & Exploration Partners announced that it filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code in order to deleverage its balance sheet and achieve a viable capital structure for building long-term value. The company said capital markets have closed to producers in the wake of $40 oil, leaving it unable to raise funds that could have prevented bankruptcy. “We have taken this difficult, but necessary step in order to provide adequate time to complete ongoing discussions and process with our lenders to restructure our balance sheet and create a strong financial foundation for the future,” Founder and CEO Hunt Pettit said. Crude oil prices fell as low as $36.64 per barrel on Tuesday, before rising to $37.88 in early trading on the New York Mercantile Exchange.

Fire out at Texas natural gas processing plant, cause sought — A fire that burned for days at a West Texas natural gas processing plant is out as investigators try to determine what sparked the blaze. An Anadarko (an-uh-DAR’-koh) Petroleum Corporation official had no timeline Tuesday on when the Ramsey unit near Orla will reopen. Two people were slightly hurt when fire broke out last Thursday at the plant a few miles south of the Texas-New Mexico line. Anadarko spokesman John Christiansen says the fire was extinguished Monday. He says the next step is to work with regulators to determine the cause and assess damage. Christiansen says the priority will be to safely repair the plant, to resume service to customers, and to complete previously planned expansion projects.

Hydrogen sulfide concerns in West Texas oil well blowout — Emergency officials have evacuated a 2-mile radius near a West Texas oil well that blew out and spewed a mixture of dangerous hydrogen sulfide. Gaines County Judge Tom Keyes says nobody was hurt in Tuesday morning’s accident at a rural site about 4 miles east-northeast of Seminole. Keyes says about two dozen homes were evacuated, as a precaution. Keyes says the well is operated by Tabula Rasa Energy of Houston. Company officials didn’t immediately return a message. Authorities haven’t said what caused the blowout. Keyes says emergency personnel are monitoring winds for any shifts that could mean expanding the isolation area. Hydrogen sulfide is a flammable, poisonous gas with an odor similar to rotten eggs. Seminole is a town of about 6,400, located 70 miles northwest of Midland.

Another fracking fracas, this one in New Mexico - — A small tract of land is creating a big fuss outside the fastest-growing city in New Mexico. An energy company based in Oklahoma is looking at a two-acre plot in a scarcely populated area as a potential place to drill, but opponents say the site is too close to Rio Rancho, a sprawling bedroom community that hugs the state’s largest city, Albuquerque. “If there is an accident, there is no money for compensation or remediation,” Rio Rancho homeowner Steve Frankuchen told during a break at a meeting of the Sandoval County Planning and Zoning Commission. “If the company goes bankrupt, Rio Rancho goes down the tubes.”

Oklahoma Earthquakes: Bombshell Doc Reveals Big Oil’s Tight Grip on Politicians and Scientists  --   Al Jazeera America correspondent Josh Rushing and the Fault Lines team recently traveled to the state and spoke to several Oklahoma residents, seismologists, oil and gas industry officials, and lawmakers, including Oklahoma Governor Mary Fallin, who has been slow to acknowledge the connection between the earthquakes and the oil and gas industry. The bombshell documentary, which EcoWatch has previewed, explores the mounting scientific evidence that links earthquakes to injection wells, as well as the maddening hurdles and bureaucracy that state scientists and regulators face in their efforts to halt the potential crisis and national security threat. As EcoWatch has extensively reported, the Sooner State is experiencing a frightening spike in seismic activity. Before 2009, Oklahoma had two earthquakes of magnitude 3.0 or greater each year, but now there are two a day. Oklahoma now has more earthquakes than anywhere else in the world, a spokesperson from the Oklahoma Corporation Commission (OCC), the state’s oil and gas regulatory body, said earlier this month.  Scientists have identified that the injection of large volumes of toxic wastewater left over from oil drilling and fracking operations into underground wells has triggered the state’s now daily earthquakes. While state regulatory agencies have ordered changes and the shut down of several wells to slow the earthquake rate, as you can see in the image below, thousands of these wells are still in operation, literally dotting the map.

Energy Companies Want Judge to Dismiss Historic Lawsuit Over Oklahoma Earthquakes  -- Energy companies are trying to legally distance themselves from the fracking-linked earthquakes currently rattling Oklahoma. According to a new report from the Associated Press, Lincoln County District Judge Cynthia Ferrell Ashwood is hearing two energy companies’ motion to dismiss a major liability lawsuit. The lawsuit in question was brought by Sandra Ladra, an Oklahoma woman who claims she was injured after a 5.6-magnitude quake—the largest ever recorded in the state—hit the city of Prague in 2011. She alleges that the earthquake was caused by the injection of wastewater from oil and gas production into underground wells. Ladra is specifically suing Spess Oil Co., in Cleveland, Oklahoma, Tulsa-based New Dominion LLC as well as 25 unnamed parties. According to the Associated Press, Ladra claims the large tremor crumbled her two-story fireplace and caused rocks to fall on her legs and left a gash her knee. Ladra is asking for $75,000 in actual damages plus punitive damages.  Steve Spess, a manager of Spess Oil, said in an August 2014 statement that his company injects water at low pressure and they don’t believe that is causing the earthquakes.  This lawsuit is particularly significant because it could “for the first time, legally acknowledge that the oil and gas industry may have something to do with the swarm of earthquakes the state,” as Newsweek observed. Oklahoma has been a hotbed of frequent and ongoing earthquakes ever since the state’s fracking boom kicked off in 2009. Before 2009, Oklahoma had two earthquakes of magnitude 3.0 or greater each year, but now there are two a day. In the past year alone, there have been more than 2,100 earthquakes of magnitude 1.5 or greater. The scientific consensus is that the seismic activity is caused by the massive quantities of wastewater that is injected underground and triggering faults. This joint study by the University of Oklahoma, Columbia University and the U.S. Geological Survey even says that the devastating 2011 quake was linked to fluid injection.

Oklahoma’s Oil And Gas Industry Says Paying For Earthquake Damage Would Be Really Terrible - Less than a week after state regulators shut down seven waste disposal wells in Oklahoma, two companies being sued for earthquake damages are asking the case be dismissed.  Spess Oil Company and New Dominion LLC say that plaintiff Sandra Ladra waited too long to file her suit, which asks for $75,000 in damages stemming from being hit by falling rock when an earthquake struck her home and damaged her chimney. The earthquake was allegedly triggered by the fracking companies, who were conducting wastewater injection nearby.  “When you look at the actual science and you look at the data, you can’t help but go, ‘It’s the injection wells, stupid.’ It’s just that obvious,” Scott E. Poynter, Ladra’s lead attorney, told the Associated Press. “Oklahoma shouldn’t have more earthquakes than anywhere on the planet, but it does.”  Earthquakes have proliferated across Oklahoma in recent years as oil and gas production from fracking, or hydraulic fracturing, has exploded. During fracking, chemical-laced water is injected at high pressure into the ground, allowing pockets of trapped oil and gas to loosen and be captured. The process creates a huge amount of wastewater, which cannot be reused due to the chemical content and contamination from elements in the ground, often including oil itself. Fracking companies typically inject the wastewater into lined wells.  The U.S. Geological Survey has linked disposal wells to Oklahoma’s earthquakes, which have gone from one or two a year to an expected 941 this year. By August, the state had already seen more earthquakes than 2014, the previous record year.

Bakken pipeline hearing nears completion; decision could be weeks away -- A forthcoming decision by Iowa regulators is just one of the approvals needed across four states for a proposed 30-inch diameter crude oil pipeline, but may prove the biggest hurdle. The Iowa Utilities Board is expected to conclude its hearing next week after 11 days of testimony, 80 witnesses and a public comment day that drew hundreds of people. The anticipated decision may not come until February, though. “In my opinion, the Iowa utility commission and Iowa courts are going to be the biggest hurdle to getting the pipeline built,” said Chris Healy, a lawyer with Meierhenry Sargent LLP of Sioux Falls, S.D., who represents landowners on eminent domain settlements in the case. The governor-appointed, three-person Iowa Utilities Board will not only rule on Texas-based Dakota Access LLC’s hazardous liquid permit to cross 346 miles of Iowa as part of the 1,134-mile Bakken pipeline, but also to what extent, if at all, to empower the developer to condemn private land in the path. Dakota Access, which is seeking permission to build the pipeline from North Dakota through South Dakota and Iowa to a terminal in Illinois, did not return several messages seeking comment. Iowa’s process for eminent domain, which will play a key role in how quickly the $3.8 billion pipeline if approved gets built, is different from other states. Iowa could grant or deny the permit, and has a range of options for eminent domain — from all or none to some point in between.

Bakken pipeline developer urges faster decision - The developer proposing a Bakken crude oil pipeline from North Dakota to Illinois wants Iowa regulators to decide on its hazardous liquid pipeline permit request by early January. That would be consistent with the Iowa Utilities Board’s estimate earlier this year of a decision by December or early January, but faster than the board’s most recent estimate of February. “We believe the IUB should adhere to the original schedule of rendering a decision by late December or early January to ensure the timely construction of this important energy infrastructure project so we can safely transport domestically produced crude oil to refining markets as quickly as possible,” Dakota Access LLC spokeswoman Vicki Granado said in an email Tuesday. The board’s hearing on the permit, which began Nov. 12, concluded after about 10 p.m., Monday. The board must decide whether to grant the permit and, if so, whether to grant Dakota Access eminent domain power. Dakota Access already has hundreds of miles of pipes stockpiled in a farm field near Newton, and has agreements with contractors to build the line. The Texas-based oil company had hoped to begin construction in early 2016 and have the 1,134 mile pipeline operational by the end of the year. The new timeline puts that schedule at risk.

Judge throws out lawsuit challenging Nebraska pipeline law  — A judge has thrown out a lawsuit challenging a Nebraska law that allowed the Nebraska governor to approve the proposed Keystone XL oil pipeline route through the state. Holt County District Judge Mark Kozisek tossed the lawsuit on Friday, agreeing with the pipeline company’s argument that the issue was rendered moot by TransCanada’s decision to abandon plans to move forward on the project, the Omaha World-Herald reported.  That means the law will remain on Nebraska’s books, for now. The landowners who filed the suit had urged the judge to allow them to proceed with the lawsuit, arguing that companies could use the 2012 law in the future to avoid the Nebraska Public Service Commission — a small, elected group that regulates most pipeline projects — opting instead for a governor’s review and blessing.

Colorado fracking bans land at the state Supreme Court -  The bitter battle over whether local governments in Colorado — specifically Fort Collins and Longmont — should be able to ban oil and gas drilling rigs, and fracking, from their borders will go before the state’s highest court on Wednesday. In two hours of oral arguments at the Colorado Supreme Court, attorneys representing the state, energy companies, environmental groups and the governments of Fort Collins and Longmont will argue an issue that exploded in 2012 and 2013, as voters and officials grappled with drilling rigs setting up new operations in what once were farm fields, but over the years have become home to towns, schools and strip malls.  And people from across the United States will be watching the outcome of the cases, according to energy industry executives. The central issue is whether state officials have overarching authority to regulate how energy companies drill for oil and natural gas in Colorado, or whether local governments should do it instead. State officials and members of the energy industry say the oversight authority rests with the state, which has the expertise and experience to do so. “It’s the state’s position that there are technical aspects of oil and gas exploration and production over which the state has primacy as matters of statewide concern and that under the law in Colorado, as it exists today, a local jurisdiction may not prohibit those activities,” said Matt Lepore, the director of the Colorado Oil and Gas Conservation Commission, which has sued Longmont’s ban on fracking and storing fluids related to fracking within its borders.

Colorado Supreme Court hears arguments in intense fracking case (Slideshow) - Attorneys, state officials and representatives from oil and gas industry as well as people opposed to drilling rigs in their neighborhoods packed the Colorado Supreme Court chambers Wednesday. More people stood outside the courtroom, unable to get a seat to listen to oral arguments on whether local communities — specifically Longmont and Fort Collins — can ban hydraulic fracturing within their boundaries.   State officials and energy industry executives have said the state has the final say over industry operations — including the use of fracking, which has been credited with the production of record-breaking amounts of oil and natural gas in Colorado and nationwide in record years. In 2012, Longmont voters approved a ban on the use of hydraulic fracturing, or fracking, within the city’s borders. In 2013, Fort Collins voters approved a five-year moratorium on fracking inside the city. Both cities were sued in separate legal cases, each case got one hour of oral argument on Wednesday; a decision could come anywhere between three months to nine months from now. The legal cases have drawn attention nationwide because Colorado is at the forefront of the issue of conflicts over oil and gas operations close to towns and neighborhoods. Outside, before the hearings started, a group of about 30 residents held protest signs.  “I’d prefer to see the fracking wars of the last five years to end — and have local officials and citizens have the ability to control the type of development that’s occurring in their jurisdictions,” Sura said.  But inside the hearings, attorneys for the Colorado Oil and Gas Conservation Commission (COGCC), which regulates industry operations and sued Longmont, as well as attorneys for the oil and gas industry, argued repeatedly that the two cities’ bans violated the state’s authority and impeded the efficient recovery of Colorado’s oil and gas reserves.

Legislative committee approves new oilfield waste rules --  New oilfield waste rules will take effect in North Dakota with the new year. The Legislature’s Administrative Rules Committee has approved rules that will allow certain landfills to accept waste with higher levels of radioactivity. Environmental Health Chief Dave Glatt has said the elevated standard is still safe for people and the environment, and that the rules will enable regulators to better track the waste. The state Health Council endorsed the rules in August. North Dakota generates up to 75 tons of radioactive waste daily, largely from so-called oil filter socks that strain liquids during the oil production process. Environmental groups say they’re considering a court challenge.

We Are Sacrifice Zones: Native Leader Says Toxic North Dakota Fracking Fuels Violence Against Women  (video interview and transcript) "What we're dealing with is a death by a thousand cuts," says North Dakota indigenous leader Kandi Mossett of the impact of the booming fracking and oil-drilling industry in her home state. "We've had violence against women increase by 168 percent, particularly in the area of rape," Mossett says. "We have 14-, 15- and 16-year-old girls that are willingly going into man camps [for oil workers] and selling themselves." She says the full impact of toxins from oil drilling won't be felt for another 20 years. "I'm so worried that at this COP21 my two-and-a-half-year-old daughter won't have a say, but she will be experiencing the worst impacts. It just doesn't make any sense to me that this is the 21st COPand we are considered sacrifice zones in my community."

Pipeline reclamation program fields 2 dozen complaints — A North Dakota program aimed at helping resolve disputes over pipeline reclamation has fielded about two dozen requests for help so far. The Legislature earlier this year created the pipeline restoration and reclamation oversight pilot program. It’s meant to help resolve disputes between pipeline companies and landowners or tenants. Twenty-three requests had been filed as of the end of October, The Bismarck Tribune reported. Williams County had the most with five, followed by Mountrail and Burke counties with four each, McKenzie County with three and Divide County with two. Bowman, Dunn, McLean, Mercer and Oliver counties had one each. “We’re getting really good feedback. The industry, they see it as a good approach to the problem.” There are more than 20,000 miles of pipeline already crossing North Dakota and thousands more miles to be added in coming years, according to the Agriculture Department.  The North Dakota Farm Bureau earlier this year opposed the pilot program, calling it duplicative. Officials with the group declined comment to the Tribune.

North Dakota Boosted Oil Output Ahead Of OPEC Meeting  |  Rigzone: (Reuters) - North Dakota's oil producers boosted output in October to sell as much as possible ahead of last week's OPEC meeting, bucking a trend for contraction amidst plunging crude prices. The 13-member bloc of global oil producers had long been expected to keep or raise its unified output cap at its semiannual meeting. Because output wasn't trimmed and members were effectively allowed to pump at will, oil prices have sunk further since the meeting, adding to losses of more than 50 percent in the past year. "A lot of (North Dakota) operators were pretty pessimistic about the OPEC meeting, and they looked at October and November to sell oil at what may have been the high price for the next six months," Lynn Helms, head of the state's Department of Mineral Resources, said on a Wednesday conference call with reporters. The move now appears prescient, as OPEC's meeting ended last week without a reference to its output ceiling. North Dakota producers also were able to raise output, in part, because of new natural gas collection equipment coming online from Oneok Inc and others. About 86 percent of produced natural gas was collected and processed during October, 5 percentage points higher than the previous month and far above state-required minimums. Roughly 260 wells had failed to meet the minimum during September and had been temporarily shuttered by state officials, but they were able to come online by October, fueling part of the production rise. Still, the state's oil producers only fracked 43 wells in October, 65 percent fewer than the previous month, an ominous harbinger as at least 110 must be completed each month to maintain long-term production.

Producing Wells Completed -- December 9, 2015 - One of the more interesting data points for tracking the Bakken may be "producing wells completed." These are wells that had/have been drilled to total depth (including the horizontal segment) but for some reason were not completed at the time they reached total depth. Early in the boom, wells were not completed soon after reaching total depth mostly due to logistical reasons: a shortage of frack spreads or a shortage of sand, for example. Then, during the peak of the boom, when there waere adequate resources, the fracklog began to grow because of operational reasons. Operators delay fracking on multi-well pads until all wells are drilled; in addition, operations on neighboring wells may affect fracking operations on another pad. There is a slowdown in fracking during the winter but that generally does not occur until January or February. Starting in October, 2014, operators began drilling to depth but then shutting in the wells due to the low price of oil. In mid-2015, the NDIC gave the operators additional time to complete their wells, no longer holding them to the "one-year rule." Sometime over the past year of tracking "producing wells completed," it started to become apparent that this might be a useful data point to track to better understand the Bakken. Right now, I have just some very basic data, but there are some derivative data points yet to be tracked. For example, the wells that are being drilled now and not completed are in the very best spots in the Bakken. In addition, they are being drilled on existing pads and may positively impact production from existing wells. Here are some basic data points from November, 2015:

North Dakota sees further declines in oil production ahead as prices hit seven-year low - North Dakota’s oil price has dropped to a seven-year low, and operators are drilling fewer new wells, portending future declines in production, the state’s Mineral Resources Department reported Wednesday. “We are looking at a lot of belt tightening and we are looking at it to continue through the entire first half of 2016,” Lynn Helms, director of the regulatory agency said on his monthly Director’s Cut conference call with reporters. In October, however, oil production in North Dakota rose 0.6 percent to nearly 1.17 million barrels per day compared with September, but that’s down from the peak of 1.23 million barrels last December. Helms said that upward blip partly resulted from North Dakota producers selling oil in advance of last Friday’s meeting of Organization of the Petroleum Exporting Countries (OPEC). The decision at that meeting to maintain production levels further sank oil prices. “They were trying to move and sell as much as they could ahead of the OPEC meeting,” said Helms, who expects prices won’t recover for months.

The Red Queen Has Not Fallen Off The Treadmill Yet -- - It's possible a comment was made in the Director's Cut but I did not see it. I may have missed it.  The Director's Cut has had a monthly comment suggesting how many well completions were needed to maintain a certain amount of oil production. The last time I saw that comment was in the July, 2015, Director's Cut (May data). This was the comment: To maintain production near 1.2 million barrels per day, 110 - 120 completions must be made per month.  Did anyone note how many completions there were in October, 2015, as reported in the most recent Director's Cut? Yup -- 43 completions. I find that incredible. For the longest time it was reported that upwards of 120 well completions were needed each month to maintain 1.2 million bopd production in North Dakota, and in October, only 43 completions were reported. And that was down from 123 completions the month before. 

Pipeline companies buy land for multi-billion pipeline projects to carry Bakken crude  A multitude of rigs may be stacked in the weeds right now, but pipeline companies are still laying big bets on a big oil future in the Bakken. Two of those multi-billion bets were recently laid in southwestern Williams County. Advertisement Lunnen Real Estate Services has recently closed two multimillion dollar real estate deals, one for TransCanada’s Upland Pipeline project and the other for Energy Transfer Partner’s Dakota Access pipeline. “There may be a slowdown in oil drilling, but these companies are preparing for the future,” said Jeff Lunnen, with the company. “These are significant investments in infrastructure for infrastructure to get future oil out of this area. These are the backbones of getting this stuff to market.” The two deals were separate, although located in the same vicinity in the 1804 Industrial Park on the west side of Williston. Lunnen said he had been in the process of subdividing the property for an industrial park when he was approached by the companies.

AP: Railroads beat back new safety rules after derailments - A pair of train derailments in 2012 that killed two people in Maryland and triggered a fiery explosion in Ohio exposed a little-known and unsettling truth about railroads in the U.S. and Canada: No rules govern when rail becomes too worn down to be used for hauling hazardous chemicals, thousands of tons of freight or myriad other products on almost 170,000 miles of track. U.S. transportation officials moved to establish universal standards for when such steel gets replaced, but resistance from major freight railroads killed that bid, according to Associated Press interviews with U.S. and Canadian transportation officials, industry representatives and safety investigators. Now, following yet another major accident linked to worn-out rails — 27 tanker cars carrying crude oil that derailed and exploded in West Virginia earlier this year — regulators are reviving the prospect of new rules for worn rails and vowing they won’t allow the industry to sideline their efforts. “We try to look at absolutely every place where we can affect and improve safety,” said Federal Railroad Administrator Sarah Feinberg. “Track generally is the place that we’re focusing at the moment, and it’s clearly overdue. Rail head wear is one place in particular that we feel like needs to be addressed as soon as possible.”

BNSF fined for tardy reporting of spills along railway - Washington state regulators have fined BNSF Railway $71,700 for tardy reporting of crude oil leaks and other hazardous material spills along the state’s railway. The Utilities and Transportation Commission on Monday approved a settlement agreement between the railroad and its staff. But the UTC removed a provision that would have suspended $40,000 of the penalty if the railroad complied with reporting requirements for a year. Commissioners said in their order that imposing the entire penalty would give BNSF more incentive to follow reporting requirements. The company initially faced up to $700,000 in potential fines. In March, regulators issued a complaint alleging that BNSF failed to report 14 releases to the state within the required time period. The incidents occurred at BNSF facilities throughout the state, including Seattle, Vancouver, Blaine and Everett.

Washington pens list of recommendations for oil terminal projects - A letter from the state Utilities and Transportation Commission to the Department of Ecology outlines a plethora of railroad safety concerns the commission has over the crude-by-rail storage facilities proposed for the Port of Grays Harbor. The letter, dated Nov. 30, came on the final day of the Department of Ecology’s public comment period following the release of the draft environmental impact statements for the projects, which was released on Aug. 31. The statements outlined potential environmental and economic impacts of two crude-oil-storage facilities proposed for Westway and Imperium’s Port properties. Imperium’s facility was purchased this summer by Iowa-based Renewable Energy Group. The commission’s letter breaks down its safety concerns by category, including bridges, public and private railroad crossings, signage along the track, issues with sections of the track itself and switching operations. The letter also outlines recommendations for the Department of Ecology to address the various concerns. The commission’s general functions include regulating businesses in the electric, telecommunications, natural gas and water industries, and overseeing costs of those services to ensure fairness to both the companies and the consumers, according to the commission’s mission statement. The commission’s first section of concern centers on the load capacity of the 52 bridges that sit along the Puget Sound &Pacific rail line between Centralia and the Port. The draft statements from Ecology, the commission’s letter says, do not address this concern thoroughly enough.

Antonovich calls for Porter Ranch gas leak state of emergency  - Los Angeles County Supervisor Michael Antonovich said earlier this week that he will ask the Board of Supervisors to declare a “state of emergency” regarding a leaking well at Southern California Gas Co.’s storage facility above Porter Ranch. The board will take up the request at next week’s meeting. “This action will ask for state and federal assistance to provide for our residents in the Porter Ranch area with additional air monitoring and help with efforts to cap the well,” Antonovich said in a statement. “This is a serious problem that has severely impacted our communities for the last 48 days.” More than 3,600 families have been or are being relocated. Antonovich also sent a letter to Gov. Jerry Brown saying that the gas company did not report the leak in a timely fashion and had not prepared a response plan for such an event. He is also asking the state Public Utilities Commission to conduct a review of the facility regarding its “future viability.” During a Wednesday afternoon briefing at a gas company facility in Chatsworth on progress to fix the leak, Gillian Wright, vice president of customer services for the utility, said she could not comment on Antonovich’s plan because she did not know about it.

Erin Brockovich calls on her neighbors to unite over Porter Ranch gas leak - More than 2,000 residents affected by a natural gas leak above Porter Ranch attended a community meeting Wednesday night hosted by environmental activist Erin Brockovich. Brockovich brought an attorney from law firm Weitz & Luxenberg — where she works, a law firm spokeswoman said — a meteorologist and a water pollution expert who gave about an hour presentation and answered questions from residents. Residents asked about health concerns and whether air filtration systems installed on their homes by the gas company would be effective. More than 3,600 residents have left their homes or are in the process of relocation due to the odors emitted by a leaking gas well at the Aliso Canyon storage facility in the Santa Susana Mountains above Porter Ranch. Mercaptan, an additive to natural gas that smells like rotten eggs, has caused symptoms of nosebleeds, headaches, nausea, respiratory problems and stomach discomfort among residents. Southern California Gas Co. discovered the leaking well on Oct. 23. Officials have said it could take four months to cap the leak. Because the leak will likely drag on for months, county health officials have begun to monitor chemicals, some that are known carcinogens, in natural gas because those chemicals can cause long-term health effects. So far, the levels monitored have not reached a level of concern.

Judge rejects bid to block Alberta Clipper pipeline upgrade — A federal judge rejected the key parts of a lawsuit brought by tribal and environmental groups that sought to block a capacity expansion on the Alberta Clipper crude oil pipeline, saying Wednesday that the courts don’t have the authority to intervene at this stage. U.S. District Judge Michael Davis concluded the letters the State Department sent to Canadian-based Enbridge Energy weren’t the kinds of final decisions that courts have jurisdiction to review. A coalition of tribal, environmental and climate change groups sued, saying the State Department should not have allowed Enbridge to build a temporary workaround to move more tar sands crude across the border pending the final federal approval. They said it threatens ecologically sensitive areas in northern Minnesota, and resources such as wild rice that are important to the area’s Ojibwe bands. But the government countered that the State Department merely confirmed that Enbridge already had the legal authority to proceed under its existing permit. “Obviously we’re disappointed in the decision, which essentially says the courts can’t help you,” said Ken Rumelt, an environmental attorney from the Vermont Law School, who represented the plaintiffs. He said they’ll consider whether to appeal after they’ve digested the judge’s opinion.  The plaintiffs, including the Sierra Club, issued statements saying that while the court may not have the authority to stop the project, President Barack Obama does. They noted that a fully expanded Alberta Clipper would carry more tar sands oil than the proposed Keystone XL pipeline, which Obama killed last month because it would have undercut U.S. efforts to achieve a global climate change deal.

Chevron slashes budget by 24 percent to weather low oil prices - Chevron Corp plans to slash its budget by 24 percent next year, part of a revamped strategy to rein in spending and position the energy giant to be nimble as oil prices show little sign of rising in the near future. The dramatic cutback in spending is likely to be echoed by other oil majors who will soon release spending plans, with rival ConocoPhillips set to release its 2016 budget on Thursday. Shares of Chevron fell 0.5 percent to $87.20 in after-hours trading. As of Wednesday's close, the stock has dropped 21 percent so far this year. Chevron had previously signaled it could slash its budget for next year. Plunging oil prices have cut sharply into the industry's margins this year, fueling thousands of layoffs and spreading deep unease on Wall Street about whether some energy companies can service their debt. Chevron plans to spend $26.6 billion across the globe in 2016, with the bulk of spending on international oil and gas exploration and production projects, with the second-largest share going to projects in the United States, including shale developments in Texas. The San Ramon, California-based company said in October it would cut 10 percent of its staff to weather the low-price storm.

ConocoPhillips to cut spending due to falling oil prices - ConocoPhillips said it plans to slash spending on projects by 25 percent next year as the energy company and its rivals deal with plunging oil prices. The Houston company said it expects to spend $7.7 billion in 2015, down from the $10.2 billion it expects to spend this year. The money is used for oil exploration, drilling and other projects around the world. Oil prices reached their lowest levels since 2009 this week. There’s an oversupply of oil, bringing prices down. ConocoPhillips CEO Ryan Lance said in a statement that the current environment for the company “remains challenging.” Several energy companies have reduced spending on weakened demand for oil. Chevron Corp., for example, said this week that it expects to spend $25.6 billion on projects next year, down 24 percent from this year. ConocoPhillips also said Thursday that it expects operating costs to be $7.7 billion for 2016, down from $10.5 billion in 2014.

Oil’s drop below $38 may cause a world of hurt for U.S. shale -- As crude-oil futures are descending toward seven-year lows, U.S. shale-oil producers are getting walloped.  West Texas Intermediate crude-oil futures for January delivery dropped 5.4% to below $38 a barrel Monday and were looking at their worst levels since 2009, after the Organization of the Petroleum Exporting Countries decided last week to keep crude-oil production at its current levels despite a price plunge of more than 60% from the 2014 summer peaks.   Saudi Arabia, OPEC’s largest oil producer and exporter, “is clearly betting on two things: a pickup in 2016 global demand, and the long-awaited impact of production cuts from nonconventional U.S. projects,” said Katrina Lamb, head of investment strategy and research at MV Financial. ‘We believe Saudi Arabia will stay the course, forcing high-priced production out of the market.’ Jay Hatfield, co-founder and president of InfraCap and portfolio manager of its MLP exchange-traded fund   Since the November 2014 OPEC meeting, the Saudis have made their strategy to defend market share regardless of price very clear.   “We believe Saudi Arabia will stay the course, forcing high-priced production out of the market,” Hatfield said the Saudi’s share of global production has edged up to about 10.5% currently from 10.4% in April 2015, while the U.S.’s share has declined to 9.5% from 10.1% over that period. On Monday, U.S. monthly government data showed that total domestic shale-oil production is expected to fall by 116,000 barrels a day to 4.861 million barrels a day in January.

Impact of crushed oil and gas prices on production economics. -- The CME/NYMEX Henry Hub contract for January delivery hit a 22-year low yesterday (December 10, 2015) of $2.015/MMBtu, 46% below year-ago price levels. But US gas production has been humming along near 73 Bcf/d, more than 3.0 Bcf above a year ago and about 1.0 Bcf below the all-time high earlier this year. It’s a similar story for crude oil, with oil prices closing at $36.76/Bbl yesterday, but production hanging in there above 9 MMb/d. This is a testament to lower drilling service costs and producers’ ability to improve drilling productivity. But can productivity gains and drilling costs keep up with continually lower commodity prices? Today we look at how productivity gains and falling drilling costs are impacting producers’ rates of return.In Part 1, we told the productivity story:  how productivity improvements made production a formidable force in the market in 2015 in spite of substantial headwinds from low oil and gas prices, drilling budget cuts and falling rig counts. We showed how rig counts came off dramatically in correlation with prices this past year. But gas production volumes didn’t follow the rig count down. That’s because producers very quickly learned to do a lot more with a lot less.  To quantify drilling productivity in the context of gas, we showed various industry metrics, including drilling time, wells drilled per year per rig, 30-day average IP rate and IP additions per rig per year. We looked at these metrics over time for EOG Resources in the Eagle Ford play, which showed that EOG is now drilling wells in one-third the time it took in 2011, drilling three times more wells per rig each year, and producing double the volume from each well in its first 30 days. And all of that translates to five times more volume produced for every rig than in 2011. So there are fewer rigs operating but those rigs are much more prolific than they were in 2011 or even a year ago.

Natural Gas Settles Below $2 for First Time Since 2012 - WSJ - Natural gas settled below the $2 mark for the first time in three years Friday as mild forecasts for December get even milder and expectations for heating demand fall even more.  Natural gas has now lost 48% in a year, as a U.S. drilling boom has filled up stockpiles to record high while months of temperate weather have limited demand both for gas heat and gas-fired power. Winter is often the time when heating demand hits its highs and prices follow, but weather has been so mild through the fall that prices for a January futures contract has hit its lowest point in 17 years,   Prices for the front-month January contract settled down 2.5 cents, or 1.2%, at $1.99 a million British thermal units on the New York Mercantile Exchange. That is the lowest settlement since April 24, 2012. Gas futures have lost 9% during the week, their fifth-straight losing week. Weather updates Friday showed above-normal temperatures spreading even further. Temperatures across the East and in most of the country’s biggest markets for natural-gas heating will be more than 15 degrees above normal through Tuesday.  Many traders and analysts have been caught off guard by how far gas has fallen. But with stockpiles still near a record of 4 trillion cubic feet and forecasts suggesting the unseasonable warmth could last through January, there is little urgency to buy now or expect prices to shoot higher. The warm weather also pushed heating oil to a six-year low. And prices for both oil and coal have been plummeting, suggesting energy is cheap across the board and likely to remain so.  Spot prices in New York, which once were regularly higher than those in the Louisiana benchmark, plummeted below $1/mmBtu for most of the day. Prices on pipelines that go through the Marcellus Shale region, the heart of the country’s gas boom, traded as low as 48 cents/mmBtu.

Tick Tock: Time Running Out for Struggling Oil and Gas Drillers - The 18th oil and gas driller so far this year is in the process of filing for bankruptcy protection, as the company ran out of funds. As reported by Fuel Fix, the Fort Worth-based Energy & Exploration Partners, which drills for oil and gas in East Texas, had the unfortunate timing of going public in 2014 just as oil prices began collapsing. The company’s revenues sank along with low oil prices, but the nail in the coffin is the sudden tightfistedness from credit markets. Without the ability to access new loans, Energy & Exploration Partners had no other choice but to go through the bankruptcy process. “The impact of the depression in oil prices on the debtors’ business cannot be overstated,” John Castellano, a managing director of AlixPartners and also the company’s interim chief financial officer, said in court documents,  according to Fuel Fix.The gloom over the health of the energy sector is reflected in the rapid deterioration of the value of energy bonds. While the share prices for energy companies have plummeted, more recently bond prices have also collapsed. That suggests a growing consensus that more defaults are likely. As the WSJ notes, the price for credit-default swaps, which act as insurance against the possibility of default, for Chesapeake Energy have quadrupled in just the past three months. The markets are currently putting the chance of default for the second largest gas driller in the U.S. at 95 percent within the next five years.

Warning: Half of oil junk bonds could default - Energy companies that loaded up on debt during the oil boom are likely to have trouble paying back those loans. Oil prices have collapsed over 65% since the middle of last year to below $37 a barrel this week and there's no recovery in sight. It's fueling financial turmoil on Wall Street with Standard & Poor's Ratings Service recently warning that a stunning 50% of energy junk bonds are "distressed," meaning they are at risk of default. Overall, about $180 billion of debt is distressed. It's the highest level since the end of the Great Recession and much of it is in energy companies. "The wave of energy defaults looming in the wings could make for some very bumpy roads ahead in 2016," Bespoke Investment Group wrote in a recent report. The firm described the junk bond market environment as "pretty terrible" lately. That's a dramatic change from recent go-go years, when the shale oil boom along with cheap borrowing costs allowed energy companies to take on loads of debt to fund expensive drilling operations. U.S. oil production skyrocketed, creating a gigantic supply glut that is currently pushing prices lower and hurting the ability of many energy companies to repay their debt. "The tide may be turning. Excess leverage during the good years has dented credit profiles," analysts at research firm Markit wrote in a report published on Wednesday. 

Zombies appear in U.S. oilfields as crude plumbs new lows | Reuters: Drained by a 17-month crude rout, some U.S. shale oil companies are merely hanging on for life as oil prices lurch further away from levels that allow them to profitably drill new wells and bring in enough cash to keep them in business. The slump has created dozens of oil and gas "zombies," a term lawyers and restructuring advisers use to describe companies that have just enough money to pay interest on mountains of debt, but not enough to drill enough new wells to replace older ones that are drying out. Though there is no single definition of a zombie, most investors and analysts consulted by Reuters say they tend to have exceptionally high debt loads and face the prospect of shrinking oil reserves. About two dozen oil and gas companies whose debt Moody's rates toward the bottom of its junk bond scale broadly fit that description. Investors and analysts mentioned SandRidge Energy Inc., Comstock Resources, and Goodrich Petroleum Co as some of that group's more prominent members. To stay alive, zombie companies have curbed costly drilling and are using revenue from existing production to pay interest and other expenses in a process some describe as "slow-motion liquidation."  Bankruptcies and defaults loom because the cutbacks in new drilling have been so deep that many companies risk getting caught in a vicious circle of shrinking oil reserves, falling revenue and declining access to credit, experts say.

The Largest US Pipeline Operator Is Plunging After It Just Cut Its Dividend By 74% -- From a dividend of 51 cents, expectations were for a cut to around 32c.. but the company slashed the dividend to just 12.5c - strongly suggesting the balance sheet is considerably worse than expected... a 74% collapse! Kinder Morgan, Inc. (KMI) today announced that its Board of Directors has approved a plan pursuant to which it expects to pay quarterly dividends of $.125 per share to its common stockholders ($.50 annually), down from its current quarterly level of $.51, beginning with the fourth quarter 2015 dividend payable in February 2016. This dividend enables the company to use a significant portion of its large cash flow to fund the equity portion of its expansion capital requirements, eliminate any need to access the equity market for the foreseeable future and maintain a solid investment grade credit rating. KMI anticipates enough retained internally generated cash flow to fund all of the required equity contribution projected for 2016 and a significant portion of its debt requirements. The company has reviewed its expected investments in 2017 and 2018 and believes that its stable and growing internally generated cash flow will allow it to continue to fund the equity portion of its capital budget without the need to access the equity market. It anticipates meeting all of the rating agencies’ requirements to remain investment grade, and expects a net debt/EBITDA ratio of 5.5 for 2016 and anticipates reducing that ratio in subsequent years.

If It Owns a Well or a Mine, It’s Probably in Trouble - -  The pain among energy and mining producers worsened again on Tuesday, as one of the industry’s largest players cut its work force by nearly two-thirds and Chinese trade data amplified concerns about the country’s appetite for commodities.The full extent of the shakeout will depend on whether commodities prices have further to fall. And the outlook is shaky, with a swirl of forces battering the markets. The world’s biggest buyer of commodities, China, has pulled back sharply during its economic slowdown. But the world is dealing with gluts in oil, gas, copper and even some grains. “The world of commodities has been turned upside down,” said Daniel Yergin, the energy historian and vice chairman of IHS, a consultant firm. “Instead of tight supply and strong demand, we have tepid demand and oversupply and overcapacity for commodity production. It’s the end of an era that is not going to come back soon.” The pressure on prices has been significant. Prices for iron ore, the crucial steelmaking ingredient, have fallen by about 40 percent this year. The Brent crude oil benchmark is now hovering around $40 a barrel, down from more than a $110 since the summer of 2014. A number of commodity-related businesses have either declared bankruptcy or fallen behind in their debt payments. Even more common are the cutbacks. Nearly 1,200 oil rigs, or two-thirds of the American total, have been decommissioned since late last year. More than 250,000 workers in the oil and gas industry worldwide have been laid off, with more than a third coming in the United States.

Daily chart: Adjusting the taps | The Economist -- HOW will the oil price affect profitability and production? Who pumps how much at what price? Depending on geography, some reserves are more expensive to exploit than others and only a high oil price can justify the costs. This interactive graphic allows you to choose an oil price and see its effect on OPEC and non-OPEC production and viability, broken down by country. Saudi Arabia and its Gulf neighbours, blessed by geology, manage to make a profit even when oil is at $20 due to its readily accessible reserves. America's shale belt used to be profitable with oil at around $100. But now efficiency gains have sent that down sharply. It takes a soaring oil price for Russia's giant but costly reserves kick in. Oil firms involved in other hard-to-reach and inefficient reserves, such as oil sands in Canada, ultra-deep offshore deposits, and the Arctic, are also hoping for a return to three-digit oil. Using the graphic above, take your turn at the tap, tighten the squeeze, and feel the oil magnates' pain.

Politico: Democrats might give Big Oil a big win in Congress -- As today’s Politico headline makes clear, Democrats are poised this week to grant the oil industry its number one wish — lifting the oil export ban. The fact that they most likely will vote to pass this the same week as the COP21 talks are concluding does make it seem like in DC they are all talk and no action when it comes to caring about the climate over Big Oil. The big win in question would be a vote to lift the oil export ban. This has been a goal of the oil industry for the past several years and is the stated top priority of the American Petroleum Institute.  As Kenneth Cohen, Exxon Mobil’s recently retired vice president for public and governmental affairs, told the New York Times in October - “The sooner this happens, the better for us.” ConocoPhillips CEO Ryan Lance said lifting the export ban is “number one on my wish list.” The oil companies want to lift the ban so that they can frack every last bit of American oil and sell it to countries like China who are going to need a lot more oil in the next couple of decades while most predictions have American oil demand staying flat or decreasing.  There is no good reason to do this other than to improve oil company profits. This could result in several more million barrels a day of oil be fracked in the US in the coming decade. And yet now Democrats are saying they want to negotiate on the issue.

Democrats steadfast in demands for axing U.S. oil export ban – Senate Democrats on Tuesday laid out a list of demands they seek before making any deal to end the 40-year-old ban on crude oil exports in the wide-ranging government funding bill. With oil prices falling to nearly seven-year lows of less than $40 a barrel, producers are desperate to open crude sales to global markets. They say lifting the ban would give U.S. allies an alternative to Russia and OPEC countries for oil, breathe life into the drilling industry, and increase U.S. energy security. Opponents say it would hurt jobs at refineries, raise the amount of oil carried by trains, which have suffered a slew of recent accidents while carrying crude, and hurt the environment. “I’ve heard a long list, a long list of things,” Senator Dick Durbin, an Illinois Democrat, told reporters. Durbin said a deal to end the ban on the trade restriction is something Senate Majority Leader Mitch McConnell and his fellow Republicans “are salivating over.”  Democrats want measures in return for their support, including extending tax credits for wind and solar power for 10 years, or make them permanent. Granting that could alienate Republicans in states that produce or rely on coal. Democrats also want the Land and Water Conservation Fund, which maintains national parks with revenues from oil operations, reauthorized and fully funded. Lifting the ban on crude exports could be a $20 billion to $30 billion “windfall” per year for oil companies, Durbin said. “There are things that the oil industry … should be willing to help us pay for in this country,” Durbin said.

The U.S. Is About To Get A Lot More Fracking, Thanks To Congress - When Congress emerges on the other side of the annual scrum of budget-building, the oil and gas industry is poised to pick up a major win. The decades-old oil export ban — which was developed to protect American consumers and support energy independence — is unlikely to survive into the new year.  The ban is expected to be lifted in a rider attached to the omnibus spending bill — which is stuffed annually with environmental cuts and attacks that can’t otherwise get passed — due Friday. Environmentalists and consumer advocates have largely come down against lifting the ban, which they say will increase fossil fuel extraction in the United States and raise oil prices for American consumers.  “This will certainly lead to more drilling,”  Oil Change International, an anti-fossil-fuel group, estimated that lifting the ban will result in 476,000 more barrels per day by 2020. The American Petroleum Institute (API), which is pushing for a lift to the ban, came up with 500,000. In a political landscape where different interests can come up with very different estimates, it is telling that the two groups converged closely.  According to a report from the Center for American Progress, repealing the ban would result in an additional 515 million metric tons of carbon pollution each year — roughly equal to 108 million more passenger cars or 135 coal-fired power plants. The increase in extraction — primarily expected to come from fracking — will be accompanied by an increase in transportation from the oil fields to the coast, which means more pipelines and more oil trains, which pose additional environmental threats.  Big Oil is going to get $22 billion in profits because of this. Twenty-two billion. It’s absolutely crazy.  And the increased production won’t make the United States any more energy independent. In fact, American oil refineries are expected to take a hit, as much of the oil will be shipped overseas.

Congress Does Some Horse Trading Over Possible End to U.S. Oil-Export Ban -- A potential end to the longtime ban on U.S. oil exports is emerging as a surprise flash point in congressional negotiations to pass spending and tax measures in the coming week, reflecting a political and economic shift that was unthinkable not long ago. Many obstacles remain, but oil executives consider the flurry of year-end legislation the best chance to remove the 40-year-old ban at least until after the 2016 presidential election, raising the political stakes for an industry being pummeled by cheap oil prices. Congress is now battling over what to include in the fiscal 2016 spending bill and a measure renewing tax breaks. Democrats are pushing for renewable energy and environmental measures, and some Republicans are signaling they might agree, in exchange for the provision allowing oil exports, which is urgently advocated by oil companies. The government's current funding runs out at midnight on Friday. To avoid any funding lapse, the House is expected to pass by Friday a measure keeping the government running through Dec. 16 as lawmakers finish negotiations on a longer- term bill. The Senate approved the five-day patch on Thursday. Democrats, in exchange for allowing oil exports, are demanding the renewal for at least five years of tax credits for wind and solar power, as well as a permanent authorization for the Land and Water Conservation Fund. Democrats from the Northeast, including Sen. Tom Carper of Delaware and Edward Markey of Massachusetts, are also floating a tax credit for independent domestic refineries, especially a few in the Northeast whose profits could be hit if oil exports are allowed.

Lifting oil export ban bad for the environment  -- It’s the fundamental connection between environmental degradation and human health that has us concerned about the prospect of Congress lifting the U.S. oil export ban as part of any tax package or spending bill deal. Doing so would worsen climate change and threaten our communities with toxic spills.  The list of threats climate change poses to our health – and especially children’s health -- is long. Too many children already struggle to breathe on bad air days, and increased temperatures will make those days more frequent and severe. The tick that carries Lyme disease—fear of which already has us constantly checking our kids for bugs—is already breeding faster due to warmer weather, and other insect born diseases are likely to spread more easily. Detailing these impacts and more, The Lancet, one of the world’s most respected medical journals, labeled climate change ‘the biggest global health threat of the 21st century.’ To avoid global warming’s most devastating health impacts and reduce pollution, we must end our dependence on fossil fuels and transition to 100 percent pollution-free, renewable energy. But lifting our decades-old ban on the export of U.S. oil takes us in the opposite direction. If the oil companies have a larger distribution market for oil produced in the U.S., they’ll drill more—upwards of another 3.3 million barrels per day for the next 20 years, according to some estimates. Even if only a fraction of all this extra oil is burned, global warming pollution could still increase 22 million metric tons per year—the equivalent of five average-sized coal power plants.

Making the US a Petro-State – White House Keeps Alive GOP Hopes for Lifting the Oil Export Ban -  Gauis Publius - Short and brutally ugly. This is an all-hands-on-deck moment. The White House is reportedly the chief negotiator on behalf of Big Oil’s attempt to lift the crude oil export ban. As part of the government shutdown negotiation, the White House, in collusion with Democrats in the Senate, is willing to lift the crude oil export ban in exchange for “renewable energy … conservation benefits … and other party priorities” (see below for this language). More here; search for “oil”. To be clear, lifting the four-decades-old crude oil export ban would be a disaster. In particular, it would:

  1. Give the GOP and the American Petroleum Institute (API) a huge win on a top-priority item.
  2. Throw a lifeline to struggling U.S. oil producers, many of whom are terribly over-leveraged and would otherwise default on their debt. (This is one reason API wants the ban lifted so badly.)
  3. Bail out the industry’s debt-holders (banks and other entities), whose money is at risk should these oil producers fail (yes, another bank bailout).
  4. Add a great deal to the carbon that enters the atmosphere by removing a choke-point for bringing extracted U.S. carbon to the global market. (Think of this as offsetting the Keystone pipeline rejection. Instead of preventing carbon from coming to the market, this would enable it.)
  5. Offset any good Obama may be trying to do in Paris, by a lot.
  6. Offset or destroy his attempt to create a “good on carbon” legacy. Obama, simply put, is acting like a “Big Oil enabler,” and should the deal go through, he deserves to see that phrase on his tombstone every time he looks at it.

Mexican crude exports to Europe, Asia are rising - In September 2015, monthly U.S. crude oil imports from Mexico totaled 0.6 million barrels per day (b/d), the lowest level since 1990, and a decrease of about 50% since January 2011. Meanwhile, Mexico's exports of heavy crude oil to Asia and light crude oil to Europe rose, according to data from Mexico's national oil company Petróleos Mexicanos (Pemex). Most of Mexico's exports are of heavy crude oil, which Pemex defines as crude oil with an API gravity equal to or below 27 degrees. Heavy crude oil volumes sent to U.S. Gulf Coast (Petroleum Administration for Defense District 3) refineries have fallen as new infrastructure has allowed greater volumes of Western Canadian Select heavy crude oil to reach PADD 3 refineries. In addition, production of Maya crude oil from the offshore Cantarell field, traditionally Mexico's largest oil field, has decreased significantly. As Mexican heavy crude oil exports to the United States have decreased, increasing volumes have been sold to Asian markets, especially India, and to a lesser extent South Korea and Japan. Greater volumes of heavy crude oil have been processed in Mexico's domestic refineries, partially offsetting a decline in processed volumes of lighter domestic crude types. A drop in Mexican exports of light crude oil (API gravity above 38 degrees) to the United States has been largely offset by increased light crude exports to Europe, especially Spain. Smaller volumes of Mexico's light crude oil have been exported to European countries such as Italy, France, and the Netherlands. 

Fracking Expands in Latin America, Threatening to Contaminate World's Third-Largest Aquifer - Hydraulic fracturing, or fracking - a method whereby hydrocarbons trapped within rocks are extracted - is expanding rapidly in Latin America. Fracking emits benzene, toluene, ethylbenzene and xylene, which are considered by the World Health Organization to be carcinogenic and responsible for blood disorders and other immunological effects. Despite these adverse health effects, however, reserves have already been mapped out in Bolivia, Colombia, Venezuela, Paraguay, Uruguay, Chile, Argentina, Brazil and Mexico. In Mexico, recently passed energy reform legislation promotes fracking as a means of extracting shale gas - and with the reform, the government has opened the oil industry up to the private sector. More than 1,000 wells using the technique are currently in operation in at least 11 of Mexico's 32 states.. "I didn't know anything about oil, but after our water started to get contaminated, we found out that more than 240 wells in our region were using that thing they call fracking,"    This year in Argentina, fracking was used to drill into more than 1,000 shale gas reserves of compact sand and tight oil in slate or shale. According to International Energy Agency figures published in 2015, only the United States, Canada, and more recently Argentina and China produce large volumes of shale gas; the latter two countries are spearheading the development of shale extraction. One of the greatest current fracking threats in South America is located in the Entre Ríos region of Argentina and the neighboring area of Uruguay in the Paraná Chaco, where the extraction of shale oil and shale gas is planned. According to Roberto Orchandio, an engineer and former oil industry employee in the United States and Argentina, contaminated water poses a serious danger. "In this region, the Guaraní Aquifer can be found, which is the third-largest in the world and holds 20 percent of South America's water, spanning an area that includes southern Brazil and part of Paraguay, Argentina and Uruguay," Orchandio told Truthout. "So, we are concerned that if they have to drill into the aquifer, it will be contaminated and therefore destroyed. We have to weigh up if this is worthwhile."

Nine firms apply for Scottish fracking rights - BBC News: Nine companies have applied for licences to carry out fracking operations beneath 1,900 sq km of land in Scotland, it has been revealed. The information was given by the UK government in response to a freedom of information request by the Ferret investigative journalism website. It did not disclose who the companies were or where they have applied to extract shale gas. But Scotland's shale reserves are said to be focused in the central belt. The UK government's Department for Energy and Climate Change (DECC) has been offering exclusive rights to exploit onshore oil and gas resources under its 14th licensing round.  But a decision on who will be awarded the licences in Scotland, and whether they should be awarded at all, will not be taken until after full powers over fracking are devolved to Holyrood under the Scotland Bill. The Scottish government placed a temporary moratorium on fracking in January while a study was carried out into is potential impact. In its response to the Ferret, the DECC said a total of nine companies had applied for the rights to 19 blocks in Scotland, each covering 100 sq km. But the DECC said it could not name the companies, or say where the blocks were, for commercial confidentiality reasons.

Gazprom Neft undertakes first ever 15-stage fracking operation - The Gazprom Neft Group’s first high-volume 15-stage fracked* horizontal well has been brought into production by Gazpromneft Khantos: such high-level multi-stage fracking having been made possible through the use of non-ball-and-socket well completion and stimulation technology**.  Multi-stage fracking operations at the Yuzhno-Priobskoye field well were undertaken as part of the company’s activities in the development of hard-to-recover oil reserves. Running to a total well depth of 4.2 kilometres, horizontal drilling comprised 760 metres. The key feature of the configuration of the horizontal section of the well lies in its allowing well stimulation to continue throughout its entire operation, removing any limitations on the number of fracking operations that can be undertaken. Once development is complete, the well’s operational potential is expected to reach at least 75 tonnes of oil per day — exceeding comparable figures for lesser multi-stage fracking operations by at least 10 percent. The implementation of innovative technologies here not only makes possible greater well output, but will, in the longer term, also lead to a greater proportion of hard-to-recover reserves being brought into development. Vadim Yakovlev, First Deputy CEO, Gazprom Neft, commented: “The use of cutting-edge technologies is an absolute priority throughout the entire Gazprom Neft Group. In 2015, in particular, we expect to see group-wide horizontal drilling volumes increasing by 12.5 percent, to 334 wells, with the number of high-technology wells completed with multistage hydraulic fracking increasing by more than 40 percent this year, to 238.”

Caspian Sea Oil Rig Continues to Burn, Heightening Risk of Spill - — A fire on an oil platform in the Caspian Sea burned on Monday for a fourth day, and the Azerbaijani company that operates the site warned that the fire could spread to the oil wells that feed the platform, heightening the risk of a spill. Workers were evacuated on Friday, but one of two lifeboats capsized in rough seas, leaving 29 people missing and presumed dead.There have been no reports of spills so far. While rich in oil, the Caspian Sea, the largest enclosed inland body of water in the world, is also vulnerable to ecological damage. After the breakup of the Soviet Union, Western companies including BP modernized the Caspian offshore industry. But the platform that caught fire on Friday was a legacy of the Soviet period, built in 1984.  BP has no relation to the site, which is operated by the State Oil Company of Azerbaijan, but it does operate nearby drilling rigs. A burst natural gas pipeline started the fire on Friday.  Whatever the eventual consequences of the fire, an accident so costly in lives and risky to the Caspian Basin is sure to raise alarms about safety in the offshore oil industry, still struggling to rebuild its reputation after the BP spill in the Gulf of Mexico in 2010. So far, 33 workers have been rescued and one body has been retrieved from the water,  On Sunday, in an indication that rescuers did not expect to find the missing 29 men alive, the company said it had sent a request to neighboring countries to search for bodies in their territorial waters.

Overflowing Global Oil Storage Leads To Soaring Supertanker Rates -- One month ago when oil was attempting another break out above $50, we wrote that the black gold had officially reached its "tipping point" when as we noted China had finally reached the limits of its onshore oil storage capacity.  This followed rather dire warnings by both us earlier in the year.... and Goldman more recently, that US oil storage is also rapidly approaching it own tipping point, something which the oil market has finally priced in with the collapse in crude to levels not seen since the financial crisis. Fast forward to today, when none other than the PIRA Energy Group warned that the oil market is set to exhaust onshore crude storage some time in 1Q 2016, which considering there are just 23 days left in 2015, could be as soon as 4 weeks from today, and judging by the way oil is trading, that's increasingly what the market (if not so much Andy Hall) thinks. PIRA adds that global oil stocks seen 500m bbl above normal by end-2015, and that Brent will "continue to struggle" because of surplus.  To be sure, if land storage is exhausted, even Goldman's rather dire prediction of $20 oil may prove optimistic.

OPEC Unity Shattered as Saudi-Led Policy Leads to No Limits: At a chaotic meeting Friday in Vienna that was expected to last four hours but expanded to nearly seven, the Organization of Petroleum Exporting Countries tossed aside the idea of limiting production to control prices. Instead, it went all in for the one-year-old Saudi Arabia-led policy of pumping, pumping, pumping until rivals -- external, such as Russia and U.S. shale drillers, as well as internal -- are squeezed out of market share. “Lots of people said that OPEC was dead; OPEC itself just confirmed it,”  OPEC has set a production target almost without interruption since 1982, though member countries often ignored it and pumped well above it. The ceiling of 30 million barrels a day, in place since 2011 and now abandoned as too rigid, is no exception. OPEC output has outstripped it for 18 consecutive months, according to data compiled by Bloomberg. Now the organization says it will keep pumping as much as it does now -- about 31.5 million barrels a day -- effectively endorsing limitless output. The oversupply has sent the price of Brent, a global oil benchmark, to a six-year low, triggering the worst slump in the energy sector since the 2008 world financial crisis. It’s cut the profits of major oil companies such as Exxon Mobil Corp. and BP Plc in half while crude-rich countries such as Mexico and Russia have watched their currencies plunge and their coffers shrink.

OPEC's Middle Finger to the Oil Markets -- OPEC’s decision at its semi-annual meeting in Vienna on Friday not to cut production but to legitimize its overproduction shows that the group is determined at any cost to recover the market share it lost to producers outside the cartel, particularly those drilling for oil in the United States. Which means that the world can probably expect oil prices to remain low for some time. Traditionally, OPEC members have produced about 40 percent of the world’s crude oil, but 18 months ago prodigious U.S. production began to eat into its market share. It also created an oil glut that caused prices to decline precipitously from a high of more than $110 per barrel beginning in June 2014.The group had the option of reducing its production ceiling, which had been at 30 million barrels per day for several years, to help stabilize prices. Such a move would have been led by Saudi Arabia, OPEC’s leading producer, which for years had been the “swing” producer, adjusting production up or down to keep prices at levels with which the group was comfortable. Instead, Saudi Oil Minister Ali al-Naimi decided on a strategy to maintain OPEC’s production level, a move that helped accelerate the drop in oil prices, which have now plunged to just over $40 per barrel. There were calls from several members of the group, including Algeria, Ecuador and Venezuela, for OPEC to reduce output, but at Friday’s meeting the cartel agreed to maintain its production ceiling. Al-Naimi said his goal in refusing to cut production was to drive the U.S. drillers out of business. . So far that strategy has worked, as rig counts in the United States have fallen substantially. But al-Naimi’s strategy has also had unwanted side-effects on OPEC members themselves. The Saudi minister evidently believed that oil-producing countries, particularly rich Gulf States, could weather a period of lower revenues while frackers licked their wounds. After all, at the time Saudi Arabia had monetary reserves of about three-quarters of a trillion dollars.

Oil price tumbles to lowest level in 7 years - Dec. 7, 2015: Oil tumbled another 6% on Monday to as low as $37.50 a barrel, its weakest level in almost seven years. A massive supply glut has wiped out two-thirds of oil's value after it peaked at nearly $108 a barrel in June 2014. The latest oil plunge is weighing on the stock market, with shares of Big Oil companies like Exxon Mobil (XOM) retreating further. The Dow dropped 117 points, with the energy sector its biggest drag. Oil settled at $37.65 a barrel on Monday, the lowest since February 2009. These moves come after Friday's decision by OPEC not to cut oil output following a contentious six-hour meeting. The oil cartel essentially left production near record highs despite the oversupply problem. "My head is spinning from the past few days of declines. Sentiment is horrible. It's very bearish,"OPEC is gripped by a deep divide between two factions, one led by the top oil producing nation Saudi Arabia and its rich allies in the Gulf that can stomach cheap oil and another led by Nigeria, Venezuela and other countries that need higher prices to boost their economies. But with Saudi Arabia firmly in control of decision making, a near-term oil recovery doesn't seem likely. "If you didn't get the message before you probably have by now: The Saudis are really not coming to the rescue,"

Fear grips market as oil leads commodity crash - Brent crude prices have crashed below $40 a barrel for the first time since the depths of the global financial crisis as Opec floods the market to drive out rivals, with a parallel drama unfolding across the gamut of industrial metals. The Bloomberg commodity index has fallen to within a whisker of lows last seen in 1998 and has now dropped by two-thirds from its peak, wiping out the entire gains of the resource supercycle.  While plummeting commodity prices can be a warning sign that the world economy is heading into recession, the latest sell-off has a different character. The slump is chiefly due to excess production, and amounts to a “positive supply shock” that should boost global recovery. Bank of America said oil demand has risen by 1.8m barrels a day (b/d) over the past year, the second strongest in a decade.“The oil market is driven by fear,” . The spectacle of a neutered Opec unable to act in a clear crisis – or even issue a coherent statement – has rattled investors. “We have a ‘dump and pump’ war between Saudi Arabia and Iran. It’s possible the Saudis will try to match the Iranians with an extra 500,000 b/d in an exhaustion game. Anything could happen,” he said. “US inventories are already at record highs, yet we are going into a seasonal period when they normally rise further."

OPEC Takes Down Oil Majors as Lower-for-Even-Longer Kicks In  - For months, many executives at the world’s largest oil producers have been talking about prices staying lower for longer. After OPEC’s decision to keep pumping full pelt that could become lower for even longer. Even before Friday, the prolonged slump in crude had forced analysts to cut their earnings-per-share estimates for the world’s 10 largest integrated oil companies in recent weeks. With oil dropping to the lowest in more than six years after the Organization of Petroleum Exporting Countries meeting on Friday, further downgrades are probably on the way. “A potential OPEC cut was the last source of hope for the bulls near term,” “The oil majors have already started to underperform the market over the past few weeks, but this now coupled with earnings downgrades and valuations that imply $70 a barrel should put further pressure on share prices.” The mean adjusted 2016 EPS estimate for Exxon Mobil Corp. has been cut by more than 9 cents a share and for Royal Dutch Shell Plc by 8.4 cents over the past month, according to data compiled by Bloomberg. EPS projections for Total SA, Europe’s second-biggest oil company, and Repsol SA are lower for 2016 than those for this year. Those estimates assume a much higher price than the $41.19 a barrel that Brent traded at as of 9:57 a.m. in London on Tuesday.

Oil to stay low for a long, long time, according to traders: Crude oil's slide continued on Monday morning, as oil futures broke below $39 per barrel. And with oil producers unwilling to publicly make moves to reduce the supply of oil, traders don't appear to see crude rising back above $50 per barrel any time soon. On Monday, the first futures contract that shows oil above $50 expires in the second half of 2017. Crude oil for December 2017 delivery (which is more liquid than other far-in-the-future contracts) is trading at just $50.50 per barrel. Futures contracts don't reflect pure expectations of where that commodity will trade; they also reflect things like the costs of storing that commodity, the extra price that users will pay to have access to the commodity for convenience reasons, and prevailing interest rates. Yet the crude oil futures curve clearly reflects expectations that the commodity's plunge below $50 is not a short-term phenomenon. "The futures curve is telling you that the market is totally oversupplied, and will remain so for a long time,"  The latest bad news for crude came on Friday, when the Organization of Petroleum Exporting Countries decided to take a "wait and watch" approach to production levels, rather than taking action as oil prices continue to plummet. That spelled bad news for oil bulls who may have been hoping the oil cartel might signal a policy shift.

Crude Pops As API Reports Surprise Inventory Draw After 10 Weeks Of Builds - After 10 weeks of inventory builds, API reports a 1.9mm barrel draw (hugely missing DOE expectations of a 1.3mm build). The initial reaction was a knee-jerk higher by 25c, but we note that Cushing saw a 614k barrel build (5th week in a row) and is perhaps the more crucial storage level to montori. As one trader noted, "OPEC wants to produce as much as they want," and as global land (and sea) storage fills, so "$35 is clearly a level of interest."  Charts: Bloomberg

Crude Surges After DOE Reports Biggest Inventory Draw In 4 Months -- Following last night's unexpected inventory draw reported by API, DOE reported an even bigger draw of 3.568 million barrel (against expectations of a 1.3mm barrel build). The biggest draw in almost 4 months sent crude surging back to $39.  Biggest crude inventory draw in 4 months...

Oil gives up gains; crude stocks drop 3.6M barrels: Oil prices gave up gains on Wednesday after spiking on the first decline in crude stockpiles in nearly three months, and as many investors expected a fall to below 2008 lows due to a mounting global supply glut. The Energy Information Administration reported crude inventories fell by 3.6 million barrels in the last week, compared with analysts' expectations for an increase of 252,000 barrels. Crude stocks at the Cushing, Oklahoma, delivery hub rose by 423,000 barrels, EIA said. Crude futures got support earlier in the day after industry group the American Petroleum Institute reported on Tuesday a 1.9-million-barrel fall in U.S. crude inventories last week. Brent crude oil futures were down 58 cents at $39.68 a barrel at 12:44 a.m. EDT (1744 GMT). U.S. West Texas Intermediate (WTI) crude futures were at $36.97 per barrel, down 54 cents from their last settlement. Gasoline stocks rose by 786,000 barrels, compared with analysts' expectations in a Reuters poll for a 2.2 million barrels gain. Distillate stockpiles, which include diesel and heating oil, increased by 5 million barrels, versus expectations for a 2.5-million-barrel increase, the EIA data showed. The headline decline in crude inventories was driven by a 7.3-million-barrel draw in the Gulf Coast region. Andy Lipow, president of Lipow Oil Associates, told CNBC crude deliveries into the area were delayed by fog in the ship channel last week.

SPR, Commercial Crude Oil Stock With More Than A Year's Worth Of Import Protection; -- EIA  ---  From the EIA today: As a member of the International Energy Agency (IEA), the United States is obligated to maintain stocks of crude oil and petroleum products, both public and private, to provide at least 90 days of import protection and to collectively participate in the release or sale of oil supplies to help balance a shortage among IEA members in the event of a severe energy supply disruption. Based on September levels of net crude oil and petroleum product imports, the SPR alone holds crude oil stocks equivalent to 156 days of import protection.   Including average levels of commercial stocks over the past 5 years, total days of import coverage provided by strategic and commercial stocks is currently 450 days.

Oil Prices Down, But Production Stays Up --  Oil prices have fallen to their lowest levels since 2009. Brent crude oil, one of several kinds of oil on the world market, dropped below $40 a barrel on Tuesday. However, the main group of oil producing countries has been unable to reduce production to limit supply. The Organization of Petroleum Exporting Countries (OPEC) met in Vienna last week. OPEC said members should be part of climate change-related talks such as the COP-21 meeting in Paris. The group also called on members to maintain, in its words, an “energy dialogue” with countries that produce oil but are not OPEC members. About two-thirds of oil production is carried out by non-OPEC countries. But, the 13 member countries could not agree on any production cuts. OPEC oil production continues at record levels. An OPEC report says the group’s oil production increased to over 31 million barrels of oil per day. Some experts say OPEC member Saudi Arabia continues its production levels to keep competitors from gaining market share. Some producers in the United States use techniques like hydraulic fracturing, or fracking,to increase oil output. However, that method costs more than the traditional drilling techniques used in many other countries. These may include the indirect costs of pollution to ground water or very small earthquakes in some places.

The Pain Game – How Low Can Oil Prices Go?: Crude oil prices plunged to new lows on December 7, following on the heels of OPEC’s decision to scrap its production target last week. The markets are reaching new depths of pessimism, with WTI and Brent breaking fresh seven-year lows, dipping below the nadir from earlier this year. The decision to scrap its production target stems from the increasing competition between Saudi Arabia and Iran. As Iran has the intention of bringing 500,000 to 1 million barrels of oil per day back online within the next year, Saudi Arabia decided to abandon all pretense of a production ceiling. As we reported in last week’s newsletter, the practical effect of removing the ceiling will likely be minimal – OPEC members were ignoring it anyways. But by erasing the production target from its official policy, Saudi Arabia and Iran could engage in increasing pricing competition and fights for market share. All OPEC members, except for Saudi Arabia, are producing flat out. Iran will soon be doing the same. Saudi Arabia, on the other hand, could decide to produce more or discount its crude further in order to capture more market share in Europe and/or Asia, for example. Either way, the repercussions are not good news for oil prices as supplies will remain abundant and could even increase. The markets reflected the grim news on Monday with oil prices plunging by more than 5 percent.

IEA Chief Sees No Oil-Price Recovery Until 2017 -- The International Energy Agency (IEA) expects oil prices to remain low through 2016, but forecasts a rebound to begin in 2017 as the current oil glut recedes and demand rises. “Looking to 2016, I see very few reasons why we can see growth in prices,”  Fatih Birol, the executive director of the IEA, told a news conference Wednesday in Paris on the sidelines of the United Nations climate conference. “I think 2016 will be a year where we will have a lower price environment.” Iran’s return to the global oil market will only contribute to the oversupply of oil, especially since OPEC, of which Iran is a member, agreed at its third consecutive ministerial meeting on Dec. 4 not to adjust its daily output to bolster prices. The ceiling remains at 30 million barrels per day, but the group has been exceeding this limit by an estimated 1.3 million barrels per day. “There is a lot of oil in the market now, and 2016 demand in the market will be weaker,” said the chief of the Paris-based IEA, which advises its 29 member states on energy policy. “And at the same time we may well see Iran to come to the market if sanctions are lifted, which is going to increase the amount of oil in the markets.”

How Far Will Oil Sink Before Christmas? -- Last week’s OPEC decision has set off another round of crude losses, which persisted through the week. WTI is now decidedly in mid-$30s territory, with Brent breaking through the $40 per barrel threshold. The losses were once hard to imagine. The bearish voices out there (Goldman Sachs, for example) had raised eyebrows over the course of this year when they predicted oil would drop below $40 per barrel, even provoking some mockery at times. But they were right – here we are. The short run doesn’t look great, either. “When we look at 2016, I don't see many reasons why we can see upward pressure on the prices…Demand is weaker and we may well see Iran come back (to the market) and there will be a lot of oil,” IEA’s executive director Fatih Birol said in Paris this week. “So 2016 may well be another year with lower prices and this will have implications of course for investments in the oil sector.” The collapse of crude prices has once again put pressure on emerging market currencies. Canada’s dollar hit an 11-year low against the U.S. dollar this week. Colombia’s peso hit an all-time low. Russia’s ruble is once again under fire, nearing record lows. Other currencies under pressure – the Saudi riyal, the Nigerian naira, the South African rand, Brazil’s real, and Mexico’s peso. With a rate hike just around the corner from the Federal Reserve, the dollar could appreciate further – or put another way, emerging market currencies could continue to fall. This threatens to destabilize fragile economies with rising inflation and depleting foreign exchange reserves.

Oil Sinks to Biggest Weekly Decline of 2015 After IEA Warning --Oil tumbled to its biggest weekly decline of the year after an International Energy Agency report highlighted the magnitude of the global crude glut. The IEA, an energy monitor, said low prices are taking a toll on supply but producers haven’t yet scaled back enough to make a dent in stockpiles. Oil has fallen for six straight sessions while registering its largest weekly percentage decline of 2015. This latest leg of oil’s selloff, which has slashed prices by about a third since the start of the year, has rattled stock and debt markets anew. The Dow Jones Industrial Average recently was down 270 points, or 1.6%. Junk bonds, which were also reeling from a fund’s closure, slumped. U.S. oil futures for January delivery fell $1.14, or 3.1%, to $35.62 a barrel on the New York Mercantile Exchange Brent, the global benchmark, fell $1.80, or 4.5%, to $37.93 a barrel on ICE Futures Europe. Both lost about 11% for the week, putting them down a third for the year and at their lowest settlement since the financial crisis. U.S. oil last settled this low in February 2009 and Brent in December 2008. The last time U.S. crude posted a six-session losing streak was in March. For Brent, it was in mid-2014.  Money managers have moved sharply against crude in recent weeks, repeatedly adding to bets on falling prices. Data released late Friday by the Commodity Futures Trading Commission shows only 80,474 more bets on rising prices than falling prices, the smallest margin in more than five years.

Oil slides to new 7-year low as IEA warns of worse glut - BNN News: Oil futures extended their tumble with little pause on Friday, with crude prices hitting their worst levels since the 2008/9 credit crunch, after the International Energy Agency (IEA) warned that global oversupply could worsen next year. Mild pre-winter weather that reduced heating demand and a plummeting U.S. stock market ahead of a widely expected interest rate hike this month added to the drag. Brent crude futures slipped below $39 (U.S.) a barrel the first time since December 2008, trading down $1.07 at $38.66 by 10:15 a.m. EST. U.S. crude’s West Texas Intermediate futures entered the $35 territory for the first time since February 2009. WTI was 80 cents lower at $35.99, hitting a session low at $35.78. “The WTI and Brent markets are trending at this point with no real interest from anyone to buy,” . “The forecast remains incredibly warm for the U.S. That’s a large drag on demand and means less demand for distillates and more for export, which drags down the rest of the world as well.”

How Low Can It Go? Oil Crashes To $35 Handle | Inventory levels are at record highs across the globe, and the OPEC price war has killed off any notion that the oil cartel will act to rescue prices. That means the only way markets balance out will be from a sharp contraction in supply from private sector drillers. So the spotlight shifts back to U.S. shale, where the IEA says OPEC’s decision to scrap its production target will force a more severe correction on supplies. The Paris-based energy agency warned that the medium-term will look more constrained on the supply side because of the fall in production and investment, but the markets will have to suffer through excess capacity in the short run.Next week, the Federal Reserve could add a bit of pressure on oil markets when it moves to raise interest rates. That should put downward pressure on oil prices, but also spark some volatility in emerging market currencies. 2015 has been eventful, but the fireworks are not over yet.

This Is Why $20 Oil Is A Possibility -- The day of reckoning has arrived for the oil price with the head and shoulders pattern I have been tracking for two months finally being completed in recent weeks. It became a rather drawn out affair with markets awaiting the outcome of the OPEC meeting of 4 December where OPEC elected to stay the course and do nothing. With WTI closing at $40 and Brent on $43 on Friday both are testing support levels. WTI in particular has had strong support at $40 in recent weeks. Should this support be broken then another major down leg is to be expected to the vicinity of $20. I can see nothing in the numbers presented below to provide hope that $40 may hold. The market remains over-supplied and awash in oil. Lower price is required to remove supply from the market.

  • World total liquids production up 240,000 bpd to 97.09 Mbpd, a new record high.
  • OPEC production down 20,000 bpd to 31.72 Mbpd (C+C)
  • N America production up 260,000 bpd to 19.66 Mbpd.
  • Russia and FSU up 90,000 bpd to 14.01 Mbpd
  • Europe down 10,000 bpd to 3.40 Mbpd (compared with October 2014)
  • Asia down 50,000 bpd to 7.99 Mbpd.
  • Middle East rig count is rising. The international oil rig count is stable. The US oil rig count is falling.

U.S. rig count in steepest decline in three months - Fuel Fix: – The number of active U.S. drilling rigs fell by 21 this week, Baker Hughes reported Friday, as crude prices continued to sputter in the wake of OPEC’s move to do away with its longstanding output ceiling. The overall U.S. rig count dropped by 28 to 709, the steepest one-week drop since late September. Since the 2014 peak, U.S. oil producers have sidelined 1,221 units, about 63 percent of them. In Texas, drillers idled nine units this week, the state’s sharpest fall since April. Oil producers peeled off 15 rigs in the prolific Permian Basin in West Texas, where so far crude production hasn’t fallen amid a sharp oil-market downturn.

U.S. Oil-Rig Count Declines by 21 - WSJ: The U.S. oil-rig count dropped by 21 to 524 in the latest week, according to Baker Hughes Inc., marking the fourth consecutive week of declines. 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. There are 67% fewer rigs from a peak of 1,609 in October 2014. According to Baker Hughes, the number of gas rigs was down seven to 185. The U.S. offshore-rig count was 23 in the latest week, down two from last week and down 37 from a year ago. For all rigs, including natural gas, the week’s total fell by 28 to 709.  Oil tumbled to nearly seven-year lows Friday, with the U.S. benchmark price slipping below $36 a barrel after a top energy watchdog said low prices are taking a toll on supply but that isn’t yet enough to relieve the global crude glut.

OPEC Production Hits Three-Year High As Oil Price Resumes Slump - The latest confirmation that the oil cartel formerly known as OPEC is effectively non-existent, came a little over an hour ago when in its latest November monthly report, the Organization of Petroleum Exporting Countries reported that total monthly crude output for the member nations rose to 31.695 million barrels per day, the highest amount produced in three and a half years. The production boost was driven not so much by the wildcard Iran (whose own supply will hit the global market in the near future) but by Iraq, as the second biggest oil producer in OPEC Pumped 4.3 million bpd, an increase of 247,500 barrels from the previous month, offsetting a modest 25,200 barrel decline from Saudi Arabia. Bloomberg reports that Iraq has pushed output to record levels this year as international companies develop fields in the south, while the semi-autonomous Kurdish region increases independent sales in the north, according to the International Energy Agency. Production had dipped in October as storms delayed southern loadings and as flows through the northern pipeline were disrupted, according to Iraq’s Oil Ministry. This was the highest monthly production since April 2012, and shows that even OPEC's recently announced production ceiling of 31.5 million barrels was already breached even before it was introduced.  Some other highlights from the report (link):

  • OPEC says in its monthly report that demand for its crude is at 29.4M barrels/day this year - lower than its current output and 200K less than previous estimates. But it's keeping 2016's demand view steady at 30.8M and still anticipates global demand rising about 1.25M barrels/day next year versus 2015's projected increase of 1.5M. OPEC cautions its "oil-demand forecast for 2016 is subject to considerable uncertainties--depending on the pace of economic growth, development of oil prices and weather conditions, as well as the impact of substitution and energy policy changes." - WSJ
  • OPEC trims supply estimates for outside the group in 2016 by 250K barrels/day to 57.1M as it expects the price plunge to take its toll on the US oil industry and other producers near-term. It notes US shale-oil production had been declining since April, and "this downward trend should accelerate in coming months given various factors, mainly low oil prices and lower drilling activities."  - WSJ

OPEC points to larger 2016 oil surplus as group's output hits multi-year high – OPEC pumped more oil in November than in any month since late 2008 and forecast little increase in demand for its crude next year, pointing to a larger supply surplus even as low prices hurt rival producers. The Organization of the Petroleum Exporting Countries in a report also forecast supply from non-member countries will fall more sharply next year, which would suggest its strategy, reaffirmed last week of defending market share, is working. OPEC’s report follows an acrimonious OPEC meeting on Dec. 4, where it rolled over a policy of pumping crude to safeguard market share, despite oil prices that have more than halved to $40 a barrel in 18 months due to excess supply. A year ago, Saudi Arabia pushed though an OPEC decision to defend market share instead of cutting output to support prices, hoping to slow growth in rival supplies such as U.S. shale oil. “U.S. tight oil production, the main driver of non-OPEC supply growth, has been declining since April,” OPEC said in the report. “This downward trend should accelerate in coming months given various factors, mainly low oil prices and lower drilling activities.” Supply outside OPEC is expected to decline by 380,000 barrels per day (bpd) in 2016, the report said, as output falls in regions such as the United States and former Soviet Union. Last month, OPEC predicted a drop of 130,000 bpd. But OPEC also increased its 2015 non-OPEC supply growth forecast by 280,000 bpd, citing upward revisions to output from the United States, Brazil, Russia and the UK, among other countries. OPEC production, which has surged since the policy shift of November 2014 led by Saudi Arabia and Iraq, is far higher than forecast demand. Supply rose by 230,000 bpd in November to 31.70 million bpd, said the report, citing secondary sources.

Despite Climate Concerns, OPEC Plans to Keep Pumping Oil While It Can - Even as United Nations climate-conference delegates met near Paris on Friday seeking ways to reduce the globe’s dependence on high-carbon fuels like oil, some of the world’s biggest petroleum producers vowed to keep pumping flat out.The Organization of the Petroleum Exporting Countries said on Friday that it would keep producing oil at current levels, which are estimated to exceed 31 million barrels a day.But with petroleum prices continuing to plummet and world leaders intent on steadily reducing the burning of oil and natural gas, OPEC, meeting in this holiday-bedecked city, might be celebrating what history could show to be Big Oil’s last hurrah. Some OPEC members, including the United Arab Emirates, have acknowledged that their economies need to diversify and wean themselves from an oil-rich diet.  In fact, the United Arab Emirates’ delegation to the climate conference has pledged to increase their use of clean energy sources — a mere 0.2 percent of the mix last year — to 24 percent by 2021.But, meanwhile, the pumping continues unabated. The United Arab Emirates say they are producing close to three million barrels a day, up about 180,000 barrels a day from last year’s levels.

Despite low oil prices, Gates looks to Gulf in anti-poverty campaign – Low oil prices and tight budgets in the Gulf are making it harder to raise money for a fund tackling poverty in the Muslim world, but a growing culture of philanthropy may draw in wealthy regional donors, billionaire campaigner Bill Gates said. The Microsoft co-founder is visiting the Gulf seeking donations towards his foundation’s planned $2.5 billion fund, which will work to reduce poverty and disease across 30 countries in the Middle East, Africa and Asia. The fund is a joint project with the Jeddah-based Islamic Development Bank, which has committed $2 billion in loans financing if the Gates Foundation raises $500 million in donations – mostly from the wealthy oil-producing Gulf states. “Certainly the price of oil means that these countries are having to prioritize both domestic and internationally things they do,” Gates told Reuters on Sunday in the United Arab Emirates, ahead of his trip to Kuwait City. “It would be easier if oil was $100 a barrel.”

A New World Order? -- Global Crude Supply and Demand Through 2025. - Overall oil prices and the differentials between the world’s different benchmark crude grades have been on a rollercoaster ride over the past decade. In the last eighteen months - since June 2014 – rising production of U.S. shale crude together with oil producer cartel OPEC’s decision not to curb output in response - have led to significant worldwide supply and inventory surpluses that are hurting producers and providing a windfall to many refiners. Today we review a new report from Turner Mason & Company that offers a detailed analysis of global crude oil supply and demand drivers and pricing over the next 10 years. The oil market (including prices) is driven by a large number of factors and influences including those that are characteristic of commodities such as supply/demand fundamentals, technology breakthroughs, and new discoveries as well as unpredictable influences such as politics, OPEC decisions, weather, economic conditions, and government regulation (to name but a few). These factors together have contributed to rampant and unpredictable oil price volatility in the past 10 years. Against this backdrop of uncertainty, energy companies must plan, operate and build their businesses. Major project costs often run into billions of dollars with lead times of 5-10 years or more. Before these projects are completed, market shifts can cause margins to evaporate or soar unexpectedly. It is therefore essential that all segments of the industry, upstream, midstream and downstream analyze the potential of such volatility to impact their plans in order to survive and make appropriate investment choices.

Financial War over Oil Reshapes World, Will End with Much Higher Prices - We have not begun a new era of low oil prices, fruits of new tech and a beneficent Fate. Low oil prices are the wreckage from a war – a financial war. The verdict is in. Experts proclaim OPEC’s policies a failure. Here’s T. Homer Bonitsis, associate professor of finance at the New Jersey Institute of Technology:  OPEC is non-relevant in terms of its ability to affect the price of oil. So any decision by OPEC will not have a long-term effect on the oil market. There are too many OPEC quota-chiseler countries and non-OPEC production countries that cast a shadow over the effectiveness of OPEC maneuvers. … The Saudi strategy of attempting to knock out competitors by using predatory pricing is not a game changer long-term … Some producers may shut down temporarily, but will reopen when prices recover again. Indeed, some producers may go bankrupt — only to have their assets sold at bargain prices. The new investors in these assets have a lower fixed cost structure to produce oil; in essence, creating a lower-cost competitor! The policy is doomed to failure long-term.” This is an economist’s perspective: now is forever, economics is everything. It’s why they are so frequently astonished by events.   In 2014 world output was 8% above that of 2008. Non-US production had risen 2%; US output had risen 64%. Action was necessary. The Saudis kept their taps open, watched oil prices crumble, and waited. It’s a game of chicken. With their cost of production (including both capital and operating costs) under $10/barrel, they know who will win. Here’s Saudi Aramco CEO Ali I. Naim yesterday at the International Petroleum Technology Conference in Qatar, speaking softly: “There is no additional unconventional oil coming to the market; actually there is a decline. … So the supply and demand imbalance in the market will adjust and stabilize, and the gap will be closing. And we will be seeing, hopefully, adjustment in the prices going forward starting in 2016.”

Impending natural gas deal angers many Israelis - As Israel prepares to push through a long-delayed landmark natural gas deal, Prime Minister Benjamin Netanyahu is facing a growing backlash by protesters who accuse him of using shady backroom dealings and strong-arm tactics to push through the plan. While some critics say the deal is a sellout, much of the opposition has focused on the great lengths Netanyahu has gone to win its approval. To clear the final hurdle, Netanyahu is said to have orchestrated the resignation of his economics minister in order to personally overturn an anti-trust ruling against the deal. Thousands of people have taken to the streets in recent weekly protests — the biggest show of discontent with the government’s economic policies since demonstrations over the country’s high cost of living in the summer of 2011. “The reason people are going out into the streets … is not just because the public opposes the deal. It’s because the public understands, and it’s not so difficult to understand, that a dubious deal has been prepared here,”

'No gas imports from Israel; not now, not later' — Jordan neither imports natural gas from Israel nor plans to do so, Minister of Energy and Mineral Resources Ibrahim Saif said on Tuesday. In response to a question by MP Rula Hroub during Tuesday’s Lower House oversight session, Saif said the issue of importing natural gas from Israel “was halted and the deal with the American company shelved”. The minister added that the liquefied natural gas imported and stored at the terminal in Aqaba covers 85 per cent of the electricity companies’ needs of the substance. Earlier this year, Prime Minister Abdullah Ensour announced that talks between Jordan and Noble Energy to buy natural gas from Israeli fields were put on hold “until the US company settles its ongoing legal dispute with Israel”. State-owned National Electric Power Company signed a letter of intent in late 2013 with Noble Energy, which owns 39 per cent of the Leviathan natural gas field in Israel, to buy gas over a period of 15 years at a total cost of $15 billion starting late 2017. The deal was expected to be signed in November.   Hroub’s question was on the authenticity of rumours about planned construction of a pipeline to pump natural gas into Jordan from Palestinian territories occupied by Israel. Hroub said she was not satisfied with the minister’s response and will turn her question into an inquiry at the right time.

Oil Producer's Currencies Are Collapsing As Brent Breaks Below $40 -- With the oil price collapse accelerating (Brent just dropped below $40 for the first time since Feb 2009), the currencies of major oil-exporting nations - such as the Canadian dollar and Norwegian crown - are plunging... Not helped by weakness in China trade data, questions over global growth and inflation expectations are growing. Oil-exporting nations  (and growth-linked currencies) are getting monkey-hammered... As Reuters notes, with lower oil prices likely to add to global deflationary concern and Chinese data doing little to improve sentiment, risk appetite remained fragile. The Canadian currency fell 0.4 percent against the U.S. dollar, to C$1.3555. That was the U.S. dollar's strongest level since mid-2004. Similarly the Norwegian crown fell a six-week low against the euro. "If you are looking to play weak oil prices, you would want to sell the Canadian dollar and the Norwegian crown," said Jeremy Stretch, head of currency strategy at CIBC World Markets. "With oil prices falling and some even talking about oil falling to $30 a barrel, revenues for these countries will take a beating and hence their currencies will remain under pressure."The Australian dollar fell 0.6 percent to $0.7220 AUD=D4 as this week's tumble in iron ore and the latest Chinese data weighted on the currency's woes. Citi recommended that investors sell the Aussie through options. "The weakness in the Chinese economy will spill over to Australia through commodities demand as well as reduced demand for the Australian dollar via reserves and other channels. This should leave it vulnerable to an eventual leg higher in the dollar," they said. Charts: Bloomberg

Brazil's Petrobras offers to sell up to 10 pct of coveted offshore oil field | Reuters: Brazil's state-run oil company Petrobras is offering up to a quarter of its 40 percent stake in the huge Libra offshore oil prospect as its seeks to reduce the largest debt in the global oil industry, two industry sources said on Tuesday. The stake could fetch up to $1.5 billion, according to analysts at Macquarie, and is likely to attract international oil companies keen to expand in one of the world's fastest-developing oil basins. Petroleo Brasileiro SA, as Petrobras is formally known, is targeting $15.1 billion in disposals by the end of next year but has struggled to sell assets in less attractive prospects off Brazil and in the Gulf of Mexico. Chief Executive Aldemir Bendine has told Brazil's congress that the company will not be able to meet repayment obligations on its debt of more than $130 billion and maintain a $19 billion investment plan next year unless it hits the disposal target. The company is now offering sought-after oil prospects in the so-called sub-salt areas in the Santos basin south of Rio de Janeiro, several industry sources said. These areas contain vast reserves trapped deep beneath the sea bed by a layer of mineral salts.

Venezuelan Government Losing Grip As Low Oil Prices Take Their Toll - The Venezuelan government suffered a huge electoral loss on December 6. The opposition won a majority of seats in the parliament, a striking blow to Venezuelan President Nicolas Maduro. Maduro’s ruling party lost its majority for the first time in sixteen years. The result can largely be chalked up to the collapse in crude oil prices, which has shattered the economy, drained government coffers, and left the country’s currency in tatters. Despite the crisis, OPEC declined to throw Venezuela a lifeline on December 4, and not for a lack of trying on behalf of the Venezuelan delegation. The South American nation pleaded its case with its fellow OPEC members, calling for a lowering of the collective output target by five percent. But largely due to the uncertainty over how much extra production is set to come back from Iran, OPEC failed to agree on a production target. Without a quick fix in oil prices, the only option left for Venezuela is the tougher task of addressing the problems within its own domestic oil sector. Admittedly, this won’t reap benefits in the short-term, but Venezuela consistently underperformed even before the collapse in oil prices, so there is no time like the present to begin addressing the problems at the state-owned PDVSA.  There is a lot to work with. Venezuela has the world’s largest proven oil reserves – its 298 billion barrels exceed even Saudi Arabia’s reserves (268 billion barrels). It has large but mature and declining conventional production in the Maracaibo Basin in the northwest. It also has massive deposits of heavy bitumen in the Orinoco Belt.

Venezuela Oil Prices Crashes To 2004 Lows -- Putting the 'mad' in Maduro. Venezuela's heavy crude oil price just crashed almost 9% to $31.24... its lowest since December 2004. Time for another 'swap' with China?  Charts: Bloomberg

On Iran Sanctions, Mixed News–and Warnings for Potential Investors - Over the past few months, investors from Europe and Asia have gone to Tehran in droves, searching for post-sanction deals and bolstering Iranian hopes that the lifting of international sanctions will draw significant investment. Some in Europe have described Iran “as ‘an El Dorado’ and potential ‘bonanza.’ ” The chief of Iran’s central bank has cited the country’s “unique geographical advantage,” its “sense of timeliness and discipline,” and “very good history of being a trade partner.” In October, he predicted that “Iran will be a very favored destination for many international investors.” But Treasury officials bear mixed news: The U.S. is preparing to meet its commitments on sanctions relief tied to implementation of the nuclear deal. Still, many U.S. sanctions tied to Iran’s support for terrorism, human rights abuses, and other negative behaviors remain in place. And within days of the Iranian central banker’s comments in October, the Financial Action Task Force, which sets global standards on countering money laundering and terrorist financing, issued another searing rebuke of Iran’s “strategic deficiencies.” Only Iran and North Korea, the task force said, present such “on-going and substantial money laundering and terrorist financing” risks that the international community should apply active “counter-measures” to protect the global financial system. The task force said that as sanctions are being lifted under the nuclear agreement, it “remains particularly and exceptionally concerned about Iran’s failure to address the risk of terrorist financing and the serious threat this poses to the integrity of the international financial system.” It repeated its long-standing call for financial institutions to “give special attention to business relationships and transactions with Iran, including Iranian companies and financial institutions.”

Islamic State oil trade 'worth more than $500m' - BBC News: The so-called Islamic State (IS) has made more than $500m (£330m) trading oil, a US treasury official has said. Its "primary customer" has been the government of Syria's President Bashar al-Assad, despite its ongoing battle to overthrow the regime, Adam Szubin told the BBC. IS had also looted up to $1bn from banks in territory it held, he said. A US-led coalition has been bombing IS targets, including oil facilities, in Syria and Iraq for over a year. IS' finance chief was recently killed in one such mission, Pentagon officials announced on Thursday. "The two are trying to slaughter each other and they are still engaged in millions and millions of dollars of trade," Mr Szubin said of Syria and IS, in comments reported by Reuters news agency. The group was estimated to be making as much as $40m a month from the oil trade, including from buyers in Turkey, he added. Cutting off the group's cash flow was a key part of the coalition strategy to defeat IS, he said. Unlike other designated terrorist groups, IS did not rely on funding from foreign donors, but generated money from its own operations, Mr Szubin said. The US-led coalition has recently launched a military campaign, dubbed Tidal Wave 2, intensifying air strikes on IS oil fields, refineries and tankers being used by the group. IS currently generates around $80m a month, mainly from oil revenues, according to findings focusing on late 2015 from UK defence consultancy IHS.

War, low oil prices cripple Iraq Kurds' once-vibrant economy - Less than two years ago, Iraq’s northern Kurdish region was booming, as oil revenues poured in and foreign investors flocked to a rare island of stability in a turbulent region, but that all began to change when the black flags of the Islamic State group darkened the horizon. Kurdish forces backed by U.S.-led airstrikes repelled an IS assault in the summer of 2014 and have been among the most effective forces battling the extremists. But low oil prices and a longstanding dispute with the central government over revenues, along with an influx of refugees, have crippled the local economy. The regional capital, Irbil, is littered with half-finished or abandoned building projects — hotels, offices and apartments that many had hoped would one day transform the largely autonomous region into a Kurdish Dubai. Foreigners attracted to the region by business opportunities and liberal social mores are leaving, civil servants haven’t been paid for months and day laborers gather on street corners, hoping for work. “The economy today has very bad indicators. Savings are running out, people are starting to borrow and cut their expenses, which is directly affecting the market’s direction,” . “The housing sector is declining in a way that has never been seen before, the trade sector, including car sales, is also seeing declines, and all this is connected to the important fact that the region’s market is disconnected from its customers and markets in central and southern Iraq.”

Iran Has "Irrefutable Evidence" Of Turkey's Role In ISIS Oil Trade - When Turkey shot down an Su-24 near the Syrian border late last month, the world held its collective breath. Everyone was asking themselves the same question: “How will Putin respond?” The fear was that Moscow would retaliate militarily. After all, Putin isn’t exactly known for backing down from a fight. Of course an attack on one NATO member is considered an attack on the entire alliance and so, it appeared that the world might have witnessed a Franz Ferdinand moment, if you will.  But Putin had an ace up his sleeve.  Rather than sending a couple of Tupolev Tu-95 Bears to Ankara, Moscow unleashed a propaganda campaign aimed at exposing Turkey’s role in facilitating Islamic State’s lucrative oil trade. It was almost as though Putin was just waiting for Turkey to give him an excuse. Just hours after the Russian warplane crashed, Putin accused Turkey of buying ISIS oilon the way to calling Erdogan a “backstabber”. Adding insult to injury, he said all of that while sitting right next to Jordan’s King Abdullah.  From there, Moscow proceeded to deliver near daily pronouncements accusing Erdogan and his family of funding international terrorism and the entire media campaign culminated in an epic presentation by the Russian MoD featuring photos of oil trucks, videos of airstrikes and maps detailing the trafficking of stolen oil.  As it turns out, this strategy has done far more damage to Ankara than one could ever hope to achieve with a couple of bombing runs. Turkey’s complicity in the smuggling of stolen crude from Syria and Iraq has been put on display for the entire world to see and it’s been nothing short of an epic embarrassment for Erdogan. It’s also helped to inform the public about the extent to which ISIS operates with the support of state actors. Last week, Russia even went so far as to suggest that the US is involved as well.  Meanwhile, Iranian diplomat and analyst Seyed Hadi Afghahi had the following to say in an interview with Sputnik: "If Erdogan continues to deny the facts [Iran] will provide more irrefutable hard evidence such as photos, GPS navigation of the oil convoys and videos.”

Turkey refuses to withdraw troops sent to north Iraq base -- Turkey has said it will not withdraw hundreds of soldiers who arrived last week at a base in northern Iraq, despite being ordered by Baghdad to do so within 48 hours. The arrival of such a large and heavily armed Turkish contingent in a camp near the frontline has added yet another controversial deployment to a war against Islamic State fighters that has drawn in most of the world’s major powers. Ankara says the troops are there as part of an international mission to train and equip Iraqi forces to fight against Isis. The Iraqi government says it never invited such a force, and will take its case to the UN if they are not pulled out. Washington, which is leading an international coalition against Isis that includes Turkey, Arab states and European countries such as Britain and France, has told the Turkish and Iraqi governments to resolve the standoff, and says it does not support deployments in Iraq without Baghdad’s consent.

Iraq May Seek "Direct Military Intervention From Russia" To Expel Turkish Troops -- Turkey just can’t seem to help itself when it comes to escalations in the Mid-East.  First, Erdogan intentionally reignited the conflict between Ankara and the PKK in an effort to scare the public into nullifying a democratic election outcome. Then, the Turks shot down a Russian warplane near the Syrian border. Finally, in what very well might be an effort to protect Islamic State oil smuggling routes, Erdogan sent 150 troops and two dozen tanks to Bashiqa, just northeast of Mosul in a move that has infuriated Baghdad.  We discussed the troop deployment at length on Saturday in “Did Turkey Just Invade Iraq To Protect Erdogan's ISIS Oil Smuggling Routes?,” and you’re encouraged to review the analysis in its entirety, but here was our conclusion: The backlash underscores the fact that Iraq does not want help from NATO when it comes to fighting ISIS. Iraqis generally believe the US is in bed with Islamic State and you can bet that Russia and Iran will be keen on advising Baghdad to be exceptionally assertive when it comes to expelling a highly suspicious Turkish presence near Najma. You’re reminded that Iran wields considerable influence both politically and militarily in Iraq. The Iraqi military has proven largely ineffective at defending the country against the ISIS advance and so, the Quds-backed Shiite militias including the Badr Organisation, Asaib Ahl al-Haq and Kataib Hezbollah have stepped in to fill the void (see our full account here).Of course that means that the Ayatollah looms large in Iraq and when it comes to loyalty, both the militias and a number of Iraqi lawmakers pledge allegiance to Tehran and more specifically to Qassem Soleimani. The point is this: Iran is not going to stand idly by and let America and Turkey put more boots on the ground in Iraq which is why just hours after Ash Carter announced that The Pentagon is set to send in more US SpecOps, Kataib Hezbollah threatenedto hunt them down and kill them. Not coincidentally, PM Haider al-Abadi rejected a larger US troop presence just moments later.  Now, Abadi has given Turkey 48 hours to get its troops out of Iraq or else.

The Bad Blood Between Russia and Turkey Is Spreading to Armenia and Azerbaijan - Escalating tensions between Russia and Turkey have spread to the Caucasus, a volatile region where both powers have long contested each other's influence. After Turkish jets shot down a Russian warplane that allegedly flew into Turkish airspace last week, a Cold War-style war of words erupted between Ankara and Moscow. Turkey has refused to apologize for the incident, while Russia has blocked sales of tourism packages to Turkey, imposed sanctions on Turkish fruits and vegetables, and accused Turkey of buying oil from the Islamic State. Now the two sides are squaring off over the ongoing conflict between Armenia and Azerbaijan, two tiny former Soviet republics that have been at loggerheads since a six-year war over an ethnic Armenian enclave in Azerbaijan called Nagorno-Karabakh ended in 1994. "This is largely talk right now, but the problem is neither Turkey nor Russia really need war in the Caucasus," said Paul Stronski, a senior associate at the Carnegie Endowment for International Peace. "The situation between Armenia and Azerbaijan has been pretty dangerous already. It's clear that things can easily get out of hand."

The Saud Family to Select West’s ‘Moderate’ Jihadists Who Will Take Over Syria -- The Saud family, Saudi Arabia’s royals, have called together a meeting on December 15th in Riyadh, Saudi Arabia, of their fellow fundamentalist Sunnis who are fighting against the secular Assad government to take over Syria, and the Sauds will announce after the conference which groups will have the West’s blessings.  The only armed group that has thus far been announced to have been invited is Jaysh al-Islam, which is a Salafist-Wahhabist fundamentalist organization, and like all Salafists and Wahhabists, is rabidly anti-Shiite. By contrast, Syria’s President, Bashar al-Assad, is a Shiite, and, furthermore, he has always insisted upon a strict separation of church-and-state; so, he’s considered like the devil, by the Sauds and other Wahhabists and Salafists (including the leaders of America’s other Arabic allies: Qatar, UAE, Kuwait, and Bahrain).

The spread of Wahhabism, and the West’s responsibility to the world - François Hollande’s declaration of war against Isis (also known as Islamic State) was, perhaps, a natural reaction to the carnage in Paris but the situation is now so grave that we cannot merely react; we also need sustained, informed and objective reflection. The French president has unwittingly played into the hands of Isis leaders, who have long claimed to be at war with the West and can now present themselves as noble ­resistance fighters. Instead of bombing Isis targets and, in the process, killing hapless civilians, western forces could more profitably strengthen the Turkish borders with Syria, since Turkey has become by far the most important strategic base of Isis jihadis. We cannot afford to allow our grief and outrage to segue into self-righteousness. This is not just the “Middle East problem”; it is our problem, too. Our colonial arrangements, the inherent instability of the states we created and our support of authoritarian leaders have all contributed to the terrifying disintegration of social order in the region today. Many of the western leaders (including our own Prime Minister) who marched for liberté in Paris after the Charlie Hebdo massacre were heads of countries that, for decades, have backed regimes in Muslim-majority countries that denied their subjects any freedom of expression – often with disastrous results.

Jihadis now integral part in US designs for Syria - In Syria [the US] plan was to use the non-IS jihadis against IS by promising them a part in the post-Assad Syrian regime. That is the reason why Kerry is promoting a political transition there to get Assad out, hand over Syria to these jihadis with a bunch of old Syrian politicians being the external face of the regime (mainly for pacifying public opinion back home). Saudi Arabia and Qatar have provided the necessary assurances that the US will have nothing to fear from this new Syrian government, and that it will follow the plan. The US will provide more arms to this 'new Syrian army' (ie, the non-IS jihadis) and hope that, with the Kurds and Western air support, it’ll knock IS out (or at least push it out of Syria). This plan has been stymied by the Russian intervention, and the rejuvenated Syrian army's successful offensive against the jihadis. Kerry is still pushing the political plan, but Russia will never agree to anything that hands Syria over to these jihadis. The outcome is, therefore, likely to be decided on the battlefield, where it currently seems the R+6 will succeed. For Iraq the West's plan appears to be to split it into three portions: a Kurdish entity, a Sunni one, and a Shia rump. The first part of the plan has been put into effect. The Kurdish peshmerga, supported by US airpower and SF, captured Sinjar. Additional SF have now been sent to support the Kurdish peshmerga. The Turks have moved troops near Mosul to support the coming Kurdish attack on the city. This expanded Kurdish region will be one entity in the new Iraq.(The Kurds would never attack Mosul or any other non-Kurdish areas unless they had solid assurances that they could keep their gains). It was because of this plan that the US's air campaign in Iraq was so devoid of results (often because planes weren't cleared to attack targets). Large-scale air attacks with their attendant civilian casualties would have alienated the local Sunni population of Anbar. That is also the reason why IS's oil operations weren't attacked until Putin shamed Obama into it; even then special steps were taken to avoid Sunni casualties. The hope was (is) to revive the old Sahwa (Sons of Iraq) movement (a Sunni force friendly towards the US) and let it take over Anbar and other Sunni areas of Iraq to form the Sunni entity.“

How Far Can The Syria Conflict Spiral Out Of Control? -- Business is business, so why not buy oil from ISIS. The Russians claim the Turks are doing it, and in all likelihood even Assad is buying it. No one can fight a war without oil, according to Robert Bensh, partner and managing director of Pelicourt LLC oil and gas company. But while the politically unhinged are coming out the woodwork, the more important aspects of this story remain elusive to the public. Is the dangerously unspoken theory that ISIS is a bulwark against Iran what’s keeping the West from tackling the Islamic State wholeheartedly on its territory? With no nation that can control it, the threat is now out of control and a war of ambiguous targets is emerging. In an exclusive interview with James Stafford of, Bensh discusses:

• How far the Russia-Turkey spat can go economically
• The fallout effects for countries caught in between
• What Russia wants
• What Turkey wants
• What other geopolitical purposes ISIS serves
• Why ISIS can’t be controlled
• How Shi’ite radical groups differ
• Why we’re looking at a possible remapping of a significant part of the energy arena
• Why we shouldn’t listen to billionaire buffoons

Behold The Deflationary Wave: China Is Flooding The World With Its Unwanted Commodities -- Between commodity-backed financing deals and the centrally-planned mal-investment boom-driven excess capacity, China has a lot of 'liquidation' to do to normalize from a credit-fueled smoke-and-mirrors world to a painful reality. As Bloomberg notes, there’s no let-up in the onslaught of commodities from China. While the country's total exports are slowing in dollar terms (as we noted last night), shipments of steel, oil products and aluminum are reaching for new highs, flooding the world with unwanted inventories. China's de-glutting is now the rest of the world's problem as the deflationary tsunami grows ever higher. Chinese trade data was ugly with exports down 5 straight months... But, as Bloomberg notes, shipments of steel, oil products and aluminum are reaching for new highs, according to trade data from the General Administration of Customs. That’s because mills, smelters and refiners are producing more than they need amid slowing domestic demand, and shipping the excess overseas.

Iron Ore Plummets Below $40 a Ton as Global Glut Hurts Outlook - Iron ore sank below $40 a metric ton on rising low-cost supply from the world’s top miners and weakening demand in China, with investors assessing the impact of the first shipments from Gina Rinehart’s Roy Hill mine within the coming days. Ore with 62 percent content delivered to Qingdao lost 2.4 percent to $39.06 a dry ton, a record low in daily prices compiled by Metal Bulletin Ltd. dating back to May 2009. The raw material is headed for a third annual decline and has lost 80 percent since peaking in 2011 at $191.70. Shares of top producer Vale SA fell to an 11-year low. Iron ore has been pummeled as a slowdown in China hurt demand as producers including Brazil’s Vale and BHP Billiton Ltd. and Rio Tinto Group in Australia boosted supply to defend market share. As data last week showed China’s steel industry shrank further, billionaire Rinehart’s mine in Australia’s Pilbara geared up to start exports, with two vessels set to be loaded at Port Hedland. Stockpiles at China’s ports, tracked as a gauge of demand in the largest user, climbed to the highest in about seven months. The drop below $40 would reflect “weak demand, post-summer destocking, and perhaps a buyers’ strike on the expectation of lower prices given the rate of seaborne’s ongoing supply expansion,” Tom Price, an analyst at Morgan Stanley in London, said before the price data were released. The outlook for China’s steel demand is subdued, he said. While iron ore has retreated with commodities from oil to copper this year, it remains well above levels seen in recent decades. The commodity traded as low as $10.51 a ton in 1988, when annual benchmark contracts were negotiated between the largest miners and steel producers, according to data from the International Monetary Fund. That pricing system was superseded by a shift to spot rates as China’s demand ballooned.

Plunging Commodities Interfere With The New World Order - Anglo American, a British company, and one of the world’s biggest miners, and a ‘producer’ of platinum (world no. 1), diamonds, copper, nickel, iron ore and coal, said today it would scrap dividends AND fire 85,000 of it 135,000 global workforce (that’s 63%!). Anglo is just the first in a long litany line we’ll see going forward. Commodities ‘producers’ are being completely wiped out, hammered, killed, murdered. They’ve been able to hedge their downside risks so far, but now find they can’t even afford the price of the hedges (insurance) anymore. And then there’s all the banks and funds that financed them. And they’ve all been gearing up for production increases too, with grandiose plans and -leveraged- investments aiming for infinity and beyond. You know, it’s the business model. .But there’s another side to this, one that not a soul talks about, and it has Washington, London and Brussels very worried. Here goes: These large mining -including oil- corporations most often operate in regions in the world that are remote and located in countries with at best questionable governments (the corporations like it like that, it’s how they know who to bribe to be able to rape and pillage). The corporations de facto form a large part of the US/UK/EU political/military control system of these areas. They work in tandem with the CIA, MI5, the US and UK military, to keep the areas ‘friendly’ to western industries and regime. This has caused unimaginable misery across the globe, in for instance (a good example) the Congo, one of the world’s richest regions when it comes to minerals ‘we’ want, but one of the poorest areas on the planet. No coincidence there.

Commodities rout deepens as Chinese trade data signal weaker demand - The accelerating rout in commodity prices has piled pressure on energy and resources shares in Asia Pacific amid more signs of slowing demand from China. Although oil prices pushed back on Tuesday from seven-year lows, stock markets around the region felt the pain from uncertainty about global growth and the likely rise in US interest rates later this month.Data showed on Tuesday that China’s exports fell by a more-than-expected 6.8% in November from a year earlier, their fifth straight month of decline. Imports fell 8.7%, which was not as much as expected but enough to signal continued weak demand from the world’s second biggest economy. Analysts were unsure if the numbers signalled a possible improvement in Chinese domestic demand, which has been a key factor in driving world commodity prices to multi-year lows. “The big picture hasn’t really changed that much. The US is doing okay, but the problems with emerging markets are really quite big,” “Imports have been slumping for more than a year now, so the year-on-year figures are benefiting from a much lower base, which statistically we should expect. But I’m not so sure the number today reflects a real fundamental change for the better in import demand.”

Chinese Exports Fall for Fifth Consecutive Month -  China’s trade with the rest of the world continued to shrink in November, in the latest negative sign for growth in the world’s second-largest economy.  China’s exports fell in November for the fifth consecutive month, as weak global demand continued to weigh on the world’s largest manufacturing nation. Imports were better than expected—though they remained weak—leading to another sizable monthly trade surplus. “External demand is still weak with so many uncertainties in November in the U.S. and Europe, but imports were a little better than expected,” said BBVA Research economist Xia Le. “That said, I don’t see a significant rebound in economic momentum,” he added.  On Tuesday, China’s General Administration of Customs reported that exports fell 6.8% in November in dollar terms from a year earlier, compared with a decline of 6.9% in October. This compared with a median forecast of 5.3% in a survey of 14 economists conducted by The Wall Street Journal. Imports last month fell 8.7% year-over-year, compared with an 18.8% decrease in October. This was better than the 11.8% decline that was forecast by the economists. The country’s trade surplus narrowed in November to $54.1 billion from $61.6 billion in October. The surveyed economists expected a surplus of $62.8 billion.

China Trade Data: More Bad News For China's Economy As Exports Fall 6.8% In November   -- China’s exports fell 6.8 percent in dollar terms year-on-year in November, their fifth consecutive monthly drop, according to official figures released Tuesday. The fall was slightly less than the previous month’s 6.9 percent drop but analysts said it was further evidence of pressure on the Chinese economy, the world’s second biggest, which saw GDP growth slow to 6.9 percent in the third quarter of 2015 -- its lowest rate for six years.  Imports also fell in November by 8.7 percent compared to a year earlier, though the decline was significantly slower than that of the previous month -- when they plunged 18.8 percent on the year -- and better than some market predictions. In yuan terms, exports were down 3.7 percent to 1.25 trillion yuan (about $195 billion) while imports fell 5.6 percent to 910 billion yuan (about $142 billion) compared to falls of 3.6 percent and 16 percent respectively in October. While some economists welcomed the slight improvements in the dollar figures, others noted the decline in exports was still sharp compared to September’s 3.7 percent fall. And ANZ Bank economists Li-Gang Liu and Louis Lam said in a research note sent to International Business Times that the continued decline in imports showed China’s “domestic demand remained weak.”  Analysts said the figures were likely to increase pressure on the Chinese government to take further measures to stimulate the economy, such as increasing infrastructure spending to stimulate the economy, and further interest rate cuts (China has already had six in the past year) to help businesses raise funds.

China’s economic slowdown slams California exports - California feels China’s pain. The recent economic struggles of the populous overseas nation have caused a slowdown in the state’s export trade industry. The latest evidence came in October 2015 figures released by Beacon Economics, the consulting firm that breaks down California’s export totals from U.S. Commerce Department figures. Beacon said in-state businesses shipped merchandise valued at about $14.7 billion in October, down 5.4 percent from $15.53 billion sent abroad in October 2014. Amid the sea of data in the report was this: California shipments to China in the August-to-October period fell by 11.4 percent, from $4.19 billion last year to $3.71 billion in 2015. Shipments declined across the board, from computer equipment to agricultural products. “It’s very much indicative of China’s wobbly economy for the past several months, and the authorities there have not figured out how to respond,” It’s not just China,. California shipments to other key trading partners also have hit the skids. During the August-October period, exports to Canada tumbled from $4.9 billion to $4.32 billion from the year-earlier period, a decline of 12 percent. Exports to Japan declined by nearly 5 percent, from $2.97 billion to $2.83 billion.

US launches trade dispute with China over tax on imported aircraft - The US has launched a trade dispute against China, claiming that American aircraft and components are put at a disadvantage because of a tax break Beijing offers locally made small aircraft. The US Trade Department has asked the World Trade Organisation (WTO) to intervene, saying Chinese-produced escape a 17pc value added tax that is levied on imported aircraft and parts. Michael Forman, US Trade representative, called the tax – generally imposed on aircraft weighing under 25 tons – is “discriminatory, unfair and harmful to US workers and business of all sizes in the critical aviation industry”. “The Chinese government is undermining fair competition and playing by their own set of rules. Punishing American small and medium-sized aircraft and aircraft component manufacturers is a direct violation of WTO commitments,”

China Aims to Retool Its Manufacturing Industry with Robots -  - China is laying the groundwork for a robot revolution by planning to automate the work currently done by millions of low-paid workers. The government’s plan will be crucial to a broader effort to reform China’s economy while also meeting the ambitious production goals laid out in its latest economic blueprint, which aims to double per capita income by 2020 from 2016 levels with at least 6.5 percent annual growth. The success of this effort could, in turn, affect the vitality of the global economy. The scale and importance of China’s robot ambitions were made clear when the vice president of the People’s Republic of China, Li Yuanchao, appeared at the country’s first major robotics conference, held recently in Beijing. Standing onstage between two humanoid entertainment robots with outsized heads, Li delivered a message from China’s leader, Xi Jinping, congratulating the organizers of the effort. He also made it clear that robotics would be a major priority for the country’s economic future. Many of the robots on show at the conference’s exhibition hall were service or entertainment robots such as automated vacuum cleaners, cheap drones, or quirky looking machines designed to serve as personal companions. But there were also many industrial robots that signaled the real impetus for China’s robot push: its manufacturing sector.

JPMorgan Had 'Sons And Daughters' Hiring Program For Chinese Elite - JPMorgan’s crime spree continues. While the Too Big To Fail/Jail bank was already being investigated for violating the Foreign Corrupt Practices Act (FCPA) for hiring children of the the Chinese Communist Party elite in exchange for influence with the Chinese government, The Wall Street Journal claims a new report will show further crimes.  According to the Journal, JPMorgan is preparing to submit a report to US investigators in April that shows the firm hired 222 candidates connected to the Chinese elite under what was known internally as the “Sons and Daughters” program. So, not a few bad apples or isolated incidences, but a broadly practiced policy. The program detailed in the report reveals that JPMorgan’s corrupt hiring practices were widespread and often involved favors beyond seeking better treatment from the Chinese government. JPMorgan often hired children of companies the bank took public and did business with in Hong Kong:  The hiring program coincides with the rise of JPMorgan’s business in China and Hong Kong, specifically. By all accounts, JPMorgan payed-to-play in China. The payment took the form of high-paying jobs for relatives of government and business officials. That behavior is explicitly banned by FCPA, which makes it a federal crime to give anything of value to foreign government officials in hopes of influencing them. JPMorgan’s only defense is that those 222 people connected to the Communist Party elite and state-owned enterprises were all, somehow, the best candidates.

Oh look, we’re back to “record” Chinese capital outflows -- In which October’s brief respite gets absorbed into a pretty clear trend. From Capital Economics: Today’s FX reserves data suggest that capital outflows picked up sharply last month, leading the People’s Bank (PBOC) to resume selling FX in order to prop up the value of the renminbi.The value of China’s FX reserves stood at $3.438tn at the end of November (the Bloomberg median was $3.493tn, our forecast was $3.475tn), a decrease of $87bn from a month earlier. Our calculations suggest that exchange rate fluctuations will have reduced the dollar value of the portion of the reserves held in other currencies by around $30bn. This points to PBOC FX sales of $57bn last month. Since we expect the combined goods and services trade surplus to have been around $55bn last month, this would imply record net capital outflows of $113bn, up from outflows of $37bn in October. The pick-up in capital outflows appears to have been predominately driven by increased expectations for renminbi depreciation.And, to repeat ourselves, from Nomura on what’s next: Overall, we continue to forecast an extremely challenging flow backdrop for China into 2016, where the risk is for more periods of net capital outflows. Medium-term structural capital outflows from the private sector as reflected in the significant gap between China’s net international investment position (IIP) and that of the public sector (FX reserves) should also sustain upward pressure on USD/RMB …This compares with our view of limited capital inflows, where the trade surplus-related USD selling flow could be smaller than expected due to the hoarding of USD by corporates. In addition, we believe global diversification into RMB assets should be moderate as investors may exercise caution due to concerns over China’s economy and financial market valuations.

China forex reserves plunge to lowest level since Feb 2013 - China's foreign exchange reserves, the world's largest, fell by $87.2 billion in November to $3.44 trillion, central bank data showed on Monday, the lowest level since February 2013 and the third largest monthly drop on record. The onshore yuan is down over 3 percent so far this year, and remains under pressure as investors expect US interest rates to be increased for the first time in around a decade later this month. The fall in foreign exchange reserves was the biggest since a record monthly drop of $93.9 billion in August. China's FX reserves have declined for the last five quarters and posted a record quarterly fall in the third quarter. "The pick-up in capital outflows appears to have been predominately driven by increased expectations for renminbi (yuan) depreciation," . "A rise in offshore interest rates due to the increased likelihood of a December Fed rate hike will also have added to outflow pressures." "The fall in November was larger than expected, which indicates that China's use of forex reserves had exceeded expectations,"

WSJ Survey: Yuan No Challenge to Dollar Amid China’s Tiptoe Toward Freer Markets - China’s yuan is highly unlikely to challenge the dollar’s hegemony as the world’s most used reserve currency in the next 50 years despite winning International Monetary Fund backing, according to economists surveyed by The Wall Street Journal. The IMF last week added the yuan to its elite basket of reserve currencies, acknowledging the growing heft of the world’s No. 2 economy and encouraging Beijing to move ahead with promised liberalization. But economists surveyed by the Journal expressed deep uncertainty about the country’s political and economic fate. Beijing’s ponderous move toward freer markets and a more open society will likely keep a tight lid on the yuan’s appeal as a reserve currency in the decades ahead, many said. “Until China fully transforms its nation into an open democracy with an economy much more transparent, subject to market forces…there is no chance the renminbi will overtake the U.S. dollar,” said Economic Outlook Group’s Bernard Baumohl. To match the dollar’s appeal, China will need markets as deep as those in the U.S. and to produce economic indicators that are trustworthy, he said. Mark Nielson of MacroEcon gave China a 40% chance of the yuan challenging the dollar’s rule in the next fifty years: “Long-term China stability is uncertain.”  And Sam Kahan and Jim Meil of ACT Research said, “Unless there is a dramatic change in the economic and political structure of China, the yuan won’t be a challenger.”

Onshore Yuan Has Been In Freefall Since The IMF Added China To The SDR Basket - For the 5th day in a row, Onshore Yuan has tumbled against the USDollar. Absent the violent devaluation in August, this is the largest drop since March 2014, leaving the Chinese currency at its weakest level against the USD since August 2011. It appears that after showing some signs of 'stability' to appease The IMF's political decision, and following the weak trade data this week, China has decided to escalate the currency wars, perhaps in anticipation of (or in an attempt to stall) any market turbulence when The Fed hikes rates next week andwithdraws up to $800bn in liquidity from global marketsAs it seems, with the blessing of The IMF, China has begun its competitive devaluation efforts...slowly and under the cover of darkness from America's mainstream media... Put simply, something is going on as the world's money markets prepare for what lies ahead next week and the asset classes with the most risk (see CCC US Corps, EM FX, Oil) are the first to suffer before the effects of shortened collateral chains ripple up into mom-and-pop's 401k. Charts: Bloomberg

China’s Dollar-Depegging Signal Likely a Bet on More Greenback Strength -- China’s indication Friday it will loosen its long-time peg to the dollar and instead target a basket of currencies on the eve of an expected U.S. Federal Reserve rate increase is likely no coincidence. The Fed’s anticipated move next week and further increases in the coming year are expected to pressure the dollar higher against most major currencies around the world.  That’s the last thing Beijing wants as it struggles to prevent its economy from collapsing. A stronger yuan would add another headwind to its travails, weighing on exports.“They must be expecting the dollar will rise further,” said Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics and a former senior Fed official. Pegging the yuan to a basket of currencies wouldn’t by itself depreciate the yuan. But if Beijing believes the greenback’s value will rise against those exchange rates, “then this is a depreciation relative to that future increase,” he said. Removing the peg amid a strengthening dollar would also mean Beijing wouldn’t have to continue ransacking its foreign exchange reserves to stabilize the yuan’s value, an increasingly expensive task.

Yuan Slides As PBOC Signals Intent To Further Weaken Currency -- We have been almost alone in our exclamations at the collapsing offshore Yuan in the last few days but since The IMF blessed China's currency with inclusion in The SDR, CNH is down 13 handles. However, now we appear to have an answer. Overnight saw commentary from CFETS (China's FX market 'manager') that indicated implicitly that Trade-Weighted Yuan was still trading too high. In late China trading, The China Foreign Exchange Trade System (also known as CFETS) has published CFETS exchange rate index on its website on December 11th. The CFETS, founded on April 18, 1994, is a sub-institution of the PBC. Its main functions include: providing systems for FX trading, RMB lending, bond trading, and exchange rate and interest rate derivatives trading; organizing FX trading, RMB lending, bond trading, and exchange rate and interest rate derivatives trading; providing clearing, information, risk management, and surveillance services on interbank markets; and engaging in other businesses authorized by the PBC. In their words, this will help bring about a shift in how the public and the market observe RMB exchange rate movements.

China’s weakening renminbi poses stability threat - While investors are focused elsewhere, the biggest threat to market stability loiters. China’s renminbi is weakening. Nothing shocked investors in 2015 as much as the August devaluation of the renminbi. It was enough to halt the dollar bull run and scupper the Federal Reserve’s rate hike hopes. Now, as investors anticipate the US central bank will finally tighten policy next week, the renminbi is losing steam. While not as dramatic as its August decline, the currency has quietly drifted 1.8 per cent weaker against the dollar over the past six weeks. The direction of China’s currency looms large over global markets as it begs big questions: does renminbi weakness reflect badly on the state of the Chinese economy? And if so, will that darken the outlook for commodity markets and miners, with repercussions for global and US economic prospects? “On a relative basis, the depreciation is fast,” says Nomura’s Craig Chan, Asian foreign exchange strategist. What really shifts the renminbi is China’s central bank, the People’s Bank of China, which every day sets a reference rate for the onshore rate allowing the currency to trade 2 per cent either side of that rate. This week, the PBoC relaxed the rate to its lowest level in four years, and the renminbi duly reached its lowest end-of-day rate since August 2011. “I’m a little bit surprised they have let it go quite this far,” says Adrian Owens, investment director at GAM International. “I would have thought they would stabilise things.”

Chinese devaluation is a bigger danger than Fed rate rises -  The world has had a year to brace for monetary lift-off by the US Federal Reserve. A near certain rate rise next week will come almost as a relief. Emerging markets have already endured a dollar shock. The currency has risen 20pc since July 2014 in expectation of this moment, based on the Fed's trade-weighted "broad" dollar index. The tightening of dollar liquidity is what caused a global manufacturing recession and an emerging market crash earlier this year, made worse by China's fiscal cliff in January and its erratic, stop-start, efforts to wind down a $26 trillion credit boom. The shake-out has been painful: hopefully the dollar effect is largely behind us. The central bank governors of India and Mexico, among others, have been urging the Fed to stop dithering and get on with it. Presumably they have thought long and hard about the consequences for their own economies. The greater risk for the world over coming months is that China stops trying to hold the line against devaluation, and sends a wave of corrosive deflation through the global economy. Fear that China may join the world's currency wars is what haunts the elite banks and funds in London. It is why there has been such a neuralgic response to the move this week to let the yuan slip to a five-year low of 6.4260 against the dollar.

China’s yuan falls to 4½ year low as central bank steps back — China’s yuan hit 6.4515 to the dollar in mid-morning trade today, its lowest level in nearly four and ½ years, raising questions over how far Beijing will let the currency weaken to help shore up economic growth. It was also weaker than the lowest level reached in mid-August after a central bank surprised global markets with a devaluation. Today’s weakening came after the People’s Bank of China set its official midpoint rate at 6.4358 per dollar,its weakest level since August 5, 2011, prior to market opening. Last week, the International Monetary Fund announced that it would include the yuan in its Special Drawing Rights (SDR) basket, an important milestone in China’s integration into global finance. Markets have been rife with speculation that Beijing would allow the yuan to depreciate after the SDR inclusion, and the yuan’s performance this week appears to justify that speculation, some traders said. However, other traders suspect the PBOC is increasing the volatility of yuan trading, letting it depreciate before the Federal Reserve’s rate decision next week, and will then guide it to appreciate afterwards. Speculators have been burnt many times by the PBOC’s temporary tolerance of sharp yuan movements in one direction, followed by a hard strike back in the opposite direction. 

"Let's Just Hope Shipping Isn't Telling the Real Story of China" - One of the recurring topics we have focused on extensively in the past few months has been the dramatic collapse of all shipping-related metrics when it comes to seaborne trade with China, from the recent record plunge in the Baltic Dry index... ... to Shanghai Containerized Freight.... both of which are taking place even as China exports record amount of commodities to the outside world...We have also repeatedly noted that the implications for both China, and the entire world, from these charts are dire because they suggest that not only is China not growing, but the entire world is now gripped in not only an earnings and GDP (in USD-denominated terms, global GDP is set to decline by several trillion dollars) recession, but also suffering its first trade contraction since the financial crisis. And now, Bloomberg has turned its attention to just these, and other comparable charts, and published an article titled "Let's Just Hope Shipping Isn't Telling the Real Story of China", prudently adding that investors betting that China’s near-insatiable appetite for industrial raw materials will drive global economic growth may want to skip the shipping news. Here's why: For the first time in at least a decade, combined seaborne imports of iron ore and coal - commodities that helped fuel a manufacturing boom in the world’s second-largest economy -- are down from a year earlier. While demand next year may be a little better, slower-than-anticipated growth in 2015 has led to almost perpetual disappointment for shippers, after analysts’ predictions at the end of 2014 for a rebound proved wrong.

Hong Kong housing bubble threatens to bust - Hong Kong home sales sank last month to a record low as an imminent interest rate in the US this month scared away prospective buyers. According to Land Registry data, November saw 2,826 registered residential transactions, down 14.4 per cent from October and 41.7 per cent less than in November last year. In terms of value, residential transactions dropped 7.7 per cent month on month to HK$20.8 billion. “Total home sales including those in primary and the secondary market dropped to the lowest level since we have started to gauge property transactions in 1996,” said Wong Leung-sing, an associate director of research at Centaline Property Agency. He said prospective buyers in general held back their purchases in view of softening home prices and a potential rate hike also dented interest. Given the peg of the Hong Kong dollar to the US dollar, any increase in interest rates in Washington would impact the home market here. “Sales volume in the secondary market fell for the fourth straight month to a 20-year low,” Wong said. Hong Kong home prices fell 4.5 per cent after peaking in September, according to the Centa-City Leading Index, but was still up 6 per cent from the beginning of the year. Last week, 20 out of 50 housing estates monitored by Ricacorp Properties recorded zero transactions.

Korea advised to cut debt levels: Korea is one of the Asian economies required to reduce their overall debt to avoid major risks to growth because the debt increase has gained speed recently, International Monetary Fund (IMF) economists said at a conference in Seoul Friday. Developing Asian economies have grown since the 2008 global financial crisis on increased debt and leverage by individuals and companies in the private sector, said Ding Ding, senior economist at the IMF's Asia and Pacific Department. But debt in Korea and other Asian countries has reached threatening levels as they seek further monetary easing to support growth amid growing uncertainties such as the U.S. Fed's anticipated rate hike next week and slowing demand from China, he said. Some Asian countries now carry debt nearing levels that toppled major Asian countries in the 1997 Asian financial crisis. Korea went to the IMF to seek a $58.3 billion bailout in November 2007, following a severe liquidity crisis. The IMF extended a total of $19.5 billion, lower than the initially requested amount, to Korea. "Concerns about leverage are again at the forefront of policy considerations in many emerging markets, including in Asia,"

China's slowdown continues to squeeze Asian manufacturing-  Manufacturing activity in Taiwan weakened for the eighth straight month in November, with China's economic slowdown continuing to have a dampening effect. Although the Nikkei Taiwan Manufacturing Purchasing Managers' Index, or PMI, improved to 49.5 from October's 47.8, it was unable to break past the "boom or bust" threshold of 50. Close A reading above 50 indicates economic expansion, while anything below indicates a contraction. Exports, which account for about 70% of the island's gross domestic product, struggled due to weaker Chinese demand. Especially limp were shipments of information technology-related products such as semiconductors and liquid crystal display panels, which have been falling amid a slowdown in the global smartphone market. Tepid demand also contributed to slower purchasing activity, with Taiwanese companies selling off inventory. Employment expanded, but only marginally, which "suggested companies remain relatively cautious towards the business outlook," said Annabel Fiddes, an economist at Markit, the U.K. financial research company that compiles the surveys the index is based on. "Fragile global economic conditions and a slower growth trajectory in China may continue to act as a drag on Taiwan's economy." The Taiwanese government on Oct. 30 announced that GDP for the July-September quarter slipped 1.01% from a year earlier in real terms, marking the first negative growth since the third quarter of 2009. It was pulled down by worse-than-expected exports and domestic spending. Capital formation also contracted due to a slowdown in the construction sector and a decline in electronics inventory.

Japan big manufacturers' mood darkens in fourth quarter as global demand wanes | Reuters: Big Japanese manufacturers turned less optimistic in October-December, a government survey showed on Thursday, with worries about a slowdown in global demand weighing on confidence. Thursday's figures reinforce expectations that the Bank of Japan's closely-watched tankan corporate sentiment survey due next week could also show deterioration in business sentiment heading into year-end. Worsening corporate sentiment and a relentless decline in oil prices could set the stage for additional monetary easing next year as doubts about economic momentum and achievement of the central bank's 2 percent inflation target remain. "Our house view is the BOJ will ease in January when they review their long-term forecasts," said Hidenobu Tokuda, senior economist at Mizuho Research Institute. "Manufacturers are clearly worried about the emerging market slowdown. The domestic economy is not that bad, but it does seem to have peaked for the time being."   The business survey index (BSI) of sentiment at large manufacturers stood at plus 3.8 in October-December, less than plus 11.0 in July-September, a joint survey by the Ministry of Finance and the Economic and Social Research Institute, an arm of the Cabinet Office, showed on Thursday.

The TPP Is the Last, Best Opportunity for New Global Trade Rules -   There is no other area of global governance—not climate change, not management of the oceans, not monetary policy, not peacekeeping—in which the nations of the world have agreed to cooperate more closely than on the rules governing international trade. But over the past half-century, each step toward greater trade cooperation has been a bit harder than the last. The fate of the Trans-Pacific Partnership (TPP) trade agreement—the recently concluded mega-regional deal linking the United States, Japan and 10 other Pacific Rim countries—will likely decide whether the historic project of building better global rules for trade continues, or collapses under its own weight. The TPP, which has been under negotiation for nearly a decade and now awaits difficult ratification battles in each member country, offers the best hope for restarting a global push for trade liberalization after more than two decades of stagnation.

Rajan gives rupee bond bulls confidence to forecast end of rout  - Reserve Bank of India Governor Raghuram Rajan gave Indian bond bulls confidence to forecast an end to a two-month jump in yields. Even as he left benchmark interest rates unchanged on Tuesday, Rajan said inflation risks are to the downside and he “will use the space for further accommodation, when available.” That triggered the biggest rally in sovereign notes in two months. The benchmark 10-year yield, at 7.71 per cent Wednesday, will drop another 16 basis points by March 31, a Bloomberg survey of 10 fixed-income dealers and fund managers shows. It surged 25 basis points in the previous two months, the most since the period ended September 2013. Deutsche Asset Management India Pv. and Standard Chartered Plc are among those predicting rupee debt can withstand the prospect for higher US borrowing costs that prompted outflows of foreign funds last month. Citigroup Inc. says the RBI could cut rates right after India’s federal budget, typically in February, should Prime Minister Narendra Modi’s government stay on course to narrow the deficit. “The 10-year has room to rally despite some near-term headwinds because of the Federal Reserve,” said Kumaresh Ramakrishnan, Mumbai-based head of fixed income at Deutsche Asset, which manages 207.2 billion rupees ($3.1 billion). “We don’t classify the RBI’s policy as hawkish. Yields should be lower by March, at around 7.40 per cent-7.50 per cent.” Consumer prices rose 5 per cent in October, matching the RBI’s target for March 2017. Rajan’s inflation fight has been complicated by a proposed increase in salaries of millions of federal government employees that could boost consumption and derail plans to curb the deficit to 3.9 per cent of gross domestic product in the year ending March 2016 and to 3.5 per cent the following year.

Indian rubber farmers facing ruin as global prices crash - Agricultural commodity prices have been roiling the world's producer countries across Latin America, Africa and Asia. In just the past one year, wheat has declined by 22 per cent, rice by 17 per cent, soybeans by eight per cent, palm oil by 21 per cent, sugar by 12 per cent, coffee by 27 per cent and rubber by 20 per cent, according to IMF commodity prices data. A slice of this crisis is visible in India too - with rubber farmers mostly in Kerala but also in the North-East and some other states. Prakasan Mastar is in despair. He runs a two acre rubber plantation in Kannur district, Kerala. Till a few years ago, his 30-year old plantation was a good source of income. He got Rs.248 for every kilogram of raw rubber produced. But this year the price he is getting is just Rs.95-98 per kg. "I spend about Rs.160 to get a kilo of raw rubber. How can I sell it for Rs.98?" he asks. This is the plight of nearly 8.5 lakh rubber farmers in India, mostly concentrated in Kerala but also in Karnataka, Tripura and Tamil Nadu. International rubber prices have crashed, synthetic rubber is slowly taking over, and price support mechanisms promised to these small farmers have not been put in place. According to a study done by the Sabha, 93 percent of India's rubber production is taking place in small plantations of less than 2 hectare size. So the price crash has caused complete ruin with several farmers abandoning their trees and all of them taking up other low paying jobs to earn a living.

India's economy outpaces China, RBI seen holding rates | Reuters: India's economic growth picked up in July-September, outpacing China on improving domestic demand and manufacturing activity, and the acceleration could persuade the country's central bank to keep interest rates unchanged at its Tuesday meeting. The Reserve Bank of India (RBI) is expected to hold rates steady after a sharper-than-expected 50 basis point cut at its last meeting, as it looks to control price rises ahead of a tighter 2016 inflation target. Asia's third-largest economy expanded by a 7.4 percent annual rate in the second quarter of the 2015/16 financial year that ends in March, compared with 7 percent in April-June, the Statistics Ministry said on Monday. China reported annual growth of 6.9 percent for the three months ended Sept. 30. A survey of analysts by Reuters had forecast Indian GDP growth of 7.3 percent for the July-September quarter. Stronger growth would be a boost for Prime Minister Narendra Modi after a defeat in state elections in India's third-most populous state of Bihar. Modi is focusing on reforms to accelerate growth and hopes to convince his opponents to implement a much-delayed national sales tax in 2016.

India’s confusingly speedy economy and very own deflator problemINDIA CLOCKS IN AT 7.4 PER CENT REAL GDP GROWTH AND IS NOW THE WORLD’S FASTEST GROWING BRIC ECONOMY! Sorry. Got carried away by charts like this one from BofAML: Or this one from Deutsche that has India growing at 7.8 per cent in 2017 (with inflation running at a v decent 5 per cent): Thing is, and as we’ve written before, there is still a lack of confidence in India’s recently updated economic growth series showing up in our inboxes even as the room for caveats in the media gets increasingly squeezed — the validity of such stats tend to be less relevant when they’re telling a positive story, no? Anyway, here’s a few more up to date paragraphs from Macquarie, which dropped after the most recent print at the end of November (our emphasis): Notwithstanding the reported real GDP growth numbers, a common question that we keep getting from investors is whether the Indian economy is actually growing above the 7% mark when essentially it still feels around 6% looking at the onground reality and global situation… The good …: As we have been highlighting, there are some green shoots emerging, especially on the public capex front and urban consumption. … and the bad: The corporate earnings downgrade cycle continues, with the street having downgraded Nifty estimates by around 15–17% since the beginning of the year. Bank credit growth remained sluggish at 9.3% YoY for the Sept-15 quarter. Banking sector pressure continues, with nearly 13–15% of the book being stressed. Private corporate capex is yet to bounce back meaningfully, and rural consumption has slowed significantly, led by weak monsoons and curtailment in government spending. A weak global economy, too, is holding back capacity utilisation in the manufacturing sector and exports.

India No. 1 choice for global tech R&D - Times of India: India remains the No. 1 location for MNCs to establish product engineering and R&D centres outside their home countries, and the growth of these centres in India is outpacing the average global growth. India accounted for $12.3 billion, or 40%, of the total of $31 billion of globalized engineering and R&D in 2015, according to a study by consulting firm Zinnov. Compared to 2014, the revenues of the captives in India grew by 8.3%, as against the growth of 7.6% for all captives. China follows India with revenues of $9.7 billion. Zinnov, which has been focused on this space since it was founded over a decade ago, finds that 69% of all new offshore technology centres this year were set up in India. The past two years have seen a spate of new centres being set up and the older ones expanding, including those of Exxon Mobil, Lowe's, Visa, Victoria's Secret, JC Penny, CME Group, Wells Fargo, and British Telecom. Software & internet accounts for 35% of the work being done in the captives, telecom & networking follows with 14% and semiconductors 12%. Consumer electronics, automotive, computer peripherals, medical devices, industrial, and aerospace & defence are other areas of work. Zinnov finds another interesting trend: Engineering and R&D outsourcing to third parties is beginning to outpace growth of captives in India. India is the second biggest outsourcing destination, after Western Europe, where companies like Altran, Alten, Akka Technologies, Assystem and Harman Connected Services are strong.

Surprise India-Pakistan talks spark optimism - Meeting between Modi and Sharif in Paris apparently laid the groundwork for the Bangkok talks [EPA]South Asia analysts expressed optimism on Monday after talks were secretly held between arch rivals India and Pakistan in the Thai capital - a move that signalled a long-awaited thaw in frigid relations. In a further surprise move towards rapprochement, it was announced Indian Foreign Minister Sushma Swaraj will hold talks with Pakistani officials on Wednesday, the first visit to Islamabad by India's leading diplomat in three years.Tensions between the nuclear-armed rivals have been high for decades with two of three wars fought over the disputed Himalayan region of Kashmir. India has long accused Pakistan of supporting separatist Muslim rebels in India's part of the territory.Pakistan National Security Adviser Nasir Khan Janjua and his Indian counterpart Ajit Doval met in Bangkok on Sunday for the unannounced talks. Kashmir cold to Narendra Modi's visit A joint statement issued after the meeting said "discussions covered peace and security, terrorism, Jammu and Kashmir, and other issues, including tranquility along the LoC [Line of Control - the de facto Kashmir border]."Discussions were held in a candid, cordial and constructive atmosphere," the statement said. "They were guided by the vision of the two leaders for a peaceful stable and prosperous South Asia."

Wary of debt cliff, Australia seeks soft landing for housing  - Australia is attempting to let the air out of a housing bubble without also deflating a vital source of economic growth or stressing a deeply-indebted household sector. It's a balancing act few others have pulled off and there is scant room for error as the country is already struggling with the aftermath of a once-in-a-century mining boom. Adding to the stakes are record levels of household debt, whose ratio against disposable income is even higher than that of the United States when the market there collapsed in 2007. This has left policy makers in an uncomfortable bind. The Reserve Bank of Australia (RBA) has made clear its reluctance to cut interest rates again for fear of overheating the market. But neither do they want home prices to fall in a way that would stress over-leveraged owners and potentially deal a damaging blow to the economy. "This leaves a sense that it will be hard to get the goldilocks adjustment the RBA would like, which stabilizes risks without snuffing out the growth contribution from housing,"

Leaders sound alarm on budget as economists predict billions wiped from revenue: Australia's federal and state leaders have issued a stark warning of growing budget pressures across all levels of government amid calls for the federal government to reset voter expectations about the health of Australia's public finances. Some of Australia's top economists are predicting that the federal government's mid-year budget update on Tuesday will show the collapse in iron ore prices and record-low wages growth will wipe billions from Commonwealth revenue. Three different analyses in the past fortnight show the federal budget deficit will be between $33 billion and $39 billion worse than expected over the next four years.  Budget challenges took centre stage at the Council of Australian Governments meeting in Sydney on Friday, with a joint communiqué warning of "emerging budgetary pressures across all levels of government, particularly in the health sector". The meeting ended without an agreement on changing the tax system but Prime Minister Malcolm Turnbull said the "aim is to take action" when the COAG meets again in March.

Aussie Falls With Loonie Near 11-Year Low as Commodities Tumble - Australia’s currency extended its biggest loss in more than a month and Canada’s dollar held near an 11-year low as a slump in commodity prices weighed on the outlook for the nations’ exports. The Aussie and Loonie slid about 1 percent against the greenback Monday after iron ore and oil prices sank to their lowest since at least 2009. The rout in commodity currencies comes before the Federal Reserve decides next week whether to raise U.S. interest rates for the first time in almost a decade. The Bank of Canada and the Reserve Bank of Australia both kept interest rates unchanged at their meetings last week. Australian government bonds surged Tuesday. “The commodity slide is negative for the Australian dollar,” . “It raises the risk that the RBA will start commenting adversely on the currency as the central bank did until July this year when the exchange rate and commodity prices last diverged sharply. That would help push the Australian dollar down in the absence of further RBA interest rate cuts.” The Australian currency fell 0.2 percent to 72.55 U.S. cents as of 12:01 p.m. in Tokyo from Monday, when it dropped 1 percent in its biggest loss since Nov. 6. The Canadian dollar was little changed at C$1.3514 against its U.S. counterpart, after touching C$1.3524 in New York, the weakest since June 2004. Iron ore, Australia’s biggest export, is trading below $40 a metric ton on rising supply from the world’s top miners, while Brent oil futures fell to their lowest since 2009 Monday as OPEC effectively abandoned its strategy of limiting production. A Bloomberg gauge of commodity prices fell to the lowest in more than 16 years. Brent for January settlement ended Monday at $40.73 a barrel, the lowest close since February 2009.

We are shrinking! The neglected drop in Gross Planet Product : Presenting the October 2015 IMF World Economic Outlook, Maurice Obstfeld identified the fall of commodity prices as one of the powerful forces shaping the outlook for the world economy. The strength of this force, however, is underestimated by the official forecasts in the IMF’s flagship publication. As illustrated in Figure 1 the IMF world economic outlook database reports a reduction of Gross Planet Product (GPP) for the year 2015 by -3,8 trillion dollar (-4.9%). A nominal reduction of GPP of this size has occurred only once since 1980 (the starting year of the IMF database), namely at the start of the Great Recession when GPP contracted by -5.3%. Table 1 illustrates that all previous contractions of nominal GPP are associated with major crises in the world economy.. Since the IMF forecast both positive growth and positive inflation, the nominal shrinkage of GPP puts into question the consistency of the IMF World Economic Outlook data and forecasts.

Globalization Pauses: Will It Resume? - The volume of global trade rose more quickly that world economic growth during the 1980s, 1990s, and up to the global recession that started around 2008. . But during the last few years, the pattern of globalization has first halted, and may even have slightly reversed itself. Have we reached "peak trade," so that the the era of rising globalization has ended? Or is the leveling out of the world trade/world GDP ratio just a pause, before globalization starts growing again? An VoxEU.ord ebook called  The Global Trade Slowdown: A New Normal?, edited by Bernard Hoekman, explores these questions in an overview essay and 19 mostly readable chapters. To set the stage for the discussion, here are some figures. The first one (from Hoekman's introduction) shows patterns of exports, imports, and net trade. The top panel shows that levels of imports and exports in G7 countries (the US, Canada, Japan, Great Britain, France, Germany, and Italy) peaked back in early 2008, rebounded back to that level, but has shown a drop-off in early 2015. The bottom panel shows that exports and imports in the BRIICS countries (Brazil, Russia, India, Indonesia, China and South Africa) rebounded to higher-than-2008 levels, but have also shown an actual decline in early 2015.

US rate hikes could hurt emerging markets, says BIS -- Emerging markets are at risk of negative fallout from an eventual rise in US interest rates despite more settled conditions in financial markets in the fourth quarter, the Bank for International Settlements said Sunday. "The calm has been uneasy," said BIS economics department head Claudio Borio. "Very much in evidence, once more, has been the perennial contrast between the hectic rhythm of markets and the slow motion of the deeper economic forces that really matter." In its quarterly review the BIS, a Switzerland-based consortium of central banks, noted that emerging markets settled down after a turbulent summer when volatility in China's stock market and currency upended financial markets. "The short-lived market response might suggest that [emerging markets] could ride out the prospect of US monetary tightening," the BIS said, referring to financial market trends in emerging markets since mid-November. "However, less favorable financial market conditions, combined with a weaker macroeconomic outlook and increased sensitivity to US interest rates, heighten the risk of negative spillovers to [emerging markets] once US rates do start to rise."

BIS Warns of ‘Uneasy Calm’ in Markets Before Possible Debt Storm- The Bank for International Settlements (BIS) has warned in its latest quarterly review that the current ‘uneasy calm’ in financial markets might be short lived, threatened by the Fed’s widely expected interest rate hike - the first rate increase in a decade. This latest warning comes after BIS - the central bank of central banks  - had previously cautioned that recent economic turmoil in the global stock markets  “showed how developed and emerging markets were exposed to the unwinding of financial vulnerabilities built up since the 2008 crisis.” See: “BIS Warns of ‘Major Faultlines’ In Global Debt Bubble”. “The short-lived market response might suggest that EMEs (emerging market economies) could ride out the prospect of US monetary tightening. However, less favourable financial market conditions, combined with a weaker macroeconomic outlook and increased sensitivity to US interest rates, heighten the risk of negative spillovers to EMEs once US rates do start to rise in the United States”. BIS Quarterly report December 6th Again, BIS warns that investors remain “hooked on every word and deed" of central banks and that recent turmoil in markets was not caused by isolated incidents but rather “the release of pressure that has gradually accumulated over the years along major fault lines”.

New Shipping Container Rule Riles Exporters - WSJ: Retailers, manufacturers and farmers world-wide are protesting a new marine shipping safety rule they say will raise transport costs and cause delays at ports worldwide. The rule, which kicks in next July in 171 countries, requires exporters to certify the weight of containers before they’re loaded onto ships. Carriers say accurate weights are needed because overloaded containers frequently damage cargo and even cause ships to capsize. But shippers in many countries say they are ill-equipped to weigh so many containers. Some say they learned about the rule only recently and are still in the dark about key details, including how it will be enforced. In a survey of shippers, carriers, and others involved in global trade conducted by container booker Inttra Inc., 57% of respondents were only vaguely familiar or not aware of the rule, and nearly 60% did not believe shippers would be ready by July. “The industry has been slow in making shippers aware,” said Juerg Bandle, senior vice president of sea freight for Swiss logistics company Kuehne + Nagel International AG. “Now the industry is under time pressure to implement. It will be very challenging.” The conflict over the new rule shows how the shipping industry is struggling to balance safety and speed. Shipping lines have in recent years rolled out large ships capable of carrying as many as 20,000 container, lowering overall expenses but raising the potential cost of an accident. Meanwhile, shippers fret about even short delays as they are under pressure to deliver goods faster to consumers and businesses.

New Study: Illicit Financial Flows Hit US$1.1 Trillion in 2013 « Global Financial Integrity: – Illicit financial flows from developing and emerging economies surged to US$1.1 trillion in 2013, according to a study released Wednesday by Global Financial Integrity (GFI), a Washington, DC-based research and advisory organization. Authored by GFI Chief Economist Dev Kar and GFI Junior Economist Joseph Spanjers, the report pegs cumulative illicit outflows from developing economies at US$7.8 trillion between 2004 and 2013, the last year for which data are available. Titled “Illicit Financial Flows from Developing Countries: 2004-2013″ the study reveals that illicit financial flows first surpassed US$1 trillion in 2011, and have grown to US$1.1 trillion in 2013—marking a dramatic increase from 2004, when illicit outflows totaled just US$465.3 billion. “This study clearly demonstrates that illicit financial flows are the most damaging economic problem faced by the world’s developing and emerging economies,” said GFI President Raymond Baker, a longtime authority on financial crime. “This year at the U.N. the mantra of ‘trillions not billions’ was continuously used to indicate the amount of funds needed to reach the Sustainable Development Goals. Significantly curtailing illicit flows is central to that effort.”

In Nigeria, Chinese Investment Comes With a Downside - - Across this populous African nation, low-cost Chinese goods are everywhere, evidence of Beijing’s growing dominance in global trade. The trade flow has helped keep life affordable for millions of Nigerian families, at a time when the country is struggling with economic stagnation and plunging prices, as well as the deadly costs of the Boko Haram insurgency.But shoddy or counterfeit products are a national problem in Nigeria, Africa’s largest economy, where impoverished consumers have few alternatives. Some shoddy goods are benign, like the Chinese-made shirts, trousers and dresses with uneven stitching and stray threads that fill street markets. But electrical wiring, outlets and power strips from China, ubiquitous in new homes and offices, are connected to dozens of fires a year in Lagos alone. The relationship between China and Nigeria is a complex web of dependency, one replicated in dozens of developing countries around the world, like Chile, Ethiopia and Indonesia. Such ties are integral to China’s global ambitions. President Xi Jinping of China, who was in Africa this week emphasizing economic diplomacy, just committed $60 billion in development assistance to the Continent. But such efforts also pose new and unpredictable challenges for Beijing. China has lent heavily to commodity-exporting countries, which are now struggling with low commodity prices. At the same time, China’s highly competitive manufacturing sector has devastated many smaller-scale rivals across Africa, Asia and Latin America. Mr. Xi’s pledge in Africa, in part, seemed aimed at quelling criticism over what some see as a lopsided relationship that largely benefits China.

Moody’s Places Brazil on Review for Downgrade - WSJ: In another blow to embattled President Dilma Rousseff, Moody’s Investors Service  placed Brazil’s debt on review for a downgrade that would put it into junk territory, citing the country’s rapidly worsening economic and political situation. The move Wednesday was expected, analysts said, after statistics earlier this month showed gross domestic product shrank 4.5% in the third quarter. The shrinking economy has cut into tax revenue, causing the government budget deficit to swell. On the political front, Congress moved last week to begin impeachment proceedings against Ms. Rousseff. “We’ve already seen significant deterioration; we don’t see how these trends can change quickly,” said Samar Maziad, Senior Sovereign Analyst at Moody’s. The review should take 30 to 90 days, Ms. Maziad said. The president’s office declined to comment on Moody’s decision. Moody’s also downgraded the debt of state-controlled oil company Petróleo Brasileiro, or Petrobras, moving it deeper into junk territory, and placed the company on review for a further downgrade.

Mexico seeks to double food exports to China in 2016 - - Mexico is seeking to double its food exports to China next year, the government announced Monday. The Latin American country is expected to export $290 million worth of food products to China in 2016, an increase of around $150 million compared with that of this year, according to the Secretariat of Agriculture, Livestock, Rural Development, Fishing and Food (Sagarpa). The increase will generate more than 5,000 jobs in the primary sector, Jose Calzada Rovirosa, head of Sagarpa, said in a press release. Rovirosa, who arrived in China on Saturday for a working visit, aiming to review progress in sanitary protocols for the exportation, in the short and medium term, of powder milk and baby formulas, tobacco and white corn, and to open the market to bananas, La Jornada daily reported Sunday.

Chicken for diapers: Bartering abounds in scarcity-stricken Venezuela - Venezuela’s grinding economic crisis has generated a plethora of problems including triple-digit inflation, shortages of basic goods and massive lines at markets. But it’s also inspiring boot-strap solutions, including a growing number of bartering websites for desperate shoppers. More than 14,000 people are following the Twitter handle @spvzla where medicine is traded and bartered. The Facebook page “Trueque Anti-Bachaqueros Caracas” — another popular swapping site — has more than 10,300 members. And the image sharing site Instagram has become the go-to place to find baby items. The page Mamaenapuros, or “Mom in a Jam,” for example, has more than 22,000 followers. As Venezuela heads into key legislative elections Sunday, perhaps no issue is threatening the ruling party more than economic malaise. Plummeting oil prices have sapped the government’s ability to import items in a nation where about 70 percent of all goods come from abroad. In addition, Draconian price and currency controls, along with entrenched corruption, have created thriving black markets, where subsidized goods are hoarded and then sold for two and three times their official price. As a result, while the nation boasts the world’s largest oil reserves, it’s having trouble keeping aspirin and car batteries on the shelves.

Triumphant Venezuelan opposition looks to free prisoners - (Reuters) - Triumphant opposition leaders vowed on Monday to use their new majority in Venezuela's legislature to free jailed opponents of the Socialist government, but also promised not to go after political foes. The Democratic Unity coalition won more than twice the number of National Assembly seats as the Socialists in Sunday's vote that punished President Nicolas Maduro's government for deep economic and social crisis in the oil-producing country. It was the first time in 16 years that the "Chavismo" movement, named for former socialist President Hugo Chavez, lost its majority in the 167-member assembly, and gives the opposition a platform to further erode Maduro's power. The 53-year-old president, who was handpicked by Chavez but lacks his charisma and political guile, quickly accepted defeat in a speech to the nation in the early hours of Monday that calmed fears of violence. Aware that victory owed more to public discontent with Maduro than support for the opposition, coalition head Jesus Torrealba urged Venezuelans to bury their differences.

Canada tax hike leaves hole, higher budget deficit eyed - The Canadian government's planned tax hike on the rich will not cover the cost of a promised middle-class tax cut, an official projection showed on Monday, increasing the likelihood the budged deficit will be higher than forecast. Finance Minister Bill Morneau, releasing the projection as he announced the new tax measures, repeatedly declined to say if he would adhere to the Liberal campaign promise to limit deficits to C$10 billion ($7.4 billion). Instead, he said the economy was worse than expected and required government investments. "What you can assume is that as we face up to an economic situation that is more challenging that we expected, as we face up to an oil price that is lower than we might have expected, we recognize that our economy is going to be challenged," he told reporters. "So we're going to continue to move forward with those investments that we believe will improve our productivity and improve our level of growth."

Bank of Canada would consider setting interest rate below zero: Poloz - Negative interest rates are now on the table, but Canada’s central banker insisted Tuesday they’re unlikely to be implemented even as oil prices, the loonie and the stock market plunged for the second day in a row. Bank of Canada governor Stephen Poloz unveiled the bank’s new “Framework for Conducting Monetary Policy At Low Interest Rates” — which included tools such as quantitative easing and negative interest rates in its arsenal after examining similar moves from its global peers during the financial crisis. Negative interest effectively charges customers for deposits, discouraging saving and encouraging spending. Such measures would only be used “in the unlikely event that the economy was hit with another major negative shock,” such as another global financial crisis, Poloz said during a speech to the Empire Club of Canada Tuesday. Poloz said the revision had nothing to do with dramatic oil prices drops this week, which have fallen further below $40 a barrel to a seven-year low. That pushed the loonie down to 73.60 cents U.S. Tuesday, a level last seen in June 2004.

Syrian Refugees Greeted by Justin Trudeau in Canada - Prime Minister Justin Trudeau and a battery of politicians from across the political spectrum were on hand at the Toronto airport to greet the refugees.“You are home,” Mr. Trudeau said to the first passengers to disembark after a 16-hour flight from Beirut on a Canadian military aircraft. “You’re safe at home now.” The premier of Ontario, Kathleen Wynne, gave them winter coats.Under a plan announced by Mr. Trudeau’s new government, a series of flights will bring 10,000 Syrian refugees into Canada by the end of this month and a total of at least 25,000 before March.The widespread embrace of the plan by the Canadian public stands in stark contrast with the controversy raging over the issue in the United States, where many politicians, especially on the right, have called for bans or restrictions on the admission of Syrian refugees.

Russia's Budget Deficit to Reach $21Bln in 2016 – Finance Ministry - Russia's budget deficit is expected to reach 1.5 trillion rubles ($21.7 billion) in 2016 with an oil price baseline of $40 a barrel, Deputy Finance Minister Maxim Oreshkin said Friday, Interfax agency reported. In this projection, the deficit will constitute about 2 percent of GDP, and the ministry will have to be more conservative in its spending policy to maintain budget deficit margins of 3 percent GDP, Oreshkin said. This deficit limit had previously been set by Russian President Vladimir Putin. The Finance Ministry estimated Russia's GDP at 78.7 trillion rubles ($1.15 trillion) in the 2016 budget bill. Its previous deficit forecast, due to the oil price and falling ruble, was 1 trillion rubles ($14.4 billion). Budget revenues were projected at 13.7 trillion rubles ($204 billion), with expenditures expected to reach 16 trillion rubles ($238 billion). The budget bill projected the average price of Russian Urals oil in 2016 at $50 per barrel. On Monday, the oil price descended to a seven-year historical low and has continued to fall. On Friday, February futures for Brent crude oil dropped 0.4 percent to $39.98 a barrel, Interfax reported.

IMF Reverses Policy on Lending into Official Arrears -- So the shoe has finally dropped. IMF policy has been not to lend to countries that have arrears to official creditors. I have long thought the IMF should (and would) depart from its policy in the case of Ukraine's debt to Russia, which was structured in a fairly transparent effort to capture the benefits of both private and official lending. Whether or not one approves of Russia's motives or techniques in structuring the loan, it seems clear to me that the IMF should not allow its policies to be held hostage in this case.  News reports now indicate that the IMF has switched course. More details to follow, but it seems like this is a general shift in policy rather than (as Mitu Gulati and I suggested in the post linked above) a one-off exception applicable only to the Russian debt. The shift has been in the works for a while and was suggested in an IMF staff report in 2013. Still, it's a pretty big deal for IMF board members to approve. Official creditors generally like to have a veto over Fund decisions, even if they don't always like the consequences of the veto in particular cases.

The IMF forgives Ukraine’s debt to Russia  -- On December 8, the IMF’s Chief Spokesman Gerry Rice sent a note saying: “The IMF’s Executive Board met today and agreed to change the current policy on non-toleration of arrears to official creditors. We will provide details on the scope and rationale for this policy change in the next day or so.” Since 1947 when it really started operations, the World Bank has acted as a branch of the U.S. Defense Department, from its first major chairman John J. McCloy through Robert McNamara to Robert Zoellick and neocon Paul Wolfowitz. From the outset, it has promoted U.S. exports – especially farm exports – by steering Third World countries to produce plantation crops rather than feeding their own populations. (They are to import U.S. grain.) But it has felt obliged to wrap its U.S. export promotion and support for the dollar area in an ostensibly internationalist rhetoric, as if what’s good for the United States is good for the world. The IMF has now been drawn into the U.S. Cold War orbit. On Tuesday it made a radical decision to dismantle the condition that had integrated the global financial system for the past half century.  The creditor leverage that the IMF has used is that if a nation is in financial arrears to any government, it cannot qualify for an IMF loan – and hence, for packages involving other governments.  But on Tuesday, the IMF joined the New Cold War. It has been lending money to Ukraine despite the Fund’s rules blocking it from lending to countries with no visible chance of paying.

Greece Loses Last Trace Of Sovereignty After EU Takes Control Over Greek Borders - Ever since this summer's dramatic "referendum" farce, and the subsequent hijacking of the Greek banking system by the ECB's ELA, Greece has officially been a nation without state sovereignty. Europe reminded Greece of just this a few days ago when days after its waved the carrot before Turkey promising billions in aid, and an EU acceptance fast track, it threatened Greece with expulsion from the Schengen customs union (a union which as a subsequent leakrevealed will likely be "temporarily" shuttered for as long as two years unless the refugee crisis is brought under control). Perhaps to confirm that few things will stand in its mission-creep to subjugate the sovereignty of European member states, starting with the poorest and most insolvent, namely Greece, we find out that the EU and its border agency, is not only preparing to take over border control of countries that have been found to be "ill-equipped" to deal with the refugee problem, but has already launched this plan into action in Greece. Because after being threatened with expulsion from the Schengen zone, Greece (which does not actually share a contiguous, physical border with any Schengen nation) caved in and accepted an offer from the European Union to bolster its borders with foreign guards as well as other aid, including tents and first aid kits. This decision follows reports that Greece was unwilling to accept foreign border guards on its territory, but these were later denied by the government.

Greece is a Nation Under Occupation -  Ilargi - Brussels thinks it’s found a whipping boy for all its failures. Greece. It’s fast increasing its accusations against Athens’ handling of the 100s of 1000s of refugees flooding the country. Everything that goes wrong is the fault of Greece, not Brussels. The EU has so far given Greece €30 million in ‘assistance’ for the refugee crisis, while the country has spent over €1.5 billion in money it desperately needs for its own people. But somehow it’s still not done enough. The justification given for this insane shortfall is that Greece doesn’t blindly follow all orders emanating from Europe’s ‘leaders’. Orders such as setting up a joint patrol of the Aegean seas with … yes, Erdogan’s Turkey. Where Greece gets next to nothing as the children keep drowning, Turkey gets €3 billion and a half-baked promise to join the Union sometime in the future. Which was never going to happen, the EU would blow up before Turkey joins and certainly if it does, and most certainly now that Russia’s busy detailing the link between the Erdogan cabal and Europe’s supposed new archenemies -move over Putin?!, which, incidentally, are reason for France to ponder a kind of permanent state of emergency; ostensibly, this is Hollande’s way of exuding confidence. ‘We must protect our way of life’. Given Schengen -while it lasts-, which effectively erases all frontiers, this de facto means permanent emergency across the entire EU. And that, to a degree, though the two may seem unrelated, plays into the EU’s insistence to station foreign border guards (military police) at Greek borders. A, we can’t put it in different words, completely insane demand to which Alexis Tsipras’ government has apparently even acceded.  Insane because once you have foreigners deciding who can enter or leave your country, you’re effectively a country under occupation. It really is that simple. This latest attempt at power grabbing on the part of Brussels could have some ‘unexpected side effects’, though. And that may be a good thing.

Thousands of Migrants Stranded in Greece as Route North Is Narrowed - — There has been a rough triage taking place the last few weeks along the barbed-wire and chain-link fence separating Greece from Macedonia.“Only Syrians, Iraqis and Afghans!” a Greek police officer shouted recently, looking over the bedraggled families coming forward at this transit camp, one of the main gateways for people fleeing conflict, persecution and poverty in search of better lives in Europe.The rest — the Iranians, Yemenis, Ugandans, Moroccans, Algerians, Pakistanis, Congolese, Somalis and more — are left to look on with anger and despair.The border crossing here ran smoothly for months, an efficient funnel for tens of thousands of people who had made it across the Aegean and the Mediterranean and were heading toward Germany and beyond. In orderly groups of 50, they were shepherded into Macedonia and onto trains heading north.But the door to Europe, seemingly flung open this summer to all, has quietly shut for many of them, without much fanfare or explanation and over the objections of Greece. The idea is to slow the flow of people — nearly a million have reached Germany this year — and filter out some of those who would not qualify for refugee status on the basis of fleeing a war.Since the new policy took effect last month, thousands of migrants, unable to move forward and unwilling to go back, have been living in the fields around here, making do in ragged pup tents, their laundry drying nearby. They have huddled by campfires to stay warm, eagerly telling anyone who will listen that they, too, should be allowed to go north.

12 Million Homeless, Displaced Syrians Facing Disaster as Winter Approaches - More than 12 million people in Syria — nearly half of whom are children — are in need of immediate humanitarian assistance before winter sets into the war-torn country, an international aid group said Friday. Robert Mardini, regional director for the Middle East at the International Committee of the Red Cross (ICRC), said in a statement that after nearly five years of conflict, Syrians lack even basic resources, as temperatures are starting to fall below freezing. “The humanitarian situation in Syria is catastrophic and deteriorating day by day,” Mardini said. “The people are facing a bitter winter ahead and they have very few resources…the situation is nothing short of critical for many, many people,” Mr Mardini continued. ICRC is one of many humanitarian organizations in the country that have been unable to deliver aid to the most vulnerable due to destroyed infrastructure and security risks. Meanwhile, the United Nations agency for Palestinian refugees (UNWRA) said earlier this week that around a third of its facilities inside Syria have been “rendered inoperable due to damage or active conflict.” UNRWA Commissioner-General Pierre Krahenbuhl warned of the risks that the refugees will face in months to come. “Palestine refugees face great uncertainty, with many of them lacking adequate shelter and struggling to meet their minimum food needs,”

EU plans border force to police external frontiers -  Brussels is to propose the creation of a standing European border force that could take control of the bloc’s external frontiers — even if a government objected. The move would arguably represent the biggest transfer of sovereignty since the creation of the single currency. Against the backdrop of a crisis that has seen 1.2m migrants reach Europe this year, the European Commission will unveil plans next week to replace the Frontex border agency with a permanent border force and coastguard — deployed with the final say of the commission, according to EU officials and documents seen by the Financial Times. The blueprint represents a last-ditch attempt to save the Schengen passport-free travel zone, by introducing the kind of common border policing repeatedly demanded by Paris and Berlin. Britain and Ireland have opt-outs from EU migration policy, and would not be obliged to take part in the scheme. European leaders have discussed a common border force for more than 15 years, but always struggled to overcome deep-seated objections to yielding national powers to monitor or enforce borders — one of the core functions of a sovereign state. Greece, for instance, only recently agreed to accept EU offers to send border teams, after months of wrangling over their remit. Systemic weaknesses in the Schengen Area agreement were laid bare by this year’s massive influx of migrants, many of them unregistered, into the EU through Greece and Italy. Concerns came to a head after last month’s terrorist attacks in Paris, when it transpired that at least some of the assailants came to Europe from Syria via Greece.

The Latest: Poland to Continue Upgrading Border Surveillance -  Germany's interior minister says that 965,000 people were registered as asylum-seekers in the country from January through the end of November. The figure given by Interior Minister Thomas de Maiziere on Monday puts the total number of new arrivals this year above the total of 800,000 he forecast for 2015 in August. He said he won't give a new full-year forecast. De Maiziere said the actual number of new arrivals through the end of November is below 965,000 because of people who registered more than once or continued to other countries, but he can't say how much lower.Germany's interior minister says the number of migrants arriving in the country has declined significantly over the past week or two. Interior Minister Thomas de Maiziere said Monday refugees and other migrants have been arriving at a pace of 2,000 to 3,000 a day in recent days, down from the 8,000 to 10,000 who often arrived daily over recent months. He said the cause isn't entirely clear but pointed to bad weather in the Mediterranean that has deterred people from crossing from Turkey to Greece, and efforts by Turkey to stop people leaving by sea. He said that "this isn't yet a turnaround, but it is a good development." De Maiziere's comments came after he announced that 965,000 people were registered in Germany as asylum-seekers from January to November. —

Poland considering asking for access to nuclear weapons under Nato program -- Poland’s deputy defence minister has said the ministry is considering asking for access to nuclear weapons through a Nato program in which non-nuclear states borrow the arms from the US.  Tomasz Szatkowski said the ministry was discussing whether to ask for access to Nato’s “nuclear sharing” program to strengthen the country’s ability to defend itself. Polish media said Szatkowski’s comments on Saturday to the private broadcaster Polsat marked the first time a Polish official has indicated the country wants to join the program. Among Nato’s 28 members there are three nuclear powers – the US, France and Britain – but only the US has provided weapons to allies for nuclear sharing. Belgium, Germany, Italy, the Netherlands and Turkey have hosted nuclear weapons as part of the program.

Spain's public debt-to-GDP ratio at 99.3 pct in third quarter | Reuters: Spanish debt as a percentage of economic output stood at 99.3 percent in the third quarter, the Bank of Spain said on Friday, above the government's forecast of 98.7 percent by the end of the year. The debt-to-GDP ratio was also 99.3 percent in the second quarter, revised up from a previous 97.7 percent after the government assumed debt related to a highway concession in the northern region of Catalonia. The total public debt came to 1.06 trillion euros ($1.2 trillion) at the end of the third quarter, up from 1.05 trillion three months earlier and compared with just 383.8 billion euros in 2007 before the onset of the economic slump. The government has set its debt-to-GDP targets at 98.5 percent for 2016, 96.5 percent for 2017 and 93.2 percent for 2018.

Population Deflation: Spain Joins Germany with Negative Net Birth Rate; Italy on Threshold  - On the demographic front things are not looking so good for the eurozone.  With declining birth rates and the aging of the population, Mario Draghi will struggle to produce inflation in a population deflationary environment.  Please consider Spain Dying as its Birthrate PlummetsSpain’s population will fall by more than five million over the next 50 years, according to a forecast that raises the prospect of even more “ghost villages” around the country. In the first six months of this year, Spain recorded 225,924 deaths and 206,656 births, the national statistics institute reported. The country has not seen deaths exceed births consistently since the civil war, from 1936 to 1939, and before that the 1918 Spanish flu pandemic.  The English version El Pais asks Is it time for Spain to address its plummeting birth rate? Figures from the National Statistics Institute (INS) show there was a peak in 1944, with 23 births per 1,000 inhabitants. But that number bottomed out in 1998 when only nine births per 1,000 were reported. “We have seen an incredible decline in the birth rate, which has been cut by half since 1975, and this trend is here to stay,” “We are witnessing a rapid decline in births and it seems that nobody cares. In the short term it is a relief because it means less spending for families and for the state, and nobody is complaining because no one stops to think about the future consequences,” he says. British economist Paul Wallace, author of Agequake, which investigates the causes and effects of population aging, has argued that the major investment for any society must be in its own replacement. In this case, Spain has failed.

Marine Le Pen's National Front in historic French poll victory - -- The far-right National Front party looks set to take over the running of four councils in France after winning 28 per cent of the vote in regional elections, in a result that has shocked governing elites across Europe. In the first test of public opinion since the November 13 terrorist attacks in Paris, the anti-immigration party of Marine Le Pen notched up its best result since it was founded in 1972. With almost all of the votes counted, National Front (FN) was placed first in six of the country’s 13 regions. The centre-right and socialists in certain regions have refused to join forces to stop the FN, which could allow it to win up to four regions in the second round on Sunday. Ms Le Pen described the result as “magnificent”, adding that it showed that the FN was now “without contest the first party of France”. The result reverberated across the continent, with Sigmar Gabriel, leader of Germany’s social democrats and the country’s vice-chancellor, calling it a “wake-up call for all democrats in Europe”. “It is of course a shock when rightwing extremists achieve such a result and become the strongest political force in the first round of voting in France — one of the founding members of the EU in the heart of Europe,” he said. Matteo Renzi, Italy’s prime minister, said in a Facebook post on Monday that European institutions needed to “change” or they risked becoming the “best allies of Marine Le Pen and those who try to imitate her.” “Without a strategic design, particularly on the economy and on growth, populist movements will sooner or later prevail also in general elections,” wrote Mr Renzi, who has clashed with Brussels over budget and migration policy. A candidate for her party in France’s northern region, Ms Le Pen won the first round with 40 per cent of the vote while Marion Maréchal-Le Pen, her niece, also headed the field with more than 40 per cent of the vote in the south-eastern region of the country.

Front National's election triumph leaves mainstream parties reeling -- French mainstream politicians have struggled to come up with a response to what one analyst described as the “major hangover” of a historic victory by the Front National in the first round of regional elections.  While the far-right had been predicted to do well, the FN’s record score of almost 28% of the national vote and first place in six of the country’s 13 regions by Sunday night left the traditional parties reeling. The governing Socialist party came third as expected, but analysts agreed on Monday that the main loser was the centre-right opposition party Les Républicains, led by the former president Nicolas Sarkozy. The Socialists announced they would withdraw their candidates in regions where the party was trailing and urge supporters to vote tactically to form a “Republican front” to see off the Front National in the second round this coming Sunday. But the instruction issued by the party headquarters in Paris was defied by the Socialist candidate in the Alsace-Champagne-Ardenne-Lorraine region, who came third but announced he would stand for the second round anyway. Related: Front National support is changing France's political landscape Jean-Pierre Masseret, who scored 16% against 36% for the Front National frontrunner and 25% for the centre-right candidate, told journalists: “I am not withdrawing … it is necessary to offer a democratic choice.” He added: “Voters from the left have the right to be represented. It is by confronting the FN that we will push it back, not by avoiding it. Avoidance has always benefited the FN.”

Le Pen's Victory Brings Eurozone Closer to Disaster - The victory for Marine Le Pen’s Front National in the French regional elections at the weekend is bad news for the Eurozone–but we won’t know just how bad for another week. You might think that a thumping first-round victory for a party that doesn’t really believe in the single currency (or any other part of Europe’s ‘Ever Closer Union’ agenda) is just bad news for the currency bloc’s cohesion per se. But there is bad news and there is disastrous news, and disaster is still 17 months away. That’s because France is one of Europe’s more centralized countries, concentrating executive power in the office of the presidency. Historically, the presidential election in France is the only one that counts for much. The Presidential elections use a two-round system of votes that sees the top two candidates go head-to-head in a run-off. These days, more often than not, the final result depends on the tactical switches of those who vote for all the unsuccessful candidates in the first round. If the electorate rallies with discipline and energy around the best option for defeating the FN in the second round, then the guardians of the euro from Portugal to Estonia will breathe a sigh of relief. There will be a very different sigh if it doesn’t.  The second round of the regional elections next week doesn’t quite copy the presidential model (only parties polling below 5% are eliminated), but it offers enough potential for tactical voting to give a rough idea of how the chips could fall if Le Pen reaches the run-off for the Elysée, as pretty much all the opinion polls of this year suggest she will.

Is France Building an Apartheid State?  -- French reality has been punctuated by seemingly random, spectacularly gruesome acts of violence carried out by individuals who come from the most excluded sections of French society. They are at once native-born citizens of France and the country’s ultimate outsiders. The main perpetrators of the Charlie Hebdo attacks and the atrocities this November were not a foreign presence which has disturbed a peaceful status quo in French society, but the unwanted, outcasted byproducts of the French Republic and its imperial legacy in the Middle East.. For French Muslims and other minorities, the situation increasingly resembles the plight blacks faced in apartheid South Africa and even that of the Palestinians living under Israeli military occupation. Though French minorities confront only a shadow of the disproportionate violence that Israel has visited upon Palestinians, they have found themselves in a permanent state of exclusion enforced by a regime of increasingly brutal repression. The racism that has always simmered just above the surface of mainstream French society has reached historic highs. In the month following the attacks on Charlie Hebdo, the Collective Against Islamophobia measured a 70% rise in Islamophobic incidents, 80% of which were directed against Muslim women usually targeted because they wore hijab. This includes Islamophobic language, verbal and physical assaults and property damage. Since the terrorist attacks of November 13, mosques, halal butchers, kebab restaurants and town halls have been attacked.

Portugal: backlash against austerity unites divided left - In Portugal’s biggest political upheaval for a generation, moderate Socialists and hardline Communists agreed this autumn to bridge an ideological divide that had kept them apart for more than 40 years. Accompanied by the radical Bloco de Esquerda (BE), the thaw in relations has brought the left together as never before in a pact designed to overturn austerity. More than a quarter of a century after the fall of Europe’s most potent symbol of the divide between Soviet communism and free-market democracy, António Costa, the Socialist party (PS) leader and broker of the new alliance, compares the agreement to “tearing down the last remains of a Berlin Wall”. The surprise detente between former foes was triggered by the inconclusive outcome of the country’s October 4 general election. The centre-right Forward Portugal (PAF) coalition led by Pedro Passos Coelho, elected prime minister in 2011, emerged as the largest force, but lost more than 700,000 votes, 25 seats and its outright majority in the 230-seat parliament. Aníbal Cavaco Silva, the conservative president, urged Mr Costa to ensure government stability by supporting a minority centre-right administration in return for policy concessions. But the PS leader surprised the country — and the rest of Europe — by tearing up the prepared script and forging an “anti-austerity” alliance with the far left. This move had not been suggested to voters before the election. Acclaiming the new pact, Mr Costa told parliament: “a taboo has ended, a wall has been knocked down, another prejudice has been overcome”. Shortly afterwards, the once divided left, which won a majority of parliamentary seats in the election, united to bring down Mr Passos Coelho’s new government 11 days after it took office on October 30.

Austerity in Europe: Government cuts have tended to land on the young | The Economist -- MANY suspect governments of protecting increasingly wrinkly electorates over the young within the big austerity packages imposed since the financial crisis and recession. While youths have had a particularly rough ride within labour markets, the overall effects of the response to the crisis are a bit more complicated. A new issue of Fiscal Studies, an economic journal, published today compares the austerity packages implemented in six European countries (Britain, Italy, France, Spain, Ireland and Germany) and would seem to provide fodder for those who think the young have been given a raw deal. First, look at investment. When there is a hole to be plugged, governments might be tempted to slash investment spending and maintain current spending. This is politically easier; current benefit claimants will squawk more loudly than those who might have used the now-cancelled roads. The papers show that in all countries other than France and Germany investment spending was cut more quickly than current spending--future generations are the main losers of this prioritisation. Next, look at the packages of tax-and-benefit changes that governments used to curtail borrowing. The collection of papers compare net household incomes in 2014 with what they would have been if no policy changes had been made after the recession (2015 for Britain). They find that in France, Ireland and Britain, on average working-age household incomes were squeezed harder than pensioner incomes. In Ireland, where pensioners saw net income cuts of over 5%, one-earner households saw average cuts of 12.1%. The government protected the main pensioner benefit, opting to hike property taxes, introduce water charges and slash working-age benefits instead.

The real Mario Draghi (eventually) stands up --As one day shocks go, the market reaction to the ECB’s announcements on Thursday was very dramatic. The 4.5 per cent intraday reversal in the dollar/euro exchange rate was the largest since 2009, and the combined drop in equities, bonds and the dollar has been described as the most severe since 1999.  Mr Draghi must have been concerned about this extreme market reaction, because his speech in New York the following day struck an entirely different tone. He attempted to upgrade the size of the new package of quantitative easing from €360 billion to €680 billion, and in effect promised unlimited QE until the inflation objective is reached (see John Authers).Many investors have blamed Mr Draghi for some misleading forward guidance going into the Governing Council meeting. The announcement certainly fell some distance short of the pre-emptive easing that appeared to be in his mind less than one month ago, when he said that the ECB would use “all instruments” to return inflation to target “without undue delay”. So which is the real Mr Draghi? And is he still in control? When the dust settles, investors will realise that nothing much has changed. Nevertheless, Mr Draghi’s apparent volte face has left investors needlessly confused. When he stepped up the aggressiveness of his language on 20 November, he must have been fully aware that he was fuelling already rampant expectations of a major easing in December. This was the culmination of a series of “uber dovish” speeches that had successively greater effects on the markets. Such a skilled operator did not do this by accident.

Finland Government Officials Propose to Give Tax-Free Payout of $870 to Every Citizen Each Month -- As a way to improve living standards and boosts its economy, the nation of Finland is moving closer towards offering all of its adult citizens a basic permanent income of approximately 800 euros per month. The monthly allotment would replace other existing social benefits, but is an idea long advocated for by progressive-minded social scientists and economists as a solution—counter-intuitive as it may first appear at first—that actually decreases government expenditures while boosting both productivity, quality of life, and unemployment. “For me, a basic income means simplifying the social security system,” Finland’s Prime Minister Juha Sipilä said last week. Though it would not be implemented until later in 2016, recent polling shows that nearly 70 percent of the Finnish people support the idea. According to Bloomberg, the basic income proposal, put forth by the Finnish Social Insurance Institution, known as KELA, would see every adult citizen “receive 800 euros ($876) a month, tax free, that would replace existing benefits. Full implementation would be preceded by a pilot stage, during which the basic income payout would be 550 euros and some benefits would remain.”

Banks score victory on use of ratings in capital calculations The banking lobby has beaten back a global reform plan that it claimed would result in a “substantial” increase in capital. The Basel Committee on Banking Supervision said on Thursday that it has dropped a plan to ban banks from relying on rating agencies when they calculate risks in their portfolio. The US already has such a rule in place, so the global change of heart could make it harder to compare the riskiness of American banks with that of their rivals elsewhere in the world. The U-turn comes after intense lobbying from banks and the rating agencies themselves, which argued that forcing them out of calculations would mean a cruder measure of credit riskiness — and one that would drive up the amount of capital banks must hold. The Basel Committee, which sets global minimum standards for banks, is working on a new a package of measures aimed at preventing lenders from gaming the system by using their own models to calculate risk-weighted assets. RWAs form the denominator in the fraction used to calculate banks’ all-important capital ratios. The overhaul, which is an attempt to make it easier to compare banks’ balance sheets, is part of a wave of reforms that the industry has dubbed “Basel IV”; a new layer of regulation on top of the Basel III capital rules that come fully into force in 2019. Policymakers and regulators argue that the new measures are simply the implementation and finalisation of long-flagged reforms put in place during the financial crisis.

Finland Plans to Give Every Citizen, Rich or Poor, $870 a Month - Those struggling to make ends meet in Finland could soon get some extra cash, courtesy of the government. The Nordic nation is considering plans to hand over 800 tax-free euros to citizens every month. And it’s not just for citizens who are strapped for cash—every resident would receive a monthly payment equivalent to about $870. The monthly €800 payment would replace all other welfare, social security programs, unemployment payments, The Independent reports. The Finnish government plans to begin testing the program in 2017.Finland’s unemployment rate is at a 10-year high of more than 9 percent (the United States’ rate is 5.4 percent). Some fear that the basic income would be unfair, with the wealthy receiving the same amount as the poor. Others worry it might make people less eager to find work, but the monthly check is actually designed to get people back into the workforce. For many Finnish citizens, getting a part-time or low-paying job could impact their welfare benefits; leaving them worse off than if they did not work at all. Americans face a similar problem: working 30 hours a week in several states disqualifies Americans from receiving unemployment. The process to receive government assistance in practically every nation is complicated—requiring dozens of forms, proof of job seeking, and the filing of weekly. A set monthly check, no strings attached, would eliminate the red tape. “For me, a basic income means simplifying the social security system,” said Prime Minister Juha Sipila, who supports the idea, according to The Telegraph. A survey by the Finnish Social Insurance Institution found that 69 percent of citizens would prefer basic income to other benefits.

It Begins: Desperate Finland Set To Unleash Helicopter Money Drop To All Citizens --With Citi's chief economist proclaiming "only helicopter money can save the world now," and the Bank of England pre-empting paradropping money concerns, it appears thatAustralia's largest investment bank's forecast that money-drops were 12-18 months away was too conservative. Over the last few months, in a prime example of currency failure and euro-defenders' narratives, Finland has been sliding deeper into depression. Almost 7 years into the the current global expansion, Finland's GDP is 6pc below its previous peak. As The Telegraph reports, this is a deeper and more protracted slump than the post-Soviet crash of the early 1990s, or the Great Depression of the 1930s. And so, having tried it all, Finnish authorities are preparing to unleash "helicopter money" to save their nation by giving every citizen a tax-free payout of around $900 each month! As The Telegraph explained, nobody can accuse Finland of being spendthrift, or undisciplined, or technologically backward, or corrupt, or captive of an entrenched oligarchy, the sort of accusations levelled against the Greco-Latins.The country's public debt is 62pc of GDP, lower than in Germany. Finland has long been held up as the EMU poster child of austerity, grit, and super-flexibility, the one member of the periphery that supposedly did its homework before joining monetary union and could therefore roll with the punches.

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