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

Saturday, December 19, 2015

week ending Dec 19

Fed Officials Worry Interest Rates Will Go Up, Only to Come Back Down - WSJ: Federal Reserve officials are likely to raise their benchmark short-term interest rate from near zero Wednesday, expecting to slowly ratchet it higher to above 3% in three years. But that’s if all goes as planned. Their big worry is they’ll end up right back at zero. Any number of factors could force the Fed to reverse course and cut rates all over again: a shock to the U.S. economy from abroad, persistently low inflation, some new financial bubble bursting and slamming the economy, or lost momentum in a business cycle which, at 78 months, is already longer than 29 of the 33 expansions the U.S. economy has experienced since 1854. Among 65 economists surveyed by The Wall Street Journal this month, not all of whom responded, more than half said it was somewhat or very likely the Fed’s benchmark federal-funds rate would be back near zero within the next five years. Ten said the Fed might even push rates into negative territory, as the European Central Bank and others in Europe have done—meaning financial institutions have to pay to park their money with the central banks. Traders in futures markets see lower interest rates in coming years than the Fed projects in part because they attach some probability to a return to zero. In December 2016, for example, the Fed projects a 1.375% fed-funds rate. Futures markets put it at 0.76%. Among the worries of private economists is that no other central bank in the advanced world that has raised rates since the 2007-09 crisis has been able to sustain them at a higher level. That includes central banks in the eurozone, Sweden, Israel, Canada, South Korea and Australia

Fed Weighs Merits of Jumbo Portfolio in Post-Crisis Era - Once the Federal Reserve lifts interest rates from near zero, likely this week, the focus will turn to the other legacy of the crisis-era policies: the Fed's swollen balance sheet. The prevailing view is that the U.S. central bank's $4.5 trillion portfolio, vastly expanded by bond purchases aimed at stimulating the economy, will have to shrink once rates are on their way up, and the Fed will just need to decide how quickly. Now, however, there is a new twist to the debate, with some policymakers and outside experts saying that there are reasons to keep the balance sheet big. As recently as September 2014, the Fed pledged to eventually "hold no more securities than necessary," in its "normalization" plan, a level widely interpreted as close to its pre-crisis $900 billion size. A "permanently higher balance sheet ... is something that we haven't studied that much but I think needs a lot more thought," John Williams, president of the San Francisco Fed, said last month. It could also give the Fed a permanent policy tool with which to target sectors of the economy and certain parts of the bond market.

Fed Watch: Makes You Wonder What The Fed Is Thinking - The Fed is poised to raise the target range on the federal funds rate this week. More on that decision tomorrow. My interest tonight is a pair of Wall Street Journal articles that together call into question the wisdom of the Fed's expected decision. The first is on inflation, or lack thereof, by Josh Zumbrun: Central bank officials predict inflation will approach their target in 2016. The trouble is they have made the same prediction for the past four years. If the Fed is again fooled, it may find it raised rates too soon, risking recession. A key reason for the Federal Reserve to raise interest rates is to be ahead of the curve on inflation. But given their poor inflation forecasting record, not to mention that of other central banks  One would expect waning confidence in their inflation forecasts to pull the center more toward the views of Chicago Federal Reserve President Charles Evans and Board Governors Lael Brainard and Daniel Tarullo and thus defer tighter policy until next year. Now combine the inflation forecast uncertainty with the growing consensus among economists that the Fed faces the zero bound again in less than five years. This one's from Jon HilsenrathAmong 65 economists surveyed by The Wall Street Journal this month, not all of whom responded, more than half said it was somewhat or very likely the Fed’s benchmark federal-funds rate would be back near zero within the next five years. Ten said the Fed might even push rates into negative territory, as the European Central Bank and others in Europe have done...  Supposedly this is of great concern at the Fed. Hilsenrath cites the October minutes:  Fed officials worry a great deal about the risk.  The policy risks are asymmetric. They can always raise rates, but the room to lower is limited by the zero bound. But that understates the asymmetry. You should also include the asymmetry of risks around the inflation forecast. The Fed has repeated under-forecasted inflation. It seems like they should also see an asymmetry in the inflation forecast that compounds the policy response asymmetry. Asymmetries squared.

This week, the US government will take action to slow the economy and prevent wage growth - Imagine President Barack Obama announced a plan for a new tax that he said would raise the price of borrowing money in America. Every new mortgage would become more expensive. So would every auto loan and small-business loan. Towns and school districts would find the cost of new bonds elevated, as would large corporations. All across the land, credit availability would diminish. Republicans would, of course, denounce him. Why would the president impose a new job-killing tax at a time when the American people have been suffering from an agonizingly slow labor market recovery and years of flat wages? And then imagine the Democratic reaction when Obama explained that it wasn't his aim to spend the money on some new social program, or even use it to reduce the deficit. His only goal with the new tax was precisely to reduce the pace of job growth. To make sure that unemployment didn't get too low. That workers' bargaining power didn't become excessive.  It's unimaginable, of course. Congress, the press, and the public would all throw a fit. Yet at this point it is considered all but certain that the Federal Reserve is going to do exactly this by raising interest rates at its meeting next week. There's broad agreement among economists that this kind of tight-money policy leads to slower economic growth and fewer jobs being created. Yet it's happening with barely a word of public concern.

Why Very Low Interest Rates May Stick Around - The Federal Reserve will most likely raise interest rates this week for the first time in nearly a decade. To understand what it means — and doesn’t mean — consider a previous year in which interest rates were on the rise.  In 1920, borrowing costs soared to their highest levels since the end of the Civil War. Some people were terrified of what it was doing to the economy. The interest rate that caused this anxiety? A mere 5.4 percent on the 10-year United States Treasury note — lower than the rates during the entirety of the 1980s and most of the 1990s. What does this have to do with the Fed’s likely move this week? For years, financial commentators have been predicting an imminent rise in rates. After all, goes the theory, the Fed has been engaged in extraordinary interventions to artificially depress the cost of borrowing money. Surely those rates will snap back to their pre-2008 levels, if not rise higher. If that happens, get ready for double-digit mortgage rates and a substantially higher cost to maintain the government debt.But if you look at the longer arc of history, a much different possibility emerges. Investors have often talked about the global economy since the crisis as reflecting a “new normal” of slow growth and low inflation. But, just maybe, we have really returned to the old normal. Very low rates have often persisted for decades upon decades, pretty much whenever inflation is quiescent, as it is now. The interest rate on a 10-year Treasury note was below 4 percent every year from 1876 to 1919, then again from 1924 to 1958. The record is even clearer in Britain, where long-term rates were under 4 percent for nearly a century straight, from 1820 until the onset of World War I. The real aberration looks like the 7.3 percent average experienced in the United States from 1970 to 2007.

Summers, Roubini Warn of Premature Federal Reserve Rate Move - Federal Reserve policy makers risk making a mistake that will be difficult to correct if they raise interest rates on Wednesday, according to former U.S. Treasury Secretary Lawrence Summers and economist Nouriel Roubini. “There are still substantial questions about the growth prospect, about the prospect of achieving the 2 percent inflation target, about uncertainties in financial markets,” Summers said in an interview with Bloomberg Television in Dubai, to be aired later on Tuesday. “In a world where error is inevitable, it’s much better to make easily reversed errors than to make difficult-to-reverse errors.” The U.S. central bank is widely expected to start lifting benchmark borrowing costs even as inflation runs at an annual pace of 0.2 percent. The economy is likely to grow at 2.5 percent this year and next, little changed compared with 2014, according to economists estimates on Bloomberg. “A decision to delay rates runs risks that are easily reversed by subsequently raising rates, whereas a decision to raise rates, if it proves to have been the wrong decision, is a much more difficult decision to correct,” Summers said. Nouriel Roubini, chairman of Roubini Global Economics, echoed similar sentiments. “Suppose that you are a bit more cautious and you start moving slowly and the economy becomes too strong and inflation picks up, you’ll be behind the curve but still you can tighten a bit faster,”

Fed-pocalypse Now? - Kunstler -  If ever such a thing was, the stage is set this Monday and Tuesday for a rush to the exits in financial markets as the world prepares for the US central bank to take one baby step out of the corner it’s in. Everybody can see Janet Yellen standing naked in that corner — more like a box canyon — and it’s not a pretty sight. Despite her well-broadcasted insistence that the economic skies are blue, storm clouds scud through every realm and quarter. Equities barfed nearly four percent just last week, credit is crumbling (nobody wants to lend), junk bonds are tanking (as defaults loom), currencies all around the world are crashing, hedge funds can’t give investors their money back, “liquidity” is AWOL (no buyers for janky securities), commodities are in freefall, oil is going so deep into the sub-basement of value that the industry may never recover, international trade is evaporating, the president is doing everything possible in Syria to start World War Three, and the monster called globalism is lying in its coffin with a stake pointed over its heart. Folks who didn’t go to cash a month ago must be hyperventilating today. But the mundane truth probably is that events have finally caught up with the structural distortions of a financial world running on illusion. To everything there is a season, turn, turn, turn, and economic winter is finally upon us. All the world ‘round, people borrowed too much to buy stuff and now they’re all borrowed out and stuffed up. Welcome to the successor to the global economy: the yard sale economy, with all the previously-bought stuff going back into circulation on its way to the dump. Mrs. Yellen and her cortege of necromancers may just lose their nerve and twiddle their thumbs come Wednesday. If they actually make the bold leap to raise the fed funds rate one measly quarter of a percent, they might finally succeed in blowing up a banking system that deserves all the carnage that comes its way. There is something in the air like a gigantic static charge, longing for release.

Fed raises benchmark interest rate for first time in nearly 10 years: The Federal Reserve on Wednesday raised its benchmark short-term interest rate for the first time in 9 1/2 years, providing a long-awaited vote of confidence for the recovery from the Great Recession by beginning to remove the last of the central bank’s extraordinary steps to boost economic growth. Seven years to the day after lowering the rate to near zero, members of the policymaking Federal Open Market Committee edged it up 0.25 percentage point. The move ended months of speculation about when the so-called federal funds rate, which affects terms for consumer and business loans, would begin inching back toward normal. In a statement approved by a unanimous vote, Fed officials said there “has been considerable improvement in labor market conditions this year” and that they expect low inflation to rise in the coming months. Central bank policymakers said they acted now in part because it takes time for changes in the interest rate to affect the economy. But they promised to go slow with future rate hikes, slowly reducing the stimulus. “The committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate,” the statement said.

FOMC Statement: Fed Funds Rate target range increased to 1/4 to 1/2 percent - FOMC Statement: (excerpt) The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2 percent objective. Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent. The stance of monetary policy remains accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation. In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

Parsing the Fed: How the December Statement Changed from October -  The Federal Reserve releases a statement at the conclusion of each of its policy-setting meetings, outlining the central bank’s economic outlook and the actions it plans to take. Much of the statement remains the same from meeting to meeting. Fed watchers closely parse changes between statements to see how the Fed’s views are evolving. The following tool compares the latest statement with its immediate predecessor and highlights where policy makers have updated their language. This is the December statement compared with October.

Federal Reserve Raises Interest Rates For First Time In Nearly A Decade -- To the surprise of basically nobody at this point, the Federal Reserve Board announced today that it was raising a key interest rate, the first time the Board has raised rates in nine and a half years: — The Federal Reserve said on Wednesday that it would raise short-term interest rates for the first time since the financial crisis struck, a vote of confidence in the strength of the American economy at a time when much of the rest of the global economy is struggling.The widely anticipated decision, a milestone in the Fed’s postcrisis stimulus campaign, ends a seven-year period in which the Fed held short-term rates near zero. Even as it raises its benchmark interest rate by 0.25 percentage points, to a range of 0.25 to 0.5 percent, however, the Fed emphasized subsequent increases would come slowly.The decision to raise rates “recognizes the considerable progress that has been made toward restoring jobs, raising incomes and easing the economic hardships that have been endured by millions of ordinary Americans,” the Fed’s chairwoman, Janet L. Yellen, said at a news conference after the decision was announced. Interest rates on mortgages and other kinds of loans, and on savings accounts and other kinds of investments, are likely to remain low by historical standards for years to come.  Moving to raise rates is the most important and riskiest decision the Fed has made under the leadership of Ms. Yellen, the Fed’s chairwoman since early 2014. Every other developed nation that has raised rates since the end of the financial crisis has been forced to backtrack as economic conditions proved unable to handle higher rates.

Fed Raises Rates After Seven Years Near Zero, Expects ‘Gradual’ Tightening Path - WSJ: The Federal Reserve said it would end a seven-year experiment with near-zero interest rates by raising its benchmark rate and emphasizing a plan to lift it gradually over the next three years. The move marks a test of the economy’s capacity to stand on its own with less central-bank support to spur continued spending and investment by households and businesses. “The Fed’s decision today reflects our confidence in the U.S. economy,” Fed Chairwoman Janet Yellen said Wednesday in a press conference after a two-day policy meeting. “We believe we have seen substantial improvement in labor market conditions and while things may be uneven across regions of the country, and different industrial sectors, we see an economy that is on a path of sustainable improvement.”  The Fed’s move promises to ripple across the globe. The anticipation of higher rates and stronger growth in the U.S. has driven investors to push up the value of the U.S. dollar. That in turn has hit commodities prices and companies in emerging markets that borrowed heavily in dollars during the low-rate period. A stronger currency is making it harder to pay off those debts.  The Fed leader won a unanimous vote, the capstone on a tumultuous year marked by wavering and internal disagreement about when to move. Fed officials are proceeding with great caution. They said they would raise the benchmark federal-funds rate—an overnight interbank lending rate—from near zero to between 0.25% and 0.5%, and would adjust their strategy as they see how the economy performs. “We have very low rates and we have made a very small move,” Ms. Yellen said to underscore her own caution.

Fed Watch: As Expected - Today, the FOMC voted to raise the target range on the federal funds rate by 25bp. The accompanying statement and the Summary of Economic Projections offered no surprises. That very lack of surprise should be counted as a "win" for the Fed's communication strategy. A little bit of extra direction since September went a long way. The statement again described the economic growth as "moderate." Although there is some external weakness, the domestic economy is solid, hence "the Committee sees the risks to the outlook for both economic activity and the labor market as balanced." The Fed continues to expect that inflation will return to target. On the basis of that forecast and lags in the policy policy process: Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent.  Importantly, the Fed does not believe policy is tight: The stance of monetary policy remains accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation. The Fed currently expect future hikes to occur only gradually: The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. But, this is a forecast not a promise: However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data. No dissents; none of the possible dissenters thought their objections were sufficient to deny Federal Reserve Chair Janet Yellen a unanimous decision on this first hike.

Era ends at Fed with 1st rate hike since 2006. What next?  --   The Federal Reserve’s move to raise its benchmark lending rate marks the end of era, putting in the past a rate that had been anchored around zero since December 2008. The quarter-point hike in the federal funds rate on Wednesday, the first such hike since June 2006, marks the start of a return to economic normalcy.  The Fed’s benchmark rate influences loans as short as three months and as long as three decades. The hike represents the first of an expected slow but steady climb in borrowing costs across the economy over the next few years. It also closes a chapter, where from 2008 until Wednesday, the Fed threw everything but the kitchen sink at the U.S. economy in hopes of staving off a financial collapse and later shorten the time it took to get back to recovery. “The Fed’s decision today reflects our confidence in the U.S. economy, that we believe we’ve seen substantial improvements in labor market conditions,” Federal Reserve Chair Janet Yellen said in a news conference. Aside from holding its benchmark rate near zero, the Fed also purchased trillions of dollars in government and mortgage bonds in a bid to drive down mid-term and long-term borrowing costs. Going forward, it will be gradually more expensive for ordinary Americans to carry debt on a credit card, cost more to borrow to take out a car loan, and even raise the price of getting a mortgage for a new home.

Fed rate rise is first step to rebalance US financial system -- All eyes are focused on the US Federal Reserve. By announcing a 25 basis point rate rise, Janet Yellen, Fed chair, has started weaning the American economy from its addiction to cheap money. Given the recent mixed economic data, economists are divided about the merits of this decision. For a different perspective on the challenge facing the Fed, it is worth looking at another corner of Washington: the Office of Financial Research. Just before the Fed announcement, the OFR published its first Financial Stability Report on the health of US finance. This went largely unnoticed because most voters do not have the faintest idea what the OFR actually does. That is a pity. The OFR was set up after the 2008 crisis as an offshoot of the Treasury to assess financial risk, and its report reveals that several years of ultra-low rates have created a distinctly distorted American financial system. Ms Yellen will need extraordinary skill — and luck — to handle these distortions without sparking another crisis. This week’s market reaction to the Fed might seem impressively calm, but the real test for the wider financial system has barely begun. In finance, there are at least three areas investors need to watch. The first is the fact that the ultra-loose policy has created credit bubbles that could now deflate. Because they have not emerged in the sectors that were at the centre of last decade’s bubble, mortgages and banks, they have attracted less attention. But, as the Bank for International Settlements wrote earlier this month, debt has increased significantly since 2008 in emerging markets. Also, the OFR observed this week: “In our assessment, credit risk in the US non-financial business sector is elevated and rising” — to a point where “higher base rates may create refinancing risks . . . and potentially precipitate a broader default cycle”.

What Does The Fed Raising Interest Rates Mean?  - The Federal Reserve raised the interbank borrowing rate today by one quarter of one percent or 25 basis points. Readers are asking, “what does that mean?” It means that the Fed has had time to figure out that the effect of the small “rate hike” would essentially be zero. In other words, the small increase in the target rate from a range of 0 to 0.25% to 0.25 to 0.50% is insufficient to set off problems in the interest-rate derivatives market or to send stock and bond prices into decline. Prior to today’s Fed announcement, the interbank borrowing rate was averaging 0.13% over the period since the beginning of Quantitative Easing. In other words, there has not been enough demand from banks for the available liquidity to push the rate up to the 0.25% limit. Similarly, after today’s announced “rate hike,” the rate might settle at 0.25%, the max of the previous rate and the bottom range of the new rate. However, the fact of the matter is that the available liquidity exceeded demand in the old rate range. The purpose of raising interest rates is to choke off credit demand, but there was no need to choke off credit demand when the demand for credit was only sufficient to keep the average rate in the midpoint of the old range. This “rate hike” is a fraud. It is only for the idiots in the financial media who have been going on about a rate hike forever and the need for the Fed to protect its credibility by raising interest rates.

FOMC Projections and Press Conference --Statement here. Fed Funds Rate target range increased to 1/4 to 1/2 percent. As far as the "Appropriate timing of policy firming",  participant generally think there will be three to four rate hikes in 2016. The FOMC projections for inflation are still on the low side through 2017.  Yellen press conference here. On the projections, mostly projection for Q4 2015 were just narrowed. ..  Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.  The unemployment rate was at 5.0% in November, so the unemployment rate projection for Q4 2015 was set to 5.0%.  Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.  As of October, PCE inflation was up only 0.2% from October 2014. PCE core inflation was up only 1.3% in October year-over-year.

Here’s How the Fed Actually Raises Interest Rates -- Federal Reserve officials on Wednesday ended a years-long policy of keeping interest rates at or near zero, voting for the first rate hike since 2006 and ending a hotly-debated monetary policy that was meant to keep the American economy afloat in the wake of the financial crisis. But Fed Chair Janet Yellen and her fellow central bankers can’t simply throw a switch that automatically sets interest rates across the economy. Instead, the Fed will rely on two tools to help lift rates into a target range. Think of the Fed as pulling and pushing the elevator up and down, and the cost of money for everyone from consumers to corporations rises and falls as the elevator does. See the animated GIF below for more on how this all works.

Fed May Have To Drain As Much As $1 Trillion In Liquidity To Push Rates 25 bps Higher --It's 2:00:01 pm and the Fed has just announced it will hike rates by 25 bps while using very dovish language to convey that just like "tapering was not tightening" in 2013, so "tightening isn't really tightening", and unleashing a massive buying order. So far so good. But the real question is what does this mean for post-kneejerk market dynamics, and the one most important variable of all: liquidity. The all too crucial, and overdue, answer to this question will be delivered when the Fed releases its "implementation note" concurrently with the FOMC statement which should explain all the nuances of just how the Fed will adjust the IOER-Reverse Repo piping that will be crucial to pull of the rate hike in practice, something which has been stumping  Two weeks ago, we cited repo-market expert E.D. Skyrm who calculated that moving general collateral higher by 25bps would require the Fed draining up to $800 billion in liquidity: "In 2013 on my website, I calculated that QE2 moved Repo rates, on average, 2.7 basis points for every $100B in QE. So, one very rough estimate moved GC 8 basis points and the other 2.7 basis points per hundred billion. In order to move GC 25 basis points higher, in a very rough estimate, the Fed needs to drain between $310B and $800B in liquidity." That may be conservative.

Fed Reveals Rate Hike "Plumbing" Details: Removes Cap On Reverse Repos, Limits Each Counterparty To $30 Billion -- Perhaps even more important than the actual rate hike announcement, the one statement the market was particularly focused on was the Fed's "implementation note", which lays out the Fed's thought process on how it will actually raise rates in order to maintain the Fed Funds in the 0.25%-0.50% range. What it reveals is that in addition to removing the daily limit on aggregate borrowings through its overnight reverse repurchase facility, previously set at $300 billion (recall that according to Citi, the Fed may need to drain up to $1 trillion in excess liquidity to effect the 25 bps hike), it will have a per counterparty limit of $30 billion per day, which may or may not be enough.Separately, the Simon Potter's desk at the NY Fed announced "that the Desk anticipates that around $2 trillion of Treasury securities will be available for ON RRP operations to fulfill the FOMC’s domestic policy directive." What is missing from the analysis is how the Fed will approach the fact that securities pledged to the Fed remain outside of the traditional repo pathway, and thus the liquidity shortage among the treasury market is likely to continue if not worsen. Most of these are in line with expectations. Now it remains to be seen if these theoretically necessary measures will also be practically sufficient.

Why the Fed Is WRONG About Interest Rates  -- Richard Werner – an economics professor and the creator of quantitative easing – says that it’s a myth that interest rates drive the level of economic activity. The data shows that the opposite is true: rates lag the economy. Economics prof Steve Keen – who called the Great Recession before it happened – points out today in Forbes that the Fed’s rate dashboard is missing crucial instrumentation: The Fed will probably hike rates 2 to 4 more times—maybe even get the rate back to 1 per cent—and then suddenly find that the economy “unexpectedly” takes a turn for the worse, and be forced to start cutting rates again. This is because there are at least two more numbers that need to be factored in to get an adequate handle on the economy: 142 and 6—the level and the rate of change of private debt. Several other numbers matter too—the current account and the government deficit for starters—but private debt is the most significant omitted variable in The Fed’s toy model of the economy. These two numbers (shown in Figure 2) explain why the US economy is growing now, and also why it won’t keep growing for long—especially if The Fed embarks on a period of rate hiking.

The Fed’s New “Operation Twist”: Twisted Logic for Bank Profits at the Expense of the Real Economy - naked capitalism - Yves here.  I hope you’ll circulate this article widely. It explains why the Fed’s effort to depict interest rate increases as necessary given the state of the “recovery” and the prospects for inflation are obviously false. The rate rises are all about bolstering financial firm profits, as if banks have a right to them. In other words, this is a continuation of the process set forth in Simon Johnson’s landmark 2009 article, The Quiet Coup. From the overview: The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets…recovery will fail unless we break the financial oligarchy that is blocking essential reform.  One could imagine a more honest case for rate increasesL that sustained negative real yields promotes speculation (witness the proliferation of Silicon Valley unicorns), hurts retirees and savers, and puts the viability of long-term investors like life insurers and pension funds at risk. But given how weak this recovery is, and that deflationary pressures are strong, any rate increases should be accompanies by more fiscal spending. Yet the Fed has not said a peep on that front and instead hope the confidence fiary will come to the rescue.  The fact that the Fed is embarking on a policy that will perpetuate the financial system being outsized relative to the real economy, particularly when more and more academic studies confirm that that is negative for growth, confirms that the Fed needs fundamental governance changes to reduce bank influence and increase democratic accountability. A place to start might be having all the regional Fed presidents be nominated by the President and subject to Congressional approval.

Fed Follies - Paul Krugman  - No, I don’t mean the decision to raise rates, although nothing I’ve seen changes my view that it’s a bad idea. I mean the desperate efforts to say something new about today’s move. I understand that there are strong journalistic incentives here, but it really is trying to squeeze blood from a stone.After all, this move was completely telegraphed in advance; I guess there was some small chance that the Fed would wait, but really very little. Longer-term bond rates barely moved, showing that there was very little news.And it will be quite some time before we have any evidence about whether the Fed’s judgement of the economy’s trajectory was right. (I think this was an ex ante mistake even if it turns out OK ex post, but it’s still interesting to see how it goes.) We’re talking months if not quarters, and it may take years.I guess even the fact that the Fed succeeded in communicating its intentions is a kind of news story. But it’s pretty thin gruel.

New Paper on the Three Ways the Fed Is Failing Us -  I recommend taking a look at a new paper by Carola Binder titled Rewriting the Rules of the Federal Reserve for Broad and Stable Growth. Binder argues that the Federal Reserve faces three major problems going forward: its institutional bias against full employment, its questionable ability to enforce regulations on the financial sector, and conflicts of interests built into its basic governance model. That last point is a take on “Audit the Fed” that is not designed to hamstring policy, as the current measures are, but is instead approaches the issue from the left. Binder’s paper develops each of these three points in detail – here’s a quick summary. Full employment is important for long-term reduction of inequality. Periods of high unemployment not only do damage to workers who lose their jobs and see their skills atrophy, but also cause those who keep their jobs to experience weaker wage growth. This is especially hard on those with lower incomes, who see larger cuts in working hours during periods of high unemployment. If full employment is so important, why has the Fed given it a lower priority than fears about “credibility” and inflation that is nowhere to be seen? Binder walks through the history of how we got here. It’s important to remember that the current approach isn’t based on the empirical literature. There is no evidence that allowing, for instance, higher inflation in the single-digit range is harmful to growth. As it looks like the economy will be weak, and interest rates low, for the foreseeable future, this is a problem that won’t go away on its own. And as she concludes, “excessive emphasis on low and stable inflation at the expense of a strong labor market is unwarranted. Privileging low inflation over maximum employment means that more people are likely to experience unemployment, underemployment, or stagnant wages.”

The Fed’s Rate Hike & Recession Risk - The Federal Reserve yesterday raised its target range for the Fed funds rate by 25 basis points to 0.25% to 0.50%–the first hike in nine years. The reasoning, as the Fed explained, is the “considerable improvement in labor market conditions this year” and the outlook for inflation “will rise, over the medium term, to its 2 percent objective.” But the economic data is mixed, as yesterday’s sharply divergent US macro updates remind. Housing starts rebounded smartly in November, but industrial production tumbled 0.6% last month—the biggest monthly decline in more than three years. As a result, output is now contracting by more than 1% a year. The obvious question: does the resumption of monetary tightening coincide with the start of a new recession? No, based on the numbers available at the moment. But the latest run of data looks worrisome… again. The labor market betrays no sign of trouble, and that may be enough to keep the business cycle in the positive column. There are other encouraging signs as well, including robust 4%-plus year-over-year growth in real personal income ex-transfer receipts. But the latest dip in the Philly Fed’s ADS Index—a quasi real-time business-cycle benchmark—comes at an awkward moment. Indeed, the symbolism of a rate hike at a point when the US economy appears to be stumbling doesn’t inspire much confidence. After yesterday’s round of macro updates, the ADS Index was revised down to a weak -0.58. That’s still above the tipping point of -0.80 that marks the start of recessions, based on the San Francisco Fed’s analysis (“Diagnosing Recessions”). Nonetheless, the latest slide in this index in the current climate raises new questions about the wisdom of yesterday’s policy change. Translating the ADS data into probability estimates of recession risk via a probit model reveals a sharp jump in macro risk after yesterday’s updates. The implied probability that an NBER-defined recession for the US has started this month jumped to roughly 20%–the highest since early 2013.

Goldman Sachs on Fed Funds rate: "Fairly easy path to a second hike in March" -- A few excerpts from a research piece by Goldman Sachs economists: A Road Map to Hikes in March and Beyond  The FOMC raised its target range for the federal funds rate to 0.25-0.50% this week, shifting attention to the pace of subsequent hikes. While the median dot indicates a further 100bp increase in the funds rate in 2016, implying a second hike in March, the market is skeptical. ... We see a fairly easy path to a second hike in March. We expect growth to remain above trend and employment gains to remain well above the "breakeven" rate. Most importantly, inflation is likely to rise by March as sharp declines in energy and health care prices drop out of the year-on-year calculation, supporting the Fed's expectation that inflation will pick up as transitory pressures fade.... We find that ... the odds of a March hike are about 80% and the odds of four hikes by year-end are about 66%. Most analysts expect no change at the January FOMC meeting, but another rate hike in March seems likely.  Note that the effective funds rate was 0.37% yesterday (in the new range).

Bernanke says Fed likely to add negative interest rates to recession-fighting tool kit - — The Federal Reserve should consider using negative rates to counter the next serious downturn, said former chairman Ben Bernanke in an interview with MarketWatch. “I think negative rates are something the Fed will and probably should consider if the situation arises,” Bernanke said. Read full interview: Bernanke: I never expected 0% rates to last so long Former Fed Vice Chairman Alan Blinder urged the Fed during the financial crisis to set negative interest rates for overnight deposits — essentially charging banks a fee to park funds at the central bank. Blinder argued this would force banks to find more productive uses for the money. Bernanke and his colleagues opted not to push interest rates below zero, worried that the costs outweighed the benefits. In particular, there was a concern that money-market funds wouldn’t be able to recover management fees. But experience in Europe has shown this fear was unfounded. In the region, the European Central Bank, the Swiss National Bank and the central banks of Denmark and Sweden have deployed negative rates to some degree.

David Stockman Warns "Dread The Fed!" - Sell The Bonds, Sell The Stocks, Sell The House - There is going to be carnage in the casino, and the proof lies in the transcript of Janet Yellen’s press conference. She did not say one word about the real world; it was all about the hypothetical world embedded in the Fed’s tinker toy model of the US economy. Yes, tinker toys are what kids used to play with back in the 1950s and 1960s, and that’s when Janet acquired her school-girl model of the nation’s economy. But since that model is so frightfully primitive, mechanical, incomplete, stylized and obsolete, it tells almost nothing of relevance about where the markets and economy now stand; or what forces are driving them; or where they are headed in the period just ahead. In fact, Yellen’s tinker toy model is so deficient as to confirm that she and her posse are essentially flying blind. That alone should give investors pause—-especially because Yellen confessed explicitly that “monetary policy is an exercise in forecasting”. This stupendously naïve old school marm still believes the received Keynesian scriptures as penned by the 1960s-era apostles James (Tobin), John (Galbraith), Paul (Samuelson) andWalter (Heller). But c’mon.Those ancient texts have no relevance to the debt-saturated, state-dominated, hideously over-capacitated global economy of 2015. They just convey a stupid little paint-by-the-numbers simulacrum of what a purportedly closed domestic economy looked like even back then.

Key Measures Show Inflation close to 2% in November -- The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning: According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.1% annualized rate) in November. The 16% trimmed-mean Consumer Price Index rose 0.1% (1.4% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.  Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers was unchanged (0.3% annualized rate) in November. The CPI less food and energy rose 0.2% (2.2% annualized rate) on a seasonally adjusted basis. Note: The Cleveland Fed has the median CPI details for November here. Motor fuel was down 26% annualized in November.

Private Debt Decelerates in 2015Q3, Real U.S. GDP Follows -- Previously, we established that there is a rather strong correlation between changes in the acceleration of nominal private sector debt in the U.S. and the direction of growth for the nation's real GDP growth rate. In a nutshell, we found that "nearly 88% of periods in which the trailing twelve month average of private debt acceleration declined or was negative occurred when the U.S.' real GDP growth rate was falling", indicating that changes in the acceleration of private debt is a good predictor of the direction of GDP growth.   Why such a strong correlation between nominal private debt and real GDP? Unlike money borrowed by government entities, when people or businesses take out loans in the private sector of the economy, they do so only when they can reasonably anticipate that they will be able to generate the income or revenue needed to pay their creditors back over the terms of their loans. If they anticipate that they will have a hard time doing that going forward, they will avoid taking on debt, and vice versa - they will increase the rate of their borrowing if they anticipate having an easier time paying it back.  With the Federal Reserve having released its flow of funds data through the end of the third quarter of 2015 in the past week, we can now introduce our chart showing our calculated acceleration rate for private sector debt in the U.S. and its trailing year average against the backdrop of periods of falling GDP growth rates, recessions and the Federal Reserve's various Quantitative Easing (QE) programs in the period from Janaury 2006 through September 2015.  We see that in the third quarter of 2015, the acceleration of private debt in the U.S. remained negative, declining slightly from the previous quarter. Correspondingly, the BEA's second estimate of real GDP for the quarter indicates that its growth rate is likewise falling.

Foreigners Sell A Record $55.2 Billion In US Treasuries In October - After several months of significant reserves liquidations by China (specifically by its Euroclear proxy "Belgium") which tracked the drop in China's reserves practically tick for tick, in October Chinese+Belgian holdings were virtually unchanged according to the latest TIC data, as China moderated its defense of its sliding currency. Of course, putting this in context still shows a China which has sold $600 billion of US paper since 2014, as this website was first to note over half a year ago. And while we expect a prompt resumption of Treasury selling in the coming months following China's recent aggressive devaluation of its currency, what was more notable in today's TIC data was the consolidated total change of all foreign US Treasury holdings. As shown in the chart below, following an increase of $17.4 billion in September, foreign net sales of Treasuries hit an all time high of $55.2 billion, surpassing the previous record of $55.0 billion set in January. In absolute terms, October's total foreign holdings by major holders declined to $6,046.3 trillion the lowest since the summer of 2014. What is the reason? There are two possible explanations, the first being that foreigners are unloading US paper (ostensibly to domestic accounts) ahead of what they perceive an imminent Fed rate hike which would pressure prices lower, or more likely, the ongoing surge in the dollar and collapse in commodity prices continues to pressures foreign reserve managers to liquidate US  Treasury holdings as they scramble to satisfy surging dollar demand domestically and unable to obtain this much needed USD-denominated funding, are selling what US assets they have. Should this selling continue or accelerate in the coming months and if it has an adverse impact on TSY yields, it may also force the Fed's tightening hand if, as some expect, the liquidation of foreign reserves becomes a self-fulfilling prophecy and leads to a material drop in Treasury prices.

Current Account December 17, 2015: Highlights: The nation's current account deficit widened sharply in the third quarter, to $124.1 billion from a revised $111.1 billion in the second quarter. This is the widest gap of the recovery, since the troubles of fourth-quarter 2008. A greater deficit in goods trade, at $0.8 billion in the quarter, is the smallest factor in the widening. A narrowing in the surplus for primary income, at $6.6 billion, and a widening in the gap for secondary income, at $5.8 billion, are the main factors behind the quarter's deficit. The gap relative to GDP rose 1 tenth in the third quarter to a still manageable 2.7 percent.

Much to wrap up in Washington before the holidays - — The White House and top lawmakers want to wrap up a year's worth of budget work and let Congress adjourn this coming week until 2016. There are two major bills: a $1.1 trillion government-wide spending measure, and a broad renewal of expiring tax breaks for businesses and individuals that could cost hundreds of billions of dollars over the next decade. What's at stake:

  • • Spending bill —  With Republicans dominating bill details, the departments of Veterans Affairs, Justice and Defense will get the healthiest increases, while Housing and Urban Development and the Environmental Protection Agency won't do as well. Congress approved legislation Friday financing the government through Wednesday, giving lawmakers time — they believe — to craft and approve a final deal.
  • • Environment and energy — Republicans want to block new Obama administration emissions standards for power plants; thwart a rewrite of clean-water rules; prevent curbs on hydraulic fracturing, or fracking, on federal lands; and limit new ozone regulations. They also want to end the four-decade-old ban on U.S. oil exports. In exchange, Democrats want a permanent extension of tax breaks for solar and other alternative energy sources. This issue could play out in the spending measure or the tax bill.
  • • Foreign relations and security — Some lawmakers want to block Obama from easing travel restrictions to Cuba, part of administration efforts to improve ties with the communist-run nation.
  • • Tax bill — This measure would renew about 50 expiring tax breaks for individuals and businesses. A bare-bones version could cost around $100 billion over the next decade, but potential add-ons could swell its cost to $700 billion or more. It would be paid for by government borrowing, meaning federal deficits would grow.
  • • Tax breaks — Republicans would like to permanently renew expiring tax breaks for business costs for research and development and for purchasing equipment. Democrats want to make permanent some tax credits for college students and families with children, and earned income tax credits for lower-earning married couples and families with more than two children. Without congressional action, those tax breaks diminish in 2018.

House Reaches Accord on Spending and Tax Cuts -  — Republican and Democratic negotiators in the House clinched a deal late Tuesday on a $1.1 trillion spending bill and a huge package of tax breaks.Legislative drafters, racing a midnight deadline, met the time limit for issuing the tax package but apparently missed it for the spending bill. That could push back a vote on the House floor by one day, until Friday. The late-hour tension emphasized the deep disagreements over an array of policy provisions that have left weeks of negotiations tinged with acrimony. Since the Republicans took back control of the House in 2011, a majority in the party has routinely opposed compromise budget and spending measures, forcing party leaders to rely on Democrats for votes to clear the bills. All signs indicate that the same dynamic is playing out now. But the House Democratic leader, Representative Nancy Pelosi of California, has voiced angry opposition to the huge package of tax breaks, saying it would unfairly benefit big business. And even Tuesday night, some Democrats in the House leadership said Ms. Pelosi was on the verge of turning against the omnibus spending measure because of her opposition to a Republican provision that would lift the 40-year ban on exports of crude oil from the United States. Republican congressional leaders and the White House reached a budget accord in late October that set top-line spending levels for 2016 and 2017. Throughout Tuesday, major components of the spending legislation appeared to be falling into place, including a tentative agreement to alter major provisions of the Affordable Care Act, delaying a planned tax on high-cost health insurance plans and suspending a tax on medical devices for two years.

Text of the Consolidated Appropriations Act, 2016 (PDF) House of Representatives.

Paul Ryan’s first deal is just like John Boehner’s old ones.: When Paul Ryan was handed the speaker’s gavel in late October, he pledged to restore normal order to the People’s House and eliminate the sort of backroom deals that rank-and-file members complain are shoved down their throats at the 11th hour. So, late Tuesday night, Ryan unveiled a few thousand pages of consequential tax, spending, and regulatory legislation costing roughly $2 trillion and gave Congress and the public two whole days to review everything. . To be fair to Ryan, the buzzer-beating legislating has more to do with the workload and deadlines John Boehner left him than anything he did wrong. The agreement Ryan reached with fellow congressional negotiators also looks much like one Boehner would have reached: Each side scores some points, but Republican congressional majorities again will fail to deliver a high-profile, base-pumping, ideological victory over some nefarious aspect of the “Obama agenda” on which conservatives had drawn a red line. Will this land Ryan in the same hot water that eventually cooked Boehner? He’ll get a pass, for now.  The two towering paper stacks are the 2016 omnibus appropriations package, which funds the government through next September, and a “tax-extenders” bill that, well, extends (and in many cases makes permanent) a bunch of tax breaks that were set to expire. Though they will be voted on separately, they were negotiated together. The omnibus is more favorable to Democrats, and the tax extenders are more favorable to Republicans.

Congress sleds through spending, tax bills with something for everyone -- From the frivolous to the serious, there’s something for everyone in the massive $1.1 trillion government spending bill and a separate $680 billion tax extenders package that Congress is expected to vote on this week. Christmas could come a few days early for sledding enthusiasts in Washington, D.C., thanks to language tucked into the 2,000-plus-page spending bill that would lift a ban on sledding on Capitol Hill. The provision dates back to the Sept. 11, 2001, terrorist attacks and an 1870s rule that the Capitol grounds and terraces not be “used as playgrounds.” Sledders in the district committed acts of civil disobedience – and fun – last winter when they took to sled, discs, trays, or whatever they could find, and hurled themselves down the hill after snow storms. The provision in the spending bill urges the Capitol Police not to enforce the no-sled zone. Proving that everyone’s an art critic, lawmakers are apparently fed up with scrims – wraps placed around buildings to hide unsightly construction or renovation projects. The spending bill dictates that “None of the funds made available by this Act may be used for scrims containing photographs of building facades during restoration or construction projects.."

Why deficit hawks are missing in action on budget, tax bills - Congress is about to add hundreds of billions of dollars to the national budget deficit, yet the “deficit hawks” on Capitol Hill are largely silent. “Maybe they should be on the endangered species list,” quipped House minority leader Nancy Pelosi, in a briefing with reporters last Friday.  End-of-year, must-pass monster spending bills are always an ugly business. Both sides say they deplore the practice. But this year’s double whammy – a $1.1 trillion omnibus spending bill and a tax bill expected to cost $780 billion over the next 10 years – is arguably worse. The House passed the tax bill on Thursday, 318 to 109, and the spending bill on Friday, 316 to 113. The Senate passed both measures Friday, 65 to 33. “The deal not only adds to the debt, it also squanders most of the hard-earned savings from either the ‘fiscal cliff’ deal ($800 billion in revenue) or the sequester (more than $900 billion in spending cuts),” said the nonpartisan Committee for a Responsible Federal Budget, in a statement.  Many of the lawmakers who have spoken out in the past for fiscal restraint “are just being silent,” says Maya MacGuineas, CRFB president and a longtime advocate for lower federal deficits. “There is no leadership on the issue.”

Lurking Within That Ominous, Omnibus Spending Bill - Bill Moyers - There is an unwritten rule in Congress that before you do even a little for the working class you must do a lot for the donor class. So while the $1.1 trillion — yes, that’s a “t” — budget bill now winding its way to passage contains some tax breaks for low-income workers, in reality, it’s a bonanza for Big Business.Congressional leadership actually split the bill in two with one devoted to spending and the other devoted to cuts. “That way,” Paul Singer writes in USA Today, “Republican conservatives can vote against the spending bill, Democratic liberals can vote against the tax bill, and both bills still pass and a government shutdown is averted.”Let’s start with the fossil fuel industry. For 40 years, Republicans and some Democrats have been demanding an end to the ban on crude oil exports. The omnibus bill lifts that ban just as the world community meeting in Paris agreed that emissions released from fossil fuels must be lowered if the planet is to escape incineration. Selling off cheap oil abroad is — you should excuse the expression —like throwing gasoline on the fire. But in Congress, the energy giants have money to burn, and that cash speaks louder than threats to the earth or its inhabitants. In the 113th Congress (2013 and 2014) the fossil fuel industry spent $326 million and change on lobbying and political campaigns. In return, they received government favors totaling $33.7 billion. Do the math: According to the advocacy group Oil Change International, for every dollar the oil, gas and coal industry spends on influencing Washington, it gets back $103 in subsidies. With this new spending bill, expect another gusher of donations to be coming in any day now.

Congress snuck a surveillance bill into the federal budget last night - After more than a year of stalemate, Congress has used an unconventional procedural measure to bring a controversial cybersurveillance bill to the floor. Late last night, Speaker of the House Paul Ryan (R-WI) announced a 2,000-page omnibus budget bill, a last-minute compromise necessary to prevent a government shutdown. But while the bulk of the bill concerns taxes and spending, it contains a surprise 1,729 pages in: the full text of the controversial Cybersecurity Information Sharing Act of 2015, which passed the Senate in October.. CISA has been widely criticized since it was first introduced to congress in 2014, with Sen. Ron Wyden (D-OR) calling it "a surveillance bill by another name." The bill would make it easier for private sector companies to share user information with the government and other companies, removing privacy and liability protections in the name of better cybersecurity. But critics like Wyden say removing those protections would turn internet backbone companies into de facto surveillance organs, with no incentive to protect users' privacy.

House Passes $1.15 Trillion Spending Bill: Here Is What's In It --Moments ago, the House of Representatives just passed the $1.15 trillion spending bill that includes a $680 billion package of tax-break extensions, in a 316 to 113 vote, and will now move to the Senate, where its passage is likewise assured and will be signed by the president over the next few days. For those wondering what are the main components of the spending bill, here is a quick summary.From Goldman Sachs.

  • 1. A broad year-end spending and tax deal has been reached.
  • 2. We expect this legislation to become law. While each party opposes certain aspects of the deal, overall we expect there to be sufficient support to get majorities in both chambers.
  • 3. The bill would provide a small fiscal boost in 2016. As the bill is over 2000 pages long and formal budget estimates of the spending totals and tax provisions have not yet been released, we will wait to assess the fiscal impact.
  • 4. The repeal of oil export ban and extension of renewable incentives made it into the final version. The ban on US crude oil exports would be repealed, and the administration would be prohibited from restricting exports except in national emergencies and similar circumstances. Also, as part of the agreement on oil exports, the production tax credit (PTC) for wind power installations would be extended through 2019, with a phase-down from 2017 through 2019. The investment tax credit (ITC) for solar installations would be extended for three years, through 2019, at the current rate and would then be phased down through 2021, expiring in 2023 (note that the deadline has also been changed, so that it now applies to projects where construction has started by the expiration date, rather than being put into service by expiration).
  • 5. Delay in ACA-related taxes slightly more generous than expected. Implementation of the “Cadillac tax” (40% excise tax on high-cost employer-sponsored health premiums) would be delayed from 2018 to 2020.
  • 6. Real estate provisions largely as expected, but with relief for pending transactions.
  • 7. Permanent R&D credit and small business expensing, bonus depreciation extended four years.
  • 8. Stimulus-related personal tax incentives were made permanent. Enhanced refundable tax credits for low-income earners originally enacted in the 2009 stimulus legislation have been scheduled to expire in 2017, reverting back to less generous levels. The bill would make the enhanced versions of the child tax credit (CTC), earned income tax credit (EITC), and American opportunity tax credit (AOTC) permanent.
  • 9. Miscellaneous items of potential interest. Income from gains on timber sales for C corporations (i.e., not REITs) would be taxed at 23.8% in 2016. Heating and air-conditioning would become eligible for small business expensing (Section 179), increasing the tax incentive to install new systems.

Congress clears $1.8 trillion tax and spending bills - Congress on Friday approved a $1.1 trillion spending bill with a pair of overwhelming bipartisan votes, capping a frenzied final few weeks of legislating before lawmakers head home for the holidays and gear up for the 2016 election year. The House moved first, passing the government funding bill on a 316-113 vote. The Senate followed suit just a few hours later, clearing the legislation —which also included a $680 billion tax package that the House cleared on Thursday — on a 65-33 tally. Story Continued Below “This legislation helps our economy, helps our national security, and strikes more blows to a partisan health law that hurts the middle class,” said Senate Majority Leader Mitch McConnell (R-Ky.) on Friday morning. “I think it’s legislation worth supporting.” Speaker Paul Ryan (R-Wis.) also praised the package shortly after the House passed it. "This bipartisan compromise secures meaningful wins for Republicans and the American people, such as the repeal of the outdated, anti-growth ban on oil exports," Ryan said in a statement. "The legislation strengthens our military and protects Americans from terrorist threats, while limiting the overreach of intrusive government bureaucracies like the IRS and the EPA."

Obama signs $1.1 trillion budget compromise - US News: (AP) — President Barack Obama has signed a $1.1 trillion measure that will boost spending for defense and non-defense programs over the coming year. Republican leaders and the White House have said they feel good about the outcome and have described the deal as the best they could do under divided government. The president fended off any array of riders that included efforts to halt federal money for Planned Parenthood and place greater restrictions on Syrian refugees. Republicans secured an end to the ban on most crude oil exports. Congress also extended $680 billion in tax cuts for businesses and individuals, with the White House in particular touting the tax breaks for the wind and solar industry. The signing of the budget bill caps months of negotiations and averts a government shutdown.

The Surprising Winner Of Congress’ Budget Deal - There has been a lot of outcry about Congress repealing the oil export ban in the new budget bill, but two alternative forms of energy just got big boosts.  The solar Investment Tax Credit, which has helped propel the solar industry in the United States to record growth over the past few years, has been extended. Wind, too, will get an extension.  In a call with reporters Friday, the head of the Solar Energy Industries Association said that extending the credit would provide certainty for the industry and allow it to grow to 5 percent of the nation’s electricity supply by 2020.   “We expected a significant drop off in 2017 if the ITC was not extended,” the group’s president, Rhone Resch, said. Under the extension, the industry will enjoy a 30 percent tax credit for both residential and commercial solar installation for the next four years, before it steps down to 26 percent for 2020 and 22 percent for 2021. Resch said that costs are expected to drop by 40 percent by then, allowing solar to continue to be a low-cost option for states looking to meet the requirements of the Clean Power Plan and individuals looking to lower electricity costs.  The group estimates that by the end of 2020, there will be about 100 gigawatts (GW) of solar capacity installed in the United States, about four times as much as there is now.

Spending bill bars IRS and others from forcing political disclosure: — The $1.1 trillion spending deal Congress released Wednesday would bar the Internal Revenue Service from completing controversial new regulations to define and potentially crack down on the political activities of non-profit groups. The 2,009-page bill also would prohibit the Securities and Exchange Commission from trying to force public companies to disclose their political activities to shareholders and the public. Campaign-finance watchdog groups slammed the measures, tucked into the last-minute spending bill, as a push by the Republican-controlled Congress to limit disclosure of corporate-backed political spending that they argue threatens to overwhelm the next year’s presidential contest. Non-profit groups increasingly are active in elections, but do not have to disclose their donors' identities. The provisions will “allow hundreds of millions in dark money to continue to be laundered into elections,” said Fred Wertheimer, president of Democracy 21, a campaign watchdog group.

Congress Just Passed The Second Patriot Act And Nobody Noticed: How CISA Became The Law -- Back in 2014, civil liberties and privacy advocates were up in arms when the government tried to quietly push through the Cybersecurity Information Sharing Act, or CISA, a law which would allow federal agencies to share cybersecurity, and really any information with private companies, and vice versa, including the NSA, "notwithstanding any other provision of law." The most vocal complaint involved CISA’s information-sharing channel, which was ostensibly created for responding quickly to hacks and breaches, and which provided a loophole in privacy laws that enabled intelligence and law enforcement surveillance without a warrant. Ironically, in its earlier version, CISA had drawn the opposition of tech firms including Apple, Twitter, Reddit, as well as the Business Software Alliance, the Computer and Communications Industry Association. In April, a coalition of 55 civil liberties groups and security experts signed onto an open letter opposing it. In July, the Department of Homeland Security itself warned that the bill could overwhelm the agency with data of “dubious value” at the same time as it “sweep[s] away privacy protections.” Most notably, the biggest aggregator of online private content, Facebook, vehemently opposed the legislation however a month ago it was "surprisingly" revealed that Zuckerberg had been quietly on the side of the NSA all along as we reported in "Facebook Caught Secretly Lobbying For Privacy-Destroying "Cyber-Security" Bill."

US Air Force reveals $3bn drone expansion plan - Doubling the number of pilots and support staff and expanding to more bases around the US are two parts of the Air Force’s plan to meet the Pentagon’s goal of expanding drone operations. The $3 billion wish list still needs congressional approval.  The plan was announced on Thursday, after months of soliciting feedback from the USAF’s drone pilots and support staff, who have complained about being overworked and underappreciated. It envisions adding 75 MQ-9 Reaper drones to the current fleet of 175 Reapers and 150 MQ-1 Predators, increasing the number of squadrons from eight to 17, and adding up to 3,500 new pilots and support staff, reported the Los Angeles Times. Another reason for the expansion is the rising need for surveillance flights, according to General Herbert “Hawk” Carlisle, head of USAF’s Air Combat Command (ACC), which oversees drone operations. “Right now, 100% of the time, when a MQ-1 or MQ-9 crew goes in, all they do is combat,” said Carlisle. “So we really have to build the capacity.” Another part of the plan would see the command structure in the largely improvised drone program brought in line with the more traditional chain of command within the USAF.

The Navy’s New $362 Million Ship Needs a Tow to Get Home - Yahoo News: The USS Milwaukee, an advanced littoral combat ship and the most recent vessel launched by the U.S. Navy, lasted less than three weeks in the water before a problem involving metal filings in its lubrication oil caused it to suffer a “complete loss of propulsion.” The $362 million ship had to be towed into port for repairs.The Milwaukee, a Freedom-class LCS, was commissioned in Milwaukee on November 21. According to Navy Times, the expensive vessel began suffering problems with its propulsion system as it began its lengthy journey to its eventual home port in San Diego. The problems became acute late last week as the ship moved down the eastern seaboard after stopping in Halifax, Nova Scotia. On Friday the ship suffered an “engineering casualty” and had to be towed into port at Little Creek, Virginia.

Trump Slams Hillary's "Stupid Policies" That Have "Killed Hundreds Of Thousands" Having disposed of Saudi's "dopey, daddy's boy" Prince bin Talal, Donald Trump has turned his attention back to domestic affairs, taking Hillary Clinton head on. With some of his most heated comments yet, The Hill reports, the Republican presidential front-runner is pinning blame for the Syrian civil war and the rise of the Islamic State in Iraq and Syria (ISIS) on Hillary Clinton. “She is the one that caused all this problem with her stupid policies,”Trump said on “Fox News Sunday.” “You look at what she did with Libya, what she did with Syria.”  “You look, she was truly, if not the, one of the worst secretary of States in the history of the country,” he added. “She talks about me being dangerous; she’s killed hundreds of thousands of people with her stupidity.”

Labor Advisory Committee Report on TPP Synthesizes Everything Wrong About the Trade Deal -- David Dayen -- The U.S. Trade Representative’s Office has been maligned for its network of Trade Advisory Committees, allegedly “independent” counsel for trade agreements. The Washington Post did the best work on the Advisory Committees back in February of last year, showing that 85 percent of the cleared advisors (meaning cleared to read the text of trade agreements as they are being negotiated) either worked directly for private industries or their trade groups. But there’s another, more obscure group called the Labor Advisory Committee. Its 19 members are all the heads of major labor unions . And like all Advisory Committees, they are required by law to write a report to Congress expressing their opinions about any finalized trade agreement. That means we now have this 121-page document, giving labor’s full argument against the TPP, from the people who have been following it from the inside for several years.  It gets off to quite a start in the first words of the executive summary: On behalf of the millions of working people we represent, we believe that the TPP is unbalanced in its provisions, skewing benefits to economic elites while leaving workers to bear the brunt of the TPP’s downside. The TPP is likely to harm the U.S. economy, cost jobs, and lower wages.

Don’t Be Misled; The TPP Is Still Coming Full Steam --Recently there have been news reports that Republicans are going to delay TPP until after the 2016 elections. Do not be misled; this is a bargaining ploy. They want the Obama administration to make “side agreements” that give corporations even more. We have to keep up the fight, and keep getting the word out. People opposed to the Trans-Pacific Partnership (TPP) “trade” agreement have recently had their hopes lifted by reporting that Senate Majority Leader Mitch McConnell has said that perhaps President Obama should avoid bringing TPP up for a vote before the elections. But note the reasons for Republican objections. The Washington Post, “McConnell warns that trade deal can’t pass Congress before 2016 elections“: But McConnell, who said Thursday that he has relayed his concerns to Obama, is joined in his questioning of the deal by Sen. Orrin G. Hatch (R-Utah), the Senate Finance Committee chairman, who was also a key supporter of the fast-track legislation. They have raised particular concerns about provisions related to tobacco and pharmaceutical companies.[. . .] McConnell has balked over a provision that would bar tobacco companies from accessing an international tribunal established to settle disputes between TPP nations and multinational corporations seeking damages for profits lost because of changes in laws — stricter public health regulations on cigarettes, for example. Hatch has been concerned about provisions that would offer pharmaceutical companies that develop next-generation biologic drugs about eight years of protections for intellectual property, four years fewer than is currently available under U.S. laws.

8 Terrible Things About the Trans-Pacific Partnership -  In October, President Obama hailed the proposed Trans-Pacific Partnership (TPP) as “the most progressive trade deal in history.” But progressive public-interest organizations say that the final text, the fruit of seven years of secretive trade talks between the United States and 11 other Pacific Rim countries, dashed even their low expectations. The deal not only continues most of the troubling features of trade agreements since NAFTA but also breaks worrisome new ground. Like most recent international economic agreements, the TPP only glancingly resembles a classic trade deal, concerned mainly with tariffs and quotas. Rather, like the WTO agreements or NAFTA, it is an attempt to set the rules of the global economy to favor multinational corporations over everything else, trampling on democracy, national sovereignty and the public good. The more than 600 corporate lobbyists who had access to the draft texts used their insider status to shape the deal, while labor unions, environmentalists and others offered testimony from outside, with little impact.  In June, with the help of GOP leaders, Obama very narrowly won “fast-track” authority on the deal, restricting Congress to an up-or-down vote, with no amendments. He would no doubt like that vote soon. Repudiating the TPP could become a campaign talking point across party lines. Already, all three Democratic presidential candidates and most of the Republicans have come out in opposition to it. But Congress has never rejected a trade agreement under fast-track authority, and some TPP opponents suspect that the administration gave a small group of Democrats a pass to vote no on fast track as long as they pledged to vote yes on the final agreement if needed. This is likely to be a close fight. To inform that fight, we’ve asked experts to explain, in plain English, some of the deal’s most alarming implications.

The 1% Versus The 99%: Realignment, Repression Or Revolution -- The richest 20 Americans now own as much wealth as the country’s poorest 152 million people combined. That is just one of the findings of noted inequality scholar and author Chuck Collins’s most recent report, “Billionaire Bonanza, The Forbes 400 and the Rest of Us.” In a wide-ranging interview, which will be available in its entirety as a podcast tomorrow, Collins likened the current situation to the “Gilded Age,” the time just before the turn of the 20th century, when there was a similar accumulation of wealth at the top and political power was concentrated in the hands of a few rich men. And Americans are slowly realizing that the extreme accumulation of wealth at the very top is hurting their own prospects.  But grassroots efforts to redress economic inequality must contend with the political power that comes with great wealth. Wages have now been stagnant for three decades and the median wealth of Americans has actually declined since 1990. At the same time, the rich have gotten richer. A lot richer.This is an unstable situation. With pressure building for change but potent forces stacked against it, there are only three options, Collins told WhoWhatWhy: “Realignment, revolution or repression.”

Obama opens White House doors to forge CEO alliances | Reuters: President Barack Obama, who made few friends in corporate board rooms early in his first term as he pressed for tighter regulations on banks and remarked on the "fat cats" who helped precipitate the financial crisis, heads into his final year in the White House having built – or rebuilt – alliances with chief executives of the nation's biggest companies. The president and his top advisers have kept an open door for CEOs of Fortune 100 companies, keeping almost 1,000 appointments with them, a Reuters review of White House records shows. Of the hundreds of appointments listed, Obama himself was present at about half, ranging from intimate Oval Office gatherings to lavish state dinners. Obama is the first U.S. president to make White House visitor logs public. "That number is the tip of the iceberg," said Valerie Jarrett, Obama's longest-serving senior adviser who runs his Office of Public Engagement. The president and his aides also regularly meet with representatives from the rest of the Fortune 500, as well as small- and medium-sized businesses, both in Washington and around the country, she said. The Reuters review included only the Fortune 100 list of largest companies, and was limited to White House meetings.

Partial Tally of Hidden Private Equity Fees: 6% of Equity Invested – Yves Smith - A study just released by Oxford Professor Ludovic Phalippou seeks to identify how much limited partner are paying in fees they don’t see and can’t control, as in the charges private equity firms make to the companies they buy on behalf of investors, the so-called “portfolio companies”. The headlines at the Wall Street Journal and the Financial Times report his study as finding $20 billion in hidden fees, but they fail to emphasize that this study was based on an in-depth examination of 592 companies and 1044 transactions, meaning a subset.  Remarkably, neither article includes a conclusion in the study’s’ opening paragraph, which is far more arresting (emphasis ours): We describe these contracts and find that related fee payments sum up to $20 billion evenly distributed over twenty years, representing over 6% of the equity invested by GPs on behalf of their investors. We’ve embedded the study at the end of the post. It has lots of juicy detail and data tables, so we may have more to say about it once we’ve had time to read it closely.

Debunking “The Big Short”: How Michael Lewis Turned the Real Villains of the Crisis into Heros  - Yves Smith - I hate to give any attention to Michael Lewis’ The Big Short, since the wildly popular book told a fundamentally misleading story of the crisis which sadly has become conventional wisdom. And it wasn’t just harmlessly inaccurate; it directed public and even lawmaker attention away from the real drivers of this debacle.  Absent the actions of the subprime shorts that Lewis lionized, the US would have suffered a S&L-level housing criss (which at the time was seen as a serious blow to the banking system and the economy), not a global financial crisis that came perilously close to taking down systemically important capital markets firms around the world. And let us not forget that the way in which the financial system was rescued represented the greatest looting of the public purse in history.  But the fact that the movie based on the book is now out and getting a lot of attention in the media and even among people I know, it seems necessary to remind readers how the book has done a great disservice by deceiving the public. And that includes influential members of the public; Politico reported that “‘The Big Short’ has been mentioned at least 15 times on the Senate floor and in press conferences and committee hearings.”

How the accounting industry and SEC hobbled America’s audit watchdog: The Public Company Accounting Oversight Board was set up to oversee the auditing profession after a rash of frauds. The industry got the upper hand, as the story of the board's embattled chief shows. The board was “moving too slowly,” Schnurr said, to address auditing failures that in recent years had shaken public confidence in those firms.   These were fighting words in the decorous auditing profession, and they hit their target. PCAOB Chairman James Doty was among those attending the annual accounting-industry gala where Schnurr spoke. And Schnurr was Doty’s new supervisor.“This is going to get ugly,” Doty said to a colleague afterward. In his new SEC job, Schnurr now had direct authority over the PCAOB – a regulator that just a few years earlier had derailed his C-suite ambitions at Deloitte & Touche. As deputy managing partner at the world’s largest accounting firm, Schnurr had commanded an army of auditors – until a string of damning PCAOB critiques of Deloitte’s audits led to his demotion. Then, in August 2014, SEC Chair Mary Jo White named Schnurr to his SEC post. It was a remarkable instance of Washington’s “revolving door” for professionals moving between government and industry jobs.  Schnurr wasn’t the only one with a Deloitte tie. White had counted Deloitte among her clients while a partner at law firm Debevoise & Plimpton. White’s husband, John White, is a partner at law firm Cravath Swaine & Moore, which also counts Deloitte among its clients.

Demand For Safe Assets Surged Last Week - The safe-haven trade dominated last week’s market activity. Investment-grade bonds in foreign and US markets delivered the only gains for the five trading days through Dec. 11, based on a set of ETFs representing the major asset classes.Leading the way: foreign corporate bonds, which gained 1.2% last week via the PowerShares International Corp Bond ETF (PICB).  The overwhelming trend, however, was negative for most markets. The big loser last week: emerging market equities, which tumbled a hefty 7.0% for five days through Dec. 11 (Vanguard FTSE Emerging Markets (VWO). Expectations that the Federal Reserve may start to raise interest rates this week are weighing on emerging markets. As the Financial Times notes: “Much of the concern centers on China. Chinese officials and independent economists say a rise in US rates would probably bolster the dollar against the renminbi, leading to capital outflows from China and sucking EM currencies into new phase of turbulence.” Meanwhile, the longer-term trend for markets generally is looking weak across the board. Save for investment-grade US bonds and a fractional gain for US equities, all the major asset classes via ETF proxies are posting losses for the trailing one-year period through Dec. 11. The suffering, however, currently comes in an assortment of negative comparisons.

Stone Lion Capital Partners Suspends Redemptions in Credit Hedge Funds -- Stone Lion Capital Partners L.P. said it suspended redemptions in its credit hedge funds after many investors asked for their money back. The move, nearly unprecedented in the hedge-fund industry since the financial crisis, is the latest example of the sudden crunch facing traders across Wall Street looking to sell beaten-down positions. On Thursday, Third Avenue Management LLC stunned investors with the announcement it was barring withdrawals while it liquidates a high-yield bond mutual fund, a move that intensified a selloff sweeping the junk-bond world. Stone Lion, founded in 2008 by Bear Stearns & Co. Inc. veterans Gregory Hanley and Alan Mintz, is in a similar malaise, facing heavy losses on so-called distressed investments including junk bonds, post reorganization equities and other special situations, people familiar with the matter said. A Stone Lion spokesman said suspending redemptions was the only way to “ensure fair and equitable treatment for all” investors.

Third Avenue Gets SEC's Permission to Freeze Redemptions: Third Avenue Management finally got around to seeking and obtaining permission from the Securities and Exchange Commission to enact a plan it announced last week that sent shivers through the high-yield debt market. On Wednesday, Third Avenue Management received approval from the SEC to "suspend the right of redemption" until it completes the liquidation of its focused credit fund. Today's filing by Third Avenue to receive that approval came after the firm already had announced last Friday that it was freezing redemptions as it tried to liquidate the fund's portfolio. The SEC "expressed concerns" with that plan, according to Wednesday's filing. The broader investment community also was concerned with Third Avenue Management's actions; SEC regulations require that mutual fund shares be redeemable at any time, and suspending redemption requires SEC approval. The SEC's approval comes with significant caveats. "The Commission required the fund to put in place investor and market protections, including ongoing Commission oversight and provisions involving an orderly and fair process as a condition of its approval of the order," an SEC spokesperson said in a statement emailed to Real Money. Third Avenue Management's announcement on Friday sparked a mini-panic in the high-yield debt market that was addressed by Federal Reserve Chairwoman Janet Yellen in a press conference following the Federal Open Market Committee meeting.

Fed Interest Rate Hike Could Be Bad News for Junk Bonds: The markets have pretty much priced in a rate hike by the Federal Reserve later this week, which, if it happens, will be the first since 2006. But that doesn’t mean there won’t be surprises along the way. We’re already seeing dominos begin to fall in the corporate debt markets, with the liquidation last week of the largest U.S. mutual fund since 2008, Third Avenue. The fund was heavily invested in risky corporate debt, the kind that pays high yields in good times but can go bad as rates rise. The big question now is whether this is just the beginning of a larger correction in the corporate debt markets.There is reason to think that the answer is yes. Savvy investors, including people like Carl Icahn, have been fretting about the corporate debt markets, otherwise known as “junk bonds,” for some time now. Usually, it’s not so easy for lower grade corporates to issue bonds and raise debt. But the Federal Reserve’s unprecedented money dump and easy monetary policies of the last several years, which drove interest rates down to record levels, left investors looking for bigger payoffs, pushing them into the junk bond market. Corporations of all stripes have issued record amounts of debt over the last few years, buoyed by expectations that the Fed would keep the party going. But the music will likely stop this week if rates go up. Investor confidence reflects that, with big outflows in junk bonds that led to the fall of Third Avenue and could bring down other mutual funds and money market players that have piled into these risky markets.  The worry is that jitters in the junk bond market will start to spread into higher quality corporate bonds and the larger debt markets. Already, the value of some higher grade corporate debt is falling. Investors and policy makers are also worried that the markets could seize up quite quickly if this happens.

Market Instability Won’t Deter a Fed Rate Hike - - Mohamed A. El-Erian -- Last week's volatility in the markets, highlighted by further implosions in the high-yield and energy segments, won't deter the Federal Reserve from raising interest rates on Wednesday. But the turmoil complicates the central bank's communications challenge, particularly the need to wrap the hike in heavily conditional and responsive packaging. Three months ago, the Fed faced a similar set of circumstances: Markets were unsettled by concerns about Chinese growth, sharply lower oil prices and pockets of illiquidity, which all tightened financial conditions. Accordingly, even though the U.S. economic situation supported an interest rate hike, officials believed it would be prudent to wait for a return to tranquility in global financial markets. With the subsequent calm in October and November, the Fed primed markets for an increase in December -- only a week ago, a Wall Street Journal survey found that more than 90 percent of economists expected a hike. Yet a return of global financial market instability wasn't part of the plan. Last week, markets sold off sharply because of fresh worries about China; uncertainties associated with the pending divergence in the policies of systemically important central banks; and spillover effects from three unhinged market segments (oil, high-yield bonds and emerging-market currencies). Investor nervousness was amplified by concerns about liquidity caused by Third Avenue's decision to limit redemptions from its high-yield fund. These developments are significant, but they probably won't cause the Fed to decide against raising rates for the first time in almost 10 years. In the last three months, the U.S. economy has continued to strengthen its record of robust employment creation, bringing the 12-month average to about 240,000 jobs a month and taking the unemployment rate down to 5 percent.

Wall Street fears a run on junk bonds -- and worse - Fasten your seat belts, investors. We may be in for a bumpy ride. Large-cap U.S. stocks suffered their worst one-day loss since September last Friday as many popular big-tech stocks -- such as Amazon (AMZN) and Facebook (FB) -- rolled over. And it looks like the stock market's bears are about to run amok with the Dow Jones industrial index back below its 200-day and 50-day moving averages, falling into a confirmed downtrend for the first time since August.   Corporate profits are under pressure. Crude oil has already returned to its 2008 and 2009 financial panic lows, with no support in sight.  And now, bond funds are being hit in a way that reminds many of the mortgage-backed troubles of early 2007 as the housing blowup was starting. We had a preview of sorts back in August, when stocks suffered their most violent pullback since the Washington debt-ceiling standoff of 2011. All of this, along with evidence of stock market outflows and what's set to be the third consecutive quarter of negative S&P 500 earnings growth, is a big red flag that trouble is coming.  Because while the Fed is widely expected to raise interest rates from near zero to just 0.25 percent, this seemingly small policy change is likely to have wide ramifications across global markets. Never before has the Fed waited this long into a business cycle to start tightening monetary policy. Never before have interest rates been held this low for this long.

Investors See More Carnage as Third Avenue Spurs Contagion Risk - Top bond managers are predicting more carnage for high-yield investors amid a market rout that forced at least three credit funds in the past week to wind down. Lucidus Capital Partners, a high-yield fund founded in 2009 by former employees of Bruce Kovner’s Caxton Associates, said Monday it has liquidated its entire portfolio and plans to return the $900 million it has under management to investors next month. Funds run by Third Avenue Management and Stone Lion Capital Partners have stopped returning cash to investors, after clients sought to pull too much money. “It could get pretty ugly this week,”  “The most recent sell-off has not been fundamentally driven,” he said, citing constrained dealer balance sheets as a factor.  Debt of struggling companies has slumped, with one market gauge falling to a six-year low, as declining energy and commodity prices hit producers just as the Federal Reserve prepares to raise borrowing costs for the first time in almost a decade. Scott Minerd, global chief investment officer at Guggenheim Partners, predicts 10 percent to 15 percent of junk bond funds may face high withdrawals as more investors worry about getting their money back. He joins money managers Jeffrey Gundlach, Carl Icahn, Bill Gross and Wilbur Ross in warning of more high-yield trouble ahead. Third Avenue rattled markets when it announced Dec. 9 that it’s liquidating a $788.5 million corporate debt mutual fund and delaying distribution of investor cash to avoid bigger losses.  “The risk is that this is going to cascade into something bigger,” . “If we’re going to see contagion, the most vulnerable funds are going to be the ones that are down significantly.”

Junk Bonds Stagger as Funds Flee - WSJ: Traders and regulators have fretted for more than a year that mayhem might ensue if U.S. mutual funds sought to sell rarely traded bond investments. After junk-bond prices posted their largest drop since 2011 on Friday, investors say they are bracing for another difficult week, likely featuring hectic trading and large splits between buy and sell orders. Gaps as wide as 10% between the price bondholders are willing to accept and buyers are willing to pay are likely to be commonplace until at least the conclusion of the Federal Reserve’s two-day meeting Wednesday, hedge-fund and mutual-fund managers said. The worst selling lately has hit bonds of especially risky, or distressed, companies, reflecting the turmoil at the Third Avenue Focused Credit Fund, the junk-bond fund that shook markets when it halted investors’ withdrawals last week, they said. But some traders were focusing on large price declines in the securities of firms that are rated well above distressed levels, which they took as an unwelcome sign that some investors were selling stronger securities to raise cash.  A hedge-fund manager said he tried Friday morning to sell loans issued by Clear Channel Communications, now known as IHeartMedia Inc., one of the Third Avenue fund’s largest holdings, at 71 cents on the dollar, the price Wall Street traders quoted him. No buyers materialized until late afternoon when he received a single bid at 64 cents on the dollar, an offer he refused.

Junk Contagion Spreads: Investment Grade Bonds Plunge To 2-Year Lows, 10Y Liquidity Implodes, CLOs Next -- Just as we warned, the collapse of the high-yield market has spread contagiously to the investment grade market as selling begets selling and redemptions need to be met from what you can sell, not what you need to sell (but can't). LQD (the investment-grade bond ETF) is getting hammered today, breaking to its lowest in almost 2 years. As Europe closed, HYG managed to stabilize but the selling accelerated in LQD (the investment-grade bond ETF)... And while the storm that is rocking junk, and has now moved on to the investment grade space has not yet roiled government bond prices, it appears to already be doing a number on the liquidity of the most liquid, on the run security, the 10 Year government bondswhich as the following chart from Stone McCarthy shows saw the 10-year trading "extremely special", at -235 basis points, the most negative it has been since the summer of 2014, suggesting that liquidity shortages are now manifesting themselves across all fixed income markets. Finally, just as with the bunding of subprime mortgage debt, so those "bundles" are once again in trouble... The bust in commodities that’s roiling junk bonds is also taking its toll on funds that bundle loans used to finance buyouts.

Junk debt ETFs dodge contagion | Reuters: (IFR) - Exchange-traded funds of junk debt proved to be robust through the sell-off in the high-yield market in the early part of this week - shaking off concerns that such products would exacerbate a sharp rout across the asset class. Trading volumes in the iShares iBoxx High-Yield Corporate Debt ETF surged to US$18.2bn from December 7 to 16, a record for any eight-day period, driven by the closure of a high-profile distressed debt fund, Third Avenue Asset Management, and lingering energy market concerns. Some market participants - such as Carl Icahn and Howard Marks - had concerns that high trading volumes in debt ETFs during a time of stress would trigger a dislocation in the value of funds against the value of underlying bonds. A sharp dislocation - some feared - would then escalate downward pressure on high-yield prices as fund holders rushed to redeem the shares of funds, which would then lead to forced selling of the underlying bonds. However, redemption requests - though sizable - paled in comparison with overall trading activity, and prices of the two largest junk debt ETFs remained tight to the net asset values of their underlying benchmarks. The performance of the ETFs throughout the rout gave investors a window into market demand - an increasingly important consideration as liquidity in high-yield markets continues to decline.

Wells Fargo warns of energy ‘stresses’ The head of corporate banking at Wells Fargo, the biggest bank in the world by market capitalisation, has warned of “stresses” in its energy portfolio, as the ongoing slump in the price of oil begins to weigh heavily on servicers and producers. Kyle Hranicky, who spent nine years at the helm of the Houston-based Wells Fargo Energy Group before rising to head the corporate banking division in May, said that the bank had been in discussions with clients for several months about preserving cash and cutting borrowing limits. “Some have liquidity to survive the cycle but others will be under significant stress and may be forced to sell assets or recapitalise,” he said. “We’ve been in the energy business for over 30 years, so we’re comfortable with cycles. But this one feels deeper and broader and could last longer.” The oil slump has hit stocks and bonds hard, causing a lot of problems for fund managers over the past year. But the damage is only now beginning to be felt in banks’ loan books, where oil services companies, in particular, have been bearing the impact of cuts in the industry. Bankers say that they are cutting exploration and production companies’ borrowing limits by an average of 10 to 20 per cent, as the value of their reserves has fallen sharply. Over the past 18 months the price of oil has fallen by two-thirds, touching a six-year low of $35.16 last week. Last month a trio of US bank regulators reported that aggregate loans in danger of default to the oil and gas sector had risen to $34bn, five times higher than a year earlier. The annual report, which tracks loans shared around at least three banks, blamed “aggressive acquisition and exploration strategies” since 2010 which have driven up leverage and made many borrowers “more susceptible to a protracted decline in commodity prices”.

Treasury Report Shows Biggest Threat to U.S. Is on Wall Street - Pam Martens - If the U.S. government issued a warning yesterday that there was a credible threat of a new terrorist attack from a foreign terrorist, we can guarantee you that it would have made front page headlines. What the U.S. government did instead yesterday was to issue a formal warning that the prospects for a new financial crisis have grown, and, in one area, are at an “historically elevated level.”  Since the financial crisis of 2007-2009 did more economic damage to the U.S. than all terrorist attacks combined and will have a devastating impact on the standard of living of the next generation, one would think this new financial warning would have been worthy of a mention on the front pages of mainstream newspapers. And yet, we could find no mention in the New York Times, Los Angeles Times, Chicago Tribune, Washington Post, etc. (To their credit, the Wall Street Journal and Reuters did write about the findings.) What might explain the hesitation to carry the story by the major dailies is the contradictory nature of the material released by the U.S. Treasury’s Office of Financial Research (OFR). That’s the body created under the Dodd-Frank financial reform legislation of 2010 to keep the Financial Stability Oversight Council (also created under Dodd-Frank) informed on a timely basis to rising threats to financial stability in the U.S. The OFR report listed a litany of hair-raising threats to financial stability but then bizarrely concluded: “Overall, threats to U.S. financial stability remain moderate….”   Rational readers of the report must conclude that when financial data turns unprecedented and “historic” in a significantly negative way, it can’t be a “moderate” concern.

Pull Back the Curtain on Exchange Traded Funds and Out Pop Wall Street Mega Banks -Pam Martens - The selloff in junk bonds has rattled the markets and is raising questions about just who it is that is providing liquidity to the junk bond Exchange Traded Funds (ETFs) — which have magically redeemed billions of dollars in withdrawals from retail investors while the underlying bonds in their portfolio are under severe stress in the broader marketplace. Unknown to most retail investors is that there is an entity called an “Authorized Participant” hiding behind the curtain of ETFs that is making that liquidity possible.  According to an August 8, 2014 written question and answer exchange between the National Association of Insurance Commissioners and BlackRock and State Street – two large sponsors of ETFs — the most active Authorized Participants for corporate bond ETFs include “Deutsche Bank, Goldman Sachs, JPMorgan, Bank of America Merrill Lynch, Morgan Stanley and Cantor Fitzgerald.” It seems pretty obvious why these so called “Authorized Participants” are hiding behind that esoteric title. Their liquidity to ETFs is actually being backstopped by their too-big-to-fail status which is actually backstopped by the U.S. taxpayer.As Senator Elizabeth Warren told a Senate hearing on March 3 of this year:“During the financial crisis, Congress bailed out the big banks with hundreds of billions of dollars in taxpayer money; and that’s a lot of money. But the biggest money for the biggest banks was never voted on by Congress. Instead, between 2007 and 2009, the Fed provided over $13 trillion in emergency lending to just a handful of large financial institutions. That’s nearly 20 times the amount authorized in the TARP bailout.

Thousands more bank jobs under threat -  Big banks in Europe and the US announced almost 100,000 new job cuts this year, and thousands more are expected from BNP Paribas and Barclays early next year, as the wave of lay-offs that began in 2007 shows no sign of abating. The 2015 cuts — which exclude the impact of major asset sales — amount to more than 10 per cent of the total workforce across the 11 large European and US banks that announced fresh lay-offs, according to analysis by the Financial Times. The most recent came last week, as workers at Dutch lender Rabobank learnt of 9,000 cuts across their bank the day after Morgan Stanley announced 1,200 lay-offs, including at its ailing fixed income division. Barclays and BNP Paribas, two of Europe’s biggest banks, will unveil job cuts when they announce strategies that are designed to strip out 10 to 20 per cent of the costs at their investment banks, people familiar with the situations said.

‘The Big Short,’ Housing Bubbles and Retold Lies, by Paul Krugman - In May 2009 Congress created a special commission to examine the causes of the financial crisis. The idea was to emulate the celebrated Pecora Commission of the 1930s, which used careful historical analysis to help craft regulations that gave America two generations of financial stability. But some members of the new commission had a different goal.   Peter Wallison of the American Enterprise Institute, wrote to a fellow Republican on the commission it was important that what they said “not undermine the ability of the new House G.O.P. to modify or repeal Dodd-Frank”; the party line, literally, required telling stories that would help Wall Street do it all over again. Which brings me to a new movie the enemies of financial regulation really, really don’t want you to see.“The Big Short” does a terrific job of making Wall Street skulduggery entertaining, of exploiting the inherent black humor of how it went down. ... But you don’t want me to play film critic; you want to know whether the movie got the underlying ... story right. And the answer is yes, in all the ways that matter. ... The housing bubble ... was inflated largely via opaque financial schemes that in many cases amounted to outright fraud — and it is an outrage that basically nobody ended up being punished ... aside from innocent bystanders, namely the millions of workers who lost their jobs and the millions of families that lost their homes. While the movie gets the essentials of the financial crisis right, the true story ... is deeply inconvenient to some very rich and powerful people. They and their intellectual hired guns have therefore spent years disseminating an alternative view ... that places all the blame ... on ... too much government, especially government-sponsored agencies supposedly pushing too many loans on the poor. Never mind that the supposed evidence for this view has been thoroughly debunked, constant repetition, especially in captive media, keeps this imaginary history in circulation no matter how often it is shown to be false. Sure enough, “The Big Short” has already been the subject of vitriolic attacks in Murdoch-controlled newspapers...

America’s biggest housing program is run by the IRS, and it’s a huge giveaway to rich people -- The mortgage interest tax deduction is a garbage policy.  It's hugely regressive: 52 percent of the benefit goes to the richest 10 percent of Americans, and only 0.1 percent of the benefit goes to the poorest 20 percent. The deduction is supposed to encourage homeownership, but economists Edward Glaeser and Jesse Shapiro have found that it overwhelmingly goes to rich people who'd own homes anyway, so there's "almost no effect" on the number of people owning. It does, however, make people buy bigger houses, which is bad for carbon emissions, encourages low-density, sprawling housing construction, and discourages living in cities. As if that weren't enough, it gives housing an edge over alternative investments, which prevents investment in more productive areas. And its cost dwarfs spending on housing programs actually meant to help the poor. But the mortgage interest deduction is also hugely popular with people in the top 40 percent or so of the income distribution, and those people have an outsize voice in our democracy. So outright repeal seems like a pipe dream. But a new report from the Tax Policy Center confirms that even milder policies could do a lot of good. They consider three options:

  1. Only make interest on the first $500,000 of a mortgage deductible (currently the cap is $1 million)
  2. Turn the deduction into a nonrefundable 15 percent credit, which even people not itemizing their taxes can claim
  3. Doing both 1 and 2

They then evaluate how the changes would affect taxpayers across the income scale: Unsurprisingly, the changes are all progressive: They involve significant tax hikes for the rich. But the credit option has the bonus of actually being a small tax cut for some low- and middle-income families. That's because bringing the credit out of the itemization process means that millions of families taking the standard deduction can now benefit. It also means that families in the 10 percent tax bracket will get a bigger break than they would've before.

Fannie and Freddie’s Government Rescue Has Come With Claws - Gretchen Morgenson - Since 2008, the mortgage giants have been held to far more punishing standards than the big banks, opening the door to an attempted Wall Street takeover. The decision to sweep into the Treasury all of the companies’ profits — which by now have far exceeded the amount of the total bailout and dividends owed — has attracted legal challenges from institutional investors and speculators in Fannie and Freddie. Originally set up by the federal government to make homeownership feasible in good times and bad, Fannie and Freddie were private companies with an implicit government guarantee. The investors maintain that the government’s action was an improper taking of private property. Some legal experts also contend that the action violated state laws. The Obama administration disputes the charges and is fighting them in court. Whatever the legal implications, the August 2012 change in the bailout terms reflected a series of decisions made by the Obama administration that have prevented the mortgage companies from benefiting fully from their recovery. Indeed, from their September 2008 bailout until the present day, these government-sponsored enterprises, or G.S.E.s — which guarantee 80 percent of mortgages nationwide — have faced demands from their overseers that were far more draconian than anything asked of the big banks also rescued during the financial crisis. These demands have helped open the door to an attempted Wall Street takeover of the companies’ assets and future profits.  “The political winds of the moment make it popular to punish these companies and their remaining owners and reap the benefits for the taxpayers,”

The Continuing Fight Over Fannie and Freddie, and the Real Problem of US Mortgages -- Yves Smith  I’m a bit late to comment on an important series by the New York Times’ Gretchen Morgenson on the continuing, until now largely behind the scenes, fight over the future of the giant mortgage guarnators, Fannie and Freddie.  In her first article, A Revolving Door Helps Big Banks’ Quiet Campaign to Muscle Out Fannie and Freddie, Morgenson showed, in gory detail, how Wall Street had labored mightily to take over the activities of the mortgage behemoths for their fun and profit. Mind you, it’s not as if they already take a big proportion of the savings from the mortgage guarantee for themselves now; you can see that in refis, where much of the benefit of the interest rate reduction is chewed up in fees and other charges. Her second article, Fannie and Freddie’s Government Rescue Has Come With Claws, discusses in depth how the Administration flagrantly violated the terms of its own bailout deal to hoover up the earnings from Fannie and Freddie for Treasury, rather than give shareholders the proportion they were due, and took other punitive measures that were contrary to the 2008 legislation that set forth how a conservatorship of Fannie and Freddie would work. These pieces provide insight into the state of play with government sponsored enterprise “reform” and also as a case study of how banks influence government policy, and how eager the Obama Administration has been to take up their cause (not that a Republican or Clinton Administration would behave any differently). But Morgenson’s focus on the machinations of the banks and their allies in government resulted in her not incorporating the policy issues. And without an understanding the policy problems, it’s easy to draw the wrong conclusions about how we got where we are and what might be the best approaches going forward.

If MERS Had An “Ass” … the Tennessee Supremes Would Have Kicked It! --  The news site is reporting that in a lawsuit filed to set aside a tax sale of mortgaged land in Hamilton County, the Tennessee Supreme Court has held that Mortgage Electronic Registration Systems, Inc. was not entitled to prior notice of the sale because MERS did not have an interest in the land that is protected under the Due Process Clause of the U.S. Constitution!  HERE: MERS v DITTO_TN Supreme Court rules against MERS!   The Tennessee Supreme Court is the first to rule in such a manner!   The site is reporting that the purchaser of the Hamilton County land borrowed money from a MERS member lender, signing a promissory note secured by the property by a deed of trust, which was recorded in the Hamilton County Register of Deeds office. The deed of trust described MERS as “a separate corporation that is acting solely as nominee for [the lender]” and said that MERS was the beneficiary of the deed of trust “solely as nominee” for the lender and any successor to the lender.  As is customary in the MERS® System, the originating lender sold the note to another lender.  Subsequent to that, the property owners failed to pay their 2006 property taxes, so Hamilton County initiated tax foreclosure proceedings.  The county sent notice of the foreclosure and the tax sale to the borrowers and to the original lender, but not to MERS. Eventually, the property was sold at a tax sale to Carlton Ditto.  Just like in the Cabrera, Robinson and Johnston cases in California, after learning of the action, MERS filed a lawsuit to set aside the tax sale, naming Hamilton County and Mr. Ditto as defendants.

Latest Cyberthreat: Stealing Your House - The clues were there for months, but property investor Sybil Patrick didn’t put them together. The locks to a vacant Harlem brownstone she owns were changed. Belongings weren’t in the same place she left them.  But it turned out the house had been sold, without her knowledge, about a year earlier for roughly $750,000.   The case was one of about 30 related incidents in Manhattan in which a group of people allegedly forged or attempted to forge new deeds using easily available online records, to sell the homes and collect the proceeds, according to officials at the Manhattan district attorney’s office. Since last fall, New York prosecutors have arrested four people on grand larceny charges connected to the sale of Ms. Patrick’s house, according to the district attorney’s office.  Prosecutors in Chicago and Detroit also said they have seen a spike in a category of crime known as deed fraud.  Investors who own several properties are especially vulnerable, prosecutors said, as they are less likely to notice if someone moves into a home they don’t visit regularly. Ms. Patrick owns the Harlem brownstone in addition to her primary residence. “This crime has always happened, but it’s been made much more prolific” by having records online, said Executive Assistant District Attorney  David Szuchman, The rise in such crimes is an unintended consequence of an effort to put documents on the Internet to promote transparency in local real-estate markets.

Fannie and Freddie called upon to securitize more low-income loans - HousingWire: The Federal Housing Finance Agency, conservator to Fannie Mae and Freddie Mac today unveiled its "Duty to Serve" initiative. The FHFA is seeking comments on Duty to Serve, which seeks to establish the following: "This statute requires Fannie Mae and Freddie Mac (the Enterprises) to serve three specified underserved markets: manufactured housing, affordable housing preservation and rural markets," said the FHFA in a statement. "The proposed rule would require the Enterprises to adopt plans to improve the distribution and availability of mortgage financing in a safe and sound manner for residential properties that serve very low-, low-, and moderate-income families in the three specified underserved markets." The changes are further outlined in this Reuters article. "The change would allow borrowers to take out mortgages with greater protections and lower default rates, according to the proposal. It also proposed creating plans to preserve affordable housing for renters and owners that include purchasing loan pools on small multifamily rental properties and energy retrofit loans on single-family properties. For rural areas, FHFA is considering expanding lending by modifying underwriting guidelines, increasing rural loan purchases and providing technical assistance to small lenders working in the areas." Here is the fact sheet for the plan, comments are open for 90 days

CoreLogic Reports 256,000 US Properties Regained Equity in the Third Quarter of 2015 --CoreLogic ... today released a new analysis showing 256,000 properties regained equity in the third quarter of 2015, bringing the total number of mortgaged residential properties with equity at the end of Q3 2015 to approximately 46.3 million, or 92.0 percent of all homes with an outstanding mortgage. Nationwide, borrower equity increased year over year by $741 billion in Q3 2015.  The total number of mortgaged residential properties with negative equity stood at 4.1 million, or 8.1 percent, in Q3 2015. That was down 4.7 percent quarter over quarter from 4.3 million homes, or 8.7 percent, compared with Q2 2015 and down 20.7 percent year over year from 5.2 million homes, or 10.4 percent, compared with Q3 2014. ... For the homes in negative equity status, the national aggregate value of negative equity was $301 billion at the end of Q3 2015, declining approximately $8.1 billion from $309.1 billion in Q2 2015, a decrease of 2.6 percent. On a year-over-year basis, the value of negative equity declined overall from $341 billion in Q3 2014, representing a decrease of 11.8 percent in 12 months. Of the more than 50 million residential properties with a mortgage, approximately 8.9 million, or 17.6 percent, have less than 20 percent equity (referred to as “under-equitied”) and 1.1 million, or 2.2 percent, have less than 5 percent equity (referred to as near-negative equity). Borrowers who are “under-equitied” may have a difficult time refinancing their existing homes or obtaining new financing to sell and buy another home due to underwriting constraints. Borrowers with near-negative equity are considered at risk of moving into negative equity if home prices fall.

Mortgage Equity Withdrawal Slightly Positive in Q3, First Time since Q1 2008 -- The following data is calculated from the Fed's Flow of Funds data (released last week) and the BEA supplement data on single family structure investment. This is an aggregate number, and is a combination of homeowners extracting equity - hence the name "MEW", but there is still little (but increasing) MEW right now - and normal principal payments and debt cancellation (modifications, short sales, and foreclosures).  For Q3 2015, the Net Equity Extraction was a positive $4 billion, or a positive 0.1% of Disposable Personal Income (DPI) - only slightly positive.  MEW for Q2 was revised up slightly, so this is the 2nd consecutive quarter with slightly positive MEW - the first positive MEW since Q1 2008.  This graph shows the net equity extraction, or mortgage equity withdrawal (MEW), results, using the Flow of Funds (and BEA data) compared to the Kennedy-Greenspan method. Note: This data is still heavily impacted by debt cancellation and foreclosures. The Fed's Flow of Funds report showed that the amount of mortgage debt outstanding increased by $48 billion in Q3. The Flow of Funds report also showed that Mortgage debt has declined by almost $1.3 trillion since the peak. This decline is mostly because of debt cancellation per foreclosures and short sales, and some from modifications. There has also been some reduction in mortgage debt as homeowners paid down their mortgages so they could refinance. With residential investment increasing, and a slower rate of debt cancellation, MEW has now turned slightly positive.

FNC: Residential Property Values increased 5.9% year-over-year in October -- FNC released their October 2015 index data.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values decreased 0.1% from September to October (Composite 100 index, not seasonally adjusted).   The 10 city MSA decreased 0.1% (NSA), the 20-MSA RPI increased 0.1%, and the 30-MSA RPI increased 0.1% in October. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).   Notes: In addition to the composite indexes, FNC presents price indexes for 30 MSAs. FNC also provides seasonally adjusted data. From FNC: FNC Index: Home prices slipped 0.1% after a nine-month run The latest FNC Residential Price Index™ (RPI) indicates that U.S. home prices pulled back in October, ending a nine-month run of increases buoyed by low mortgages rates and rising credits. Nationwide, home prices fell 0.1% between September and October, led by declines in some of the country’s largest housing markets. October’s year-over-year growth remains unchanged from the prior month at a solid 5.9%. “In a relatively stable market like today’s, it is normal that home prices retreat to flat or negative growth territory as home sales subside entering the fall and winter months,” “On the upside, low interest rates and the leverage provided by loans under affordable housing programs help maintain affordability and partly offset the impact on affordability from months of rapidly rising prices. With a much anticipated policy rate increase to affirm the strength of the U.S. economy, we will likely be looking at a milder seasonal slowdown and possibly a sooner return of market rebound in 2016,” continued Mayer.  The year-over-year (YoY) change was the same in October as in September.  The index is still down 14.6% from the peak in 2006 (not inflation adjusted).

Nearly 95% of Young Renters Want to Buy, But Many Say They Can’t Afford It - Nearly all young renters want to own a home, even if many are also pessimistic that economic conditions will allow them to, finds a new survey by the National Association of Realtors. Nearly 95% of renters 34 years old or younger want to own a home in the future and overall 83% of renters said they have a desire to own, according to NAR’s new quarterly survey of renter and owner households. But only half of all households polled—renters and homeowners—said they believe the economy is currently improving and 44% said they believe the country is in a recession. Renters were slightly more optimistic, with 57% saying the economy is improving. More than half of renters said they haven’t yet bought a home because they couldn’t afford one, while just 19% said they prefer the flexibility of renting. “There appears to be sizeable, pent-up demand for buying that currently remains untapped because of a variety of economic and personal reasons impacting many households,” said Lawrence Yun, NAR’s chief economist. An earlier survey by NAR of people who recently purchased a home found that the share of first-time buyers fell to its lowest level in almost three decades. First-time buyers fell to 32% of all purchasers in 2015 from 33% last year, the third straight annual decline. News Corp, owner of The Wall Street Journal, also owns Move Inc., which operates a website and mobile products for the NAR.

Merrill Lynch: "Home Sweet Home" -- A few excerpts from a piece by Michelle Meyer at Merrill Lynch: Home sweet home.  We expect continued improvement in homebuilding and sales in 2016 and 2017, but still far from a V-shaped trajectory. Here are our baseline forecasts:
• Housing starts to average 1.275 million in 2016 and 1.4 million in 2017 on the way to a return to the historical average of 1.5 million by the end of 2017. [CR NOTE: For reference, housing starts will probably be just over 1.1 million in 2015].

• Existing home sales to increase 5% in 2016 and 3% in 2017. We look for more robust growth in new home sales with a gain of 10% and about 14% over the next two years, respectively.  [CR Note: New Home sales will probably be just over 500 thousand in 2015]
• Home price appreciation should slow with prices up only 1.8% in 2016. The forecast for 2017 becomes more controversial as our baseline forecast is for a decline of 1.5%, as our model looks for home prices to converge to income. [CR Note: A decline in nominal prices seems unlikely in 2017. However a decline in real prices (nominal price increases less than inflation) is possible].
In our view, a reasonable estimate of “normal” is the pre-crisis average of about 1.5 million. The math is simple: household formation of 1.2 million + demolitions of 300K + some number of second home purchases. There is a risk that household formation is on a slightly slower pace given persistently high rates of doubling up among young adults.

Housing Starts increased to 1.173 Million Annual Rate in November - From the Census Bureau: Permits, Starts and Completions Privately-owned housing starts in November were at a seasonally adjusted annual rate of 1,173,000. This is 10.5 percent above the revised October estimate of 1,062,000 and is 16.5 percent above the November 2014 rate of 1,007,000. Single-family housing starts in November were at a rate of 768,000; this is 7.6 percent above the revised October figure of 714,000. The November rate for units in buildings with five units or more was 398,000. Privately-owned housing units authorized by building permits in November were at a seasonally adjusted annual rate of 1,289,000. This is 11.0 percent above the revised October rate of 1,161,000 and is 19.5 percent above the November 2014 estimate of 1,079,000. Single-family authorizations in November were at a rate of 723,000; this is 1.1 percent above the revised October figure of 715,000. Authorizations of units in buildings with five units or more were at a rate of 539,000 in November. The first graph shows single and multi-family housing starts for the last several years. Multi-family starts (red, 2+ units) increased in November. Multi-family starts are up 20% year-over-year. Single-family starts (blue) increased in November and are up 15% year-over-year. This is the highest level of single family starts since January 2008. The second graph shows total and single unit starts since 1968. The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low), Total housing starts in November were above expectations, and starts for September and October were revised up slightly.

New Residential Housing Starts Above November Forecast - The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for November new residential housing starts. The latest reading of 1.173M was above the forecast of 1.135M.Here is the opening of this morning's monthly report:Privately-owned housing starts in November were at a seasonally adjusted annual rate of 1,173,000. This is 10.5 percent (±8.6%) above the revised October estimate of 1,062,000 and is 16.5 percent (±10.3%) above the November 2014 rate of 1,007,000. Single-family housing starts in November were at a rate of 768,000; this is 7.6 percent (±9.6%)* above the revised October figure of 714,000. The November rate for units in buildings with five units or more was 398,000. [link to report] Here is the historical series for total privately-owned housing starts, which dates from 1959. Because of the extreme volatility of the monthly data points, a 6-month moving average has been included. Here is the data with a simple population adjustment. The Census Bureau's mid-month population estimates show substantial growth in the US population since 1959. Here is a chart of housing starts as a percent of the population. We've added a linear regression through the monthly data to highlight the trend.

Housing Starts Bounce As Permits Surge Most In 5 Years On Multi-Family Spike --Housing Starts rose 10.5% in November (after plunging 12% in October) as it appears weather-weakened construction caught back up with single-family starts recovering from the plunge in October. The South saw the biggest spike (up 21%) and Northeast fell 8.5%.Building Permits rose 11% MoM (after a 5.1% last month) as multi-family spiked from 446 to 566 (driven by a 22% spike in The Midwest and The West). This is the biggest MoM gain since Dec 2010. Permits spiked most in 5 years, Starts surged...Starts driven by single-family... Permits driven by multi-family... Welcome to the post-Fed rate-hike renter nation? Charts: Bloomberg

New Residential Building Permits: 128K Jump in November -- The U.S. Census Bureau and the Department of Housing and Urban Development have now published their findings for November new residential building permits. The latest reading of 1.289M was well above the forecast of 1.150M. Here is the opening of this morning's monthly report: Privately-owned housing units authorized by building permits in November were at a seasonally adjusted annual rate of 1,289,000. This is 11.0 percent (±1.6%) above the revised October rate of 1,161,000 and is 19.5 percent (±2.0%) above the November 2014 estimate of 1,079,000. Single-family authorizations in November were at a rate of 723,000; this is 1.1 percent (±0.9%) above the revised October figure of 715,000. Authorizations of units in buildings with five units or more were at a rate of 539,000 in November. [link to report] Here is the complete historical series, which dates from 1960. Because of the extreme volatility of the monthly data points, a 6-month moving average has been included.

November 2015 Residential Building Sector Data Much Better This Month - Be careful in analyzing this data set with a microscope as the potential error ranges and backward revisions are significant. Also the nature of this industry variations from month to month so the rolling averages are the best way to view this series - and the data remains in the range we have seen over the last 3 years. This month is significantly better than the previous month.

  • The unadjusted rate of annual growth for building permits in the last 12 months has been around 10% - it is a +24.7 % this month.
  • Construction completions are lower than permits this month for the 11th month in a row (when permits exceed completions - this sector is growing)..
  • Unadjusted 3 month rolling averages for permits (comparing the current averages to the averages one year ago) is 9.8% (permits) and 7.2% (construction completions):

Econintersect Analysis:

  • Building permits growth accelerated 24.9 % month-over-month, and is down 1.3 % year-over-year.
  • Single family building permits grew 14.4 % year-over-year.
  • Construction completions accelerated 3.9 % month-over-month, up 10.4 % year-over-year.

US Census Headlines:

  • building permits up 11.0 % month-over-month, up 19.5 % year-over-year
  • construction completions down 3.2 % month-over-month, up 9.2 % year-over-year.

Comments on November Housing Starts - Total housing starts in November were above expectations, however some of the strength might be related to the relatively warm weather in some parts of the country.  As an example, starts in the Northeast were up 21.5% year-over-year.  But most of the strength was in the South (up 35.5% year-over-year), so the positive report was not all weather.  This first graph shows the month to month comparison between 2014 (blue) and 2015 (red).  Total starts are running 11.0% ahead of 2014 through November. Single family starts are running 10.5% ahead of 2014 through November, and single family starts were up 14.6% year-over-year in November. Starts for 5+ units are up 13.1% through November compared to last year. Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment). These graphs use a 12 month rolling total for NSA starts and completions. The blue line is for multifamily starts and the red line is for multifamily completions. The rolling 12 month total for starts (blue line) increased steadily over the last few years, and completions (red line) have lagged behind - but completions have been catching up (more deliveries), and will continue to follow starts up (completions lag starts by about 12 months). Multi-family completions are increasing sharply year-over-year. I think most of the growth in multi-family starts is probably behind us - in fact multi-family starts might have peaked in June (at 510 thousand SAAR) - although I expect solid multi-family starts for a few more years (based on demographics).

NAHB: Builder Confidence declines to 61 in December - The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 61 in December, down from 62 in November. Any number above 50 indicates that more builders view sales conditions as good than poor. From the NAHB: Builder Confidence Edges Down One Point in December Builder confidence in the market for newly constructed single-family homes remained relatively flat in December, dropping one point to 61 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).  “For the past seven months, builder confidence levels have averaged in the low 60s, which is in line with a gradual, consistent recovery,” said NAHB Chief Economist David Crowe. “With job creation, economic growth and growing household formations, we anticipate the housing market to continue to pick up traction as we head into 2016.”...All three HMI components posted modest losses in December. The index measuring sales expectations in the next six months fell two points to 67, the component gauging current sales conditions decreased one point to 66, and the index charting buyer traffic dropped two points to 46. Looking at the three-month moving averages for regional HMI scores, the West increased three points to 76 while the Northeast rose a single point to 50. Meanwhile the Midwest dropped two points to 58 and the South fell one point to 64.

NAHB Housing Market Index: Down Slightly in December -- The National Association of Home Builders (NAHB) Housing Market Index (HMI) is a gauge of builder opinion on the relative level of current and future single-family home sales. It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook. The latest reading of 61, a decrease from the previous month's figure, was below the forecast of 63. Here is the opening of this morning's monthly report: Builder confidence in the market for newly constructed single-family homes remained relatively flat in December, dropping one point to 61 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). [link to report] Here is the historical series, which dates from 1985.

AIA: "Architecture Billings Index Hits another Bump " in November  Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment. From the AIA: Architecture Billings Index Hits another Bump As has been the case a few times already this year, the Architecture Billings Index (ABI) dipped in November. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the November ABI score was 49.3, down from the mark of 53.1 in the previous month. This score reflects a decrease in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 58.6, up just a nudge from a reading of 58.5 the previous month. “Since architecture firms continue to report that they are bringing in new projects, this volatility in billings doesn’t seem to reflect any underlying weakness in the construction sector,” said. “Rather, it could reflect the uncertainty of moving ahead with projects given the continued tightness in construction financing and the growing labor shortage problem gripping the entire design and construction industries.”
• Regional averages: South (55.4), West (54.5), Midwest (47.8), Northeast (46.2)
• Sector index breakdown: multi-family residential (53.8), institutional (52.0), commercial / industrial (51.0), mixed practice (47.6)

This graph shows the Architecture Billings Index since 1996. The index was at 49.3 in November, down from 53.1 in October. Anything below 50 indicates contraction in demand for architects' services.This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.The multi-family residential market was negative for most of the year - suggesting a slowdown or less growth for apartments - but has been positive for the last two months. According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction.

Hotel Occupancy: Heading for a Record Year --Here is an update on hotel occupancy from STR: US results for week ending 5 December The U.S. hotel industry recorded positive results in two of the three key performance measurements during the week of 29 November through 5 December 2015, according to data from STR, Inc.  In year-over-year measurements, the industry’s occupancy decreased 0.4% to 57.0%. However, average daily rate for the week was up 1.8% to US$116.51, and revenue per available room increased 1.5% to US$66.37.The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.  Hotels are currently in the weakest part of the year; December and January.

Spending on U.S. Travel and Tourism Slows in the Third Quarter - Growth in travel spending in the U.S. slowed in the third quarter, as tourists spent less on accommodations and recreational and entertainment activities. Travel and tourism spending rose at a seasonally adjusted rate of 4.3% in the third quarter, the Commerce Department said Wednesday, down from a revised rate of 8.4% in the second quarter. The previous estimate for the second quarter was 6.5%. As the labor market firms and gasoline prices remain low, American consumers have been spending more this year on the road, in the air, and at restaurants and bars, boosting employment in the hospitality sector. In the third quarter, 14,600 jobs were added at bars and restaurants, and air transportation also added 4,500 employees. Despite the low gasoline prices, spending on “transportation-related commodities” grew 7% in the third quarter, up from 4.5% in the second quarter. This category includes gasoline as well as car rentals and reservation services. Air travel spending grew by 13.3%, a slight deceleration from the second quarter’s 15.1%. But spending on “recreation and entertainment” fell by 8.1% in the third quarter, erasing some of the 5.6% growth it posted in the previous quarter. Spending on accommodations slowed in the third quarter to 4%, from a revised 13.5% growth rate in the second quarter.

CPI unchanged in November, Core CPI up 2.0% YoY --From the BLS: The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 0.5 percent before seasonal adjustment. The indexes for energy and food declined in November, offsetting an increase in the index for all items less food and energy and resulting in the seasonally adjusted all items index being unchanged. The energy index fell 1.3 percent, with all of the major component indexes declining except electricity. ...The index for all items less food and energy rose 0.2 percent in November, the same increase as in September and October. ... The index for all items less food and energy rose 2.0 percent, its largest 12-month increase since the 12 months ending May 2014. This was at the consensus forecast of no change for CPI, and also at the forecast of a 0.2% increase in core CPI.

November Consumer Price Index: Up Slightly from October - dshort - The Bureau of Labor Statistics released the November CPI data this morning. The year-over-year unadjusted Headline CPI came in at 0.50%, up from 0.17% the previous month. Year-over-year Core CPI (ex Food and Energy) came in at 2.02% (rounded to 2.0%), little changed from the previous month's 1.91% (rounded to 1.9%).Here is the introduction from the BLS summary, which leads with the seasonally adjusted monthly data: The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 0.5 percent before seasonal adjustment. The indexes for energy and food declined in November, offsetting an increase in the index for all items less food and energy and resulting in the seasonally adjusted all items index being unchanged. The energy index fell 1.3 percent, with all of the major component indexes declining except electricity. The food index fell 0.1 percent, as the index for food at home fell 0.3 percent, with five of the six major grocery store food group indexes declining.The index for all items less food and energy rose 0.2 percent in November, the same increase as in September and October. The indexes for shelter, medical care, airline fares, new vehicles, and tobacco were among the indexes that rose in November. In contrast, the indexes for recreation, apparel, household furnishings and operations, and used cars and trucks all declined. [More…] The first chart is an overlay of Headline CPI and Core CPI (the latter excludes Food and Energy) since the turn of the century. The highlighted two percent level is the Federal Reserve's Core inflation target for the CPI's cousin index, the BEA's Personal Consumptions Expenditures (PCE) price index.

Core CPI Rises 2.0% Driven By Surging Rents, Giving Fed Green Light To Hike Rate -- Just hours before the FOMC sits down in the Marriner Eccles to discuss just how it will announce the first rate hike in 9 years, 7 years to the day after it cut rates to zero, it got the best gift from the BLS it could have asked for: core inflation rose precisely the amount the Fed wanted from a year ago, ot 2.0% on the dot, the highest annual core CPI increase in the past year. Why the jump? "About two-thirds of this increase is accounted for by the shelter index, which rose 3.2 percent over the span." This took place even as the CPI for energy Fell 14.7% Y/y; while fuel oil plunged 31.4% from a year ago, which meant that the headline CPI increase from a year ago was a far more modest 0.5%, which still was the largest 12 month increase since the 12-month period ending December 2014. On a monthly basis, headline CPI came in unchanged, declining from the 0.2% increase a month ago, as the indexes for energy and food declined in November, offsetting an increase in the index for all items less food and energy. The energy index fell 1.3 percent, with all of the major component indexes declining except electricity. The food index fell 0.1 percent, as the index for food at home fell 0.3 percent, with five of the six major grocery store food group indexes declining. The full breakdown by components is shown below:

CPI, Empire survey, Redbook retail sales, Housing index - One of the Fed’s mandates. The ‘headline’ number is below target due to the energy impulse, but the ‘core’ rate, led by services, is on target. The question is whether energy prices, if they remain at current levels, will ‘pull down’ other prices. And the comparisons with last year are now vs the lower numbers that were released after the oil price collapse. And not to forget that the Fed uses futures prices as indications of future spot prices, even for non perishables, which technically only represent ‘storage prices’. So with oil futures prices substantially higher than spot (due to elevated storage costs which have been supported by Iran storing oil in anticipation of being able to sell it next year) the Fed’s forecasts will use those elevated prices to forecast that much more inflation. Highlights Consumer price inflation is very low though the deflationary thrust may be clearing. The CPI came in as expected with no change in November with the core rate, which excludes food and energy, also coming in at expectations with a moderate 0.2 percent gain.Many components show declines in the month including transportation, apparel (where low import prices are still at play), and recreation. Food prices also fell in the month, which is the first drop since March, while energy prices really fell, down 1.3 percent in November reflecting a 2.4 percent decline for gasoline in a dip that continues to extend through December as well. But there are areas showing pressure including medical care for a second month in a row. Housing is also up but only at a moderate 0.2 percent with owner’s equivalent rent also up 0.2 percent. Year-on-year prices are showing lift but reflect easy comparisons with price weakness this time last year. The overall rate is up 0.5 percent, 3 tenths higher in the month, with the core rate up 1 tenth to 2.0 percent which hits the Fed’s target.

November 2015 CPI  -- Here are my updated charts. Not much to say. Both shelter and non-shelter core inflation continue to move in the same ranges that they have seen for the past couple of years. Considering these levels, the expected rise in the Fed Funds Rate is a bit troubling. As I have mentioned before, interest rates may not be that important. Now, raising rates will have some disinflationary effect, so there is a danger here. But, housing is our constraint now, both on real production and on inflation. As important, or more important, than rates, within some range, is the expansion of mortgage debt outstanding. There have been false starts before, but recently it looks like mortgage levels have begun to expand again. So, I still have some hope that some force is leading to mortgage expansion - whether that is regulatory, or from development of unconventional mortgage funding sources, or from continued recovery in home equity. Maybe this can save us from ourselves.

November 2015 CPI Core Inflation Is Now At the Fed Target Rate of 2.0%.:  According to the BLS, the Consumer Price Index (CPI-U) year-over-year inflation rate was 0.5% - almost no inflation. The year-over-year core inflation (excludes energy and food) rate grew 0.1% to 2.0 %, and now is at the target set by the Federal Reserve. Does this green light movement of the federal funds rate by the FOMC?  As a generalization - inflation accelerates as the economy heats up, while inflation rate falling could be an indicator that the economy is cooling. However, inflation does not correlate well to the economy - and cannot be used as a economic indicator. There were few major influences on this month's CPI. Energy was mixed. The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 0.5 percent before seasonal adjustment. The indexes for energy and food declined in November, offsetting an increase in the index for all items less food and energy and resulting in the seasonally adjusted all items index being unchanged. The energy index fell 1.3 percent, with all of the major component indexes declining except electricity. The food index fell 0.1 percent, as the index for food at home fell 0.3 percent, with five of the six major grocery store food group indexes declining. The index for all items less food and energy rose 0.2 percent in November, the same increase as in September and October. The indexes for shelter, medical care, airline fares, new vehicles, and tobacco were among the indexes that rose in November. In contrast, the indexes for recreation, apparel, household furnishings and operations, and used cars and trucks all declined. The all items index rose 0.5 percent over the last 12 months; this is the largest 12 month increase since the 12-month period ending December 2014. The food index rose 1.3 percent over the span, while the energy index declined 14.7 percent. The index for all items less food and energy rose 2.0 percent, its largest 12-month increase since the 12 months ending May 2014.

Four takeaways from November real retail sales: As I have often written, real retail sales is perhaps my favorite metric, because it can be mined for so much information about the current status and future trend of the economy. With CPI being reported this morning as unchanged, we now have this metric through November. Let's look at it a number of separate ways: First of all, real retail sales set a record: This tells us that the expansion is intact. Next, YoY real retail sales are useful in projecting nonfarm payrolls in the 6 month period thereafter. Most recently, YoY retail sales growth has decelerated (blue), and nonfarm payroll growth (red) has followed suit: Growth, but at a slower pace than a year ago, is what is indicated for jobs in the next few months. Next, comparing YoY real retail sales (blue) with YoY real PCE's (red) tells us whether we are early or late in the expansion, as real retails sales tend to accelerate first out of a recession, and decelerate first in the latter half of an expansion. Here's the updated status: This continues to provide strong evidence that we are past mid-cycle. Finally, real retail sales per capita are a useful long leading indicator, tending to peak about a year before a recession starts. These have been basically flat since July, and November failed to exceed the September high: This leaves open the possibility of a recession starting sometime in the second half of next year. Since two other long leading indicators - bond yields and corporate profits - are also no longer flashing green, this gives added importance to housing permits and starts, which will be reported on Thursday.

Democrats Introduce Bill to Buy Me Some Brand New Guns -- Ah, the Democratic party is trying this againGun owners would be paid to sell their firearms to the federal government under new legislation from Democrats.The Safer Neighborhoods Gun Buyback Act, which was reintroduced this week by Rep. Donald Payne Jr. (D-N.J.), is the latest attempt by Democrats to address gun violence. The bill has 22 co-sponsors. I was going to write that this sounds like a really spiffing opportunity for me to get rid of my older guns and buy brand new ones. But then I saw this caveat: As part of Payne’s $360 million gun buyback initiative, the Justice Department would pay gun owners a premium of 25 percent more than the market value of their firearms. Gun owners could turn over their firearms to state and local governments as well as certain gun dealers. In return, the gun owners would receive a debit card they could use to purchase anything other than more guns and ammunition. Ah, you dastardly rasc—wait, actually that doesn’t really stop me doing anything much at all does it? Were I so minded, I’d just use the money on the debit card to pay for the things I have to buy anyway, and then buy all my guns back with the money in my bank account that I hadn’t had to spend.

Freight Shipments Hammered by Inventory Glut, Weak Demand | Wolf Street: The transportation sector just keeps getting worse. Within this transportation sector is freight, a gauge of the goods-based economy, which is having a rough time. In November, the number of freight shipments in North America plunged 5.1% from a year ago, according to the Cass Freight Index. It hit the worst level for any November since 2011. The index is based on $28 billion in freight transactions processed by Cass on behalf of its client base of “hundreds of large shippers,” Cass explains. It covers shipments, regardless of the mode of transportation, including shipments by truck and rail. It does not cover bulk commodities. Shippers include companies in consumer packaged goods, food, automotive, chemical, OEM, heavy equipment, and retail. This index of shipment volume has been lower year-over-year every month, with the exception of January and February, which makes for an increasingly awful looking year:Reasons for these lousy shipment volumes are spread throughout the economy, including a litany of big retailers that have come forward with crummy results and disappointing projections. Yesterday it was Dallas-based Neiman Marcus, which caters to luxury shoppers. It reported its first quarterly sales decline since 2009, down 1.8% from a year ago, with same-store sales down 5.6%. It booked a loss and laid off 500 people. As so many times, there’s a private-equity angle to it: Subject of an LBO in 2005, it’s now owned by Ares Capital and the Canadian Pension Plan Investment Board. They were hoping to make a bundle via an IPO. But now the IPO has been put on hold.

Massive Collapse in Trucking Shipments for Seven Straight Months --A chart of the DAT freight index posted on CCJ Indicators shows a massive, ongoing collapse in trucking shipments."Spot freight falls 15 percent: The amount of freight available on the spot market fell 15 percent in November from October, DAT reported last week. That dip is in line with seasonal trends, the online loadboard said. Year over year, however, freight volume fell 45 percent from November 2014. Van freight fell 2.9 percent from October, flatbed 39 percent and reefer 9.1 percent, DAT says." Not to worry! To that I would add that in August, September, October, and November, shipping volumes were down compared to the same month in 2011, 2012, 2013, and 2014 except for the single instance of September 2015 vs. September 2012.“We expect conditions to improve as we move through the year as the market further prepares for tight truck capacity when the HOS, ELD, and speed governor rules are implemented over the next two years,” says FTR’s Jonathan Starks. “The main risk right now is the weakness in manufacturing and the high inventory levels. The inventory situation needs to be corrected before we are likely to get a sizable burst of manufacturing activity. Look for that to happen early in 2016.

Rail Week Ending 12 December 2015: Bad Data Continues And Marginally Worse Than Last Week: Week 49 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 returned to contraction 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 544,975 carloads and intermodal units, down 8 percent compared with the same week last year. Total carloads for the week ending Dec. 12 were 270,953 carloads, down 13.2 percent compared with the same week in 2014, while U.S. weekly intermodal volume was 274,022 containers and trailers, down 2.3 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 39.5 percent to 10,764 carloads; and motor vehicles and parts, up 1.8 percent to 19,502 carloads. Commodity groups that posted decreases compared with the same week in 2014 included metallic ores and metals, down 27.2 percent to 20,935 carloads; coal, down 22.3 percent to 92,934 carloads; and petroleum and petroleum products, down 21.5 percent to 13,417 carloads. For the first 49 weeks of 2015, U.S. railroads reported cumulative volume of 13,589,488 carloads, down 5.4 percent from the same point last year; and 13,075,037 intermodal units, up 1.7 percent from last year. Total combined U.S. traffic for the first 49 weeks of 2015 was 26,664,525 carloads and intermodal units, a decrease of 2.1 percent compared to last year

LA area Port Traffic increased YoY in November  - First, from the Port of Long Beach: Port Sees Fifth Straight Month of Cargo Gains Strong cargo volume continued at the Port of Long Beach in November with 6.6 percent growth in container trade over the same month last year. It was the fifth straight month of increases and enough cargo to rack up the second-busiest November in the Port’s 104-year history....Upcoming post-holiday sales planned by retailers across the country drove the Port’s strong cargo numbers. Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic. The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).  To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average. On a rolling 12 month basis, inbound traffic was up 0.5% compared to the rolling 12 months ending in October. Outbound traffic was down 0.4% compared to 12 months ending in October. The recent downturn in exports might be due to the strong dollar and weakness in China. The 2nd graph is the monthly data (with a strong seasonal pattern for imports). Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March (depending on the timing of the Chinese New Year). Imports were up 6% year-over-year in November; exports were down 5% year-over-year.

November 2015 Sea Container Counts Continue to Be Soft: The data for this series is remains soft with the rolling averages remaining in contraction year-over-year - although imports did expand year-over-year comparing this month to the same month one year ago. This continues to indicate weak economic conditions domestically and globally. Consider that imports final sales are added to GDP usually several months after import - while the import cost itself is subtracted from GDP in the month of import. Export final sales occur around the date of export. Container counts do not include bulk commodities such as oil or autos which are not shipped in containers. For this month: As the data is very noisy - the best way to look at this data is the 3 month rolling averages. There is a direct linkage between imports and USA economic activity - and the change in growth in imports foretells real change in economic growth. Export growth is an indicator of competitiveness and global economic growth. The continued underperforming of exports is not a positive sign for GDP as the year progresses.There is reasonable correlation between the container counts and the US Census trade data also being analyzed by Econintersect. But trade data lags several months after the more timely container counts.

Road trip? Record numbers of Americans hit the highway - Motorists logged 273.5 billion miles on U.S. roads in October, a 2.4 percent increase over last year and the most ever for the month, according to data released on Wednesday by the U.S. Department of Transportation. The fresh numbers are the latest piece of evidence showing a sustained U.S. road revival that has been fueled by a rout in global petroleum prices and a growing U.S. economy. The national average price for gasoline on Wednesday was $2.01 per gallon, down from $2.52 a year ago, according to AAA, the motorists' advocacy organization. This year through October, motorists traveled 3.12 trillion vehicle miles on U.S. roads, a 3.4 percent increase over last year.  Driving activity in the United States is closely watched since the country accounts for about 10 percent of global gasoline demand.U.S. refiners continued to benefit from the surge in driving demand that has buoyed crack spreads and profits, as they ran their plants at full tilt to take advantage of the increased demand. Meanwhile, surging demand for new trucks and SUVs fueled by cheap gasoline is holding back improvements in U.S. fuel economy and greenhouse gas emissions, a government report due out on Wednesday is expected to show.

Tired of gas pumps? Fort Worth startup brings the fuel to you - Charlie Campbell drives a couple hundred miles per week, but has hardly stopped at a gas station in five months. Instead, the gasoline comes to him. The senior vice president for finance and administration at Hillwood Properties in far north Fort Worth is a customer of a startup that aims to revolutionize how Americans buy their fuel. The company is Booster Fuels, and it’s financially backed by developer Ross Perot Jr., Microsoft co-founder Paul Allen and others. The company, which is still in its infancy, for now runs a small fleet of fuel trucks that patrols the parking lots of major employers such as Hillwood, Galderma Laboratories and Dyncorp International in the AllianceTexas area. But its goal is to take the concept national. The customers — like Campbell, who orders a tank of gas once every week or two — work at major employment centers. When those customers need gas, they use a smartphone app — similar to how Uber users call for a ride — and request that a fuel truck find their car in a parking lot (using global positioning technology that is part of the app) and fill the tank. Usually, in less than an hour the fuel truck arrives in their parking lot and fills them up. The customers can carry on with their workday, doing whatever they do in cubicles and conference rooms, while a driver trained in hazardous materials fills up their vehicle, checks their tire pressure and sometimes even wipes the windshield.

Fed: Industrial Production decreased 0.6% in November - From the Fed: Industrial production and Capacity Utilization Industrial production declined 0.6 percent in November after decreasing 0.4 percent in October. In November, manufacturing production was unchanged from October. The index for utilities dropped 4.3 percent, as unusually warm weather held down the demand for heating. The index for mining fell 1.1 percent in November, with much of this decrease attributable to sizable declines for coal mining and for oil and gas well drilling and servicing. At 106.5 percent of its 2012 average, total industrial production in November was 1.2 percent below its year-earlier level. Capacity utilization for the industrial sector declined 0.5 percentage point in November to 77.0 percent, a rate that is 3.1 percentage points below its long-run (1972–2014) average.  This graph shows Capacity Utilization. This series is up 10.1 percentage points from the record low set in June 2009 (the series starts in 1967). Capacity utilization at 77.0% is 3.1% below the average from 1972 to 2012 and below the pre-recession level of 80.8% in December 2007.   The second graph shows industrial production since 1967. Industrial production decreased 0.6% in November to 106.5. This is 22.1% above the recession low, and 1.3% above the pre-recession peak. This was below expectations of a 0.2% decrease, partially due to the warm weather. The weather is boosting some sectors - like housing starts - and hurting other sectors like heating utilities.

November 2015 Industrial Production Data Weak: The headlines say seasonally adjusted Industrial Production (IP) declined (the manufacturing portion of this index was unchanged month-over-month). Consider this a soft data point that was slightly worse than expected. Our analysis is slightly better than the headline view.

  • -Headline seasonally adjusted Industrial Production (IP) decreased 0.6 % month-over-month and down 1.2 % year-over-year.
  • -Econintersect's analysis using the unadjusted data is that IP growth decelerated 0.2 % month-over-month, and is up 0.9 % year-over-year.
  • -The unadjusted year-over-year rate of growth decelerated 0.5 % from last month using a three month rolling average, and is up 0.9 % year-over-year.

IP headline index has three parts - manufacturing, mining and utilities - manufacturing was unchanged this month (up 0.9 % year-over-year), mining down 1.1 % (down 8.2 % year-over-year), and utilities were down 4.3 % (down 7.6 % year-over-year). Note that utilities are 10.6 % of the industrial production index, whilst mining is 15.5 %.   Unadjusted Industrial Production year-over-year growth for the past 2 years has been between 2% and 4% - it is currently 0.5 %. It is interesting that the unadjusted data is giving a smooth trend line.Economic downturns have been signaled by only watching the manufacturing portion of Industrial Production. Historically manufacturing year-over-year growth has been negative when a recession is imminent. This index is not indicating a recession is imminent.

Industrial Production Declines Most in 3.5 Years, Down Eighth Time in Ten Months -- Industrial production shocked to the downside this morning with a drop of 0.6%, the most in 3.5 years vs. an Econoday Consensus guess of -0.2%. Moreover, last month was revised lower, from -0.2% to -0.4%.  November was another weak month for the industrial economy, in part reflecting unusually warm temperatures that are driving down utility output. Industrial production came in at the Econoday low forecast, down a very sharp 0.6 percent in November. This is the biggest drop in 3-1/2 years. Utility output fell a monthly 4.3 percent after falling 2.8 percent in October. Mining, reflecting low commodity prices and contraction in energy extraction, has also been week, down 1.1 percent for a third straight decline. This brings us to the most important component, manufacturing where October's 0.3 percent bounce higher (revised downward from 0.4 percent) now unfortunately looks like an outlier. Manufacturing production came in unchanged in November reflecting weakness in motor vehicles, down 1.0 percent in the month, and also a dip back for construction supplies which fell 0.2 percent after a weather-related surge of 2.3 percent in October. One positive is a slight snapback for business equipment which, after declines in the two prior months, rose 0.2 percent. All the weakness is pulling down capacity utilization, to 77.0 percent in November for a heavy 5 tenths dip. Utilization is running more than 3 percentage points below its long-term average. Mining utilization is now under 80 percent, down 1.1 points in the month to 79.4 percent. Utility utilization fell 3.4 points in the month to 74.5 percent with manufacturing utilization down 1 tenth to 76.2 percent. Excess capacity, though not cited as a major factor behind the lack of inflation in the economy, does hold down the cost of goods.

Industrial Production Crashes Most Since 2009, Weather Blamed -- For the third month in a row US Industrial Production dropped MoM, crashing 0.6% in November (against expectations of a mere 0.2% drop). This is the 9th month of 2015 with no MoM increase in industrial production and is the biggest MoM drop since March 2012. However,for the first time since Dec 2009, Industrial Production fell YoY (down 1.2%) signalling America is deep in recession. The excuse blame is "unusually warm weather"which sent the utilities index down 4.3% as demand for heating tumbled. Ironically, capacity utilization fell to 77.0% (against exp of77.4%, down from 77.5%), its lowest since January 2014, when it was blamed on cold winter. Recession? Transitory collapse in Industrial Production... In 35 years there has not been a drop in IP without a recession. So if the wealther was to blame for November, what was to blame for January, February, March, April, May, June, September, and October? Or could it be unequivocally good low oil prices? Oil & Gas Well Drilling Output is the lowest this century...

The Big Four Economic Indicators: November Industrial Production Contracts Again, YoY Negative -  According to the Federal Reserve: Industrial production declined 0.6 percent in November after decreasing 0.4 percent in October. In November, manufacturing production was unchanged from October. The index for utilities dropped 4.3 percent, as unusually warm weather held down the demand for heating. The index for mining fell 1.1 percent in November, with much of this decrease attributable to sizable declines for coal mining and for oil and gas well drilling and servicing. At 106.5 percent of its 2012 average, total industrial production in November was 1.2 percent below its year-earlier level. Capacity utilization for the industrial sector declined 0.5 percentage point in November to 77.0 percent, a rate that is 3.1 percentage points below its long-run (1972–2014) average. The full report is available here. Today's report on Industrial Production for November shows a month-over-month decline of 0.6 percent (0.56 percent to two decimal places), which was below the consensus of a 0.1 percent decrease. Despite two upward revisions and one downward revision, all of 0.1 percent to the previous three months, this indicator has posted a monthly decline for eight of the last ten months and is down 1.17% year-over-year. The year-over-year level is lower than at the start of all ten recessions since 1950 and now in negative territory for the first time since 2009.  As a long-term indicator, it needs two key adjustments to correlate with economic reality. First, it should be adjusted for inflation using some sort of deflator relevant to production. Second, it should be population-adjusted. The chart below is another way to look at Industrial Production over the long haul. It uses the Producer Price Index for All Commodities as the deflator and Census Bureau's mid-month population estimates to adjust for population growth. We've indexed the adjusted series so that 2012=100.

Empire State Manufacturing Declined, but Decline Slowed in December --This morning we got the latest Empire State Manufacturing Survey. The diffusion index for General Business Conditions at -4.6 (-4.59 to two decimals) shows an increase from last month's -10.74, which still signals a decline in activity, but at a slower rate. The forecast was for a reading of -6.0. The Empire State Manufacturing Index rates the relative level of general business conditions in New York state. A level above 0.0 indicates improving conditions, below indicates worsening conditions. The reading is compiled from a survey of about 200 manufacturers in New York state. Here is the opening paragraph from the report. The December 2015 Empire State Manufacturing Survey indicates that business activity declined for a fifth consecutive month for New York manufacturers. However, the pace of decline slowed somewhat: the headline general business conditions index, though still negative, moved up six points to -4.6. New orders continued to drop, but shipments increased for the first time since the summer. Price indexes suggested that input prices increased slightly, while selling prices remained slightly lower. Labor market conditions deteriorated noticeably, with survey indicators pointing to a sharp decline in both employment levels and hours worked. Nonetheless, indexes for the six-month outlook increased markedly, suggesting more widespread optimism about future business conditions. Here is a chart of the current conditions and its 3-month moving average, which helps clarify the trend for this extremely volatile indicator:

Empire State Manufacturing Contracts Fifth Month, Employment and Workweek Worst Since 2009 -- As expected, the Empire State Manufacturing Index is in contraction for the fifth consecutive month. Employment and workweek both collapsed. Economists pretty much got the index correct with a Consensus Estimate of -7.00 vs. the actual reading of -4.59.  Factory activity continues to contract in the New York manufacturing region and especially, unfortunately, employment and the workweek. The Empire State index posted its fifth negative reading in a row, minus 4.59 for December which however is the least weak reading of the run. New orders, at minus 5.07, are down for a seventh month in a row but here to the degree of contraction is easing. Not easing, however, is employment which is deeply negative at minus 16.16 for the fourth contraction in a row and the deepest since July 2009. The workweek is another disappointment, at minus 27.27 for the worst reading since even further back, to April 2009. But there are pluses in this report led by a big gain for the six-month outlook, to 38.51 from 20.33. The gain reflects greater optimism for new orders and shipments but no greater optimism for employment where hiring is expected to be no more than moderate. Turning back to negatives, prices received are down for a fourth month in a row, at minus 4.04. Contraction in prices for finished goods points to price concessions and lack of demand. There were no positives in this report. The six-month outlook is generally useless as I have proven before.   Bottoms tend to form just as everyone throws in the towel. Only following extreme negative sentiment, after everyone gives up, does the future outlook tend to be too pessimistic. Thus, increasing optimism in the face of these negative readings is best viewed as worrisome, not a positive.

NY Fed: Manufacturing Contracts Again in Region, Outlook Improves -- The NY Fed manufacturing survey indicated contraction for the fifth consecutive month in the New York region. However the outlook has improved. From the NY Fed: Empire State Manufacturing SurveyThe December 2015 Empire State Manufacturing Survey indicates that business activity declined for a fifth consecutive month for New York manufacturers. However, the pace of decline slowed somewhat: the headline general business conditions index, though still negative, moved up six points to -4.6. New orders continued to drop, but shipments increased for the first time since the summer. .....Labor market conditions deteriorated noticeably: the index for number of employees, negative for a fourth consecutive month, fell nine points to -16.2, and the average workweek index plunged thirteen points to -27.3, its lowest level since early 2009. Indexes for the six-month outlook increased markedly this month, suggesting more widespread optimism about future business conditions. The index for future business conditions jumped eighteen points to 38.5, and the indexes for future new orders and future shipments also rose sharply. Labor market conditions were expected to improve, with the index for expected number of employees little changed at 15.2 and the index for expected workweek rising to 10.1.

Empire Manufacturing Contracts For 5th Month As Workweek Crashes Near Record Lows  -- While Empire Fed Manufacturing survey modestly beat expectations (-4.6 vs -7 exp), it has been in contraction for 5 straght months. The biggest driver of the 'beat' was a massive surge in 'hope' (six month outlook surged from 20 to 38.5 - its biggest percentage gain since Nov 2011). At the same time as hope soars, employment tumbles to 6 year lows and average workweek collapses to its lowest since the peak of the crisis in 2009.  5th straight month of contraction...

Philly Fed Manufacturing Index: Activity Weakens in December  - The Philly Fed's Manufacturing Business Outlook Survey is a monthly report for the Third Federal Reserve District, covers eastern Pennsylvania, southern New Jersey, and Delaware. While it focuses exclusively on business in this district, this regional survey gives a generally reliable clue as to direction of the broader Chicago Fed's National Activity Index. The latest gauge of General Activity came in at -5.9, down from last month's 1.9. The 3-month moving average came in at -2.8, up from -2.9 last month. Since this is a diffusion index, negative readings indicate contraction, positive ones indicate expansion. The Six-Month Outlook was up at 23.0, versus the previous month's 43.4. Today's -5.9 came in well below the 1.5 forecast at Here is the introduction from the survey released today:Manufacturing conditions in the region weakened this month, according to firms responding to the December Manufacturing Business Outlook Survey. The indicator for general activity, which was slightly positive last month, fell into negative territory. The indexes for new orders and shipments were mixed. Firms reported slight increases in overall employment this month and an increase in average work hours compared with November. Manufactured goods prices, as well as input prices, declined this month. Nearly all of the survey’s future indicators showed notable weakening this month. (Full Report)The first chart below gives us a look at this diffusion index since 2000, which shows us how it has behaved in proximity to the two 21st century recessions. The red dots show the indicator itself, which is quite noisy, and the 3-month moving average, which is more useful as an indicator of coincident economic activity.

December 2015 Philly Fed Manufacturing Fell Back Into Contraction.: The Philly Fed Business Outlook Survey fell back into contraction. However, key elements are also in contraction. Both manufacturing surveys released for this month are in contraction, This is a very noisy index which readers should be reminded is sentiment based. The Philly Fed historically is one of the more negative of all the Fed manufacturing surveys but has been more positive then the others recently. The index declined from +1.9 to -5.9. Positive numbers indicate market expansion, negative numbers indicate contraction. The market expected (from Bloomberg) -5.0 to 8.0 (consensus 1.2). Manufacturing conditions in the region weakened this month, according to firms responding to the December Manufacturing Business Outlook Survey. The indicator for general activity, which was slightly positive last month, fell into negative territory. The indexes for new orders and shipments were mixed. Firms reported slight increases in overall employment this month and an increase in average work hours compared with November. Manufactured goods prices, as well as input prices, declined this month. Nearly all of the survey's future indicators showed notable weakening this month. Most Current Indicators Fall The diffusion index for current activity returned to negative territory this month, decreasing from 1.9 to -5.9. This is the third negative reading in the past four months (see Chart 1). The index for current new orders remained negative and fell 6 points, to -9.5. However, firms reported higher shipments, as the current shipments index increased 6 points to a reading of 3.7. Firms reported a decline in unfilled orders, with the index falling from 2.4 to -17.7. The current inventories index increased 9 points to its first positive reading in four months.

Philly Fed Back in Contraction, Index Below Any Economist's Guess --Ho hum. Another manufacturing report, and another debacle. The Philly Fed report came in much worse than expected and is back in contraction at -5.9, below the Econoday Consensus estimate of 1.2 and even below the lowest economist's estimate of -5.0.  The negative headline, below Econoday's low-end estimate, isn't even half of story for the December Philly Fed report which is pointing to another rough month for the nation's factory sector. The headline index came in at minus 5.9 for its third negative reading in four months. New orders have been in the negative column for the last three months, at a steep minus 9.5 in today's report. Unfilled orders, which popped up slightly in November, are back in the minus column and deeply in the minus column at 17.7.Manufacturers in the Philly Fed's sample worked down their backlogs to keep up shipments which came in on the plus side at 3.7. But without new orders coming in, shipments are bound to fall. Employment, likewise, is bound to fall though it did hold in the plus column for a second month in a row at 4.1 in December. Ominously, price data are beginning to turn deeply negative, at minus 9.8 for inputs and minus 8.7 for final goods -- the latter an indication of weakening demand. Another ominous detail in the report is a breakdown in the 6-month outlook, down more than 20 points to 23.0 which is low for this reading. Expectations for future orders are especially weak. Today's report falls in line with Tuesday's Empire State report and are both reminders that weak global demand, together with the breakdown in the energy and commodity sectors, are pulling down the nation's factory sector.

Philly Fed Collapses To Lowest Since Feb 2013 As 'Hope' Crashes - Following last month's bounce, driven by a surge in 'hope', The Philly Fed collapsed to -5.9 (dramatically missing expectations of +1.0) and hitting its lowest levels since Feb 2013. With 'hope' plunging back to its lowest levels since Dec 2012, there was little to support the dream as Prices Paid and Received plunged, and New Orders cratered to 3 year lows. Future CapEx expectations crashed as did workweek and employment outlooks.

Kansas City Fed: Regional Manufacturing Activity "declined moderately" in December -- From the Kansas City Fed: Tenth District Manufacturing Activity Declined Moderately The Federal Reserve Bank of Kansas City released the December Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity declined moderately, although expectations for future activity remained solid. “After two months of mostly steady activity, regional factories pulled back again in December,” said Wilkerson. “The weakest activity was in energy-concentrated states.”..Tenth District manufacturing activity declined moderately in December, reversing gains from the last several months, while producers’ expectations for future activity remained solid. Most price indexes continued to ease further. The month-over-month composite index was -9 in December, down from 1 in November and -1 in October ...The employment index dropped from -8 to -14, and the capital expenditures index posted its lowest level since August 2010. ... Future factory indexes were mixed, but remained at generally solid levels. The future composite index was basically unchanged at 7, while the future production, shipments, and new orders for exports indexes increased modestly.

Kansas City Fed Survey: Pull Back After Gains --The Kansas City Fed Manufacturing Survey business conditions indicator measures activity in the following states: Colorado, Kansas, Nebraska, Oklahoma, Wyoming, western Missouri, and northern New Mexico Quarterly data for this indicator dates back to 1995, but monthly data is only available from 2001.Here is an excerpt from the latest report: The Federal Reserve Bank of Kansas City released the December Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity declined moderately, although expectations for future activity remained solid. "After two months of mostly steady activity, regional factories pulled back again in December," said Wilkerson. "The weakest activity was in energy-concentrated states." [Full release here]  Here is a snapshot of the complete Kansas City Fed Manufacturing Survey. The three-month moving average, which helps us visualize trends, is back to levels last seen in April.

Kansas City Fed Manufacturing Also Contracting in December 2015: Of the three regional manufacturing surveys released to date for December, all are in contraction There were no market expectations reported from Bloomberg - and the reported value was -9. Any value below zero is contraction.Tenth District manufacturing activity declined moderately in December, reversing gains from the last several months, while producers' expectations for future activity remained solid. Most price indexes continued to ease further. The month-over-month composite index was -9 in December, down from 1 in November and -1 in October (Tables 1 & 2, Chart). The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. The decline came from both durable and nondurable goods factories, particularly for food and beverage, computer and electronic equipment, and machinery production. The weakest activity continues to be in energy-concentrated states. The majority of other month-over-month indexes also decreased. The production index fell from 3 to -8, and the shipments, new orders, and employment indexes dropped modestly. In contrast, the order backlog index improved somewhat from -17 to -2. The raw materials inventory fell from 3 to -16, and the finished goods inventory index also moved further into negative territory. Most year-over-year factory indexes declined in December after improving slightly last month. The composite yearover-year index fell from -5 to -15, a six-year low, and the production, shipments, new orders, and order backlog indexes also decreased moderately. The employment index dropped from -8 to -14, and the capital expenditures index posted its lowest level since August 2010. Both inventory indexes decreased sharply from the previous month.

Kansas City Manufacturing Region Back In Contraction, Employment in Severe Contraction - The Kansas City manufacturing index is back in contraction as expected in this corner after a brief wonderland experience last month that took the diffusion index to +1.  Economists don't guess about this regions, so let's dive into the details straight from the 10th District Fed Report.  The first three columns show the Fed surveys about 100 manufacturing companies. The diffusion index is formed by subtracting the number of companies with a decrease from the number of companies with an increase. The last column is a seasonal adjustment. The bad news in manufacturing goes on, and on, and on. This is the eighth contraction in nine months.

US Manufacturing PMI Plunges To Lowest Since 2012 As Factory Orders Collapse To 2009 Lows -- Following the collapse in industrial production, it is no surprise that Markit's Manufacturing PMI has plunged to 51.3, its lowest since October 2012. Under the surface it is a disaster with production volume growth the softest since October 2013, and new orders crashed to worst since September 2009. But do not ignore manufacturing because, as Markit notes, “Although manufacturing only accounts for around one-tenth of the economy, the Manufacturing PMI exhibits a high correlation of 77% with GDP as industrial activity has an important cyclical impact on other parts of the economy. With many sectors such as transport and business services dependent upon the manufacturing economy’s health, the downturn in the survey data sends a warning signal that the US upturn appears to be rapidly losing momentum as we move into 2016. However, the picture will become clearer with the publication of services PMI numbers on Friday.” Charts: Bloomberg

PMI Services Flash December 18, 2015: The services PMI is slowing sharply this month, to 53.7 vs 56.1 for the final November reading and vs 56.5 for the flash reading. This is the lowest reading in a year reflecting the slowest growth in new orders since January and a fifth straight month of contraction in backlog orders. Optimism over future growth is understandably down, reflecting what the report says is a subdued global outlook, election uncertainty and softer demand in the energy sector. Price readings remain subdued with inputs at their weakest pace since February. Despite weakness in orders and the downcast outlook, hiring is described as "resilient". Given weakness in global demand, the service economy is the nation's bread and butter and today's report, though only one data point, hints at slowing for the economy.

The New U.S. Digital Divide: Between the Haves and the Have-Mores - The rich are different from you and me. They have more technology. That’s the conclusion of a new report from the McKinsey Global Institute, “Digital America: A Tale of the Haves and Have-Mores,” which finds that the sectors, firms and people investing more in digital technology are reaping outsized rewards. The authors start from the premise that nearly everyone is benefiting from technology at some level, from consumers driving home with the help of GPS to small businesses selling their wares online. But some “frontier firms,” those on the leading edge of digitization, have made substantially more investment in digital technology and are making far better use of it. The report measures digitization along three axes: investment in assets like computers and data storage, usage of technologies like payment systems or social marketing, and how digitally enabled the workforce is. “The companies that use digital technology more seem to have higher growth, higher profitability, and are disrupting everyone else,” The divide between the “haves” and “have mores” shows up not just between firms, but across sectors. Digitization has made little inroads in construction, health care and agriculture, all sectors where productivity growth has been negative between 2005 and 2014, according to the report. Leading sectors have posted productivity growth ranging from 2.9% in oil and gas to 4.6% in ICT over the same period.  At the individual level, that translates to faster wage growth in those sectors. Sectors further along the digital labor index, which measures how many occupations and tasks are digitized and the penetration, or “deepening,” of digital technology, have seen wages grow between 4% and 5% between 1997 and 2014, well above the 2.4% economy average, the report said

Weekly Initial Unemployment Claims decrease to 271,000 --The DOL reported: In the week ending December 12, the advance figure for seasonally adjusted initial claims was 271,000, a decrease of 11,000 from the previous week's unrevised level of 282,000. The 4-week moving average was 270,500, a decrease of 250 from the previous week's unrevised average of 270,750.  There were no special factors impacting this week's initial claims. The previous week was unrevised at 282,000. The following graph shows the 4-week moving average of weekly claims since 1971.

Why Has The Labor Participation Rate Plunged?  -- Why has the percentage of the population that's in the work force declined so dramatically? It's a question many have asked, and Gordon T. Long and I attempt to answer in our most recent video program The Participation Rate Mystery--Solved. Why does the Participation Rate matter? Intuitively, we all understand that the lower the participation rate (i.e. the percentage of the population with a job or actively looking for a job), the greater the tax burden on the remaining workers. We all understand that as the number of workers supporting each retiree declines, the remaining workers will have less income to support their own families, as the rising costs of retirees must be paid with higher taxes in our pay-as-you-go social and healthcare programs such as Social Security and Medicare /Medicaid. Where there were once around eight workers for every retiree, now the ratio is down to 2.5 workers per retiree--and the cost of providing healthcare for the elderly has soared. For context, let's look at a few charts of the participation rate and related metrics.Let's start with the engine of wealth creation--productivity. The productivity of industrialized nations' work forces topped out in the cheap-oil boom years of the 1960s.

No evidence of labor shortages, but Congress is nevertheless considering giving H-2B employers access to more exploitable and underpaid guestworkers -- Expanding and deregulating the H-2B visa program (a temporary foreign worker program that allows U.S. employers to hire low-wage guestworkers from abroad temporarily for seasonal, non-agricultural jobs, mostly in landscaping, forestry, seafood processing, and hospitality) has been a top goal for business groups including the U.S. Chamber of Commerce, ImmigrationWorks USA, landscaping and seafood employers, and the Essential Worker Immigration Coalition (EWIC)—lobbyists representing employers claiming they can’t find U.S. workers willing to mow lawns, plant trees, or pick crabmeat. These lobbyists have never presented a credible case regarding labor shortages in H-2B jobs. But H-2B employers have spent millions of dollars on litigation, lobbying, and campaign contributions; anything it takes to keep wages from rising and to prevent their access to low-paid indentured foreign workers with few rights from ever being restricted. And it’s happening again. To avoid a government shutdown, Congress has to pass appropriations legislation soon to fund the entire federal government. Whenever that happens, members of Congress attempt to insert “riders,” legislative provisions tucked into appropriations bills that amend the law in substantive ways that have nothing to do with appropriations. Thanks to the aforementioned corporate lobbyists, the current 2016 fiscal year appropriations negotiations include discussions about riders to remake the H-2B program by increasing its size and lowering the wage rates employers are required to pay, which would permit employers to pay their H-2B workers much less than American workers employed in the same jobs and local area. In addition, legislation in the House and Senate has been introduced that would permanently reduce H-2B wage rates, triple the program in size, and repeal all of the protections for foreign and American workers that the Obama administration just implemented in April 2015, after fighting opposition from corporate lobbyists and Congress for the past five years.

Black unemployment is significantly higher than white unemployment regardless of educational attainment -- The black unemployment rate is nearly or more than twice the white unemployment rate regardless of educational attainment. It is, and always has been, about twice the white unemployment rate; however, the depth of this racial inequality in the labor market rarely makes the headlines.  Over the last 12 months, the average unemployment rate for black college graduates has been 4.1 percent—nearly two times the average unemployment rate for white college graduates (2.4 percent) and equivalent to the unemployment rate of whites with an associate’s degree or who have not completed college (4.0 percent). The largest disparity is seen among those with less than a high school diploma: while whites with less than a high school diploma have an unemployment rate of 6.9 percent, the black unemployment rate is 16.6 percent—over two times the white average.The broader significance of this disparity suggests a race penalty whereby blacks at each level of education have unemployment rates that are the same as or higher than less educated whites. It also means that black college graduates are the only group of black workers who have an unemployment rate similar to the overall unemployment rate, as you can see from the horizontal line in the above chart. For whites, the only group whose unemployment rate exceeds the national average is those with less than a high school education. Persistent disparities in unemployment are constant reminders of how race continues to have an undue influence on life in this country.

Sen. Mikulski wrecks labor standards in H-2B guestworker program - Senator Barbara Mikulski wants the public to believe that replacing U.S. workers with lower-paid foreign guestworkers is somehow good for us and good for the economy. That’s nonsense. The economy needs good-paying jobs for U.S. workers, not jobs that pay $5 an hour less and get filled by indentured workers recruited from foreign countries. Sen. Mikulski claims that her efforts to gut the Department of Labor’s H-2B visa program regulations are all about trying to protect the Maryland seafood industry, which she claims is at risk because few Americans are willing to take oyster and crab-shucking jobs for minimum wage. What she doesn’t tell the public is that the H-2B visa program she’s expanding—while simultaneously gutting all of its rules—is used mostly to bring in landscape laborers and gardeners, not crab pickers. Her claim that bringing in one poorly paid gardener creates four jobs in the U.S. economy—a claim concocted by a conservative think tank—is utter baloney. You can find some economist somewhere who will defend almost any claim, but that particular claim is indefensible. Bringing in landscape laborers on H-2B visas who are indentured to their employers and can’t bargain for better wages and working conditions lowers wages for Americans who would otherwise get those jobs, and it leaves more money in the employer’s pocket, but it doesn’t create additional jobs. As EPI has shown, there are no labor shortages in landscaping or other H-2B occupations, but employers want H-2B workers instead of Americans because they can control them and keep them in shocking conditions.

BLS: Unemployment Rate decreased in 27 States in November -- From the BLS: Regional and State Employment and Unemployment Summary Regional and state unemployment rates were little changed in November. Twenty-seven states had unemployment rate decreases from October, 11 states had increases, and 12 states and the District of Columbia had no change, the U.S. Bureau of Labor Statistics reported today.  ... North Dakota had the lowest jobless rate in November, 2.7 percent, followed by Nebraska, 2.9 percent. New Mexico had the highest rate, 6.8 percent. This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession. The size of the blue bar indicates the amount of improvement. The yellow squares are the lowest unemployment rate per state since 1976. The states are ranked by the highest current unemployment rate. New Mexico, at 6.8%, had the highest state unemployment rate. The second graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 11 states with an unemployment rate at or above 11% (red). Currently no state has an unemployment rate at or above 7% (light blue); Only nine states are at or above 6% (dark blue).

Health Care and Education Jobs Bolster States’ Employment - Health care jobs are rising across the country, as an aging population demands more nurses, doctors and home health aides. The economy added 638,000 jobs in the education and health services industry sector between November 2014 and November 2015, the bulk of them in health care. Twenty-one states added at least 10,000 in that sector over the past year, the Labor Department reported Friday. Three large or densely populated states, California, Texas and New York, added 71,000, 63,800 and 72,100 education and health services job respectively over the previous 12 months. Florida, home to many retirees, added 46,900 jobs in the sector.  An estimated 10,000 Americans turn 65 every day as the baby boom generation reaches its golden years, the Pew Research Center estimates, which will create growing demand for health care. At the same time, the number of school-age children has been falling. From 2009 to 2014, the population ages 5 to 18 fell by 1%, according to an analysis by Adam Ozimek at Moody’s Analytics, which could lead to a slowdown in demand for education services and a subsequent decline in state and local employment. Across the country, 35 states and the District of Columbia added jobs in November, and 14 states lost jobs. Nevada, where two supermarket chains, Haggen and Fresh & Easy, announced layoffs in November, lost 6,700 jobs. Texas, Florida and Virginia saw overall employment grow by 16,300, 35,200, and 14,400 jobs respectively.

Where There’s Distress in the U.S. Economy --The vast majority of large U.S. counties saw employment and wage growth in the past year, but the economy is still dotted with pockets of distress. More than 93% of the nation’s 342 largest counties posted job growth between June 2014 and June 2015, the Labor Department said Thursday. Each of these counties had at least 75,000 jobs during that period. Many of the fastest-growing counties were in the same states as counties where jobs were slipping away, underscoring the uneven nature of the economic recovery.  Of the 20 counties posting job losses in that period, five were in Texas or Louisiana, two states heavily reliant on the energy industry, which has been slammed by low oil prices. Ector, Texas, lost 2,352 jobs in the mining sector over the year as total employment in the county fell by 4.2%. But Texas and Louisiana also had three of the top 10 fastest-growing counties, including counties in suburban Dallas and Houston, where employment climbed by 5% or more in the period, compared with nationwide job growth of 2%. Another sign that the nation’s economic growth is spreading unevenly: Of the top 10 counties with the fastest employment growth, none ranks in the top 10 for wage growth, suggesting that many of the new jobs may be lower- or middle-wage. The counties adding jobs at the swiftest pace are mostly found across the South—Florida, Texas, Louisiana, Arkansas—and in Utah. As for wage growth, the money’s in California. Of the 10 counties with the fastest-growing wages, seven were in that state, with Ventura County’s 15.2% pay raise topping the list. The average weekly wage there grew by $143 over the year ended June 2015. In Santa Clara, wages grew 11.3%, for an extra $214 per weekly paycheck. But Kern County, Calif., with an economy largely based on oil production, saw its employment and wages both fall by 1%.

Where the Jobless Rate Is 2.3%, Here’s What Happened to Wages - How tight does the labor market have to get before wages really start heating up? In Lincoln, Neb., average hourly earnings were stagnant until the unemployment rate crossed below 2.5% in the fall of 2014. Then, wages took off. Since last October, they gained as much as 10.9% from a year earlier. The jobless rate in October: 2.3%. No one is suggesting the national unemployment rate has to get down to 2.5% before wages show signs of life. But there are some questions on what full employment looks like. While the unemployment rate is back to 2008 levels, other metrics look weak.“I continue to judge that there remains slack in the economy, margins of slack that are not reflected in the standard unemployment rate, and in particular I’ve pointed to the depressed level of labor-force participation, and also the somewhat abnormally high level of part-time employment,” Federal Reserve Chairwoman Janet Yellen said this week. Ms. Yellen’s comments came as Fed officials raised the central bank’s benchmark interest rate for the first time since 2006, citing the possibility of overshooting its employment and inflation objectives.The nonaccelerating inflation rate of unemployment, or Nairu, is the Goldilocks unemployment rate–neither too hot nor too cold. There is demand for workers but not so much that higher wages are fueling excessive inflation.The Fed, tasked by Congress with promoting maximum employment and stable prices, would like to reach that figure. Fed officials’ median projection for the normal long-run unemployment rate was 4.9% as of December. But economists don’t agree on a specific number, or even whether the economy has already reached full employment. In October and November, the unemployment rate was 5% and wages showed signs of firming.

Do Minimum-Wage Boosts Reduce Reliance on Government Assistance? - WSJ: For years, the the union-backed Fight for $15 campaign has argued that raising minimum wages will curb low-wage workers’ reliance on government assistance programs—saving taxpayers money. Not so, says a new study that found federal and state minimum-wage boosts have had no statistically significant impact on working-age adults’ net use of several such programs, including Medicaid and the Supplemental Nutrition Assistance Program formerly known as the food-stamp plan. The study, partly funded by the right-leaning Employment Policies Institute, contends a $15 minimum wage is poorly targeted to recipients of these programs. Among those who would be affected by a $15 minimum wage, just 12% are SNAP recipients and just 10% are Medicaid recipients. It’s a less-explored part of a years-old debate between economists who have researched the hot-button topic of minimum wage and its effects on the U.S. economy. The difference with this new report, being released Friday, its authors say, is that it looks at a wider swath of government assistance programs over a longer period of time and across multiple major data sources, including those with information on welfare caseloads and expenditures.

Fifth of US adults live in or near poverty -- - One in five US adults now lives in households either in poverty or on the cusp of poverty, with almost 5.7m having joined the country’s lowest income ranks since the global financial crisis. Many of the new poor, or near-poor, have become so even amid an economic recovery that is widely expected to lead the US Federal Reserve to raise interest rates next week for the first time in almost a decade. More than 45 per cent of them — almost 2.5m adults — have joined the lowest income ranks since 2011, long after the post-crisis recession was ostensibly over. The findings, contained in data prepared for a new study of the US middle class by the Pew Research Center and shared with the Financial Times, put a stark human face on the economic legacy left by the crisis and reveal how uneven the recovery has been. They illustrate how many Americans are being left behind even amid the strong jobs growth that, should the Fed move as expected, will be at the core of the argument its policymakers present for raising rates. They also help explain why any notion of a recovery still seems a long way off to many in the US and why the message of populist politicians such as Donald Trump that America is not working resonate on the eve of an election year. “The old American dream was to own a home and two cars. The new American dream is to have a job.” A large part of the shrinking of the US middle class, which for the first time in decades now forms less than a majority of the country’s adult population, has surprisingly been due to the country’s growing affluence, the Pew study found. But the country’s lowest income group — defined by Pew for a three-person household as earning less than $31,402 a year — has also grown at more than five times the rate of the middle class in the past seven years. There are now 48.9m adults in this bracket in the US, up from 43.2m in 2008 and just 21.6m in 1971.

Killing Entitlements Would Make Inequality Worse - Noah Smith  Celebrated economist Martin Feldstein in a recent Wall Street Journal op-ed argued that U.S. wealth inequality is much less than advertised. The reason, Feldstein says, is that future Social Security, Medicare and Medicaid payments are a form of uncounted wealth that dramatically boosts the wealth of the poor by trillions of dollars. If we take entitlements into account, Feldstein says, wealth inequality isn’t so bad.  It isn't such a novel observation and counting future payments as wealth is OK, as far as the economics goes. Capitalizing a future income stream -- valuing it in terms of its present value and counting it as today’s wealth -- is standard practice in finance, and there’s no reason this can’t be applied to Social Security and Medicare. But if we want to look at wealth in these terms, we have to add a lot more than just entitlements. For example, maybe we should add human capital. That refers to the capitalized value of people’s skills and knowledge. In the future, my skills will command a premium, allowing me to have much higher earnings over the course of my life than if I were only able to do manual labor. Rich people, in general, have much more human capital than poor people. They’ve worked in big companies and gone to good schools, which most poor people have not.  Another big chunk of wealth is network capital (also called social capital). This refers to the value of people’s business contacts and friends. Having a strong network helps you get a job, do business deals, and get investment capital. It is hugely important to people’s long-term earnings potential, so it too should be capitalized into wealth.  Together, human capital and net capital determine a large portion of people’s future earnings, and future lifetime earnings add up to some pretty substantial numbers. Thus, if we are to measure the kind of inequality that Feldstein wants to measure, we will have to add these in. Adding network capital and human capital will hugely increase wealth inequality. That doesn’t seem to be what Feldstein has in mind.

Majority Of Millennials Have Under $1,000 In Savings --Millennials are projected to number 75.3 million for 2015, surpassing a projected 74.9 million for Baby Boomers. The Millennials will therefore comprise a greater percentage of the population than Baby Boomers for the first time. To gain insight into the saving habits of Millennials, we recently performed a survey of those from the ages of 18 to 34. We received 2,585 responses to our survey. The results of our survey found that over 50% of Millennials have less than $1,000 in savings. This would indicate that most millennials do not have a cushion to fall back on in case of an emergency. The rest of our findings can be analyzed with the visualizations below: For those surveyed, we found that:

  • 51.8% of Millennials have less than $1,000 in savings.
  • 18% of Millennials have savings of $1,000 to $5,000.
  • 7.3% of Millennials have savings of $5,000 to $10,000.
  • 6.4% of Millennials have savings of $10,000 to $20,000.
  • 16.5% of Millennials have savings of more than $20,000.

America’s permanent, ubiquitous tent-cities - Homelessness in America dwindled away after WWII, when the GI Bill and generous social programs seemed to finally get on top of a problem that had been with the country since its inception; but starting with Reagan's mass de-institutionalizations and cuts to social services, homelessness has only grown, a phenomenon America answered by criminalizing being alive, and pretending not to notice homeless people in encampments at the edge of more and more US cities. The criminalization of homelessness is only possible because of the vilification of homeless people: Catholic Churches installing drizzlers to stop people from sitting outside them; prison sentences for charging cellphones; criminalizing treating homeless people humanely.The answer -- semipermanent homeless camps -- are only possible because we pretend they aren't there: we don't even count homeless people.But the real answer, the one supported by evidence, that actually works, and costs less than anything else, is incredibly simple: pay for housing. Chris Herring's long history of homelessness in America is an important perspective on how we got here, and how having a certain number of people that society simply treats as surplus to requirements has once again become the new normal. Armies of homeless people have changed American politics in the past, marching on Washington and demanding justice. Today's homeless world has more possible ways of organizing than any other cohort in history, between mobile phones and library Internet.

“We will not be silent”: American Jews hit the streets during Hanukkah to fight Islamophobia and racism - This Hanukkah, Jews across the U.S. are taking to the street to rally against the Islamophobia and racism rampant in their communities. On each night in the eight-day-long religious holiday, Jewish activists are participating in protests against various forms of injustice in a campaign initiated by the Network Against Islamophobia, a project called for by national peace organization Jewish Voice for Peace (JVP) to challenge anti-Muslim bigotry, along with Jews Against Islamophobia, a coalition of JVP-New York and the activist group Jews Say No! The demonstrations are being held in 15 cities throughout the country, including Chicago, Boston, Miami, Seattle, Atlanta. The first demonstration was held at New York City’s Rockefeller Center on Sunday, Dec. 6, the first night of Hanukkah.Activists are conveying their commitments through signs in the shape of eight candles, which together comprise a symbolic menorah. A ninth sign, modeled after the shamash, or “helper” candle, reads “Jews against Islamophobia and racism — rekindling our commitment to justice.”

Kock-Sponsored Sentencing “Reform”: A Fake Break for Minorities, A Get-Out-of-Jail Free Card for White Collar Crooks  - I was told if I saw a prisoner, a parolee, or an Ex with a tattoo of the number “13-1/2″ on their arm, it meant 1 judge, 12 jurors, and 1/2 of a chance. 1/2 of a chance to win in court as the cards were stacked against those who could not afford adequate representation or were African American. For sure if you went to trial, the resulting sentencing would be harsher as you made them work rather than accept the offered plea bargain. Part of the sentencing reform as proposed by Congress, backed by the Koch Bros, and supported by CAP as well as other progressive orgs. is meant to prevent the Koch Bros. associates and white collar business types from going to prison when they break the law. As to be expected, the Koch Bros. could care less about minorities and the people lacking economic means to fight back in court to prevent going to prison. Mind you now, those minorities and people of little means would still benefit from an early release; however, the effort by the Koch Bros., CAP, etc. does nothing to prevent them from going to prison in the first place. I had previously warned on another site the effort to revise sentencing guidelines is flawed as it failed to address the upfront justice system as I explain here;  Sorry Ed, Keith, and Nancy: The issue was always in the courts and how defendants are represented and what avenues they had available to them once and if they were convicted and sentenced. The resources are not there, they are over burdened, and they are understaffed. Defendants do not raise much of a fight in the courtroom as they lack the resource to do so. Today, plea bargaining rules the courtroom and 85%+ of all cases before a judge are plea bargained away with many defendants even signing away their rights to appeal for a period of time. It is a matter of expediency as counties and states do not want to fund the courts and defendants can be moved through the system speedily to the prisons.

Foohey on Black Churches in Bankruptcy -- Credit Slips blogger Pamela Foohey has a new article on SSRN, "Lender Discrimination, Black Churches, and Bankruptcy." This paper builds on her previous work about churches in bankruptcy to dig into the demographics of which churches end up in bankruptcy court. From her abstract: "Churches with predominately black membership — Black Churches — appeared in chapter 11 more than three times as often as they appear among churches across the country. A conservative estimate of the percentage of Black Churches among religious congregation chapter 11 debtors is 60%. The likely percentage is upward of 75%. Black Churches account for 21% of congregations nationwide." Foohey discusses the various reasons why black churches would be overrepresented in chapter 11. I suspect there will be a lot of debate about the paper's conclusions, but it is hard to argue with the notion that race matters in bankruptcy as it does across so many parts of life in the U.S. (h/t to Mechele Dickerson's work). Foohey's paper will get bankruptcy experts talking again about why and how it matters, even if there is disagreement on the specifics.

How Hedge Funds Deepen Puerto Rico’s Debt Crisis - David Dayen --This is a distress call from a ship of 3.5 million American citizens that have been lost at sea,” Puerto Rico Governor Alejandro García Padilla said on December 1, begging the Senate Judiciary Committee to help protect his homeland from an unspooling disaster. After issuing bonds for over a decade on everything not nailed down, Puerto Rico now carries $73 billion in debt, a sum that García Padilla had termed “not payable” in June. Successive governments have enacted punishing austerity measures to service the debt, despite a stubbornly depressed economy and poverty rates near 50 percent. Now, after defaulting on smaller loans, it’s likely that much of the $957 million due January 1 will go unpaid, bringing more chaos and suffering at the hands of Puerto Rico’s creditors. In many ways, the Puerto Rico situation is sui generis, resulting from a patchwork of laws and obligations on an entity that is not really a country and not really a U.S. state. But looked at another way, Puerto Rico is just the latest battlefield for a phalanx of hedge funds called “vultures,” which pick at the withered sinews of troubled governments. In Greece, Argentina, Detroit, and now Puerto Rico, vultures have bought distressed debt on the cheap, and then used coercion, threats, and legal action to secure a massive windfall, compounding the effects on millions of citizens. The legal wrangling masks an irony: As creditors demand that Puerto Rico pay back everything it owes, hedge fund managers have used the island as a tax haven to avoid their own responsibilities. Wealthy investors don’t just want to make money in Puerto Rico; they want to use their leverage to effectively buy an island playground.

In Largest Ever Muni Restructuring, Puerto Rico Power Authority Strikes Deal With Creditors, Insurers -- When last we checked in on Puerto Rico’s seemingly intractable debt debacle, Governor Alejandro Garcia Padilla was pandering to Congress in an ill-fated attempt to secure some manner of federal intervention that would help to alleviate the strain on the island’s finances.  Meanwhile, the commonwealth avoided a messy default on $273 million in GO debt by using an absurd revenue clawback end-around to make a $354 million payment on December 1.  On Friday, we get the latest out of Puerto Rico and the news is ... well, good we suppose.PREPA - Puerto Rico’s power authority - has reached a restructuring agreement with bondholders and insurers to refinance some $8.2 billion in debt via securitization. As Bloomberg reports, “ad hoc creditors will take 15c haircut on bonds and bond insurers will put up $450m surety bond.”

Los Angeles schools set to reopen after threat prompted closure (Reuters) - Public schools in Los Angeles were set to reopen on Wednesday, a day after local officials canceled classes for some 640,000 students in the nation's second-largest school district over a threatened attack with bombs and guns later deemed a hoax. Authorities conducted an extensive search of the Los Angeles Unified School District's more than 1,000 schools and by late Tuesday said the buildings were secure and students were safe to return. Los Angeles Police Chief Charlie Beck said extra police officers would be deployed at city schools on Wednesday in part to manage jitters following the closure. Officials also said they distributed materials to teachers intended to help them discuss the disruption with students. The emailed threat, which authorities said was routed through Germany but likely originated locally, came nearly two weeks after a married couple inspired by Islamic State fatally shot 14 people and wounded 22 others at a county office building 60 miles (100 km) away in San Bernardino. A similar email was sent to New York City's public schools though officials dismissed it as a hoax and kept campuses open.

Hoax Or No Hoax? You Decide - Here Is The Full Text Of The Email Threat That Closed LA Schools -- Below is the full text of the threatening email directed toward the Los Angeles Unified School District that led to the closing of all schools (and which NYC School District decided was a hoax)... you decide?

Augusta County Schools Closed Due to Calligraphy Assignment Reaction: According to a statement from the county schools administration, it's because of numerous phone calls and emails that have been sent to schools in the area following a geography assignment that involved copying Arabic calligraphy. The calligraphy message was the Shahada, or Muslim statement of faith that translates as "There is no god but Allah, and Muhammad is the messenger of Allah." Sporting events and other extra curricular activities have also been cancelled for Thursday night and into the weekend. Below is a statement from the Augusta County Schools district regarding the closure: Augusta County Schools and all administrative offices will be closed Friday, December 17, 2015. Following parental objections to the World Geography curriculum and ensuing related media coverage, the school division began receiving voluminous phone calls and electronic mail locally and from outside the area. As a result of those communications, the Sheriff's Office and the school division coordinated to increase police presence at Augusta County schools and to monitor those communications. The communications have significantly increased in volume today and based on concerns regarding the tone and content of those communications, Sheriff Fisher and Dr. Bond mutually decided schools and school offices will be closed on Friday, December 18, 2015.  All extra-curricular activities are likewise cancelled for tonight, Thursday, December 17, through the weekend.

School pension bill to hit 30 percent of employee salaries next year -  For years, school districts have griped about the escalating costs of employee pensions swallowing bigger pieces of their budgets. Turns out, the funding for the Public School Employees' Retirement System should have been more.  The executive director of PSERS said as much in a press release that pointed to an increase in the annual employer contribution rate to 30.03 percent for the 2016-2017 school year. "For the first time in 15 years, the employer contribution rate provides 100 percent of the actuarially required rate based on sound actuarial practices and principles," said PSERS' Glen Grell. Various pieces of pension legislation, Grell said, have artificially suppressed the employer contributions paid to PSERS by the school employers and the state, which picks up half of the cost. As a result, the $48.8 billion fund that pays the pensions of nearly 220,000 retirees is underfunded by $37.3 billion. Nearly $1 billion of that was added in 2014-2015 when the increase to districts was 21 percent. Next year the increase is 16 percent.

    Three Reasons for Those Hefty College Tuition Bills - Mankiw - we do about the high cost of higher education? As we pick the next president, that question should feature prominently in the public debate. The economic prosperity of our children and grandchildren hinges on finding the right answer. lthough increasing college attendance makes a lot of sense, both for individuals and for the nation, the financial hurdle to doing so is higher than ever. The College Board reports that published tuition and fees at a typical private, nonprofit college, adjusted for overall inflation, have increased by 70 percent over the last 20 years. What gives?   Three forces are at work. The first is called Baumol’s cost disease. Many years ago, the economist William Baumol noted that for many services — haircuts as well as string quartet performances — productivity barely advances over time. Yet as overall productivity rises in the economy, wages increase, so the cost of producing these services increases as well. The second force increasing the cost of education is the rise in inequality. Educational institutions hire a lot of skilled workers: It takes educated people to produce the next generation of educated people. Thus, rising inequality has increased not only the benefit of education but also the cost of it. Advertisement The third force at work is what economists call price discrimination. Businesses of all sorts have an incentive to charge different prices to different consumers based on their willingness and ability to pay. Movie theaters, for example, charge children less than adults for a ticket. Colleges have increasingly followed this practice by raising published prices and offering more financial aid based on a family’s resources. I often joke that Harvard should complete the process by setting tuition at $1 billion a year. But that sticker price applies only to the children of Bill Gates. Everyone else gets a special price, just for you.

    What Science Has to Say About Affirmative Action - Scientific American - Fisher v. University of Texas at Austin has wound its way back to the Supreme Court, which will once again examine whether consideration of race in undergraduate admissions is constitutional. One striking development during the oral arguments on December 9th was Justice Scalia’s invocation of the disputed mismatch hypothesis: that affirmative action hoists black students into schools that are “too fast” for them, leading to a mismatch between their true qualifications and the schools that they attend. Justice Scalia, along with the conservative think tank The Heritage Foundation and others, continue to present this hypothesis as fact even though the primary evidence for this argument has been called into serious question by many scientists. At the core of this argument is the idea that schools with race-conscious admissions policies give preference to students of color over white students even though they are objectively less qualified, as evidenced by lower average pre-college test scores and grades. That achievement gaps persist in college is often cited as proof that this idea is correct. In other words, if black students with lower SAT scores than their white peers also receive worse grades in college, or more often switch into “easier” majors, then surely they were less college-ready to begin with. However, the underlying assumption that poorer academic outcomes indicate lower ability ignores a large piece of the puzzle: the taxing psychological environment faced by students of groups historically marginalized in academics.

    Professor Suspended For Saying Christians And Muslims Worship The ‘Same God’ - A major evangelical Christian university has suspended a tenured professor after she argued that Christians and Muslims “worship the same God” and donned a hijab to express solidarity with Muslims. On December 10, Dr. Larycia Hawkins, a tenured political science professor at Wheaton College in Illinois, took to Facebook to vent her frustration about the growing list of anti-Islam incidents in the United States since the terrorist attacks in Paris. Hawkins, herself a Christian at the evangelical school, declared that she would wear a hijab throughout the Christian season of Advent “in human solidarity with [her] Muslim neighbor.”  “I stand in religious solidarity with Muslims because they, like me, a Christian, are people of the book,” she wrote in the Facebook post, referencing the Quranic phrase used to highlight the common bond between Christians, Muslims, and Jews. “And as Pope Francis stated last week, we worship the same God.” Hawkins’ actions and comments — especially her insistence that Muslims and Christians worship the same God — immediately stirred controversy at the theologically conservative school, prompting her to write another post on December 13 where she explained that her position is “one held for centuries by countless Christians (church fathers, saints, and regular Christian folk like me).” Her defense apparently was not enough to convince officials at Wheaton, however. The school released a statement on December 15 announcing her suspension, citing her comments.

    Nearly Half of Youth Say 'American Dream' Is Dead: Harvard Poll - American's youth are down on the future, with nearly half of those ages 18 through 29 believing the "American Dream" is more dead than alive, a nationwide survey released Thursday by Harvard University’s Institute of Politics shows. Reflecting the sour mood of the overall electorate, 48 percent of those asked “For you personally, is the idea of the American Dream alive or dead?” responded “dead.” Those who picked “alive” accounted for 49 percent. While the race or ethnicity of the poll's respondents didn't significantly impact the results, the level of education of those questioned did play a role in determining the answer. Fifty-eight percent of college graduates said the dream was alive for them personally, compared to 42 percent of those not in college or who had never enrolled in college. “It is disturbing that about half of the largest generation in America doesn't believe the American dream is there for them personally,” said John Della Volpe, the institute’s polling director. “That frustration, I think, is tied into a government they don't trust and they don't think is working for them.”

    America, It's Over! Yale Students Sign Petition To Repeal First Amendment -  Satirist Ami Horowitz tests the waters at Yale University to see if today's Ivy League students would actually sign a petition to repeal the First Amendment... It goes exactly how you might think it would... Within an hour on the Yale campus, Horowitz collected over 50 signatures from student who wanted to repeal a significant part of the Constitution. The petition to “blow up” the First Amendment (which protects freedom of speech, freedom of religion, freedom of assembly, freedom of the press, and freedom of petition), was met with such comments as "I think this is fantastic, I absolutely agree," and "excellent," or "I love it." And as DailyCaller noted, one female student ironically agreed with Horowitz when he suggested, "I think the Constitution should be one big safe space."  To sum it all up... America, It's Over!

    Scalia Has It Backwards: Black Students Must Work Twice as Hard as White Classmates - Justice Scalia is worried that affirmative action means black students are sometimes “pushed ahead too fast” and suggests we should go to “lesser schools” instead. The conservative US supreme court justice’s concerns are seriously misplaced. The larger issue is can the majority – who have enjoyed the advantage of systemic oppression – handle competition from students who for the length of this country’s history have had to be twice as competent with fewer resources and outlets?  As an African-American woman who went to an elite school, I know my life would’ve been different without Dartmouth. But the university would’ve been lesser without me, too, and the contributions I made while I was a student. To focus solely on my GPA and job title as indicators of my success misses the point. College isn’t just about classes, it’s about experiences. A diverse classroom is rife with potential for meaningful discussions and the proliferation of ideas. People of color decimate the challenges given to them in the classroom and in our time away from our desks we often bring depth, nuance and unfiltered perspectives to colleagues that cannot see an issue from a different angle. I went to school with students (of different races and economic backgrounds) that were better at certain skills than I was, and sitting in a classroom with them pushed my critical-thinking skills to the brink, enhanced my world view and flooded the nooks and crannies of my psyche with new stimuli. I was told “no” at Dartmouth more times than I can count – when I wanted to do an independent study, when I wanted to do a foreign study program and when I wanted to create a senior thesis. I took those “no’s” and tried to turn them into positive experiences.

    How Socioeconomic Status Impacts Online Learning: The driving force behind the increasing popularity of massive open online courses (MOOCs) is that they provide — as the term defines it — open access to a massive online audience. Anyone with an Internet connection who wants to learn, can. Whether you’re rich or poor, living in a New York City high-rise or a remote Nepalese village, MOOCs promise to level the higher education playing field. The question is: Does reality reflect this ideal?A new research study by MIT education researcher Justin Reich and Harvard University’s John Hansen seeks the answer. “Democratizing Education? Examining Access and Usage Patterns in Massive Open Online Courses” takes a close look at how socioeconomic resources influence MOOC enrollment and course completion — and whether online learning is truly opening as many doors as anticipated.  Reich’s study uses three indicators: parental educational attainment, neighborhood average educational attainment, and neighborhood median income.The research finds that these indicators are correlated with student enrollment and success in MOOCs, especially among younger students. Young students enrolling in HarvardX and MITx on edX live in neighborhoods where the median income is 38 percent higher than typical American neighborhoods. Among teenagers who register for a HarvardX course, those with a college-educated parent have nearly twice the odds of finishing the course compared to students whose parents did not complete college. At exactly the ages where online learning could offer a new pathway into higher education, already affluent students are more likely to enroll in a course and succeed.

    Maryland county wants to ease the burden of student debt for its residents -- The science teacher at Watkins Mill High School in Gaithersburg, Md., rents an $800-a-month basement apartment and drives the same 2006 Hyundai Elantra he’s had since college. He owes about $20,000 more than he makes in a year. Although the federal student loans he took out carry a manageable, low rate, most of his debt comes from loans his parents took out that cost him nearly 8 percent in interest. And as O’Connor pursues a graduate degree — a requirement for all public school teachers in Maryland — there’s a good chance he will have to borrow again. “At this rate, I can’t imagine a foreseeable future where I can afford a home in Montgomery County,” he said. O’Connor is exactly whom lawmakers had in mind when they developed legislation that would allow Montgomery to establish a loan authority, a move that would give the county the ability to leverage its municipal borrowing power to extend rock-bottom rates to its residents. It could be a way for the wealthy county to attract young, college-educated workers and entrepreneurs.

    Brace Yourself: Our Latest Look at Student Debt - College Tuition and Fees constitute one of the biggest threats to our economic outlook. Here is a chart of data from the relevant Consumer Price Index sub-component reaching back to 1978, the earliest year Uncle Sam provides a breakout for College Tuition and Fees. As an interesting sidebar, we've thrown in the increase in the cost of purchasing a new car as well as the more substantial increase for the broader category of medical care, both of which pale in comparison. During the decade of the 1990's, when real out-of-pocket funding declined 25%, tuition and fees rose 92%, which sounds substantial ... until you compare it to the 1257% across the complete data series. For early boomers (a decade before the timeframe in the chart above) paying for college was sort of like buying a car. But in recent decades, it has become more like buying house, for which the strategy of a minimum down payment is commonplace for first-time buyers. The annual stair-step rise in college costs seen above is probably the most dramatic visualization of inflation data we routinely produce. The only chart we have that rivals it is our quarterly snapshot, updated earlier this week, of federal loans to students from the Fed Flow of Funds report.  Sadly, the chart above doesn't illustrate all the student loans outstanding. We don't have a data source for private loans for college expenses, but the New York Fed estimates total student loan debt to be in the neighborhood of $1.2 Trillion.

    The Impact of Rising Student Loan Debt on Mortgage Borrowing - Cleveland Fed -  Over the past 10 years, student debt has been increasing, both in terms of the total amount of debt outstanding and the number of borrowers. From 2005 to 2015, outstanding student loan debt rose from $364 billion to $1.2 trillion, and the percentage of people aged 18 to 30 with a student loan increased from 27% to 40%. Even after total consumer debt started to decline during the Great Recession, student loan debt steadily increased at an average quarterly rate of 3.2%. The sharp rise in student loan debt has raised concerns that young people with a lot of student debt may be having trouble getting a mortgage or other types of loans. In this article, we look at whether the increase in student loan debt could be responsible for the decline in mortgage borrowing by people who are between the ages of 18 and 30.

    Pensions & Investment Editorial Savages Trustees for Failing to Perform Fiduciary Duty Over Private Equity Fees -- Yves Smith - A seismic shift is underway.  I have never seen an editorial of a trade publication, much the less a mainstream media publication, take on its establishment in as brutal a manner as Pensions & Investments did yesterday in Shining new light on fees. Mind you, the strident tone is fully deserved, indeed necessary given the complacency, severity of capture, and fecklessness of most “alternatives investment” limited partners, particularly in private equity. The members of this too-cozy industry are not used to being called out by fellow insiders. But the fact that P&I has taken this bold step says that a considerable minority recognizes that the retrograde position of blind loyalty to private equity lords and masters is a long term losing proposition, particularly now that it is being revealed that private equity is failing to deliver on its its promise of clearly superior returns. Once the emperor is revealed to be scantily clad, it’s well-nigh impossible to justify the lack of transparency, the one-sided agreements, the fee gouging, and the outright criminality.  Of course, the private equity firms still have a tremendous amount of power, particularly by virtue of their near-lock on top legal expertise by virtue of how much they throw around in fees. But a turn in political sentiment and media coverage is going to mean many of the standard lines that investors accepted that were just a crock, like the claim that private equity agreements are trade secrets. will increasingly have to be defended on their merits. And a lot of them simply won’t hold up to any degree of critical scrutiny. I urge you to read the op-ed in full (f you have trouble with the P&I link, you can also read it at CalPERS, albeit with a bit of funky formatting). You’ll see I am not overstating in depicting this article as brutal.

    We Won a Fight Against CalPERS Over Its Plan to Ignore Private Equity Risk  - Yves Smith - Honestly, I’m still amazed we prevailed, since usually by the time powerful and insular organizations like CalPERS are ready to implement new (bad) policies, the scheme is too far advanced to be halted.  On Monday, December 7, we saw a remarkable agenda item on CalPERS’ website that was set for a vote at the Investment Committee meeting the following Monday December 14. Here’s the overview from our post on Friday, based on our Bloomberg op-ed that ran last Thursday, December 10: 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!

    CBO’s 2015 Long-Term Projections for Social Security: Additional Information  - The Social Security Policy Options, 2015 was not the only report released by CBO yesterday. You have this one filling out the details in the Long-Term Budget Outlook.  Haven’t read this one either. So you all get first shot at framing the debate! Go get ‘em Tigers! (extended comment section)

    Obamacare Sign-Ups Could Get A Bump As Higher Penalties Kick In -- This is the last week to choose a health plan under the Affordable Care Act if you want insurance coverage to begin by Jan. 1. And officials who have spent the past two years using the carrot of persuasion to get people to buy insurance through the state or federal exchanges say the time has come for the stick. That stick is a hefty fine. Penalties for failing to buy insurance will roughly double. A family of four that makes $250,000 a year could face a fine when tax time rolls around in 2017 that approaches $10,000 if they don't get coverage for 2016. Kevin Counihan, CEO of the federal insurance exchange, says he thinks the high fines will induce people who didn't have insurance before to at least shop around before deciding to skip coverage again. Counihan, who was director of marketing for the Massachusetts health exchange 10 years ago, says it was when the fines approached $1,000 that sign-ups jumped.  "It got people's attention," In 2016, an individual who doesn't buy insurance will owe at least $695. The minimum fine for 2015 is $325. The 2016 penalties could reach the thousands — from as much as 2.5 percent of a person's income, up to as much as the average annual price of a "bronze plan," the lowest-cost health plan available on the insurance exchange.

    The Omnibus spending bill on health care policy - Yuval Levin has a very good piece on this, here is one bit: They’re [the Democrats] no longer offering themselves up as a sacrifice to protect every last bit of the law[Obamacare], as they have done at enormous political cost for the last five years. Now, they’re spending their capital to protect key constituencies (and therefore themselves), even at the cost of allowing the structure of Obamacare to become even more incoherent and unsustainable. There is a less polemic but still true version of that sentence, if you are so inclined.  Here is another bit: …They’re thinking past Obamacare, like the Republicans are. Of course, Democrats have a different vision of what comes after Obamacare. Hillary Clinton has started articulating that vision here and there: It’s a move in the direction of the original Hillarycare from 1993, which would add on to elements of Obamacare stricter price controls and more federal micromanagement of the provision of care. (Scott Gottlieb considered what this might look like in National Affairs this summer.) And this: The omnibus bill contains a provision, identical to one in last year’s bill, which requires that risk-corridor payments in the Obamacare exchanges be budget neutral. That will make Obamacare much more difficult to manage.  Furthermore, in the bill Congress restricts federal funding for CRISPR.

    2,009-Page, $1,205,146,000,000 Republican Spending Deal Allows Funding of Planned Parenthood: -- The 2,009 page fiscal 2016 spending deal that the Republican House leadership released today authorizes $1,205,146,000,000 in federal outlays between now and the end of fiscal 2016, according to the Congressional Budget Office, and it does not prohibit funding of Planned Parenthood, according to the House Appropriations Committee.  The spending bill is paired with a separate 233-page tax bill. “We are maintaining all of our pro-life protections, including the Hyde Amendment, and we are making cuts to the UNFPA program,” House Speaker Paul Ryan said of the omnibus spending bill at a press conference today. Planned Parenthood is the nation’s top abortion provider. In its latest annual report (2013-2014), it said that it did 327,653 abortions in fiscal 2013 (which ended on Sept. 30, 2013), and that in the year that ended on June 30, 2014, it received $528.4 million in government health services grants and reimbursements.“Look in divided government, you don’t get everything that you want,” Ryan said at his press conference. “Republicans didn’t get all that we wanted. Democrats didn’t get all that they wanted. This is a bipartisan compromise. It is a bicameral compromise. And I understand that some people don’t like some of the aspects of this. But that is the compromise that we have. And I do believe that we will have bipartisan votes on both of these bills.” In its analysis of H.R. 2029—“The Consolidated Appropriations Act of 2016”—the CBO said that changes in law that will be made by the bill will have the net effect of increasing the federal deficit by $57.6 billion in the ten-year period from fiscal 2016 through fiscal 2025.

    Senators Cruz and Lee Introduce Reciprocity Bill -- Senators Ted Cruz (R-Texas) and Mike Lee (R-Utah) have just introduced a bill that would implement an idea that I have long championed, making drugs, devices and biologics that are approved in other developed countries also approved for sale in the United States. Highlights of the “Reciprocity Ensures Streamlined Use of Lifesaving Treatments Act (S. 2388), or the RESULT Act,” include:

    • Amending the Food, Drug and Cosmetic Act to allow for reciprocal approval of drugs, devices and biologics from foreign sponsors in certain trusted, developed countries including EU member countries, Israel, Australia, Canada and Japan.
    • Encouraging the FDA to expeditiously review life-saving drug and device applications, this legislation would provide the FDA with a 30-day window to approve or deny a sponsor’s application….
    • The HHS Secretary is instructed to approve a drug, device or biologic if the FDA confirms the product is:
      • Lawfully approved for sale in one of the listed countries;
      • Not a banned device by current FDA standards;
      • There is a public health or unmet medical need for the product.
    • If a promising application for a life-saving drug is declined Congress is granted the authority to disapprove of a denied application and override an FDA decision with a majority vote via a joint resolution.

    The Corporate Takeover of the Red Cross - When Gail McGovern was picked to head the American Red Cross in 2008, the organization was reeling. Her predecessor had been fired after impregnating a subordinate. The charity was running an annual deficit of hundreds of millions of dollars. A former AT&T executive who had taught marketing at Harvard Business School, McGovern pledged to make the tough choices that would revitalize the Red Cross, which was chartered by Congress to provide aid after disasters. In a speech five years ago, she imagined a bright future, a “revolution” in which there would be “a Red Cross location in every single community.’’ It hasn’t worked out that way. McGovern and her handpicked team of former AT&T colleagues have presided over a string of previously unreported management blunders that have eroded the charity’s ability to fulfill its core mission of aiding Americans in times of need. Under McGovern, the Red Cross has slashed its payroll by more than a third, eliminating thousands of jobs and closing hundreds of local chapters. Many veteran volunteers, who do the vital work of responding to local fires and floods have also left, alienated by what many perceive as an increasingly rigid, centralized management structure. Far from opening offices in every city and town, the Red Cross is stumbling in response to even smaller scale disasters.

    Drug overdose deaths in the US reach record levels - BBC News: More than 47,000 Americans died from drug overdoses in 2014 - the most ever recorded in one year, US officials say. The Centers for Disease Control and Prevention (CDC) released a report on Friday that showed overdose deaths jumped 7% from just one year earlier. The spike in deaths has coincided with a rapid rise in the abuse of opioid-based prescription painkillers such as oxycontin and hydrocodone. The CDC said 61% of the deaths involved some type of opioid, including heroin. Many abusers of painkillers shift to using heroin as it becomes harder to obtain the prescription medications. "The United States is experiencing an epidemic of drug overdose (poisoning) deaths," the CDC's report reads.The report found significant increases in overdoses in 14 states across the country. All regions of the US - including the Northeast and the South - were affected. Overdose deaths are up in both men and women, in non-Hispanic whites and blacks, and in adults of nearly all ages, the report said. Rural West Virginia had one of the worse overdose rates in the US. The state rate was 35.5 per 100,000 people; the national rate was about 15 per 100,000.

    What your father ate before you were born could influence your health - There is increasing evidence that parents' lifestyle and the environment they inhabit even long before they have children may influence the health of their offspring. A current study, led by researchers from the Novo Nordisk Foundation Center for Basic Metabolic Research, sheds light on how. Researchers in Associate Professor Romain Barrès' laboratory compared sperm cells from 13 lean men and 10 obese men and discovered that the sperm cells in lean and obese men, respectively, possess different epigenetic marks that could alter the next generation's appetite, as reported in the medical journal Cell Metabolism. A second major discovery was made as researchers followed six men before and one year after gastric-bypass surgery (an effective intervention to lose weight) to find out how the surgery affected the epigenetic information contained in their sperm cells. The researchers observed an average of 4,000 structural changes to sperm cell DNA from the time before the surgery, directly after, and one year later.  "Epidemiological observations revealed that acute nutritional stress, e.g. famine, in one generation can increase the risk of developing diabetes in the following generations," Romain Barrès states. He also referenced a study that showed that the availability of food in a small Swedish village during a time of famine correlated with the risk of their grandchildren developing cardiometabolic diseases. The grandchildren's health was likely influenced by their ancestors' gametes (sperm or egg), which carried specific epigenetic marks - e.g. chemical additions to the protein that encloses the DNA, methyl groups that change the structure of the DNA once it is attached, or molecules also known as small RNAs. Epigenetic marks can control the expression of genes, which has also been shown to affect the health of offspring in insects and rodents.

    Genetic testing may be coming to your office: A handful of firms are offering employees free or subsidized tests for genetic markers associated with metabolism, weight gain and overeating, while companies such as Visa Inc., Slack Technologies Inc., Instacart Inc. recently began offering workers subsidized tests for genetic mutations linked to breast and ovarian cancer. The programs provide employees with potentially life-saving information and offer counseling and coaching to prevent health problems down the road, benefits managers say. Screening for genetic markers linked to obesity is the latest front in companies’ war on workers’ weight woes. Obesity-related conditions such as Type 2 diabetes comprise a large share of overall health-care costs, estimated to run more than $12,000 a worker this year, according to a recent survey from Towers Watson and the National Business Group on Health. Employers are hoping to help bend the cost curve—and make their workers healthier—by more aggressively targeting obesity and coaxing workers to lose weight. Fortunately, none of that information ever will be used against the interests of workers, nor will any worker face pressure, explicit or implicit, to submit to such a test…

    State Of Emergency Declared In Michigan City After Lead Found In Children's Blood -- “The City of Flint has experienced a Manmade disaster,” said the city’s mayor Monday evening, as she declared a state of emergency over evidently staggering levels of lead in the city’s tap water. . In September, news broke that lead contamination was on the rise in Flint. Dr. Mona Hanna-Attisha of the Hurley Medical Center concluded that since the water supply switched from the Detroit system to Flint River in April 2014, the number of infants and children with elevated levels of lead in their blood had doubled, from 2.1% to 4%. The World Health Organization sayslead affects children’s brain development resulting in reduced intelligence quotient (IQ), behavioral changes such as shortening of attention span and increased antisocial behavior, and reduced educational attainment. . The neurological and behavioral effects of lead are believed to be irreversible.”The high levels of lead have been attributed to old pipes and plumbing, which researchers say rubs off more into Flint River water than it does other sources. Because the water itself is more corrosive than other supplies, it erodes the pipes it flows through, picking up lead along the way.  Flint River is one of the filthiest rivers in Michigan. Over the years, it has housed raw sewage, tires, old refrigerators — which residents have attempted to sift out — and lead. In spite of this, officials declared it safe to drink in April 2014, when they switched the supply to the tainted river.  Shortly after the April switch, residents complained the water emitted a foul odor and was cloudy in appearance, but local and state officials insisted the water was safe. In spite of these assurances, in January 2015, MLive reported the State Department of Environmental Quality had “issued a notice of violation of the Safe Drinking Water Act for maximum contaminant levels for trihalomethanes — or TTHM — a group of four chemicals that are formed as a byproduct of disinfecting water.” These chemical byproducts are linked to cancer and other diseases, and presented a separate issue from the lead.  The water was so dirty that in October 2014, General Motors announced it would no longer use treated Flint River water at its engine plant out of fears it would cause corrosion.

    Nobody Worries About Water Crises Until They Happen on American Soil - Water in the cities in Michigan has been a major issue for several years now. Detroit has been a particular mess. In 2014, the Detroit Water and Sewerage Department turned off the water to 100,000 Detroit residents who were delinquent in paying their bills. The situation was an instant nightmare;  neighbors who could not afford to settle their debts instead chose to pay a local handyman $30 to have their water turned back on illegally. Detroiters in neighborhoods across the city who cannot face their accumulated water debts—even with the department's offer to only collect 30 percent initially—are opting for the same solution.   So now, in what was supposed to be a temporary measure, Flint was disconnected from the Detroit water supply in April of 2014. The Flint water supply now came from the Flint River, and it was pretty much a chemistry set before people began noticing the lead levels. And it's not as though nobody could have seen this comingSafety tests conducted in 2014 and early 2015 showed high levels of TTHM or THM in the drinking water, violating the Safe Drinking Water Act. TTHM, or total trihalomethane, is a byproduct of chlorine disinfection. According to the EPA, prolonged exposure to or consumption of such chemicals can pose significant health risks. The Flint River has a history of poor water quality due to industrial pollution and agricultural runoff, according to an assessment by the Michigan Department of Natural Resources. But efforts to remove pollutants and clean up the river have been successful in the past 40 years. And now, the lead hammer has dropped on all of them. Concerned residents have filed a class-action lawsuit.  These parents and other Flint residents filed a class-action federal lawsuit against Snyder, the state, the city and 13 other public officials in November for the damages they have suffered as a result of the lead-tainted water. The suit, which claims to represent "tens of thousands of residents," alleges that the city and state officials "deliberately deprived" them of their 14th Amendment rights by replacing formerly safe drinking water with a cheaper alternative that was known to be highly toxic.

    Water rates to spike to help LA's aging pipe system - The board that oversees the Department of Water and Power Tuesday unanimously approved a plan to raise customer water rates over the next five years to help pay for upgrades to the city's aging pipe system. For the typical household, bills would go up about $3 per month under the rate hike plan. The changes would make an average monthly bill of about $58 to increase to about $73 at the end of the five years, according to an example in a staff report. The average or low water user is likely to see bills grow 4 percent each year, while heavy water users could see bills go up by 7 percent per year, with the biggest increase in the first of the five-year plan, the report said. The proposal will go to the Los Angeles City Council for consideration. Fred Pickel, the independent watchdog of the LADWP, signed off on the plan as being "reasonable," and said the proposal includes provisions for monitoring the progress of the projects and allows for necessary changes to be made to the rate structure.

    Largest Desalination Plant in Western Hemisphere Opens: Will It Fix the Drought? -The largest desalination plant in the Western Hemisphere, which we featured on EcoWatch earlier this year, officially opened Monday. If the Carlsbad, California plant performs as expected, desalination could play a much larger role in addressing the four-year drought plaguing the state. About 15 other desalination plants are being proposed in California.  “We’ve now established a model, not just for San Diego County but for other plants up and down the coastline, so that we can make sure California’s future is bright and that we have the water we need,” Poseidon Water, the builders of the $1 billion plant, said it can produce up to 50 million gallons of fresh water a day, which amounts to about 10 percent of the county’s total water use. The company has plans for another plant about 60 miles north of Carlsbad in Huntington Beach. Desalination is a contentious issue, though. Researchers at MIT have developed a small-scale solar-powered desalination machine that has been hailed as a potential solution for drought-stricken communities. But critics, citing marine impacts and its high cost, say desalination isn’t a good solution and can’t fix the drought. Various environmental groups, including the Surfrider Foundation, opposed the plant in Carlsbad.

    Historic Supreme Court Ruling Bans GMO Crop Trials in Philippines: The Supreme Court of the Philippines has ordered a permanent ban on field trials of GMO eggplant and a temporary halt on approving applications for the “contained use, import, commercialization and propagation” of GMO crops, including the import of GMO products. The court ruled in favor of Greenpeace Southeast Asia, as well as several Filipino activists, academics and politicians, in a major victory for Filipino farmers and activists around the world.“This decision builds on a wave of countries in Europe rejecting GE crops and is a major setback for the GE industry,” said Virginia Benosa-Llorin, Ecological Agriculture campaigner for Greenpeace Philippines. “The Philippines has been used as a model for GE regulatory policy around the world, but now we are finally making progress to give people a right to choose the food they want to eat and the type of agriculture they want to encourage.” The temporary ban is in place until a new “administrative order” takes effect and includes the highly controversial GMO golden rice, an experimental project by International Rice Research Institute (IRRI) that is currently back at the R&D stage due to the crop’s poor performance.

    'Kill switches' could make genetically modified food more palatable -- In the US you can buy and eat genetically modified apples that don’t go brown, potatoes that are less likely to cause cancer, and – as of recently – salmon that grow fasterGenetic modification allows us to breed organisms with specific characteristics by precisely inserting sections of DNA into their genetic code. Genetically modified organisms (GMOs) offer a number of advantages to farmers and crop growers. But there are also public concerns about GMOs, ranging from their potential effects on human health to their dominance by large corporations. When I debated the use of genetically modified bacteria this summer, I found the audience’s main concern was the potential for GMOs to escape and contaminate the environment. So what if science could fix this? Recent progress in GM technology has seen scientists engineer “kill switches” that are designed to act as an emergency stop mechanism for GMOs. These are pieces of inserted genetic code that create characteristics intended to prevent a GMO from surviving and reproducing if they “escape” from a contained site, such as a field of GM crops, into the wild.  One type of kill switch involves making GMOs dependent on nutrients not found in nature. Two independent pieces of research published in early 2015 essentially redesigned Escherichia coli bacteria to require synthetic versions of nutrients essential for survival and growth. If these genetically recoded organisms (GROs) were to escape into the “non-contained” environment, they would be unable to get the nutrients they needed, effectively activating the kill switch causing them to die.

    Are You Eating Frankenfish? -  NY Times - THIS month, Congress may decide whether consumers are smart enough to be trusted with their own food choices. Some lawmakers are trying to insert language into must-pass spending legislation that would block states from giving consumers the right to know whether their food contains genetically modified ingredients  They must be stopped. Nine out of 10 Americans want G.M.O. disclosure on food packages, according to a 2013 New York Times poll, just like consumers in 64 other nations. But powerful members of the agriculture and appropriations committees, along with their allies in agribusiness corporations like Monsanto, want to keep consumers in the dark. That’s why opponents of this effort have called it the DARK Act — or the Deny Americans the Right to Know Act. As a chef, I’m proud of the food I serve. The idea that I would try to hide what’s in my food from my customers offends everything I believe in. It’s also really bad for business. Why, then, have companies like Kellogg and groups like the Grocery Manufacturers Association spent millions in recent years to lobby against transparency? They say, in effect: “Trust us, folks. We looked into it. G.M.O. ingredients are safe.” But what they’re missing is that consumers want to make their own judgments. Consumers are saying: “Trust me. Let me do my own homework and make my own choices.”

    Congress insists on labels for GM salmon - Financial Times - It is unlikely to say “Frankenfish”, but genetically modified salmon is about to gain a label. The US Congress on Friday overturned a November ruling by the Food and Drug Administration that authorised the sale of GM salmon without any special labelling in what could be a significant victory for advocates of broader GM labelling rules in the US. Included in a 2009-page spending bill that passed through Congress on Friday is a provision that requires the FDA not to allow the sale of any food containing genetically engineered salmon until it publishes labelling guidelines. The ban was pushed by Democratic senator Maria Cantwell from salmon-producing Washington state, who for years has campaigned against the approval of the genetically modified fish. “Consumers have a right to know whether they are buying Washington’s world-class wild salmon or Frankenfish engineered in a lab,” she said. Critics charge the move is a case of Washington pork barrel — or fish barrel — politics and a move by a member of Congress to protect a local industry from a disruptive new competitor. “It is like Ford inserting amendments in an appropriations bill to block Chevy from introducing a new automobile” is how Ron Stotish, president and CEO of AquaBounty, the Massachusetts company behind the GM salmon, put it. But the move is also emblematic of what is now both a growing movement at the state level to require labelling for GM products in the US and a growing paradox in the US position regarding GM organisms in trade negotiations with the EU and others.

    AP: Global supermarkets selling shrimp peeled by slaves: Every morning at 2 a.m., they heard a kick on the door and a threat: Get up or get beaten. For the next 16 hours, No. 31 and his wife stood in the factory that owned them with their aching hands in ice water. They ripped the guts, heads, tails and shells off shrimp bound for overseas markets, including grocery stores and all-you-can-eat buffets across the United States. After being sold to the Gig Peeling Factory, they were at the mercy of their Thai bosses, trapped with nearly 100 other Burmese migrants. Children worked alongside them, including a girl so tiny she had to stand on a stool to reach the peeling table. Some had been there for months, even years, getting little or no pay. Always, someone was watching. No names were ever used, only numbers given by their boss — Tin Nyo Win was No. 31. Pervasive human trafficking has helped turn Thailand into one of the world's biggest shrimp providers. Despite repeated promises by businesses and government to clean up the country's $7 billion seafood export industry, an Associated Press investigation has found shrimp peeled by modern-day slaves is reaching the U.S., Europe and Asia. The problem is fueled by corruption and complicity among police and authorities. Arrests and prosecutions are rare. Raids can end up sending migrants without proper paperwork to jail, while owners go unpunished.

    One of the big arguments for a vegetarian diet might be wrong -- A paper from Carnegie Mellon University researchers published this week finds that the diets recommended by the Dietary Guidelines for Americans, which include more fruits and vegetables and less meat, exacts a greater environmental toll than the typical American diet. Shifting to the diets recommended by Dietary Guidelines for American  would increase energy use by 38 percent, water use by ten percent and greenhouse gas emissions by six percent, according to the paper.  While the research builds on previous work that likewise undermines the conventional wisdom, the debate over the environmental virtues of vegetarianism are unlikely to subside any time soon. For one thing, the vegetarians have a point: scientists on both sides have concurred that eating beef - though not other meats - has daunting environmental impacts.  Because of the amount of grain and land used to produce a pound of beef, as well as the volume of methane the animals produce, the nation’s intake of beef has significant environmental ramifications, particularly in terms of greenhouse gas emissions. Indeed, the environmental impacts from beef production dwarf those of other animal foods such as dairy products, pork and poultry.

    And Just Like That, "Free Trade" Pact Trounces US Law --Claims that trade pacts like the pending Trans-Pacific Partnership (TPP) will not trump public health and environmental policies were revealed to be fiction on Tuesday after Congress, bending to the will of the World Trade Organization, killed the popular country-of-origin label (COOL) law. The provision, tucked inside the omnibus budget agreement, repeals a law that required labels for certain packaged meats, which food safety and consumer groups have said is essential for consumer choice and animal welfare, as well as environmental and public health. Congress successful revoked the mandate just over one week after the WTO ruled that the U.S. could be forced to pay $1 billion annually to its NAFTA partners, which argued that the law "accorded unfavorable treatment to Canadian and Mexican livestock." Lori Wallach, director of Public Citizen’s Global Trade Watch division, said that consumers relied on the standard to "make informed choices about their food," and that Congress' elimination of the rule "makes clear that trade agreements can—and do—threaten even the most favored U.S. consumer protections."The move flies in the face of statements made by President Barack Obama, who—arguing in favor of the 12-nation TPP, pledged that "no trade agreement is going to force us to change our laws."

    Fish Stocks Are Declining Worldwide, And Climate Change Is On The Hook --  For anyone paying attention, it's no secret there's a lot of weird stuff going on in the oceans right now. We've got a monster El Nino looming in the Pacific. Ocean acidification is prompting hand wringing among oyster lovers. Migrating fish populations have caused tensions between countries over fishing rights. And fishermen say they're seeing unusual patterns in fish stocks they haven't seen before.Researchers now have more grim news to add to the mix. An analysis published Monday in the Proceedings of the National Academy of Sciences finds that the ability of fish populations to reproduce and replenish themselves is declining across the globe."This, as far as we know, is the first global-scale study that documents the actual productivity of fish stocks is in decline," says lead author Gregory L. Britten, a doctoral student at the University of California, Irvine.Britten and some fellow researchers looked at data from a global database of 262 commercial fish stocks in dozens of large marine ecosystems across the globe. They say they've identified a pattern of decline in juvenile fish (young fish that have not yet reached reproductive age) that is closely tied to a decline in the amount of phytoplankton, or microalgae, in the water."We think it is a lack of food availability for these small fish," says Britten. "When fish are young, their primary food is phytoplankton and microscopic animals. If they don't find food in a matter of days, they can die."

    Why are Chinese fishermen destroying coral reefs in the South China Sea? -- What I came across on a reef far out in the middle of the South China Sea has left me shocked and confused. I'd been told that Chinese fishermen were deliberately destroying reefs near a group of Philippine-controlled atolls in the Spratly Islands but I was not convinced. "It goes on day and night, month after month," a Filipino mayor told me on the island of Palawan. "I think it is deliberate. It is like they are punishing us by destroying our reefs." I didn't take it seriously. I thought it might be anti-Chinese bile from a politician keen to blame everything on his disliked neighbour - a neighbour that claims most of the South China Sea as its own. But then, as our little aircraft descended towards the tiny Philippine-controlled island of Pagasa, I looked out of my window and saw it. At least a dozen boats were anchored on a nearby reef. Long plumes of sand and gravel were trailing out behind them.  "Look," I said to my cameraman, Jiro. "That's what the mayor was talking about, that's the reef mining!" Even so, I was unprepared for what we found when we got out on the water. A Filipino boatman guided his tiny fishing boat right into the midst of the Chinese poachers. They had chained their boats to the reef and were revving their engines hard. Clouds of black diesel smoke poured into the air. "What are they doing?" I asked the boatman. "They are using their propellers to break the reef," he said. Again I was sceptical. The only way to see for sure was to get in the water. It was murky and filled with dust and sand. I could just make out a steel propeller spinning in the distance on the end of long shaft, but it was impossible to tell exactly how the destruction was being carried out. The result was clear, though. Complete devastation.  This place had once been a rich coral ecosystem. Now the sea floor was covered in a thick layer of debris, millions of smashed fragments of coral, white and dead like bits of bone.

    Oregon Is The Latest Target Of Right-Wing Effort To Get Rid Of National Forests --A draft bill recently released by U.S. Representative Greg Walden (R-OR) proposes to dispose of hundreds of thousands of acres of national forest land in Oregon’s Klamath River Basin so that it can be clear-cut or auctioned off to the highest bidder. The proposal, which is the latest in a series of attempts by right-wing politicians to seize or sell-off national public lands, is so controversial that observers say it could spark a renewed water war in Rep. Walden’s home state of Oregon. The Klamath Basin, a 15,000-plus square mile river basin spanning regions of both Oregon and California, has long been the site of fierce disputes over the allocation of scarce water supplies and the collapse of fisheries and wildlife habitat.  Over the past several years, however, a wide range of stakeholders — including farmers, tribes, landowners, conservationists, and national, state, and local governments — engaged in a collaborative process aimed at resolving the decades-long Klamath water crisis and restoring economic stability and environmental integrity to the basin. These negotiations resulted in three bipartisan agreements which seek to remove four hydroelectric dams along the Klamath River, promote water quality and wildlife restoration, and provide local farmers, businesses and communities with economic stability and certainty.  Congressman Walden’s draft bill, which he circulated just four weeks before the settlement is set to expire, would undermine these locally-driven agreements by eliminating the requirements that the dams be removed and giving away massive stretches of the Winema-Fremont National Forest and the Klamath National Forest— so that they could be clear-cut by logging companies or sold to the highest bidder.

    Scarred Riverbeds and Dead Pistachio Trees in a Parched Iran - Iran is in the grip of a seven-year drought that shows no sign of breaking and that, many experts believe, may be the new normal. Even a return to past rainfall levels might not be enough to head off a nationwide water crisis, since the country has already consumed 70 percent of its groundwater supplies over the past 50 years. Always arid, Iran is facing desertification as lakes and rivers dry up and once-fertile plains become barren. According to the United Nations, Iran is home to four of the 10 most polluted cities in the world, with dust and desertification among the leading causes.In Zanjan, in central Iran, the historic Mir Baha-eddin Bridge crosses a riverbed of sand, stones and weeds. In Gomishan, on the shores of the Caspian Sea, the fishermen who once built houses on poles surrounded by freshwater now have to drive for miles to reach the receding shoreline. In Urmia, close to the Turkish border, residents have held protests to demand that the government return water to a once-huge lake that is now the source only of dust storms. More than 15 percent of the approximately 150,000 acres of pistachio trees in the main producing area in Kerman Province have died in the last decade or so. A nationwide network of dams, often heralded by state television as a sign of progress and water management, is adding to water shortages in many places while helping deplete groundwater.

    November 2015: Earth's Warmest November and 2nd Warmest Month of Any Kind on Record --November 2015 was Earth’s warmest November on record by a huge margin, according to data released by NOAA's National Centers for Environmental Information (NCEI) on Thursday. November 2015 also had the second largest positive departure of temperature from average of any month among all 1631 months in the historical record that began in January 1880; only last month (October 2015) was more extreme. As shown in the table below, October and November 2015's 0.97°C and 0.99°C departures from the 20th Century average beat the next eight runners-up by an unusually large margin, underscoring how unusual and extreme the current surge in global temperatures is. NASA also rated November 2015 as the warmest November in the historical record. November 2015's warmth makes the year-to-date period (January - November) the warmest such period on record, according to both NOAA and NASA. November 2015 was the seventh consecutive month a monthly high temperature record has been set in NOAA's database, and the ninth month of the eleven months so far in 2015.

    November Burns Through Temperature Records: This November was the warmest on record, according to a monthly climate update issued by the National Oceanic and Atmospheric Association (NOAA) National Centers for Environmental Information. November was also the seventh month in a row to average global temperatures that were not only warmer than average, but also broke records set during previous years. NOAA scientists based their report on global temperature data going back to 1880, when climate record-keeping began. To determine global temperatures, scientists average surface temperatures on land and in the oceans. November's data showed that across the globe, average land-surface temperature was higher than the 20th century average by 2.36 degrees Fahrenheit (1.31 degrees Celsius). This year's average sea-surface temperature was higher than the 20th century average by 1.51 degrees F (0.84 degrees C), also a record-breaking number.Over land and sea surface combined, the November average temperature was 1.75 degrees F (0.97 degrees C) higher than the 20th century average. From September through November in the contiguous United States this year, temperatures in every single state were warmer than average, with record warmth recorded in Florida. The entire year of 2015 will likely prove to be one of the five warmest ever recorded in the United States, with record and near-record warmth in Florida, Nevada, Washington and Oregon. When weather and climate agencies like NOAA incorporate monthly reports like these into the larger record of climate data, they can compare average temperatures over time to detect patterns of how Earth's climate is changing, and how quickly.

    A White-Hot Christmas Wraps Up Earth’s Hottest Year on Record - This has been by far the hottest year on record, and it’s ending with an exclamation point. Holiday shoppers in New York’s Rockefeller Center have been checking off their lists in weather that’s an eerie 20 degrees warmer than normal. Meanwhile, another stack of global temperature records has fallen. Last month was the hottest November in 136 years of data, according to U.S. figures released on Thursday, making it the ninth record-breaking month of 2015. This year has been so far off the charts, it’s certain to go down as the hottest year on record even if December turns out to be unusually cool (it won’t).  El Niño is largely responsible for this year’s extremes, but make no mistake: This is what global warming looks like. Before this year, 13 of the 14 hottest years fell in the 21st century. The thermometer creep is relentless. The animation below shows the earth’s warming climate, recorded in monthly measurements from land and sea dating back to 1880. Temperatures are displayed in degrees above or below the 20th century average.

    NASA: 2015 Will Be ‘A Scorcher Relative To All Other Years’ On Record - November was so hot globally it’s now over 99.999 percent certain 2015 will be the hottest year on record — driven overwhelmingly by record levels of carbon pollution in the air. Gavin Schmidt, the director of NASA’s Goddard Institute of Space Studies (GISS), tweeted out this chart Monday: 2015 will be a scorcher relative to all other years in the record. Even with sampling uncertainty: Schmidt also tweeted out “With Nov update to GISTEMP, probability of 2015 being a record year is > 99.999%.” Scientifically, >99.999 percent certainty is equivalent to the chances that:

    • The new Star Wars movie will make money.
    • Donald Trump will say something at the Las Vegas GOP debate that will offend somebody.
    • At some point in your life, you will experience either death or taxes.

    Air temperatures in the Arctic reach 115-year high: researchers: The Arctic is heating up, with air temperatures the hottest in 115 years, and the melting ice destroying walrus’ habitat and forcing some fish northward, a global scientific report said Tuesday. Air temperature anomalies over land were 2.3 degrees Fahrenheit (1.3 degrees Celsius) above average, “the highest since records began in 1900,” said the 2015 Arctic Report Card, an annual peer-reviewed study issued by the National Oceanic and Atmospheric Administration. Meanwhile, the annual sea ice maximum occurred February 25, about two weeks earlier than average, and was “the lowest extent recorded since records began in 1979.” “Warming is happening more than twice as fast in the Arctic than anywhere else in the world. We know this is due to climate change, and its impacts are creating major challenges for Arctic communities,” said NOAA chief scientist Rick Spinrad at the annual American Geophysical Union fall meeting in San Francisco. “We also know what happens in the Arctic doesn’t stay in the Arctic,” he said.

    Monster El Nino Hurls 43+ Foot Waves at US West Coast -- For NOAA, it looks like we’re well on the way toward seeing one of the most powerful El Ninos ever recorded. And already, there’s some brutal Fall and Winter weather events starting to emerge as a result. One event, in particular, is today roaring into the US West Coast like a Godzilla-hurled freight train.  It’s just one upshot of a Monster El Nino in a record warm world. A weather and climate event — one likely pumped up by an overall atmospheric warming of 1 C above 1880s levels — that will likely continue to have severe and worsening global impacts over the coming months. NOAA’s September, October, November ONI Index, the key zone for measuring El Nino strength, hit a +2.0 degree Celsius positive anomaly this week. That’s just 0.3 C shy of the most powerful El Nino ever recorded — 1997-1998 which peaked out at +2.3 C in the same monitor. With October, November and December likely to show even hotter overall readings for the Central Equatorial Pacific, it appears that the 2015-2016 El Nino will strike very close to this ONI high mark. Peak weekly sea surface temperature values already exceeded top 1997-1998 temperature levels for NOAA (+2.8 C for 1997-1998 vs + 3.1 C for 2015-2016). So we wait on the ONI three month measure for October, November and December to give broader confirmation. The other major El Nino monitor — the Bureau of Meteorology (BOM) in Australia — has weekly sea surface temperatures peaking at +2.5 C in the same zone. This is 0.2 C short of peak 1997-1998 values. BOM notes that the current El Nino is near peak and that, according to its own measures, is unlikely to exceed 1997-1998 but will likely hit within the top 3 strongest events.

    As Florida Keys flood, property worries seep in - (AFP) - Extreme high tides have turned streets into canal-like swamps in the Florida Keys, with armies of mosquitoes and the stench of stagnating water filling the air, and residents worried rising sea levels will put a damper on property values in the island chain. On Key Largo, a tropical isle famous for snorkeling and fishing, the floods began in late September. While people expected high tides due to the season and the influence of a super moon, they were taken by surprise when a handful of streets in the lowest-lying neighborhoods stayed inundated for nearly a month with 16-inches (40-centimeters) of saltwater. By early November, the roads finally dried up. But unusually heavy rains in December brought it all back again. "Like a sewer," said Narelle Prew, 49, who has lived for the past 20 years in her four-bedroom home on Adams Drive, a waterfront lane lined by boat docks. Residents have signed petitions, voiced anger at community meetings and demanded that local officials do something, whether by raising roads or improving drainage. Sometimes, they clash over whether the floods are, or are not, a result of man-made climate change. "There seems to be a mix of responses -- whether they think it is sea level rise, and what they think the government should be doing about it."

    Greenland's glaciers retreating at record speeds  (UPI) -- Greenland's glaciers are on retreat, shrinking at strikingly fast rates -- at least twice as fast as any time over the last 9,500 years. Researchers with Columbia University's Earth Institute compared modern satellite data with records of glacier growth and decline gleaned from ice cores. Their findings were published last week in the journal Climate of the Past. "If we compare the rate that these glaciers have retreated in the last hundred years to the rate that they retreated when they disappeared between 8,000 and 7,000 years ago, we see the rate of retreat in the last 100 years was about twice what it was under this naturally forced disappearance," study co-author William D'Andrea, a paleoclimatologist at Columbia's Lamont-Doherty Earth Observatory, explained in a press release.  Scientists were able to measure ancient glacier movements by measuring the levels of silt and sediments trapped in the ice cores collected from a glacial lake. As glaciers move, they grind the bedrock beneath them. The faster the movement, the more sediment, which is washed downstream by the glacier's melt water.

    Paris climate deal: nearly 200 nations sign in end of fossil fuel era - Governments have signalled an end to the fossil fuel era, committing for the first time to a universal agreement to cut greenhouse gas emissions and to avoid the most dangerous effects of climate change. After 20 years of fraught meetings, including the past two weeks spent in an exhibition hall on the outskirts of Paris, negotiators from nearly 200 countries signed on to a legal agreement on Saturday evening that set ambitious goals to limit temperature rises and to hold governments to account for reaching those targets. Government and business leaders said the agreement, which set a new goal to reach net zero emissions in the second half of the century, sent a powerful signal to global markets, hastening the transition away from fossil fuels and to a clean energy economy. The deal was carefully constructed to carry legal force but without requiring approval by the US Congress - which would have almost certainly rejected it.

    Paris climate deal: key points at a glance -- Governments have agreed to limit warming to 1.5C above pre-industrial levels: something that would have seemed unthinkable just a few months ago. There is a scientific rationale for the number. John Schellnhuber, a scientist who advises Germany and the Vatican, says 1.5C marks the point where there is a real danger of serious “tipping points” in the world’s climate. . But bear in mind we’ve already hit 1C, and recent data shows no sign of a major fall in the global emissions driving the warming. As many of the green groups here in Paris note, the 1.5C aspiration is meaningless if there aren’t measures for hitting it. The 1.5C passage from the Paris agreement. Before the conference started, more than 180 countries had submitted pledges to cut or curb their carbon emissions (intended nationally defined contributions, or INDCs, in the UN jargon). These are not sufficient to prevent global temperatures from rising beyond 2C – in fact it is thought they will lead to a 2.7C rise or higher. The INDCs are recognised under the agreement, but are not legally binding. Countries have promised to try to bring global emissions down from peak levels as soon as possible. More significantly, they pledged “to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century”. Experts say, in plain English, that means getting to “net zero emissions” between 2050 and 2100. The UN’s climate science panel says net zero emissions must happen by 2070 to avoid dangerous warming.

    Analysis: The final Paris climate deal - Carbon Brief - The 31-page draft no longer has any brackets to indicate areas of disagreement on the text.  Nonetheless, the COP21 plenary later today must still sign off on the deal. The final draft of the Paris deal includes a temperature limit of “well below 2C”, and says there should be “efforts” to limit it to 1.5C. This is stronger than many countries had hoped just months previously, but falls short of the desires of many island and vulnerable nations, which had pushed for 1.5C as an absolute limit. To give practical relevance to the temperature limit, the deal also includes a long-term emissions goal. The draft wording aims to peak global greenhouse gas emissions “as soon as possible” and to achieve “balance” between emissions and sinks in the second half of the century. This is similar to the “emissions neutrality” language, which appeared in the previous draft, but more specific and tightly defined. It effectively means reaching net-zero emissions after 2050, though the lack of a specific timeline is a blow to those that wanted the clearest possible message for investors. The text provides essentially a two-stage process to increase ambition over time, acknowledging that the current provisions are not going to be enough to reach the long-term 2C temperature limit.   In 2018, there will be a facilitative dialogue to take stock of the collective efforts of countries, which should inform the efforts of future commitments. Countries which have submitted targets for 2025 are then urged to come back in 2020 with a new target, while those with 2030 targets are invited to “communicate or update” them.

    Here’s what you need to know about the new Paris climate agreement | Grist: — The Paris Agreement to address climate change, adopted on Saturday, will be remembered as a big step forward and at the same time a frustrating set of compromises and omissions. The COP21 conference brought every country to the table, they all accepted the science of climate change, and they agreed to work together to do something about it. But some proved more ambitious than others, and the rich countries didn’t come up with enough money to get the best deal possible. The bottom line is that the agreement gets us far closer to containing climate change than we were two weeks ago, but still far short of where we need to go. In fact, we won’t even know for years what it will accomplish. How much the agreement reduces greenhouse gas emissions, and through that reduces warming, will depend on whether countries meet their targets for curbing emissions and deploying renewable energy and whether they ramp up their ambition in the years ahead. In terms of climate justice, there is even less to cheer. Rich countries like the U.S., Canada, and the European Union upped their pledges for climate finance slightly, but nowhere near enough to compensate for the hugely outsized share of the global carbon budget they have devoured.

    ANALYSIS-A la carte action on climate change: (Reuters) - At the end of bargaining, when the last bracketed differences in diplomatic language were [glossed over], the global climate accord that emerged from two weeks of talks in Paris proved to be a very a la carte deal. The intentional flexibility of the Paris agreement was constructed not only to accommodate the diversity of 195 national interests. It had to compensate for its limited legal authority with enough aspirational language to send governments away confident that a global turn from fossil fuels to cleaner energy sources was inevitable. "You cannot always press the parties to do something on your own terms," U.N. Secretary General Ban Ki-moon told Reuters in an interview just hours before the agreement was adopted but not in serious doubt. "Just motivate the parties so that they do it in their own way." Most countries in Paris accept that they face a wicked problem in trying to stop rising global temperatures. With some exceptions, there is a willingness to get off dirty energy sources, though many will still need to burn a lot of coal for quite a while. All know it will take billions of dollars to get there. What no one wanted to accept was an onerous collection of international rules dictating how they do it. The final accord therefore repeatedly "invites," "urges," "requests" and "further requests" countries to take action. The most ambitious goals - such as holding the increase in global temperatures to 1.5 Celsius degrees above pre-industrial levels - are aspirational, requiring belief that technologies yet to be invented will offer a realistic route to achieving them.

    Agriculture Plays A Huge Role In Climate Change. So Why Was It Left Out Of The Paris Climate Deal?  Despite claiming nearly half of the world’s land and accounting for one-third of the world’s greenhouse gas emissions, food and agriculture had always played a secondary role in international climate negotiations, pushed aside in favor of discussions about energy and transportation.But this year — as delegates from nearly 200 countries met in Paris to push for a global agreement on climate change — agriculture finally got a moment in the spotlight.Some of that attention is a result of the way that the talks were structured, requiring individual countries to submit independent climate pledges in advance of the conference — something that no other conference has done. Those individual plans — known as Intended Nationally Determined Contributions, or INDCs — tend to mention agriculture, especially in relationship to mitigation: more than 80 percent include strategies for mitigating the impact of agriculture on climate change, while 60 percent include strategies for adapting agriculture to climate change.  “Countries see agriculture as part of the solution, and that, I think, is changing things,” There is no fraternity in the world who is more susceptible to climate change than farmers.  Food security is mentioned in the preamble to the final Paris agreement, an inclusion that the United Nations’ Food and Agriculture Organization’s director José Graziano da Silva called “a game changer.” But within the main text of the climate agreement forged in Paris, both food security and agriculture are left out — an absence that some say signals a rift between country-level priorities and international action.

    Countries just adopted a historic climate change accord. Here’s what happens next - The word “historic,” already being used to describe the just-accepted Paris climate agreement, is more than warranted. The world will now have a new and comprehensive regime in place to shape how its diverse nations go about the urgent task of reducing their greenhouse gas emissions. That’s why climate activists are ecstatic the world over right now. It’s a big deal. The more ambiguous news, however, is that this document, by its very nature, depends on key sectors of society to respond to help make sure its goals are realized. Countries, companies and individuals all across the planet will have to do the right things — and very hard things, at that. And it’s too soon to tell exactly how they will do so. What’s more, even if everyone plays by the rules, the standards and goals set out by the Paris agreement may not be enough to prevent the catastrophic effects of climate change. New science suggests that forces already set in motion — the melting of glaciers, the release of carbon dioxide from thawing permafrost — could unleash considerable impacts that this new deal is unable to prevent. But We have seen even before this landmark text a sharp growth in renewable energy installments around the world, from the U.S. to Germany to China. We have seen the coal industry begin to stumble and a surge in natural gas. The trends, in other words, are already pointing in the direction that the agreement itself means to encourage. But what will energy companies — and energy investors — do once they read that the world now intends to “reach global peaking of greenhouse gas emissions as soon as possible…and to undertake rapid reductions thereafter?” Will this send a strong enough “signal,” to change the decisions that these companies, and these wealthy individuals, make?

    The world just agreed to a major climate deal in Paris. Now comes the hard part. - What this Paris agreement does, then, is provide a set of diplomatic tools to prod countries into cutting emissions even more deeply over time. The deal's text starts with aspirational goals: the world should aim for an emissions peak "as soon as possible" and limit total warming to less than 2°C, or perhaps even to 1.5°C. (The Earth has already warmed about 1°C since pre-industrial times.) It's a signal that countries at least hope to do more than they're already doing. The deal then adds transparency measures to verify that nations are actually restraining their emissions. Importantly, it requires that countries reconvene every five years to reconsider the ambition level of their pledges. And wealthy countries have set a goal of providing more than $100 billion per year in public and private financing by 2020 for poorer countries, to help them invest in clean energy and cope with sea-level rise, droughts, floods, and other ravages of climate change. There are plenty of hard questions about how effective these diplomatic tools will be. Will the transparency measures work? Will that climate aid actually materialize? The basic reality, though, is that the Paris agreement can only encourage countries to step up their efforts. It can't force them to do so. That's the hard part, the part that comes next. Further action will ultimately depend on policymakers and investors and engineers and scientists and activists across the globe, not the UN. In other words, the Paris deal is only a first step. Perhaps the easiest step. To stop global warming, every country will have to do much, much more in the years ahead to transition away from fossil fuels (which still provide 86 percent of the world's energy), move to cleaner sources, and halt deforestation. They'll have to pursue new policies, adopt new technologies, go far beyond what they've already promised.

    How Much Will the Paris Climate Deal Cost the U.S.? -- Now that officials from the U.S. and nearly 200 other countries have reached a deal in Paris meant to keep global warming at bay, many citizens back home want to know—how much will it cost us? No one knows for sure, but one estimate from an environmental think tank in Washington pegs the cost as a $170 billion hit to U.S. gross domestic product in 2030, or about 0.7% of the total economic output that year. “You don’t collapse an economy by switching to cleaner fuels,” . “Every time the business community has rung warnings bells, and frankly the economy keeps going.” The idea behind the Paris talks is that all countries have to participate in a United Nations-organized effort to curb emissions of greenhouse gases linked to global warming. To get everyone on board, each country was allowed to develop its own plan, and countries aren’t compelled to meet their targets, which cover the period after 2020. Few political leaders are interested in ordering up deep, painful cuts to emissions in ways that could unleash high electricity prices, stunt industrial growth or prevent impoverished citizens from clawing their way into the middle class.So most countries, under pressure from peers as well as domestic critics, settled on cuts likely to cause small to moderate economic pain in the medium term, with the potential for big benefits in the longer term if all the major economies comply and humankind keeps the effects of climate change at bay. The U.S. pledge is built around President Barack Obama’s “clean power plan,” which focuses on steep reductions in carbon dioxide emissions from the electricity sector—mainly coal. The U.S. government estimates the impact of the power rule—issued by the Environmental Protection Agency—at between $28 billion and $39 billion in 2030, or 0.1% to 0.2% of projected GDP.

    Why $16.5 Trillion to Save the Planet Isn't as Much as You Think - Making the energy industry safer for the climate may not cost as much as you think, even if the price tag is $16.5 trillion. That’s the sum the International Energy Agency estimates it will cost the 187 governments to clean up pollution under the pledges made for the United Nations climate talks in Paris, which concluded on Saturday. In all, governments will spend $13.5 trillion meeting their goals. If they spent $3 trillion more, it would hold temperature increases to the ceiling they adopted of 2 degrees Celsius (3.6 degrees Fahrenheit). It’s an eye-popping figure. Yet the world is already set to invest about $68 trillion on its energy needs by 2040, even without a climate plan, the IEA projects. That will go for everything from renewable energy to coal-fired plants and building efficiency upgrades. The Paris deal is intended to fundamentally tilt the spending toward the greener side of the business.“The strength of the agreement is that it allows a thousand policy flowers to bloom,” . “This sends a powerful economic signal that fossil fuels will be saddled with financial and legal premiums to remain part of the energy mix, and clean energy will enjoy subsidies.” The deal endorsed the 2-degree goal and called on nations to “pursue efforts to limit the temperature increase to 1.5 degrees.” That more ambitious target implies vast cuts to emissions from burning fossil fuels that will go beyond the IEA’s estimate.

    Paris COP21: Costliest treaty in history solves next to nothing -  The Paris Treaty will do very little to rein in temperature reductions, Copenhagen Consensus president Dr. Lomborg said today.  “The Paris Treaty promises to keep temperature rises below 2°C. However, the actual promises made here will do almost nothing to achieve that. It is widely accepted that to keep temperature rises below 2°C, we have to reduce CO₂ emissions by 6,000Gt.

    - Paris cuts between 2016 and 2030 only amount to less than 1% of CO₂ cuts needed to reach 2°C target
    - Paris will likely be the world’s most expensive treaty ever at a costs of at least $1 trillion a year
    - $100bn in climate aid is a very poor use of money
    - Without technological breakthroughs, large carbon cuts will remain hugely expensive 
    - Gates-led innovation fund is best initiative to emerge from Paris
    - Green R&D needs to be increased 10-fold to $100 billion per year

    Saving the Planet: How Climate Breakthroughs Are Made -- Breaking news Saturday in Paris from the 21st Conference of the Parties (COP) of the UN Framework Convention on Climate Change: National leaders described the agreement finally reached as “an historic breakthrough”.  Oops. My mistake. That was from the 13th COP in Bali in 2007. Then there was the 15th COP in Copenhagen in 2009, which achieved an “unprecedented breakthrough… to curb greenhouse gas emissions.” Of course, the 16th COP in Cancun in 2010 produced a “breakthrough deal”. Not to be outdone, the 17th COP in Durban in 2011 reached a “breakthrough on [a] course for [a] future accord.” The 19th COP in Warsaw in 2013 yielded a “foundation for a global agreement.” The 20th COP in Lima in 2014 produced a “global warming agreement… [that] would for the first time commit all countries… to [cut] emissions.” And now, finally, at long last, the 21st COP just this past Saturday “reached a landmark accord that will, for the first time, commit nearly every country to lowering planet-warming greenhouse gas emissions.” So: Climate negotiation breakthroughs are a dime a dozen. They live or die in the details, and the thunderous applause drowning out even the noise from the innumerable private jets departing Paris has obscured three crucial parameters that will make this agreement only the latest exercise in delusion: Precisely what has been agreed, who actually will pay the costs, and the degree to which the “planet” has been “saved.”

    CON21 - Ilargi -- French Foreign Minister Laurent Fabius just announced, in Paris, a “legally binding agreement” that no-one has agreed the financing for. We can hear a couple thousand lawyers across the globe snicker. But it’s all the COP21 ‘oh-so-important’ climate conference managed to come up with. No surprises there. They couldn’t make the 2ºC former goal stick, so they go for 1.5ºC this time. All on red, double or nothing. Because who really cares among the leadership, just as long as the ‘targets’ are far enough away that they can’t be held accountable. I’ve been writing the following through the past days, and wondering if I should post it, because I know so many readers of the Automatic Earth have so much emotion invested in these things, and they’re good and fine emotions. But some things must still be said regardless of consequences. Precisely because of that kind of reaction. No contract is legally binding if there’s no agreement on payment. Nobody has a legal claim on your home without it being specified that, if, when and how they’re going to pay for it.  I understand some people may get offended by some of the things I have to say about this – though not all for the same reasons either-, but please try and understand that and why the entire CON21 conference has offended me. After watching the horse and pony show just now, I thought I’d let ‘er rip:

    The Godfather Of Climate Change Calls Obama's Deal "A Fraud, It's Bullshit" -Amid all the self-congratulatory mutual masturbation that has effused since the "historic" signing of a climate 'deal' with no enforcement mechanism, few are better qualified (or more outspoken) to describe the utter farce that COP21 is than former NASA scientist James Hansen, who as The Guardian notes, is considered the father of global awareness of climate change...“It’s a fraud really, a fake,” he says, rubbing his head. “It’s just bullshit for them to say: ‘We’ll have a 2C warming target and then try to do a little better every five years.’ It’s just worthless words. There is no action, just promises. As long as fossil fuels appear to be the cheapest fuels out there, they will be continued to be burned.”The talks, intended to reach a new global deal on cutting carbon emissions beyond 2020, have spent much time and energy on two major issues: whether the world should aim to contain the temperature rise to 1.5C or 2C above preindustrial levels, and how much funding should be doled out by wealthy countries to developing nations that risk being swamped by rising seas and bashed by escalating extreme weather events. But, according to Hansen, the international jamboree is pointless unless greenhouse gas emissions aren’t taxed across the board. He argues that only this will force down emissions quickly enough to avoid the worst ravages of climate change.

    What climate ‘tipping points’ are – and how they could suddenly change our planet - Just think of the climate like a chair. It takes a strong push to tip over a chair stood on four legs, but when it’s leaning on only two legs the required push becomes smaller. Indeed, if the inclination becomes large enough, it will tip over by itself. Today, climate change inclination is increasing – and we know it could suddenly tip over, as our planet has previously witnessed several abrupt switches between different states. Along with what happened to the Sahara, there are also the flip-flops between ice ages and moderate conditions which happened every 1,000 years, before things settled down 10,000 years ago. The idea that global warming might destabilise many climate systems and give rise to abrupt transitions was explored in the movie The Day After Tomorrow, in which melting ice shelves caused a sudden reversal in Atlantic currents – and a worldwide catastrophe.The idea of climate tipping points was explored more rigorously by a team of scientists led by myself for a study recently published in the journal PNAS. We looked at all the simulations performed by 37 climate models that had been used to inform the Intergovernmental Panel of Climate Change (IPCC) – together with their historical and pre-industrial simulations. That gave us a gigantic amount of data: around 1015 bytes divided over several computer servers around the world. We detected 37 cases of abrupt change, distributed over three different climate change scenarios. These include the Arctic becoming ice-free even in winter, the Amazon rainforest dying off and the total disappearance of snow and ice cover on the Tibetan Plateau.

    Blocking the Sun Is No Plan B for Global Warming - More than 300 watts per square meter of sunshine hits the top of Earth's atmosphere each year. To a tinkerer's mind there is an obvious solution: block some of that sunlight from coming in. That's the solution known as geoengineering—the large-scale manipulation of the planet’s environment, in this case the sky. As negotiators at the climate talks underway here spar over what to do about adding more CO2 to the air, geoengineering becomes more and more attractive to those with this tinkerer's bent—a group dubbed the "geoclique" by journalist Eli Kintisch in his 2010 book Hack the Planet: Science’s Best Hope—or Worst Nightmare—for Averting Climate Catastrophe. These scientists, engineers and businessmen want to at least study options for blocking sunlight, which they say can be relatively inexpensive when compared with the bill for transforming the trillion-dollar global energy system that largely burns fossil fuels. Figuring out how droplets of sulfuric acid sprayed into the stratosphere might offset rising CO2 offers physicists a chance to have a literal global impact. As journalist Oliver Morton details in his new book "The Planet Remade: How Geoengineering Could Change the World," the geoclique is calling the approach "solar-radiation management," to fend off critics who call the sulfur idea far-fetched, or dangerous. The lexical sleight of hand hasn’t attracted the favor of climate negotiators, although a nation or even an average Internet billionaire could pay for a program to swathe the world in a sulfuric veil, using specially modified jet planes plying the stratosphere. A more speculative and longer-term alternative would be a fleet of self-propelled ships that could seed low-lying clouds across the world's oceans, expanding cloud cover and reflecting more sunlight.

    Beijing issues 2nd smog red alert of the month - US News: (AP) — China's capital Beijing issued its second smog red alert of the month, triggering vehicle restrictions and forcing schools to close. A wave of smog is due to settle over the city of 22.5 million from Saturday to Tuesday. Levels of PM2.5, the smallest and deadliest airborne particles, are set to top 500, according to the official Beijing government website. That is more than 20 times the level that is considered safe by the World Health Organization. Half the city's cars will be forced off the road on any given day, while barbecue grills and other outdoor smoke sources will be banned and factory production restricted. Schools will close and residents advised to avoid outdoor activities. On Friday afternoon, the air was relatively good, with a PM2.5 reading of about 80 and the sun shining brightly over the city. However, visibility in some parts of Beijing will fall to less than 500 meters (1,600 feet) on Tuesday when the smog will be at its worst, the city government website said. An almost complete lack of wind would contribute to the smog's lingering over the city, it said. Smog red alerts are triggered when levels of PM2.5 above 300 are forecast to last for more than 72 hours. Although the four-tier smog warning system was launched two years ago, Beijing had not issued a red alert until last week, drawing accusations that it was ignoring serious bouts of smog to avoid the economic costs. Some residents have defied the odd-even license plate number traffic restrictions and complained about the need to stay home from work to accompany housebound children. Others have used the break from school to travel to places where the air is better, while many who stay wear air filtering face masks and run air purifiers in their homes. Scientific studies attribute 1.4 million premature deaths per year to China's smog, or almost 4,000 per day.

    Will China Be the Enforcer of the Paris Climate Agreement? -- One of the main reasons the climate foot-draggers, in both parties, want to go slow on climate in the U.S. (aside both parties’ allegiance to “wealth creation”) is the China argument. In simple form, it says, “Whatever the U.S. does to save the climate will be undone by China, so why bother?” I don’t think that argument holds true any longer. Ambrose Evans-Pritchard, writing in The Telegraph: China is the low-carbon superpower and will be the ultimate enforcer of the COP21 climate deal in Paris Chinese scientists have published two alarming reports in a matter of weeks. Both conclude that the Himalayan glaciers and the Tibetan permafrost are succumbing to catastrophic climate change, threatening the water systems of the Yellow River, the Yangtze and the Mekong. One report was by the Chinese Academy of Sciences. The other was a 900-page door-stopper from the science ministry, called the “Third National Assessment Report on Climate Change”. The latter is the official line of the Communist Party. It states that China has already warmed by 0.9-1.5 degrees over the past century – higher than the global average – and may warm by a further five degrees by 2100, with effects that would overwhelm the coastal cities of Shanghai, Tianjin and Guangzhou. The message is that China faces a civilizational threat. Whether or not you accept the hypothesis of man-made global warming is irrelevant. The Chinese Academy and the Politburo do accept it. So does President Xi Jinping, who spent his Cultural Revolution carting coal in the mining region of Shaanxi. This political fact is tectonic for the global fossil industry and the economics of energy. Eight of the world’s biggest solar companies are Chinese. So is the second biggest wind power group, GoldWind. China invested $90bn in renewable energy last year and is already the superpower of low-carbon industries. It installed more solar in the first quarter than currently exists in France. Isabel Hilton from China Dialogue says the energy shift has reached a point where Beijing has a vested commercial interest in holding the world to the Paris deal. “The Chinese think they can dominate low-carbon technologies,” she said….

    Beijing's Smog Alarms Public, But Data Shows India's Air Quality Is Far Worse - Forbes: Beijing’s dangerous levels of smog clogged news feeds this week. But analysis of World Health Organization data obtained by Forbes shows that other cities suffer far worse air pollution — in some cases, 50 percent more on average.The Chinese capital issued the second ever red alert for hazardously high levels of air pollution Friday. The first red alert closed down schools and limited traffic between Monday and Thursday. Pollution levels reached 300 micrograms per cubic meter, 12 times the World Health Organization’s recommended exposure of 25. The pollution mostly comes from China’s coal-burning power plants. It kills over 4,000 people a day, according to a paper published in a peer-reviewed journal earlier this year. Beijing’s smog looms large in the public’s imagination, perhaps as a symbol of collective anxiety about the rise of a foreign power. But, as our infographic shows, other parts of the developing world have far worse average air pollution. According to data collected by WHO in 2014, 13 of the 20 most polluted cities in the world are in India. No Chinese city appears in the top 20, although 14 Chinese cities were in the top 100 cities with the worst air. Beijing ranked 76th in that list. (The lone pink marker in the U.S. is Fresno, California — 161st)

    Canadian company sells cans of fresh air to China - What would you pay for a breath of fresh air? Canadian company Vitality Air thinks it's worth between $15 and $46. In the wake of a red alert issued this month in Beijing for air pollution, the product has become increasingly popular in China. "Just like bottled water, premium air is a growing industry because people are noticing the difference," Vitality Air website says. The company says the canned air is "fresh Rocky Mountain air" from Alberta, Canada. Customers can buy canned air or pure oxygen similar to what you'd find in an oxygen bar. The canisters come in different sizes with an inhalation mask for optimal use. Vitality Air has received international orders from other countries and will be sending its first 500 bottle shipment to China this week, according to CNBC.

    Critics concerned about some wind farms planned for Texas — The residents of Clay County gained national attention over the summer when it was announced the county’s new Shannon Wind Farm would power Facebook’s new billion-dollar Fort Worth data center 100 miles to the southeast. Last July, Clay County Judge Kenneth Liggett told the Fort Worth Star-Telegram that residents overwhelmingly supported the new wind farm near Windthorst, saying: “99 percent of folks like it. One or two don’t.” The Star-Telegram reports five months later, he said that’s no longer the case. “It has been diminished a bunch by the actions of this group,” Liggett said. That group, Clay County Against Wind Farms, has been having meetings to raise awareness about two new proposed wind farms in the county just east of Wichita Falls. With an estimated population of 10,370, Clay County maintains a rural feel, and rancher Forrest Baldwin wants to keep it that way. “What we’re trying to do is get folks that might be interested in wind turbines to stop and think about it a little bit,” said Baldwin, whose family owns the 7,000-acre Sanzenbacher Ranch near Henrietta, established in 1873. “Are we really going to fundamentally transform the county from this rural setting that you see to more of an industrial type complex, and I think the majority of people now are saying, ‘No that’s not what we want,’ ” Baldwin said. To him, wind farms are a blight for several reasons, among them: They ruin the rural skyline, hurt land values and reduce the acreage used for agriculture.

    Not-From-The-Onion-But-Should-Be story of the day -  This town is not too bright about solar panels. A North Carolina town rejected a solar farm proposal after citizens at the Woodland Town Council expressed fears that the panels would take away sunlight from their town.  Jane Mann, a retired science teacher from Northampton, spoke at the town meeting with concerns about photosynthesis and was worried plants wouldn’t get enough sunlight if solar panels were installed, the Roanoke-Chowan News-Herald reported. She also argued that solar panels could cause cancer.  Her husband, Bobby Mann, claimed that solar farms would “suck up all the energy from the sun” and ruin the town’s businesses. “You’re killing your town,” he said. “All the young people are going to move out." Company representatives from the Strata Solar Company tried reasoning with the town’s concerns, and told them there wouldn’t be any negative impacts. “The panels don’t draw additional sunlight,” Brent Niemann, a company representative told the concerned citizens. “There are no toxical materials on site. This is a tried and true technology.” It appeared the solar company’s appeal to sensibility didn’t work, as the town rejected the proposal, 3-1 against rezoning land near the town’s highway to build the solar farm.

    North Carolina citizenry defeat pernicious Big Solar plan to suck up the Sun -- The citizens of Woodland, N.C. have spoken loud and clear: They don't want none of them highfalutin solar panels in their good town. They scare off the kids. "All the young people are going to move out," warned Bobby Mann, a local resident concerned about the future of his burg. Worse, Mann said, the solar panels would suck up all the energy from the Sun.  Another resident—a retired science teacher, no less—expressed concern that a proposed solar farm would block photosynthesis, and prevent nearby plants from growing. Jane Mann then went on to add that there seemed to have been a lot of cancer deaths in the area, and that no one could tell her solar panels didn't cause cancer. “I want information," Mann said. "Enough is enough." These comments were reported not in The Onion, but rather by the Roanoke-Chowan News-Herald. They came during a Woodland Town Council meeting in which Strata Solar Company sought to rezone an area northeast of the town, off of US Highway 258, to build a solar farm. The council not only rejected the proposal, it went a step further, voting for a complete moratorium on solar farms. That seemed to please the residents evidently tired of Big Solar's relentless intrusion into their community. One resident, Mary Hobbs, said her home was surrounded by solar farms and has lost its value. That led Ars to the satellite view of Woodland on Google Maps, to see if we could verify the veracity of Hobbs' claims. This publication will not look the other way as Big Solar attempts to railroad the good citizens of small-town America. Alas, when we looked at the satellite view we didn't see any sign of solar farms as we perused the verdant fields and woods of the aptly named Woodland.

    What Just Happened in Solar Is a Bigger Deal Than Oil Exports -- The clean-energy boom is about to be transformed. In a surprise move, U.S. lawmakers agreed to extend tax credits for solar and wind for another five years. This will give an unprecedented boost to the industry and change the course of deployment in the U.S. The extension will add an extra 20 gigawatts of solar power—more than every panel ever installed in the U.S. prior to 2015, according to Bloomberg New Energy Finance (BNEF). The U.S. was already one of the world's biggest clean-energy investors. This deal is like adding another America of solar power into the mix. The wind credit will contribute another 19 gigawatts over five years. Combined, the extensions will spur more than $73 billion of investment and supply enough electricity to power 8 million U.S. homes, according to BNEF. In the short term, the deal will speed up the shift from fossil fuels more than the global climate deal struck this month in Paris and more than Barack Obama's Clean Power Plan that regulates coal plants, This is exactly the sort of bridge the industry needed. The costs of installing wind and solar power have dropped precipitously—by more than 90 percent since the original tax credits took effect—but in most places coal and natural gas are still cheaper than unsubsidized renewables. By the time the new tax credit expires, solar and wind will be the cheapest forms of new electricity in many states across the U.S. The tax credits, valued at about $25 billion over five years, will drive $38 billion of investment in solar and $35 billion in wind through 2021, according to BNEF. The scale of the new projects will help push costs down further and will stimulate new investment that lasts beyond the extension of the credits.

    U.S. Renewable Energy isn’t Helping the Economy — or the Fight Against ISIS – Manhattan Institute - Although the Islamic State is located in some of the sunniest regions of the globe, it’s making money selling not stolen solar panels and wind turbines but stolen oil. That should send a message to Congress, whose new $1.1 trillion spending bill extends the wind-production credit that expired last year and provides a new extension to the solar credit. Congress will vote on the bill Friday. Extension of renewable energy credits was the price to pay for allowing American companies to export crude oil, a ban that has been in place since 1975. With oil piling up in storage facilities, the need to export is obvious. The Iran deal allows Iran to export oil, and it’s only fair to allow American corporations the same rights as their Iranian counterparts. The bill shows that it’s practically impossible to get rid of a program or a tax credit. The rationale for renewable energy is to reduce greenhouse-gas emissions. Greenhouse-gas emissions from power plants have declined by 15% from 2005 to 2013, according to the Energy Information Administration, not from the use of renewables, but because of the growth of natural gas-fired power plants. With low natural gas prices, this is likely to continue. America generated 27% of its electricity from natural gas in 2014, compared with 4.4% from wind and less than 0.5% from solar. (Another 39% came from coal and 19% came from nuclear power.) Wind energy is dependent on credits.  ISIS is not putting up windmills or solar panels. It is not forcing ethanol into the gasoline supply (as EPA announced it would do last week). It is getting funds from oil to grab more lands in Syria and Iraq, and fund suicide bombers to kill Westerners. Oil, together with natural gas and coal, are valuable commodities to produce energy, while renewables are not. While ISIS kills, America is slowing its economy with its focus on renewables.

    Hatred, Insults and Even Death Threats Over Climate Science? -- Here are some actual quotes from mail, emails, and phone messages to climate scientists: "You and your colleagues … ought to be shot, quartered and fed to the pigs” “Just a quick note to encourage you to do the right thing and shoot yourself in the head” “Wanker, you wanker you nead (sic) to be killed” “Beware of retribution upon yours. Someone somewhere will hunt you down” “I hope someone puts a bullet between your eyes” “I hope your child sees your head in a basket after you’ve been guillotined” We’re talking about scientists here — people who have studied calculus and physics most of their lives, working behind-the-scenes. If they were interested in being celebrities they could have gone into the TV weather field, for example. If they were interested in making a fortune, they could have used their intellect to make millions on Wall Street. If they wanted to change the world, they could have gotten into politics.

    Cheap gas spurs SUV sales and puts U.S. climate goals at risk - Surging demand for trucks and SUVs fueled by cheap gasoline is holding back improvements in U.S. fuel economy and greenhouse gas emissions, a government report due out on Wednesday is expected to show. The disconnect between consumer demand for larger, less efficient vehicles and the Obama administration's climate goals sets up a clash between the auto industry and federal regulators. Mark Rosekind, who heads the National Highway Traffic Safety Administration, said in a Reuters interview last week the administration will consider automakers' arguments that the shift away from cars makes it harder to hit the 2025 fleet average fuel economy target of 54.5 miles (87.7 km) per gallon. But the landmark agreement announced in France over the weekend, to transform the world's fossil fuel-driven economy in bid to arrest global warming, could make a cut in the target difficult for the U.S. government to accept. "Unfortunately there have been too many decisions that are made - 'Oh, prices went down, it's OK again,'" said Rosekind. said. "No, it's not." Consumers are responding to signals from gas pumps, where a combination of relatively low taxes - federal gasoline taxes have not gone up since 1993 - and oil unleashed by hydraulic fracturing or fracking have pushed U.S. gasoline prices to an average of just over $2 a gallon - the lowest level in six years. In November, fuel efficiency of vehicles purchased fell sharply to 25 mpg - down 0.8 mpg from a peak in August 2014, said University of Michigan researcher Michael Sivak, who tracks fuel efficiency.

    Why Volkswagen Cheated --  On December 10, Volkswagen Chairman Hans-Dieter Pötsch made a public admission: A group of the company’s engineers decided to cheat on emissions tests in 2005 because they couldn’t find a technical solution within the company’s “time frame and budget” to build diesel engines that would meet U.S. emissions standards. When the engineers did find a solution, he said, they chose to keep on cheating, rather than employ it. Noting that Volkswagen had suspended nine managers believed to be involved in the deception, Pötsch added that the scandal arose from “a mindset in some areas of the company that tolerated breaches of the rules.” But Pötsch did not answer perhaps the biggest question of the scandal: Why did Volkswagen cheat on that particular engine at that particular time?Part of the answer lies, Newsweek has learned, in the unprecedented tightening of emissions standards by the United States Environmental Protection Agency (EPA) for model year 2004, when the agency dramatically raised the bar on how much pollution new cars in the U.S. would be permitted to discharge into the atmosphere—presenting a virtually impossible engineering challenge to the world’s automakers.Since the mid-1970s, the EPA has introduced progressively more stringent emissions standards for light-duty vehicles, including cars, sport-utility vehicles and small pickup trucks. But the requirements for model year 2004 were among the toughest ever. The federal agency slashed the amount of nitrogen oxide it allowed cars to emit from their tailpipes by more than 94 percent—from 1.25 to 0.07 grams a mile. Nitrogen oxide is a pollutant found in vehicle exhaust and cigarette smoke that, along with carbon dioxide, the EPA heavily regulates. Pollutants from tailpipe emissions can cause premature death, bronchitis, asthma and respiratory and cardiovascular illness.

    Methane Leaks Responsible for 30% + of Climate Change  -- For decades, utilities in California have logged, but not repaired, thousands of pinprick leaks in pipelines criss-crossing the state. These leaks are considered non-hazardous because they don’t pose a health or safety risk. But they do pose an environmental risk. Tim O’Connor, an attorney with the Environmental Defense Fund (EDF), says not many people, from utilities to state leaders, have been thinking about it.“It is this hidden environmental issue which is quite significant,” O’Connor says.‘Certain situations—not all, I want to be very clear on this—you’d find some leaks that would go unrepaired for literally years.’ Eric Hofmann, Utility Workers Union of America If you add up the greenhouse gas emissions coming from all pipeline leaks statewide, he says, it’s as if we’re putting 700,000 more cars on the roads.Methane is a Potent Greenhouse GasMost Californians who care about climate change understand that carbon dioxide emissions are a key part of the problem, but methane – which can seep from landfills, oil and gas infrastructure, wastewater ponds or agricultural facilities – is an important piece of the puzzle when it comes to combating climate change.“It has a stronger global warming potential,” explains Riley Duren, a climate scientist who has been tracking atmospheric methane with NASA’s Jet Propulsion Laboratory. “On a 20-year timeline, methane is about 80 times more efficient at trapping heat than an equivalent amount of carbon dioxide.”

    Britain follows Paris deal with cuts to green subsidies – Britain cut more renewable energy subsidies on Thursday, putting jobs at risk and drawing criticism for losing credibility in tackling climate change, a week after the landmark deal in Paris. Britain’s Conservative government has been reining in spending on all renewables subsidies since it took power in May, saying the cost of technology has come down sharply and subsidies should reflect that. Thursday’s cuts came a day after it allowed the use of fracking to extract shale gas below national parks and protected areas and as the licenses were awarded for shale oil and gas extraction. “Ministers happily take credit for being climate champions on an international stage while flagrantly undermining the renewable industry here at home,” said Green MP Caroline Lucas.  The government produced its own impact assessment on the changes showing they could result in the loss of between 9,700 and 18,700 solar jobs. “In a world that has just committed to strengthened climate action in Paris and which sees solar as the future, the UK government needs to get behind the British solar industry,” Paul Barwell, the head of Britain’s Solar Trade Association, said in a statement.

    Japan, S Korea plan 61 new coal plants in next 10 years, despite global climate deal - Less than a week since signing the global climate deal in Paris, Japan and South Korea are pressing ahead with plans to open scores of new coal-fired power plants, casting doubt on the strength of their commitment to cutting CO2 emissions.Even as many of the world's rich nations seek to phase out the use of coal, Asia's two most developed economies are burning more than ever and plan to add at least 60 new coal-fired power plants over the next 10 years. Officials at both countries' energy ministries said those plans were unchanged. Japan, in particular, has been criticised for its lack of ambition - its 18-percent target for emissions cuts from 1990 to 2030 is less than half of Europe's - and questions have been raised about its ability to deliver, since the target relies on atomic energy, which is very unpopular after the 2011 disaster at the Fukushima nuclear plant. "It will not be easy to change the dynamic for domestic coal use, but I think Japan cannot continue ignoring this," . "Eventually Japanese businesses will start recognising the meaning of emissions neutrality and the rapid shift to renewables in other countries and start responding," Analysts say Japan and South Korea could reduce carbon emissions by much more than they pledged in Paris.

    Arch Coal to delay bond interest payment as bankruptcy looms - Arch Coal Inc, the second-largest coal miner in the United States, delayed a $90 million interest payment that was due Tuesday, pushing back a widely expected bankruptcy filing. The company's shares shot up nearly 35 percent to $1.20. "It tells you how bad things have become when hanging on becomes a victory," analysts at BB&T Capital Markets wrote in a note. "This year, an ACI filing looks like a near certainty." The company was widely expected to file for bankruptcy by Tuesday. If Arch Coal files a Chapter 11 petition, it will become the fourth coal miner to declare bankruptcy this year, joining Walter Energy Inc, Alpha Natural Resources Inc and Patriot Coal. "Shareholders in this troubled sector are likely relieved that (Arch Coal's) management is exploring options to maximize value to the benefit of all stakeholders," said David Johnson, a founding partner at restructuring firm ACM Partners.

    COP21 and the coal industry : Yet that flexibility was required for the deal to win approval from countries such as India, Saudi Arabia and the US – where the agreement will still be subject to Senate approval, the point at which US involvement in the Kyoto Protocoal foundered. It also provides a lifeline for the coal industry, said Benjamin Sporton, CEO of the World Coal Association. “The foundation of this Paris Agreement at the INDCs […] which for many include a role for low-emission coal technologies, such as high-efficiency low-emissions coal and carbon capture and storage,” said Sporton in response to the deal. “With the commitments countries made going into COP21, the International Energy Agency said electricity generation from coal would grow by 24% by 2040.” It was a point picked up elsewhere in the industry with the Minerals Council of Australia (MCA) saying that the deal would “support and accelerate the further roll-out of low emissions coal technologies.” “High-efficiency low-emission (HELE) coal-fired power plants are a central element of the emissions reductions plans of China, India, Japan and southeast Asian nations tabled in Paris,” the MCA continued. “More than 650 units are already in place in East Asia along, with more than 1060 of these units under construction or planned.” Sporton also said the Paris deal underlined the need to speed up development and deployment of carbon capture and storage (CCS). “We call on governments to move quickly to support increased investments in CCS and through providing policy parity for CCS alongside other low-emission technologies.”

    Even if the global warming scare were a hoax, we would still need it - - Chinese scientists have published two alarming reports in a matter of weeks. Both conclude that the Himalayan glaciers and the Tibetan permafrost are succumbing to catastrophic climate change, threatening the water systems of the Yellow River, the Yangtze and the Mekong. The Tibetan plateau is the world’s "third pole", the biggest reservoir of fresh water outside the Arctic and Antarctica. The area is warming at twice the global pace, making it the epicentre of global climate risk. One report was by the Chinese Academy of Sciences. The other was a 900-page door-stopper from the science ministry, called the “Third National Assessment Report on Climate Change”. The latter is the official line of the Communist Party. It states that China has already warmed by 0.9-1.5 degrees over the past century – higher than the global average - and may warm by a further five degrees by 2100, with effects that would overwhelm the coastal cities of Shanghai, Tianjin and Guangzhou. The message is that China faces a civilizational threat.Whether or not you accept the hypothesis of man-made global warming is irrelevant. The Chinese Academy and the Politburo do accept it.  This political fact is tectonic for the global fossil industry and the economics of energy. Until last Saturday, it was an article of faith among Western climate sceptics and some in the fossil industry that China would never sign up to the COP21 accord in Paris or accept the "ratchet" of five-year reviews. . This political judgment was perhaps plausible three or four years ago in the dying days of the Hu Jintao era. Today it is clutching at straws.

    Irradiated: The hidden legacy of 70 years of atomic weaponry: At least 33,480 Americans dead --Byron Vaigneur watched as a brownish sludge containing plutonium broke through the wall of his office on Oct. 3, 1975, and began puddling four feet from his desk at theSavannah River nuclear weapons plant in South Carolina.The radiation from the plutonium likely started attacking his body instantly. He’d later develop breast cancer and, as a result of his other work as a health inspector at the plant, he’d also contract chronic beryllium disease, a debilitating respiratory condition that can be fatal.“I knew we were in one helluva damn mess,” said Vaigneur, now 84, who had a mastectomy to cut out the cancer from his left breast and now is on oxygen, unable to walk more than 100 feet on many days. He says he’s ready to die and has already decided to donate his body to science, hoping it will help others who’ve been exposed to radiation. Vaigneur is one of 107,394 Americans who have been diagnosed with cancers and other diseases after building the nation’s nuclear stockpile over the last seven decades. For his troubles, he got $350,000 from the federal government in 2009. His cash came from a special fund created in 2001 to compensate those sickened in the construction of America’s nuclear arsenal. The program was touted as a way of repaying those who helped end the fight with the Japanese and persevere in the Cold War that followed.Most Americans regard their work as a heroic, patriotic endeavor. But the government has never fully disclosed the enormous human cost.

    New database provides monthly inventory and status of U.S. electric generating plants --EIA's recently introduced Preliminary Monthly Electric Generator Inventory consolidates currently available information on electric generators into a single product. This new database will enable users to identify monthly changes in generator status and to track units that are being added or retired from the generating fleet.  Monthly tracking of electricity generator additions is particularly important given the rapid increase in utility-scale (1 megawatt or greater) solar generating units, which have been installed at a rate of 24 plants per month in 2015 and account for nearly two-thirds of the total plants added this year. The full database includes 19,914 operating power plants with more than a million megawatts of net summer capacity (as of September 2015), as well as 1,080 planned plants, 2,989 retired plants, and 687 canceled or postponed plants. The new database integrates information submitted on the monthly survey Form EIA-860M, Monthly Update to Annual Electric Generator Report, and on the annual survey Form EIA-860, Annual Electric Generator Report, and provides information on plant operators, generator fuel and type, operator, and operating status. Generators can be analyzed by sector, state, capacity, technology type, energy source, and prime mover (i.e., a device used to transform one form of energy, commonly mechanical, into electric energy).

    A state-by-state look at renewable energy requirements - Twenty-nine states and the District of Columbia have requirements that utilities get a certain amount of their electricity from renewable sources. Nine additional states have goals for renewable energy, while a dozen others have no targets. A state-by-state look at renewable energy policies.

    Ohio has big stake in energy debate - For two weeks in Paris, negotiators from more than 190 countries worked toward the historic agreement announced Saturday on commitments to lower greenhouse gases that scientists say are warming the planet and causing climate changes around the globe. In few places in the U.S. is this debate more relevant than in Ohio, which ranks fifth nationally in carbon dioxide emissions from burning fossil fuels, and where two-thirds of the electricity we consume comes from coal. That means big changes — and potentially huge costs — could be in store for coal-dependent states like Ohio as a result of the climate-change benchmarks agreed to in Paris. The state already faces a 2022 federal deadline to start cutting power plant carbon dioxide emissions under the Obama administration’s Clean Power Plan, which Ohio is challenging in federal court along with 26 other states. The federal mandate calls for increased use of renewable energy like solar and wind, and shifts away from coal and toward lower-carbon natural gas. For Ohio, that means a 37 percent reduction in the rate of power plant carbon dioxide emissions by 2030, according to rules finalized in October by the U.S. Environmental Protection Agency. “The day of reckoning is coming,” said Jack Shaner, deputy director of the Ohio Environmental Council. “Ohio has traditionally had to be drug kicking and screaming to comply with federal clean air standards. That has taken a toll on our health, on our environment and even on our economy.”

    Crews finish effort to drain sunken barge found in Lake Erie — Crews have finished an effort to eliminate environmental threats from a sunken barge that apparently sat undiscovered in Lake Erie for nearly 80 years, The U.S. Coast Guard said Thursday. Salvage crews recently pumped out hazardous, oil-based substances from the barge, though six of the eight tanks onboard were empty. The mixture of cargo and water removed from the site near the U.S.-Canadian border totaled more than 33,000 gallons, the Coast Guard said in a statement announcing the effort’s official end. Whether oil-based substances in the other tanks spilled when the barge sank or trickled out over time remains a mystery. A Coast Guard spokesman, Lt. Mike Hart, previously said officials have no way to make a determination on that. The vessel is believed to be the Argo, which sank during a storm in 1937. The wreckage was among 87 shipwrecks on a federal registry that identifies the most serious pollution threats to U.S. waters. Historical documents indicated it was transporting benzol and crude oil when it went down. A report produced by the National Oceanic and Atmospheric Administration in 2013 said it was believed to be carrying 100,000 gallons of the oil-based products. Up to $5.65 million from two funds was made available for the cleanup, and the actual costs still are being finalized, the statement said.

    Fracking Bans Are Teaching Americans That They Are Not as Free as They Think - In December 2014, people in Ohio took an unprecedented step to protect their communities and natural environment from fracking. To enforce their city ban on fracking activities, the residents of Broadview Heights filed a class action lawsuit against the oil and gas corporations that were threatening them—and against their own governor and state government. The lawsuit seeks a ruling that would stop oil and gas corporations from overturning Boadview Heights’ frack ban, and seeks a declaration that the state’s preemptive oil and gas laws—which require every Ohio community to allow fracking—violate the constitutional right of the people of Ohio to govern their own communities.The residents of Broadview Heights aren’t the only ones pitted against their own state. In Colorado, residents of Lafayette filed a similar class action, based on their city ban on fracking. The Lafayette lawsuit, much like that in Broadview Heights, seeks a court order prohibiting drilling corporations from interfering with the local frack ban, and a ruling that Colorado’s oil and gas laws—which also mandate that every community allow drilling and fracking—are unconstitutional.The communities share more than just lawsuits—in both Broadview Heights and Lafayette, it wasn’t the city government that proposed and adopted the frack bans, in November 2012 and November 2013 respectively, but the residents themselves through a public referendum. Similarly, in both class action lawsuits, it was community members who filed the lawsuits on behalf of all residents of their communities.In the lawsuits, residents are arguing that the actions taken by corporations and their state government—to interfere with and override their local fracking bans—violate the constitutional right of residents to local, community self-government.

    Ohio is poised to set records for volumes of drilling wastes going into injection wells -  Ohio is on track to end 2015 with a record volume of drilling wastes going into the state’s injection wells. Through nine months, Ohio’s 211 injection wells have taken in 20.0 million barrels of wastes, according to activist Teresa Mills of the Buckeye Forest Council who compiled the data from Ohio Department of Natural Resources’ records. That’s enough to fill 1,275 Olympic-sized swimming pools, the forest group said. That compares to 22.0 million barrels injected in all of 2014 and 16.3 million barrels for all of 2013. Ohio has already accepted 9.7 million barrels of liquid wastes from Ohio drillers in 2015. That compares to 10.7 million barrels in 2014 and 8.1 million barrels in 2013. Ohio has also accepted 10.2 million barrels from out-of-state drillers, mostly in Pennsylvania and West Virginia. In 2014, Ohio accepted 11.2 million barrels from out-of-state sources. It also took in 8.2 million barrels in 2013. Ohio can do little to block out-of-state wastes because they are protected as interstate commerce by the U.S. Constitution. Coshocton County was No. 1 in Ohio in 2014 volumes. It was followed by Athens, Trumbull, Portage and Muskingum counties. Stark County was No. 10.

    Taking a stance against fracking waste — Taking a stand against the disposal of hydraulic fracking brine and drill cuttings, the Fayette County Commission is moving forward with an ordinance that would ban the storage, disposal or use of oil and natural gas waste countywide. The with a quorum of two, commissioners Denise Scalph and Matt Wender passed the ordinance on first reading Tuesday, and it must be passed on second reading at a January 12 meeting before taking effect. Commissioner John Henry Lopez was not in attendance Tuesday. The ordinance is in response to a longstanding controversy over an injection well site in Lochgelly, positioned just upstream from a drinking water intake on New River. As previously reported by The Register-Herald, water testing conducted by Duke University showed frack waste had infiltrated Wolf Creek, a tributary to the New River. The ordinance interprets state code as allowing county commissions to pass ordinances to protect public health and safety and eliminate public nuisances. Reviewing the ordinance, county commission attorney Larry Harrah explained that no state or federal permit, license, charter or corporation operating under state charter will be allowed to violate the county ban. The enforcement for the ordinance will come through the court system, said Harrah. The commission as well as individual citizens can sue those who violate the ordinance. In addition to recuperative legal costs, Fayette County Circuit Court can impose a fine of between $1,000 and $5 million for the misdemeanor offense.

    Fracking plays active role in generating toxic metal wastewater, study finds: The production of hazardous wastewater in hydraulic fracturing is assumed to be partly due to chemicals introduced into injected freshwater when it mixes with highly saline brine naturally present in the rock. But a Dartmouth study investigating the toxic metal barium in fracking wastewater finds that chemical reactions between injected freshwater and the fractured shale itself could play a major role.  The findings, which are published in the journal Applied Geochemistry, show that transformation of freshwater used for fracking to a highly saline liquid with abundant toxic metals is a natural consequence of water-rock reactions occurring at depth during or following fracking. Fracking wastewater poses a hazard to drinking water supplies if improperly disposed. A PDF is available on request. The researchers examined samples from three drill cores from the Marcellus Shale in Pennsylvania and New York to determine the possible water-rock reactions that release barium and other toxic metals during hydraulic fracturing. . A mile below the earth's surface where fracturing takes place, chemical reactions occur between water and fractured rock at elevated pressure and temperature and in the absence of oxygen.  It has been assumed that the peculiar composition of the produced wastewater results from mixing of freshwater used for fracking with high salinity water already underground that also contains barium. But the Dartmouth team found that a large amount of barium in the shale is tied to clay minerals, and this barium is readily released into the injected water as the water becomes more saline over time.

    Magnum Hunter latest oil producer to seek bankruptcy - Oil and gas producer Magnum Hunter Resources Corp and its affiliates filed for Chapter 11 bankruptcy protection on Tuesday to carry out a debt-cutting plan as a prolonged slump in oil prices has depleted the company's cash. The company entered into a restructuring agreement that will convert its funded debt into equity, substantially reducing its more than $1 billion in debt, according to a company statement. Magnum Hunter ranks among the biggest energy producers to file for bankruptcy this year, joining Samson Resources Corp, Sabine Oil & Gas Corp, Quicksilver Resources Inc and Energy & Exploration Partners Inc. To fund its operations during its bankruptcy, the company's lenders agreed to provide up to $200 million in financing, which will also convert into equity when Magnum Hunter emerges from bankruptcy, according to the statement. Magnum Hunter, which operates primarily in the Appalachian Basin in West Virginia and Ohio, said it expects to emerge from bankruptcy in April. "With the unified support of our various lenders, we anticipate this restructuring will be a success and unprecedented in our industry," said Gary Evans, the company's chairman and chief executive officer, in the statement. Evans noted in his statement that Magnum Hunter expects to become one of the first energy companies to find a quick path out of Chapter 11 bankruptcy.

    'Backdoor' amendment in Pa. fiscal code guts regulations, gives millions to new natural gas fund - The state Senate on Thursday passed the fiscal code with some new language that environmentalists say not only guts regulations governing the oil and gas industry, but also subsidizes it. The fiscal code, which tells lawmakers how to spend money in the general fund, takes $12 million from the Alternative Energy Investment Act and puts it into a new Natural Gas Infrastructure Development Fund, delays implementation of the federal Clean Power Plan and handcuffs new regulations on oil and gas operators. State environmental regulators have been working for three years to modernize regulations governing drilling and natural gas production, but the fiscal code could wreck that progress and force them to start over, environmentalists say. After the Senate passed the fiscal code 48-2, a dozen environmental groups on Thursday afternoon issued a joint statement calling the move “state government at its least transparent and most hostile to public health, clean air and pure water.” The Marcellus Shale Coalition, the industry’s largest trade group, applauded the Senate for its bipartisan support.

    Fracking sharply reduces property values for property owners who use well water: Home values decline steeply when fracking occurs in neighborhoods that use well water, says new research from Duke University. But the outcome differs in neighborhoods that rely on piped water, where home values rise slightly after shale-gas drilling occurs. The study, conducted in Pennsylvania, found that in areas using well water, home prices dropped by an average of $30,1676 when shale drilling occurred within a distance of 1.5 kilometers. Meanwhile, homes using piped water gained an average of $4,800 in value after shale wells opened nearby. Hydraulic fracturing, or "fracking," is a relatively new technology in which gas is extracted by drilling into a shale formation and then applying a high-pressure mixture of water, sand and chemicals to create cracks from which the underground gas stores are released. The paper is among the first to quantify the impact of fracking on property values in a wide geographic area, said lead author Christopher Timmins, a Duke economics professor who specializes in environmental economics. It appears online in the December issue of the American Economic Review. "Our results show clearly that housing markets are responding to homeowners' concerns about groundwater contamination from shale gas development," Timmins said. "We may not know for many years whether these concerns are valid or not. However, they are creating a real cost to property owners today."

    Some gas produced by hydraulic fracturing comes from surprise source: Some of the natural gas harvested by hydraulic fracturing operations may be of biological origin—made by microorganisms inadvertently injected into shale by oil and gas companies during the hydraulic fracturing process, a new study has found.The study suggests that microorganisms including bacteria and archaea might one day be used to enhance methane production—perhaps by sustaining the energy a site can produce after fracturing ends. The discovery is a result of the first detailed genomic analysis of bacteria and archaea living in deep fractured shales, and was made possible through a collaboration among universities and industry. The project is also yielding new techniques for tracing the movement of bacteria and methane within wells. "A lot is happening underground during the hydraulic fracturing process that we're just beginning to learn about," said principal investigator Paula Mouser, assistant professor of civil, environmental and geodetic engineering at The Ohio State University. "The interactions of microorganisms and chemicals introduced into the wells create a fascinating new ecosystem. Some of what we learn could make the wells more productive." Oil and gas companies inject fluid—mostly water drawn from surface reservoirs—underground to break up shale and release the oil and gas—mostly methane—that is trapped inside. Though they've long known about the microbes living inside fracturing wells—and even inject biocides to keep them from clogging the equipment—nobody has known for sure where the bacteria came from until now.

    Consol Energy subsidiary agrees to settlement over water usage - Marcellus Shale gas well developer, CNX Gas Co. LLC, has agreed to pay $450,000 to settle state violations alleging it exceeded its water withdrawal limits from a reservoir in north Franklin, Washington County, on multiple occasions from 2011 through 2014. The settlement agreement was announced Thursday by the Pennsylvania Department of environmental Protection, which will receive $345,750, and the state Fish and Boat Commission, which will get $105,000. According to the DEP news release, CNX, a subsidiary of Consol Energy Inc., violated its state water withdrawal permit on 43 days between October 2011 and june 2013. And on 164 days between October 2013 and December 2014, CNX withdrew water from the reservoir despite limiting restrictions set by the Fish and Boat Commission. Those illegal withdrawals resulted in, “low water levels in the reservoir, drying out of the shallow shoreline areas and the surrounding forested wetlands,” the release said. “Protecting the waters of the Commonwealth is a core function of both DEP and the PFBC and this agreement underscores the fact that, together, we take this responsibility very seriously,” said Eric Gustafson, DEP manager for Oil and Gas Operations in the Southwest Oil and Gas District Office. “We expect that operators will follow their water management plans and draw-down permits to the letter.” CNX drills and hydraulically fractures shale gas wells, each of which can use upwards of 4 million gallons of water.

    Frackers Freak Out that EPA May Determine Fracking Fracks Water - Billions of gallons of water are contaminated by fracking every year – most of it permanently. There is no science to indicate otherwise. The oil and gas industry fears the Environmental Protection Agency may issue a new report that says fracking contaminates U.S. water supplies and is urging the agency to stick with the science of its original findings that shows no such risk exists. The Independent Petroleum Association of America sent a letter Monday to EPA Administrator Gina McCarthy pressing her not to give in to anti-fracking special interest groups that have been pressuring the agency to go against scientific precedent with a finding that fossil fuel production from shale poses systemic risks to the nation’s water supply.The EPA is finalizing its draft report on the effects of fracking on the nation’s water supply. The industry group says that although EPA’s draft report, developed in concert with the agency’s Scientific Advisory Board, shows no substantial risk from fracking, members of the advisory board are looking to change that in the final version of the report.Recent reports suggest members of the EPA advisory board may be considering a revision to the EPA five-year report findings “based not on science, but rather pressure from special interest groups,” the letter says. “We recognize that several critics of U.S. oil and natural gas production, who have waged a years-long campaign to ban or restrict the use of hydraulic fracturing, have publicly pressured EPA and the SAB into revising its finding,” the letter reads. “But we must remind you that the SAB is a scientific body, and thus its conclusions should be based on science; they should not be subject to political pressure from environmental groups who simply disagreed with what the EPA’s five-year study found.”

    We are Seneca Lake Red-lines Crestwood: no fossil fuel infrastructure -- “With this red line laid down across Crestwood’s driveway, we declare that its plans to store fracked gases in abandoned salt caverns on Seneca Lake constitutes an emergency,” said Colleen Boland, who recently returned from the Paris climate talks. “We declare that these plans threaten our water, our children, and our climate.”The red line motif emerged at the end of the Paris climate talks last Saturday, as 15,000 people marched in the streets of Paris. It signifies a commitment to holding society to the lines that cannot be crossed in order to avoid catastrophic climate change. Eighty percent of fossil fuels must be left in the ground in order to curb climate change.The red line motif also was prominent last weekend as 300 residents in Porter Ranch, CA demanded closure of the Aliso Canyon Storage Facility. The Southern California Gas Co. field has spewed natural gas into the atmosphere since Oct. 23. It currently contributes a full one-quarter of California’s daily methane emissions. There have been hundreds of complaints from the surrounding community of headaches, nosebleeds, stomachaches, rashes, and respiratory illness from exposure to the gas and its additives. 1,000 families have evacuated. The company estimates it will take 3 months to plug the leak.“Aliso Canyon is a clear warning to us of what can go wrong with underground gas storage,” said Tony Del Plato, 67, of Covert, “and how willing the companies are to ignore the plight of the communities around them, and the impact on the climate.”Schuyler County deputies arrested the nine shortly before 10 a.m. as they blocked a Crestwood tanker truck from leaving the facility.

    NatGas Bloodbath Accelerates Amid LNG Glut Worse Than Oil ---'s Nick Cunningham warns, while the glut in oil is expected to continue for the next year or so before balancing in late 2016, the pain for liquefied natural gas (LNG) could be just beginning... Building LNG export terminals is a long-term proposition. It can take years to develop a greenfield project, bringing a lump of new capacity online long after the project was initially planned, exposing developers to the possibility that market conditions could change in the interim. It is not unlike a conventional oil project, such as an offshore well, which also can take years (as opposed to a much shorter lead time for shale drilling). But there is a major difference between oil and LNG: the market for LNG is much smaller and less liquid (no pun intended). In other words, a handful of new LNG export terminals can significantly alter the supply/demand balance. That is exactly what is currently unfolding. Several years ago, spot prices in Asia for LNG spiked, particularly following Fukushima nuclear meltdown. Japan’s demand for LNG skyrocketed. At the same time, the shale gas revolution was unfolding in the U.S., and rock bottom prices opened up a window of opportunity to ship American gas to Asia. But it wasn’t just the U.S. – LNG export terminals proliferated around the world, particularly in Australia. There were so many projects planned at the same time, and the first batch started to come online this year, with many more nearing completion in 2016 and 2017. The rush of new supply is hitting the market all at the same time. Not only would such a rush in supply have pushed down prices on their own, the timing is actually really unfortunate for LNG exporters. Economies in East Asia are slowing, leaving a shortfall in demand. Japan, the largest LNG importer, is seeing its economy stagnate. China’s growth has slowed significantly.

    Natural-Gas Prices Drop to Lowest Level Since 1999 - WSJ: Natural-gas prices dropped to the lowest level since 1999, as concerns about weak demand continued to weigh on the market. Futures for January delivery settled down 7.2 cents, or 3.8%, on Tuesday at $1.822 a million British thermal units, the lowest settlement since March 24, 1999. On an inflation-adjusted basis, Tuesday’s settlement price is the second-lowest on record. The inflation-adjusted record low is $1.80/MMBTU, reached in January 1992. Gas futures have fallen for five consecutive sessions as higher-than-average temperatures show no sign of letting up. Warm weather in the U.S. caused by the El Niño weather phenomenon has sharply limited demand for the heating fuel this year. About half of U.S. households use natural gas as their primary heating source. “The potential for early winter is gone,” said Donald Morton, senior vice president at Herbert J. Sims & Co., who runs an energy-trading desk. “They’re talking 65 degrees in New York on Christmas day.…Every day we go is one less day of demand.”

    Natural Gas Falls to All-Time Inflation-Adjusted Low - WSJNatural-gas fell to the lowest ever inflation-adjusted price in its history of Nymex trading on Wednesday as extremely warm weather continues to limit demand. Prices for the front-month January contract settled down 3.2 cents, or 1.8%, at $1.79 a million British thermal units on the New York Mercantile Exchange. That is the lowest settlement since March 24, 1999. Gas prices have been falling precipitously in recent weeks because of the combination of record-high stockpiles and a December that could be the worst for heating demand in history. Prices have fallen 25% in just one month and have dropped 39% from their high in August. Wednesday settlement put gas below the inflation-adjusted low of $1.801 that had been in place since January 1992. Gas did make a move up to small gains in after-hours trading, but many traders and brokers had little explanation for that rebound. The trader Marc Kerrest said he noticed prices and spreads moving higher for months far away, a sign front-month prices could follow. He closed out some of his bearish bets before settlement, he said. “But in no way would I consider going [bullish on] gas just because of what it’s done,” in recent weeks, said Mr. Kerrest, who manages his own gas-focused fund, Cornice Trading LLC. Warm weather in the U.S. caused by the El Niño weather phenomenon has sharply limited demand for the heating fuel this year. The natural-gas market is oversupplied, and some traders and analysts say the industry could run out of storage space for gas by mid-2016.

    Natural Gas Prices Slump Again - Natural gas prices fell again on Wednesday, plunging to their lowest-ever price level (adjusted for inflation). Futures expiring in January declined 1.8% to settled at $1.79  a million British thermal units, though the United States Natural Gas exchange-traded fund (UNG) rallied into the stock-market’s closing bell, up 1.6%. Owners of UNG so far in 2015 have lost half their money. The culprit is unusually warm winter weather, which shrivels the demand for natural gas as a heating fuel. Don’t expect the situation to change before the end of the year. Weather prognosticators expect mild weather conditions from Kansas City, Mo. to Augusta, Maine, in the Days ahead. Some are forecasting that gas will be so abundant that the industry may run out of space by the middle next year. But Anthony Yuen, a commodities strategist at Citigroup, says that things might not be so dire after all, assuming that weather patterns return to some semblance of normalcy next year. That’s a big if, of course. He explains: “This warm weather certainly has markets spooked – is it justified? While winter heating demand has certainly taken a hit this quarter, a mild 4Q alone is not as bearish as some market participants may think. Historically, on average only 27% of winter inventory draws occurred during the first half of the winter heating demand season (Nov-Dec), while 73% of draws occurred during the second half (Jan-Mar). … Our model over 35 years of 1Q winter demand scenarios, we find that storage levels would likely remain reasonable next year despite the mild start to the winter season if normal weather conditions were to return in the second half of winter.”

    Natural Gas Falls to 16-Year Low on Healthy Supply - WSJ: Natural gas slid to a fresh 16-year low on Thursday as traders increasingly fear warm weather and heavy stockpiles are leading to a glut that will last deep into next year. Heating demand has been so limited, but production is still going so strong that stockpiles last week—usually solidly into winter heating season—fell by only a third of their average drop for the week, the U.S. Energy Information Administration. The fall was also far less than traders and analysts expected, just 34 billion cubic feet compared with expectations for 41. Prices whipsawed after the news, and then fell decisively in the afternoon, extending gas’s losing streak to seven sessions, the longest since December 2012. Prices for the front-month January contract settled down 3.5 cents, or 2%, at $1.755 a million British thermal units on the New York Mercantile Exchange. That is the lowest settlement since March 23, 1999. And it is the lowest inflation-adjusted settlement in the history of Nymex trading, which started for gas in 1990. A historically strong El Niño weather phenomenon has sharply limited demand for the heating fuel this year just as rampant production had pushed stockpiles to an all-time high. Forecasts have predicted temperatures hitting 70 degrees Fahrenheit in New York on Christmas Eve, a crippling blow to a market reliant on winter heating to drive demand.

    Weekly Natural Gas Storage Report - EIA -  Working gas in storage was 3,846 Bcf as of Friday, December 11, 2015, according to EIA estimates. This represents a net decline of 34 Bcf from the previous week. Stocks were 541 Bcf higher than last year at this time and 322 Bcf above the five-year average of 3,524 Bcf. At 3,846 Bcf, total working gas is above the five-year historical range.

    Gas Pipelines Cut Down Forests to Ship Fracked Gas to China -- Today, residents of Pennsylvania and New York are standing together and demanding that our elected officials shut down dirty fossil fuel infrastructure and support community-based renewable energy sources instead! It’s time for politicians to wake up to what New Yorkers who have opposed the “Constitution” and Northeast Energy Direct pipelines already know. Regardless of what name you use, it’s the same pipeline. It’s the same fight.Both projects threaten to forever harm New York’s environment by ripping through forests, streams, fields, and farms of the northern Catskills. Both threaten to victimize the same landowners, using eminent domain granted by a rubber-stamp agency — the Federal Energy Regulatory Commission — to take private property for corporate profit. Both threaten to ruin rural communities with air pollution and industrialization. And both threaten our planet with climate catastrophe, feeding a growing addiction to fossil fuels at home and abroad while undermining the necessary shift to renewables. Indeed, through most of New York, the biggest difference between the two pipelines is the distance between them — about 50 feet.Yet, while the public clearly understands that these doppelganger gas projects are one and the same, our state politicians seem to believe they can pander to their constituents with mixed messages.

    Kinder Morgan tops $70k on lobbying  — The energy company that wants to build a $3 billion natural gas pipeline across Southern New Hampshire spent $53,500 to lobby state officials in 2014 and an estimated $70,780 so far in 2015, more than any other public interest, nonprofit or labor organization, according to Open Democracy. The nonprofit organization’s analysis of campaign contributions also reveals that Gov. Maggie Hassan in 2014 received a $2,000 donation from Richard and Nancy Kinder. Richard Kinder is the co-founder and executive chairman of Kinder Morgan. The Concord-based nonpartisan organization was founded in 2009 by campaign finance reformer Doris “Granny D” Haddock, who died a year later. The group is best known in New Hampshire for its flagship campaign, the New Hampshire Rebellion, which aims to get big money out of politics. The group analyzed campaign finance records over the past 15 years to determine the extent of political contributions and lobbying from Kinder Morgan, whose Tennessee Gas Pipeline subsidiary has applications pending before state and federal regulators for the 30-inch transmission pipe that would cross through 17 towns in Southern New Hampshire. Kinder Morgan spokesman Richard Wheatley said the company does not make corporate political contributions, and that the figures cited by Open Democracy, if accurate, reflect the individual contributions of Kinder Morgan executives or employees. As regards lobbying expenditures, he declined to comment.

    More Natural Gas Infrastructure Is Needed - Wheeling Intelligencer  -Prices for all natural gas remain depressed, but Joe Eddy said Marcellus and Utica shale drillers are now selling their product for just 75 cents per 1,000 cubic feet, which is leading some companies simply to keep it in the ground. Eddy, president and CEO of Eagle Manufacturing in Wellsburg, represented the Independent Oil and Gas Association of West Virginia during a Thursday meeting at Oglebay Park. He said approximately 1,400 horizontal wells that have already been drilled in Ohio, West Virginia and Pennsylvania are still waiting for fracking jobs because there is simply nowhere to send the natural gas. Furthermore, Eddy said there is enough ethane produced in the Marcellus and Utica shale regions now to support "eight or nine crackers." He said the planned $5.7 billion PTT Global Chemical plant would significantly benefit the Upper Ohio Valley's economy because it would allow the product to be processed locally.  However, the lack of pipelines is now the major problem, Eddy said."We have to have the ability to move the resource out. That's why our pricing is so low - we just can't move it," Eddy said. According to the New York Mercantile Exchange Thursday, the price for an Mcf of natural gas was about $1.75. This is significantly lower than the roughly $3 per unit price from one year ago. However, Eddy said the lack of adequate pipelines in the Marcellus and Utica regions means producers are only getting about 75 cents per Mcf at this time. "You just can't stuff anymore into the pipelines we have. It is a glut of gas," he said.

    Report: Atlantic Drilling Would Offer $0 To States, Not $19 Billion --  The Obama administration and several southern governors are talking about drilling for oil off the Atlantic coast.  But a new report from the Center for a Blue Economy suggests that the southern Atlantic states — Virgina, North Carolina, South Carolina, and Georgia — would see little to no benefit from offshore drilling, while putting a critical piece of their economies and lifestyles at risk.  The report, commissioned by the Southern Environmental Law Center (SELC), looked at a 2013 industry report commonly used to justify offshore drilling and found that it is based on outdated assumptions — including a price of oil roughly triple what it currently is. The 2013 Quest Offshore report, prepared for the American Petroleum Institute and the National Ocean Industries Association, evaluated the economic benefit of opening the entire Atlantic coastline to offshore drilling (the administration’s five-year plan includes only the four states mentioned above and is restricted to 50 miles off the coast), assumed lease sales in 2018 (currently projected for 2021), set the price of oil at $120/barrel (oil is currently near an 11-year low of less than $40/barrel), and did not look at potential economic damage from oil activities.  What we have already is so crucial and so valuable to our southeastern states. It’s not worth the risk

    Carolinas congressmen seek delay in offshore testing - — South Carolina U.S. Rep. Mark Sanford, in a letter signed by more than two dozen other House members, is asking the federal government to halt permitting activities for seismic testing for offshore natural gas and oil. The letter, written with Virginia U.S. Rep. Bobby Scott, was sent Thursday to Abigail Ross Hopper, the director of the federal Bureau of Ocean and Energy Management. It calls on the agency to prepare new environmental reviews of the impacts of using seismic air guns to explore off the coast. The letter, also signed by North Carolina Republican U.S. Rep. Walter Jones and Democratic U.S. Rep. David Price as well as 27 other House members, said that current studies don’t take into account the long-term economic and ecological impacts. Sanford, a Republican, Jones and Price were the only members of the congressional delegations in the Carolinas calling for a moratorium.  The Bureau of Ocean and Energy Management is reviewing if and where oil and gas leases might be issued on the Atlantic Outer Continental Shelf between 2017 and 2022. The letter said using seismic air guns which bounce sound waves off the ocean floor to explore for fossil fuels “is an enormously disruptive activity in the ocean” and can impact commercial fish catches and disrupt the feeding and breeding behaviors of endangered right whales. The letter also noted that information about what is found by energy companies won’t be shared with the states so states can’t make a reasonable analysis of the benefits and risks posed by offshore drilling.

    Orange County bans fracking: -- Orange County unanimously passed a resolution Tuesday to ban fracking — the controversial process of drilling down into the Earth to extract gas using high-pressured water and chemicals. The resolution had had strong support after it was placed on the Orange County Commission's consent agenda for its meeting. Before commissioners voted, though, they turned to the public for input. The language of the resolution is still being finalized. One by one, supporters of the county's proposed ban took to the podium to share their thoughts. Commissioners also discussed the resolution with a back-and-forth conversation about wording in certain paragraphs. Discussions on fracking have made their way across the United States as well. Fracking has garnered supporters, who have said it helps produce more oil and gas at home, which drive down those prices. Opponents say it's disastrous for the environment and produces health concerns for those living near drills sites. At the state level, competing bills have been written in Florida.

    Report: Straits of Mackinac oil pipeline not necessary - Continuing to move up to 23 million gallons of crude oil per day through 62-year-old, underwater pipelines in the Straits of Mackinac is too risky and not necessary, an environmental group said Monday. For Love of Water, or FLOW, released a report on alternatives to Enbridge’s Line 5, saying the existing oil pipeline network in the Midwest provides alternatives that pose far less risk to the Great Lakes. FLOW would like the Michigan Pipeline Safety Advisory Board to take a comprehensive, system-wide look at the oil pipeline network in the state and close down Line 5. “The bulk of the oil that goes through Line 5 goes from Canada back to Canada,” said Gary Street, a former Dow chemical engineer and FLOW technical adviser. “The risk is being given to the state of Michigan; the profitability flows to Enbridge. “Our work today has given us reason to believe that alternatives do exist, and they exist within the existing pipeline system.” FLOW-outlined alternatives include existing pipeline systems coming north to Michigan from the Gulf of Mexico and the “Alberta Clipper” pipeline that takes crude oil from Alberta, Canada eastward. The Alberta network includes a pipeline through productive oil regions in North Dakota that runs southeast through Minnesota and reaches a major pipeline hub area near Chicago. From there, available pipeline capacity exists on Enbridge’s Line 6B, which runs east-west through the southern Lower Peninsula of Michigan before reaching Marysville and continuing on to Sarnia, Ontario — the same Michigan finishing point for Line 5.

    Minnesota Supreme Court backs Sandpiper pipeline opponents — The Minnesota Supreme Court has given a victory to opponents of the proposed Sandpiper oil pipeline, declining to review a Court of Appeals decision requiring an environmental impact statement for the project. In an order Tuesday, the high court without comment denied petitions by the Minnesota Public Utilities Commission and an Enbridge Energy subsidiary to hear their appeal. The Court of Appeals in September reversed the PUC’s decision to grant a certificate of need for the Sandpiper pipeline, which would carry Bakken light crude from western North Dakota across Minnesota to an Enbridge terminal in Superior, Wisconsin. The court said state law requires the completion of an environmental impact statement before granting the certificate. The PUC had planned to conduct the environmental review at a later stage in the proceedings.

    Minnesota regulators to make some key pipeline decisions — The Minnesota Public Utilities Commission meets Thursday to make some important decisions on how it will proceed with Enbridge Energy’s proposed Sandpiper oil pipeline from the Bakken oil fields of North Dakota across Minnesota to Superior, Wisconsin. The decisions will also affect Enbridge’s proposal to replace its aging Line 3 pipeline from the tar sands of Alberta to Superior because Enbridge wants the new line to partially follow Sandpiper’s route. The path forward became murky in September when the Minnesota Court of Appeals ruled that Sandpiper needs a full environmental review, and the PUC now faces a complicated web of issues to work out. Enbridge Energy wants to build the 616-mile Sandpiper pipeline to carry light crude oil, much of which is currently is shipped by rail. Enbridge separately plans to replace its Line 3 pipeline, which runs 1,097 miles, was built in the 1960s and is operating at reduced capacity for safety reasons. The two projects overlap because Enbridge wants the Line 3 replacement to follow the same route as Sandpiper from its terminal in Clearbrook, Minnesota, to Superior, rather than its crowded existing corridor. The appeals court ruling created considerable uncertainty among the commissioners and the project’s supporters and opponents over what’s next. The PUC had planned on conducting a fuller environmental review later, during a separate set of state regulatory proceedings on what route Sandpiper should take.  Sandpiper’s opponents say the pipeline poses an unacceptable risk of oil spills in environmentally sensitive areas of northern Minnesota. Their recommendations on how to proceed aren’t identical, but in general they support doing a thorough EIS and keeping the certificate-of-need and route proceedings separate.

    Regulators authorize expansive environmental reviews for proposed Minnesota pipelines - State regulators decided Thursday to take a deeper look at the environmental effects of crude oil pipelines planned across northern Minnesota. In procedural decisions on a pair of pipelines — one to deliver North Dakota crude oil, another to import Canadian crude — the Minnesota Public Utilities Commission set the stage for an expansive environmental analysis that supporters fear will delay the projects. “We already know it is going to be gigantic,” commission Chairwoman Beverly Jones Heydinger said of the planned environmental study. The effort was compared to PolyMet Mining Corp.’s proposed northern Minnesota copper mine. A 3,500-page environmental report on that project was released in November — after 10 years of work. Calgary-based Enbridge Energy, which proposes the two pipelines, wants the reviews done in time to begin construction in 2017. Company officials are concerned that delays in the studies could wreck that schedule. “We intend to do extensive modeling of spill deposition and what happens at key, representative points — what would happen with a small- or medium-sized leak or a large leak,” said Bill Grant, deputy commission for energy in the state Commerce Department, which will oversee the environmental studies.

    Induced Earthquakes Remain Challenge for Oil, Gas Operations  - Rigzone: Earthquake activity in Oklahoma, believed to have been triggered by saltwater disposal well injection activity, marks the latest in a trend of a growing number of U.S. earthquakes and their link to increased oil and gas activity. The Oklahoma Corporation Commission’s (OCC) oil and gas conversation division called for operations at two disposal wells to be halted Nov. 19, and for reduced volumes for 23 other wells, a total net volume reduction of 41 percent. The wells targeted for shutdown or reduction were in the Cherokee-Carmen area of the state. Additionally, disposal wells within 10 to 15 miles of earthquake activity are being placed on notice to prepare for possible changes to their operations, OCC said in a Nov. 19 advisory. The notice is the latest in a series of oil and gas disposal well volume reduction plans implemented by OCC to address earthquakes that have occurred in Oklahoma this year. Since 2009, the number of earthquakes occurring in the central United States has increased, according to the U.S. Geological Survey (USGS). From 1973-2008, an average of 24 earthquakes of magnitude 3 or larger occurred each year. From 2009 to 2014, an average 193 earthquakes occurred per year, peaking last year with 688 earthquakes. So far this year, 430 earthquakes of magnitude 3 or greater have occurred in the central U.S. region, according to the USGS website.

    Oil starting to flow through Enbridge pipeline — Construction on the Enbridge pipeline is complete with delivery of oil expected to begin before the new year. “Our original plan was to get it in service before the end of the year and it looks like we are going to make it,” said Jennifer Smith, manager of stakeholder relations. The 167-mile pipeline, known as the Southern Access Extension, will transport crude oil from Enbridge’s Flanagan terminal near Pontiac to a petroleum terminal hub near Patoka in Marion County. The $900 million pipeline crosses eight area counties, including Livingston, McLean, DeWitt, Macon, Christian, Shelby, Fayette and Marion. Officials are currently working to fill the 24-inch diameter line with oil, a process that takes several days to complete, said Smith. The pipeline will have the capacity to transport 300,000 barrels per day. “Once the line fill is complete, the pipeline will be placed into service and oil will begin being delivered to customers,” she said. “We expect that to occur this month.”

    Illinois becomes second state to approve Bakken pipeline - Illinois has become the second state to approve a controversial interstate crude oil pipeline that is proposed to pass through Iowa. Spokesman Bob Gough confirmed the Illinois Commerce Commission voted 5-0 Wednesday to approve a permit for that state’s 177-mile segment of the pipeline. Dakota Access LLC, the Texas-based company proposing the $3.8 billion Bakken oil project, said in a statement it was pleased. “This decision moves Dakota Access another step closer to beginning construction on an underground pipeline to transport domestically produced light sweet crude oil out of production areas in North Dakota to refining markets around the country,” it said. Dakota Access has easement agreements for 81 percent of the land needed in Illinois, the company said. South Dakota’s Public Utilities Commission gave its approval in November. A decision in North Dakota is expected in January. The Iowa Utilities Board, which concluded its hearing phase of the case earlier this month, indicated it might not rule until February.

    Dakota Access pushes IUB for decision on Bakken pipeline - Dakota Access LLC, the Texas-based company proposing the Bakken pipeline, is urging the Iowa Utilities Board to make a decision quickly on whether or not the use of eminent domain will be allowed for the company to gain access to properties where landowners have not signed over rights. The pipeline would initially carry 320,000 barrels of crude oil each day from North Dakota’s Bakken Shale through South Dakota and Iowa en route to a hub in Pakota, Ill., that connects to a Texas-bound pipeline. It would extend 343 miles through Iowa and transverse 18 counties in the state, including Story and Boone. The total cost of the project would be $3.8 billion, according to IUB. Beginning on Nov. 12, and ending last Monday, the IUB held hearings to decide if permits would be issued and eminent domain would be granted to enable the pipeline’s construction. The IUB originally said that they expected to make a decision in December or early January but that timeline has since been changed to February, which may interfere with the Dakota Access’ planned construction schedule, if the permits are approved. “It is our hope that the IUB adheres to the original schedule of issuing a decision by 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. We will do all we can to support the IUB in its decision-making process to meet this time frame,” said Vicki Granado, spokeswoman for Dakota Access. This move by Dakota Access has caused concern among opponents of the pipeline’s construction who have argued that the company is not considering the voice of Iowans.

    Bakken pipeline supporters, foes speak out at Iowa DNR meeting — Iowans gave mixed reviews during a public meeting Wednesday to a proposed oil pipeline that would cut across the state — some favoring it and the jobs it would provide, others calling it an environmental threat to be rejected. A crowd of nearly 100 people attended a sometimes raucous meeting held by Iowa Department of Natural Resources officials, who will decide whether to grant an environmental permit needed by the proposed Bakken oil pipeline to cross publicly owned land and water under state jurisdiction. Dakota Access LLC, a unit of Texas-based Energy Transfer Partners, has proposed an underground pipeline to transport about 450,000 barrels of crude oil daily from North Dakota through South Dakota and Iowa to a distribution hub at Patoka, Ill. The Iowa segment would cross diagonally for 343 miles through 18 counties, from Lyon County in northwest Iowa through Lee County in southeast Iowa. Included in the route would be crossings of publicly-owned lands and waters at the Big Sioux River and Big Sioux River Complex Wildlife Management Area, both in Lyon County; the Des Moines River in Boone County; and the Mississippi River in Lee County. Company officials say the pipeline would be tunneled under the Mississippi River into Illinois.

    Trial scheduled for oil truck operator in North Dakota murder-for-hire case | – The trial of an oil truck operator charged with orchestrating the killings of two business rivals competing for work in North Dakota’s giant Bakken oil patch was slated to begin in January after the man withdrew his guilty plea, his lawyer said on Thursday. In a September plea agreement, James Henrikson admitted to an interstate murder-for-hire plot to kill Kristopher “KC” Clarke in February 2012 in North Dakota and Douglas Carlile in December 2013 in Spokane, Washington. Henrikson withdrew the plea last month after a judge ruled he was not made aware of the mandatory minimum penalty of life imprisonment his crimes carried prior to entering the plea, court documents showed. Henrikson has now pleaded not guilty, his attorney, Todd Maybrown, said. The trial was slated for Jan. 25 in Richland, Washington. Henrikson faced murder-for-hire and conspiracy to commit murder-for-hire, among other charges, in alleged plots against several people he viewed as an impediment to his enterprises, as well as conspiracy to distribute heroin, court documents said.

    North Dakota regulators mull easing pipeline spill fine  — North Dakota regulators are considering easing a record $2.4 million fine levied against a Texas company for a pipeline spill that spewed saltwater and oil for three months before being detected. The North Dakota Industrial Commission, a three-member all-Republican panel led by Gov. Jack Dalrymple, approved the sanction in June against Woodlands, Texas-based Summit Midstream Partners and its subsidiary, Meadowlark Midstream Co. The 3 million-gallon spill, the largest in state history, was discovered in early January near Williston in western North Dakota but regulators believe the ruptured pipeline had been leaking unnoticed since early October, 2014. Officials said it primarily contaminated Blacktail Creek but also flowed into the Little Muddy and Missouri rivers, though there was no harm to drinking water supplies because it was so diluted. Alison Ritter, a spokeswoman for the state Department of Mineral Resources, said Monday that the state and the company are “actively negotiating a settlement.” Ritter’s agency regulates the state’s oil and gas industry and is overseen by the Industrial Commission. North Dakota regulators routinely settle on fines that are about 10 percent of the maximum penalty, saying it promotes cooperation.

    SEC investigating unusual 2012 stock trading at oil train company - Federal authorities have been investigating a price spike in the stock in a Minnesota-based oil train loading company after it went public in 2012, resulting in an windfall for investors who held promissory notes with an unusual payout feature. The investigation by the U.S. Securities and Exchange Commission (SEC) is focused on a $9 million loan by several individuals to Dakota Plains Holdings of Wayzata. Under the terms of the promissory notes, the note holders received bonus payments based on Dakota Plains’ share price during the first 20 days after its stock began publicly trading in March 2012. In a filing in U.S. District Court in Minnesota, the SEC said that after Dakota Plains went public through a reverse merger, its stock “rose to $12 per share on very light volume and stayed at or near $12 per share for almost exactly 20 days,” entitling the note holders to $32.9 million. After the run-up in price, shares steadily fell and never rose anywhere near the $12 level.  The investor, Jessica Medlin, is the former spouse of Ryan Gilbertson, CEO of Northern Capital Partners, a private equity firm based in Wayzata. According to the SEC, both of them engaged in 2012 Dakota Plains transactions.  At the time, Gilbertson also was president of Northern Oil and Gas Inc., which invests in North Dakota oil leases. Gilbertson left Northern Oil and Gas, also based in Wayzata, in October 2012, a few months after the events under SEC investigation.

    Oil, gas producers urge BLM to reconsider proposed rules -- The Independent Petroleum Association of America on Monday urged the U.S. Bureau of Land Management to reconsider its approach and work with the industry on proposed rules to update, replace and codify three of its Onshore Oil and Gas Orders. The BLM’s proposed rules would result in substantial changes to the way U.S. onshore oil and gas operations are conducted and would lead to significant increases in the costs of oil and natural gas development on federal and tribal lands. The IPAA filed formal comments Monday evening along with the American Petroleum Institute and Western Energy Alliance.“As they currently stand, the federal government’s proposed changes to its Onshore Order are counterproductive and do not account for innovative new technologies,” The IPAA, API and Western Energy Alliance submitted joint comments on Onshore Order 4 and Onshore Order 5.Western Energy Alliance and the IPAA also submitted comments on Onshore Order 3.Independent producers account for 90 percent of the nation’s energy production, supporting more than 200,000 jobs, and send more than $10 billion in additional revenue to the United State Treasury each year through royalties and other payments.  Many producers argue that added layers of costly regulations make it difficult for producers and small businesses to continue to develop resources.

    DUC, DUC, Production Boost?  |  Rigzone: Hundreds, if not thousands of drilled but uncompleted (DUC) wells are idling in the United States, but how much they could produce – or even when production may commence – vexes industry insiders. As analysts at Raymond James (RayJa) explained in a November report, DUCs have long been part of the oil and gas business. A natural, “normal” imbalance exists for two primary reasons: the difference between the number of rigs and completion crews, and the lag between drilling time and completion time. And while an absolute method for calculating the number of DUCs is up for debate, there’s little disagreement that currently there is an overabundance of DUCs. States calculate DUCs on often incomplete data that is “massively oversimplified,” RayJa said. For example, Texas data would indicate there are more than 2,000 DUCs in the Permian basin. But more typical estimates vary from 500 or so to more than 3,000 DUCs. And those numbers are expected to swell in 2016 if oil prices don’t incent operators to put the DUCs to work. The key issue is what bringing these DUCs online will do to U.S. production. RayJa’s best guess, “with a very low confidence level” is that DUCs could account for 100,000 to 300,000 barrels per day (bpd) for 2016 production growth. “Again, the actual DUC impact upon our U.S. oil supply model could be as low as zero and as high as 400,000 bpd next year,” RayJa said.

    Lawmakers question delays in energy lease sales (AP) — Members of Congress from eleven states say they’re concerned about postponements to recent oil and gas lease sales. The lawmakers wrote U.S. Interior Department Assistant Secretary Janice Schneider asking her to explain the delays by Jan. 5. They cited postponed sales on public lands in Arkansas, Utah and Michigan. The effort is led by two Utah House Republicans — Natural Resources Committee Chairman Rob Bishop and Oversight Committee Chairman Jason Chaffetz. Acreage leased by Interior’s Bureau of Land Management has dropped sharply over the past eight years. More than 4 million acres were leased in 2007, compared to 1.2 million acres in 2014. Much of the decline has been attributed to efforts to ensure a ground-dwelling bird, the greater sage grouse, is not imperiled by drilling.

    DUCs -- Rigzone Analysis -- This is an interesting analysis by the Rigzone staff with regard to DUCs. There are many story lines. This analysis focuses on how fast and how much oil can be brought to the market if the price of oil makes it economical to complete these DUCs. But here are my thoughts. They assume the DUCs will all be completed but with the caveat that if the price does not support completing these DUCs, some may not be completed. When I first started blogging, the completion (fracking) accounted for about half the total cost; drilling vertically and then drilling horizontally to "total depth" accounted for the other half. With drilling becoming much more efficient and fracking now involving many more stages, more sand, and more water, the costs of fracking have gone up in proportion to drilling. Rigzone puts the total cost at 1/4th for drilling and 3/4ths for fracking. What they do not mention is that the upfront costs of a) building the road to the pads; b) building the pads; c) laying the pipeline -- water, wastewater, oil -- in some cases; d) paying the upfront lease money for the initial well; e) putting in the storage tanks; f) doing the survey studies from scratch; etc., has all been done. Those were significant costs; if anyone has seen the miles of roads the oil companies have built in the Bakken, they know this is a great expense to have behind them.  But the biggest factor affecting whether to complete or not complete a well is knowing that these wells will be productive. It's not like these are wildcats and they don't know whether they will have a well or not.   Rigzone suggests that in one scenario operators will leave the DUCs uncompleted until the price of oil makes them economical, and then at that time, there will be a "mad rush" (my words, not Rigzone's) to complete the DUCs. NDIC has not given the operators an "infinite" amount of time to complete these wells. In North Dakota, operators have been given an additional year to complete wells, going from one year to two years. I update the status of wells periodically, and note that DUCs are being completed on an ongoing basis. 

    Tough times ahead for US shale producers — Cash-strapped US shale oil producers are facing another sharp sell-off in an 18-month crude slump, with reduced hedging protection risking a severe hit to earnings if prices fail to recover. A Reuters analysis of hedging disclosures from the 30 largest oil producers showed the sector as a whole reduced its hedge books in the three months to September. "Producers have survived 2015 as they benefited from large reductions in service costs while having a significant amount of production hedged at high prices," said John Arnold, the Texas billionaire formerly at hedge fund Centaurus Advisers. "Come January 1, revenues will experience a pronounced decline for many companies, coinciding with a time of severe stress for balance sheets across the industry," he said. When oil started falling from about $100 a barrel in mid-2014 due to a global supply glut, many US producers had strong hedge books guaranteeing prices around $90 a barrel. Now, with prices below $36 and flirting with 11-year lows on the renewed fear of oversupply, only five drillers among those reviewed by Reuters expanded their hedges in the third quarter and eight had no protection beyond 2015, leaving them fully exposed to price swings.

    The Future Of The U.S. Oil Fracking Sector - It’s no secret that the global oil industry is undergoing a major adjustment. Oil prices dropped precipitously during the summer of 2014 and haven’t really recovered as of yet. If anything, even further weakness is indicated as a supply glut continues to plague financial markets amidst a slowing global economy. Now there’s a battle going on between the former world oil cartel OPEC and the U.S. shale oil revolution. OPEC has long been the world determinant of oil prices, with a huge market share of the industry and the ability to control supply as it saw fit. However, the entrance of U.S. shale oil has thrown the industry for a loop, with OPEC now controlling less and less of the oil market share. And the organization hasn’t been taking it lightly. Despite the struggles of the global economy, OPEC has not reduced oil production. That has driven prices to seven-year lows, with even further drops in the near future likely. The idea is to keep oil low enough to make U.S. fracking cost prohibitive and drive these companies into bankruptcy so they can’t threaten OPEC’s dominance in the industry. But the U.S. shale oil industry isn’t going anywhere anytime soon. Despite the pain OPEC is causing in oil values, the shale revolution is here to stay.

    Chesapeake Bonds Plummet To 27 Cents Of Par After Company Hires Restructuring Advisor - After numerous false starts and months of hollow hopes for the stakeholders of beleaguered gas producer Chesapeake Energy, including an activist stake built up by none other than Carl Icahn which was the source of much transitory joy, various notional reducing debt exchanges, and speculation of asset sales, the time is coming when the inevitable debt-for-equity restructuring, one which could wipe away most or all of the existing $2.6 billion equity tranche (down from $11 billion a year ago) is on the table. According to the WSJ, Chesapeake has hired restructuring advisor Evercore "to shore up its balance sheet as commodity prices extend their decline." This means that Evercore will seek to further slash its debt, almost certainly be equitizing a substantial portion of it, and handing it over as equity in the new company to CHK's bondholders.And while many saw the restructuring, and potential prepackaged bankruptcy, coming from a mile away, what precipitated it was the plunge in the company's liquidity as a result of the ongoing collapse in commodity prices. Just earlier today, nat gas hit the lowest price in 13 years, which meant that after ending 2014 with $4.1 billion in cash, the company is down to just $1.8 billion in cash, or about 1-2 quarter of liquidity at the current cash burn rate. But while CHK's stock has imploded, falling 79% this year to around $4.09 per share or a $2.7 billion market cap, the real story is in the company's bonds.Chesapeake’s $1.3 billion in bonds due in 2020 bearing 6.625% interest recently traded at 29 cents on the dollar, down from 47 cents late last month, according to MarketAxess. Worse, the company's 2023 bonds which were trading at par as recently as late May, just rumbled to a record low 27 cents on the dollar.

    Chesapeake Energy Works With Advisers To Reduce Debt Load - Chesapeake Energy Corp. is working with restructuring advisers at Evercore Partners Inc. to shore up its balance sheet as commodity prices extend their decline, according to people familiar with the matter. The Oklahoma City-based company, co-founded in 1989 by famed wildcatter Aubrey McClendon, became one of the dominant U.S. gas explorers during the shale boom. Fueled by cheap debt, Chesapeake expanded aggressively in Ohio, Texas and other parts of the U.S., becoming the country's second-largest, natural-gas producer behind Exxon Mobil Corp. But the tumble in natural gas prices has hurt the company, which has posted three straight quarterly losses this year. Chesapeake ended September with $1.8 billion in cash, down from $4.1 billion at the end of 2014, according to regulatory filings. Chesapeake's share price has fallen nearly 80% this year to $4 per share. Its market capitalization currently stands at roughly $2.8 billion, down from $11.4 billion a year ago. Natural gas prices fell to their lowest point in more than a decade Monday, as record-high December temperatures in New York and other cities sap demand for heating fuel. Prices are down 35% this year and 69% below their February 2014 highs, driven largely by oversupply after advances in drilling techniques unlocked new reserves in shale-rock formations across the U.S. Chesapeake's bonds have been among the hardest hit in a recent selloff of junk-rated energy-company debt, driven in part by continued declines in oil and gas prices. The company is offering to exchange bonds at a discount for up to $1.5 billion of new debt. Investors who take the offer would accept a reduction in the face value of their debt in exchange for a stronger claim on the company's assets.

    Fracking Just Caused Another 4.6-Magnitude Earthquake: Oil and gas regulators in British Columbia, Canada, confirmed this week that a 4.6-magnitude earthquake earlier this year was caused by fluid injection from hydraulic fracturing, also known as fracking. The quake is the largest of its kind in the province to be linked to the process, whereby fluid in injected into the ground at high-pressure to release natural gas stored inside shale rocks. Oklahoma's energy regulator declared last month that the state now has more earthquakes than anywhere else in the world, which scientists have also linked to wastewater injections, a long-used method to dispose of the chemical-laced byproduct of oil and gas production. A recent study by the U.S. Geological Survey traced wastewater injection methods to the 1920s in Oklahoma and tied the rise in quakes in the past 100 years to industrial activities, such as oil and natural gas production. About 1.5 billion barrels of wastewater was disposed underground in Oklahoma last year, according to statistics released by the governor's office. A swarm of earthquakes has recently rumbled through the north-central swath of the state, one with a 4.7 magnitude. In response, the Oklahoma Corporation Commission's oil and gas division has proposed ways for wastewater disposal well operators in that area to halt or reduce volume.

    Earthquake in Northern B.C. caused by fracking, says regulator - British Columbia's energy regulator has confirmed that a 4.6 magnitude earthquake in northeast B.C. in August of this year was caused by a nearby fracking operation. "This seismic event was caused by hydraulic fracturing," said Ken Paulson, CEO of the B.C. Oil and Gas Commission. Paulson said fewer than one per cent of fracking operations trigger seismic activity, and those quakes tend to be low magnitude and cause little damage. The quake struck in August, about 110 kilometres northwest of Fort St. John, near a gas fracking site operated by Progress Energy. Hydraulic fracturing or "fracking" is a process that involves pumping a mixture of water, sand and chemicals underground at high pressure to fracture rock and release trapped natural gas. Studies have linked fracking with earthquakes in the U.K., Oklahoma, and in B.C.  The epicentre of the August quake was three kilometres from the Progress Energy fracking site. The operation shut temporarily immediately after the quake but soon restarted with continued monitoring. Fracking operations have previously triggered small earthquakes in B.C. In the U.S., the disposal of frack waste has triggered larger quakes. But scientists said last summer that the 4.6 magnitude August quake may be the largest in the world caused by hydraulic fracturing. No one was injured in the earthquake and there was no damage reported, but shaking could be felt for several kilometres. "This level of earthquake, although sounds scary, but in terms of the actual seismic damage, magnitude 4.6 is very unlikely to cause significant damage,"

    ConocoPhillips capital budget cuts for 2016 largely spare Alaska - ConocoPhillips has laid out its global plans for the next year, with its base capital spending levels in Alaska falling — but its overall investment in-state remaining static due to a series of projects. In its 2016 operating plan unveiled Thursday, the firm — one of the “Big Three” oil companies operating in Alaska, and a partner with the state in a planned natural gas pipeline — said it expected to have a $15.4 billion worldwide budget for the year, split evenly at $7.7 billion apiece in capital and operating costs. Ryan Lance, the company’s chairman and CEO, said the reduced capital budget, about 25 percent smaller than 2015’s, was the product of a global operating environment he called “challenging.” “We are significantly reducing capital and operating costs, while maintaining our commitment to safety and asset integrity,” Lance said in a statement on the operating plan. “We also retain the flexibility to adjust capital spending in response to market factors. Our plan highlights the actions we accelerated over the past year to position our company for low and volatile prices.” Alaska, with relatively minor reductions, was the bright spot in ConocoPhillips’ capital budget. Cuts across the company’s operations in the Lower 48, Canada, Europe and the Asia-Pacific/Middle East ranged from 15 to 30 percent. “Approximately $1.3 billion, or 17 percent, is allocated to Alaska,” ConocoPhillips officials wrote. “This reduction of about 5 percent compared with 2015 expected spending is predominantly the result of reduced major project spending in the region following the startup of CD5 and Drill Site 2S in 2015. Capital in 2016 will mostly target development drilling, base maintenance and the progression of several major projects.”

    Company plans gravel island to extract Arctic offshore oil — Arctic offshore drilling by Royal Dutch Shell PLC drew protests on two continents this year, but a more modest proposal for extracting petroleum where polar bears roam has moved forward with much less attention. While Shell proposed exploratory wells in the Chukchi Sea about 80 miles off Alaska’s northwest coast, a Texas oil company wants to build a gravel island as a platform for five or more extraction wells that could tap oil 6 miles from shore in the Beaufort Sea. The U.S. Bureau of Ocean Energy Management is deciding how to assess the environmental effect of a production plan for the Liberty Project by Hilcorp Alaska LLC, a subsidiary of Houston-based Hilcorp Energy Co. A successful well would mean the first petroleum production in federal Arctic waters. Hilcorp’s plan for a 23-acre gravel island, about the size of 17.4 football fields, has drawn mixed reviews from conservationists and outright condemnation from environmentalists who believe the oil should stay in the ground.

    Canada's Trudeau leaves room for oil pipelines to gain local approval (Reuters) – Canada’s government sounded another note of opposition to a proposed oil pipeline in the country’s west coast, though he appeared to leave the door open to allowing proponents to acquire the needed local approval for projects to go ahead. The newly elected Liberal government campaigned on a promise to toughen up the environmental review process for oil pipelines and has voiced its opposition to Enbridge Inc’s Northern Gateway pipeline. Prime Minister Justin Trudeau reiterated that stance on Thursday, telling reporters, “I’ve been saying for years that the Great Bear Rainforest is no place for an oil pipeline, (and) that continues to be my position.” Oil would travel through parts of the Great Bear Rainforest as part of the planned pipeline from Alberta to British Columbia. “We need to be consulting with communities; we need to be partnering with indigenous peoples; we need to be reassuring Canadians that the science and environmental impact and the risks are being properly monitored,” Trudeau told reporters. “However, we do need to continue to allow processes … underway where proponents of a broad range of projects can attempt to acquire the social license that simply was not available, even as a theoretical option, over the past years,” he added.

    Britain Pushes to Revive Fracking, Possibly Under National Parks : — The British government is once again trying to revive its flagging effort to extract the country’s natural gas and oil from shale rock.On Wednesday, members of Parliament voted 298 to 261 to approve legislation allowing use of the shale-gas-extraction technique known as hydraulic fracturing 1,200 meters, or nearly 4,000 feet, beneath the surface of national parks and other protected areas, including World Heritage sites.The push by Prime Minister David Cameron’s Conservative Party comes just days after delegates to the United Nations climate conference in Paris reached a widely hailed agreement on curbing carbon dioxide emissions blamed for global warming. Despite the ambitious goals outlined on Saturday, many analysts say they believe oil and gas will play crucial roles in the world economy for decades.The opposition Labour Party criticized the government for weakening the protection of areas that need it. “We should have a moratorium on fracking in Britain until we can be sure it is safe and won’t present intolerable risks to our environment,” said Lisa Nandy, a Labour energy spokeswoman.Britain, in a separate effort to generate greater interest in shale, is expected to soon award new licenses for shale gas and oil exploration, possibly in national parks.One of the government’s aims is to allow long, horizontal wells drilled from outside such areas to tap the oil and gas below them. The government argues that there can be little harm from such deep drilling, saying that supplies of drinking water are “normally found below 400 meters.”

    UK Parliament backs fracking below national parks - The British Parliament has approved proposals that would allow fracking for shale gas below national parks, world heritage sites and other designated areas of natural beauty. The measure, which is opposed by environmental groups, was endorsed Wednesday by 298 votes to 261 and paves the way to more extensive fracking three-fourths of a mile below parks. The fracking process involves pumping huge volumes of water, sand and chemicals underground to split open rocks to allow oil and gas to flow. It has produced major economic benefits in some countries, but also raised a number of fears, including that the chemicals could spread to water supplies. The opposition Labour Party said after the vote that there should be a moratorium until better safeguards are in place. "We should have a moratorium on fracking in Britain until we can be sure it is safe and won't present intolerable risks to the environment," said Lisa Nandy, Labour's spokeswoman on energy and climate issues. She said the government is ignoring the public's "legitimate concerns" about the technology. Earlier this year, British lawmakers rejected a proposal to suspend fracking but indicated they would not permit fracking in national parks. Rose Dickinson of Friends of the Earth said the government is reneging on its commitment to have strong fracking safety regulations in place.

    Britain Offers Licenses for Shale-Rock Exploration - The British government, in an effort to stoke interest from energy companies in extracting fuels from shale rock, said on Thursday that it was offering licenses for oil and gas exploration on 159 tracts of land.The government said that 75 percent of the licenses being offered related to areas thought to contain shale gas or oil. Most of the blocks are in Northwest and Northeast England, and are believed to have substantial shale potential.“We need to get shale gas moving,” Britain’s energy minister, Andrea Leadsom, said in a statement on Thursday.The major British oil companies, BP and Shell, have so far stayed clear of the hunt for shale gas in Britain, stating that they had little interest in wading into the environmental controversy over extracting the fuel, at least until it is demonstrated that there is enough shale gas to make it commercially attractive.The government said that companies that accepted the licenses would still need to seek further permission before they could begin drilling.The licenses were offered a day after members of Parliament approved legislation that may open the way to hydraulic fracturing — the shale-gas-extraction technique known as fracking — deep beneath the surface of protected areas like national parks using long, horizontal wells outside the park borders.  A few of the licenses awarded on Thursday are in such parks.

    UK Begins Fracking Push As New Onshore Licences Are Awarded - The UK government began offering almost 100 new onshore oil and gas licences to companies on Thursday, with around three quarters of the blocks suitable for fracking. The 14th onshore licensing round was conducted by the industry regulator, the Oil and Gas Authority, with the 159 blocks on offer being consolidated into 93 licences which have been offered to companies that had successful applications. The first London-listed stocks to report they had won licences were UK Oil and Gas Investments PLC and Solo Oil PLC, with the pair winning one licence on the Isle of Wight. Fellow AIM-listed Egdon Resources PLC also said it had won nine licences under the licensing round whilst Europa Oil and Gas (Holdings) PLC secured three new licences, one of which with partner Upland Resources PLC. It is likely other London-listed stocks will have applied for licences. Under the licensing round, a total of 95 applications were made by 47 companies. Importantly, of the 159 blocks that were on offer, around 119 of them hold unconventional shale oil or gas, making them suitable for fracking which has been a hot and controversial topic this week after MP's approved fracking in certain parts of the UK, including underneath national parks. "Around 75% of the 159 blocks being offered today relate to unconventional shale oil or gas, and additional regulatory requirements apply to this kind of activity," said the UK government. "This round enables a significant amount of the UK’s shale prospects to be taken forward to be explored and tested." The dishing out of the licences comes only days after MPs voted to allow fracking for shale gas below national parks and other protected sites, bringing the already controversial topic back into the spotlight.

    Fracking: plans to drill 68 new shale gas wells unveiled - Fracking firms plan to drill up to 68 shale gas wells in England in the next five years, after being handed new rights to explore across an estimated 4,500 square miles of land. At least 14 of the new drilling sites – in parts of Yorkshire, Cheshire, Derbyshire and Nottinghamshire - are expected to be fracked under the plans, as ministers attempt to “get shale gas moving”. The areas earmarked for shale exploration include parts of the North Yorks Moors and Peak District national parks as well as several Areas of Outstanding Natural Beauty, and part of Chancellor George Osborne’s Tatton constituency. Fracking has not taken place in Britain since a temporary ban on the controversial practice was lifted in 2012, with energy firms facing repeated setbacks from strong local opposition. But Andrea Leadsom, the energy minister, said the Government wanted to “press ahead and get exploration underway so that we can determine how much shale gas there is and how much we can use”.  The Government yesterday awarded rights to energy companies to explore for oil and gas across about 5,000 square miles of England, in addition to 1,000 square miles they awarded in the summer.   Of the 6,000 square miles total, roughly 75 per cent of the licences relate to shale exploration, the Government’s Oil & Gas Authority said, with the remainder being earmarked for other types of drilling.

    UK offers fracking licenses for 132 onshore oil and gas blocks - The UK Oil & Gas Authority (OGA) has awarded a further 132 new licenses to frack oil and gas, during the second tranche of the 14th onshore oil and gas licensing round. The first tranche of the 14th round was announced in August and awarded 27 licenses. Of the total 159 licensing blocks being offered, around 75% are for unconventional shale oil or gas and subject to additional regulations for fracking. Launched on 28 July 2014, the 14th onshore licensing round received a total of 95 applications from 47 companies covering 295 ordnance survey blocks. OGA chief executive Andy Samuel said: "This round enables a significant amount of the UK's shale prospects to be taken forward to be explored and tested. The oil and gas regulator will now issue Petroleum Exploration and Development Licences (PEDL) over the offered blocks, after agreeing on specific details. The companies will now start planning future strategies for exploration activities for their licenses. These activities, however, are subject to further local planning, safety, environmental and other approvals. UK Energy Minister Andrea Leadsom said: "Last month we set out the vital role gas will play in the UK's transition to a low-carbon future. "The licences offered today move us a step closer - driving forwards this industry which will provide secure, home grown energy to hardworking families and businesses for decades to come.

    Four countries added to global shale oil and natural gas resource assessment -- EIA continues to expand its assessment of technically recoverable shale oil and shale natural gas resources around the world. The addition of four countries—Chad, Kazakhstan, Oman, and the United Arab Emirates (UAE)—to a previous assessment covering 42 countries has resulted in a 13% increase in the global assessed total resource estimate for shale oil and a 4% increase for shale gas.  A total of 26 formations within 11 basins were analyzed in these 4 countries. Although these formations contain significant volumes of technically recoverable resources, there is currently no shale exploration underway in any of the four countries, meaning the new assessed resources are not yet economically recoverable. The portions of these resources that become economically recoverable in the future will depend on crude oil and natural gas market prices, as well as the capital and operating costs and productivity within the countries. Each of the countries has an existing oil and natural gas industry with infrastructure connecting the basins to global markets. All current production of oil and natural gas in Chad, Kazakhstan, Oman, and the UAE is from non-continuous resources (from high-permeability formations).

    The zombie apocalypse in oil: Why it's a bad sign for all of us -  - The dramatic drop in oil prices has created what are called "zombie" companies, oil companies which can still afford to pay interest on huge debts, but little else. If oil prices stay low, the problem is likely to spread and become an economic zombie apocalypse for much of the industry and the communities and countries that depend on it. Meanwhile, consumers have rejoiced as cheap oil prices have led to cheap gasoline, diesel, heating oil and jet fuel.  But should those consumers be so sanguine? Can the low prices we are experiencing today be extrapolated far into the future? The conventional wisdom says yes. It claims that the American fracking boom of recent years has unleashed a flood of oil that will keep prices down for many years to come. Combine that with an undisciplined OPEC that pumps flat out and you get not a temporary dip in prices, but a new era of low-cost oil and oil products. But the same facts can be interpreted as leading to serious future supply constraints and high prices, provided the world economy does not fall into a prolonged slump that would reduce oil demand.  Cheap financing fed the fracking boom. And, even though borrowed funds are still cheap, struggling oil companies are finding their bank lines of credit reduced and a bond market that is shunning their high-yield debt. With additional funds hard to raise, many independent companies are finding it difficult to drill new wells needed to make up for declining production from existing ones, around 40 per cent per year in the two largest tight oil formations--the Eagle-Ford in Texas and the Bakken in North Dakota--where fracking is the primary technology for extracting oil. While some say that a rising oil price would quickly reverse the current downward trend in drilling activity in U.S. tight oil fields, the key will be whether investors will provide the capital needed to do so. So, it's important to understand that the OPEC war on American drillers also extends to those who finance them. If the thumping investors have taken so far as result of the long, deep slide in oil prices makes them reluctant to fund new drilling in the United States when prices rise, the presumed fast ramp-up in U.S. drilling won't take place. The necessary cheap and ready credit won't be available as it has been in the past.

    19 Million Barrels Missing: Energy investment bank, Tudor, Pickering, Holt & Company said the oil industry has deferred or cancelled about 150 projects that could unlock 125 billion barrels of oil over their lifetime. Those 150 projects could produce about 19 million barrels per day at their peak. In a separate presentation Chevron said the decline in mature fields would need $7-$10 trillion of additional investments to prevent the drop in production. In today's energy market with oil prices under $40 that investment is not going to be made. In the chart below, Chevron illustrated the problem. Demand will continue to rise since the global working population rises +200,000 per day. The existing base of production declines every day as the oil is taken out of the ground. Between now and 2030 another 200 billion barrels of oil will need to be discovered and produced in order to keep up with demand. With active drilling declining at a rapid rate and capital expenditures by the major oil companies being slashed every quarter those discoveries are not going to be made. The major reason is that all the cheap oil that could be produced profitably at $40 a barrel was discovered long ago. The majority of oil discovered today requires an average of $75 a barrel to be profitable. There are some exceptions but for every lower priced barrel, there is a higher priced barrel to offset it. Any deepwater offshore oil requires $75 or higher to be developed. You cannot spend billions of dollars developing a 10 well field at $40 oil. Chevron halted development on a North Sea project costing $8 billion because profitability required $100 per barrel or more. The vast majority of shale oil requires prices over $40 and that is why active drilling is rapidly declining.

    $30 Oil Will Accelerate Much Needed Rebound -- : Oil markets are waiting for a much greater supply contraction before prices rebound, and the deeper downturn in prices will test the current pace of adjustment. With WTI dipping to $35 per barrel, it will likely spark deeper cuts to spending and drilling, which could perhaps contribute to an accelerated pace of adjustment. In other words, a sharper fall from the mid-$40s per barrel to the mid-$30s per barrel could sow the seeds of a faster rebound than we might have otherwise witnessed. Although to date the pain has been significant in the upstream exploration and production sector, things are about to get much worse. Hedges continue to roll off, removing the last bit of protection that some drillers have had up until now.   “Come Jan. 1, revenues will experience a pronounced decline for many companies, coinciding with a time of severe stress for balance sheets across the industry,”  . Reuters surveyed the 30 largest oil producers, and only five of them actually expanded their hedging program during the third quarter of 2015. The rest saw their hedging positions erode as contracts expired. Eight of them had no hedging protection whatsoever for 2016. Reuters noted the “missed opportunity” when few companies added hedging protection when oil prices rebounded to $60 per barrel in the spring, and then again in September and October when prices rose modestly after a downturn in the summer. According to Reuters, Devon Energy, Whiting Petroleum, Hess and Denbury Resources are a few of the companies that have seen their hedging positions decline the most. That will subject them to the full savagery of oil prices flirting with 11-year lows. Without hedging, there is a much lower incentive to drill, as any barrels pulled out of the ground will be sold for much less than they would be under a hedged position.

    America's 40-year oil export ban may soon be lifted - There's growing momentum to kill the restriction and a deal could be reached before the end of the year as part of a broader spending and tax bill that's making its way through Congress.  Proponents argue the restriction is terribly outdated. It was signed into law on December 22, 1975 when the OPEC oil embargo created a shortage that slammed the American economy with skyrocketing prices.   Today, the world has too much oil -- thanks largely to the American shale oil boom. That's why crude oil prices have crashed below $35 a barrel and a gallon of gasoline is on the verge of falling below $2 per gallon. In other words, there is no longer an oil scarcity that justifies keeping it at home. In fact there's too much of it.  "Restrictions on free trade of energy are a legacy of a bygone era that doesn't reflect the realities of today," A big reason for the momentum is the fact that gasoline prices are down by half since peaking in 2008 at $4 per gallon. Politicians have less reason to fear voters will blame them for high gas prices caused by allowing U.S. oil to be sold overseas.  In fact, U.S. oil actually trades at a discount to Brent. That's because American oil producers can't currently export to overseas refiners who are willing to pay a bit more.  American producers will have access a wider market if the export ban is lifted. That's why the move is likely to make oil and gas prices in the future cheaper than they would otherwise be.

    Senators Close in on Oil-Export Deal Amid Tax-Break Talks - Senate negotiators are nearing a deal to allow unfettered U.S. crude oil exports for the first time in 40 years, though differences remain on renewable-energy tax credits that Democrats are demanding in return, according to people close to the discussions. While any agreement could still collapse in the coming days -- the deal faces opposition in the House -- lawmakers are weighing the extension of solar and wind tax credits for as long as five years in exchange for lifting the crude-export restrictions, which were established to counter the energy shortages of the 1970s. Tax breaks are part of the discussion, though lawmakers are still negotiating the length of wind- and solar-energy tax extensions and whether they should be phased out, said a Senate Democratic leadership aide, who wasn’t authorized to speak on the record. If agreed to and approved by Congress, repeal of the nation’s ban on most crude oil exports would mark the most significant shift in U.S. oil policy in more than a generation. Repeal, benefiting oil producers including ConocoPhillips, Hess Corp. and Continental Resources Inc., would come at a time when the industry is cutting jobs to deal with a global glut in crude oil and the lowest prices in seven years. Talks for a deal are under way as envoys from 195 nations reached an agreement to limit fossil-fuel pollution and curb the effects of climate change. Congress is considering lifting the export ban as part of either a package to extend expiring tax provisions or to finance the government through Sept. 30 before current funding authority expires Dec. 16. Among the items being discussed are a 9 percent manufacturing tax credit for refiners and an extension of the U.S. Land Water Conservation Fund, according to at least three lobbyists close to the negotiations. Even if such a deal is struck by Republicans and Democrats in the Senate, House Democrats, who are vital to reaching an agreement, have suggested they won’t go along unless a provision for indexing the Child Tax Credit, which allows taxpayers to reduce federal income taxes for each qualifying child, is added to the mix. And it’s unclear whether House Republicans will support a deal if they assess that the price Democrats are seeking is too high.

    Democrats Ignoring Climate Implications of Lifting Oil Export Ban – “We Can Have Our Cake and Eat It Too” -- Jason Bordoff wants to lift the oil export ban and has been actively working on this for the past two years. Which is odd if you believe that President Obama is against lifting the ban as the White House claims. Prior to Bordoff’s work to lift the oil export ban at Columbia University’s Center on Global Energy Policy (CGEP), he was special assistant to President Obama and senior director for energy and climate change. So why is Obama’s former senior director on climate change pushing a policy that will greatly increase fracking in Americaas well as global oil consumption for decades? The carbon and methane pollution consequences of this for climate change are plainly obvious. For the past two years, many former Obama administration officials have joined Republicans in calling for a lifting of the export ban. Lawrence Summers, former Obama treasury secretary gave a talk at the oil industry-funded Brookings Institute in September 2014 arguing for lifting the ban, and he didn’t leave much room for debating the merits on the issue saying, “The merits are as clear as the merits with respect to any significant public policy issue that I have ever encountered.” As for the environment, Summers dismissed any concerns with the absurd statement that “whether we move beyond fossil fuels will not be affected one way or the other by our export policy, or our natural gas export policy.”  One of the leading champions for lifting the export ban is Daniel Yergin. Yergin works for energy consulting firm IHS that has produced industry funded “studies” supporting lifting the ban. He also is part of CGEP at Columbia.  They gave him a medal. In October 2014, Secretary of Energy Ernest Moniz presented Yergin with the first James R. Schlesinger Medal for Energy Security.

    Exporting Climate Change Denial to China --Talk about irony. As the world struggles this week in Paris to finally do something meaningful about climate change, American environmentalists around the convention hall are suddenly having to divert their energy to deal with a threat from politicians back home.  Behind closed doors in Washington, Republican leaders are trying once again to commandeer the federal budget to the benefit of their fossil fuel benefactors — and they are getting an assist from some leading Democrats as well. They are apparently negotiating with the GOP to end the long-standing ban on crude oil exports, a move that would dramatically undercut America’s negotiation position, and demonstrate that the oil industry maintains a firm grip on both our political parties. A vote on lifting the ban could come as early as Friday — the very day that the world is supposed to be reaching its final climate pact.Ending the oil export ban is a poor idea on many grounds: Unions oppose it because it will cost refinery jobs, conservationists oppose it because it will lead to more drilling in sensitive areas and increased pollution in communities of color. It makes a mockery of the idea that we’re actually interested in “energy independence.” We’d get 4,500 more rail cars a day full of explosive oil. It’s such bad policy that 69 percent of Americans, across both parties, oppose lifting the ban.And if it’s bad policy, it’s even worse timing. Right at the very moment when we desperately need to be reducing emissions and investing in clean energy solutions — right when President Obama in his Paris speech and his Keystone XL rejection has called for leaving carbon underground — lifting the crude oil export ban would do the exact opposite: add 3.3 million barrels of extra oil production per day between now and 2035. That’s more than 515 million metric tons of carbon pollution per year, the equivalent of the annual emissions from 108 million passenger vehicles or 135 coal-fired power plants.

    White House says still opposes legislative move to lift crude oil export ban – The White House said on Friday it opposed legislative action to lift the U.S. ban on crude oil exports as part of negotiations on a spending agreement to fund the U.S. government in 2016. “We have opposed legislative action that would lift the ban on crude oil exports, primarily because this is already authority that rests with the executive branch,” White House spokesman Josh Earnest told a news briefing. “We do not believe it is necessary for Congress to take legislative action in this area.” Ending the ban has been one of the issues delaying a deal being negotiated in the U.S. Congress for a $1.15 trillion funding bill to pay for government operations through September 2016.

    U.S. oil export ban 'very likely' to be lifted in spending bill: source -- The 40-year-old ban on most U.S. crude oil exports will “very likely” be lifted in the government spending bill, and talks on the final budget deal are likely to continue through the weekend, a Senate aide said on Friday. The aide did not want to be identified due to the ongoing nature of the talks. When asked if it was likely that the oil export ban would be lifted, a spokeswoman for Senate Minority Leader Harry Reid, a Nevada Democrat, said there was no final deal yet. “We do not have a final agreement on the omnibus or tax extenders,” said Reid’s spokeswoman Kristen Orthman. Leaders in both the House and Senate have been meeting behind closed doors in recent days to see if a deal can be reached on the bill. Energy interests, and Republicans, who lead both chambers of Congress, say lifting the trade restriction would keep the U.S. drilling boom alive and give U.S. allies alternatives to Russia and OPEC for their oil supplies. Opponents, including many Democrats in the Senate, say it would put oil refining and ship building jobs at risk and more drilling would harm the environment and increase the number of trains carrying crude oil. The White House has said repeatedly that President Barack Obama opposes legislation in the bill to lift the ban and that Congress should instead work to help green sources of energy. It has stopped short of saying Obama would veto a spending bill that includes lifting the ban.

    Oil Export Plan Last Obstacle to U.S. Spending Bill, Reid Says - -  A dispute over ending the 40-year-old U.S. crude oil export ban is the last remaining obstacle to agreement on a spending bill to avoid a government shutdown, Senate Democratic leader Harry Reid said Tuesday. It’s up to Republicans to decide whether they’ll agree to environmental measures sought by Democrats in exchange for lifting the export ban, Reid of Nevada said on the Senate floor Tuesday. “If Republicans think reducing our carbon emissions and encouraging the use of renewable energy is an unacceptable price to pay, we can move the rest of the package without the oil export ban,” Reid said. “It’s decision time.” House Speaker Paul Ryan said congressional leaders expect to unveil a $1.1 trillion government spending bill later Tuesday for a possible vote on Thursday. Current government funding ends at the end of the day Wednesday, and the speaker said a short-term extension will be needed to keep the government operating. "I think we’ve been pretty clear we’re not going to have a shutdown," Ryan of Wisconsin said during a Politico event in Washington. Congressional negotiators have been working on the spending bill and an accompanying package of as much as $750 billion in business and low-income worker tax breaks. A resolution has been delayed by disagreements over a variety of policy changes sought by Republicans, including lifting the oil export ban.

    Meet the Lobbyists and Big Money Interests Pushing to End the Oil Exports Ban -- Steve Horn -- The ongoing push to lift the ban on exports of U.S.-produced crude oil appears to be coming to a close, with Congress agreeing to a budget deal with a provision to end the decades-old embargo.   Just as the turn from 2014 to 2015 saw the Obama Administration allow oil condensate exports, it appears that history may repeat itself this year for crude oil. Industry lobbyists, a review of lobbying disclosure records by DeSmog reveals, have worked overtime to pressure Washington to end the 40-year export ban — which will create a global warming pollution spree.  Congress has introduced four oil export-promoting bills in the past year, all of which received heavy lobbying support from the industry. Language from those bills, as with a bill that opened up expedited hydraulic fracturing (“fracking”) permitting on public lands in the defense appropriations bill last year, is inserted into the broader budget bill.   So without further ado, meet some of the lobbying and big money interests that propelled these bills forward.   H.R. 5814 mandated that the “United States should remove all restrictions on the export of crude oil, which will provide domestic economic benefits, enhanced energy security, and flexibility in foreign diplomacy.” Companies such as Anadarko Petroleum, Marathon Oil and HollyFrontier Corporation all put their best foot forward in lobbying for the bill. Anadarko paid Robert Hickmott and W. Timothy Locke — both of whom passed through thegovernment-industry revolving door — to do the job. Among them is ExxonMobil, the news these days mostly for the “Exxon Knew” climate change denial scandal and the ongoing New York Attorney General's Office investigation.Exxon's oil exports lobbyist armada includes former U.S. Senator Don Nickles (R-OK) and Majority Leader and U.S. Sen. Mitch McConnell (R-KY)'s former chief of staff Michael Solon.The fracking lobby, America's Natural Gas Alliance (ANGA), also brought its lobbying clout to the forefront for the bill. ANGAlobbied for H.R. 702 in both quarters two and three. National Industrial Sand Association, the frac sand industry's lobbying group, also lobbied for the bill.  Koch Industries front group Americans for Prosperity (AFP) also deployed a trio of lobbyists to advocate on behalf ofH.R. 702.

    US Congress Republicans agree to lift 40-year ban on oil exports - Republican leaders in the US Congress announced late Tuesday a measure allowing American oil exports for the first time in four decades. However, Democrats haven't confirmed the agreement. Both the House and Senate still must pass it and President Barack Obama must sign it into law.  “We have the best technology, the best oil and over time we will drive out Russian oil, we will drive out Saudi, Iranian,” Republican Representative Joe Barton of Texas told Bloomberg. “It puts the United States in the driver’s seat of energy policy worldwide. It is a huge victory,” he added. The announcement comes as oil prices plunge to the lows of 2008. WTI was trading one percent lower at $37.02 per barrel as of 11:10am GMT on Wednesday. Brent was down almost three percent at $37.37 a barrel. Low oil prices have increased the urgency for Congress to lift the ban, according to John Hess, chief executive of American oil company Hess Corporation.

    Congress reaches deal to lift 40-year ban on oil exports - In a move considered unthinkable even a few months ago, congressional leaders have agreed to lift the nation’s 40-year-old ban on oil exports, a historic action that reflects political and economic shifts driven by a boom in U.S. oil drilling. The measure allowing oil exports is at the center of a deal that Republican leaders announced late Tuesday on spending and tax legislation. However, Democrats haven’t confirmed the agreement. Both the House and Senate still must pass it and President Barack Obama must sign it into law. The deal would lift the ban, a priority for Republicans and the oil industry, and at the same time adopt environmental and renewable measures that Democrats sought. These include extending wind and solar tax credits; reauthorizing for three years a conservation fund; and excluding any measures that block major Obama administration environmental regulations, according to a GOP aide. By design or not, the agreement hands the oil industry a long-sought victory within days of a major international climate deal that is aimed at sharply reducing emissions from oil and other fuels, a deal opposed by the industry and one that will arguably require its cooperation. More than a dozen independent oil companies, including Continental Resources and ConocoPhillips, have been lobbying Congress to lift the ban on oil exports for nearly two years, arguing that unfettered oil exports would eliminate market distortions, stimulate the U.S. economy and boost national security

    Budget deal bill boosts oil exports, renewable energy (AP) — Republicans are hailing the likely demise of a 40-year-old ban on crude oil exports, as well as spending limits imposed on the Environmental Protection Agency, a longtime GOP target. Democrats are cheering five-year extensions of tax credits for wind and solar energy producers and renewal of a land and water conservation fund that protects parks, public lands, historic sites and battlefields. Energy and environment provisions in the massive year-end spending and tax bills give both parties reasons to celebrate. Thanks to the threat of President Barack Obama’s veto, Democrats blocked GOP proposals to thwart administration regulations on clean air and water as congressional leaders and the White House hammered out the massive budget deal. Lawmakers expect to vote on the $1.1 trillion spending bill and $680 billion in tax cuts for businesses and individuals by week’s end. Western lawmakers from both parties are highlighting a plan to spend $2.1 billion to fight increasingly serious wildfires that have afflicted the drought-plagued region in recent years. The figure is $500 million above a 10-year average for snuffing out wildfires. House Speaker Paul Ryan, R-Wis., called removal of the export ban the most important change in U.S. oil policy in more than a generation. “This is a big win for America’s energy workers, manufacturers, consumers and our allies,” he said. Lifting the ban should create about 1 million jobs in nearly all 50 states within a matter of years, Ryan said, and it could add $170 billion a year to the nation’s gross domestic product.

    Congress To Lift Four Decade Oil Export Ban: Will It Impact Crude Prices? -- A little logrolling is better than brinksmanship and legislative gridlock we suppose and thanks to GOP concessions on tax credits for wind and solar as well as a three year reauthorization of a conservation fund, Republicans were able to include a measure that lifts the 40-year old ban on crude exports in a package of spending and tax legislation that funds the government until September of 2016.  As Bloomberg reports, “House Speaker Paul Ryan told fellow Republicans in a closed-door meeting Tuesday night in Washington that leaders had reached a deal pairing a $1.1 trillion spending bill with a separate measure to revive a series of expired tax breaks.”  “I think we’ve been pretty clear we’re not going to have a shutdown,” Ryan said on Tuesday, tacitly acknowledging the reputational damage the party suffered in 2013 when bickering over Obamacare brought the government to a virtual standstill. “That’s the way I think Congress ought to run,” he added.  Foreign sales of refined products (like gasoline) were allowed under the ban - in place since 1975 after the Arab oil embargo - and as WSJ notes, “a certain type of light oil is also already starting to flow overseas thanks to permission granted in 2014 by the Commerce Department, which allows producers to reclassify a certain type of oil as a refined fuel, similar to gasoline, which is legal to ship abroad.” Exports to Canada (which is exempt from the ban) have increased ninefold to 400,000 b/d since 2008.The inexorable decline in crude prices served as the impetus for reviving the debate around the export ban. As The Journal goes on to recount, “a dramatic drop in oil prices, hovering below $40 a barrel, helped prompt lawmakers of both parties to consider pairing renewable energy support with oil exports, a type of grand Washington deal-making that hasn't been seen for years on the highly divisive issues of energy and environment.” As for the impact on global markets, OPEC’s Secretary-General Abdalla El-Badri said Tuesday that "any change in U.S. oil policy will have 'zero' impact on global mkts because the country remains an importer."

    Big Oil Just Won Another Round In Congress - In a blow to environmental activists, lawmakers agreed late Tuesday to lift the 40-year-old oil export ban in a budget deal for the coming year. In exchange, the wind and solar industries will receive some market certainty, with tax credits extensions for the next five years.  Republicans have been pushing hard this year for an end to the ban, which was established to protect American energy security after the oil embargo of the 1970s. In recent years, with the rise of fracking and American production of light, sweet crude, the international and national prices of oil have become imbalanced.  World and U.S. prices of oil are expected to converge if the export ban is repealed.Oil production is expected to get a big boost from lifting the ban. Oil Change International estimates it could add an additional 467,000 barrels a day, while the American Petroleum Institute estimates up to 500,000. “This is a powerful reminder of just how powerful Big Oil and the Koch brothers are,” Radha Adhar, a federal policy representative for the Sierra Club, told ThinkProgress. She said it had become clear that the Republican leadership was willing to shut down the government over the issue, and that Democrats in the Senate worked hard to get clean energy tax breaks in return.  Shipping oil overseas will also likely increase the amount of oil being moved from the Bakkan fields in North Dakota to the coasts — either by rail or by pipeline. Pacific Northwestern states have been moving in recent weeks to curb fossil fuel infrastructure, in an effort to reduce the amount of coal and oil moving through the area.

    Landmark exports deal was months in the making - After years of legislative gridlock on energy policy, Congress is on the verge of approving a historic compromise giving both parties key wins in what has become a ceaseless war of attrition between fossil fuels and renewable interests. The blockbuster omnibus and tax package that could be signed into law as early as this weekend would repeal the 40-year-old ban on crude oil exports, while also extending for five years the renewable production and investment tax credits for wind and solar -- sectors that are booming in response to climate change and falling costs but have been slowed by uncertainty over their on-again, off-again tax credits (E&E Daily, Dec. 15). Other issues, including policy riders and extending the popular Land and Water Conservation Fund, were also part of the horse-trading that led to this week's deal, but a swap that would repeal the exports ban in exchange for green tax credits has been the foundation of the quid pro quo for months.Getting to an agreement was anything but easy and was driven by a small group of lawmakers who methodically pressed the exports issue for more than a year, laboring patiently to sell the idea to skeptical colleagues. Leading the charge was Senate Energy and Natural Resources Chairwoman Lisa Murkowski (R-Alaska), who raised the issue in a speech at a high-profile industry conference in March of 2014. For much of the next year, Murkowski pressed the issue, urging the Obama administration to use its existing authority to ease the export restrictions passed in the wake of the oil embargoes of the 1970s.

    Lifting Crude Oil Export Ban Locks in Fossil Fuel Dependency for Decades to Come - One year ago this week, Gov. Cuomo banned fracking in New York, listening to the growing movement to keep fossil fuels in the ground. So it’s especially disheartening that Congress, through a provision included in the omnibus appropriation, has just lifted the decades-old crude oil export ban—locking us into fossil fuel dependence for decades to come. At a time when we need to be investing in making a rapid transition to 100 percent clean energy, this decision would move us in the opposite direction.  The Democratic leadership traded this ban for a small extension of taxes that support renewable energy. The tax credit for solar will be extended and phased down over five years, with the credit for residential solar eliminated after 2021. The tax credit for wind will be cut each year until it is eliminated in 2020. The decision by President Obama and Democratic leadership to cave in to the demands of the fossil fuel cartel will harm Americans in order to give oil companies larger profits. Lifting the export ban will give these companies hundreds of billions of dollars in new profits over the next decade, while leading to more drilling and fracking for oil and increased greenhouse gas emissions. We’ll see more oil trains through towns and cities and an armada of Exxon Valdez-sized ships on our oceans. It has been estimated that lifting the crude oil export ban could lead to an increase in oil production of 3.3 million barrels a day and as many as 7,600 new wells drilled each year. Most of those wells will be fracked. The increases in drilling and fracking could lead to annual increases in greenhouse gas emissions on par with building 135 new coal fired electric power plants.

    Congress will lift the oil export ban, boost clean energy subsidies. Is that a good trade? - Late Tuesday night, as part of a sweeping budget deal, congressional leaders forged an unexpected compromise around a few key energy provisions. Basically:

    1. Democrats agreed to lift the 40-year ban on US crude oil exports, a provision long sought by the oil industry because it could bolster domestic drilling.
    2. In exchange, Republicans agreed to extend key tax subsidies for wind and solar for another five years, phasing them out only gradually. This is a big victory for the renewable industry. The 30 percent tax credit for solar was set to expire next year, putting a dent in the nascent solar boom. Same for the tax credit for wind, which lapsed back in 2014. Total cost: $25 billion.
    3. Republicans also won't block a $500 million payment that the Obama administration plans to make to the UN Green Climate Fund, which will distribute aid to developing countries as part of the Paris climate deal. Some conservatives had wanted to block these funds, to toss a wrench in the UN climate talks. So much for that.

    So... is this a good trade? Bad trade?  From a climate standpoint, this looks quite helpful in the near term. The wind and solar credits will reduce US greenhouse gas emissions moderately for the next half-decade (around 0.3 percent per year, by one estimate), at least until the EPA's Clean Power Plan takes effect. Conversely, few analysts expect the repeal of the export ban to matter much for the next few years, since conditions aren't currently favorable for exports. But in the longer run, if those conditions shift, this provision could bolster US oil production and increase emissions, which is why so many green groups hate it. It's a temporary clean energy boost, they say, in exchange for broader support for fossil-fuel extraction.

    Lift-Off? US Moving Toward Exporting Domestic Crude  - “They’ve got to come to terms pretty quick, or the government’s going to shut down. That’s where all of this comes to a head really quickly. This is politics, and when it comes down to something you really want, you can hold other things hostage, and that’s kind of what’s going on in both sides,” Medlock said. But it’s those hard-knuckled politics, coupled with some lip-biting acceptance that neither side gets exactly what it wants, that finally wins the day. “I wouldn’t be surprised if something hits [President Obama’s] desk before Dec. 31,”  Not everyone is optimistic, however. At the University of Houston, energy fellow Ed Hirs, said the import-export math simply doesn’t work. “If the U.S. is able to start exporting a million barrels of oil a day, that means we’re going to have to start importing another million barrels a day,” he told Rigzone. “The producers in the Bakken still don’t understand that they don’t sell their oil below what OPEC can sell it for, and they’ve been pushed out of the refineries in Philadelphia because they won’t compete on price.” Hirs isn’t the only one not quite ready to pop open the champagne. Analysts at Raymond James (RayJa) said in a note to investors Dec. 16 that assuming the framework remains intact, the obvious winners would be U.S. Lower 48 oil producers who would benefit from a narrower WTI discount to Brent and U.S. solar developers, who would avoid the looming tax credit fall-off at the end of 2016. “On the other hand, domestic refiners – which have long lobbied against lifting the export ban – would find a narrower WTI-Brent spread unhelpful, though there is the possibility of a new refining subsidy being added to the package, thus cushioning the effect on margins.

    Crude/Condensate Export Pipelines to Corpus and the Refineries They Feed -- We don’t expect to see a flurry of U.S. crude shipments overseas following the expected lifting of the decades old U.S. ban on exports by Congress this week. That’s because the price spread between U.S. crude benchmark West Texas Intermediate (WTI) and international equivalent Brent is currently trading at less than $2/Bbl – providing no economic incentive to cover the freight cost of shipping U.S. crude abroad. However, longer term the end of the export ban expands the market options for U.S. crude producers. In that context, well-developed pipeline connections between South Texas Eagle Ford oil and condensate production and the Port of Corpus Christi bode well for future export opportunities. This is the fourth episode in our series on crude and condensate infrastructure to and within Corpus. Episode 1 provided a brief refresher course on what lease condensate is (an ultra-light form of crude oil with an API degrees gravity level of 45 or 50 or more) and discussed why condensate, with its lighter range of hydrocarbons, is generally less desirable to Gulf Coast refineries configured to process heavier crudes.  In Episode 2 we took a high-level look at how crude and condensate moves from the Eagle Ford and the Permian to Corpus (and from the Permian to Houston and Cushing, OK), then began a detailed review of pipelines to Corpus... Our most recent entry, Episode 3, considered several pipelines that run from Gardendale to (or at least towards) Corpus, including Kinder Morgan and Magellan Midstream Partners’ Double Eagle Pipeline, NuStar Energy’s South Texas Crude Oil Pipeline System, and the Harvest Pipeline System co-owned by Hilcorp Energy and others. Today, we describe remaining pipelines to Corpus, and then discuss existing and planned refineries and splitters there.

    Report: Eagle Ford Shale Has Peaked, Lifting of Oil Export Ban Could Drain Field More Quickly -- Steve Horn - A new report published by the Post Carbon Institute concludes that Texas' Eagle Ford Shale basin, the most prolific shale oil basin in the U.S., has peaked and reached terminal decline status. The Post Carbon report dropped just as Congress is on the verge of lifting the oil export ban for U.S.-produced crude oil, which will only further incentivize drilling and fracking.   Titled “Eagle Ford Reality Check: The Nation's Top Tight Oil Play After More Than a Year of Low Oil Prices,” the report is the latest in a series of long reports on the overhyped future of oil obtained via hydraulic fracturing (“fracking”) in the U.S. by Post Carbon Institute Fellow David Hughes. Hughes formerly worked for 32 years with the Geological Survey of Canada as a scientist and research manager before coming to Post Carbon.     It also comes just two months after Post Carbon's October release of a similarly titled report on North Dakota's Bakken Shale basin, the second biggest shale oil field in the U.S. behind the Eagle Ford.   “In Eagle Ford Reality Check, David Hughes…looks at how production in the Eagle Ford has changed after a year of low oil prices,” a summary of the report explains. “Oil production in the Eagle Ford is now falling after more than a year of low oil prices. The glory days of the Eagle Ford are behind it, at the ripe old age of six years.”  Many of the same themes and concepts, for those familiar with Post Carbon's previous “shale bubble” updates, reappear in this report. Those include the drilling treadmill, drilling sweet spots, and U.S. government and industry drilling productivity assessments (the seeds and intelligence upon which energy policymaking is made) vs. independent drilling productivity assessments.  The skinny on the report is that the Eagle Ford is certainly productive and resilient, even despite a year of low global oil prices, but its future as a super-major type field is certainly in question based upon the numbers crunched by Hughes.

    Shell Cuts 2,800 Jobs as It Takes Over BG Oil Company: — Royal Dutch Shell says it expects to cut 2,800 jobs once it completes its takeover of rival BG Group.The losses amount to about 3 percent of the combined workforce, and come on top of Shell’s previously announced plan to shed 7,500 staff and contractor positions.Shell agreed to buy British rival BG Group for 47 billion pounds ($71 billion) in April. The deal will boost Shell’s oil and gas reserves by 25 percent and give it a bigger presence in the fast-growing liquefied natural gas market.Shell said in a statement Monday that “the deal remains on track for completion in early 2016.” It said it had received clearance from Chinese authorities, its last major regulatory hurdle. It has already been approved by Brazil, the European Union and Australia.

    Petrobras CEO expects to sell $20 billion in debt in 2016 - – Brazil’s Petroleo Brasileiro SA plans to sell about $20 billion of debt next year to finance its 2017 needs, Aldemir Bendine, chief executive of the state-run oil company known as Petrobras, told Bloomberg News on Thursday. There is a good possibility that bonds backed by future oil exports could help meet that financing goal and find strong demand in Asia, Bloomberg reported, citing Bendine. Petrobras, though, has ruled out the use of hybrid securities in the short term, Bendine said. He adding that such bonds, which are partly guaranteed by the future sale of equity, could be sold at some later date. Hybrid securities were the subject of reports in November that the government was considering their use as a way to rescue Petrobras in case the company found it difficult to raise enough money to pay both maturing debts and for capital investment needed to secure future output. Bendine also told Bloomberg that the only way the company will reduce its debt is through the sale of assets. Petrobras has nearly $130 billion of debt, the most of any oil company in the world.

    Oil Rout to Claim More Victims After First Norway Bankruptcy -  The collapse of oil prices has claimed its first bankruptcy victim in Norway’s offshore industry, and analysts warn more may follow. Dolphin Group ASA, a seismic surveyor that maps the seabed for oil and gas reservoirs, became the first Oslo-listed company in the industry to file for bankruptcy Monday. One of its competitors, Polarcus Ltd., is in talks on restructuring debt -- but the threat won’t stop there, with insolvency cases bound to multiply among drillers as well, analysts say. “Drilling companies might be next in line,” “Drillers are now living off their existing contracts taken out at market peak, but these are running out.” Oil producers are cutting spending globally to cope with a plunge in oil prices and there is likely to be little let up next year, with Brent crude hitting a new seven-year low Monday at $36.33 a barrel. Investment offshore Norway will this year fall the most since 2000 and is expected to fall further next year.

    BP faces Mexico class action lawsuit over 2010 oil spill - A few months after reaching the largest corporate settlement in U.S. history, BP Plc faces a class action lawsuit in Mexico over its deadly 2010 Gulf of Mexico oil spill, which a civic group on Friday said it had filed against the company. Acciones Colectivas de Sinaloa, a group specializing in consumer and environmental class action claims, lodged the lawsuit against four BP units at a Mexico City court this week, said the head of its board, David Cristobal Alvarez. The claim was based on BP’s acknowledgement of the damage caused when the Deepwater Horizon oil rig exploded on April 20, 2010, off the coast of Louisiana, and on studies supporting evidence of environmental damage in Mexico, Alvarez said. Because the Deepwater Horizon accident did not immediately contaminate the Mexican part of the Gulf of Mexico, no claims were made at the time, he added. “But with the maritime currents and the air, the contamination has reached the Gulf of Mexico, it’s started to affect people on the coasts of the states in the Gulf of Mexico,” Alvarez said.

    Why the oil price slump hasn't kickstarted the global economy  - One of the biggest economic surprises of 2015 is that the stunning drop in global oil prices did not deliver a bigger boost to global growth. Despite the collapse in prices, from over $115 a barrel in June 2014 to $45 at the end of November 2015, most macroeconomic models suggest that the impact on global growth has been less than expected – perhaps 0.5% of global GDP. The good news is that this welcome but modest effect on growth probably will not die out in 2016. The bad news is that low prices will place even greater strains on the main oil-exporting countries.  The recent decline in oil prices is on par with the supply-driven drop in 1985-1986, when Opec members (read: Saudi Arabia) decided to reverse supply cuts to regain market share. It is also comparable to the demand-driven collapse in 2008-2009, following the global financial crisis. To the extent that demand factors drive an oil-price drop, one would not expect a major positive impact; the oil price is more of an automatic stabilizer than an exogenous force driving the global economy. Supply shocks, on the other hand, ought to have a significant positive impact. Although parsing the 2014-2015 oil-price shock is not as straightforward as in the two previous episodes, the driving forces seem to be roughly evenly split between demand and supply factors. Certainly, a slowing China that is rebalancing toward domestic consumption has put a damper on all global commodity prices, with metal indices also falling sharply in 2015. (Gold prices, for example, at $1,050 per ounce at the end of November, are far off their peak of nearly $1,890 in September 2011, and copper prices have fallen almost as much since 2011.)

    Something Strange Is Taking Place In The Middle Of The Atlantic Ocean -- In the latest sign that the world is simply running out of capacity when it comes to coping with an inexorable supply of commodities, three diesel tankers en route from the Gulf to Europe did something rather odd on Wednesday: they stopped, turned around in the middle of the ocean, and headed back the way they came! "At least three 37,000 tonne tankers - Vendome Street, Atlantic Star and Atlantic Titan - have made U-turns in the Atlantic ocean in recent days and are now heading back west," Reuters reported, citing its own tracking data. The Vendome Street actually made it to within 800 miles of Portgual (so around 75% of the way there) before abruptly turning around. "Ship brokers said a turnaround so late in the journey would come at a cost to the charterer," Reuters notes. The problem: low prices, no storage capacity, and soft demand.Here's Reuters again: "European diesel prices and refining margins have collapsed in recent days to six-year lows as the market has been overwhelmed by imports from huge refineries in the United States, Russia, Asia and the Middle East. At the same time, unusually mild temperatures in Europe and North America further limited demand for diesel and heating oil, putting even more pressure on the market. Gasoil stocks, which include diesel and heating oil, in the Amsterdam-Rotterdam-Antwerp storage hub climbed to a fresh record high last week. And here are the stunning visuals via MarineTraffic. As of now, it's "unclear if the tankers will discharge their diesel cargoes in the Gulf Coast or await new orders," but what you're seeing is a supply glut so acute that tankers are literally just sailing around with nowhere to go as there are reportedly some 250,000 tonnes of diesel anchored off Europe and the Mediterranean looking for a home. On that note, we'll close with the following quote from a trader who spoke to Reuters: "The idea is to keep tankers on the water as long as you can and try to find a stronger market."

    Oil tumbles towards crisis-era lows -- Oil fell to a seven-year low on Monday and close to the levels hit during the financial crisis amid increased expectations of a persistent oversupply in global crude. The renewed pressure on the oil price comes amid widespread expectations that the US Federal Reserve will on Wednesday raise rates for the first time in nearly a decade.  Cheaper energy costs are a boon for consumers and the broader economy. However, the prolonged slide in oil is hurting highly indebted US shale drillers and the banks that lend to them, with much of the junk bond energy sector currently in distress. “The year is ending on an uncomfortable note. The smell of fear is back in the air,”  Bond markets showed fresh signs of anxiety on Monday, with a further sell-off for corporate debt.  Brent crude dropped $1.60 to $36.33 a barrel on Monday, the lowest in seven years, edging closer to the December 2008 intraday low of $36.20 a barrel. If Brent falls below this, it will hit a level last seen in the middle of 2004. The global benchmark, which had been declining for its seventh consecutive session, rebounded in afternoon trading to $38.20 a barrel. West Texas Intermediate, the US market benchmark, sank $1.09 to $34.53 a barrel, the lowest since February 2009, before recovering to $36.34 a barrel. WTI traded at $32.40 a barrel in 2008. Oil prices have tumbled since the meeting of Opec ministers at the start of the month. Brent has plunged as much as 17 per cent, while WTI is down 16 per cent.

    Per barrel oil prices testing 'ugly lows' -- The posted price for a barrel of crude oil could be below $30 by the end of December, a Texas petroleum economist said Monday. Karr Ingham, based in Amarillo, said the posted price — the actual price producers charge versus the price set by speculators in New York — was $32 on Friday, a continuation of the downward trend Texas and the rest of the country has witnessed since mid-2014 when prices started to decline. On Monday, speculators dropped the price per barrel by 3.1 percent to $34.53, the lowest since February 2009. The price of oil has been in decline in large part because of an oversupply of U.S. crude oil in storage without a matching demand. While production has decreased some, it hasn’t been a meaningful reduction. Ingham said there will be a natural reduction in activity with the rig count dropping more than 60 percent from the weekly peak average of 906 to 324 on Monday. District 9 of the Railroad Commission, which includes Wichita Falls, had 16 oil rigs operating roughly a year ago. That number was down to three on Monday. “There’s always a lag time between a drop in price and then a drop in other measures of activity and production itself,” he said. “So, now we see production starting to roll over and begin to decline, but it certainly hasn’t done that to a meaningful extent. So, the point being that the price declines as of now or not very far removed from now in the recent past have not had the desired effect of price decline … (which is) in this case to lower supply.”

    U.S. oil rises, reversing course after nearing 11-year lows -- U.S. crude rose nearly 2 percent Monday, recovering slightly after moving within a hair of 11-year lows, but analysts and traders said it is still too early to declare the market has reached its bottom. Both U.S. and global benchmark Brent crude have been tumbling downward since an OPEC meeting Dec. 4 at which the oil-producing countries removed their production ceiling, exacerbating global crude oversupply. Monday's close marked the first significant rebound since the meeting. Early in the day, both Brent and U.S. crude futures fell by as much as 4 percent to their lowest levels since the start of the 2008 financial crisis, before turning around midday in the United States. Brent futures for January delivery LCOc1 settled down 1 cent at $37.92 a barrel. U.S. crude CLc1 rose 69 cents, or 1.94 percent, to $36.31. The two benchmarks began to converge - a step toward eliminating the once-deep discount for U.S. crude - in an indication that the market is shifting structurally. Early in the session, Brent traded just 13 cents above the $36.20 low set in December 2008. Below that level, it would be at its lowest since July 2004, when oil was rebounding from single-digits lows hit during the 1998 financial crisis and when talk of a commodities super-cycle was just beginning.

    WTI Slumps Under $37 After API Reports Unexpected, Large Inventory Build -- Following last week's huge draw, total crude inventories were expected to drop 1 million barrels this week driven by expectations that refinery utilization rose last week. When API reported a hugely surprising 2.3 million barrel build, crude prices, which had drifted off highs after NYMEX close, dropped further as disappointment set in, back under $37. A majorly unexpected build...  Charts: Bloomberg

    Strong oil imports lift U.S. crude stocks near record: Kemp | Reuters: U.S. crude oil imports have accelerated over the last four weeks, pushing commercial crude inventories within a whisker of the record set in April. Crude imports surged to 8.3 million barrels per day (bpd) last week, up from 7.0 million bpd four weeks earlier, according to the U.S. Energy Information Administration (  Imports are running at the fastest rate since September 2013, with almost all the extra crude arriving at ports along the U.S. Gulf Coast. (  Both the timing and the location are unusual because refineries and traders try to minimize stocks held along the Gulf Coast at year-end to avoid storage taxes imposed by Texas and Louisiana. Faster imports have pushed crude stocks higher even as refiners have boosted the amount of crude they process to a seasonal record 16.6 million bpd. Crude imports are notoriously volatile:  Each very large crude carrier (VLCC) arrives with around 2 million barrels of crude, which is recorded in U.S. inventories once it has cleared customs. The timing of ship arrivals and customs clearances can therefore have a big influence on reported weekly import volumes. Heavy seaborne imports one week are often followed by a sharp drop the following one due to the timing of ship arrivals. But the past four weeks have seen a fairly unusual and sustained increase in imports along the Gulf Coast, where imports have risen from the equivalent of around 9 VLCCs to 14 VLCCs per week.  The reason could be purely timing-related as tankers unload now after being delayed in transit or unloading back in November. Or crude could be flowing to storage facilities in the United States because it is easier and cheaper to store there as terminals in the Caribbean, Europe and Asia fill up.There are also strong commercial reasons to put oil into storage in the United States. The contango is running at nearly $1 per barrel per month on average for the first six months (more than enough to cover the cost of financing the inventory and leasing tank space).

    Jack Kemp's Energy Tweets -- US Crude Oil Imports Surged For The Second Consecutive Week; Highest So Far This Year --Some interesting energy tweets from Jack Kemp today including the first one:

    • US crude oil imports surged for the second week running to 8.3 million b/d, the highest so far this year, at 8.3 million bopd
    • US refiners processed a seasonal record 16.6 million b/d last week up by +300,000 b/d from 2014
    • US gasoline consumption averaged 9.2 million b/d in last 4 weeks, an increase of just +61,000 b/d compared with 2014
    • US gasoline stocks adjusted for consumption are exactly with 2014 and long run average:
    • US crude oil stocks rose +4.8 million bbl last week and now almost +111 million above prior year level (the graph is staggering)
    • US total crude and product stocks rose +5.0 million bbl last wk reversing adecline of -3.6 million bbl the prior wk (the graph is staggering)

    With regard to the US economy as a whole, the "gasoline consumption" data point above is most concerning; this does not support an expanding economy.

    Crude Crashes To $35 Handle After Massive, Surprise Inventory Build & Production Rise -- Following last night's surprising 2.3mm barrel inventory build, reported by API, DOE reports a massive 4.8mm build against expectations of a 1.5mm barrel draw and way above the highest estimate of a 2.6mm draw. This is the biggest build in 2 months at a seasonally 'weak' time of year. Crude ramped overnight to regain the losses from the API dump, but dropped back to lows (under $37) before the DOE data, then crashed below $36.  Furthermore, production was up in the lower 48. Biggest build in 2 months... And production rose…  Crude prices collapsed lower...   Charts: Bloomberg

    Oil down second day running on fresh supply build, dollar spike  (Reuters) - Oil prices fell as much as 2 percent on Thursday, with Brent trading near 11-year lows, as data showing fresh supply builds at the delivery point for U.S. crude futures added to worries about a global glut. Market intelligence firm Genscape reported an inventory increase of 1.4 million barrels at the Cushing, Oklahoma delivery hub for the U.S. crude's West Texas Intermediate (WTI) futures, traders who saw the data said. "Bearish fundamentals are hanging over the oil markets like storm clouds, with no break in sight or relief in the near future," . "The dollar is moving higher too." The dollar hit a two-week high against a basket of currencies, making oil and other commodities denominated in the greenback less affordable to users of the euro among others. [USD/] WTI was down 72 cents, or 2 percent, at $34.80 a barrel by 1:40 p.m. EST (1840 GMT), reaching a session low of $34.63. On Monday, WTI hit a seven-year low of $34.53. Brent, the global crude benchmark, was down 30 cents at $37.09 a barrel, trading less than $1 above its 2004 low. WTI and Brent fell about 3 percent on Wednesday after government data showed a ramp up in oil supplies across the United States last week.

    Oil ends below $35 as natural gas suffers 7th straight loss - Oil futures settled lower Thursday, as recent data showing an unexpected climb in U.S. crude supplies and strength in the dollar following the Federal Reserve’s decision to hike interest rates combined to pull U.S. prices below $35 a barrel. Meanwhile, natural-gas futures tallied a seventh straight session loss after a report revealed that U.S. supplies of the heating fuel fell less than expected last week. January WTI crude CLF6, -2.14% fell 57 cents, or 1.6%, to settle at $34.95 a barrel on the New York Mercantile Exchange. Prices logged their lowest settlement since February 2009. February Brent crude LCOG6, -1.34% on London’s ICE Futures exchange also lost 33 cents, or 0.9%, to $37.06 a barrel. Gasoline for January delivery RBF6, +2.76% tacked on 2.9 cents, or 2.3%, to $1.262 a gallon, rebounding from losses a day earlier, while January heating oil HOF6, -0.49% shed nearly a penny to $1.105 a gallon. Oil’s decline was due to a combination of the U.S. dollar rally post-Fed and “WTI still feeling its way around $35 as it continues to test its 2008 low,” said Colin Cieszynski, chief market strategist at CMC Markets.

    Wells Fargo says slump in oil prices could last longer - Wells Fargo & Co’s head of corporate banking has warned of stresses in the bank’s energy portfolio and said the slump in oil prices “feels deeper and broader and could last longer”, the Financial Times reported this week. Wells Fargo has the largest exposure to oil and gas industry among the big U.S. banks, with its lending to the energy industry, accounting for about 2 percent of its overall loan portfolio in the third quarter ended Sept 30. Kyle Hranicky, who spent nine years at the helm of the Houston-based Wells Fargo Energy Group before rising to head the corporate banking in May, said the bank had been in discussions with energy industry clients for several months about preserving cash and cutting borrowing limits, the FT reported. Some oil and gas companies have the liquidity to survive the cycle, but others will be under significant stress and may be forced to sell assets or recapitalize, he said. A recent U.S. regulatory review could force banks to scale back loans to energy companies whose revenues have been hit hard by falling oil prices, and could force more oil drillers into bankruptcy, industry analysts have said.

    Real Crude Oil Prices From 1861 To 2015 -- December 15, 2015 (graph)

    US oil rig count jumps - The US oil rig count jumped for the first time in five weeks, by 17 this week to 541, according to driller Baker Hughes. The total rig count remained unchanged, while the number of gas rigs fell 17 to 168. Last week, the oil rig count slumped by 21 to 524, the biggest drop in two months. The gas rig count fell 7 to 185. After rebounding a bit, crude oil prices slid as the rig-count data was released. West Texas Intermediate crude futures in New York fell 1% to as low as $34.29 per barrel. At their lowest levels on Friday, oil prices were down about 20% since OPEC's December 4 meeting when it maintained its production target. Since then, data from the Energy Information Administration and others have shown that US oil inventories and output continue to be robust.

    Crude Crashes To Cycle Lows After Oil Rig Count Surges -- WTI crude has collapsed to cycle lows after the US oil rig count surged by 17, the largest jump in 5 months. The total rig count was unchanged as the surge in oil rigs was perfectly countered by the collapse in natural gas rigs. The oil rig count continues to track the lagged oil price... And that has sent Jan WTI (expires Monday) to fresh cycle lows... Charts: Bloomberg

    Oil Prices Turn Lower as Rig Count Rises - WSJ: Oil prices turned lower Friday after a big increase in weekly rig-count data returned attention to the supply glut. Baker Hughes Inc. BHI 1.29 % said the U.S. oil rig count increased by 17 in the latest week to 541, after declining for four consecutive weeks. 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 collapsing last year. But it hasn’t yet been enough to relieve the global crude glut and adding more rigs could worsen the glut. Light, sweet crude for January delivery fell 22 cents, or 0.6%, to $34.73 a barrel on the New York Mercantile Exchange, the lowest settlement since February 2009. Brent, the global benchmark, fell 18 cents, or 0.5%, to $36.88 a barrel on ICE Futures Europe, the lowest level since December 2008. Brent lost 3.8% for the week—its seventh losing week in the past 10—and is down 36% for the year. WTI lost 2.5% for the week—its third straight losing week—and is down 35% since the start of the year. The increase in rigs is the second largest in more than a year, and analysts and traders had few immediate explanations for the sharp reversal. The last time producers added this many rigs was in late July, but that came just after prices surged to around $60 a barrel. Producers had been cutting back on their spending and their work in the months since as prices retreated again. The market clearly sold off hard on the news, although one week may make little difference, brokers and analysts said. Producers shut down even more rigs—21—just a week ago. But any sign that the glut may worsen has a tendency to scare traders into selling because of how oversupplied the market is, they said.

    Oil ends down for third week as U.S. rig count rises | Reuters: Oil prices fell about half a percent on Friday after the U.S. oil rig count unexpectedly rose for the first time in five weeks, pressuring a market already at seven-year lows. Global oil benchmark Brent and U.S. crude's West Texas Intermediate (WTI) futures settled down for a third straight week. With two weeks to the year-end, both were slated to finish 2015 down about 35 percent on a rout driven by oil oversupplies. Despite the severity of the decline, data from oil services company Baker Hughes Inc showed U.S. energy firms added to the number of oil rigs in operation this week, indicating more supply to come. The closely watched report showed 17 new rigs that brought the total to 541. "The rig count increase was a bit of a surprise," . "I don't think it was a coincidence that the market fell after the report." WTI hit $34.29 a barrel, the lowest since February 2009, after the release of the Baker Hughes' report. It settled the day down 22 cents, or 0.6 percent, at $34.73. For the week, WTI lost 2.5 percent. Brent finished the session down 18 cents, or 0.5 percent, at $36.88. Its session low was $36.41, just 21 cents above a 2004 bottom. Brent lost 3 percent on the week. Some oil bears said they were actually counting on a price rebound that would let them make a bigger profit selling the market down. "I'm quietly waiting for a bigger covering bounce that will presage the next leg lower in WTI,"

    Dubai Crude Price Crashes To Lowest Since 2004, Stocks Hit 2 Year Lows -- Dubai Light Crude prices have plunged overnight, crashing the spot price below the 2008 lows for the first time, to its lowest since 2004. This is continuing to weigh on Dubai's once-exuberant equity market which just hit fresh 2-year lows as financials and property companies plunge. Worst in 11 years... Driving the exuberant money-chasers out of the nation's stock market... (and do not forget we market the top in 2014 when a company that actually did nothing saw its IPO oversubscribed 36x)... And finally this is why all of this is a problem... when there is no equity to back that 'skyscraper' of debt, the contagion will spread.  One supports the other... and vice versa.  Though we do note that Dubai's crude is not the lowest priced...

    $100 Billion Evaporates as World's Worst Oil Major Plunges 90% - Colombia is nursing paper losses of more than $100 billion after its oil boom fell short of expectations, wiping out 90 percent of the value of what was once Latin America’s biggest company. From being the world’s fifth-most valuable oil producer at its zenith in 2012, worth more than BP Plc, state-controlled Ecopetrol SA now ranks 38th. Its market capitalization has fallen to $14.5 billion, down from its peak of $136.7 billion. “They just haven’t found oil, it’s as simple as that,”  “The whole oil sector got massively over-bought, and people assumed that one day they’d hit an absolute gusher.” As the army wrested back territory from Marxist guerrillas over the last decade and a half, opening up more land for exploration, the outlook was bright for the oil sector in Colombia, which borders Venezuela, the nation with the world’s largest reserves. Ecopetrol’s share price soared to “irrational levels” as investors bet on surging output that then failed to materialize, Stebbings said. With shares in the oil producer still high, the government opted in 2013 to sell a stake in electricity producer Isagen SA rather than Ecopetrol. Finance Minister Mauricio Cardenas, who sits on the board of Ecopetrol, said in an August 2013 interview that the government didn’t want to sell a further stake in the company because its growth prospects were better than Isagen’s. Since then, Isagen shares have risen 4.2 percent, while Ecopetrol’s have fallen 74 percent.

    Russia Sees No Oil Price Recovery In The Coming 7 Years -- “Lower for longer” is becoming the catch phrase of the global oil industry, as an increasing number of energy executives and government officials alike see no opportunity for prices to rebound to their levels of mid-2014. The latest such forecast came from Maxim Oreshkin, Russia’s deputy finance minister, who says he expects oil to sell for no more than $40 to $60 per barrel for the next seven years, and that Moscow is adjusting its budget planning accordingly, given that half the country’s annual budget relies on revenues from oil and gas sales. “In our estimates, one should hardly expect any serious growth of the oil price above $50,” Oreshkin told a breakfast forum hosted by Russian newspaper Vedomosti on Friday. “The oil industry is changing structurally and it may happen that … the global economy will not need that much oil." “Therefore we see a range from $40 to $60 somewhere for the next seven years,”Oreshkin said. “And these are the prices we should base our macroeconomic policy on.” They also must take into account the pressure on Russia’s economy brought by Western sanctions imposed because of Moscow’s annexation of Ukraine’s Crimean peninsula and its role in the country’s internal conflict.  The Finance Ministry’s first step, he said, will be to address an expected deficit of 3 percent for the country’s 2016 fiscal year because his ministry forecasts that the average global price of oil will remain where it has been for the past few months, between $40 and $50 per barrel. In fact, the world’s two international benchmarks, Brent crude and West Texas Intermediate, recently dipped below $40.

    Russia plans $40 a barrel oil for next seven years as Saudi showdown intensifies - Russia is battening down the hatches for a Biblical collapse in oil revenues, warning that crude prices could stay as low as $40 a barrel for another seven years. Maxim Oreshkin, the deputy finance minister, said the country is drawing up plans based on a price band fluctuating between $40 to $60 as far out as 2022, a scenario that would have devastating implications for Opec. It would also spell disaster for the North Sea producers, Brazil’s off-shore projects, and heavily indebted Western producers. “We will live in a different reality,” he told a breakfast forum hosted by Russian newspaper Vedomosti. The cold blast from Moscow came as US crude plunged to $35.56, pummelled by continuing fall-out from the acrimonious Organisaton of Petrol Exporting Countries meeting last week. Record short positions by hedge funds have amplified the effect. Bank of America said there was now the risk of “full-blown price war” within Opec itself as Saudi Arabia and Iran fight out a bitter strategic rivalry through the oil market. Brent crude fell to $37.41, even though demand is growing briskly. It is the lowest since the depths of the Lehman crisis in early 2009. But this time it is a 'positive supply shock', and therefore beneficial for the world economy as a whole.

    World Bank lends Iraq $1.2 billion to face oil, security shocks  – The World Bank said on Thursday it would lend Iraq $1.2 billion in emergency support to help it deal with the economic effects of its fight against Islamic State militants and low oil prices. The budget support loan will be disbursed in a single tranche and should be available to Iraq before the end of the year, said Ferid Belhaj, a senior World Bank regional official who oversees Iraq. “These twin shocks, coming at this particular juncture, are threatening the stability of the country,” he told Reuters in a telephone interview, saying it was vital to prevent Iraq falling into deeper crisis. “Iraq falling into chaos means an even more chaotic Middle East. At this particular juncture, nobody wants that. We have enough chaos about,” said Belhaj, director for the Mashreq region, which includes Iraq, Lebanon, Jordan, Syria and Iran. Iraq’s state finances are heavily dependent on oil revenues, which have sunk as oil prices have plunged. At the same time, Baghdad has ramped up military spending in its battle against the hardline Islamic State group, which has killed and displaced thousands, and destroyed services and infrastructure.

    Israeli prime minister signs landmark gas deal — Israeli Prime Minister Benjamin Netanyahu has signed a landmark deal with U.S. and Israeli gas companies to develop Israel’s offshore gas deposits, despite months of protest by liberal lawmakers and environmentalists. Resource-poor Israel announced the discovery of sizeable offshore natural gas deposits about five years ago, and a partnership made up of Israeli and U.S. companies began extracting gas. After the country’s antitrust commissioner determined last year that the gas companies’ ownership constituted a monopoly, a government committee reached a deal with the firms to break up their control and introduce competition. Critics say the deal favors the developers over the Israeli public. Netanyahu dismissed the criticism as “populist,” and signed the deal Thursday. Groups opposed to the deal are submitting petitions to challenge it in Israel’s supreme court.

    Iran's October missile test violated U.N. ban: expert panel | Reuters: Iran violated a U.N. Security Council resolution in October by test-firing a missile capable of delivering a nuclear warhead, a team of sanctions monitors said, leading to calls in the U.S. Congress on Tuesday for more sanctions on Tehran. The White House said it would not rule out additional steps against Iran over the test of the medium-range Emad rocket. The Security Council's Panel of Experts on Iran said in a confidential report, first reported by Reuters, that the launch showed the rocket met its requirements for considering that a missile could deliver a nuclear weapon. "On the basis of its analysis and findings the Panel concludes that Emad launch is a violation by Iran of paragraph 9 of Security Council resolution 1929," the panel said. Diplomats said the rocket test on Oct. 10 was not technically a violation of the July nuclear deal between Iran and six world powers, but the U.N. report could put U.S. President Barack Obama's administration in an awkward position. Iran has said any new sanctions would jeopardize the nuclear deal. But if Washington failed to call for sanctions over the Emad launch, it would likely be perceived as weakness.

    Did Saudi Arabia Just Clear The Way For An Invasion Of Syria And Iraq? -  While it’s still far from common knowledge among the Western public that Washington’s closest allies in the Mid-East are funding, arming, and otherwise enabling the Sunni extremists (including ISIS) battling for control of Syria and working to destabilize Iraq, the massacre that unfolded earlier this month in San Bernardino has managed to focus some much needed attention on the role Saudi Arabia plays in promoting extremism. As we noted in the immediate aftermath of the California mass shooting, the fact that Tashfeen Malik spent 25 years in Saudi Arabia living with a father who, according to family members who spoke to Reuters, adopted an increasingly hardline ideology as time went on, underscores the fact that the puritanical, ultra orthodox belief system promoted by the Saudis is poisonous. That’s not a critique of Islam. It’s a critique of Wahhabism and the effect it has on the minds of those who are inculcated by Saudi culture.  Here’s an excerpt from "Saudi Arabia Is Underwriting Terrorism. Let’s Start Making It Pay," by Charles Kenny: For years since 9/11, U.S. and Western officials have mostly looked the other way at all this ideological support for extremism: Saudi oil was just too important to the global economy, even though many of these Saudi petro-dollars were underwriting repression at home and the growth of Salafist fundamentalism abroad.  This support for radicalism abroad should come as little surprise given that Islamic State is an ideological cousin of Saudi Arabia’s own state-sponsored extremist Wahhabi sect—which the country has spent more than $10 billion to promote worldwide through charitable organizations like the World Assembly of Muslim Youth. The country will continue to export extremism as long as it practices the same policies at home.

    Is ISIS Simply A "Saudi Army In Disguise"? -  In recent weeks I have been increasingly unsatisfied by the general explanations about who is actually pulling the strings in the entire Middle East plot or, more precisely, plots, to the point of reexamining my earlier views on the role of Saudi Arabia. Since the June, 2015 surprise meeting in St Petersburg between Russian President Putin and Saudi Defense Minister Prince Salman, the Saudi monarchy gave a carefully cultivated impression of rapprochement with former arch-enemy Russia, even discussing purchase of up to $10 billion in Russian military equipment and nuclear plants, and possible “face time” for Putin with the Saudi King Salman. Like many global political events, that, too, was soaked in deception and lies. What is now emerging, especially clear since the Turkish deliberate ambush of the Russian SU-24 jet inside Syrian airspace, is that Russia is not fighting a war against merely ISIS terrorists, nor against the ISIS backers in Turkey. Russia is taking on, perhaps unknowingly, a vastly more dangerous plot. Behind that plot is the hidden role of Saudi Arabia and its new monarch, King Salman bin Abdulaziz Al Saud, together with his son, the Defense Minister, Prince Salman.

    ISIS Twitter Handles Traced To UK Government By Hackers -- There’s no shortage of speculation about the possible role the West plays in funding, arming, and otherwise assisting Islamic State.  Recent revelations about Turkey’s role in facilitating Islamic State’s 45,000 b/d illicit oil trade have only added fuel to the fire and little by little, the Western public is starting to wake up to the fact that ISIS is more than the progeny of Abu-Mus'ab al-Zarqawi - it’s an entity that enjoys a great degree of state sponsorship. The question is this: which states ultimately participate in the conspiracy? One way to track down possible collaborators would be to go unit by unit through the network of regional affiliates that comprise Islamic State’s vast propaganda machine:  The group should have a sizeable digital footprint given how active its followers are on Twitter and given the fact that ISIS distributes some 40 pieces of propaganda each day in various formats, most of which is disseminated on the web.  With that in mind, we bring you an interesting story from The Mirror who reports that “a number of Islamic State supporters' social media accounts are being run from internet addresses linked to the UK Department of Work and Pensions.” “A group of four young computer experts who call themselves VandaSec have unearthed evidence indicating that at least three ISIS-supporting accounts can be traced back to the DWP's London offices,” the paper says, adding that “at first glance, the IP addresses seem to be based in Saudi Arabia, but upon further inspection using specialist tools they appeared to link back to the DWP.”

    Refining ISIS Oil: Images From A Syrian Cottage Industry -- From the time Turkey ambushed and downed a Russian Su-24 near the Syrian border late last month, the world has developed a fascination with Islamic State’s illicit and highly lucrative oil smuggling business.  Although there are multiple accounts which purport to explain how the group ultimately gets its oil to market, the general consensus is that there are a series of trafficking routes that all converge on the Turkish port of Ceyhan. The Russian defense ministry says it’s identified at least three such routes and a report by Al-Araby al-Jadeed documented the path the illegal crude takes from northern Iraq to the southeast coast of Turkey. While no one has yet offered any conclusive evidence to prove that Turkish President Recep Tayyip Erdogan and his family are behind the trade, there’s quite a bit of circumstantial and anecdotal evidence to tie Ankara to “Raqqa’s Rockefellers” (if you will). And while everyone loves watching Russian MoD clips of oil tankers barreling across the Turkish border without so much as slowing down, what you don’t see that often are images from the various cottage industries that have grown up around Islamic State’s oil trade. Below are several pictures of a makeshift refinery near Idlib (the site of Tuesday’s Russian airstrike on a fuel market) which Reuters says runs on Islamic State oil.

    China Has Something to Tell OPEC: Oil Prices Have Fallen Too Far - The world’s biggest energy consumer may have a message for OPEC. China’s decision to suspend fuel price cuts as crude continues its decline is sending a signal to the Organization of Petroleum Exporting Countries that prices are too low, according to a report from Sanford C. Bernstein & Co. The move gives oil a price floor around $38, according to the analysis. “China’s decision to not cut refined product (gasoline, diesel) prices is a first,” analysts including Neil Beveridge wrote in the report. The move “sends a signal to OPEC that its largest customer (China) believes that oil prices are too cheap.” China, the world’s second-biggest oil consumer, said it will suspend fuel price cuts while crude continues to fall in order to slow consumption growth and trim automobile emissions. Gasoline demand in the country increased 10.4 percent in the first 10 months of the year from the same period of 2014, according to the Paris-based International Energy Agency. OPEC raised crude production to the highest in more than three years in November and scrapped its output ceiling at a Dec. 4 meeting as it pressed on with a strategy to protect market share and pressure competing producers. Brent crude, a benchmark for most of the world’s oil, has fallen about 14 percent this month. “OPEC’s strategy of pushing prices lower is to increase demand and reduce non-OPEC supply growth,” the analysts wrote in the report. China is now signaling to OPEC members “that pricing is now too low and they will gain incrementally less in terms of demand growth from further cuts in prices.”

    Shipping Index Plunges to Fresh Record Amid China Steel Slump -  The shipping industry’s most-watched measure of rates for hauling commodities plunged to a fresh record amid a persisting glut of ships and speculation weakening Chinese steel output could translate into declining imports of iron ore to make the alloy. The Baltic Dry Index fell 4.7 percent to 484 points, the lowest in Baltic Exchange data starting in January 1985. Rates for three of the four ship types tracked by the exchange retreated. China, which makes about half the world’s steel, is on track for the biggest drop in output for more than two decades, according to data compiled by Bloomberg Intelligence. Owners are reeling as China’s combined seaborne imports of iron ore and coal -- commodities that helped fuel a manufacturing boom -- record the first annual declines in at least a decade. While demand next year may be a little better, slower-than-anticipated growth in 2015 has led to almost perpetual disappointment for rates, after analysts’ predictions at the end of 2014 for a rebound proved wrong. “It doesn’t help that Chinese steel production is about to see the most dramatic decline to the lowest in 20 years,” Rates for Capesize ships fell by between 13 percent and 15 percent, the Baltic Exchange’s figures showed. The ships are so-called because they can’t get through the locks of the Panama Canal and must instead sail through around South Africa or South America.

    China clears way for renminbi weakening -- China has paved the way for a further weakening of its currency by announcing changes in how it measures the renminbi’s value. The move, announced on Friday, has raised investors’ alarm at the prospect of a new currency war — just as the US prepares to raise interest rates. As markets gear up for next week’s Federal Reserve meeting, the People’s Bank of China signalled it would measure the level of the renminbi (or yuan) against a basket of currencies rather than just the US dollar. Adopting such a basket would make it easier for the PBoC to guide the RMB lower against the dollar, . “By showing that the yuan has actually appreciated against a trade-weighted basket of currencies, it will be very hard for the US authorities to criticise Chinese policymakers for allowing the yuan to weaken against the dollar,” he said. The move was transmitted in an article posted on the central bank’s website late on Friday, and comes at the end of a week when the RMB’s value has steadily declined against the greenback. Investors are nervous about the pace and size of weakening in the value of the RMB, after the unexpected devaluation of the currency in August triggered a shock market sell-off, prompting the Fed to postpone its rate rise plans. The offshore yuan has dropped 1.3 per cent over the week, driven by a sharp fall in China’s foreign exchange reserves and the PBoC relaxing the reference rate that sets the trading band for the onshore currency to its lowest level in four years. The PBoC had acted to steady the currency and had focused on a campaign to win reserve currency status from the International Monetary Fund, which it achieved last week. But with the Chinese economy coming under strain, the strength of the currency hurts its competitiveness. Combined with fears that a stronger dollar would lead to greater capital outflows from China, analysts have been expecting the PBoC to conjure up a gradual weakening of the RMB.

    China's Currency Continues To Tumble As AsiaPac Credit Markets Plunge, EM Stocks Lowest Since 2009 -- Following weakness in the middle-east and as WTI prices slide back into the red (on the heels of record speculative shorts in crude oil), Asia-Pac stocks are opening to the downside (but only modestly). On the bright side, the ZARpocalypse has been delayed briefly as the Rand is rallying on the back of Zuma hiring a new finance minister. On the dark side, offshore Yuan continues to plummet, down 6 of the last 7 days (down 14 handles!) and the Yuan fixed weaker for the 6th day in a ro wto July 2011 lows. and signaling more turmoil ahead of The Fed's decision. AsiaPac credit markets are gapping notably wider, EM stocks down 9th day in a row to 2009 lows, and EM FX is plunging. AsiaPac credit markets are gapping wider... Worst day in over 2 months.

    China edges towards a new exchange rate policy - It would be tempting to ascribe the large drop in global risk assets last week to the onset of Federal Reserve tightening and a further meltdown in commodity prices. No doubt these factors played a part, but the dominant force was probably the same one that shook the markets in August – the fear of a sudden devaluation of the Chinese renminbi. This would export deflationary forces from China’s industrial sector to the rest of the world, and would interact very badly with the start of a monetary tightening cycle in the US. Throughout last week, the renminbi weakened against the dollar, especially in the offshore currency market that is most affected by flights of capital from China. . Fears of devaluation were mounting fast. The PBOC responded to these concerns after Asian markets closed on Friday by significantly clarifying its thinking. It hinted that it is still committed to a stable exchange rate in line with “equilibrium”, but suggested that this would now be better viewed against a basket of currencies, and not just against the dollar.This does not yet amount formally to a new currency regime. Old habits of obsessive secrecy die hard. But this indication is probably the death knell for the semi-fixed $/RMB exchange rate that has been largely intact since 2012. The initial response of western markets on Friday was one of scepticism, with some analysts describing the change as another covert devaluation versus the dollar. US equities fell further late on Friday.

    Why China Is Loosening the Yuan’s Ties to the Dollar -- China’s new pledge to depeg its currency from the U.S. dollar underscores a difficult fact for Beijing: the U.S. Federal Reserve could blunt its efforts to rekindle Chinese growth. The Fed is widely expected to raise rates this week amid signs of a strengthening U.S. economy. Meanwhile, China’s economy is going the other direction, with Beijing cutting interest rates and making other moves to loosen monetary policy and spur slowing economic growth. A U.S. rate increase could hinder that effort. It would likely make the dollar stronger, forcing China to intervene in currency markets to maintain the peg. That means buying yuan, often from Chinese banks, which effectively takes money out of China’s financial system at a time when Beijing is trying to make more available to its businesses and consumers. Already, credit remains tight for many Chinese borrowers, especially small and private companies, despite six interest-rate cuts and looser bank reserves ...

    China Weakens Yuan For 9th Consecutive Day, Longest Streak Since 2008 -- In the first two weeks of August 2008 (just a month before Lehman imploded), as tensions built in US financial markets, China weakened the Yuan for 10 straight days. Tonight, China just extended its streak of weakening the Yuan fix to 9 days (for an aggregate 1.4% devaluation, the largest such drop outside of August's devaluation in history). This pushes the Yuan back to June 2011 levels. Yuan fix at lowest since June 2011...

    China’s Renminbi Declines After Being Named a Global Currency, Posing Challenges - At the end of last month, the Chinese renminbi was anointed as one of the world’s elite currencies, a first for an emerging market and a widely hailed acknowledgment of China’s rising financial influence and economic might. But soon after reaching that milestone, the renminbi started slowly and steadily falling as Chinese companies and individuals moved huge sums of money out of the country’s weakening economy.The falling currency sets a fresh challenge for Beijing’s leaders as the Chinese renminbi is increasingly woven into the global marketplace. While a weaker currency helps the country’s exporters, the government must also control the slide, or risk fanning market worries and trade tensions. So far, the Chinese government has stepped into currency markets repeatedly to control the tempo of the drop, but not enough to stop it.Over the last two weeks, the renminbi has dropped 1.3 percent against the dollar. The move follows a 4 percent devaluation in August. And while China’s central bank has stayed studiously silent, most banking industry economists now expect the renminbi to continue slipping in the weeks and months to come. “We are looking for larger depreciation in the first half of next year, and then a stabilization,” Every morning this last week, the central bank has weakened by an additional 0.1 or 0.2 percent its daily fixing of the value of the renminbi, which sets the midpoint for the currency’s daily trading range. The People’s Bank of China, the country’s central bank, faces a tricky balancing act.  If the renminbi falls too steeply, the volatility could prompt traders to place large bets on further depreciation, making the decline harder to control.

    China’s workforce could rise rather than fall - That is the subject of a new FT article by Steve Johnson.  I’ve already covered this on MR, but here is a recap of some of Johnson’s points:

    • 1. Official pension ages in urban areas are 50 for blue-collar women, 55 for white-collar women and 60 for men.  Those could be raised by the government thereby boosting the labor force.  For instance, in terms of actual practice, at age 60 only 55 of urban Chinese men are still in the labor force, and just one-third of urban Chinese women are still in the labor force.
    • 2. Chinese pension policy penalizes late retirement and this easily could be changed.
    • As Johnson writes: “…if China adopted measures to retain older workers in the labor force, its working population would barely fall at all until at least the mid-2030s.” With more women working, China in 2040 might have a labor force as large as it has today.  If the retirement issue and the gender issue are both solved, China’s labor force in 2040 likely will be 10 percent higher than it is today.

    Chinese slowdown likely to hit global growth: A sharp slowdown in China's economy to a 2.3% growth rate in the next three years would have "significant knock-on effects" across emerging markets and corporate credit quality worldwide, according to Fitch Ratings. While Fitch emphasized that this hypothetical scenario did not reflect its current expectations for China's growth, it was "designed to test credit connections between China and the rest of the world". If the slowdown scenario materialized, it could create ripple effects through the high-yield bond market, the agency said. 'China's rapid rise as a global economic power, and its deepening ties to the rest of the world, have forced global credit investors to weigh carefully the potential impact of a sharp China slowdown, ' says Bill Warlick, Senior Director, Macro Credit Research. "A greater-than-expected deceleration in Chinese economic activity would have far-reaching implications for global growth, corporate credit quality and monetary policy", the researchers said. Fitch's Warlick said markets were watching China for signs of the slowdown accelerating. In particular Korea, Taiwan, Hong Kong, Japan, Singapore and Australia would all face trade-based GDP slowdowns. Xi's comments "signal that the government may cut the growth target in the next five year plan (2016-20) to 6.5 percent from 7 percent for 2011-15", according to a December 4 analysis by Deutsche Bank. "Setting a relatively more realistic target leaves room for policy makers to balance between growth and structural adjustments", the report said. In the US, a sharp deceleration in Chinese growth resulting in reduced import demand could drive the bilateral trade deficit with China wider.

    China's central bank injects liquidity into market -- China's central bank on Friday offered a total of 100 billion yuan ($15.4 billion) in six-month medium-term lending facility (MLF) loans at 3.25 percent to 13 financial institutions. "The move is aimed at maintaining proper liquidity in the market," said the People's Bank of China (PBOC) in a statement. The PBOC said it will guide banks to lend the money to small businesses and the agricultural sector, Xinhua news agency reported. The MLF is a new liquidity tool designed for commercial and policy banks to borrow from the central bank by using securities as collateral.

    Taiwan central bank cuts interest rates again - Taiwan's central bank cut its benchmark interest rate for the second time in three months Thursday, opting to support the island's recession-hit economy and take advantage of a relatively calm reaction in Asia to the Federal Reserve's first rate increase in nearly a decade. The central bank lowered the benchmark discount rate to 1.625% from 1.750%. It also trimmed its other key rates for secured and unsecured loans by the same amount. The central bank last lowered rates in September, the first reduction in more than six years. The decision comes after revised data showed the island fell into recession in the third quarter, as the slowdown in mainland China hits the economy harder than originally thought. China is Taiwan's biggest export market. The gross domestic product data prompted the government to lower again its growth estimates for the current year and for 2016, despite having already halved its forecast for 2015 in August. Other figures showing continued weakness in industrial production, exports and export orders have added to the gloomy picture. The central bank cited slower-than-expected global and domestic growth, a widening negative output gap and a weak inflation outlook as reasons for the move. It noted that consumer prices had fallen by an average of 0.35% each month in the January-November period. "The decision is clearly underpinned by the rapid deterioration of exports. Low inflation allows the CBC to extend the rate cutting cycle,"

    Baltic Dry Crashes To New Record Low As China "Demand Is Collapsing" -- Despite a brief dead-cat-bounce late November, which Jim Cramer heralded as evidence of stabilization in China, the world's best known freight index has collapsed to new all-time record lows this morning. Amid a persistent glut of ships and ongoing concerns about Chinese steel imports, The Baltic Dry has tumbled to 471 - the lowest level in at least 30 years. Worst. Ever.  As Bloomberg adds, China, which makes about half the world’s steel, is on track for thebiggest drop in output for more than two decades, according to data compiled by Bloomberg Intelligence... Owners are reeling as China’s combined seaborne imports of iron ore and coal -- commodities that helped fuel a manufacturing boom -- record the first annual declines in at least a decade. While demand next year may be a little better, slower-than-anticipated growth in 2015 has led to almost perpetual disappointment for rates, after analysts’ predictions at the end of 2014 for a rebound proved wrong. “It doesn’t help that Chinese steel production is about to see the most dramatic decline to the lowest in 20 years,”

    Exclusive: Japan's far-flung island defense plan seeks to turn tables on China - Japan is fortifying its far-flung island chain in the East China Sea under an evolving strategy that aims to turn the tables on China's navy and keep it from ever dominating the Western Pacific Ocean, Japanese military and government sources said. The United States, believing its Asian allies - and Japan in particular - must help contain growing Chinese military power, has pushed Japan to abandon its decades-old bare-bones home island defense in favor of exerting its military power in Asia. Tokyo is responding by stringing a line of anti-ship, anti-aircraft missile batteries along 200 islands in the East China Sea stretching 1,400 km (870 miles) from the country's mainland toward Taiwan. Interviews with a dozen military planners and government policymakers reveal that Prime Minister Shinzo Abe's broader goal to beef up the military has evolved to include a strategy to dominate the sea and air surrounding the remote islands. While the installations are not secret, it is the first time such officials have spelled out that the deployment will help keep China at bay in the Western Pacific and amounts to a Japanese version of the "anti-access/area denial" doctrine, known as "A2/AD" in military jargon, that China is using to try to push the United States and its allies out of the region.

    Japan firms' inflation expectations fall, keep BOJ under pressure | Reuters: Japanese firms' inflation expectations fell from three months ago as slumping oil costs weighed on underlying price growth, a Bank of Japan survey showed on Tuesday, adding to doubts on the effectiveness of the central bank's massive stimulus program. The outcome may heighten market expectation of near-term monetary easing since BOJ Governor Haruhiko Kuroda has said the bank won't hesitate to act if sliding inflation and overseas headwinds discourage firms from raising prices, analysts said. "It's looking increasingly like last October, when the oil rout and weak consumption drove the BOJ into easing," said Mari Iwashita, chief market economist at SMBC Friend Securities. "The number of firms that are raising prices may have peaked. If commodity prices continue to fall and wages fail to pick up, the BOJ may ease in January," she said. The BOJ has pledged to accelerate inflation to 2 percent by aggressively pumping money into the economy, betting that companies and households will spend more now than save on expectations that prices will rise ahead. But companies polled by the BOJ, as part of its detailed "tankan" survey for December, showed they expect consumer prices to rise an average 1.0 percent a year from now, lower than their projection three months ago of 1.2 percent.

    As jobs-for-life fade, mobility key as workers face a survival reality check - Japan Times -- Shuhei Takebe graduated from a prestigious university in Japan. It qualified him to become a day laborer. After three years of part-time work at rock concerts and baseball games, Takebe, 25, is attending a job training program in an attempt to land full-time employment. He’s fallen on the wrong side of a growing schism in Japan: Those with a traditional job-for-life, with health care, pension and regular promotions; and those in temporary or contract work with no benefits or job security. “I’ve been going nowhere after college,” Takebe said. “I want to do something, but it’s hard to figure out how.” Takebe’s dead end is also Japan’s. The country’s rigid labor system — forged in the heydays of the 1960s when production-line jobs were plentiful, is now the bane of the economy. Rather than hire full-time employees who are hard to fire, many companies opt for cheaper, more flexible temporary staff. Those nonregular positions now make up almost 4 out of 10 workers and get paid about 40 percent less on a comparable basis, government data show.

    Upgrading to Abenomics 2.0 - David Beckworth --What has the 'monetary arrow' of Abenomics accomplished? To answer this question, recall that this part of Abenomics called for the Bank of Japan (BoJ) to double the monetary base and raise inflation to 2%. On the former goal the BoJ has been successful. On the later goal it is still a work in progress, though inflation has been trending upward.   Assessing the Abenomics inflation record is a bit tricky because the 2014 sales-tax hike in Japan put upward pressure on the inflation rate. Nonetheless, after accounting for the tax hike inflation is overall  moving up. This can be seen in the next two figures. The first one shows the core inflation rate since 2000. The second zooms in on the past few years and shows core inflation with and without the tax hike. An upward trend is apparent in this figure. Core inflation is now around 1%, the highest it has been since the late 1990s. So inflation is being pushed up, albeit at a slower paced than originally envisioned under Abenomics.

    Bank of Japan announces extra easing measures - —The Bank of Japan announced supplementary measures for its quantitative easing program Friday, committing to increasing its exposure to longer-term government bonds and domestic stock funds. The central bank said it will lengthen the average remaining maturity of the Japanese government bonds it purchases to seven to 12 years from seven to 10 years. It said it would maintain its overall target of annual asset purchases at around ¥80 trillion ($650 billion). The BOJ also said it will buy another ¥300 billion of exchange-traded equity funds, in addition to the ¥3 trillion in ETFs it has purchased annually since late 2014. The additional ETF purchases would target funds comprised of shares in companies that are “proactively making investment in physical and human capital.”   The surprise moves reflect a renewed sense of urgency at the central bank. BOJ Gov. Haruhiko Kuroda has maintained that the BOJ’s policies are having their desired effect, and that underlying inflation remains on an upward trajectory. Still, he has recently reiterated his pledge to do whatever is required to achieve the BOJ’s 2% inflation target at the “earliest possible time.” The central bank’s inaction during recent policy meetings had raised doubts among some economists about Kuroda’s commitment to that vow.

    Bank of Japan surprises with stimulus tweak -  Japan's central bank announced an unexpected tweak to its vast stimulus programme on Friday, jolting financial markets and pushing the yen into a brief dive.The decision came days after the Federal Reserve's first interest rate cut in almost a decade and highlights the divergence in monetary policy between the US central bank and its overseas rivals. BoJ policymakers rolled out a series of changes, including boosting their holdings in firms dedicated to capital spending and new hiring. They also made some other changes -- including hiking the bank's exposure to longer-term bonds -- after wrapping up their last policy meeting of the year. The announcement comes as analysts raise concerns the BoJ would struggle to scoop up enough bonds under its 80 trillion yen ($654 billion) annual asset-buying scheme -- which effectively prints money to spur lending. News that the BoJ had tinkered with policy shocked financial markets, which had expected it to stay its hand for now, although the reaction was short-lived.

    Abe's Cabinet OKs ¥3.5 trillion extra budget to support economy - Prime Minister Shinzo Abe’s Cabinet approved an extra budget Friday worth ¥3.5 trillion for this fiscal year through March to bolster the economy through enhanced welfare services and a more competitive farm sector. The fiscal 2015 supplementary budget plan is designed to realize the prime minister’s key policies, including steps to support child-rearing and prevent people from leaving their jobs to take care of their elderly family members. The government also aims to improve the international competitiveness of Japanese farmers, in the wake of the Trans-Pacific Partnership free trade agreement recently reached by Japan, the United States and 10 other countries. After Cabinet approval, the government will aim to have the extra budget bill enacted during an ordinary Diet session to be convened Jan. 4. Given the recent trend of lower interest rates that decreases debt-servicing costs for the government, the actual size of spending under the extra budget will be ¥3.32 trillion, according to the Finance Ministry. The government will not issue any debt to form the supplementary budget, instead using tax revenues for the fiscal year, which are expected to top its projection partly due to robust corporate earnings, as well as unspent funds from the previous year’s budget.

    Japan and India sign bullet train deal amid closer ties - India has agreed to buy a high-speed bullet train from Japan, in an attempt to transform its creaking rail system. Prime Minister Narendra Modi said the train would link Mumbai and Ahmedabad, cutting travel time on the route from eight hours to two. The deal was one of a raft of agreements reached after talks between the two sides in Delhi. The leaders of Asia's second and third largest economies also announced other areas of co-operation. These include working on defence technology, and agreeing a memorandum of understanding on the peaceful use of nuclear energy. The latter agreement is expected to allow Japan to export nuclear plant technologies to India. Last week Mr Modi's cabinet cleared the $14.7bn (£9.6bn) cost of building the bullet train system. The agreements with Japan came during a three-day visit to India by the Japanese Prime Minister, Shinzo Abe, which began on Friday. Both countries are in territorial disputes with China, and their new accords may be seen by some as a reaction against China's growing influence in the region.

    Exports fall for 12th straight month, down 24.43% in November -- India’s merchandise exports fell for the twelfth consecutive month in November this year. During the 2008-09 global financial meltdown, the decline was for nine months on the trot. Last month, exports contracted 24 per cent — the steepest fall in recent years —to $20 billion, according to data released by the commerce ministry on Tuesday. Compared to this, exports were $26 billion in November 2014, Exports had last recorded growth a year ago, rising 7.3 per cent year-on-year. The rate of drop in exports for November is the highest since then. Besides global slowdown, the fall is attributed to a decline in global commodity prices. Imports, too, declined 30 per cent to $30 billion in November compared with the year-ago period, when it was $43 billion. During April-November 2015, India’s cumulative imports were $261 billion. This is a 17 per cent drop from $316 billion, the cumulative figure for the same period last year. In line with overarching trends, gold imports, too, fell 36 per cent to $3.5 billion — down from $5.6 billion in November 2014. As a result, trade deficit has narrowed to $88 billion cumulatively for months leading up to November in the current financial year. The corresponding figure for the previous year was $102 billion. The oil import bill dropped 45 per cent in October to $6.4 billion, following global cues of plunging crude oil prices. Compared to this, $11.7 billion was the comparative cost in November last year.

    Obama Trades Against China | The American Conservative: The Trans-Pacific Partnership is certainly a mixed bag. On a positive note, it steals a march on China for influence in Asia. In a way, it also advances the liberal world economic order on which this country’s prosperity rests, its global influence depends, and with which its fundamental national interest has long identified. But the agreement also misses much, muddles many critical issues, and even contradicts itself. Such an uneven picture makes it difficult for an honest analysis to arrive at a net assessment, not the least because its complexity also promises any number of unintended consequences. The only thing left, then, is to track where the positive promise lies and where the thing falls especially short. Matters are clearer from a geopolitical than from an economic perspective. Linking Japan, Brunei, Malaysia, Singapore, Vietnam, Australia, and New Zealand in an extensive trade agreement with the Unites States along with Canada, Mexico, Chile, and Peru, cannot help but leverage this country’s influence in the region and accordingly diminish China’s. It may do nothing to address China’s very real military challenges in the Western Pacific, but the economic edge is no small thing. In this way it does much to support the administration’s “pivot” toward Asia. Indeed, its promise in this regard has become evident in just the last few weeks as India, South Korea, and Taiwan have expressed interest in the agreement. Even Beijing, which seemed largely uninterested in the effort as it was negotiated over these many years, has hinted that it, too, might have an interest in joining or arranging some kind of association. That is no small thing either.

    US calls for ditching of Doha talks - - The US has for the first time publicly called for the Doha Round of global trade negotiations to be abandoned, arguing that after almost a decade and a half of fruitless discussions, developing and developed nations alike needed to recognise they were going nowhere and that it was time to try new approaches. Writing in the Financial Times ahead of the World Trade Organisation’s biennial ministerial meeting in Nairobi this week, Mike Froman, the US trade representative, said that 14 years after it was launched the Doha Round “simply has not delivered”. “We need to write a new chapter for the [WTO] that reflects today’s economic realities,” Mr Froman said. “It is time for the world to free itself of the strictures of Doha.” The US call sets the stage for an acrimonious showdown in Nairobi this week over the future of the Doha Round and the WTO itself that is likely to overshadow a push for a smaller agreement on a narrow range of agriculture and development issues. It also highlights what has become an uncomfortable paradox in the world of trade negotiations. While negotiators at the WTO have in recent years stepped up their efforts to revive the Doha Round, the belief of most people in the global business community is that it died a painful and final death in 2008 amid a stalemate over agriculture between developed and developing nations. The US and others have also turned their focus in recent years to new regional negotiations such as the recently concluded Trans-Pacific Partnership, which included the US, Japan and 10 other economies. Still, many in the developing world continue to cling to the Doha negotiations.

    Pakistan PPP GDP Nears Trillion Dollar Mark in 2015 -- Pakistan's PPP GDP is nearing trillion US$ mark in 2015, according to the latest figures available from the International Monetary Fund.  Nominal GDP based on current exchange rates is reported at $270 billion in 2015, up from $246 billion in 2014, an increase of $24 Billion.  Pakistan's per capita nominal GDP for 2015 is $1,427.085, up from $1,325.790 in 2014.The nation's PPP GDP increased from $884 billion to $930 billion, an increase of $46 billion. Pakistan per capita PPP GDP is $4,902 for 2015, up from $4,749 in 2014, according to the IMF. A dramatic decline in terrorist violence in Pakistan since the launch of Pakistan Army's Operation Zarb-e-Azb and a big drop in international oil prices have helped drive the country's economic recovery in recent months. Among the clearest signs of recovery are increasing auto sales, growing smartphone purchases and cement consumption. Pakistan auto industry is booming. Toyota, Suzuki and Honda factories are working around the clock in the southern port city of Karachi and eastern city of Lahore -- yet customers can still wait for up to four months for new vehicles to be delivered, according to media reports. At the same time, increased construction activity is visible everywhere in the country. First 5 months of the current fiscal year have seen sales of 93,570 cars, an increase of 66% over the same period last year. Over 2 million 3G subscriptions and a corresponding number of smartphones are being bought every month in the country. More than half the people in Pakistan are expected to own a smartphone within the next few years.  Domestic cement sales have jumped by a phenomenal 16.89% to 4.29 million tons during July and August 2015 from 3.67 million tons shipped in the same period last year.

    Malaysia’s 1MDB Sent $850 Million to Entity Set Up to Appear Owned by Abu Dhabi Wealth Fund - WSJ: A troubled Malaysian state investment fund sent at least $850 million last year to an offshore entity set up to appear that it was owned by an Abu Dhabi sovereign-wealth fund, a transfer which deepens the mystery over billions of dollars that are unaccounted for, according to documents reviewed by The Wall Street Journal and people familiar with the matter. The 1Malaysia Development Bhd. fund, or 1MDB, set up by Malaysian Prime Minister Najib Razak in 2009 to promote economic development, is under investigation in at least six countries over a broad array of allegations that money was siphoned off for political spending and for personal gain. One focus of investigation is $2.4 billion in payments that 1MDB said it made to a unit of Abu Dhabi’s International Petroleum Investment Co., or IPIC, as part of a deal involving the Malaysian fund’s purchase of power plants. The Journal reported in September  that IPIC officials had concluded they did not receive the money, according to people familiar with the matter. A 1MDB unit transferred at least $850 million via three transactions last year to a British Virgin Islands-registered company with a name that made it look like it was controlled by IPIC, according to wire transfer documents viewed by the Journal and two people familiar with the matter.

    Kazakhstan CDS jump, Eurobonds fall after tenge hits record low | Reuters: Kazakhstan's debt insurance costs rose and Eurobond prices fell across the curve on Monday after the country's tenge currency hit a fresh record low, weighed down by weaker oil and rouble prices. Data from Markit showed that five-year credit default swaps rose 23 basis points (bps) to 314 bps, the highest since late-October. Kazakh dollar-denominated bonds fell, shaving off as much as 0.64 cents, with the 2025 issue trading at 97.448 cents in the dollar - its lowest since early-October.

    Natural Resources Were Supposed to Make Afghanistan Rich. Here’s What’s Happening to Them. - By 2007, the US Geological Survey had undertaken the most comprehensive study of the mineral deposits below the country’s surface. An internal Pentagon memo claimed that Afghanistan could develop into the “Saudi Arabia of lithium,” referring to the mineral that is an integral component of laptop and smartphone batteries. Washington was ecstatic about the findings and in 2010 claimed that at least $1 trillion in resources was up for grabs. “There is stunning potential here,” said Gen. David Petraeus, then the head of US Central Command, speaking to The New York Times. US officials said that the deposits could sustain the Afghan economy and generate thousands of jobs, reducing corruption and reliance on foreign aid. Currently, with 60 percent of the country’s budget provided by foreign donors, outside investment is crucial. Acknowledging the inability of the Afghan Ministry of Mines and Petroleum to handle a burgeoning resource industry, the US government pledged to help implement accountability mechanisms. However, regulations like the mining law—revised in 2014 to bring greater transparency—have had little effect on illegal mining and the non-payment of royalties. The warning signs were there. “This is a country that has no mining culture,” Jack Medlin, a geologist in the US Geological Survey’s international-affairs program, told the Times.

    Emerging markets set to feel pain of US rate rise -- If, as widely expected, the US Federal Reserve tightens monetary policy this week, emerging markets are likely to feel the pain. Analysts say pressure on EM currencies is set to intensify, more capital may flow out to safer havens and debt service costs may rise for thousands of companies that have borrowed in US dollars. What makes the outlook particularly bleak is that even if EM currencies fall against the dollar, export earnings may fail to recover from their current falls. The self-righting mechanism that has rescued EMs from many a financial squall — cheaper currencies often boost exports — appears to have broken down this year. Much of the concern centres on China. Chinese officials and independent economists say a rise in US rates would probably bolster the dollar against the renminbi, leading to capital outflows from China and sucking EM currencies into new phase of turbulence. “US monetary policy and China risk are intimately connected, almost like a package of risks,” “If US monetary policy tightens, that will shrink the China-US interest differential and strengthen the dollar. Both of these outcomes will set the stage for a weaker renminbi, and that will constitute a negative shock for EM,” . The renminbi’s 4 per cent decline against the US dollar since its August devaluation has fed a downtrend in EM currencies, with commodity exporters and Asian countries that supply Chinese manufacturers among the worst hit. But despite the sharp depreciation in almost all EM currencies against the dollar over the past 18 months, EM exports have failed to recover, falling 12.5 per cent year on year in October to mark the biggest collapse since the 2008-09 crisis, statistics compiled by Capital Economics show.

    Santa’s sleighs lie idle: Alphaliner warns of Xmas record for unemployed boxships - Splash 247: The number of 500+ teu containerships idled will hit a record high by the end of the year, according to French analysts Alphaliner. A total of 329 ships equivalent to 1.4m teu – equivalent to 7% of the global fleet – were laid up by the end of November, up by 23 ships from a fortnight prior. Laid up ships leapt by 400,000 teu in November are on course to break December 2009’s all time record of 1.5m teu soon. This comes despite a marked uptick in the number of ships being sent for scrap. The only ship type to reverse the trend were ships of around 2,000 teu. “The forthcoming Christmas season will do little to stimulate demand, adding to the market’s overall misery,” Alphaliner warned.

    The Truth Comes Out: "This Is The Worst Global Dollar GDP Recession In 50 Years" - The following brief summary of the global economic situation should, once and for all, end all debate about whether the world is "recovering" or is now mired deep in a recession. From DB's 2016 Credit Outlook: Debt has continued to climb since the crisis with Global Debt/GDP still on the rise, with no obvious sign of when this rise stops for many major countries. Indeedmuch of the post GFC increase in debt has been raised on the back of the commodity super-cycle which is currently unraveling in EM and the US HY market. Outside of this, the US overall has de-levered to some degree but even there debt levels remain very high relative to all of history excluding the GFC period. With limited tolerance from the authorities to see defaults erode the huge debt burden, the best hope for a more normal financial system is for activity levels to increase so we can slowly grow the economy into the debt burden. However this requires strong nominal GDP growth and we continue to see the opposite.The left hand graph of Figure 6 looks at a global weighted average of Nominal GDP growth in the G7. On this measure we are still seeing historically weak activity. In dollar terms the situation is even worse. The right hand chart of Figure 6 shows a much more volatile global NGDP series which converts the size of each economy in dollar terms and then looks at the growth rate YoY. With the recent strength in the USD we are seeing a huge global dollar nominal GDP recession - the worst since the 1960s. Whilst this might not be a series that is followed, it does show the sharp contraction of dollar activity levels in the global economy over the last year or so which has to have ramifications given it’s the most important global financial market currency.

    Global inflation: a laboured process -  The dramatic fall in the price of oil has had a marked effect on headline inflation across the world. In contrast, measures of core inflation (ex. food & energy) have been more stable suggesting, that once the base effects from oil drop out, headline rates of inflation should bounce back. However, while inflation rates around the world will mechanically pick up in the near-term, it is not clear that global labour markets are strong enough to drive inflation fully back to target. In June last year the price of a barrel of oil peaked at a little over $115, before falling to around $45 by January 2015,  one of the largest ever falls without a clear trigger. Of course, this decline should provide a significant boost to many economies: as consumers spend less at the petrol pumps they could opt to spend more on other goods, boosting inflation in the medium-term. But, in the short-term, this decline in the oil price has lowered headline inflation across the world by around 2pp since mid-2014 (Chart 1). Measures of core inflation that attempt to strip out shocks to energy and food prices have seen much more modest moves. So, while the decline in oil makes judging inflationary pressures much more difficult, this could suggest that underlying inflationary pressures remain strong enough to bring inflation back to target. But the relative stability of average core inflation across the world may give false comfort. Core inflation had started to slide in many countries before the fall in oil prices. And, although in aggregate global core inflation appears stable, in the post-crisis period the relative strength of core inflation in many emerging markets has offset low core inflation in many advanced economies.

    Brazil stripped of investment grade rating as crisis deepens - Brazil lost its coveted investment-grade rating on Wednesday after Fitch became the second credit agency to downgrade the country's debt to junk status, citing concerns about an economic and political crisis threatening to topple President Dilma Rousseff. Fitch downgraded Brazil to BB+ with a negative outlook less than 24 hours after the left-leaning Rousseff moved to loosen next year's budget targets in a bid to safeguard spending for welfare programs. The decision undercut her orthodox finance minister, Joaquim Levy who staked his reputation on an austerity agenda that has now stalled in Congress. Levy blamed the government's abandonment of targets needed to cut debt for Fitch's decision. "Obviously the goal of zero (debt reduction) is very bad and resulted in the downgrade,". The real currency and dollar-denominated bonds tumbled amid forced selling after the downgrade, which came just three months after Standard & Poor's cut Brazil's rating to junk, further clouding the outlook for an economy reeling from its sharpest downturn in a quarter-century.

    November Unemployment Hits Seven Year High In Brazil As Supreme Court Mulls Impeachment Bid -- "They will not achieve anything by attacking my record, which is known; I love my country and I'm honest. I will fight against the illegitimate interruption of my mandate using all the tools that the rule of law gives me,” embattled President Dilma Rousseff told a gathering of youth groups late Wednesday in Brasilia.  One of those “tools” was the Supreme Court and more specifically Judge Luiz Fachin who Rousseff appointed last June.  Earlier this month, Fachin suspended impeachment proceedings until December 16 after a controversial vote stacked the impeachment committee with Rousseff’s political rivals. As we reported at the time, the Supreme Court suspended Lower House Speaker Eduardo Cunha’s bid to oust the President pending a December 16 debate on the constitutional validity of the proceedings and an examination of a controversial vote that nearly caused a house session to “collapse into chaos,” as Reuters put it (as an aside, the court will decide on Cunha's removal next year as there apparently isn't enough time before the recess). “The Communist Party of Brazil, a small party in Rousseff's coalition, raised the constitutional issue in an injunction filed last week,” Reuters went on to report, adding that “the injunction said a 1950 law laying out impeachable crimes by a president was not compatible with Brazil's 1985 constitution.”

    Neoliberalism Resurgent: What to Expect in Argentina after Macri’s Victory --Matias Vernego - The election of businessman Mauricio Macri to the presidency in Argentina signals a rightward turn in the country and, perhaps, in South America more generally. Macri, the candidate of the right-wing Compromiso para el cambio (Commitment to Change) party, defeated Buenos Aires province governor Daniel Scioli (the Peronist party candidate) in November’s runoff election, by less than 3% of the vote. Macri is the wealthy scion an Italian immigrant family that made its money on the basis of government contracts. He went on to work for the family business and later, defying his father’s wishes, became president of the most popular professional soccer club in the country, Boca Juniors. In 2007, he won election as mayor of the capital city, Buenos Aires—the springboard for his eventual election to the presidency. This is a momentous change in Argentina’s history, since it is the first time that a right-wing party has won the presidency by electoral means. In the past, conservatives had only gained power through military coups or by disguising neoliberal policies under more progressive electoral promises and the mantle of a left-of-center party—as in Carlos Menem’s Peronist government in the 1990s.

    Canada Need Not Fear Deficit Financing  -- As the new Liberal Government takes shape, all eyes will be focussed on how it proposes to finance its ambitious agenda . Deficit financing will be at the centre of all discussions concerning jobs and economic growth over the next five years. In its latest Economic and Fiscal Update (November, 2015), Canada's Finance Department recognizes  the damage that has already occurred from plunging commodity prices, the deterioration in the country's terms of trade and the worldwide slowdown . The major question facing the Government is:  What is the capacity of the Federal finances and the Canadian economy to meet this challenge?  The Parliamentary Budget Office(PBO) and Finance Canada each produce a fiscal outlook to 2020-21 based upon existing government policy at the time. On balance, there is no material difference between the two forecasts over the next 5 years. PBO average annual  deficit is  $2.9 billion, ; the Government annual average  deficit is $2.7 billion. However, there is a sizable difference in the fiscal year  2020-21. The Government projects a surplus of $ 6.6 billion while the PBO anticipates a deficit of$4.6 billion . The Government forecasts assume a more optimistic forecast for revenues personal and corporate taxes as well from the GST ( national sales tax) . As with all forecasts, the further out one goes the less reliable are the projections in either direction. For our purposes, we will use the Government’s projections for the period as a whole as a benchmark with which to explore the capacity of the Canadian economy to manage Federal deficits. The analysis would not be materially different had we adopted  the PBO figures. Table 1  is a summary of the fiscal outlook to financial year 2021 prepared by Finance Canada, the department responsible for the national budget.  These projects use the former ( Harper) Government fiscal 2015 fiscal framework, update to November 2015. None of the new (Trudeau) Government policies are included.

    Canadian Dollar Crashes To 12-Year Low After Collapse In Consumer Prices --Not since December 2013 have Canadian Consumer Prices dropped by such a large amount.November CPI dropped 0.3% MoM, dramatically worse than expected to the largest drop since Dec 2013. The largest YoY drop in Canadian CPI, amid a surge in inventories relative to a collapsee in wholesale sales sent the loonie crashing above 1.4000 for the first time since August 2003.  Candian CPI tumbles and Wholesale Sales plunges...  Which send USDCAD to 12 year lows...

    Russia central bank prepares for $35 oil as economic recovery stays elusive -– Russia’s central bank has drawn up a “risk scenario” under which oil prices will stay around $35 for the next three years, governor Elvira Nabiullina said, an outcome that would severely dent Russia’s chances of making a robust economic recovery. Nabiullina made the comments after the central bank left its main lending rate on hold at 11 percent, extending a pause in its easing cycle because of growing inflation risks. The central bank has come under pressure to soften monetary policy to limit an economic slump, but inflation has declined more slowly than initially forecast and the rouble remains vulnerable due to renewed oil price weakness. Russia’s economy is feeling the impact of Western sanctions over the crisis in Ukraine as well as weak commodity prices, which make up the bulk of the country’s exports. “External conditions remain complicated, with persistent unfavorable trends,” Nabiullina told a news conference. “First of all, this is high volatility of the world markets.”  Nabiullina said while the bank believed the Russian economy was over the most severe stage of its slump, conditions were not yet in place for a resilient recovery.   The central bank sees the economy contracting by 0.5-1 percent in 2016 before growth of 0.0-1 percent in 2017.

    The IMF Changes its Rules to Isolate China and Russia  - Michael Hudson - The nightmare scenario of U.S. geopolitical strategists seems to be coming true: foreign economic independence from U.S. control. Instead of privatizing and neoliberalizing the world under U.S.-centered financial planning and ownership, the Russian and Chinese governments are investing in neighboring economies on terms that cement Eurasian economic integration on the basis of Russian oil and tax exports and Chinese financing. The Asian Infrastructure Investment Bank (AIIB) threatens to replace the IMF and World Bank programs that favor U.S. suppliers, banks and bondholders (with the United States holding unique veto power). Russia’s 2013 loan to Ukraine, made at the request of Ukraine’s elected pro-Russian government, demonstrated the benefits of mutual trade and investment relations between the two countries. As Russian finance minister Anton Siluanov points out, Ukraine’s “international reserves were barely enough to cover three months’ imports, and no other creditor was prepared to lend on terms acceptable to Kiev. Yet Russia provided $3 billion of much-needed funding at a 5 per cent interest rate, when Ukraine’s bonds were yielding nearly 12 per cent.”[1] What especially annoys U.S. financial strategists is that this loan by Russia’s sovereign debt fund was protected by IMF lending practice, which at that time ensured collectability by withholding new credit from countries in default of foreign official debts (or at least, not bargaining in good faith to pay). To cap matters, the bonds are registered under London’s creditor-oriented rules and courts. This was the setting on December 8, when Chief IMF Spokesman Gerry Rice announced: “The IMF’s Executive Board met today and agreed to change the current policy on non-toleration of arrears to official creditors.” The IMF intended to adopt a new policy in the spring of 2016, but the dispute over Russia’s $3 billion loan to Ukraine has accelerated an otherwise slow decision-making process.[5]

    Ukraine won't repay $3 billion Russian debt due this weekend - (AP) — Ukraine won't make a $3 billion debt repayment due to Russia this weekend because Moscow refused to agree to terms already accepted by other international creditors, Ukraine's prime minister said Friday. The "moratorium" on outstanding debt repayments to Russia announced by Ukrainian Prime Minister Arseniy Yatsenyuk effectively means that Ukraine is defaulting on the debt due Sunday. That move could jeopardize crucial loans that Ukraine has been receiving from a $17.5 billion bailout deal with the International Monetary Fund. It's the latest spat between the two neighbors following a run of gas supply disputes, Russia's 2014 annexation of the Crimean Peninsula and its support for separatists in eastern Ukraine.   Moscow has previously said it will take Ukraine to court if it fails to pay on time. Ukrainian Finance Minister Nataliya Yaresko said late Friday she hoped the dispute could still be resolved but Kremlin spokesman Dmitry Peskov discounted that possibility, saying "there is only the court prospect." Alongside the sovereign debt, the Ukrainian government has decided to put on hold the repayment of a combined debt of $507 million that two Ukrainian state-owned enterprises owe to Russian banks.

    The Neocon's Hegemonic Goal Is Driving The World To Extinction -- My warning that the neoconservatives have resurrected the threat of nuclear Armageddon, which was removed by Reagan and Gorbachev, is also being given by Noam Chomsky, former US Secretary of Defense William Perry, and other sentient observers of the neoconservatives’ aggressive policies toward Russia and China. Daily we observe additional aggressive actions taken by Washington and its vassals against Russia and China. For example, Washington is pressuring Kiev not to implement the Minsk agreements designed to end the conflict between the puppet government in Kiev and the break-away Russian republics. Washington refuses to cooperate with Russia in the war against ISIS.  Washington continues to force its European vassals to impose sanctions on Russia based on the false claim that the conflict in Ukraine was caused by a Russian invasion of Ukraine, not by Washington’s coup in overthrowing a democratically elected government and installing a puppet answering to Washington. The list is long. Even the International Monetary Fund (IMF), allegedly a neutral, non-political world organization, has been suborned into the fight against Russia. Under Washington’s pressure, the IMF has abandoned its policy of refusing to lend to debtors who are in arrears in their loan payments to creditors. In the case of Ukraine’s debt to Russia, this decision removes the enforcement mechanism that prevents countries (such as Greece) from defaulting on their debts. The IMF has announced that it will lend to Ukraine in order to pay the Ukraine’s Western creditors despite the fact that Ukraine has renounced repayment of loans from Russia. Michael Hudson believes, correctly in my view, that this new IMF policy will also be applied to those countries to whom China has made loans. The IMF’s plan is to leave Russia and China as countries who lack the usual enforcement mechanism to collect from debtors, thus permitting debtors to default on the loans without penalty.In other words, the IMF is presenting itself, although the financial media will not notice, as a tool of US foreign policy.

    Russia doubles electricity supply to Crimea - Russian President Vladimir Putin has switched on the second of two power lines to complete the first energy bridge to Crimea. This increases the power supplied to the peninsula by 230 MW. The first power line providing 260 MW started on December 2. "We now face the next challenge of launching another two energy bridges to the Crimean Peninsula in April or May at the latest. We need to supply Crimea with 800 MW of electricity, which will cover all of its needs," said President Putin. "I want to thank you all for the accelerated pace of the work that has been made as soon as possible,” he added.  According to Energy Minister Aleksandr Novak, along with Crimea’s own energy resources, the peninsula now gets 1,000 MW of electricity. This meets 80 to 100 percent of the region's demand, depending on the time of the day, according to Novak. The second power hookup will allow the reconnection of Crimean factories. In November and the beginning of December , Crimea was facing a serious shortage of electricity as a result of bomb blasts which destroyed two pylons in Ukraine on November 22.

    War Is On The Horizon: Is It Too Late To Stop It? --  In his September 28 speech at the 70th Anniversity of the United Nations, Russian President Vladimir Putin stated that Russia can no longer tolerate the state of affairs in the world. Two days later at the invitation of the Syrian government Russia began war against ISIS. Russia was quickly successful in destroying ISIS arms depots and helping the Syrian army to roll back ISIS gains. Russia also destroyed thousands of oil tankers, the contents of which were financing ISIS by transporting stolen Syrian oil to Turkey where it is sold to the family of the current gangster who rules Turkey. Washington was caught off guard by Russia’s decisiveness. Fearful that the quick success of such decisive action by Russia would discourage Washington’s NATO vassals from continuing to support Washington’s war against Assad and Washington’s use of its puppet government in Kiev to pressure Russia, Washington arranged for Turkey to shoot down a Russian fighter-bomber despite the agreement between Russia and NATO that there would be no air-to-air encounters in Russia’s area of air operation in Syria. Although denying all responsibility, Washington used Russia’s low key response to the attack, for which Turkey did not apologize, to reassure Europe that Russia is a paper tiger. The Western presstitutes trumpeted: “Russia A Paper Tiger.”

    EU leaders say Russia-Germany gas line could break EU rules  — European Union leaders raised objections on Friday to a massive new pipeline project that would pump natural gas directly from Russia to Germany, claiming that the scheme would break EU laws. The Nord Stream 2 project would expand the current Nord Stream pipeline under the Baltic Sea which directly links Germany to natural gas reserves in Siberia. The pipeline bypasses both Ukraine and Slovakia, which are traditional transit countries for supplies pumped by Russian energy giant Gazprom, depriving them of substantial transit fees. But some EU leaders, at a summit in Brussels, said that Nord Stream 2 would do nothing to reduce Europe’s dependency on Russian gas. Russia provides for most of Europe’s natural gas needs, and price wars between Russia and Ukraine have interrupted supplies in the EU in the past. “Nord Stream does not help diversification, nor would it reduce our energy dependence,” European Council President Donald Tusk said, after chairing the meeting. Tusk said the leaders decided that any new energy infrastructure must help reduce energy dependency and diversify suppliers. “All projects have to comply with all EU laws. This is a clear condition for receiving support from the EU institutions or any member state, be it legal, political or financial,” he said.

    Germany’s Merkel Defends Russian Gas Pipeline Plan - WSJ: —German Chancellor Angela Merkel found herself under pressure on Friday from other Europe Union leaders over her government’s support for a natural-gas pipeline from Russia that others fear could further undermine the economic and political stability of Ukraine. The planned expansion of PAO Gazprom’s Nord Stream pipeline, which ships Russian gas via the Baltic Sea to northern Germany, would add an extra 55 billion cubic meters of gas in capacity—about as much as the company currently transports through Ukraine. Officials in Brussels and Washington as well as Kiev have accused Moscow of using the project, dubbed Nord Stream 2, to deprive Ukraine of much of its remaining political leverage as well as much-needed revenues from transit fees. Ukrainian President Petro Poroshenko on Wednesday called Nord Stream 2 his country’s “greatest concern as of today.” But Ms. Merkel defended the planned pipeline. “I made clear, along with others, that this is a commercial project; there are private investors,” Ms. Merkel said following talks with the other 27 EU leaders. During the discussion on Nord Stream, the chancellor’s position was attacked by Italian Prime Minister Matteo Renzi and Bulgaria’s Boyko Borisov, while she received some backing from Dutch Premier Mark Rutte.  Gazprom holds a 50% stake in the Nord Stream 2 consortium.

    Refugee Crisis Drives Rise of New Right Wing in Germany - SPIEGEL - It is still just a radical minority that is responsible for much of the xenophobia and violence. The tens of thousands of volunteers who offer their assistance in refugee shelters every day still predominate. But at the same time, a new right-wing movement is growing -- and it is much more adroit and, to many, appealing than any of its predecessors. Reinforcements from the Center of Society In the past, the right wing was characterized primarily by thugs with shaved heads, bomber jackets and jackboots -- people who had difficulty getting the words "Blood & Honour" tattooed on their arms without a spelling mistake. After the 1990s, the jackboot crowd was replaced by the "Autonomous Nationalists," right-wing extremists who disguised themselves by wearing left-wing clothing, but who were just as violent as their forebears. These street-extremists are still around, but they have received reinforcements. The New Right comes out of the bourgeois center of society and includes intellectuals with conservative values, devout Christians and those angry at the political class. The new movement also attracts people that might otherwise be described as leftist: Putin admirers, for example, anti-globalization activists and radical pacifists. Movements are growing together that have never before been part of the same camp. Together, they have formed a vocal protest movement that has radicalized the climate in the country by way of public demonstrations and a digital offensive on the Internet.

    Angela Merkel pledges to cut German immigration figures but rejects limit -- Angela Merkel has promised to “tangibly” reduce the number of refugees and migrants entering Germany in an attempt to quell a rebellion in her conservative ranks, but rejected calls to impose a cap on immigration. At a gathering of her Christian Democratic Union (CDU) party, Merkel said Germany would pursue a range of measures to stem the flow of asylum seekers, expected to reach about 1 million this year. “Even a strong country like Germany would in the long run be unable to cope with such a large number of refugees,” the chancellor said in a one-hour long speech. “We want to tangibly reduce the number of refugees arriving. With an approach focused on the German, European and global level, we will succeed in regulating and limiting migration.” However, she said Germany had a “moral and political” duty as Europe’s top economic power to continue to help desperate people, particularly those from war-ravaged Syria. “We will live up to our humanitarian responsibility,” she said. “The refugee crisis is a historic test for Europe, which I am convinced it will pass. Even if everything we do in Europe is interminably arduous” After weeks of increasingly vocal dissent from the right wing of the CDU, many commentators had expected the party conference in Karlsruhe to be the stage for a showdown between Merkel and her critics. Instead, Merkel emerged from the gathering largely unchallenged, with an overwhelming majority of delegates voting in support of her roadmap for dealing with the refugee crisis. Only two delegates voted in favour against her proposals.

    Germany to ‘noticeably reduce’ migrant influx, says Merkel --- The German chancellor has promised to “noticeably reduce” the number of migrants entering Germany. Angela Merkel was speaking at the congress for her Christian Democrats party in response to concerns from within her party about an influx this year alone of one million refugees. “The spirit with which we need to tackle the refugee crisis: we have achieved so much, we will continue to make this work.. also because the essence of the Christian Democrats is to show how we deal with difficult situations,” Merkel said. Despite being widely praised for her bold response to the crisis, Merkel faces growing opposition to her open-door policy, “We want to and we will noticeably reduce the number of refugees because it’s in everyone’s interest,” added Merkel. Her use of the phrase “noticeably reduce” is from a party resolution which was hastily reworked on the eve of the conference to avert an open rebellion over her refugee policy.

    European Nations Throw Up On EU Plan To Seize Border Sovereignty, Impose Standng Border Force -  Last week we reported that in a move which the FT dubbed would "arguably represent the biggest transfer of sovereignty since the creation of the single currency" Brussels was about 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. Not unexpectedly, the plan went far beyond a Franco-German request to give Frontex more powers and staff. The request was made a few weeks after the Paris attacks, when frustration surfaced over Greece’s inability to better manage the flow of migrants as it emerged that at least two of the Paris attackers were registered as Syrian refugees on a Greek island. Why? Because Europe saw a real crisis opportunity and decided to jump on it. As a result of this dramatic takeover of the most sacrosanct aspect of state sovereignty, a few unelected EU bureaucrats would effectively have veto rights over decisions how individuals states would police their borders: "Although member states would be consulted, they would not have the power to veto a deployment unilaterally." Furthermore, the new agency would be able to deport people who do not have the right to remain in Europe, essentially voiding the protections that come with nationality at least among EU member states, as well as several that are currently outside of it.

    Denmark passes law to seize jewelry from refugees to cover expenses - Denmark passed a law on Sunday to confiscate jewelry from refugees in order to 'make ends meet', Swedish national public TV broadcaster STV reported. Justice and Immigration Minister Sören Pind had last week defended the move during a live news program on a state-run TV channel saying, "This way the revenue that is obtained can be used to meet the costs of the refugees." However, Pind underlined that wedding or engagement rings, watches and cell phones would not be confiscated, but all items with a value over 300 euros would be seizedby the government. While the law is already drawing public criticism from Denmark and Sweden, police are trying to determine how it will be enforced. Denmark has been getting a bad reputation in Europe, especially since the Nordic country launched anti-refugee ads in September and shut off rail way links to the country. Its anti-refugee stance has been in full spate since Denmark's ruling Liberal Party won power in June on an anti-immigration platform.

    UN: Record-breaking 60 Million Forcibly Displaced Worldwide: The U.N. refugee agency warns the number of people forcibly displaced from their homes is likely to exceed 60 million in 2015. The UNHCR has released its Mid-Year Trends 2015 report covering global forced displacement during the first six months of this year. The UNHCR report does not include the hundreds of thousands of refugees who made the perilous journey to Europe across the Mediterranean nor the thousands more seeking refuge from many conflicts around the world during the last half of this year. But the report says the numbers are staggering and alarming. Millions Figures show the global refugee total by mid-2015 had exceeded 20 million, the highest number since 1992; asylum claims had gone up by 78 percent from last year, and the numbers of internally displaced people had jumped by about 2 million to an estimated 34 million. U.N. refugee spokesman Adrian Edwards told VOA the current levels of forcible displacement, predicted to reach more than 60 million by year’s end, have not been seen since World War Two.

    Ilargi: Marine Le Pen Will Reap What The EU Has Sown - Many people are cheering now that yesterday Marine Le Pen and her Front National (FN) party didn’t get to take over government in any regions in the France regional elections. They should think again. FN did get a lot more votes than the last time around, and, though she will be a little disappointed after last weekend’s results, it’s exactly as Le Pen herself said: “Nothing can stop us”.And instead of bemoaning this, or even not believing it, it might be much better to try and understand why she’s right. And that has little to do with any comparisons to Donald Trump. Or perhaps it does, in that in the same way that Trump profits from -people’s perception of- the systemic failures of Washington, Le Pen is being helped into the saddle by Brussels. The only -remaining- politicians in Europe who are critical of the EU are on the -extreme- right wing. The entire spectrum of politics other than them don’t even question Brussels anymore. Which is at least a little strange, because support for the EU on the street is not nearly as strong as among politicians, as referendum after referendum keeps on showing. Some of which have rejected (more power to) the EU outright, like the one in Denmark last week, while others do it indirectly, by voting for anti-EU parties -see France this and last weekend-. There’s a long list of these votes going back through the years, with for instance both France and Holland saying No to the EU constitution in 2005, which led to many countries to postpone their own votes on the topic.

    France vows to tackle unemployment after far-right surge - France 24: The French government will announce new measures aimed at fighting unemployment next month, Prime Minister Manuel Valls said on Monday, a day after regional elections saw the far-right National Front (FN) score a record number of votes. Speaking on national television, Valls did not spell out specific details but said Labour Minister Myriam El Khomri was preparing a "massive plan" to boost professional education. "We must act quickly. These measures will be ready in January," he told France 2 television. France's unemployment rate rose to 10.6 percent in the third quarter, its highest quarterly rate since 1997. The regional election run-off, in which the conservative Les Républicains party won seven constituencies and the Socialists five, was no real victory for the two mainstream parties, who have been shaken by the FN's growing appeal to disillusioned voters. Although it won no region on Sunday after the Socialists pulled out of its key target regions and urged their supporters to back the conservatives of former President Nicolas Sarkozy, the FN, led by Marine le Pen, still recorded its best showing in its history, securing more than 6.8 million votes.

    As Poland Lurches to Right, Many in Europe Look On in Alarm -   — In the few weeks since Poland’s new right-wing government took over, its leaders have alarmed the domestic opposition and moderate parties throughout Europe by taking a series of unilateral actions that one critic labeled “Putinist.”Under their undisputed leader, Jaroslaw Kaczynski, they pardoned the notorious head of the security services, who was appealing a three-year sentence for abuse of his office from their previous years in power; tried to halt the production of a play they deemed “pornographic”; threatened to impose controls on the news media; and declared, repeatedly and emphatically, that they would overrule the previous government’s promise to accept refugees pouring into Europe.Continue reading the main story  But the largest flash point, so far, has been a series of questionable parliamentary maneuvers by the government and the opposition that has allowed a dispute over who should sit on the country’s powerful Constitutional Tribunal to metastasize into a full-blown constitutional crisis — with thousands of protesters from all sides taking to the streets.

    'Black Hole' in Funds Causes Deficit in Pensions - The insurance funds’ deficit has reached 13.88 billion euros and it is threatening the pensions of Greek citizens. Out of the total 1 billion euros came from delayed lump sums, as well as main and supplementary pensions that the funds owe to 330,000 citizens who applied for temporary pension. The remaining 12.88 billion euro deficit was caused from obligations within the Funds, causing major concern about further cuts to pensions. The country’s creditors have been pressuring Greece for further reductions in main and supplementary pensions with permanent cuts in 2016, due to this deficit in insurance funds. It appears that IKA has drawn the short straw in regards to this “secret” debt, since the fund’s obligations to other public funds amounts to 11.26 billion euros. IKA is followed by OAEE with a total debt of 1.35 billion euros to other state bodies.

    Debt and Demographic Debt Spirals: Krugman - We used to think that high labor mobility was a good thing for currency unions, because it would allow the union’s economy to adjust to asymmetric shocks — booms in some places, busts in others — by moving workers rather than having to cut wages in the lagging regions. But what about the tax base? If bad times cause one country’s workers to leave in large numbers, who will service its debt and care for its retirees? Indeed, it’s easy conceptually to see how a country could enter a demographic death spiral. Start with a high level of debt, explicit and implicit. If the work force falls through emigration, servicing this debt will require higher taxes on those who remain, which could lead to more emigration, and so on. ... Portugal, with its long tradition of outmigration, may be more vulnerable than most, but I have no idea whether it’s really in that zone. ... Now, it’s true that emigration in an economy with mass unemployment doesn’t immediately reduce the tax base, since the marginal worker wouldn’t have been employed anyway. But it sets things up for longer-run deterioration. ...

    Lagarde to stand trial over Tapie affair FTA French court has ordered Christine Lagarde, the head of the International Monetary Fund, to face trial over her role in a disputed €400m payout made to businessman Bernard Tapie in 2008. Ms Lagarde, who was French finance minister at the time, has for years denied wrongdoing in the affair that has entangled several members of the cabinet of former President Nicolas Sarkozy. She appeared to have won the day in September when prosecutors argued that the case against her should be dropped. But France’s Cour de justice de la République, a special tribunal set up to try ministers, said on Thursday that she would stand trial over the affair. Ms Lagarde is accused of negligence in public office in relation to misuse of public funds, an offence that carries a maximum sentence of one year in prison and a fine of up to €15,000. The decision to put the IMF chief on trial is the latest twist in the 22-year legal saga. It concerns more than €400m paid out to Mr Tapie by the French government in 2008 in compensation after he claimed he was defrauded by Crédit Lyonnais, at that point a state-owned bank, into selling his stake in sports equipment company Adidas for lower than it was worth in 1993. The French state had long fought against the compensation claim, but abruptly changed tack and ordered an arbitration. Critics claimed the payout — approved by Ms Lagarde — was rigged to reward Mr Tapie, a former socialist, for backing Mr Sarkozy’s election campaign. Earlier this month, however, the Paris appeal court ruled Mr Tapie had to pay back the money he received from the French state. He had been arguing the payout should have been higher. In a statement, Ms Lagarde’s office said she “would like to reaffirm that she acted in the best interest of the French state and in full compliance with the law”.

    1000 defined benefit pension plans 'unlikely' to pay in full - About 1,000 private-sector pension schemes, including 25 of the largest in the UK, are “highly unlikely” to pay their members’ pensions in full, new analysis suggests. The stark findings, in a paper published on Monday by the Pensions Institute, a research body, suggest the number of troubled pension schemes is far higher than officially acknowledged. In the UK, there are more than 6,000 “defined benefit” schemes, where the employer promises to pay a pension typically based on a proportion of final salary to the member, and then to a spouse or dependent after the member dies. But these pension schemes, with about 11m members, have come under pressure from low gilt yields, which increase the cost of the pension promise, and increasing life expectancy. They have aggregate liabilities near £1.1tn. The paper suggests 1,000 of these schemes, with a combined deficit of £45bn, are subject to “unmanageable” financial stresses. As a result, 600 will “never” pay full pensions, and a further 400 may see their sponsoring company sink under the weight of the pension scheme burden. The number of “stressed” schemes in the paper represents 15 per cent of those potentially eligible for compensation from the Pension Protection Fund, the lifeboat scheme for defined benefit scheme members when an employer goes bust. This compares with a PPF estimate of 10 per cent of schemes.

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