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

Saturday, January 2, 2016

week ending Jan 2

The Fed's Rate Hike Hoax- There Is No Short Term Money Market - The Fed has “raised interest rates” (wink-wink). Its primary tools in this make believe policy are interest on excess reserves (IOER) and the interest paid on reverse repos (RRP). The new Fed Funs target rate is now 25-50 bp. Fed Funs were reported to be trading at a weighted average rate of 36 bp on December 22. Of course, there is no actual Fed Funds market. Fed Funds are the money that banks who were short of reserves borrowed from banks which had excess reserves, so that they could meet the minimum reserve requirement. In 2008, the amount of Fed Funds outstanding rose as high as $450 billion. Over the past 7 years, as the Fed pumped $2.6 trillion of excess reserves into the system, virtually no banks have been short of reserves, so the amount of Fed Funds outstanding shrank to $50 billion.Today there are very few banks which need to borrow reserves to meet their requirement, and those that do are certainly not representative of the market as a whole. These would be banks in distress, or banks who are acting at the behest of the Fed to make it appear that a real market exists. But in reality, banks that need to borrow Fed Funds today are more like people who are so short of cash that they are forced to resort to payday lenders to pay their bills. The Fed Funds rate is therefore the equivalent of the payday lender loan shark rate for banks who are so short of cash, they can’t pay their bills. In order to make it appear that the it actually has control over short term rates, the Fed has increased IOER by 25 basis points. This increases the subsidy the US taxpayers are paying the big banks from $6.5 billion per year to $13 billion per year. But hey. We don’t mind. It’s for a good cause. And it’s only $40 per American. We’re happy to help out.

Managing the Fed’s balance sheet -- Last week I discussed the tools that the Federal Reserve will be using to raise short-term interest rates as we enter the next phase of U.S. monetary policy. In brief, the Fed plans to use interest on reserves and reverse repurchase agreements as an offer to borrow back Federal Reserve deposits at an annual rate between 25 and 50 basis points (0.25% to 0.50% interest per year). That offer from the Fed puts an effective floor under the fed funds rate, which is the rate at which institutions would lend these funds overnight to other banks. When the Fed raises its offering rate, the fed funds rate should go up with it. Today I look at the implications of these new procedures for the Fed’s balance sheet.Large banks and certain other financial institutions have accounts with the Federal Reserve known as Federal Reserve deposits. The Fed has the ability to acquire new assets (securities it buys or loans that it makes) simply by crediting the counterparty’s account with the Fed with a new balance. When it does so, the Fed’s assets go up by the value of the securities or loan, and its liabilities go up by the same amount in the form of new Fed deposits. The graph below records the Federal Reserve’s assets each week since the end of 2002. Up until 2007 these consisted almost entirely of Treasury securities (shown in blue). In response to the financial crisis, the Fed made a series of emergency loans (shown in brown) through facilities such as Term Auction Credit and the Commercial Paper Lending Facility (now no longer used) as well as large loans to foreign central banks in the form of currency swap agreements (in green). These roughly doubled the Fed’s total asset holdings by the end of 2008. As emergency loans were repaid, the Fed opted to maintain and then increase its assets through purchases of new Treasury securities and mortgage-backed securities in three separate phases of what are popularly referred to as “quantitative easing” or QE1, QE2, and QE3. Since the end of 2014 the Fed has kept its assets constant, only buying securities to replace those that mature. The current value of Fed assets is $4.5 trillion, five times as large as it had been near the end of 2007.

How the Fed tightened -- Back in August, we explained the mechanics of how the Fed can tighten policy in today’s world of abundant bank reserves. Now that the first policy tightening under the new framework is behind us, we can review how the Fed did it, if there were any surprises, and what trials still lie ahead. On December 16, the FOMC announced an increase in the target range for the federal funds rate (with effect on December 17) from the 0.00%—0 .25% range that prevailed since December 2008 to the new range of 0.25%—0.50%. In contrast to past instances of policy tightening (the most recent was June 2006), the FOMC did not instruct the FRBNY Market Desk to seek “conditions in reserve markets consistent with increasing the federal funds rate” to the new target. Quite the contrary: the Committee directed the Desk to “continue rolling over maturing Treasury securities at auction and to continue reinvesting principal payments on all agency debt and agency mortgage-backed securities in agency mortgage-backed securities.” The new environment notwithstanding, the Desk hit the higher target range immediately and accurately. First, the effective federal funds rate—the volume-weighted rate on all transactions in the market for bank reserves (their deposits at the Fed)—rose from 0.15% on December 16 to 0.37% on December 17 and remained within 1 basis point of this rate for the following week (see the table below). Second, the standard deviation of the rates on all transactions in the federal funds market remained narrow and stable at 0.05%. Consistent with this narrow dispersion and the target-consistent rise in the effective federal funds rate, the minimum and maximum rates on transactions rose (compared to the average in the first half of December) by amounts comparable to the 25-basis-point increase in the target range.

Did Main Street Expect the Rate Hike? - Carola BinderOver a year ago, I looked at data from the Michigan Survey of Consumers to see whether most households were expecting interest rates to rise. I saw that, as of May 2014, about 63% of consumers expected interest rates to rise within the year (i.e. by May 2015). This was considerably higher than the approximately 40% of consumers who expected rates to rise within the year in 2012.  Of course, the Federal Reserve did not end up raising rates until December 2015. Did a greater fraction of consumers anticipate a rise in rates leading up to the hike? Based on the updated Michigan Survey data, it appears not. As Figure 1 below shows, the share of consumers expecting higher rates actually dropped slightly, to just above half, in late 2014 and early 2015. By the most recent available survey date, November 2015, 61% expected rates to rise within the year.Figure 2 zooms in on just the last three years. You can see that there does not appear to be any real resolution in uncertainty leading up to the rate hike. Consistently between half and two thirds of consumers have expected rates to rise within the year every month since late 2013.

The Perils of Fed Gradualism by Stephen S. Roach - By now, it’s an all-too-familiar drill. After an extended period of extraordinary monetary accommodation, the US Federal Reserve has begun the long march back to normalization. It has now taken the first step toward returning its benchmark policy interest rate – the federal funds rate – to a level that imparts neither stimulus nor restraint to the US economy. A majority of financial market participants applaud this strategy. In fact, it is a dangerous mistake. The Fed is borrowing a page from the script of its last normalization campaign – the incremental rate hikes of 2004-2006 that followed the extraordinary accommodation of 2001-2003. Just as that earlier gradualism set the stage for a devastating financial crisis and a horrific recession in 2008-2009, there is mounting risk of yet another accident on what promises to be an even longer road to normalization.  The problem arises because the Fed, like other major central banks, has now become a creature of financial markets rather than a steward of the real economy. This transformation has been under way since the late 1980s, when monetary discipline broke the back of inflation and the Fed was faced with new challenges. The challenges of the post-inflation era came to a head during Alan Greenspan’s 18-and-a-half-year tenure as Fed Chair. The stock-market crash of October 19, 1987 – occurring only 69 days after Greenspan had been sworn in – provided a hint of what was to come. In response to a one-day 23% plunge in US equity prices, the Fed moved aggressively to support the brokerage system and purchase government securities. In retrospect, this was the template for what became known as the “Greenspan put” – massive Fed liquidity injections aimed at stemming financial-market disruptions in the aftermath of a crisis. As the markets were battered repeatedly in the years to follow – from the savings-and-loan crisis (late 1980s) and the Gulf War (1990-1991) to the Asian Financial Crisis (1997-1998) and terrorist attacks (September 11, 2001) – the Greenspan put became an essential element of the Fed’s market-driven tactics.

Thoughts on Delong and Krugman blogs - Larry Summers -- Brad Delong and Paul Krugman accept my criticisms of Fed thought regarding their monetary policy strategy but disagree with my assertion that it reflects an excessive attachment to existing models and modes of thought. Their argument is that standard IS-LM leads to the conclusion you should not raise rates in the present environment so no move away from orthodoxy is necessary to reach this conclusion.  I think the issue is more on the supply side than the demand side.  If I believed strongly in the vertical long run Phillips curve with a NAIRU around five percent and in inflation expectations responsiveness to a heated up labor market, I would see a reasonable case for the monetary tightening that has taken place. Since I am not sure of anything about the Phillips curve and inflation is well below target I come down against tightening.  The disagreement does it seems to me come down to the Fed’s attachment to the standard Phillips curve mode of thought.  My disagreement is reinforced by other judgmental aspects that are outside of the standard model used within the Fed.  These include hysteresis effects, the possibility of secular stagnation, and the asymmetric consequences of policy errors.

The Fed and Financial Reform – Reflections on Sen. Sanders op-Ed -- Larry Summers -- Bernie Sanders had an op Ed in the New York Times on Fed reform last week that provides an opportunity to reflect on the Fed and financial reform more generally. I think that Sanders is right in his central point that financial policy is overly influenced by financial interests to its detriment and that it is essential that this be repaired. At the same time, reform requires careful reflection if it is not to be counterproductive. And it is important in approaching issues of reform not to give ammunition to right wing critics of the Fed who would deny it the capacity to engage in the kind of crisis responses that have judged in their totality been successful in responding to the financial crisis.  The most important policy priority with respect to the Fed is protecting it from stone age monetary ideas like a return to the gold standard, or turning policymaking over to a formula, or removing the dual mandate commanding the Fed to worry about unemployment as well as inflation. ...

The Fed's Rate Hike Trickles Down: JPM To Hike Deposit Rates... For Its Wealthiest Clients -- Moments after the Fed announced it would hike rates for the first time in 9 years on December 16, the ink on Yellen's statement was not yet dry and one after another bank announced it would hike its respective Prime rate - the benchmark rate on everything from small business loans to credit card monthly fees - from 3.25% to 3.50%.Yet while banks scrambled to increase how much they collect courtesy of the Fed's rate hike, none showed any interest in boosting the interest they pay on deposits, a rate which currenly averages below 0.1% across the US financial system.  As the WSJ put it two weeks after us, "hours after the Fed’s decision earlier this month, the largest U.S. banks announced increases in the prime rate, a reference rate for a variety of loans including credit-card debt. But most banks didn’t make any corresponding hikes to the interest they pay to depositors. The moves signaled that at least for now most banks hoped to pocket the gains from the Fed’s move." And this is what we said two weeks ago, "those who have savings at US banks, please don't hold your breath to see any increase on the meager interest said deposits earn: after all banks are still flooded with about $2.5 trillion in excess reserves, which means that the last thing banks care about is being competitive when attracting deposits."We were wrong: some should certainly have held their breath, because as the WSJ reports today, "some bank customers won’t have to wait much longer to reap benefits from the Federal Reserve’s decision to raise interest rates." Case in point: J.P. Morgan, which will begin raising deposit rates for some of its "biggest clients" in January. "Biggest" clients, of course, is a universal euphemism for "wealthiest."

2-Year Treasury Yield Spikes To 1.09% -- The 2-year Treasury yield surged yesterday (Dec. 29), rising to 1.09%–the highest since April 2010, based on daily data published by The increase in this key rate—considered to be the most-sensitive spot on the yield curve for rate expectations—suggests that the market’s confidence is rising that the Fed will continue to tighten monetary policy in 2016.  Yet some analysts warn not to read too much into the latest pop in rates, explaining that light trading volume this week may be a factor in the sudden spike in the 2-year yield. “Markets in the last week of December are thin and a lot of people have already closed their books for the year, so that’s part of why we had a weak auction,” Justin Lederer, Treasury strategist at Cantor Fitzgerald, told Reuters on Tuesday. Another factor that raises questions about the sustainability of higher yields is the weak outlook for economic activity. Expectations for fourth-quarter US GDP remain soft, based on last week’s update of the Atlanta Fed’s fourth-quarter estimate for US economic growth. The bank’s Dec. 23 nowcast slipped to a sluggish 1.3% (seasonally adjusted annual rate) for the Q4 GDP report that’s scheduled for release next month. The projected gain represents a moderate deceleration from Q3’s 2.0% pace. A sluggish pace of growth is also on track for the global economy next year, according to IMF Managing Director Christine Lagarde. “Global growth will be disappointing and uneven in 2016,” she wrote in the German newspaper Handelsblatt, Reuters reports.

US Q4 GDP tracking 1.6 after advance November trade report -  The nominal monthly trade deficit in goods narrowed modestly in November, to $60.5bn, from the revised $61.3bn deficit in October, according to the Census Bureau's advance report on international trade in goods. The deficit was narrower than the forecast ($62.0bn) and in line with consensus expectations ($60.7bn). In terms of exports, nominal goods declined 2.0% m/m (previous: -2.4%), with decreases across all end-use categories. The "other" goods category fell 15.6% on the month, retracing last month's outsized gain. Consumer goods (-1.9% m/m, previous: -3.0%), automotive goods (-1.7% m/m, previous: -1.3%), and industrial supplies (-2.7% m/m, previous: -4.6%) exports declined the most in November, as the prices for these categories all fell. Capital goods (-0.2% m/m, previous: -2.0%) and food and beverages (-0.2% m/m, previous: -5.5%) had more modest declines. Imports fell 1.8% m/m (previous: -0.6%) in nominal terms. Food and beverages (0.8% m/m, previous: -4.0%) and automotive (0.2% m/m, previous: 1.0%) rose on the month; all other categories decreased. Consumer goods imports fell a sizable 6.0% (previous: 0.5%). Capital goods (-0.8% m/m, previous: 1.1%) and industrial supplies (-1.3% m/m, previous: -5.3%) had modest declines. Alongside trade prices already reported by the BLS for November, this morning's data suggest that the real goods deficit narrowed slightly on the month, against the expectations of a modest widening. This implies a smaller drag from net trade in Q4 and a modest boost to GDP growth. This effect was partially offset by better-than-expected net exports of capital goods that trimmed the estimate of equipment investment. Overall, the Q4 GDP tracking estimate rose one-tenth, to 1.6%.

Growth Ain't What It Used To Be and Won't Be Coming Back Anytime Soon. Here's Why - Growth is all about greater flow, not stock.  Said otherwise, growth in consumption and GDP generally happens via population growth, wage growth, and/or credit growth...the greatest being population growth.  So, in that context, the below probably matters (a lot). In 2008, the US Census Bureau projected strong population gains through 2050 helping to drive growing consumption and US economic growth.  The projected population growth was generally balanced across age segments primarily driven by gains in young Hispanics due to higher birth rates and immigration.  But in 2012, in a story here the Census acknowledged that these were bad assumptions as these trends were not continuing, as had been expected.  In December of 2014, again here, the US Census affirmed and further downgraded it's population projections from 2012.  The Census now anticipates a 32% reduction from it's previous 2008 projections for US population growth from 2015 to 2050 (or about 36 million fewer Americans...chart below).  The US is still projected to grow by 77m but significantly less than the previous estimate of 113m.  95% of the cuts to the population growth are in the under 45yr/old population.  As the chart below highlights, the cuts among the 0-24 and 25-44 populations were massive...the change in growth among the 45 and older miniscule.  The chart below highlights the reductions in population growth across the age segments, and as mentioned above, the 0-24yr/old population growth was slashed by 76% or 24 million fewer youth and 40% fewer 25-44yr/olds.  . And for those curious, even during the Great Depression, there was population growth of the young to at least maintain rising consumption...but this time around in the Greater Depression, the world faces overcapacity, too much debt, and flat to declining young the world over (except Africa) only offset by the liability that is the rapidly rising older population.  For those believing the rest of the world will carry the day here is an article outlining the breakdown of population growth worldwide.

Unfinished (economic) business - As 2015 comes to a close, the broad consensus is that the U.S. economy is solidly back from the brink, if not quite yet firing on all cylinders. Certainly, that was the judgement of the Federal Reserve when it raised the interest rate it controls in mid-December. . So, not to be a downer but to present a balanced view, here’s a list of economic concerns we carry with us into 2016.

  • The job market: The unemployment rate at 5 percent is about at what the Fed considers to be the full employment rate, meaning the lowest rate consistent with stable inflation. You ask me, the job market isn’t as tight as the unemployment rate suggests. The underemployment rate, for example, is 9.9 percent and by my calculations, full employment for this measure is 8.5 percent, so it still has some room to fall. Also, the share of employed prime-age workers (25 to 54) is still climbing out of its recessionary hole. By the end of 2015, this indicator of labor demand had clawed back just half of its losses (see chart above).
  • The macro economy: Although the quarterly readings will always bounce around, gross domestic product growth has reliably settled into its trend of around 2 percent, with consumer spending holding up particularly well, reflecting strong job growth amidst low inflation. But that’s not a particularly fast clip, and even this deep into the expansion, growth has yet to close the “output gap,” the difference between potential and actual GDP, where “potential” means GDP at fully utilized resources.
  • Inequality: The forces behind income inequality, which include globalization, the absence of full employment, the rise of finance, and centrally, the perennially weak bargaining power of most workers, are of course still with us. The productivity-compensation gap, shown in Chart 3 here, probably closed a bit in 2015, as real median pay, driven up by uniquely low inflation, surpassed weak productivity growth (we don’t have full year data yet but real median earnings were up 1.5 percent through the third quarter compared to last year, while productivity was up only 0.6 percent).

Congress loses interest in the deficit: Our view (USA Today editorial) Listen to members of Congress bloviate about the national debt, and you’d think that some uncontrollable entity was running wild. But it’s not some strange, unaccountable force borrowing money and sticking future generations with the bill. It’s Congress itself. The latest exhibits are the big tax and spending measures the House and Senate passed before going home for Christmas. Lawmakers used shameless budget gimmicks to disguise the true cost of spending. They weakened the financial underpinnings of Obamacare. And they extended tax breaks without doing anything to offset the loss in revenue. Members congratulated themselves on avoiding a government shutdown and reaching a bipartisan compromise, as if that weren’t the government equivalence of a first-grader learning to tie his shoes. But the harmony was made much easier by both parties simply agreeing to borrow more money, instead of doing the hard work of raising taxes or cutting spending. All by themselves, the latest measures will add an estimated $830 billion to the deficit over the next decade. Even in Washington, that’s real money, equal to roughly 20 years of all federal spending on agriculture, for example. Roll in some of the other things Congress quietly borrowed money to pay for this year, and lawmakers have added about $1.2 trillion to the debt between now and 2025. With the economy recovering from the Great Recession and Baby Boomers starting to claim Social Security and Medicare benefits, now is the time for the government to try to balance the budget, or even generate a surplus the way it did in 1998 to 2001

Destructive Long-Termism - Paul Krugman - One of my long-running gripes about much discussion of current economic issues is about what I consider the long-run dodge. By this I mean the attempt to change the subject away from unemployment and inadequate demand toward supposedly more fundamental issues of education and structural reform. Such efforts to change the subject seem to me to be both wrong and, to some extent, cowardly. After all, if the clear and present problem is inadequate demand, then we should have policies to deal with that problem — I don’t care how important you think the long run is, we should deal with the crisis at hand.  So I was quite unhappy to see Tim Taylor, whose work I normally find admirable, taking a version of the long-run dodge in the secular stagnation debate. I was especially annoyed at this paragraph: In the past, I have called this the problem of “snowbank macroeconomics:” just as a driver of a car stuck in a snowbank can press the gas pedal as hard as they want and not make much progress, it seems to me that we are in a situation where monetary and fiscal stimulus that has been extremely high by historical standards since about 2008 has had a much smaller effect on output and inflation than would have been expected before the Great Recession. I’ve come to believe that in a financial crisis and its slow-growth aftermath, the basic tools of monetary and fiscal policy face real limits on what they can accomplish. Thus, I’d argue that the growth-based agenda should focus on a different list of issues: expanding education and training; expanding research and development spending; tax and regulatory reform; expanding international trade; and investments in energy and infrastructure. What’s wrong with this? Let me count the ways. First, where on earth does Taylor’s claim that fiscal stimulus has had much less effect than expected come from? First of all, we did not, repeat not, have massive stimulus. Here’s the ARRA as a percent of potential GDP:

US Increasingly Dominates Global Arms Trade: Congressional Report | The U.S. increasingly dominates the global arms trade, with agreements totaling about $36 billion last year -- more than half of the worldwide market, according to a new congressional report. In the Dec. 21 document, researchers at the Congressional Research Service, which provides nonpartisan policy analysis for members of Congress, concluded the U.S. ranked first in the overall sales last year, followed by Russia. "In worldwide arms transfer agreements in 2014 -- to both developed and developing nations -- United States dominated, ranking first with $36.2 billion in such agreements or 50.4% of all such agreements," the report states. "Russia ranked second in worldwide arms transfer agreements in 2014 with $10.2 billion in such global agreements or 14.2%. The value of all arms transfer agreements worldwide in 2014 was $71.8 billion." What's more, the U.S. share of overall sales increased to 50 percent in 2014 from 38 percent in 2013, according to the report.

Democratic Senator Calls For Extra Tax To Fund "War" Against ISIS - If you’re already furious about the fact that Washington’s efforts to destabilize the government of Bashar al-Assad in Syria have resulted in a five-year conflict that’s cost hundreds of thousands of innocent lives and triggered the worst refugee crisis in European history, prepare yourself, because you’re about to become even more furious.  On Sunday, in an Op-ed for the The Philadelphia Inquirer, Sen. Chris Coons (D-Del.) proposed a war surtax to pay for the fight against ISIS which is costing US taxpayers some $11 million every 24 hours. Below, find the full piece followed by some commentary.If We Must Fight, We Must Pay", by Chris Coons as originally published in The Philadelphia Inquirer

Obama's Hawaii Vacation: $8 Million; Secret Service: $317k; Nailing A 40-Foot Chip: Priceless - Thanks to the deep digging from Judicial Watch, we now know that President Obama's Christmas 2013 vacation to Hawaii cost taxpayers a handy $8.1 million. The itinerary, we are sure, was very similar to this year's golfing (and shave ice) extravaganza, which explains why, the known total expense to the American taxpayers thus far for all Obama travel is now $70,880,035.78. Well, it's only fair right? Judicial Watch announced today that it recently received expense records from the Department of Homeland Security revealing that Secret Service expenses for the Obama family vacation to Honolulu during December 2013-January 2014 cost taxpayers at least $316,698.03.  These new expenses bring the total for the Hawaii Christmas vacation trip to $8,098,060.33.  The Secret Service waited nearly two years to produce the requested numbers to Judicial Watch.

Bill Clinton Made $8 Million From Speeches To Companies With Matters Pending Before Hillary's State Dept --One of the ways Donald Trump has been able to curry favor among an electorate that's increasingly fed up with business as usual inside the Beltway, is to appeal to voters’ ingrained belief that everyone in Washington is effectively beholden to outside interests and campaign donors.  By virtue of his self-funded campaign, Trump isn’t beholden to anyone - or at least that’s what he’ll tell you.  Perhaps more than any other candidate, Hillary Clinton raises eyebrows when it comes to conflicts of interest. As we documented extensively earlier this year, contributions to the Clinton Foundation have come under scrutiny, especially after the charity said it would refile five years of tax returns after failing to properly account for donations from foreign governments. As IB Times reported back in May, Hillary Clinton’s State Department approved $165 billion in arms deals to nations who had previously given money to the Clinton Foundation. The charity also received some $7 million in donations from the MIC which benefited directly from State Department arms export approvals:

Trans-Pacific Partnership is a wonderful idea – for China - The website of the Office of the U.S. Trade Representative proudly describes the Trans-Pacific Partnership as “Made in America.” It does so to position this treaty, made up of a motley crew of allies, as a bulwark of free competitive markets against China. It is only fair, then, to judge the TPP on these merits: Will it lead to freer, more competitive markets and more rapid economic growth? Does it offer a better future for the U.S. and Canadian middle classes? Worryingly to those of us who believe that entrepreneurship is crucial for economic growth, the TPP is failing on its declared goals. Once ratified, the agreement will make our markets less free and less competitive, and it will particularly hurt innovation-based entrepreneurship. This could not come at a worse time for our future economic growth, since, as The Economist has just reported, we are already at historic lows in the formation and growth of new companies and historically high levels of concentration across many industries. The United States, which sees itself as the champion of entrepreneurship, has devised a deal that seems designed to make it harder for new high-tech businesses to start, scale up and succeed. Instead of “Made in America,” the U.S. Trade Representative should describe the deal for what it truly is: “The delight of Beijing.” A careful reading of the agreement shows that it is Chinese economic officials who should be opening their best champagne in celebration. The only explanation for this outcome is that, in the secrecy under which the TPP was negotiated, interests representing a very narrow slice of U.S. society were allowed in, and the public interest was blocked at the door.

U.S. Election Debate Complicates Passage of Pacific Trade Pact - WSJ: An international trade agreement embraced by President Barack Obama and the Republican-controlled Congress is drawing fire from many presidential candidates, illustrating the populist shift of both parties in the age of Donald Trump.Contenders ranging from Democratic front-runner Hillary Clinton to Republican Sen. Ted Cruz of Texas have spoken out against the 12-nation Trans-Pacific Partnership the administration is hoping Congress will pass next year, even though both previously supported Mr. Obama’s trade policy—and could well embrace the Pacific deal in the future. On the Democratic side, Mrs. Clinton moved to criticize the trade deal before its text was released in November, a move that solidified her support from labor groups and deflected attention from her two rivals, Sen. Bernie Sanders of Vermont and former Maryland Gov. Martin O’Malley, both foes of the Pacific deal. Supporting the TPP has become much trickier for Republicans since Mr. Trump, the billionaire developer and GOP front-runner, called the deal “horrible” and said he would also “break” Nafta while pushing to impose big tariffs on vehicles made in Mexico. Mr. Cruz backed Mr. Obama’s trade policy in a May Senate vote but later opposed the same bill, which gave the administration the authority to expedite a deal this year and submit it to a simple majority vote in Congress as early as next year.  Sen. Marco Rubio (R., Fla), who voted for so-called fast-track legislation this summer, has since said he doesn’t know if he would vote for the TPP if it comes up in the Senate next year. Of the nine major GOP candidates appearing in the last prime-time debate, only former Florida Gov. Jeb Bush, retired neurosurgeon Ben Carson and Ohio Gov. John Kasich support the Pacific deal.

For the Wealthiest, a Private Tax System That Saves Them Billions - — The hedge fund magnates Daniel S. Loeb, Louis Moore Bacon and Steven A. Cohen have much in common. They have managed billions of dollars in capital, earning vast fortunes. They have invested millions in art — and millions more in political candidates.Moreover, each has exploited an esoteric tax loophole that saved them millions in taxes. The trick? Route the money to Bermuda and back.With inequality at its highest levels in nearly a century and public debate rising over whether the government should respond to it through higher taxes on the wealthy, the very richest Americans have financed a sophisticated and astonishingly effective apparatus for shielding their fortunes. Some call it the “income defense industry,” consisting of a high-priced phalanx of lawyers, estate planners, lobbyists and anti-tax activists who exploit and defend a dizzying array of tax maneuvers, virtually none of them available to taxpayers of more modest means. In recent years, this apparatus has become one of the most powerful avenues of influence for wealthy Americans of all political stripes, including Mr. Loeb and Mr. Cohen, who give heavily to Republicans, and the liberal billionaire George Soros, who has called for higher levies on the rich while at the same time using tax loopholes to bolster his own fortune. All are among a small group providing much of the early cash for the 2016 presidential campaign. Operating largely out of public view — in tax court, through arcane legislative provisions and in private negotiations with the Internal Revenue Service — the wealthy have used their influence to steadily whittle away at the government’s ability to tax them. The effect has been to create a kind of private tax system, catering to only several thousand Americans.

The game is completely rigged: The 1 percent has more than ever — and the system is too broken to deal with it - We have reached a crossroads in our history. For all the achievements and riches of our time, the world has never been so unequal or more unjust. A century ago, at the time of the First World War, the richest 20% of the world’s population earned eleven times more than the poorest 20%. By the end of the twentieth century they earned seventy-four times as much. Today, despite seven decades of international development, three decades of the Washington Consensus, and a decade and a half of Millennium Development Goals, our world is even more divided among the haves, the have-nots, and—as President George W. Bush once quipped in an after-dinner speech—the have-mores. When it comes to wealth, rather than income, the picture is more extreme. Globally, the richest 1% now own nearly half of all the world’s wealth. The poorest 50% of the world, by contrast—fully 3 billion people—own less than 1% of its wealth. Anyone with assets of more than $10,000 a year is an exception to the global norm and is better off than 70% of everyone else alive. Yet most of us are so preoccupied by the relative few with more that we rarely stop to notice this. There is growing awareness today of the consequences in rich countries of rising income inequality: we know what it means to talk of the 1% there. But when it comes to the much greater gaps between rich and poor the world over, we confine ourselves still to talk of “global poverty.”

Soaking The Rich, Slightly - Paul Krugman -- Good catch by Josh Barro. It’s been clear for a while that taxes on top incomes went up significantly in 2013; but we’ve had to rely on estimates of the change, not actual numbers. Now the actual numbers on income taxes are in, and sure enough, fairly big hikes at the top. In case you’re wondering why the number above isn’t the same as in the previous post, the reason is that all we have from the IRS is the effect of income taxes. CBO also tries to estimate the burden of other taxes, including the indirect effect of taxes on corporate profits. Still, it’s now a fact as opposed to a mere projection that Obama significantly raised taxes at the top — and the hit was especially big at the very top of the scale. And my point that the economy’s pretty good job growth despite this tax hike — raising taxes on job creators! — refutes right-wing doctrine continues to stand.

Privilege, Pathology and Power, by Paul Krugman -- Wealth can be bad for your soul. That’s not just a hoary piece of folk wisdom; it’s a conclusion from serious social science, confirmed by statistical analysis and experiment. The affluent are, on average, less likely to exhibit empathy, less likely to respect norms and even laws, more likely to cheat, than those occupying lower rungs on the economic ladder.  And it’s obvious, even if we don’t have statistical confirmation, that extreme wealth can do extreme spiritual damage. Take someone whose personality might have been merely disagreeable under normal circumstances, and give him the kind of wealth that lets him surround himself with sycophants and usually get whatever he wants. It’s not hard to see how he could become almost pathologically self-regarding and unconcerned with others. So what happens to a nation that gives ever-growing political power to the superrich? Modern America is a society in which a growing share of income and wealth is concentrated in the hands of a small number of people, and these people have huge political influence — in the early stages of the 2016 presidential campaign, around half the contributions came from fewer than 200 wealthy families. The usual concern about this march toward oligarchy is that the interests and policy preferences of the very rich are quite different from those of the population at large, and that is surely the biggest problem. But it’s also true that those empowered by money-driven politics include a disproportionate number of spoiled egomaniacs.

Larry Summers Lectures Bernie Sanders on Financial and Monetary Policy – Pam Martens - Yesterday Larry Summers penned an opinion piece for the Washington Post, lecturing Senator Bernie Sanders of Vermont, a Presidential candidate, on what Sanders should actually be saying in his own op-eds about reforming the Federal Reserve.  No one will ever accuse Larry Summers of being short on arrogance. After promising the American people in 1999, as Treasury Secretary in the Bill Clinton administration, that pushing through the repeal of the Glass-Steagall Act would be “the right framework for America’s future financial system,” then watching that system collapse as a result of that repeal just nine years later in the worst economic upheaval since the Great Depression, one would think Summers would find some obscure hole in academia and crawl into it. Instead, Summers went on to become President of Harvard where, in 2005, he suggested at an economics conference that women might lack an innate aptitude for math and science, serving up a potential explanation for women’s low numbers as scientists at elite universities. . A year later, facing a likely second no-confidence vote from the same body, Summers resigned his post as President of Harvard. In an article explaining his resignation at Harvard, the New York Times wrote that Summers “alienated professors with a personal style that many saw as bullying and arrogant,” adding that he had created “the intense ill will and even loathing toward him within the Faculty of Arts and Sciences, the university’s largest unit.” None of this hubris, however, has dampened Summers’ ego or his willingness to blot out the disastrous economic consequences of his bad judgment calls on deregulation. In yesterday’s opinion piece at the Washington Post (which sounds like he is still campaigning for the post of Fed Chair, hoping that perhaps a new Clinton administration might lead to that eventuality) Summers chides Sanders that reforming the Federal Reserve “requires careful reflection if it is not to be counterproductive.” Summers also uses the opinion piece to bolster both his and Hillary Clinton’s self-serving view that the repeal of the Glass-Steagall Act was not responsible for the financial crisis in 2008 and ensuing economic collapse that caused millions of foreclosures and job losses. Aside from the fact that “Steagall” is misspelled twice in the three times it is used in the above paragraph, Summers is dead wrong on every other premise as well.

Even The Big Banks Now Admit It: "This Is How The Fed's 'Massive Manipulation' Broke The Market" -- Raise your hand if this sounds familiar: markets are calm, things are stable, stocks are levitating on virtually no volume... and suddenly there is a price 'air pocket' as one or more assets unexpectedly plunge in what has become a now daily "flash crash" du jour, traders panic, unable to frontrun orderly traffic HFTs immediately shut down, and all hell breaks loose. We expect everyone to have gone through this "local tail" event scenario at least once and likely many times, one which we predicted would become the norm back in 2009, and one which has, as of 2015, become the norm. Thank the Fed. But don't take it from a "fringe, tinfoil hat, conspiracy theory" website which has been repeating this for so many years we have to dig deeper with every passing day to keep ourselves amused at this farce: here is Bank of America's head of global equity derivatives research, Benjamin Bowler, with a piece slamming the massively manipulated "market" that 7 years of global central bank intervention has created, and a simple schematic which demonstrates just how broken everything is, and why one should expect many, many more such "local tail" freakouts in the future. From Bank of America:  Central bank’s risk manipulation well explains local tails. A good way to explain why we have seen local tail risks arise so frequently since central banks began to heavily manipulate asset prices is with the following analogy, illustrated in Exhibit 1. Essentially central banks, by unfairly inflating asset prices have compressed risk like a spring to unfairly tight levels. Unfortunately, the market is aware the price of risk is not correct, but they can’t fight it, and everyone is forced to crowd into the same trade. By manipulating markets they have also reduced investors’ inherent conviction by rendering fundamentals less relevant. This then creates a highly unstable (fragile) situation that breaks violently when a sufficient catalyst causes risk to rise – overly crowded positioning meets a market with little conviction.

The Dark Side Of A Record $5 Trillion In Mergers: Hundreds Of Thousands Of Imminent Layoffs --Yesterday afternoon, Dealogic announced the for the first time in history, global announced M&A volume in 2015 would surpass $5 trillion. This record eclipses by 9% the previous all time high of $4.6 trillion set during the previous market bubble year of 2007.The report adds that there were 10 $50 billion M&A transactions announced in 2015 worth a combined $798.9bn. That's five deals more than the previous record high activity set in 1998, 1999, and 2014. US targeted M&A ($2.5tr) accounts for half of 2015 volume and seven of the top 10 transactions. Breaking down by total by sector, Healthcare ($723.7bn) and Technology ($713.1bn) were the leading sectors. The biggest deals announced in 2015 were Pfizer and Allergan's pending $160bn merger, followed by Anheuser-Busch InBev's $117.4bn bid for SABMiller, two of only eight $100bn+ transactions announced on record.  Below we show the table of the Top 10 deals is below, as well as a simplified chart:Funding needs notwithstanding, the immediate result of this epic merger scramble has been a year of declining corporate revenues as well as a profit and earnings recession. The not so immediate result has been a silent layoff wave (focused initially in the energy sector) as increasingly more well-paying careers are lost and replaced with minimum wage food service and retail, often times part-time, jobs.However, bone of that accounts for the layoff shocks that is about to be unleashed as hundreds of billions of M&A deals go from announced to closed over the coming months, as the "pro-forma"management (and shareholders) demand to see results.  And where are results going to come from? Why "synergies" of course, Wall Street's favorite word for mass layoffs.

‘The Big Short,’ the Great Depression and the Evolution of Crisis Narratives by Greg Ip -- Are financial calamities the fault of bad behavior or bad economic systems? “The Big Short,” released across the country in movie theaters Christmas week, leaves little doubt. Based on Michael Lewis’s bestseller by the same name, “The Big Short” tells the story of a handful of renegade traders who figured out that the subprime mortgage bubble would end in catastrophe, and bet against (i.e. “shorted”) it. It’s an entertaining story in which director Adam McKay interlaces profanity, financial tutorials and comedy with a clear assessment of blame: financiers behaved like criminals and got away with it. It’s a message that will resonate with much of the public, and politicians. Will history agree? It’s worth looking at how views of the last such episode evolved. In the early 1930s, the public and politicians held Wall Street responsible for the stock-market crash and Great Depression.

NYSE & NASDAQ Ending Limit Risk Orders — You Are On Your Own - The New York Stock Exchange and NASDAQ are terminating stop-loss and good-til-canceled orders beginning Feb. 26, 2016. They are claiming risks occur from such orders during volatile trading. They are really admitting that there is a liquidity crisis. Additionally, going after high frequency trading and demanding that they turn over the source code to the proprietary systems will send the smart firms out of the markets. Cancelling these type of orders will only increase the risks for the average investor. The assumption has been that a flash crash takes place, these orders are elected, and then the market recovers. Complaints then materialize with hindsight, as always. Eliminating these types of orders will work in the opposite manner when there is a real decline, for they have the tendency to create a bank of sellers on any bounce and others are carried out bankrupt and unable to get out in a panic. As always, this demonstrates the one-dimensional thinking that screws up everything. This may lead to more jumpers as we saw back during the 1930s.

Eric Holder’s Law Firm Tied to Alleged Ponzi Schemer Martin Shkreli’s Stock Offering at Retrophin --Pam Martens - Eric Holder, who stepped down this year as the U.S. Attorney General after six years in office, rejoined the law firm he had left to accept the top slot at the Justice Department. That firm is Covington & Burling, which operates a revolving door between the Justice Department and its own front door. In addition to Holder, Lanny Breuer, who headed up the Justice Department’s criminal division under Holder, also returned to Covington & Burling after a devastating report by ABC’s Frontline on how his division had failed to seriously investigate crimes on Wall Street. Making the round trip between the Justice Department and Covington & Burling in 2010 was Steven Fagell, former deputy chief of staff at the criminal division, and Jim Garland, former deputy chief of staff to Attorney General Eric Holder. Dan Suleiman, former deputy chief of staff to Breuer at the Justice Department, rejoined the law firm in 2013, the same year as Breuer. While Holder was in the position as the top law enforcement officer in the land, the firm he would rejoin, Covington & Burling, was serving as “counsel to the underwriters” of a stock offering by Retrophin, then headed by CEO Martin Shkreli, the man the Justice Department is now accusing of looting Retrophin, a pharmaceutical startup, in a brazen Ponzi scheme type of operation.  Covington and Burling lawyers, Donald J. Murray and Eric W. Blanchard, are listed on the Registration statement filed by Retrophin on December 18, 2013.

JP Morgan Employees Said To Steal $400,000 From Eight Dead Clients - In the wake of 2008, it’s probably safe to say there isn’t a person alive who completely trusts a banker.  If, however, you happen to be dead, it’s more difficult to scrutinize the activities of those conducting your finances, a fact underscored by the alleged theft of hundreds of thousands of dollars from at least eight accounts belonging to deceased clients of JP Morgan.  According to an indictment filed this month in State Supreme Court in Brooklyn, Jonathan Francis and Dion Allison, employees at a Bedford-Stuyvesant branch, made hundreds of withdrawals from the accounts using ATM cards they issued. One of those charged told investigators he "used the log-on IDs of co-workers when they walked away from their desks," Bloomberg reports. As The New York Times goes on to recount, “Mr. Allison, 30, and Mr. Francis, 27, created bank cards for several of the dormant accounts [and] with two friends, Gregory Desrameaux, 24, and Kery Phillips, 40, the men then withdrew most of the stolen money, about $300,000, by using A.T.M.s around New York City.”  But it gets worse. Here’s more from The Times: In April 2013 alone, members of the group made withdrawals on 26 of 30 days, according to the indictment. By May of that year, people in the group had created fake power of attorney documents. That gave Mr. Phillips control of four of the dormant accounts, Adam Zion, an assistant district attorney, said in court on Monday. This allowed Mr. Phillips to withdraw much more money than the daily A.T.M. limit, up to $9,500 at a time, through a teller. In another example of the scheme, in February 2013, according to the indictment, Mr. Allison created a bank card for one account. That May, at a Chase branch on Flatbush Avenue, Mr. Phillips turned in fake power of attorney documents giving him control of the account. The same day, prosecutors said, Mr. Phillips withdrew through a teller $49,929.91 — everything that remained — from the account.

Ex-JPMorgan Chase Bankers Charged With Forging ATM Cards to Steal From Accounts: wo former bankers at the JPMorgan Chase & Co. in Brooklyn, New York, were indicted Monday for allegedly stealing nearly $400,000 from about 15 accounts. Jonathan Francis, 27, and Dion Allison, 30, are believed to have targeted several dormant accounts, including many that belonged to dead clients, between August 2012 and October 2013, when they were employed as personal bankers at a JPMorgan Chase branch in the Bedford-Stuyvesant neighborhood of Brooklyn. The two men targeted approximately 15 accounts that received regular cash infusions through direct deposits from the Social Security Administration, prosecutors reportedly said. At least eight of the account holders were dead, but were still receiving checks from Social Security. Francis and Allison, along with co-conspirators Gregory Desrameaux, 24, and Kery Phillips, 40, then issued ATM cards for the accounts without the account holders’ consent. According to the indictment, in April 2013 alone, these men made withdrawals ranging from $200 to $2,000 on 26 of 30 days. “Not only did they raid their victims’ savings, they also failed to conceal their deceitful tracks,” New York City Police Commissioner William Bratton reportedly said Monday. Phillips and Desrameaux, who were arraigned earlier this month, have reportedly denied the allegations, while Victor Knapp, a lawyer for Allison, told Bloomberg that it was premature to say whether his client would fight the charges. Phillips is still at large.

December 2015: Unofficial Problem Bank list declines to 250 Institutions, Q4 2015 Transition Matrix  - This is an unofficial list of Problem Banks compiled only from public sources. Here is the unofficial problem bank list for December 2015.  During the month, the list fell from 264 institutions to 250 after eight removals and three additions. Assets dropped by $2.0 billion to an aggregate $74.97 billion. A year ago, the list held 401 institutions with assets of $125.1 billion.  With it being the end of the fourth quarter, we bring an updated transition matrix to identify how banks are moving off the Unofficial Problem Bank List. Since the Unofficial Problem Bank List was first published on August 7, 2009 with 389 institutions, a total of 1,701 institutions have appeared on a weekly or monthly list at some point. There have been 1,451 institutions that have transitioned through the list. Departure methods include 809 action terminations, 395 failures, 233 mergers, and 14 voluntary liquidations. The fourth quarter of 2015 started with 276 institutions on the list, so the 24 action terminations during the quarter reduced the list by 8.7 percent. Of the 389 institutions on the first published list, 28 or 7.2 percent still remain more than six years later. The 395 failures represent 23.2 percent of the 1,701 institutions that have made an appearance on the list. This failure rate is well above the 10-12 percent rate frequently cited in media reports on the failure rate of banks on the FDIC's official list.

Federal Consumer Agency Considers Curbs on Class Action Waivers | On Oct. 7, 2015, the CFPB announced that it was considering proposed rulemaking that would, among other things, “provide explicitly that the arbitration agreement is inapplicable to cases filed in court on behalf of a class unless and until class certification is denied or the class claims are dismissed.”6 The agency intends to include in a proposed regulation either model or mandatory language that companies could use to comply with such a requirement, and make it effective to agreements entered into at least 180 days from the effective date of such a regulation.7 In the agency’s view, this proposal is necessary because “individual consumers rarely file disputes against their consumer financial service providers,” and “it may be because the amounts at stake are too small to make it rational for either the consumer or attorneys who may represent the consumer to pursue on an individual basis” or because “individual, unrepresented consumers are unable to detect…a legal claim.” The CFPB initially considered giving financial institutions discretion to provide financial consumers with access to class proceedings conducted either in arbitration or in court, so long as consumers had the ability to bring a class proceeding in some forum.8 The alternative was rejected because class arbitration was relatively untested in consumer cases and most companies indicated they would prefer class litigation over class arbitration.9 At this stage, the CFPB is collecting and reviewing feedback from small business representatives on the impact of the proposal on small businesses and non-profits. The CFPB held a meeting with a Small Business Advisory Review Panel on Oct. 20, 2015, and must release a final report that includes the views of the panel and takes into account its input no later than 60 days after that meeting. Once it completes that process, it will issue proposed regulations subject to a notice and comment process, and subsequently issue a final rule.

What Really Caused the Implosion of the Occupy Movement—An Insider’s View  - The real problem underneath it all was a deep ambivalence about power. In fact, all of the things that made Occupy Wall Street brilliant had this paradox built into them, this politic of powerlessness woven deep inside, like a bad gene or a self-destruct mechanism.  It foreclosed on the possibility of holding emerging leaders accountable, created a situation in which real leaders (whether worthy or not) went to the shadows instead of the square, and made it impossible to really develop one another (how, really, could we train new leaders if there weren’t supposed to be any in the first place?). Similarly, the refusal to articulate demands was brilliant in opening radical possibilities and sparking the popular imagination, but it also meant we didn’t have a shared goal, meant the word winning wasn’t even part of the movement’s lexicon. In many ways, it was an expression of a fear of actually saying something and taking responsibility for it, and it encouraged the often-repeated delusion that we didn’t even want anything our enemy had to give, that Wall Street and the State didn’t have any power over us. The vigilance against co-option came from honest history of movements falling prey to powerful forces hoping to dull or divert their aims; but it ultimately became a paranoia more than anything else, a tragic misunderstanding of the playing field and what it was going to take to build popular power. Instead of welcoming other progressive forces and actually co-opting them, purists shamed “liberals,” cultivated a radical macho culture more focused on big speeches at assemblies and arrests in the streets than the hard organizing behind the scenes, and turned Occupy into a fringe identity that only a few people could really claim to the exclusion of the hundreds of thousands who actually made it real. Occupy Wall Street created a new discourse, brought thousands of people into the movement, shifted the landscape of the left, and even facilitated concrete victories for working people. But at the same time, a substantial chunk of its leadership was allergic to power. And we made a politic of that. We fetishized it, wrote articles and books about it, scorned the public with it. Worst of all, we used it as a cudgel with which to bludgeon each other.

Owner Occupancy Fraud And Mortgage Performance: from the Philadelphia Fed - Policymakers and the popular press have cited anecdotal evidence to suggest that one of the contributing causes to the housing bubble was pervasive mortgage fraud.1 Recent academic work has also verified the existence of mortgage fraud along several dimensions. Ben-David (2011) finds evidence of inflated prices. Griffin and Maturana (2015a) examine three dimensions of fraud among securitized nonagency loans: unreported second liens, owner occupancy misreporting, and appraisal overstatements. Piskorski, Seru, and Witkin (2015) study second lien misreporting and occupancy fraud in the nonagency securized market. Mian and Sufi (2015) argue that borrowers misstated their incomes on mortgage applications. In this paper, we use a matched credit bureau and mortgage dataset to identify occupancy fraud in loans originated between 2005 and 2007. This occurs when mortgage borrowers claim on the mortgage application that they will be the owner occupants of the property, will not rent the property out to another individual or family, and do not intend to sell the property quickly. Borrowers may have an incentive to commit occupancy fraud because the benefits can be substantial: Banks often require declared residential mortgage investors to offer higher down payments and charge them higher interest rates because of the elevated default risk of investor loans (which we also document in this paper). In contrast to previous work, our data allow us to confirm that occupancy fraud was pervasive and did not just affect private-securitized loans. We show that more than half of all investors were fraudulent. And this applied to government-sponsored enterprise (GSE) - guaranteed, private securitized, and portfolio-held loans (by contrast, Federal Housing Administration (FHA) loans exhibited markedly lower fraud rates).

Two Cheers for Fannie and Freddie Synthetic CDOs - I read a Wall Street Journal editorial decrying Fannie Mae and Freddie Mac's use of synthetic CDOs to transfer credit risk on mortgages to the private market through the STACR and Connecticut Avenue programs. Unfortunately, the WSJ piece does not accurately describe what Fannie and Freddie are doing and fails entirely to understand why unfiltered private capital is a recipe for financial instability in housing markets.  As it happens, only a small slice of the synthetic CDOs are being offered to investors--some of the mezzanine tranches.  The notional senior and junior tranches are not being sold. What this means is that the WSJ's claim that the GSEs are using synthetic CDOs for $800 billion of their $4 trillion book of business is incredibly misleading. The notional amount of the mortgages covered by the CDOs might be $800 billion, but private capital is backing only about $25 billion ($12.7B in STACR deals and $12B in Connecticut Avenue deals). The private capital in the synthetic CDO deals accounts for less than 0.625% of the credit risk held by the GSEs. I don't immediately see a problem. It's not clear to me how, if at all, these synthetic CDOs are counted against the GSE's regulatory capital requirements, but at this point, they aren't big enough to worry about.  In fact, I think the synthetic CDOs are probably a very good development for the GSEs. The fundamental policy tension in housing finance is between the relative problems and benefits of public and private capital, neither of which is ideal.  There are obvious problems with public provision of housing finance--it can easily become politicized and result in the public incurring underpriced risk. This was a problem in the run-up to 2008, even if it did not (sorry WSJ) cause the financial crisis.  The problems in GSE underwriting were far surpassed by those in the private-label market, and losses on GSE loans never came anywhere close to those on private-label securitized loans. But we did have a real political economy problem with the GSEs.

Freddie Mac Mortgage Serious Delinquency rate declined in November, Fannie Mae Rate Unchanged --Freddie Mac reported that the Single-Family serious delinquency rate declined in November to 1.36%, down from 1.38% in October. Freddie's rate is down from 1.91% in November 2014, and the rate in November was the lowest level since October 2008.  Freddie's serious delinquency rate peaked in February 2010 at 4.20%.   Fannie Mae reported today that the Single-Family Serious Delinquency rate was unchanged in November at 1.58%. The serious delinquency rate is down from 1.91% in November 2014.  The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.  These are mortgage loans that are "three monthly payments or more past due or in foreclosure".  Although the rate is declining, the "normal" serious delinquency rate is under 1%.    The Freddie Mac serious delinquency rate has fallen 0.55 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will not be below 1% until the second half of 2016.  The Fannie Mae serious delinquency rate has only fallen 0.33 percentage points over the last year - the pace of improvement has slowed - and at that pace the serious delinquency rate will not be below 1% until 2017. So even though delinquencies and distressed sales are declining, I expect an above normal level of Fannie and Freddie distressed sales through 2016 (mostly in judicial foreclosure states).

2016 Could Reach Highest Mortgage Fraud Risk In USA Housing Market Since Crisis - from CoreLogic -- Industry professionals agree that mortgage origination fraud activity peaked between 2005 and 2008, period that offered unprecedented opportunities to manipulate the system, contributing to the boom and following bust. Through increased regulation, better controls and tighter lending guidelines, we have experienced a strong reversal, with very low fraud rates in the last several years. As we look to 2016, it is likely that loosening credit guidelines and a recovering purchase market will increase the opportunities and motivation for origination fraud, such as inflated sales prices to cover down payment misrepresentation. CoreLogic has been tracking mortgage fraud risk since the third quarter of 2010. During that time, mortgage fraud risk has shown an oscillating trend with an average increasing slope. Based on current analysis, we expect the trend to continue to follow this oscillation pattern and believe we are on the bottom cusp of the next period. If the mortgage fraud risk continues this trend, it could peak around the second quarter of 2016, reaching the highest fraud risk since 2010. The five-year national mortgage fraud index is shown in Figure 1.  Additionally, the increase in mortgage fraud risk is shifting from historically risky markets to lower-risk markets. During 2014, the national fraud risk index decreased overall.  However, certain regions, such as Florida and New York/New Jersey, continued to increase in risk. These regions have now stabilized at a high-risk level, and join Las Vegas, Los Angeles and Chicago (which have been high risk since early 2014). We are beginning to see regions that had relatively low fraud risk increase.

Some Experts Think the Housing Bubble Is Back | Zillow -   No one wants a return to the grim days of the housing crisis, when home values plunged until 31.4 percent of mortgage holders owed more on their homes than the dwellings were worth. In some parts of the country, such as Las Vegas, many people are still recovering from that spiral.  It’s harrowing to imagine another housing bubble already, and the good news is that Zillow’s economists and most of the 66 experts who responded to questions about a bubble in the fourth quarter 2015 Zillow Home Price Expectations Survey, administered by Pulsenomics LLC, think no major U.S. markets face any significant risk of a bubble for the next five years.  The more sobering news is that some of those experts think certain markets — particularly New York and San Francisco — are already in a bubble. Ten or more experts think there’s a risk that Boston, Los Angeles or Miami will enter a bubble in the next three years. The reasons for these responses depends in part on how someone defines a bubble.“There is no standard, chiseled-in-stone definition of what a bubble is,” Some people evoke former Fed Chairman Alan Greenspan’s term, “irrational exuberance,” and few experts think the entire U.S. economy is riding that wave again.However, if a housing bubble is a market in which home prices have reached unsustainable levels given the economics of their local markets, then Thrall joins the 22 experts who say San Francisco is currently in a bubble. He’s also among six who believe Seattle prices are that frothy.

October Case-Shiller Home Prices Soar Most Since March -- While it is two months delayed (and home sales have tumbled since) and before The Fed raised rates, Case-Shiller reports that home prices rose 0.84% MoM in October, beating expectations and the biggest monthly rise since March. While the YoY gains barely missed expectations at +5.54%, Miami, Tampa, and San Francisco all saw the biggest gains asChicago, Cleveland, and San Diego saw the biggest drops in home prices. It appears we are playing out the same seasonally-adjusted pattern as 2014... Charts: Bloomberg And yet, the rebound was once again all in the eye of the beholder: the seasonally adjusted data indeed shows the strongest monthly increase since March: While according to actual housing data, the monthly increase was the weakest since January.

Case-Shiller: National House Price Index increased 5.2% year-over-year in October - S&P/Case-Shiller released the monthly Home Price Indices for October ("September" is a 3 month average of August, September and October prices). This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index. From S&P:  The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a slightly higher year-over-year gain with a 5.2% annual increase in October 2015 versus a 4.9% increase in September 2015. The 10-City Composite increased 5.1% in the year to October compared to 4.9% previously. The 20-City Composite’s year-over-year gain was 5.5% versus 5.4% reported in September. ... Before seasonal adjustment, the National Index posted a gain of 0.1% month-over-month in October. The 10-City Composite was unchanged and the 20-City Composite reported gains of 0.1% month-over-month in October. After seasonal adjustment, the National Index posted a gain of 0.9%, while the 10-City and 20-City Composites both increased 0.8% month-over-month. Ten of 20 cities reported increases in October before seasonal adjustment; after seasonal adjustment, all 20 cities increased for the month.  The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000). The Composite 10 index is off 13.7% from the peak, and up 0.8% in October (SA). The Composite 20 index is off 12.3% from the peak, and up 0.8% (SA) in October. The National index is off 5.1% from the peak, and up 0.9% (SA) in October. The National index is up 28.2% from the post-bubble low set in December 2011 (SA). The second graph shows the Year over year change in all three indices. The Composite 10 SA is up 5.1% compared to October 2014. The Composite 20 SA is up 5.6% year-over-year.. The National index SA is up 5.2% year-over-year. Prices increased (SA) in 20 of the 20 Case-Shiller cities in October seasonally adjusted. (Prices increased in 10 of the 20 cities NSA) Prices in Las Vegas are off 39.0% from the peak.The last graph shows the bubble peak, the post bubble minimum, and current nominal prices relative to January 2000 prices for all the Case-Shiller cities in nominal terms.

Home Prices Rose 5.2% Year-over-Year in October - With today's release of the October S&P/Case-Shiller Home Price we learned that seasonally adjusted home prices for the benchmark 20-city index were up month over month at 0.8%. The seasonally adjusted year-over-year change has hovered between 4.6% and 5.2% for the last twelve months. The adjacent column chart illustrates the month-over-month change in the seasonally adjusted 20-city index, which tends to be the most closely watched of the Case-Shiller series. It was flat from the previous month. The nonseasonally adjusted index was up 5.2% year-over-year.  Here is an excerpt of the analysis from today's Standard & Poor's press release. "Among the positive factors are consumers’ expectations of low inflation and further economic growth as well as recent increases in residential construction including single family housing starts. Inventories of existing homes have averaged around a five month supply for the past year, a level that suggests a fairly tight market with limited supplies. Sales of new single family homes, despite recent increases in construction, remain mixed to soft compared to the trend in existing home sales." "The recent action by the Federal Reserve raising the Fed funds target rate by 25bp and spreading expectations of further increases during 2016 are leading some to wonder if mortgage interest rate might rise. Typically, increases in short term interest rates lead to smaller increases in long term interest rates. The chart below shows the average rate on 30-year fixed rate mortgages and the Fed funds rate. From May 2004 to July 2007, the Fed funds rate moved up from 1.0% to 5.25%; over the same period, the mortgage rate rose from about 6% to 6.75% during a sustained tightening effort by the Federal Reserve. The latest economic projections published by the Fed following the recent rate increase suggest that the Fed funds rate will be around 2.6% in September 2017 compared to a current rate of about 0.5%. These data suggest that potential home buyers need not fear runaway mortgage interest rates." [Link to source]

Case-Shiller Home Price Index October 2015 Improves.: The non-seasonally adjusted Case-Shiller home price index (20 cities) year-over-year rate of home price growth was 5.5 %. The authors of the index ask " if mortgage interest rate might rise. Typically, increases in short term interest rates lead to smaller increases in long term interest rates." 20 city unadjusted home price rate of growth accelerated 0.2 % month-over-month. [Econintersect uses the change in year-over-year growth from month-to-month to calculate the change in rate of growth] Comparing all the home price indices, it needs to be understood each of the indices uses a unique methodology in compiling their index - and no index is perfect. The National Association of Realtors normally shows exaggerated movements which likely is due to inclusion of more higher value homes. Case-Shiller's David M. Blitzer, Chairman of the Index Committee at S&P Indices: Generally good economic conditions continue to support gains in home prices. Among the positive factors are consumers' expectations of low inflation and further economic growth as well as recent increases in residential construction including single family housing starts. Inventories of existing homes have averaged around a five month supply for the past year, a level that suggests a fairly tight market with limited supplies. Sales of new single family homes, despite recent increases in construction, remain mixed to soft compared to the trend in existing home sales. The recent action by the Federal Reserve raising the Fed funds target rate by 25bp and spreading expectations of further increases during 2016 are leading some to wonder if mortgage interest rate might rise. Typically, increases in short term interest rates lead to smaller increases in long term interest rates. The chart below shows the average rate on 30-year fixed rate mortgages and the Fed funds rate. From May 2004 to July 2007, the Fed funds rate moved up from 1.0% to 5.25%; over the same period, the mortgage rate rose from about 6% to 6.75% during a sustained tightening effort by the Federal Reserve. The latest economic projections published by the Fed following the recent rate increase suggest that the Fed funds rate will be around 2.6% in September 2017 compared to a current rate of about 0.5%. These data suggest that potential home buyers need not fear runaway mortgage interest rates.

Case-Shiller Shows Housing Price Gains Continue - The October 2015 S&P Case Shiller home price index shows a seasonally adjusted 5.6% price increase from a year ago for the 20 metropolitan housing markets and a 5.1% yearly price increase in the top 10 housing markets.  Home prices are still climbing over double the rate of inflation.  The U.S. National Home Price Index increased 5.2% in October 2015.  Since the price low of March 2012, the 10-City composite index has increased 34.9% and the 20-City composite index has increased 36.4%.  From the housing bubble 2006 peaks, prices are now only down about 11-13%. Below are all of the composite-20 index cities yearly price percentage change, using the seasonally adjusted data. San Francisco and Denver Colorado prices increased 10.9% from a year ago. Portland Oregon home prices are up by 11% from a year ago. No composite-10 or composite-20 annual price gains are negative using the seasonally adjusted data and only four housing markets in the composite 20 were below 4% annual gains. How can afford these homes as prices are so out of alignment with wages and salaries. S&P reports the not seasonally adjusted data for their headlines. Housing is highly cyclical. Spring and early Summer are when most sales occur. For the month, the not seasonally adjusted composite-20 percentage change was 0.1% whereas the seasonally adjusted change for the composite-20 was 0.8%. The not seasonally adjusted composite-10 saw no change from last month, whereas the seasonally adjusted composite-10 showed a 0.8% increase. The below graph shows the seasonally adjusted monthly percentage change. Case-shiller home price indices are normalized to the year 2000. The index value of 150 means single family housing prices have appreciated, or increased 50% since 2000 in that particular region. Case-Shiller indices are not adjusted for inflation. Below are the seasonally adjusted levels for the month.

Luxury home prices finally getting too high?: The tables have turned in the real estate industry as luxury listing prices fell for the first time since 2012, according to a Redfin report. The brokerage firm suggests that the drop in prices stems from wealthy buyers and foreign investors refusing to buy at the top of the market. Prices for luxury homes fell by 2.2 percent in the third quarter, compared to a year ago, according to the report. "Luxury buyers don't buy because they need a place to live, so they have flexibility to time a home purchase when the market is favorable," the company's report noted.  "I think that the report was accurate in that prices have almost retraced their all-time high, which was 2006," Philip White, CEO of Sotheby's International Realty, told CNBC's "Closing Bell." In the same vein, White says the luxury market is healthier than it was before the crash in 2008. "It's even stronger; I think it's more stable, it's less erratic and the long-term value is even stronger than it was then," he said. "It was a sharp drop-off as we all know, and it's taken a long time to really get to this recovery point." While many market watchers feared that the Fed raising interest rates may increase mortgage prices further, this market is not directly affected by those changes, White said. "A lot of our transactions are all cash, and even the slight short-term interest increase really doesn't affect the mortgage rates in a significant way," he noted.

Real Prices and Price-to-Rent Ratio in October  -  The year-over-year increase in prices is mostly moving sideways now around 5%.   In October 2013, the National index was up 10.9% year-over-year (YoY). In October 2015, the index was up 5.2% YoY. Here is the YoY change since January 2014 for the National Index:In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $275,000 today adjusted for inflation (37%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation). It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 5.1% below the bubble peak.   However, in real terms, the National index is still about 19.1% below the bubble peak. The first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through September) in nominal terms as reported. In nominal terms, the Case-Shiller National index (SA) is back to August 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to February 2005 levels, and the CoreLogic index (NSA) is back to June 2005. Real House Prices The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices. In real terms, the National index is back to October 2003 levels, the Composite 20 index is back to May 2003, and the CoreLogic index back to January 2004. In real terms, house prices are back to 2003 levels.This graph shows the price to rent ratio (January 1998 = 1.0). On a price-to-rent basis, the Case-Shiller National index is back to June 2003 levels, the Composite 20 index is back to January 2003 levels, and the CoreLogic index is back to October 2003. In real terms, and as a price-to-rent ratio, prices are back to 2003 levels - and the price-to-rent ratio maybe moving a little sideways now.

Zillow Forecast: Expect November Year-over-year Change for Case-Shiller Index slightly higher than in October -- The Case-Shiller house price indexes for October were released yesterday. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close. From Zillow: November Case-Shiller Forecast Shows Continued Growth  Similar to last month’s Zillow’s Home Value Index data, October S&P Case-Shiller data shows home prices continuing to climb. The 10- and 20-City Indices as well as the National Case-Shiller Index grew by nearly 1 percent between September and October. Similarly all three of the indices showed annual growth rates north of 5 percent. This marks the first time in over a year the national index has grown at 5 percent annually. When November Case-Shiller data is released a month from now, we expect the data will show continuing growth month-over-month, though not at quite the same sizzling pace. We predict that the 10- and 20- City Indices will end November 0.5 percent above their October values (seasonally adjusted). We expect the national index to grow slightly faster than the other two, at a rate of 0.7 percent month-over-month. Inline with continued monthly growth we also expect all rates still above 5 percent when November data is released. The table below shows the current changes in Case-Shiller data along with our forecasts for next month’s data. This suggests the year-over-year change for the November Case-Shiller National index will be slightly higher than in the October report.

NAR: Pending Home Sales Index decreased 0.9% in November, up 2.7% year-over-year - From the NAR: Pending Home Sales Decline Modestly in November The Pending Home Sales Index, a forward-looking indicator based on contract signings, decreased 0.9 percent to 106.9 in November from an upwardly revised 107.9 in October but is still 2.7 percent above November 2014 (104.1). Although the index has increased year-over-year for 15 consecutive months, last month's annual gain was the smallest since October 2014 (2.6 percent)...The PHSI in the Northeast decreased 3.0 percent to 91.8 in November, but is still 4.3 percent above a year ago. In the Midwest the index rose 1.0 percent to 104.9 in November, and is now 4.1 percent above November 2014. Pending home sales in the South increased 1.3 percent to an index of 119.9 in November and are 0.5 percent higher than last November. The index in the West declined 5.5 percent in November to 100.4, but remains 4.5 percent above a year ago. This was below expectations of a 0.5% increase for this index.  Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in December and January.

November 2015 Pending Home Sales Index Weakens.: The National Association of Realtors (NAR) seasonally adjusted pending home sales index declined - and was well under expectations. Our analysis of pending home sales shows improvement - but does forecast relatively weak December existing home sales. The quote of the day from this NAR release: Home prices rising too sharply in several markets, mixed signs of an economy losing momentum and waning supply levels have acted as headwinds in recent months ... Pending home sales are based on contract signings, and existing home sales are based on the execution of the contract (contract closing). The NAR reported:

  • Pending home sales index was down 0.9 % month-over-month and up 3.9 % year-over-year (last month was reported +2.7 % year-over-year).
  • The market was expecting month-over-month growth of 0.0 % to 2.4 % (consensus 0.5 %) versus the growth of -0.9 % reported.

Econintersect's evaluation using unadjusted data:

  • the index growth was up 2.8 % month-over-month and up 5.1 % year-over-year.
  • The current trends (using 3 month rolling averages) insignificantly declined but remains in expansion.
  • Extrapolating the pending home sales unadjusted data to project December 2015 existing home sales, this would be a 5.3 % contraction year-over-year for existing home sales.

Pending Home Sales Decline 0.9%, Well Below Any Estimate; About that "Know Before You Owe" Theory -- Today the NAR released the Pending Home Sales Index, a measure of expected sales on existing homes. The Econoday Consensus Estimate was for a 0.5% rise in a range of 0.0 to 2.4%.  No economist got the sign correct. The index unexpectedly declined 0.9% month-over-month, well below even the lowest economist's estimate.  The pending home sales index was down 0.9 percent but up 2.7 percent from a year ago. Modest gains in the Midwest and South were offset by larger declines in the Northeast and West. The Northeast decreased 3.0 percent but is still 4.3 percent above a year ago. In the Midwest the index rose 1.0 percent and and is now 4.1 percent above November 2014. Pending home sales in the South increased 1.3 percent and are 0.5 percent higher than last November. The index in the West declined 5.5 percent but remains 4.5 percent above a year ago. Ahead of the release, Bloomberg parroted the NAR line that disclosure rules affected November existing home sales. I wrote about the rule changes on December 22, in Existing Home Sales Plunge 10.5%, NAR Blames "Know Before You Owe"; What's the Excuse for Last Month?  The rule change, dubbed "Know Before You Owe", was a simplification of disclosure rules. It became effective on October 3. I failed to see how a decline in November was related to simplification of rules that actually took effect the previous month.. If the rule change theory was correct, delays in November would have pushed into expected closings in December. The Econoday economist guessing a rise of 2.4% probably believed that theory. Instead, we see a plunge.

November Median Household Income at a New Post-Recession High -- The Sentier Research monthly median household income data for November came in at $56,746. The nominal median rose $75 month-over-month and is up $2,812 year-over-year. That's an increase of 0.1% MoM and 5.2% YoY. Adjusted for inflation, the latest income was up $58 MoM and $2,574 YoY. The real numbers equate to increases of 0.1% MoM and 4.8% YoY. In real dollar terms, the median annual income is 1.8% lower (-$1,052) than its interim high in January 2008 but well off its low in August 2011. The first chart below is an overlay of the nominal values and real monthly values chained in the dollar value as of the latest month. The red line illustrates the history of nominal median household, and the blue line shows the real (inflation-adjusted value). Callouts show specific nominal and real monthly values for the January 2000 start date and the peak and post-peak troughs.

American median incomes are finally back to prerecession levels - Americans’ median incomes have recovered the ground lost since the beginning of the Great Recession — and it only took 8 years. A report released Tuesday by Sentier Research drew on Census Department data to show what a long slog it’s been. The median annual household income was $56,746 in November. That’s barely above October’s median of $56,688, but it was enough to top the $56,688 reached in December 2007, when the recession began. But that’s just 1.9% higher than where it was in June 2009, the beginning of the economic expansion. Perhaps even more discouraging, the median income is 1.1% lower than in January 2000, when record-keeping began. Average weekly earnings adjusted for inflation are just 5% higher in November 2015 than they were when the recession began. Despite all that, Sentier economists Gordon Green and John Coder are optimistic. Their own household income index hit its low point in August 2011. The period since then “has been marked by an uneven, but generally upward trend in the level of real median annual household income,” they wrote. Inflation has a big impact on real incomes, Green and Coder noted. Since the expansion began, consumer prices have risen 10.9%. Inflation has been more wobbly in recent months as geopolitical shocks battered the cost of energy.

Credit card debt projected to reach $900 billion by New Year's Day - U.S. credit card holders appear to have slipped back into bad habits as comparing eight of the past 10 quarters shows year-over-year regression with debt mounting. released data that shows spenders racked up $15.3 billion in the third quarter, bringing total outstanding credit-card debt to $871.9 billion. Card holders started the year strong paying off $41.1 billion in debt, but that’s usually how the year starts and those gains have been wiped away as consumers spent $25.5 billion in second quarter. Historically, Americans add more credit card debt in the fourth quarter with last year’s Q4 reaching $39.5 billion additional debt. projects total credit card debt to surpass $900 billion by the end of the year.

Debt and the Racial Wealth Gap - IF you are black, you’re far more likely to see your electricity cut, more likely to be sued over a debt, and more likely to land in jail because of a parking ticket.It is not unreasonable to attribute these perils to discrimination. But there’s no question that the main reason small financial problems can have such a disproportionate effect on black families is that, for largely historical reasons rooted in racism, they have far smaller financial reserves to fall back on than white families.The most recent federal survey in 2013 put the difference in net worth between the typical white and black family at $131,000. That’s a big number, but here’s an even more troubling statistic: About one-quarter of African-American families had less than $5 in reserve. Low-income whites had about $375. Any setback, from a medical emergency to the unexpected loss of hours at work, can be devastating. It means that harsh punishments for the failure to pay small debts harm black families inordinately. Sometimes, the consequence is jail. Other times, electricity is cut, or wages garnished.The modern roots of the racial wealth gap can be traced back to the post-World War II housing boom, when federal agencies blocked loans to black Americans, locking them out of the greatest wealth accumulation this country has ever experienced. More recently, the bursting of the housing bubble and subsequent recession slammed minorities. In 2013, the median wealth of white households was 13 times the median wealth of black households, the widest gap since 1989. Earlier this year, my colleague Annie Waldman and I took a close look at debt-collection lawsuits in three major American cities. We expected to see a pattern driven by income, with collectors and credit card lenders suing people most often in lower-income areas. But income was just half the story. Even accounting for income, the rate of court judgments from these lawsuits was twice as high in mostly black communities as it was in mostly white ones. .

Whole Foods to Pay $500K to End Overcharging Investigation --Whole Foods shoppers may be used to paying a pretty penny, but the grocery chain itself says it will pay $500,000 to end an investigation into overcharges discovered by New York City’s consumer affairs agency.  After inspections announced this past June, the Department of Consumer Affairs said that 89 percent of the time, the store routinely overstated the weight of prepackaged foods, including meats, fruits, vegetables, and prepared foods. For example, the agency reweighed eight packages of chicken tenders and found that, on average, each package was marked up by more than $4. While the consumer affairs agency’s press release outlined a series of changes the stores in New York would need to undergo, Whole Foods officials responded with a less detailed release, stating that the company already has solid standards and procedures.

Hotel Occupancy: 2015 is Best Year on Record  -- Here is an update on hotel occupancy from STR: US results for week ending 26 December The U.S. hotel industry reported negative results in the three key performance measurements during the week of 20-26 December 2015, according to data from STR, Inc. In year-over-year measurements, the industry’s occupancy decreased 4.0% to 42.8%. Average daily rate for the week was down 1.7% to US$108.34. Revenue per available room fell 5.6% to US$46.37. 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.

U.S. consumer confidence rises more than expected -- Consumer confidence rebounded more than forecast in December as Americans grew more optimistic about the current state of the economy and job market. The Conference Board’s sentiment index climbed to 96.5 from a revised November reading of 92.6 that was higher than previously estimated, the New York-based private research group said Tuesday. The median forecast in a Bloomberg survey of economists called for 93.5. The combination of a strong labor market and cheap fuel costs have buoyed households’ finances, giving them the wherewithal to purchase everything from cars to clothing and holiday gifts. Faster growth in wages would usher in bigger gains in confidence and probably provide another boost to consumer spending, the biggest part of the economy. “As 2015 draws to a close, consumers’ assessment of the current state of the economy remains positive, particularly their assessment of the job market ,” Lynn Franco, director of economic indicators at the Conference Board, said in a written statement. The share of Americans who see greater job availability in the next six months increased, and fewer expected their incomes to decline, the report showed. Estimates in the Bloomberg survey of 57 economists ranged from 88.5 to 97.3. The group’s report is in sync with the University of Michigan’s final reading for December. That gauge climbed to 92.6, the highest since July.

Young Americans' Confidence In Economy Surges As Hopes Of "55 And Older" Shatter - Consumer Confidence among Over-55 Americans is at its lowest since September 2014. On the other hand, confidence among the Under-35 generation is its highest in 9 years (as the lowest income earners saw the largest surge in confidence in history - from 44.2. to 73.4). The 'optimism' gap between young and old Americans has never, ever been greater... Which is ironic since it is the 55-and-older generation who have record jobs (while those 25-54 have collapsed since the great recession... Away from the age-related divergence, today's consumer confidence data had lots of of oddness to it... Consumers’ appraisal of current conditions was mixed in December. Those saying business conditions are “good” increased from 25.0 percent to 27.3 percent. However, those saying business conditions are “bad” also increased from 16.9 percent to 19.8 percent. Consumers, however, were more positive about the labor market. The proportion claiming jobs are “plentiful” increased from 21.0 percent to 24.1 percent, while those claiming jobs are “hard to get” decreased to 24.7 percent from 25.8 percent. Consumers’ optimism about the short-term outlook was somewhat mixed in December. Those expecting business conditions to improve over the next six months decreased slightly to 15.2 percent from 15.7 percent. However,those expecting business conditions to worsen increased slightly to 11.0 percent from 10.6 percent.

Vehicle Sales Forecast: Record Production in 2016 - The automakers will report December vehicle sales on Tuesday, January 5th. Sales in November were at 18.1 million on a seasonally adjusted annual rate basis (SAAR), and it possible sales in December will be over 18 million SAAR again. From WardsAuto: North America Production Will Hit 18 Million Next Year Forecast 2016 production totals 18.2 million vehicles, including 17.7 million light vehicles and 490,000 medium- and heavy-duty trucks. The LV total is 1.2% above the estimated 17.44 million in 2015, while the big-truck volume is 4.9% under 2015’s estimated total of 515,000. Total estimated vehicle output in 2015 of 17.96 million units is 1.1% above 2014’s 17.42 million and will topple the previous high of 17.66 million in 2000. LV volume this year will be a new record – beating 2000’s 17.16 million – while big-truck output will be a 9-year high. 2015 was a record year for light vehicle production in the US, and it looks like 2016 will be even better.

Who should control your car’s software - Cory Doctorow has an interesting piece in The Guardian on the ability of car owners/users to alter the software in their car. That is the broad issue but of course he writes about it in the context of the coming autonomous vehicles. Doctorow begins by throwing out the red herring that is the trolley problem applied to autonomous vehicles — that is, if your car has a choice between saving one life (your own to make it interesting) and others, what should it choose? Doctorow dismisses this issue as irrelevant in that even if a car were programmed to do this, if car owners disagree, it may be re-programmed — well, so long as such re-programming is in the power of the owner. I’ll come to that in a second but I do want to say that I think it is pretty irrelevant because I cannot imagine any pre-programming being anything other than “saving the most lives.” Yes, that doesn’t take into account nuance but no general purpose programming will do that especially if we can’t find general agreement on the nuance. But Doctorow’s question is whether someone other than the owner or user of a car should be able to program it and lock the user out? The affirmative answer that, say, a car manufacturer or even a government should be able to lock the user out is that individuals cannot be trusted to re-program in socially desirable ways. Doctorow does not go into this but when we talk about restricting what something can do, if we are doing it sensibly (as usual, a big ‘if’) we would apply such restrictions when there are externalities involved. Externalities mean precisely that what is in an individual’s interest is not in society’s collective interest. Thus, we often regulate and take control from individuals precisely because we cannot trust them to refrain from acting in their own interest. In this situation, if society thinks the “saving the most lives” rule is collectively optimal, then to ensure that rule actually is implemented we need to restrict the incentives of individuals to alter it unilaterally.

Trucking Tonnage Down In November 2015 --  Truck shipments remain weak. One index is still in expansion year-over-year in November, whilst the other is in contraction. The American Trucking Associations' (ATA) trucking index declined 0.9% in November, following an increase of 1.8% during October. The October figure was revised down from our press release on November 24. In November, the index equaled 134.3 (2000=100), down from 135.5 in October, and 1.1% below the all-time high of 135.8 reached in January 2015. From ATA Chief Economist Bob Costello: Tonnage gave back half of the gain in October highlighting weakness in factory output and new fracking activity, as well as a glut of inventories throughout the supply chain. With year-over-year gains averaging just 1.2% over the last three months, there has been a clear deceleration in truck tonnage. Looking ahead, I remain concerned about the high level of inventories throughout the supply chain. We recently learned that inventories throughout the supply chain and relative to sales rose in October. This will have a negative impact on truck freight volumes over the next few months," he said.  FTR's Trucking Conditions Index (TCI) measure for October fell more than three points from September to a reading of 5.06. The TCI was projected by FTR to decline through 2015Q4, so the October reading was not unexpected. Conditions are expected to improve for truckers in 2016 as shippers become concerned with the possibility of tight capacity in the second half of the year. FTR is forecasting 3% or better growth for truck loadings in 2016, reflecting stronger than expected results in 2015 and continued economic growth going forward.

The Wheels Just Fell Off: US Trucking Has Not Been This Bad Since The Financial Crisis -- Earlier this month, we profiled yet another casualty of slumping trade, falling commodity prices, and mediocre, double-adjusted economic “growth”: trucking.  More specifically, we highlighted the dramatic November decline in Class 5-8 orders. The numbers for Class 8 - those trucks with a gross weight over 33K pounds and which, you’re reminded, make up the backbone of U.S. trade infrastructure and logistics - were a veritable disaster.  “Class 8 orders of 16,600 were below our channel check based 22,000-25,000 expectation,dropped 59% yr/yr and 36% from October (vs. the ten-year average 7% decrease in November from October), and was the weakest order month on a seasonally adjusted basis since August 2010,” Wells Fargo exclaimed, before adding that “clearly, November Class 8 orders slowed to weak levels and were beneath expectations.”  And a bit more from FTRFTR has released preliminary data showing November 2015 North American Class 8 truck net orders at 16,475, 59% below a year ago and the lowest level since September 2012.  This was the weakest November order activity since 2009 and was a major disappointment, coming in significantly below expectations.  All of the OEMs, except one, experienced unusually low orders for the month. “Based on what we were seeing, we thought freight and truck sales would stay strong through the end of 2015 and into 2016, with a downturn beginning at some point in the second half of 2016,” Kenny Vieth, president & senior analyst with ACT Research Co told FleetOwner. "Falling commodity prices means freight is drying up and that is freeing up [truck] capacity. Meanwhile, exporting less means manufactures like Caterpillar can’t sell as many machines overseas, so they start producing less and that reduces freight further," he added. Well, don't look now, but Morgan Stanley is out with its latest "truck stop" (i.e. a freight transportation update) and the picture is not pretty. Have a look at the following three graphics for the bank's Truckload Freight Index broken down by flatbed, dry van, and reefer:

Rail Week Ending 26 December 2015: Rail Continues Sliding Deeper Into Recession: Week 51 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 marginally climbed into expansion year-over-year, which accounts for approximately half of movements and weekly railcar counts continued deeply in contraction.A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 391,107 carloads and intermodal units, down 9.8 percent compared with the same week last year. Total carloads for the week ending Dec. 26 were 206,903 carloads, down 17.9 percent compared with the same week in 2014, while U.S. weekly intermodal volume was 184,204 containers and trailers, up 1.6 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 17.8 percent to 6,273 carloads; and motor vehicles and parts, up 12.8 percent to 13,229 carloads. Commodity groups that posted decreases compared with the same week in 2014 included coal, down 31.6 percent to 70,350 carloads; petroleum and petroleum products, down 26.2 percent to 10,537 carloads; and metallic ores and metals, down 26.1 percent to 17,001 carloads. For the first 51 weeks of 2015, U.S. railroads reported cumulative volume of 14,058,461 carloads, down 5.8 percent from the same point last year; and 13,522,726 intermodal units, up 1.6 percent from last year. Total combined U.S. traffic for the first 51 weeks of 2015 was 27,581,187 carloads and intermodal units, a decrease of 2.3 percent compared to last year.

U.S. goods trade deficit narrows in November -- The U.S. goods trade deficit narrowed slightly in November, as both exports and imports weakened, the Commerce Department said Tuesday ( The trade gap narrowed 1.3% in November to $60.5 billion from a revised $61.3 billion in October. The deficit was smaller than Exports of goods shrank 2% to $121 billion in November with broad-based declines across sectors. Imports dropped 1.8% to $181.5 billion, with the drop concentrated in consumer goods. These steep declines do not "imply anything good about global and domestic demand," said Ted Wieseman, an economist at Morgan Stanley. The strong dollar and weakness in major global economies has hit the trade sector hard. Exports in November are at their lowest levels in almost five years, while imports are at the lowest level since early 2011, Wieseman noted. The advance snapshot on monthly goods trade was designed to allow the government to include three months of trade data in its first estimate of gross domestic product. A more comprehensive report on the deficit for both goods and services in November will be released on Jan. 6. Trade has been a drag on growth in five of the last seven quarters. Today's data is "arithmetically a bit positive for the current quarter growth picture," Wieseman said, but he still sees trade being a slight drag on growth this quarter. Economists surveyed by MarketWatch expect 2% fourth-quarter growth, matching the growth rate in the July-September quarter. Trade subtracting 0.26 percentage point from growth in the July-September quarter.

Matthew Cunningham-Cook: Five Reasons Tariffs Are Great -- naked capitalism Yves here. We are running the risk of getting ourselves exiled from the group of non-economists that economists occasionally deign to talk to by running this post. Advocating tariffs is seen as quackery.  However, in reality, the naive economic view that “more open trade is every and always better” is unsound. It’s based on the faulty premise that moving closer to an unattainable ideal state is preferable. But that notion was debunked over 60 years ago, in the Lipsey-Lancaser theorem, in their paper, “The Theory of the Second Best”. It found that moving closer to that unachievable position could make matters worse, not better, and (gasp!) economist and policymakers needed to assess tradeoffs, and not rely on simple-minded beliefs. And the example Lipsey and Lancaster used was in trade, a specific example where the country liberalizing trade would wind up worse off. In fact, economists are now willing to make more nuanced arguments around trade restrictions. For instance, many development economists argue, contrary to the conventional wisdom of 15 years ago, that developing countries do better to restrict imports to promote the development of key sectors, as well as the growth of a more balanced economy (as in having the consumer sector grow in tandem with the export sector, as opposed to being strongly export led). But how is this argument relevant to the US? Some parts of America have more of a third-world quality than our cosseted coastal elites realize, and it’s not hard to see that they would benefit from protection, particularly if the US had a national policy to promote certain industries. But the US only does industrial policy by default, and some of the current winners, like the financial services, healthcare, and the military-surveillance complex, are not about to cede their privileged position.

Why Weak Currencies Have a Smaller Effect on Exports - WSJ: As various central banks loosened monetary policy this year, some economists predicted another cycle of beggar-thy-neighbor currency wars, in which countries race each other to become the cheapest exporter. But it hasn’t panned out that way, and now a growing body of evidence suggests why: A shift in trade dynamics is blunting the impact of a weak local currency. This could be all the more relevant now, when the monetary policies of the world’s most powerful central banks—the Federal Reserve and the European Central Bank—are heading in very divergent directions, possibly taking the value of their currencies along with them. When a country loosens its monetary policy, interest rates fall and investors tend to pull their money out in search of higher yields elsewhere, pushing down the currency’s value. That is still happening. But the dynamic isn’t affecting trade flows as much as expected. What has changed is where businesses source the things they need to make the products they export. Manufacturers once found most components needed to make their goods at home. Now they increasingly look abroad for such inputs. As a result, exports now incorporate a lot more imports.

Warmongering Pays - US Foreign Arms Sales Soar 35% -- If ever there was a clearer indication of America's "need for war" it was the latest Durable Goods orders data, which confirmed, absent defense spending, the US economy is in a tail-spin. However, as NYTimes reports, foreign arms sales by the United States jumped by almost $10 billion in 2014, about 35 percent, even as the global weapons market remained flat and competition among suppliers increased, thanks to multibillion-dollar agreements with Qatar, Saudi Arabia and South Korea. Defense Spending New Orders has soared 148% in the last 3 months... the biggest rise since 2007.  But it is the US arms sales to foreigners that is really flourising. Despite a stagnant international weapons market and increased competition among suppliers, American foreign weapons receipts rose from $26.7 billion to $36.2 billion last year. According to a new congressional report, as The NY Times reports... The United States remained the single largest provider of arms around the world last year, controlling just over 50 percent of the market.  Russia followed the United States as the top weapons supplier, completing $10.2 billion in sales, compared with $10.3 billion in 2013. Sweden was third, with roughly $5.5 billion in sales, followed by France with $4.4 billion and China with $2.2 billion. South Korea, a key American ally, was the world’s top weapons buyer in 2014, completing $7.8 billion in contracts. It has faced continued tensions with neighboring North Korea in recent years over the North’s nuclear weapons program and other provocations. The bulk of South Korea’s purchases, worth more than $7 billion, were made with the United States and included transport helicopters and related support, as well as advanced unmanned aerial surveillance vehicles.

What are Inventories Telling Us? - The category of "inventories" refers to  how much is sitting on the shelf somewhere, waiting to be used or sold. Tying up resources in holding inventories has a cost, and over time, information technology and transportation improvements have made it easier to use "just-in-time" processes for re-ordering that make it possible to hold smaller inventories. Still, the size of inventories reveals something about expectations for future business activity, and also whether those expectations were met. What's interesting is that for the last few years, inventories across the economy are on the rise. The figures below are from the ever-useful FRED data tool maintained by the Federal Reserve Bank of St. Louis. The underlying data is updated through October 2015.  Consider the ratio of inventories/dales in the retail sector first. Notice the gradual decline over timef from 1990 into the early 2000s, as information technology made it possible to hold fewer resources. Notice also that during the two periods of recession, inventories first spiked up, as retailers found themselves with unexpected stock on their shelves, and then plummeted, as retailers delayed re-ordering until they were fairly confident that the economy was growing again. Indeed, the sharp rise-and-fall pattern of inventories is a mechanism that causes a recession to last over time. Finally, notice that since about 2012, the inventory/sales ratio is on the rise.

Dallas Fed: "Texas Manufacturing Activity Rises Again, but Outlook Worsens" in December -- From the Dallas Fed: Texas Manufacturing Activity Rises Again, but Outlook Worsens Texas factory activity increased for a third month in a row in December, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 5.2 to 13.4, indicating stronger growth in output. Perceptions of broader business conditions weakened markedly in December. The general business activity index has been negative throughout 2015 and plunged to -20.1 this month. After pushing just above zero last month, the company outlook index fell 10 points in December to -9.7, its lowest level since August.Labor market indicators reflected a notable rise in December. The employment index inched up further to 12.8; 26 percent of firms noted net hiring, while 14 percent noted net layoffs. The hours worked index suggested longer workweeks and rose to 15.2, its highest level since May 2010.  Output increased, but the general business activity index declined sharply.   This was the last of the regional Fed surveys for December. Four out of five of the regional surveys indicated contraction in December, especially in oil producing areas.  Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

December 2015 Texas Manufacturing Survey Manufacturing Activity Improves Again. -  Of the five Federal Reserve districts which have released their December manufacturing surveys - three are in contraction and two in expansion. A complete summary follows. Texas factory activity increased for a third month in a row in December, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 5.2 to 13.4, indicating stronger growth in output. Some other indexes of current manufacturing activity also reflected growth in December, but the survey's demand measures showed continued weakness. New orders, an indicator of incoming demand, declined at a faster pace. The index has been below zero for five months and fell to -8.9 in December. The growth rate of orders index has been negative for more than a year and dipped 7 points to -14.3 this month. Meanwhile, the capacity utilization and shipments indexes posted their fourth positive readings in a row and inched up to 7.8 and 7.6, respectively. Perceptions of broader business conditions weakened markedly in December. The general business activity index has been negative throughout 2015 and plunged to -20.1 this month. After pushing just above zero last month, the company outlook index fell 10 points in December to -9.7, its lowest level since August. Labor market indicators reflected a notable rise in December. The employment index inched up further to 12.8; 26 percent of firms noted net hiring, while 14 percent noted net layoffs. The hours worked index suggested longer workweeks and rose to 15.2, its highest level since May 2010.

Dallas Fed Manufacturing Outlook: Worsening Business Conditions - This morning we got the most recent Dallas Fed Texas Manufacturing Outlook Survey (TMOS). The latest index came in at -20.1, a 15 point decrease from last month's -4.9. Here is an excerpt from the latest report: Texas factory activity increased for a third month in a row in December, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 5.2 to 13.4, indicating stronger growth in output. Some other indexes of current manufacturing activity also reflected growth in December, but the survey’s demand measures showed continued weakness. New orders, an indicator of incoming demand, declined at a faster pace. The index has been below zero for five months and fell to -8.9 in December. The growth rate of orders index has been negative for more than a year and dipped 7 points to -14.3 this month. Meanwhile, the capacity utilization and shipments indexes posted their fourth positive readings in a row and inched up to 7.8 and 7.6, respectively.Perceptions of broader business conditions weakened markedly in December. The general business activity index has been negative throughout 2015 and plunged to -20.1 this month. After pushing just above zero last month, the company outlook index fell 10 points in December to -9.7, its lowest level since August. Monthly data for this indicator only dates back to 2004, so it is difficult to see the full potential of this indicator without several business cycles of data. Nevertheless, it is an interesting and important regional manufacturing indicator. The Dallas Fed on the TMOS importance:

Regional Fed Manufacturing Overview: December - Five out of the twelve Federal Reserve Regional Districts currently publish monthly data on regional manufacturing: Dallas, Kansas City, New York, Richmond, and Philadelphia. Regional manufacturing surveys are a measure of local economic health and are used as a representative for the larger national manufacturing health. They have been used as a signal for business uncertainty and economic activity as a whole. Manufacturing makes up 12% of the country's GDP.The other 6 Federal Reserve Districts do not publish manufacturing data. For these, the Federal Reserve’s Beige Book offers a short summary of each districts’ manufacturing health. The Chicago Fed published their Midwest Manufacturing Index from July 1996 through December of 2013. According to their website, they suspended publication “…pending the release of updated benchmark data from the U.S. Census Bureau and a period of model verification.” They anticipate the next release to be fall of 2015. Here is a three-month moving average overlay of each of the five indicators since 2001 (for those with data).

Chicago PMI declines to 42.9  --Chicago PMI: Dec Chicago Business Barometer Down 5.8 points to 42.9 The Chicago Business Barometer contracted at the fastest pace since July 2009, falling 5.8 points to 42.9 in December from 48.7 in November...There was also ongoing weakness in New Orders, which contracted at a faster pace, to the lowest level since May 2009. The fall in Production was more moderate but still put it back into contraction for the sixth time this year. The Employment component, which had recovered in recent months, dropped back below the 50 neutral mark in December, leaving it at the lowest since July. The only positive this month came from a special question with 55.1% of the panel expecting demand to be stronger in 2016 compared with 14.3% who thought it would be lower. 30.6% of respondents thought demand would be unchanged. ...Chief Economist of MNI Indicators Philip Uglow said, “The steepness of the decline in the Barometer in recent months ends a particularly volatile year, which has seen orders and output move in and out of contraction. It lends weight to the Fed’s gradual approach to tightening, with the flexibility to change direction if needed.”  This was well below the consensus forecast of 50.0.

Chicago PMI plummets to 42.9; lowest since 2009 - Economic activity in the Midwest contracted at the fastest pace in more than six years in December, according to the Chicago Business Barometer, also known as the Chicago PMI. The index fell to 42.9 from 48.7 in November. Economists had expected it to rise 1.3 points to 50 in the December reading. The index has spent much of the year below the 50 mark that separates expansion from contraction. Order backlogs were the biggest drag in December, dropping 17.2 points to 29.4. That’s the lowest since May 2009 and marked the 11th-straight month in contraction. The last time such a sharp decline was registered was 1951. New orders also sank to the lowest level since May 2009. That’s bad news for activity down the road. Still, 55.1% of survey respondents said they expect stronger demand in 2016 than in 2015.

Chicago PMI Crashes, New Orders and Order Backlogs Plunge to May 2009 Level; Service Economy Headed for a Slowdown? - It was another disastrous month for the Chicago PMI. Economists expected a bounce back from last month's unexpected dip into negative territory.  The Econoday Consensus Estimate was a guess of 50 in a range of 48 to 53. The actual reading of 42.9, below any economist's estimate is best described as a two-month crash.  The December Chicago PMI tumbled to a reading of just 42.9, down 5.8 points. The reading was a fresh 6-1/2 year low and the seventh contraction this year. It also was far below expectations of a breakeven reading of 50. The biggest contributor to the decline was a 17.2 point plunge in order backlogs, to 29.4, marking their eleventh consecutive month in contraction. December's reading was the lowest since May 2009. The index also was depressed by ongoing weakness in new orders, which contracted at a faster pace, down 5.3 points to 38.8, the lowest level since May 2009. Both production and employment fell into contraction.  The only component to expand at a faster pace was supplier deliveries, although some companies noted that the rise was influenced more by logistics issues during the holiday season and in preparation for Chinese New Year on February 8. The PMI continued to feel the ill effects of general sluggish demand and lower energy prices, which have left their mark on Chicago area companies, along with the stronger U.S. dollar. Moreover, well above normal temperatures has impacted many businesses that rely on cold weather.

US Tumbles Into Manufacturing Recession With Abysmal Chicago PMI Report - America has never - ever - avoided a recession when Chicago's Business Barometer has collapsed to these levels. At 42.9, missing the expectations of 50.0 by the most ever, down from 48.7 in November, the final US economic data point of the year sums up perfectly what a disaster Yellen has hiked rates into.  Purchasers overwhelmingly reported that business activity levels were below seasonal norms. This feedback came from companies who usually see an uptick in business into the holiday selling season as well as those who see business taper off into the holiday. Firms gave a downbeat assessment of full-year activity levels as companies found themselves left with stocks of  finished goods amid the weaker demand backdrop

Weekly Initial Unemployment Claims increase to 287,000 -- The DOL reported: In the week ending December 26, the advance figure for seasonally adjusted initial claims was 287,000, an increase of 20,000 from the previous week's unrevised level of 267,000. The 4-week moving average was 277,000, an increase of 4,500 from the previous week's unrevised average of 272,500.  There were no special factors impacting this week's initial claims.   The previous week was unrevised at 267,000.  The following graph shows the 4-week moving average of weekly claims since 1971.

Could Few Layoffs Be a Bad Sign for the Economy? - The number of Americans seeking first-time jobless benefits, a proxy for layoffs, is lower this year than any since 1973—and some economists see that as a distressing signal. The initial claims figures are clouded because a smaller share of those laid off are applying for benefits, but the number of workers involuntarily losing their jobs is trending near historical lows. This just six years after claims spiked in the wake of the recession. The data speaks to job security. But it also indicates the labor market is less dynamic than in past decades. Firms are reluctant to let workers go, but at the same time are slow to fill job openings. Through the first 50 weeks of 2015, according to the Labor Department, the seasonally adjusted weekly average of claims filed was about 277,961. That rate is 10% lower than last year, and down from 573,731 in 2009. The current rate of claims filing is even more stunning considering the labor force has nearly doubled since 1973. “I’m concerned with lack of turnover,” said Tara Sinclair, chief economist at job search site Indeed. “If employers are taking risks, some of them are going to fail, and that will result in layoffs. But we need businesses to try new things in order to propel better economic growth.”

Unemployment Fell in Many Texas Cities, Despite the Oil Bust - Low crude-oil prices have dented the once high-flying Texas economy, but most cities across the Lone Star State are still seeing job gains and either steady or falling unemployment. Jobless rates were lower in November compared with a year earlier in nine of Texas’s 25 metropolitan areas, and unchanged in an additional four, the Labor Department reported Wednesday. Major cities like Austin, Dallas, El Paso and San Antonio all saw joblessness decline on the year, and all but three metro areas in the state saw nonfarm payrolls increase last month from a year earlier. Metro-level data are not seasonally adjusted. Unemployment last month ranged from a low of 3.2% in Amarillo to a high of 8% in the McAllen-Edinburg-Mission metro area. Unemployment rates climbed on the year in 12 metro areas including Houston, the nation’s fourth-largest city, where the jobless rate rose to 4.9% in November from 4.3% a year earlier. The statewide unemployment rate was a seasonally adjusted 4.6% in November, up from 4.4% in October but unchanged from a year earlier, while the national jobless rate last month was 5% — a level Texas has remained below for 16 consecutive months. Hiring noticeably slowed across Texas this year. Statewide nonfarm payroll growth, seasonally adjusted, averaged about 12,000 per month in the first 11 months of 2015 compared with a monthly average of 34,000 in 2014.

 Hold the Celebration on Record Low Unemployment Insurance Claims - Dean Baker - The NYT headlined an article on the drop in unemployment insurance claims, "Jobless claims near 42-year low as labor market tightens." While it would be good news if fewer people were filing for unemployment insurance because they were not losing their jobs, this is only part of the story behind the drop in claims. Due to tighter restrictions on unemployment insurance, a much smaller share of the unemployed are eligible for benefits than in prior decades. For example, in the most recent month, just under 2.2 million people were collecting benefits out of 7.9 million unemployed, which means that 29.1 percent of the unemployed were collected benefits. If we go back to November of 1973 (42 years ago), 1.7 million people were getting benefits out of unemployed population of 4.3 million, for a ratio of 39.5 percent. Part of the drop in claims in recent years is due to the improvement in the labor market, but part of the decline is due to fewer people being eligible. One can debate whether the tighter restrictions are desirable, but this is clearly a separate issue from a tightening of the labor market.

Why Job Growth Could Get Even Worse for Men Without College Degrees --New forecasts show that many of the fastest-growing jobs over the next decade could accelerate the labor-market polarization that has bred deep anxieties over the state of the U.S. economy.  The Labor Department’s recent release of biennial job market forecasts shows that the fastest-growing jobs tend to favor workers with more education, workers in jobs dominated by women and workers in urban areas, according to analyses by Jed Kolko, an economist based in San Francisco.  The projections pull back the curtain on a potentially unsettling future for many workers who have already felt upward mobility slipping away in an economy that has grown more polarized in recent decades along educational lines.  Mr. Kolko groups each occupation by the level of education required and finds that the fastest-growing are projected to be those that require some form of advanced degree—either a master’s, doctorate or professional degree. At the same time, many of the slowest-growing jobs are those that require just a high school degree, which accounted for more than a third of jobs last year. Notably, jobs that require no formal credential grow less slowly than those that require a high school degree.   This is disconcerting because it risks deepening the split of labor markets between jobs that require more education and those that demand less of it, he says. The Labor Department projections show nearly 19 in 20 jobs are projected to be added in the service-providing sector. By the end of 2024, the construction sector won’t add enough jobs to reach the 2006 peak, while manufacturing employment is expected to decline by 800,000 jobs, wiping out all of the gains made since 2010. Second, Mr. Kolko finds that several of the fastest-growing jobs, primarily in the health-care field, also are professions dominated by women. Only three of the fastest-growing jobs, wind turbine service technicians, commercial drivers and ambulance drivers, are primarily male, he finds.

Over 50, Female and Jobless Even as Others Return to Work - The latest signs of an improving economy were good enough to help persuade the Federal Reserve to raise interest rates for the first time in nearly a decade. But the better job market is not good enough to land Chettie McAfee a job. Laid off at the start of the recession from the diagnostic testing firm in Seattle where she spent more than three decades, Ms. McAfee, 58, has not worked since 2007. “I’ve been applying and applying and applying,”  At 5 percent, the jobless rate may be close to what economists consider full employment, but that headline figure doesn’t capture the challenges still facing millions of Americans who have yet to regain their footing in the workplace.Ms. McAfee is part of a group that has found the postrecession landscape particularly difficult to navigate: women over 50.That is especially striking because many recent economic and social trends — the decline of manufacturing and the rise of health care, the advance of educated women into professions and jobs once mostly occupied by men — were seen as harmful to working-age men and advantageous for the growing ranks of working women.  But many of these older women now earn far less and use many fewer skills than they did before. Others have been left stranded without any job for months or even years. Some have given up the search altogether.A new study on long-term unemployment from the Federal Reserve Bank of St. Louis found that the prospects for women over 50 darkened after the Great Recession. In 2006-7, before the downturn hit, less than a quarter of the unemployed in this group had been out of work for more than six months. By 2012-13, older jobless women accounted for half of the long-term unemployed.

Job Guarantee Versus Basic Income Guarantee  - naked capitalism Yves here. I’ve been remiss in not putting this video from November on a discussion of the merits of proposals for a job guarantee versus an income guarantee. The talk was hosted by Dissent Magazine, Jacobin, and the New Economy Coalition, and is explicitly anticapitalist, so you may need to filter out the occasional ideological leap.  The participants were Alyssa Battisoni from Jacobin, activist Jesse Myerson, Darrick Hamilton of the New School, and Pavlina Tcherneva of University of Missouri, Kansas City. There are some strong moments. For instance, Pavlina begins her critique of a basic income at 37:00, and closes with, “if the issue is capitalism, you have to change property rights. Just allowing people to not work is not enough” (~45:30)  As much as many readers advocate the idea of basic income, I suggest you consider the results of the one time it was implemented in historically on a large-scale basis: the Speenhamland system, in early industrial England. As Karl Polanyi describes at length in his classic, The Great Transformation, the long-term results were disastrous for the laboring classes. I strongly suggest you read the long-form discussion here, but the short version is that the guarantee wound up lowering wages and serving as a subsidy to employers.

The Rise Of The Temp Economy: More U.S. Employers Than Ever Want A "Disposable Workforce" - In this day and age it seems like almost everything is disposable, and many employers have found that they can make a lot more money if they have a workforce that can be turned on and off like a faucet. In America today, there are more than 17 million “independent workers”, and they represent a bigger share of the workforce than ever before. Federal laws give a lot of protection to “full-time workers”, but for temporary and contract employees it is a much different story. Temp workers don’t get health insurance, vacation time or retirement benefits. They are simply paid for the limited amount of time that they are needed and then they are disposed of immediately. There has always been a role for such workers in our economy, but these days some of the biggest corporations in the entire country are getting rid of “full-time workers” and replacing them with temp workers just so that they can make a few extra bucks. As a result, the ranks of the “working poor” continue to expand, and the decline of the middle class is accelerating. Steven Hill, a senior fellow with the New America Foundation, says that the rise of the “1099 economy” is fundamentally shifting the balance of power between employers and employeesThis practice has given rise to the term “1099 economy,” since these employees don’t file W-2 income tax forms like any regular, permanent employee; instead, they receive the 1099-MISC form for an IRS classification known as “independent contractor.” The advantage for a business of using 1099 workers over W-2 wage-earners is obvious: an employer usually can lower its labor costs dramatically, often by 30 percent or more, since it is not responsible for a 1099 worker’s health benefits, retirement, unemployment or injured workers compensation, lunch breaks, overtime, disability, paid sick, holiday or vacation leave and more. In addition, contract workers are paid only for the specific number of hours they spend providing labor, or completing a specific job, which increasingly are being reduced to shorter and shorter “micro-gigs.”

Somali workers fired at Colorado packing plant in prayer dispute | Reuters: Nearly 200 workers, mostly Somali immigrants, have been fired from a meat-packing plant in Colorado after staging a walkout to protest what they said were insufficient prayer accommodations, the company and Islamic advocacy groups said on Thursday. The Council on American-Islamic Relations (CAIR) said the workers were treated in a “discriminatory manner” by managers at the Cargill Meat Solutions [CARGIL.UL] facility in Fort Morgan, about 75 miles northeast of Denver. Jaylani Hussein, a spokesman for CAIR, said in a YouTube video posted by the group that the workers objected to new restrictions on their ability to worship on the job, "which they had been granted for a long period of time." “All of these employees are good employees (and) don’t have any other issues,” Hussein said, adding that the dispute stemmed from a "misunderstanding on policy changes" by Cargill regarding workplace prayer. Mike Martin, a spokesman for Minneapolis-based Cargill, disputed assertions the company had changed its policy, noting that since 2009 the Fort Morgan plant has set aside an on-site “reflection area" for people of all faiths. “Cargill makes every reasonable attempt to provide religious accommodations to all employees based on our ability to do so without disruption to our beef-processing business,” he said. He said the degree of flexibility the company can extend for prayers depends on a variety of factors, including daily work-flow considerations.

U.S. Plans Mass Deportation of Illegal Central American Migrants - WSJ: To stanch the flow of illegal migrants to the U.S., the Department of Homeland Security has been preparing a national operation to deport Central American families who have evaded removal orders, according to a government official. Starting early next month, U.S. Immigration and Customs Enforcement, a DHS unit, plans to start rounding up hundreds of families that entered the U.S. illegally and who have ignored a final order to leave the country, said the official. Such an order is issued by a judge in immigration court. The number of families showing up at the southwest border has spiked in recent months as gang-related violence grips El Salvador and Honduras. The region also has been plagued by drought.Typically, the migrants, many of them women and children, turn themselves in at the border and make asylum claims. U.S. authorities then release them, often to live with relatives here, while their cases are adjudicated. DHS Secretary Jeh Johnson in recent months has warned that those whose claims are denied in immigration court could be removed from the country. A spokeswoman for Immigration and Customs Enforcement didn’t dispute an operation has been planned to pursue Central Americans with removal orders. In a statement, the spokeswoman said the agency “focuses on individuals who pose a threat to national security, public safety and border security.”

U.S. Doesn’t Know How Many Foreign Visitors Overstay Visas - The question from the congressman to the Obama administration official was straightforward enough: How many foreign visitors overstay their visas every year? The reply was simple too, but not in a satisfying way. “We don’t know,” the official said. The testy exchange during a recent congressional hearing between Representative Mark Meadows, Republican of North Carolina, and Alan Bersin, the assistant secretary for international affairs at the Department of Homeland Security, highlights what some law enforcement officials call a critical weakness in the United States foreign visa program. Nearly 20 years ago, Congress passed a law requiring the federal government to develop a system to track people who overstayed their visas. After the attacks of Sept. 11, 2001, an entry and exit tracking system was seen as a vital national security and counterterrorism tool, and the 9/11 Commission recommended that the Department of Homeland Security complete a system “as soon as possible.” Two of the 9/11 hijackers, Satam al-Suqami and Nawaf al-Hazmi, had overstayed their visas. Since then, the federal government has spent millions of dollars on the effort, yet officials can only roughly estimate the number of people in the United States illegally after overstaying visas. One widely cited statistic, from a 1997 report by the Immigration and Naturalization Service, puts the number of people who overstay their visas at 40 percent — which now would mean about 4.4 million of the estimated 11 million undocumented residents in the United States. Numerous lawmakers, including the Republican presidential candidates Marco Rubio and Ted Cruz, have used that figure when trying to describe the scope of the problem. But even that number has never been conclusively substantiated

Will Inequality Ever Stop Growing? -- For nearly half a century now, inequality in America has been on the rise. The result is an alarming concentration of wealth among the country’s very well-off: The 400 richest Americans own more than the poorest 61 percent—194 million people. Unsurprisingly, this stratification follows the country’s racial cleavages: Just two of the richest 400 people are black, and the 100 richest households own as much as the nation’s entire African American population combined. Some argue that inequality per se is not inherently problematic. It is possible, after all, to imagine a society in which everyone is doing very well and lives comfortably, while those at the very top are in the stratosphere. Unfortunately, that is not what is going on. Some 47 million people in America are living in poverty. We reached out to some of the leading scholars of and experts on the economy and labor markets, and asked them what, as the year comes to an end, is giving them cause for hope and despair. Below are their answers, lightly edited for length and clarity.

The Marriages of Power Couples Reinforce Income Inequality -  These days, an investment banker may marry another investment banker rather than a high school sweetheart, or a lawyer will marry another lawyer, or a prestigious client, rather than a secretary. Whether measured in terms of income or education, there are more so-called power couples today than in the past, one manifestation of a phenomenon known as assortative mating, or more generally the pairing of like with like. These matches are great for those individuals who can build prosperous and happy family alliances, but they also propagate inequality across the generations. Of all the causes behind growing income inequality, in the longer run this development may prove one of the most significant and also one of the hardest to counter. For instance,  the achievement gap between children from rich and poor families is higher today than it was 25 years ago, according to a recent study from the Pew Research Center. Furthermore, higher income and educational inequality increase the incentive to seek out a good marriage match, so the process may become self-reinforcing. Money and talent become clustered in high-powered, two-earner families determined to do everything possible to advance the interests of their children. There is some long-term benefit for society, since many innovators and business creators will receive their initial boosts early in their lives, including the very best training in childhood, and that may enhance their eventual productivity. But there are also serious economic costs. As it becomes harder for many people to “marry up” as a path for income mobility for themselves or their children, families that are not well connected may feel disengaged, and the significant, family-based advantages for some children may discourage others from even trying.

New year brings minimum wage hikes for Americans in 14 states | Reuters: As the United States marks more than six years without an increase in the federal minimum wage of $7.25 an hour, 14 states and several cities are moving forward with their own increases, with most set to start taking effect on Friday. California and Massachusetts are highest among the states, both increasing from $9 to $10 an hour, according to an analysis by the National Conference of State Legislatures. At the low end is Arkansas, where the minimum wage is increasing from $7.50 to $8. The smallest increase, a nickel, comes in South Dakota, where the hourly minimum is now $8.55. The increases come in the wake of a series of "living wage" protests across the country, including a November campaign in which thousands of protesters in 270 cities marched in support of a $15-an-hour minimum wage and union rights for fast food workers. Food service workers make up the largest group of minimum-wage earners, according to the Bureau of Labor Statistics. With Friday's increases, the new average minimum wage across the 14 affected states rises from $8.50 an hour to just over $9.  Several cities are going even higher. Seattle is setting a sliding hourly minimum between $10.50 and $13 on Jan. 1, and Los Angeles and San Francisco are enacting similar increases in July, en route to $15 an hour phased in over six years.

California Referendum Would Force Politicians to Wear Logos of Donors -- In California, citizens can propose a referendum on anything if they gather enough signatures.  John Cox, a wealthy attorney who made a fortune to real estate, is tired politicians being bought and owned by corporate interests. He is putting up $1 million to gather signatures for a referendum that would Force Politicians to Wear Donor LogosA wealthy Republican wants to require unprecedented transparency in California by forcing state politicians to plaster their suits and dresses with the logos of their top 10 donors -- and voters fed up with those politicians may actually get the chance to vote on the idea in November. The unusual dress code is offered in a proposed ballot initiative that backers say likely will be cleared for signature collection within the next week or two. Then, 365,880 valid signatures will have to be submitted for a spot on the ballot. Initiative sponsor John Cox, an attorney who owes his fortune to real estate, says he doesn’t foresee a challenge in the threshold, which is relatively low due to poor 2014 voter turnout. Cox says he expects a boost from popular anti-establishment sentiment reflected in the presidential race. “It’s going to be immensely popular,” Cox says. “We have a system under which people who want something from government fund the campaigns of the people who make those decisions. In any other solar system that would be considered corrupt.”

California Politicians Could Soon Be Forced To Wear Logos Of Top Corporate Donors - Popular memes calling for politicians to wear the logos of their corporate sponsors have circulated the internet for years, but the suggestion may soon be a reality for California legislators. In the next week, a potential ballot measure, submitted to the Office of the Attorney General in October, is expected to receive title and summary for the 2016 election, meaning its advocates will be able to collect signatures in order to secure its official place on the ballot.The proposed law would require legislators and candidates to sport the emblems of groups that donate money to their campaigns.  As the advocacy group that launched the measure, California is Not for Sale, muses“Imagine this: a California Senator is speaking on the floor and proposes a bill he just drafted that will give oil companies huge tax advantages. Now imagine if on his jacket, he was wearing Chevron, Shell, and BP logos – some of his top ten contributors. Our law will bring this under-the-table-corruption to the surface and expose these politicians who take political contributions in exchange for favors for what they really are: corrupt.”  The ballot’s sponsor, John Cox, is an entrepreneur from San Diego and long-time advocate of reforming the California legislature, which is rife with scandal and corruption. The legislature has been plagued with multiple ethics violations and hearings, and last year, members of the governing body flew to Maui to meet with corporate executives and union bosses, who funded the trip by funneling funds through a non-profit organization. The Los Angeles Times reported on the doublespeak-inspired “Independent Voter Project,” which sponsored the event: “The group gets its money from about 24 entities, many putting up at least $7,500. They include Occidental Petroleum Corp., the Western State Petroleum Assn., Eli Lilly, the Altria tobacco firm, the California Cable and Telecommunications Assn., the state prison guards union and the California Distributors Assn., which represents distributors of tobacco and other products.”

Will California Actually Force Legislators to Wear Sponsor Patches Like Nascar Drivers? | VICE | United States: There's an old joke out there about forcing politicians to wear Nascar uniforms that tell us who their corporate sponsors are. I can't seem to trace it back to its origin, but I assume it was an email forward from someone's uncle. Now, it's looking conceivable that that joke could soon be a non-humorous, actual thing, legally required in the State of California. While the idea is still nothing more than an idea, California just might be the right place to try it out. As one of the top three states in terms of number of ballot measures created to produce new laws (The other two are Colorado and Oregon), the 2016 California ballot is expected to be freakishly overstuffed this November. If you can get get 365,000 valid signatures your issue goes on the ballot. It's not as though getting one percent of the entire population of California to endorse your idea is easy or anything, but if you've got some money burning a hole in your pocket, and the desire to change something politically, it's doable. Cox seems to fit the bill. He's an investment manager and a self-identified "Jack Kemp Republican." But precisely what is the change he has in mind? "This initiative will require every state legislator to wear on his coat, stickers, or some kind of logo representing their top ten contributors," Cox explained. Even if not an actual sports coat, the logos must be worn on the legislator's person. "It can't be a sign that they hold up."

Death Watch Illinois: Despite Massive Stock Market Rally, Illinois Pension Liabilities Go Up, and Up, and Up  -- Illinois' unfunded liabilities have risen ten out of the last eleven years. The only exception was 2011. This was despite massive rallies in financial markets every year since 2009. One out of every five tax dollars goes to pensions, but that's nowhere close to enough to stem the tide. Illinois has the worst funded pension plans in the nation. Those plans are a mere 42% funded in aggregate. That bleak estimate understates the problem because it assumes 8% annualized returns going forward. Those returns are not going to happen.   In October, Moody's cut Illinois debt to one step above junk, specifically citing pensions as the "greatest challenge".  Lower ratings have driven up borrowing costs. In turn, rising borrowing costs mean less money to spend elsewhere.  The new year is less than a week away, but Illinois still does not have a budget. Bloomberg reports Illinois Record Budget Impasse Makes It Worse for the State's Pension Disaster. As 2015 draws to a close, Illinois marks half a year without a budget. No spending plan has driven up borrowing costs, sunk its credit rating, and perhaps worst of all, exacerbated the state’s biggest problem: its underfunded pensions. Home to the least-funded state retirement system in the nation, Illinois has $111 billion of pension debt, which breaks down to more than $8,000 per resident. Partisan gridlock has produced the longest budget impasse in Illinois history. The stalemate has not only weakened state finances, it has kept lawmakers from finding a fix for those mounting liabilities. It’s been seven months since the Illinois Supreme Court rejected the state’s solution. Justices threw out the 2013 restructuring that took six attempts over 16 months to pass, despite one-party rule at the time. The measure was projected to save $145 billion over 30 years by limiting cost-of-living adjustments and raising the retirement age.

Puerto Rico governor: U.S. backtracking on island's independence | Reuters: The United States is backtracking from its historic position acknowledging Puerto Rico's right to self-governance, Puerto Rico's governor says in a pending U.S. Supreme Court case over so-called double jeopardy laws. In a letter to United Nations Secretary-General Ban Ki-moon released on Sunday, Puerto Rico Governor Alejandro Garcia Padilla said Washington is reversing a decades-old understanding that Puerto Rico, while a U.S. commonwealth, governs through its own constitution. The case plays out against a massive debt restructuring in Puerto Rico and could be a political lightning rod on an island where commonwealth status is the key issue dividing political parties. A 1950 agreement "emphasized that under the Puerto Rico constitution, the political power of the commonwealth emanates from the people and shall be exercised in accordance with their will," Garcia Padilla wrote in the letter. It came in response to a friend-of-the-court brief filed by U.S. Solicitor General Donald Verrilli in a Supreme Court case over whether Puerto Rico can prosecute people for crimes of which they have already been convicted in federal court. Verrilli argued that unlike states, Puerto Rico is not a separate sovereign, so prosecution would violate double jeopardy laws that ban trying a defendant twice for the same crime in the same jurisdiction. Puerto Rico could become sovereign "only if it were to attain statehood or become an independent nation," the United States argued.

Puerto Rico’s Debt Trap - Simon Johnson – The Caribbean island of Puerto Rico – the largest United States “territory” – is broke, and a human calamity is unfolding there. Unless a constructive course of political action is found in 2016, Puerto Rican migration to the 50 states will rival the scale of the 1930s Dust Bowl exodus from Oklahoma, Arkansas, and other climate-devastated states. With public debt service (principal plus interest) projected to nearly 40% of government revenue in 2016, Puerto Rico needs a new set of economic policies. But austerity will not work; this must be an investment-led recovery, with official measures oriented toward boosting growth by reducing the cost of doing business. The question is whether Puerto Rico will have that option. Much of its $73 billion debt has been issued by government corporations. But, though federal law allows such municipal debt to be restructured under Chapter 9 of the bankruptcy code in all 50 states, this does not apply to US territories like Puerto Rico. As a result, a protracted series of confusing legal battles and selective defaults looms. The cost of essential infrastructure services – electricity, water, sewers, and transportation – will go up while quality declines. One response has been to demand further belt-tightening, for example, in the form of wage reductions and healthcare cuts. But residents of Puerto Rico are also US citizens and they vote with their feet – the population has fallen from 3.9 million to 3.5 million in recent years as talented and energetic people have moved to Florida, Texas, and other parts of the mainland.

Puerto Rico is on the brink of a big default - Dec. 28, 2015: The island's government must pay about $1 billion to its creditors on January 4 to avoid defaulting for the second time since August. Even if it pays on time, Puerto Rico will still be saddled with a ton of debt -- roughly $73 billion in total, according to Moody's. The odds of Puerto Rico making the January payment aren't good. "It will be very, very hard, very difficult to find a way to do that payment," Alejandro Garcia Padilla, Puerto Rico's governor, recently told CNN. "We're out of cash." In fairness, Padilla made similar claims last June before Puerto Rico made a $1 billion payment on July 1, avoiding default. But in August, the island defaulted on a small portion of its debt. And conditions have only worsened since then. The August default was its first in history. The debt was mostly owned by ordinary Puerto Ricans and it has very little legal protection -- meaning the government faced little risk of being sued over the default. On January 1, Puerto Rico needs to make much larger payments on debt that has much more legal protection. Of the $1 billion, Puerto Rico must pay $332 million in general obligation bonds -- the ones that have the most legal backing. (Technically, because Jan. 1 is a holiday followed by a weekend, Puerto Rico will have until Jan. 4 to pay). Experts say Puerto Rico will likely miss a payment on its general obligation debt at some point.

Puerto Rico Says It Will Default on Some Bonds - Puerto Rico will default on nearly $174 million in principal and interest payments on bonds on Friday, the first day of 2016, the governor said on Wednesday, increasing the likelihood that the island will face lawsuits from an array of creditors. In a briefing for journalists, Gov. Alejandro García Padilla said only some of the payments would be halted immediately. They include $35.9 million due to holders of bonds issued by its Infrastructure Financing Authority, and $1.4 million due to holders of its Public Finance Corporation’s bonds. In a stark example of the financial version of musical chairs that has been playing out on the island in recent months, the government will divert a total of $174 million from lower-grade bonds to pay holders of the legally protected general obligation bonds. That diversion, known as a “clawback,” technically amounts to a default even though some of those creditors will not see a difference in their payments on Jan. 1. General obligation bonds have a top priority under Puerto Rico’s Constitution, and defaulting on them outside an official bankruptcy proceeding could set off a constitutional crisis, making the island’s problems even worse than they already are. As a result of the shuffle, the general obligation bondholders will receive on Friday the entire $328.7 million they are owed, said the governor, who referred to those top-ranked bondholders as participants in “vulture funds.”

As Oil Money Melts, Alaska Mulls First Income Tax in 35 Years - — Oil money no longer pays the bills here.The governor, facing a profound fiscal crisis, has proposed the imposition of a personal income tax for the first time in 35 years. State lawmakers, who recently moved into a palatial new office building here, where they work when not toiling in the far-off Capitol in Juneau, are now seeking less costly digs.  And a state budget that was a point of Alaskan pride — and envy from around the nation — lies in tatters as revenue that flowed from selling crude oil from Prudhoe Bay over the past four decades has been swept away.With oil prices down along with oil production, the state is facing an Alaska-size shortfall: Two-thirds of the revenue needed to cover this year’s $5.2 billion state budget cannot be collected.  Many Alaskans are not old enough to recall times this bad. This is the nation’s least-taxed state, where oil royalties and energy taxes once paid for 90 percent of state functions. Oil money was so plentiful that residents received annual dividend checks from a state savings fund that could total more than $8,000 for a family of four — arriving each autumn, as predictable as the first snowfall.   Every resource-dependent corner of the globe is in stress these days as commodity prices from copper to soybeans have collapsed to multiyear lows. States like Texas and Louisiana are also grappling with the oil downturn, but Alaska’s situation is unique. The 800-mile Trans-Alaska Pipeline, which was approved by Congress in the depths of the mid-1970s energy crisis and was completed in a crash-course construction cycle only a few years later, allowed crude oil to be shipped from oil fields emerging in the Arctic to the port in Valdez. With every barrel of oil, the state collected a royalty and a production tax that paid for most of state government and the creation of a multibillion-dollar Permanent Fund savings account.

DoJ shuts down asset forfeiture program after Congress slashes its budget - In America, your belongings can be confiscated by the police without warrant or evidence as proceeds of a crime, and then the government sues your possessions (not you), in lawsuits like "Township of East Bumblefuck vs $50,000 in $100 bills." If your goods lose the lawsuit, the police get to keep them, and use them (or sell them for operating capital). Police departments waxed fat on this, even making up "shopping lists" of desirable cars, etc, to target. States have been trying to curb this practice, changing state law so that law enforcement agencies wouldn't get to keep the stuff their seized. But the DoJ wouldn't play along, meaning that cops could still keep stuff by confiscating it under federal, not state law. Attempts to get the DoJ to play along have proved fruitless. After all, the DoJ got to split the take with local law-enforcement.. So in last week's budget bill, Congress took $1.2 billion away from the DoJ, money that they used to administer the program. Without that subsidy, the program became a money-loser. It is dead. It's unclear how much of the total national forfeiture haul will be affected by the DOJ's change, since many states don't make their forfeiture data public. But as the case of California shows, it is potentially significant: In that state in 2013, nearly eight out of every 10 dollars of forfeited property went through federal law. Under this change, that flow of cash would be shut off. Some law enforcement groups are less than happy with the change. The International Association of Chiefs of Police (IACP) said in a statement that "this decision is detrimental to state, local, and tribal law enforcement agencies and the communities they serve.  In a letter sent to President Obama, the leaders of Congress, and Attorney General Loretta Lynch, the heads of six law enforcement groups -- including the IACP and the National District Attorney's Association -- wrote to express "profound concern" over the changes:

Chicago police union seeks to destroy evidence. Good cops must stand up — After police stood by and watched now-former Officer Jason Van Dyke pump 16 bullets into 17-year-old Laquan McDonald, the Chicago police department came under Justice Department scrutiny. U.S. Attorney General Loretta Lynch announced the investigation after years of allegations and lawsuits against the department by Chicagoans concerning excessive force. The latest allegations came in the McDonald case, which revealed, among other things, that several of the officers who witnessed the shooting filed reports that were at odds with the videotape. The allegedly false reports claim that McDonald, who was carrying a three inch knife, was charging the officer when he was shot. Prosecutors saw things differently, and charged Van Dyke with first degree murder. Now Chicago’s Fraternal Order of Police (FOP) is pushing back by demanding that the city of Chicago destroy all police misconduct records that are more than 5 years old. The FOP argues that keeping those records is a breach of the union’s bargaining agreement with the city, which states that disciplinary records will be destroyed after 5 years, and records containing allegations of excessive force will be destroyed after 7 years. If the union prevails in having the city destroy the records, which go back nearly 50 years, it will be impossible for the Justice Department to establish a pattern of abuse.

America’s Incarcerated Population, Largest in World, Grew Even More Last Year - The federal government’s Bureau of Justice Statistics has released new numbers detailing how America’s incarcerated population — already the world’s largest — grew even bigger in 2014. The bureau’s researchers report that the number of individuals incarcerated grew by 1,900 people over the course of last year — “reversing a five-year decline since 2008.” It’s not all bad news, though. The researchers also report that there was a decrease in overall adults supervised by correctional systems — meaning included in community supervision or parole. In 2014, there were “about 52,200 fewer offenders than at year-end 2013.”Their report found that just seven jurisdictions “accounted for almost half of the U.S. correctional population at year-end 2014,” with Texas topping the list with 699,300 offenders. Overall, “about one in 36 adults in the United States was under some form of correctional supervision at year-end 2014.” Numerous explanations have been offered for this high rate of incarceration. As The Intercept reported earlier this month, one private prison executive offered his own theory at a recent investment bankers conference. “The reality is, we are a very affluent country, we have loose borders, and we have a bad education system,” said Shayn March, a vice president at private prison firm Geo Group. “And all that adds up to a significant amount of correctional needs, which, thankfully, we’ve been able to help the country out with and states with by providing a lower cost solution.”

Do Juvenile Curfews Increase Crime? -- Washington, DC has a juvenile curfew law. Anyone “under the age of 17 cannot remain in or on a street, park or other outdoor public place, in a vehicle or on the premises of any establishment within the District of Columbia during curfew hours.” (There are exemptions for juveniles accompanied by a parent and for travel for jobs (no detours allowed.)) Curfew laws keep some juveniles off the streets during curfew hours but which ones? The criminals seem the least likely to be deterred and with fewer people on the street perhaps the criminals are emboldened.The DC curfew switches from midnight to 11 pm on Sept 1 of every year. In a working paper, Jennifer L. Doleac and Jillian Carr test the effect of DCs juvenile curfew on gun violence by looking at the number of gunshots heard in the 11pm to midnight “switching hour” just before and just after Sept 1. From a summary:…the September 1 change provides a clean natural experiment. If curfews reduce gun violence, then when the curfew shifts to 11:00 p.m. rather than midnight, gunfire between 11:00 p.m. and midnight should go down. Does it?Just the opposite. Using data on gunfire incidents from ShotSpotter (acoustic gunshot sensors that cover the most violent neighborhoods in D.C.), we find that after the curfew switches from midnight to 11:00 p.m., the number of gunshot incidents increases by 150 percent during the 11:00 p.m. hour. This amounts to 7 additional gunfire incidents city-wide per week, during that hour alone. Jane Jacobs was right: the deterrent effect of having lots of people out on the streets is powerful. This makes juvenile curfew policies counter-productive.

Atlas Shrugged-er: Government Now Preying On High School Graduates - A friend sent me a news item from U.S. News and World Report which reported that Louisiana’s board of education is going to implement a new policy which requires all students to fill out a Free Application for Federal Student Aid in order to receive a high school diploma. Think about that for a moment.  In order to receive a high diploma, the State of Louisiana is requiring that high school seniors fill out an application which would enable them to go into debt the moment they receive their diploma. This is a mind-blowing event.  Most jobs available to high school grads do not require a college degree.  But some might require a high school diploma.  I have to wonder what the motive is behind this.  A significant portion of student debt is now being used for corporate-owned “universities” which are largely worthless to everyone except the entities who own the schools.  Goldman Sachs is a big player in this space.   Student debt, backed by the Taxpayer, is just another form of wealth transfer from the public to the banks and big corporations.

As Graduation Rates Rise, Experts Fear Diplomas Come Up Short - -- By one measure, Berea, with more than 1,000 pupils, is helping more students succeed than ever: The graduation rate, below 65 percent just four years ago, has jumped to more than 80 percent.But that does not necessarily mean that all of Berea’s graduates, many of whom come from poor families, are ready for college — or even for the working world. According to college entrance exams administered to every 11th grader in the state last spring, only one in 10 Berea students were ready for college-level work in reading, and about one in 14 were ready for entry-level college math. And on a separate test of skills needed to succeed in most jobs, little more than half of the students demonstrated  that they could handle the math they would need.It is a pattern repeated in other school districts across the state and country — urban, suburban and rural — where the number of students earning high school diplomas has risen to historic peaks, yet measures of academic readiness for college or jobs are much lower. This has led educators to question the real value of a high school diploma and whether graduation requirements are too easy.

Are U.S. academics who cite WikiLeaks blackballed? - While WikiLeaks continues to make strong interventions into the global news cycle, important debates have been simmering between editor Julian Assange and international relations scholars about whether or not the more than 2 million US diplomatic cables and State Department records WikiLeaks began publishing in 2010 (2,325,961 to be exact) are relevant to understanding how the world’s super-power operates and if Anglo-American academic institutions in the international relations discipline are biased toward the interests of US empire. The debate raises difficult questions. Do the cables provide insight into full-spectrum diplomacy, foreign relations, and concepts of sovereignty? If so, how can the indifference of certain prestigious associations and journals in the international relations discipline to WikiLeaks’ material be explained? Do these powerful institutions prefer to turn a blind eye to evidence that shows their theories wanting? Do they operate to provide a distorted view of the world and help prepare international studies graduates for jobs serving questionable US government interests? Speaking to Germany’s Der Spiegel magazine in July 2015, Assange suggested that institutions within the international relations discipline have failed to understand the intersection between current geopolitical and technological developments. Specifically, Assange charged that the US journal International Studies Quarterly (ISQ), published by the prestigious International Studies Association (ISA), would not accept manuscripts based on WikiLeaks’ material.

Student loans: Borrowers will get robocalls, thanks to Congress - – If you’re behind on your government student loans, your mobile phone may soon begin ringing with calls from debt collectors. Your friends and family may hear from them, too, thanks to Congress. A provision stuck in the spending bill approved last week exempts the U.S. Department of Education from a 1991 law that prevents harassing, automated phone calls. The Telephone Consumer Protection Act barred pre-recorded messages or auto-dialing, known as "robocalls," made to cellphones without the consent of the person called. Last week's budget grants an exemption to government debt-collectors, allowing them to auto-dial and make twice as many calls as they can by hand. It’s unclear when cellphones will start buzzing. In a letter sent Monday, four senators urged Education Secretary Arne Duncan not to allow robocalls until the Federal Communications Commission creates rules for the exemption. Congress gave the FCC nine months to act. "We are concerned that this provision will subject student loan borrowers to a barrage of unsolicited calls - and possibly leave them with no refuge to stop the calls,"

The Effort to Divert Class War Into Generational War: Lessons On Economics You Won’t Get from Jeff Bezos - Dean Baker -- Catherine Rampell devoted her column today to a popular Washington pastime: trying to get young people angry at their parents and grandparents so that they are not bothered by the enormous upward redistribution of income taking place in this country. She begins the piece by telling readers that college students are wasting their time complaining about diversity issues and sensitivity to racism and sexism, then gets to the meat of the story: “Older generations have racked up trillions in debt and stuck young people with the bill. This is not just due to expensive wars, unfunded tax cuts, Keynesian financial interventions and the other usual scapegoats for fiscal profligacy.“One of the largest ongoing sources of spending involves huge age-specific transfers: Our politicians are paying off older, higher-voter-turnout Americans in the form of generous benefits that those older people have not paid for and never will. Which means the tab will need to be picked up by someone else — i.e., someone younger. “'Invincible' youngsters are subsidizing health care for their not-yet-Medicare- eligible elders on the individual insurance market as well. And elsewhere on government balance sheets, spending on the old is crowding out spending on the young. At the state level, politicians have responded to swelling pension obligations by disinvesting from public higher education. These funding cuts have then been offset with massive tuition hikes — which fall to, you guessed it, today’s college students. “Fiscal issues of course aren’t the only way that young people have been done wrong by their elders. The warming of our planet and some politicians’ promises to undermine what small progress has been made to curb climate change also come to mind.” There is so much wrong here that it hard to know where to begin. Let’s start with an easy one, the story of Medicare and Social Security. First, Rampell’s comparison is misleading since there are few married couples with single breadwinners turning age 65. Most women have been in the workforce for the last four decades. If we look to the same study referenced by Rampell, and take the more typical case of a couple with an average earner and low earner, we find that the value of the Medicare benefit is roughly four times (rather than six) times the taxes paid.

Generational myth-busting, 101  - Jared Bernstein - This is why we all need to read Dean Baker’s Beat the Press column. This alarm bell–“the old are ripping off the young”–goes off all too frequently. The answer is not, as such histrionics imply, to do less for the elderly, most of whom depend on Social Security and Medicare (Dean also makes the point that you don’t do the young a favor when you fail to adequately support their aging parents). Remember, the income of the typical elderly beneficiary is <$30K. For about two-thirds of the elderly, Social Security is their major income source; for 36 percent, old-age benefits account for at least 90 percent of their income and these shares are even larger for minorities and for women. Without Social Security income, and 42 percent of the elderly would be poor as opposed to 10 percent with the benefits. The answer, as Dean suggests, if we really care about today’s young, is to worry less about the public debt and a lot more about the economy and society in which they’re growing up. Climate, poverty, unemployment, inequality, neighborhoods that are job deserts at best and killing fields at worst, lagging infrastructure (public schools!) and capital stock.  While it sounds cogent, this “blame the aged” trope is nothing more than a DC key-dangle (“look over here at the shiny object!”). Bookmark his rebuttal and revert to it immediately the next time someone dangles those keys.

An Aging America Shies Away From Risk - Justin Fox - More generally, could the aging of the U.S. population be behind all sorts of other phenomena, from anti-growth activism in high-priced cities and suburbs to the decline in business dynamism and entrepreneurship that has beset the country since about 2000?  Umm, maybe. The Dutch population has aged much faster than that of the U.S. The median age in the Netherlands was 28.6 in 1970 and is 42.7 now; in the U.S. it was 28.1 in 1970, is 37.8 now and is projected to be 41 -- still below the current Dutch median -- in 2060. Yet Dutch people still ride their bikes everywhere without helmets, let their kids roam around with much less supervision than is customary in the U.S., travel to all the corners of the earth without fear and are more than twice as likely to be self-employed as Americans are. Age alone doesn't determine attitudes about risk.  The scientific evidence on aging and risk aversion is mixed. Here’s a summing-up from a 2012 article by Dan Ariely and six other authors One study found that older individuals show more risk aversion in their life insurance coverage than younger individuals (Halek & Eisenhauer, 2001). Similarly, some studies found that older investors tend to own less risky stocks than younger investors (Hunter & Kemp, 2004; McInish, 1982), and have a smaller proportion of their assets in risky investments (Jianakoplos & Bernasek, 2006; Morin & Suarez, 1983; Palsson, 1996). However, other studies showed that when retirement status was controlled for, older people tended to have a higher proportion of their net worth invested in risky assets (Bellante & Saba, 1986; Wang & Hanna, 1997). Finally, one observational study examined the relationship between demographic characteristics and risk taking among nearly a thousand contestants on the TV game show “Who Wants to Be a Millionaire” (Daghofer, 2007). The age of the contestants did not significantly predict whether they voluntarily quit the game as the stakes got higher.

How Bad Are Things? -- One “advantage” of working in psychiatry is getting a window into an otherwise invisible world of really miserable people.. Every day I get to listen to people describe problems that would seem overwrought if they were in a novel, and made-up if they were in a thinkpiece on The Fragmentation Of American Society.  A perfectly average patient will be a 70 year old woman who used to live somewhere else but who moved here a few years ago after her husband died in order to be closer to family. She has some medical condition or other that prevents her from driving or walking around much, and the family she wanted to be closer to have their own issues, so she has no friends within five hundred miles and never leaves her house except to go to doctors’ appointments. She has one son, who is in jail, and one daughter, who married a drug addict. She also has one grandchild, her only remaining joy in the world – but her drug-addict son-in-law uses access to him as a bargaining chip to make her give him money from her rapidly-dwindling retirement account so he can buy drugs. When she can’t cough up enough quickly enough, he bans her from visiting or talking to the grandchild, plus he tells the grandchild it’s her fault. Her retirement savings are rapidly running out and she has no idea what she will do when they’re gone. Probably end up on the street. Also, her dog just died.

Obamacare Patients Spend 10% Of Income Out Of Pocket Despite Government Subsidies -- Even with federal government subsidies under the Affordable Care Act, a typical American buying coverage on public exchanges spends about one in 10 dollars they earn “on insurance premiums and out-of-pocket costs,” according to a new analysis. Research from the Urban Institute shows typical single enrollees with incomes between $23,540 and $58,850 spend 10% of their incomes on premiums and out-of-pocket costs and the percentage rises if the enrollee has more medical needs. The Institute, which is funded by the Robert Wood Johnson Foundation, said the income figures are 200% and 500% of the federal poverty level, which is $11,770. “We show that despite the additional assistance available, individuals across the income distribution who are ineligible for Medicaid can still face very high expenditures,” authors of the report, released last week by the Urban Institute, said. “10% of marketplace enrollees with incomes between 200% and 500% of (the federal poverty level) will spend more than 21% of their income on healthcare costs.” The high out-of-pocket costs and premiums are picking up steam as a 2016 election issue with Republican candidates reiterating their call for a repeal of the health law and Democrats, like Hillary Clinton, calling for a tax credit of up to $5,000 for Americans with high out-of-pocket costs. High out-of-pocket costs may be a reason some Americans either cannot afford the subsidized coverage or opt, instead, to take a penalty for not signing up.

Patients Struggle With High Drug Prices - WSJ: Jacqueline Racener ’s doctor prescribed a new leukemia drug for her last winter that promised to roll back the cancer in her blood with only moderate side effects.Then she found out how much it would cost her: nearly $8,000 for a full year, even after Medicare picked up most of the tab.“There’s no way I could do that,” Ms. Racener says. “It was just prohibitive.” Worried about depleting her limited savings, Ms. Racener, a 76-year-old legal secretary, decided to take the risk and not fill her prescription. The pharmaceutical industry, after a long drought, has begun to produce more innovative treatments for serious diseases that can extend life and often have fewer side effects than older treatments. Last year, the Food and Drug Administration approved 41 new drugs, the most in nearly two decades.The catch is their cost. Recent treatments for hepatitis C, cancer and multiple sclerosis that cost from $50,000 annually to well over $100,000 helped drive up total U.S. prescription-drug spending 12.2% in 2014, five times the prior year’s growth rate, according to the Centers for Medicare and Medicaid Services. High drug prices can translate to patient costs of thousands of dollars a year. Out-of-pocket prescription-drug costs rose 2.7% in 2014, according to CMS. For many of the poorest Americans, medicines are covered by government programs or financial-assistance funds paid for by drug companies. For those in the middle class, it is a different story. Though many patients can get their out-of-pocket costs paid by drug companies or drug-company-funded foundations, some patients make too much money to qualify for assistance. Others are unaware the programs exist. Medicare patients, who represent nearly a third of U.S. retail drug spending, can’t receive direct aid from drug companies. The upshot is even patients with insurance and comfortable incomes are sometimes forced to make hard choices—tapping savings, taking on new debt or even forgoing treatment.

How drug companies are gaming an old law for greater profits | PBS NewsHour: We now turn to a story that continues to worry and to anger consumers, soaring drug prices, even sometimes for new versions of old drugs. The latest case involves a drug that helps treat a rare autoimmune disorder. Until recently, its manufacturer often offered it at minimal or no cost at all. But now another pharmaceutical company, Catalyst, says it wants the FDA to approve a modified, and likely more expensive, version of the drug. I recorded this conversation yesterday with reporter Sabrina Tavernise of The New York Times. Sabrina, I’m going to start out by asking you to define something that most people have never heard of. That is orphan drugs. What are those?

Trans-Pacific trade deal bumps up health prices, costs U.S. jobs - by State Sen. Vincent Gregory and Dick Long --Our government hopes the 12-country pact will open up new economic opportunities, ensure basic labor rights, promote environmental stewardship, protect intellectual property, create high-standards trade rules — and more. But in reality, it is a morass of complicated and secretive agreements that could threaten the U.S. economy and place its most vulnerable citizens in harm's way. As it stands, the TPP fails to levy protections for American citizens, particularly when it comes to health care, financial security and food safety.   Right now, the TPP contains lengthy data-exclusivity windows for Big Pharma, which makes it more difficult for competing manufacturers to obtain the research necessary to develop specialty medications, and it weakens the government's ability to limit drug costs. These drugs, some of which can cost up to $400,000 annually, are used to treat illnesses such as multiple sclerosis, rheumatoid arthritis and different forms of cancer.. Similar provisions exist for medical devices, opening up the possibility of patenting a surgical procedure and thereby increasing its cost. Moreover, the TPP contains sneaky details allowing corporations and their subsidiaries to seek and obtain compensation from public programs that offer medication and supplies at below-market pricing — like Medicaid and Medicare. And as Americans would pay more to keep their families healthy, the TPP also would provide protections — and in some cases incentives — to corporations that send manufacturing and service-related jobs offshore. Previous trade agreements have removed millions of jobs from our economy, resulting in $600 billion in lost wages and an annual loss of $37 billion in Social Security revenue.

Of Rotten Apples and Rotten Systems  - Robert Reich -- Martin Shkreli, the former hedge-fund manager turned pharmaceutical CEO who was arrested last week, has been described as a sociopath and worse. In reality, he’s a brasher and larger version of what others in finance and corporate suites do all the time. Federal prosecutors are charging him with conning wealthy investors. Lying to investors is illegal, of course, but it’s perfectly normal to use hype to lure rich investors into hedge funds. And the line between the two isn’t always distinct. Hedge funds are lightly regulated on the assumption that investors are sophisticated and can take care of themselves.  Perhaps prosecutors went after Shkreli because they couldn’t nail him for his escapades as a pharmaceutical executive, which were completely legal – although vile. Shkreli took over a company with the rights to a 62-year-old drug used to treat toxoplasmosis, a devastating parasitic infection that can cause brain damage in babies and people with AIDS. He then promptly raised its price from $13.50 to $750 a pill. When the media and politicians went after him, Shkreli was defiant, saying “our shareholders expect us to make as much as money as possible.” He said he wished he had raised the price even higher.That was too much even for the Pharmaceutical Research and Manufacturers of America, Big Pharma’s trade group, which complained indignantly that Shkreli’s company was just an investment vehicle “masquerading” as a pharmaceutical company. Maybe Big Pharma doesn’t want to admit most pharmaceutical companies have become investment vehicles. If they didn’t deliver for their investors they’d be taken over by “activist” investors and private-equity partners who would. The hypocrisy is stunning. Just three years ago, Forbes Magazine praised Shkreli as one of its “30 under 30 in Finance” who was “battling billionaires and entrenched drug industry executives.”

91% of patients who survive opioid overdose are prescribed more opioids - Examining a national database of health insurance claims, researchers found that 91 percent of patients who suffered a nonfatal overdose of prescription opioid painkillers continued getting prescriptions for opioids following the overdose. And, the researchers found, overdose survivors who kept taking high dosages of an opioid—including morphine, oxycodone, and hydrocodone—were twice as likely to have another overdose within two years. The findings, published in the Annals of Internal Medicine, follow news earlier this month from the Centers for Disease Control and Prevention that drug overdoses, opioid overdoses in particular, have reached epidemic levels. The fact that patients surviving opioid overdoses are still being prescribed opioids is “highly concerning,” the authors of the new study wrote. In a press release, lead author Marc LaRochelle of Boston Medical Center said that "[t]he intent of this study is not to point fingers but rather use the results to motivate physicians, policy makers and researchers to improve how we identify and treat patients at risk of opioid-related harms before they occur."

Rich, White and Refusing Vaccinations - The people most likely to refuse to have their children vaccinated tend to be white, well-educated and affluent, researchers report. A study published in the January issue of the American Journal of Public Health used California state government data on “personal belief exemptions,” or opting out of vaccinations for nonmedical reasons. From 2007 to 2013, the rate of vaccine refusal for personal belief doubled, to 3.06 percent. The researchers reviewed data among all kindergarten children in the state during that time. More than 17,000 children, attending 6,911 schools, were exempted. Exemption percentages were generally higher in regions with higher income, higher levels of education, and predominantly white populations. In private schools, 5.43 percent of children were exempt, compared with 2.88 percent in public schools.   In some suburban areas, rates of exemption were near 50 percent, and more than a quarter of California’s schools have measles immunization rates below the 92 to 94 percent required for herd immunity, the level of vaccination necessary to protect people who are not immune.

Brazilian women urged to avoid pregnancy due to virus - It’s advice that you don’t usually hear – health officials in Brazil telling women not to get pregnant, if they’re thinking about it. An outbreak of the mosquito-borne Zika virus has been linked to a surge in newborn “microcephaly,” particularly in the tropical northeast region. More than 2,400 cases have been reported throughout the country, with the vast majority in the northeast. Microcephaly results in babies being born with unusually small heads, measuring less than 32 centimetres (12.6 inches) around. The brain develops abnormally during pregnancy and also fails to grow properly after birth. Microcephaly can result in serious developmental delays and, sometimes, early death.  The virus is carried by the Aedes aegypti mosquito, which thrives in tropical climates and even lives in certain pockets of the United States.It’s difficult for doctors to detect if pregnant women are infected, since the symptoms are very subtle – skin rash, headache, achy joints – and are often misdiagnosed as other things, such as food allergies. There is no vaccine to prevent microcephaly, nor is there a treatment for it, although early intervention with supportive therapies can improve a child’s development and quality of life (Mayo clinic). Brazilian health officials are urging all citizens to combat the root cause of the epidemic by eliminating any standing water that could breed mosquitoes. Pregnant women are urged to slather on insect repellent and stay indoors as much as possible; and any women who are considering pregnancy are urged to hold off until the epidemic is better understood and controlled.

Drug resistance deadlier than cancer by 2050: Study - Infections resistant to medicines will kill more people per year than cancer by 2050, and cost the world $100 trillion annually, according to a U.K. government-backed report led by Jim O'Neill, the well-known former Goldman Sachs economist. The wide-ranging study, called the Review on Antimicrobial Resistance, was commissioned by the U.K. government earlier this year amid growing concerns about drug-resistant "superbugs", including new strains of E. coli, malaria and tuberculosis. Its forecasts, based on research by RAND Europe and KPMG, suggest that drug resistance, which is estimated to have caused around 700,000 deaths globally this year, will cause 10 million by 2050 if further action is not taken. Antibiotic use is rising around the world, while at the same time the number of new antibiotics is falling. If these medicines become ineffectual, there could be a huge economic ramifications, as people of working age are affected, and once treatable diseases become incurable again. New antibiotics take time and money to develop, and by their nature are less effective the more they are used. As such, many pharmaceutical companies have slowed development of these kinds of drugs.

Dead is dead. Right? - From JAMA Neurology, “Variability of Brain Death Policies in the United States“: Brain death is the irreversible cessation of function of the entire brain, and it is a medically and legally accepted mechanism of death in the United States and worldwide. Significant variability may exist in individual institutional policies regarding the determination of brain death. It is imperative that brain death be diagnosed accurately in every patient. The American Academy of Neurology (AAN) issued new guidelines in 2010 on the determination of brain death. Procurement organizations want to be able to deliver life-saving organs to people as soon as possible after death. But – obviously – they only want to remove them from brain-dead individuals. It’s important, therefore, to have some sort of rules as to what constitutes “brain dead”. The American Academy of Neurology (AAN) put some out in 2010. There’s even a checklist where all boxes must be checked. In this study, researchers compared hospital protocols obtained from 52 procurement organizations against the guidelines to see if they have been adopted. They found 508 unique hospital policies (pretty much all the places that could evaluate brain death), and 492 of them provided data. That’s a stunning response rate, by the way. There were, however, significant discrepancies between what hospitals do and what the AAN recommends. For instance, only 56% of hospitals documented the absence of hypotension, and only 79% documented the absence of hypothermia. Only a third of policies required a neurologist or neurosurgeon (or someone with neuro expertise) to determine brain death. About 30% of policies didn’t specify who can make the final determination at all. The media is covering this in typical fashion, with all the screaming that would make you think that alive people have been pronounced dead because of shoddy practice. It’s important to note that this isn’t the case. I don’t know of any “false-positive” determinations of brain death because people did not adhere to the guidelines.

‘Toxic stress’: Max blood lead levels in Flint children 7 times higher than CDC guidelines – doctor - Experts who blew the whistle on lead-contaminated water in Flint, Michigan, and its impact on children said some kids had blood lead levels far higher than those US health officials consider “elevated” – and that the state knew kids were being poisoned. As Michigan officials scramble to help the affected community, a lead researcher who helped expose the toxicity of the water, Virginia Tech professor Marc Edwards, said city and state officials should have known that the Flint River was highly corrosive before they decided to switch from the Detroit water system in 2014. He called the lack of water treatment “unprecedented.” Without phosphate treatment, the corrosive water flowed from the Flint River through the city’s lead pipes for 17 months and became contaminated. Failures at multiple levels of government exacerbated the problem and delayed the response to the developing crisis. On Tuesday, Michigan's top environmental regulator resigned over the crisis.  Dr. Mona Hanna-Attisha, a pediatrician at the Hurley Medical Center, told RT that the highest readings she and the state recorded for elevated blood levels in Flint were 38 micrograms per deciliter. That is more than seven times higher than the level classified as “elevated” by the Centers for Disease Control and Prevention (5 micrograms). The CDC states there is no safe blood lead level in children.

The Rising Threats To Our Health - Though evidence of a looming global healthcare crisis is plainly visible, few seem to realize the consequences will be catastrophic to individuals, households and national economies. Here is a list—by no means exhaustive—of major health issues threatening hundreds of millions of people globally. Air & Water Pollution: Photos such as these provide graphic evidence that air and water pollution are serious health hazards in many developing nations around the world: The statistics are equally horrendous: roughly 40% of all deaths in Pakistan result from polluted drinking water, 500 million people in China lack clean drinking water, and in India, 90% of human waste flows untreated into rivers. Though the winter smog in Chinese cities is infamous, many other Asian nations suffer from equally poor or even worse air quality:  Air and water pollution do not stop at borders, and so severe pollution in developing economies has become a health issue in neighboring developed economies as well. As populations age, health costs rise while the working-age population that must support higher healthcare expenses declines, burdening the middle-aged workers who must support the elderly and the young. Caring for a rapidly expanding population of elderly retirees burdens governments and economies as well as households: as income is taxed to pay for care, there is less money available for other programs and investing in future productivity.  Over 1 billion people smoke cigarettes globally, with some 350 million smokers residing in China. Over one million deaths per year in China are attributed to smoking, but some estimates project this number rising to 3.5 million annually. Add together air pollution and smoking, and the health consequences become even more severe

Does the TPP allow exporting countries to certify their own food safety equivalence? --- The U.S. Trade Representative this fall released the text of the proposed Trans-Pacific Partnership (TPP), a controversial trade agreement for the United States and other countries that border the Pacific Ocean.  Critics argue that the TPP will endanger U.S. food safety, but we wanted to read the text ourselves to see if this concern is justified. If you are basically a food trade skeptic -- who thinks that farmers in poorer countries have no business seeking access to our markets, that U.S. consumers gain no benefit from food imports, and that U.S. farmers have no need for food export markets -- then no analysis of the food safety provisions will persuade you to like the TPP.  On the other hand, if you are basically open to food trade, and yet concerned that any such trade must be safe, then bear with us as we look into one central controversy: equivalence. The TPP has provisions to allow an importing country (such as the United States) to certify that the food safety oversight in an exporting country (such as Vietnam) is "equivalent" to our own.  The Center for Food Safety, a non-profit public interest organization opposed to the TPP, says the agreement allows the exporting country to claim to be equivalent, even if it violates U.S. food safety rules. In fact, the TPP's chapter on Sanitary and Phytosanitary Measures allows the importing country to decide whether the exporter's food safety rules are equivalent. The importing country may refuse to designate equivalence if the exporter violates key principles of our food safety laws. The TPP does place some requirements on the importing country that makes this decision. Let us read three of the most central requirements closely. We recognize that these requirements are substantial, but they also illustrate how seriously the TPP takes the importer's power to make this decision.

USDA Whistleblower Accuses Agency of Censorship of Pesticide Research --Dr. Jonathan Lundgren, an expert on the risk assessment of pesticides and genetically modified crops, worked for the U.S. Department of Agriculture (USDA) Agricultural Research for more than a decade. But when his findings on the ill effects of systemic pesticides and RNAi (a biological process in which RNA molecules inhibit gene expression) on pollinators began to gain traction and visibility, the harassment and punishments did as well. The 40-year-old agro-ecologist and entomologist hoped that if he kept his head down, the increasing aggression would dissipate. But it didn’t. His scientific work continued to be disrupted along with his ability to communicate with other colleagues and the press. Ultimately, the coercion and intimidation derailed Lundgren’s career and he stepped down as lead scientist and lab supervisor. On behalf of Lundgren, The Public Employees for Environmental Responsibility (PEER) filed an official Whistleblower complaint. “Censorship of public agency science does not affect only scientists—it concerns the public at large as well as every entity relying upon the integrity of USDA science,” PEER executive director Jeff Ruch stated. “USDA cannot piously pledge its devotion to scientific integrity while at the same rebuffing any attempts to safeguard it.” Separately, PEER has also filed a lawsuit against the USDA to strengthen its Scientific Integrity Policy. The suit targets official restraints on USDA scientists who publish or speak about their findings in peer-reviewed journals before professional societies and other unofficial settings.

Why Did Hillary Clinton Hire a Monsanto Lobbyist to be Her Campaign Director? - Good question, if you know nothing about Hillary's cerulean canine roots. But one fact that remains glaringly obvious to those of us paying attention to these things and those Hillary supporters who are just as strenuously ignoring those pesky facts is Hillary officially hired Monsanto fuck stick Jerry Crawford to manage her presidential campaign.  Of course, the so-called liberals who back Hillary can be excused for not knowing their facts about their girl since the MSM is largely worthless in bringing up those inconvenient facts, as evidenced in this breezy puff piece in the WaPo's Style section. Yeah, I know Style pieces in any paper are supposed to be ultimately worthless, breezy eye candy. Yet, since it contained hard political data (such as Crawford failing to deliver even a place much less a win for Hillary in Iowa in 2008), you'd think Monsanto's good name would've merited at least a fleeting mention.  And to anyone who pays even a scintilla of attention to anything Clinton says, it's screamingly obvious this woman has been pimping for Monsanto to the point of practically gargling Roundup after sucking various cock at the Biotech Industry Conference in San Diego last year. How anyone, especially a self-styled Democrat, can publicly and frequently advocate for Genetically Modified Organisms is beyond me except when one considers benefits of such a whoring for an evil empire such as Monsanto (even when her campaign manager no longer works for them).  Let's take Crawford's track record: He's long been considered a kingmaker for Democrats in his native Iowa, especially those who are friendly to Monsanto (which alone ought to show you of the alarming number of supine so-called Democrats that Crawford's helped over the years). But even when it meant costing a "fellow" Democrat a job, Crawford supported the Republican running against him and, well, just keep reading.

Obama signs ban on microbead pollution - On Monday, Dec. 28, President Barack Obama signed into law a ban on tiny plastic particles used in personal cosmetic products that scientists say are polluting U.S. lakes, rivers and the oceans. The bipartisan "Microbead-Free Waters Act of 2015," (H.R. 1321), passed by the U.S. House on Dec. 7, "prohibits the manufacture and introduction into interstate commerce of rinse-off cosmetics containing intentionally-added plastic microbeads." The tiny plastic beads, about the size of a pen-tip, have been shown to filter through municipal wastewater treatment plants after consumers rinse them down the drain while using soaps, toothpaste and other products that contain them. The concern is that pollutants can attach to the floating plastic, which enters the food chain when fish and wildlife mistake the tiny beads as edible.

Mysterious Mass Animal Deaths - 20 events - CBS News slideshow

More Fertilizer Plants Come Online, Bring CO2 Baggage - The U.S. may be on the verge of a boom in new fertilizer plants, which could be good news for farmers, but not the environment. Today’s farmers can produce more from their land than ever before thanks, in part, to nitrogen fertilizer, a key ingredient that has never been more widely available. New technologies, especially hydraulic fracturing, “fracking,” have increased domestic production of natural gas, which is essential to making nitrogen fertilizer. The fossil fuel is used to both power the plants and as the main ingredient in the product, making nitrogen fertilizer just one more way we use fuel to grow our crops. “We’ve had extremely high fertilizer prices relative to history,” said David Asbridge, senior economist and founder of the industry advisory group, NPK Fertilizer Advisory Service (NPKFAS). “And the fertilizer producers have made a lot of money. Particularly the nitrogen guys because natural gas prices have dropped at the same time.” The fertilizer industry is taking the extra wide profit margin and investing it in expansions and new plants. Since 2012, nearly two dozen projects have been announced, which would double the number of facilities currently in operation in the U.S., according to NPKFAS. Many of those projects have stalled in the permitting and financing stage. It takes more than a billion dollars to build a new, world-scale plant. Three of the world’s largest facilities are scheduled to come on stream in the next year to produce a variety of nitrogen products, including anhydrous ammonia, urea, and UAN. Two of them are being built by CF Industries, the largest nitrogen fertilizer company in North America.

U.S. Bread Basket Shifts Thanks to Climate Change - Scientific American: Today, average yields for corn and soybeans in the Midwest are about 173 bushels per acre. By 2050, researchers predict, yields could fall by as much as a quarter. Yield losses in the Midwest aren't just bad for American consumers. The region provides the largest share of globally traded corn and soybeans.  Farmers are already responding to more variable weather by installing drainage systems to keep their fields from becoming waterlogged during heavy rains and expanding irrigation to ward off the effects of drought. Some farmers are reducing tillage to increase soil carbon content and reduce erosion. Others are buying larger equipment so they can complete planting faster when the conditions are favorable. But all these measures may not be enough to prepare Midwestern farmers for the dramatic environmental changes ahead. By between 2035 to 2065, temperatures in Illinois will be more like those in the mid-South, with rainfall patterns ranging between today's East Texas and the Carolinas. While higher temperatures may make certain regions more hospitable for growing, other problems like low soil quality or not enough rainfall could make shifting production there more unlikely. The effect on food prices is much less certain; studies suggest global food prices could stay relatively unchanged or increase by more than 60 percent. These projections could become more accurate with broader access to relevant data on things like soil health, plant growth and farm management, the researchers said.

Farmers Try Political Force to Twist Open California’s Taps - California has more than 81,000 farms, and farmers claim four-fifths of all the water its citizens consume. But no one in agriculture has shaped the debate over water more — or swung their elbows wider — than the few hundred owners of an arid, Rhode Island-size finger of farmland west of Fresno. A water utility on paper, Westlands in practice is a formidable political force, a $100 million-a-year agency with five lobbying firms under contract in Washington and Sacramento, a staff peppered with former federal and congressional powers, a separate political action committee representing farmers and a government-and-public-relations budget that topped $950,000 last year. It is a financier and leading force for a band of 29 water districts that spent at least another $270,000 on lobbying last year. Its nine directors and their relatives gave at least $430,000 to federal candidates and the Republican Party in the last two election cycles, and the farmers’ political action committee gave more than $315,000 more.  Aggressive, creative and litigious — minutes of a board meeting this year cited 11 continuing or anticipated lawsuits — the district has made enemies of environmentalists, rival politicians and other farmers whose water it has tried to appropriate. But it has also repeatedly made deals and won legislative favors to keep water flowing to itself and to farms across the San Joaquin Valley, California’s agricultural heartland.

Pumped More Than Dry: California Pumps Its Water Into Oblivion (AP) — A canal that delivers vital water supplies from Northern California to Southern California is sinking in places. So are stretches of a riverbed undergoing historic restoration. On farms, well casings pop up like mushrooms as the ground around them drops.  Four years of drought and heavy reliance on pumping of groundwater have made the land sink faster than ever up and down the Central Valley, requiring repairs to infrastructure that experts say are costing billions of dollars.  This slow-motion land subsidence — more than one foot a year in some places — is not expected to stop anytime soon, experts say, nor will the expensive repairs. “It’s shocking how a huge area is affected, but how little you can tell with your eye,” Land subsidence is largely the result of pumping water from the ground. As aquifers are depleted, the ground sags. The most severe examples today are in San Joaquin Valley, where the U.S. Geological Survey in 1975 said half of the land is prone to sinking. USGS researchers later called it one of the “single largest alterations of the land surface attributed to humankind.” Drought has spawned a well-drilling boom with some tapping ancient aquifers 3,000 feet down. Decades of over-pumping have destroyed thousands of well casings and buckled canal linings. To keep water flowing through low spots, irrigation districts raise the sides of sagging canals so they can increase the water level and maintain a gravitational flow.As a result, at least one bridge now sits below the waterline. Chris White, general manager of the Central California Irrigation District in Los Banos, said replacing it is expected to cost $2.5 million. Rebuilding another canal recently cost $4.5 million.

California drought putting many trees at risk: California's forests are home to the planet's oldest, tallest and most-massive trees. New research from Carnegie's Greg Asner and his team reveals that up to 58 million large trees in California experienced severe canopy water loss between 2011 and today due to the state's historic drought. Their results are published in Proceedings of the National Academy of Sciences. In addition to the persistently low rainfall, high temperatures and outbreaks of the destructive bark beetle increased forest mortality risk. But gaining a large-scale understanding a forest's responses to the drought, as well as to ongoing changes in climate, required more than just a picture of trees that have already died. A higher-tech approach was necessary; so Asner and his team used the laser-guided imaging spectroscopy tools mounted on the Carnegie Airborne Observatory (CAO) to measure the full impact of the drought on California's forests for the first time. They combined the CAO data with more-traditional satellite data going back to 2011. Their new approach revealed a progressive loss of water in California's forest canopies over the four-year span. Mapping changes in canopy water content tells scientists when trees are under drought stress and greatly aids in predicting which trees are at greatest death and fire risk. This image shows progressive water stress on California's forests.

Unusual winter has millennials concerned about climate change -- Unusual weather is dominating the conversation on social media for the holidays, especially among millennials, who are increasingly concerned about climate change. Yik Yak, a location-based mobile app popular with millennials, surveyed its audience and found nearly 70 percent are worried about climate change. More than a quarter of them say their concern has grown due to the unusual winter weather this year…  According to the environmental advocacy group NextGen Climate, 74 percent of voters under 35 – approximately 80 million of whom are eligible to vote in 2016 – said they would be more likely to vote for a presidential candidate with a plan to tackle climate change.About 63 percent of young voters said they would be more likely to vote for Democratic presidential candidate Hillary Clinton if she supports clean energy goals, NextGen Climate said, based on results of a survey done in September.

Freakish Winter Warmth: It’s NOT Not Global Warming -- People are golfing and mowing lawns in Wisconsin. They’re gawking at cherry blossoms in Philly and D.C. My family recently played touch football in t-shirts on a field dotted with dandelions.  Day after day, popular outdoor spots in Northeast cities are transformed into a sea of naked arms, hatless heads, and the occasional bare chest, even as Christmas festoonery blinks incongruously nearby. The nightly news is covering black bears in New England who have put off hibernation to molest bird feeders. Bulbs are sprouting like its springtime and my March-flowering quince is December-flowering.  There are scattered reports of birds acting badly: like the half-dozen species of warblers, who should by now be as far South as Central America, observed lingering on in Maine and thus courting death. And there are reports of monarch butterflies, as if they didn’t have enough problems, emerging in December in several New England states, briefly. Christmas is coming, the goose is getting fat, because migration is for suckers. .It’s warm and snowless because of El Niño and the Arctic Oscillation AND global warming. Some recent coverage has muddied the connection and disseminated the idea (mainly through poorly worded headlines; unlike mine) that this heat is not the result of global warming. But of course the vital underlying fact is that we’ve already created a good deal of warming (1 degree C, as of these past months), globally, and so the climate phenomena that play out on the world stage today—like this Oct-Nov El Niño, the third hottest since 1950; and this fall’s warm Arctic, the highest land temperatures north of 60 degrees North since 1900—are inevitably playing out on top of, and being influenced by, these altered conditions. NOAA’s Deke Arndt puts it this way, as reported by the Guardian: “Long-term climate change is like climbing a flight of stairs: over time you get higher and higher. El Niño is like standing on your tippy toes when you’re on one of those stairs. Both of those together work to create the warmest temperature on record. We would not be threatening records repeatedly if we had not climbed the stairs for decades.”

It took El Nino to get Canadians talking about climate change:  For a lot of people (especially hormonal adolescents) seeing — not thinking — is believing; and when all you see is snow and slush, animated evidence pointing to a future absent those things might alarm you, but not enough to prod you into activist mode. In fact, the only popular misconception as globally resistant to reason and proof in certain places as our blithe indifference to climate change may be the certainty that Canada is still a “cold country.”  Talk to anyone who doesn’t live here, and Canada remains a synonym for cold (cleanly cold, politely cold, social-welfare-net cold — but cold). Yet anyone who’s been walking outside in shorts this past week in the GTA knows better. Baby, it isn’t cold outside. In fact, it’s balmy, especially by Canadian standards.   In other words, it’s the kind of 1 degree C weather that Americans can’t handle, but that inspires teenage boys in Toronto to play pond hockey in shorts and a T-shirt. I haven’t turned on my heat yet — and Christmas is over. But ironically, the reason for this weird weather isn’t Al Gore-ian; it’s El Nino — a weather phenomenon that arises from a band of warm ocean water that develops in the equatorial Pacific west of South America every five years or so, often reaching its highest temperatures around Christmas time.  Yet it feels as though for the first time, in light of this particularly, weirdly balmy, El-Nino weather, normal Canadians (not just activists or climatologists) are talking about climate change — and talking about it not as a theory whose effects we won’t know for many years, but as a living, breathing fact.  El Nino has managed to do in less than a month what Al Gore has been trying to do for a decade: alarm us.

Russia Warming '2.5 Times Quicker' - Russia is warming more than twice as fast as the average for the rest of the world, the country's environment ministry said Friday, sounding an alarm on the rise in floods and wildfires nationwide. A government report on environmental protection said temperatures in Russia had warmed by 0.42 degrees Celsius per decade since 1976, or 2.5 times quicker than the global warming trend of 0.17 degrees. "Climate change leads to growth of dangerous meteorological phenomena," the ministry said in a comment to the report published Friday. There were 569 such phenomena in Russia in 2014, "the most since monitoring began," the ministry said, specifically mentioning last year's ravaging floods and this year's "water deficit" east of Lake Baikal, which led to a "catastrophic rise in fires." Fires around Lake Baikal, including the nearby Irkutsk and Buryatia regions, tore through hundreds of square miles in the pristine area, with locals and campers forced to dig ditches as state media at one point offered the theory that fires were fueled by "self-igniting air" caused by ozone anomalies. Climate change has contributed to unprecedented loss of water in the Baikal itself, dropping to minimal water levels allowed by the government several times this year, including this week. "The level of Baikal has dropped to 456.1 meters (above sea level)," despite minimal water use by hydropower stations downstream on the Angara river, environment ministry spokesman Nikolai Gudkov told RIA-Novosti agency Friday.

Floods swamp Missouri, Illinois; nine million people in risk areas - Reuters: Record flooding from rain-swollen rivers has washed out hundreds of structures in Missouri, Illinois, Arkansas and eastern Oklahoma, forcing thousands to flee their homes, and 9.3 million Americans still face flood warnings. At least 28 people have died in the U.S. Midwest's extreme weather since the weekend, mostly from driving into flooded areas after storms dropped up to 12 inches (30 cm) of rain, officials said. The days of downpours have pushed the mighty Mississippi and its tributaries to record highs or levels not seen in decades, the National Weather Service and local officials said. Southern states like Louisiana will be the next to lose homes and businesses to flooding as overflowing rivers push downstream toward the Gulf of Mexico, the National Weather Service said. The floodwaters have closed sections of Interstate 44 and Interstate 55, both major trucking routes, along with many smaller roads near rivers, Illinois and Missouri officials said on Thursday. Freezing temperatures in the area in the coming days will cause some flooded areas to turn icy, adding to challenges, forecasters said.

Floods Choking Everything From Oil to Wheat in U.S. Midwest -  Deadly flooding across the U.S. Midwest is disrupting everything from oil to agriculture, forcing pipelines, terminals and grain elevators to close and killing off thousands of pigs. The floods have killed at least 20 people and closed hundreds of roads across Missouri and Illinois, according to AccuWeather Inc. Rain-swollen rivers will set records in the Mississippi River basin through much of January. Fifty miles (80 kilometers) of the Illinois River have been closed, according to the U.S. Coast Guard, as well as 81 miles of the Mississippi River in two segments. The flooding is the worst since May 2011, when rising water on the Mississippi and its tributaries deluged cities, slowed barge traffic and threatened refinery and chemical operations. The current situation increases stockpiles of crude oil and may extend this year’s price slide. Hog producers in southern Illinois were calling other farmers, hoping to find extra barn space to relocate pigs, said Jennifer Tirey, executive director of the Illinois Pork Producers Association. Processors are sending additional trucks out to retrieve market-ready pigs, she said Thursday. In one case, an overflowing creek took out electricity and made roads impassable, causing 2,000 pigs to drown. So far, the biggest oil shutdown involves Enbridge Inc.’s Ozark pipeline, which was booked to carry about 200,000 barrels a day this month to Wood River, Illinois, from Cushing, Oklahoma. The outage of the section under the Mississippi River may further add to stockpiles at Cushing that reached a record high last week.

Raw sewage is flooding into the Mississippi River due to historic flooding -  The rain-swollen Mississippi River and one of its tributaries are now carrying untreated sewage downstream after flooding knocked out a treatment plant outside St. Louis. The rising Meramec River, which joins the Mississippi about 20 miles south of the landmark Gateway Arch, swamped the Fenton Wastewater Treatment Plant late Monday, the Metropolitan St. Louis Sewer District reported. The plant normally handles less than 7 million gallons a day, but was treating nearly 24 million gallons a day when it was overrun, the agency said. "Sewage that would normally be treated at this wastewater treatment plant is not being treated at this time," the agency said. "Sewage is being diverted into nearby rivers and streams. The public is asked to avoid contact with any flood water or sewage in low lying flooded areas near the plant. The amount of water roaring untreated past the plant is a small fraction of the roughly 5 million gallons a second now coursing down the Mississippi. But Sewer District spokesman Sean Hadley said anyone exposed to floodwater should wash up afterward. "Floodwaters are already polluted as is," he said. "You should definitely take precautions and try to avoid any contact."

Flooding in Missouri Raises Vexing Questions - Like Ms. Thorne, many people in this part of the Mississippi River basin near St. Louis have come to accept that flooding is a part of life. But the damage this time has been so severe and the river levels so high that vexing questions have again been raised about whether anything can be done to truly ease the threat of the volatile and unpredictable rivers around here.  Can greater defenses be erected? Should homes be vaulted on stilts? Or is it time for some communities to pack up and leave? Officials in Missouri and Illinois have blamed flooding for 21 deaths, many of them of motorists who tried to cross flooded roads.The worst conditions struck towns along the Meramec River, southwest of St. Louis, which shattered previous flood records, forced the evacuation of thousands of people, swallowed whole neighborhoods and turned others into islands, cut off from any road access.About 20 minutes up the road in Valley Park, the Meramec crested Thursday morning at more than 28 feet above flood stage, 4.4 feet above the record set there in 1982. By Thursday night, the crest had flowed into the Mississippi River, but the Meramec was expected to stay well above flood stage for several days. “We know the floods are coming,”  “It’s a way of life for a lot of people. But when it infringes with this new high level into homes that have never been flooded, then that does have a concern for us.

Over 100,000 flee flooding in Paraguay, Argentina, Brazil, Uruguay: More than 100,000 people have had to evacuate from their homes in the bordering areas of Paraguay, Uruguay, Brazil and Argentina due to severe flooding in the wake of heavy summer rains brought on by El Niño, authorities said on Saturday. In the worse affected country, Paraguay, around 90,000 people in the area around the capital city of Asuncion have been evacuated, the municipal Emergencies Office said. Many are poor families living in precarious housing along the banks of the River Paraguay. The Paraguayan government has declared a state of emergency in Asuncion and seven regions of the country to free up funds to help those affected. Several people have been killed by trees falling in the storms that caused the flooding, local media reported. There was no official death toll yet. In Alberdi, some 120 kilometers (75 miles) south of Asuncion, the government recommended that several thousand more people living along the banks of the River Paraguay evacuate. "(The flooding) was directly influenced by the El Niño phenomenon which has intensified the frequency and intensity of rains," the national Emergencies Office said. This year's "El Nino," which sparks global climate extremes, is the worst in more than 15 years, the U.N. weather agency, the World Meteorological Organization (WMO), said last month. "Severe droughts and devastating flooding being experienced throughout the tropics and sub-tropical zones bear the hallmarks of this El Nino, which is the strongest in more than 15 years," WMO chief Michel Jarraud said in a statement. Officials at Paraguay's Emergencies Office said the river might rise even more in the coming days, stabilizing and falling back towards normal levels from January onwards.

160,000 Flee Their Homes as Devastating Flooding Hits South America --More than 100,000 people have been evacuated throughout the bordering areas of Paraguay, Uruguay, Argentina and Brazil as severe flooding continued to batter South America this weekend. According to new figures released Sunday by the Municipal Emergencies office, as many as 160,000 people have had to flee their homes due to the flooding that began Dec. 18—a devastating result of this season’s El Niño storms. Many of those impacted are low-income families living along the Paraguay River, a major river that runs through Brazil, Paraguay, Bolivia and Argentina.“[The flooding] was directly influenced by the El Niño phenomenon which has intensified the frequency and intensity of rains,” the office said. As the United Nations weather agency, the World Meteorological Organization, warned last month, this year’s storm season is the worst in more than 15 years and is likely to bring yet more flooding and droughts to the tropics and subtropics. The flooding in South America follows recent severe storms in Yemen and Mexico. In October, after Hurricane Patricia made landfall in Puerto Vallarta, Mexico, and Manzanillo, Mexico, and forced the evacuation of 50,000 people, due to climate change, it was “exactly the kind of terrifying storm we can expect to see more frequently in the decades to come,” Slate meteorologist Eric Holthaus reported. Paraguay has been the hardest hit, with an estimated 100,000 displaced, while 20,000 have been left homeless in Argentina and 9,000 in Uruguay. At least eight people have been killed across the region, according to local media.

2015 marked a 'symbolic and significant milestone' for Earth in the worst way possible - This year marks a "symbolic and significant milestone" for average global temperatures on land, which will reach a whole 1°C higher than temperatures before industrialisation, according to the World Meteorological Organisation. A single degree might not sound like a lot, but the effects of a warming planet can account for many of the extreme weather events the world has seen over the last year — from major flooding in England to spring-like temperatures on the US East Coast in December. The rise in temperature is due to the combination of El Nino &mdash a weather pattern that's characterized by warmer-than average water temperatures in the Pacific Ocean &mdash and man-made climate change caused by greenhouse gas emissions, according to WMO. "We expect 2016 to be the warmest year ever, primarily because of climate change but around 25% because of El Niño,” Adam Scaife, head of the Met Office's long-range forecasts, told the Guardian on Sunday. This year's El Nino is said to be one of the strongest ever, the effects of which will continue into the new year, according to experts. "The state of the global climate in 2015 will make history as for a number of reasons," WMO Secretary-General Michel Jarraud said in a November statement."Levels of greenhouse gases in the atmosphere reached new highs and in the Northern hemisphere spring 2015 the three-month global average concentration of CO2 crossed the 400 parts per million barrier for the first time. He added: "2015 is likely to be the hottest year on record, with ocean surface temperatures at the highest level since measurements began. This is all bad news for the planet."

El Nino weather: Worries grow over humanitarian impact - BBC News: The strongest El Nino weather cycle on record is likely to increase the threat of hunger and disease for millions of people in 2016, aid agencies say. The weather phenomenon is set to exacerbate droughts in some areas, while increasing flooding in others. Some of the worst impacts are likely in Africa with food shortages expected to peak in February. Regions including the Caribbean, Central and South America will also be hit in the next six months. This periodic weather event, which tends to drive up global temperatures and disturb weather patterns, has helped push 2015 into the record books as the world's warmest year.  "By some measures this has already been the strongest El Nino on record. It depends on exactly how you measure it," said Dr Nick Klingaman from the University of Reading. "In a lot of tropical countries we are seeing big reductions in rainfall of the order of 20-30%. Indonesia has experienced a bad drought; the Indian monsoon was about 15% below normal; and the forecasts for Brazil and Australia are for reduced monsoons." As both droughts and floods continue, the scale of the potential impacts is worrying aid agencies. Around 31 million people are said to be facing food insecurity across Africa, a significant increase over the last year. Around a third of these people live in Ethiopia where 10.2 million are projected to require humanitarian assistance in 2016.

With CO2 Boost, Marshes Can Rise to Meet Flood Risks - In the race to keep their verdure heads above rising seas, marshes that protect coastal regions from floods, storms and erosion harbor the botanical equivalents of nitro boosters: rapid growth fueled by climate-changing pollution. The same greenhouse gas that’s doing most to warm the planet and uplift its seas can also work as a fertilizer. New research suggests that rising levels of heat-trapping carbon dioxide in the atmosphere could help communities of marsh plants grow quickly enough to keep up with changes that would otherwise inundate them. “The fertilization effect from increased carbon dioxide in the atmosphere definitely enhances marsh-plant biomass functioning,” said Katherine Ratliff, a PhD candidate at Duke University who led modeling-based research published this month in Proceedings of the National Academy of Sciences. The findings suggest that mud shortages — not growth rates — could be the greatest challenges for marshes as they strive to grow quickly enough to keep up with rising seas. Sea levels have risen 8 inches since the late 1800s, with several more feet expected this century. The fostering of coastal ecosystems is considered a key defense strategy against future flooding.

Humans blamed for extreme weather -- Record December warmth is affecting large areas of the northern hemisphere, including most of Europe and the eastern US, while severe flooding hits places from Paraguay to the north of England. Climate scientists pin responsibility for the exceptional weather on man-made warming, combined with random variability and El Niño, the natural heating of the tropical Pacific Ocean that occurs every few years. David Rooke, an expert on flooding and deputy chief executive of the UK Environment Agency, said on Monday that flood preparations required a “complete rethink” as a result of climate change. “We are in a period of known extremes and we are moving into a period of unknown extremes,” he told BBC Radio. The World Meteorological Organisation expects the global average temperature this year to hit a record high — “the symbolic and significant milestone of 1C above the pre-industrial era” — as carbon dioxide and other greenhouse gases resulting from human activities trap more heat in the atmosphere. The Paris accord called on governments to contain global warming to 1.5C, with 2C as an outside limit. The UK Met Office says the world is likely to become even warmer next year, barring a random event such as a large volcanic eruption that pumps cooling dust into the atmosphere. “This forecast suggests that by the end of 2016 we will have seen three record, or near-record years in a row for global temperatures.” Although scientists resist making a direct causal link between global warming and individual weather events, they say climate change tends to increase the intensity and severity of rainstorms, because a warmer atmosphere contains more moisture and energy. There is 4 per cent more moisture in the air over the world’s oceans today than there was in the 1970s, In England the mean temperature of 9.5C is not only 5.1C above average but an amazing 2C above the previous record set in 1934 — usually monthly temperature records are beaten by a small fraction of a degree.

“Most Terrifying” Weather Ends a Hot 2015 - Peter Sinclair and Eric Holthaus - The storm that rampaged thru Texas and wreaked havoc across the south and midwest is winding up to deliver a hot blow to a suddenly vulnerable-even-in-December Arctic. Meteorologist Eric Holthaus in Slate: As it departs North America this week, the storm will rapidly intensify over the northern reaches of the Gulf Stream and draw tremendous amounts of warm air northward from Spain and the Mediterranean Sea toward the Arctic. As the storm approaches Iceland, it will have strengthened to the equivalent of some of the strongest hurricanes ever recorded in terms of atmospheric pressure. Intensely high pressure over western Russia, perhaps boosted by melting sea ice, will aid in setting up the tropics-to-pole atmospheric superhighway. Unlike other recent episodes of extreme weather around the planet, this storm is probably not related to El Niño, which has limited influence in Europe. The storm will be strengthening over the exact spot that North Atlantic temperatures have been cooling over recent years, an effect that scientists have linked to a slowdown of the basin’s circulation triggered in part by melting sea ice—the same scenario that was highly dramatized in the movie The Day After Tomorrow. This year, there’s been a notable increase in the sharp contrast between this cold patch and record warm ocean temperatures in the tropical Atlantic, an effect that leads to stronger ocean storms—like this one. The remarkable storm will briefly boost temperatures in the Arctic basin to nearly 10 degrees Fahrenheit warmer than normal—and the North Pole itself will be pushed above the freezing point, with temperatures perhaps as warm as 40 degrees. That’s absolutely terrifying and incredibly rare. Keep in mind: It’s late December and dark 24 hours a day at the North Pole right now. The typical average high temperature this time of year at the North Pole is about minus 15 to minus 20 degrees. To create temperatures warm enough to melt ice to exist in the dead of winter—some 50 or 60 degrees warmer than normal—is unthinkable. On Wednesday, the North Pole will be warmer than Western Texas, Southern California, and parts of the Sahara.

'Freak' Iceland weather bomb sets up Arctic for extreme heat - The Weather Network: Wednesday, December 30, 2015, 12:38 PM - An extreme North Atlantic storm - a weather bomb by meteorological standards - blasted tropical cyclone force winds across parts of Iceland, the UK and Ireland, but its most unusual effects could still be felt much farther to the north. Here's why. This "freak" storm, powered along by an initial pulse of heat from the Gulf Stream below and powerful winds from the Jet Stream above, has solidified itself as a weather bomb - a meteorological term referring to a storm whose central pressure drops by at least 24 millibars in 24 hours. According to the US National Weather Service Ocean Prediction Center, the storm had a central pressure of 958 millibars as of 12 UTC (7 a.m. EST) on Tuesday, and just 18 hours later, the pressure at the core of the storm dropped to just 928 mb. With the pressure dipping by that much, not only is it a weather bomb, but it even exceeded the forecast expectations by 4 millibars. This has made for a very intense weather system. The data recorded at the Höfn í Hornafirði weather station, in eastern Iceland, was even more impressive though, showing a roughly 65 millibar pressure drop in that 18 hour period, from near 990 mb down to around 935 mb as the storm passed by.  Wind speeds at Höfn í Hornafirði peaked Wednesday at a speed of 104 km/h, while Sandbúðir, in the central part of the island, recorded speeds of 112 km/h - both equivalent to tropical storm force winds.  Other portions of the island, especially in the west and northwest, were spared these intense winds. The capital city of Reykjavík, in the southwest, experienced a much more moderate wind speed peak of 50 km/h. Prior to that, however, as the storm swung past Ireland and northern regions of the UK on Tuesday night, the UK Met Office was expecting at least tropical storm-like conditions, if not worse.

Freak storm pushes North Pole 50 degrees above normal to melting point - A powerful winter cyclone — the same storm that led to two tornado outbreaks in the United States and disastrous river flooding — has driven the North Pole to the freezing point this week, 50 degrees above average for this time of year.   From Tuesday evening to Wednesday morning, a mind-boggling pressure drop was recorded in Iceland: 54 millibars in just 18 hours. This triples the criteria for “bomb” cyclogenesis, which meteorologists use to describe a rapidly intensifying mid-latitude storm. A “bomb” cyclone is defined as dropping one millibar per hour for 24 hours.  NOAA’s Ocean Prediction Center said the storm’s minimum pressure dropped to 928 millibars around 1 a.m. Eastern time, which likely places it in the top five strongest storms on record in this region.    As this storm churns north, it’s forcing warm air into the Arctic Circle. Over the North Sea, sustained winds from the south are blasting at 70 mph, and gusting to well above 100 mph, drawing heat from south to north. On Wednesday morning, temperatures over a vast area around North Pole were somewhere between 30 and 35 degrees Fahrenheit, and for at least a brief moment, surpassed the 32-degree threshold at exactly 90 degrees North, according to data from the GFS forecast model. Data from the International Arctic Buoy Programme confirms that temperatures very close to the North Pole surpassed the melting point on Wednesday. A buoy (WMO ID Buoy 6400476) at a latitude of 87.45 degrees North hit a high temperature of 0.7 degrees Celsius — or 33 degrees Fahrenheit. .

Here's Yet Another Alarming Effect Of Melting Arctic Sea Ice - Less Arctic sea ice may mean more rainfall, according to new research. Scientists have long known that the melting sea ice in the Arctic leads to more heat being absorbed by our planet, which can disturb the ecosystem.  However, according to a new study, published Tuesday in the Proceedings of the National Academy of Sciences,  there is yet another effect that vanishing ice has on our planet: The disappearing sea ice is linked to more precipitation in the Arctic.  This could impact the environment in a way that's comparable to doubling the amount of carbon dioxide in the global atmosphere, Ben Kopec, a Ph.D candidate in Dartmouth College's Department of Earth Sciences and lead author of the study, told The Huffington Post.  "As sea ice is reduced, ocean water is exposed to the atmosphere, leading to increased evaporation, and ultimately more precipitation," Kopec said. "The impacts of changing precipitation on the global climate system are significant."  The researchers found that as the sea ice shrunk 38,610 square miles, the percentage of moisture in the atmosphere increased by 18.2 percent in the Canadian Arctic and 10.8 percent in the Greenland Sea regions. The findings not only confirm a link between ice melt and precipitation, but they also correspond with other findings that show that the environment may be adapting to warming temperatures, according to the researchers.

How Critical Slowing Down in a Complex System Is Nature's Warning Signal - The Peter Lake experiment demonstrated a well-known problem with complex systems: They are sensitive beasts.Just as when the Earth periodically plunges into an ice age, or when grasslands turn to desert, fisheries suddenly collapse, or a person slumps into a deep depression, systems can drift toward an invisible edge, where only a small change is needed to touch off a dramatic and often disastrous transformation. But systems that exhibit such “critical transitions” tend to be so complicated and riddled with feedback loops that experts cannot hope to calculate in advance where their tipping points lie—or how much additional tampering they can withstand before snapping irrevocably into a new state. At Peter Lake, though, the researchers captured the first field evidence of an early-warning signal that is theorized to arise in many complex systems as they drift toward their unknown points of no return. The signal, a phenomenon called “critical slowing down,” is a lengthening of the time that a system takes to recover from small disturbances, such as a disease that reduces the minnow population, in the vicinity of a critical transition. It occurs because a system’s internal stabilizing forces—whatever they might be—become weaker near the point at which they suddenly propel the system toward a different state.

Bad news: Scientists say we could be underestimating Arctic methane emissions - Arctic permafrost has become a recent star in the climate change conversation, capturing the attention of scientists, activists and policymakers alike because of its ability to emit large quantities of carbon dioxide as well as methane — a particularly potent though relatively short-lived greenhouse gas — when it thaws. As temperatures rise in the Arctic, scientists are increasingly concerned that permafrost will become a major contributor to the greenhouse gas emissions driving global warming. Studies of permafrost emissions are important in both estimating current levels of greenhouse gas emissions and making predictions for the future. So far, most studies have focused on the way permafrost behaves in the summer, when Arctic temperatures are at their highest. But a new paper in Proceedings of the National Academy of Sciences says we’ve been overlooking the importance of cold-season emissions of methane gas in particular — and possibly underestimating their impact in the future. Currently, most of the models that scientists use to predict future methane emissions only factor in warm-season methane emissions, assuming that the vast majority of permafrost emissions will occur when temperatures are at their highest. These models are important because they allow scientists to make projections about how severe global warming will be in the future and help policymakers make decisions about how much — and how quickly — global carbon emissions need to be reduced. The researchers found that cold-season methane emissions are not only not negligible — they’re pretty significant. While emissions varied somewhat from one site to the next, Zona said that, overall, emissions from September to May accounted for about half of all the methane emitted from those sites throughout the entire year.

Scientists study methane 'hot spot' sources  - As scientists continue their work tracking sources of atmospheric methane in the Four Corners region, the federal government continues to formulate new rules intended to reduce oil and gas industry emissions. The U.S. Environmental Protection Agency — which is proposing new rules to better regulate methane emissions — projects emissions from the oil and gas industry will increase as technology that includes horizontal drilling and multi-stage hydraulic fracturing makes marginal operations like some of those in the San Juan Basin’s Mancos shale play economically feasible. The Bureau of Land Management is also working on a methane waste rule. In an effort to address the problem of climate change, the Obama administration proposed cutting methane emissions from all U.S. oil and gas production by nearly half over the next decade. The federal effort seeks to reduce methane emissions from oil and gas operations by 40 to 45 percent by 2025, compared to 2012 levels. Natural gas is 90 percent methane, a climate-warming pollutant 80 times more potent than carbon dioxide over a 20-year time period. After a 2014 report by NASA and the University of Michigan using European satellite imagery captured between 2003 and 2009 showing a large “hot spot” of atmospheric methane over the Four Corners, scientists started a project to better define the cloud’s sources. The San Juan Basin has for many years been the largest producer of natural gas in New Mexico, which is the second leading producer of natural gas in the U.S.  Colm Sweeney, lead scientist for the NOAA Earth System Research Lab Aircraft Program, said the study’s focus has been to pinpoint sources of atmospheric methane, but that data will not be released until next year. Sweeney attended the fall meeting of the American Geophysical Union in San Francisco and said there were “a few talks that showed some of the results of the work that we did.” He said the point of the meeting was to generate feedback from scientific peers, “not to broadcast the papers to the wider public.”

The Ongoing Environmental Disaster Currently Not Making The Headlines - The LA Times has a horror story that’s been going on since Oct. 23, when a Southern California Gas Co. natural gas well began leaking uncontrollably. The rate of leakage is estimated at 110,000 pounds an hour. That’s 55 tons, or the equivalent of 55,000 of these being emptied out every hour. It’s not burning, which is why it probably hasn’t gotten more coverage in the news, but 1,700 homes have been evacuated so far.  Rents in the Porter Ranch area are going up as people try to find housing — while still having to pay rent, mortgages, etc. on their homes in the affected zone around the well. It’s not just the fire risk — it’s also the other chemicals mixed in with the leak, including the rotten egg smell of hydrogen sulfide. The gas company estimates it could take another 3 months to seal the well. The Environmental Defense Fund has video of the plume, made visible by using a camera that sees in the infrared range.  The leak is primarily methane, a green house gas roughly 25 times more potent than CO2 when it comes to global warming effects. This one leak alone accounts for 25% of natural gas leaks in California, and has been compared to the BP 2010 Deepwater Horizon oil spill in the Gulf of Mexico. It’s just the biggest single problem in a much larger ongoing natural disaster. ...About one-fourth of the anthropogenic global warming we’re experiencing today is due to methane emissions, according to the Environmental Defense Fund. Leaks like the current one in California, it turns out, are a major contributor. In Pasadena, for instance, just miles from the leak in Aliso, investigators found one leak for every four milesSo far, over 150 million pounds of methane have been released by the leak, which connects to an enormous underground containment system. Silva says that the cause of the leak is still unknown, but research by EDF has also revealed that more than 38 percent of the pipes in Southern California Gas Company’s territory are more than 50 years old, and 16 percent are made of made from corrosion- and leak-prone materials.

Billowing wake-up call from LA on greenhouse gas - California is viewed as a national model in regulating greenhouse gas pollution, the one state that is actually moving the needle on climate change. That’s true to a point. But there are some gaping vulnerabilities in enforcement, and the massive natural gas leak in suburban Los Angeles underscores how far we have to go on oversight. Southern California Gas Co. officials said last weekend that they finally — finally — are close to locating the source of the methane cloud that has been billowing since October over an underground natural gas reservoir near the affluent community of Porter Ranch in the San Fernando Valley. The reserves, stored naturally inside a repurposed oil field, heat homes in the winter and fuel electrical plants in the summer. The leak appears to be in a narrow pipe used to inject surplus gas thousands of feet deep into rock formations that once served as oil wells. Because pinpointing the leak and pinching it off is complex and risky, the gas company won’t be able to stop the spewing until the spring. Meanwhile, though it isn’t despoiling beaches or killing wildlife, the disaster is being decried as the worst environmentally since the BP Deepwater Horizon oil spill. Infrared images of the catastrophe show its smelly but invisible plume rising like an industrial smokestack. Thousands of families living downwind of its rotten egg smell have had to be relocated. The methane is nontoxic but heat absorbent; the Environmental Defense Fund estimates the leakage will have the same 20-year climate impact as driving 7 million cars a day.

How Bad of a Greenhouse Gas Is Methane? - Scientific American: Environmental advocates are trying to change how policymakers consider the climate impacts of methane, a potent greenhouse gas. The change, if implemented, could make natural gas a less attractive option for generating electricity in power plants. At issue is the global warming potential (GWP), a number that allows experts to compare methane with its better-known cousin, carbon dioxide. While CO2 persists in the atmosphere for centuries, or even millennia, methane warms the planet on steroids for a decade or two before decaying to CO2. In those short decades, methane warms the planet by 86 times as much as CO2, according to the Intergovernmental Panel on Climate Change. But policymakers typically ignore methane's warming potential over 20 years (GWP20) when assembling a nation's emissions inventory. Instead, they stretch out methane's warming impacts over a century, which makes the gas appear more benign than it is, experts said. The 100-year warming potential (GWP100) of methane is 34, according to the IPCC. There is no scientific reason to prefer a 100-year time horizon over a 20-year time horizon; the choice of GWP100 is simply a matter of convention. The 100-year GWP value underestimates the gas's negative impacts by almost five times, said Ilissa Ocko, a climate scientist at the nonprofit Environmental Defense Fund. The quick warming in the short run catalyzed by methane can affect environmental processes, such as the flowering of plants, she said at the American Geophysical Union meeting last week. "The short-lived climate pollutants [like methane] that we emit from human activities are basically controlling how fast the warming occurs," she said. "This is because they are very powerful at absorbing radiation."

Australia's carbon emissions jump in 2015: Australia's greenhouse gas emissions increased by nearly 1 per cent in 2015, a federal government report quietly released in the lead-up to Christmas showed. The Climate Council said the increase showed Australia urgently needed to transition to renewables and justified calls for a worldwide moratorium on new coal mines. Australia emitted 549.3 mega-tonnes (Mt) of carbon dioxide in 2014-15, up 0.8 per cent on the year before but down nearly 3per cent on projections. Emissions increases were recorded in the electricity, transport, fugitive emissions and industrial and power generation sectors and offset only by a strong decline in agricultural emissions. Combined with emissions from land use and deforestation the overall increase in emissions on the previous year was 1.3 per cent. The Coalition pledged at the Paris climate talks, where it was agreed to restrict warming to no more than 1.5 degrees, to reduce Australia's emissions by 26-28 per cent by 2030.

Paris Agreement on climate change: the good, the bad, and the ugly: The Paris Agreement signals that climate change is back at the center of the global political agenda – at least for now. A collective weight has been lifted off the backs of the many delegates who for the past six years have been struggling to recover from the Copenhagen fiasco in 2009, where countries failed to agree on a common strategy. The lingering gloom of Copenhagen has been replaced by Paris euphoria. For this, the French hosts deserve much credit. Unprecedented participation by world leaders, including President Obama, Chinese president Xi Jinping and other heads of state, at the beginning of the summit helped set the tone that then allowed national delegates to make the necessary compromises. The Paris Agreement signifies a very welcome return to multilateralism.The 1992 United Nations Framework Convention on Climate Change laid down a broad legal structure for global cooperation to which future agreements were intended to provide more specificity. Paris did nothing of the sort. Instead, the Paris Agreement introduces a new, and mainly worrisome, model of voluntary “nationally determined contributions” by governments. Many of the results are expected to be delivered by the magic of markets and not-yet-commercially available revolutionary technology, with world leaders cheering the change along.

COP21 Was A FRAUD!: This is the most comprehensive and scientifically honest discourse about our climate future that I have encountered so far:  Dr David Wasdell is an impeccable source. The evidence and reasoning he employed, by summarising data and peer-reviewed research from many other scientists, demonstrated beyond any shadow of a doubt that the massively underestimated conclusions of the IPCC were politically watered down deceit. It enabled false (but more politically palatable) assumptions to be adopted by the COP participants and meaningless goals to be pursued (which are not binding anyway). All in all, those international toings-and-froings have been a complete joke. James Hansen called the COP21 shenanigans "half assed and half baked"  There was one benefit of COP21 however. The delusion that we still have a carbon "budget" to burn and that we still have some wiggle room to avoid disaster, does justify ongoing COP junkets for the COP junkies for next few years, before the airline industry collapses from financial Armageddon / Hi-NES depletion. May as well keep partying on the deck of the Titanic, while encouraging the crew to use chewing gum and spit to patch the gaping hole in the hull. Dr Wasdell mentioned that an 8 degree Celsius global average temperature rise is a conservative estimate and 10 degrees GATR may be more likely.

To Achieve Paris Climate Goals, U.S. Will Need New Laws -- The climate agreement’s lofty goals won’t be achieved without large corporations making big changes. And while many companies have welcomed the deal and voluntarily pledged to cut emissions, the sweeping reforms required to avert a sharp rise in global temperatures will almost certainly require substantial new government regulations.  In the United States, the goal is to reduce greenhouse gas emissions 26 to 28 percent from 2005 levels by the year 2025. To achieve that, the Obama administration is being forced to count mainly on several laws that are already on the books, rather than pursue new regulation.  That’s because the Republican-controlled Congress has vowed to block any climate legislation and to rescind the laws already in place. Senator Mitch McConnell of Kentucky, the Republican majority leader, said that President Obama was “making promises he can’t keep,” warning that the Paris agreement “is subject to being shredded in 13 months” if Republicans win the White House. Even the rules the president is counting on face challenges. For example, the Environmental Protection Agency’s Clean Power Plan is a major component of the president’s efforts. The plan pushes electricity generators away from coal and toward natural gas, and provides some incentives for renewable-power generation. It could make a significant dent in domestic carbon emissions, but it is being opposed in a number of states; the Senate has already voted to scuttle it, and the U.S. Chamber of Commerce sued to block it. Another pillar of the administration’s plan is the enforcement of increasingly tight fuel efficiency standards. Already enacted by Congress, these rules force automakers to make a gallon of gasoline go further over time. Industrial manufacturers are also required to make appliances progressively use less energy. But falling gasoline prices and the renewed popularity of less efficient S.U.V.s have blunted fuel efficiency gains. The effect of politics — and political horse trading — on these policies was underscored when members of Congress agreed to a deal that ended a ban on oil exports (helping the fossil fuel industry) but also extended tax credits for wind and solar industries.

To Fight Climate Change, Should Progressives Pool $ and Purchase Coal to Keep it in the Ground?  -- This webpage says that the MacArthur Foundation seeks to fight climate change. San Francisco's Tom Steyer has focused on this policy agenda.  Many successful progressives and non-profits seek to "fight climate change" through investing their time and $ resources to reduce our global greenhouse gas emissions through changing public policy.  If coal is the major dirty fuel, then why hasn't this group of actors figured out how to work together to use markets?  Right now they are focusing their efforts on changing policies but policies leak across borders.  U.S progressives can't change policies in China and India.  Suppose that the progressives pooled their ample $ and purchase just one asset called coal.  If they could purchase enough of it and keep it in the ground, the price of coal would rise and this would incentivize both green research and development but also fuel switching all over the world.  How much $ would this take?  Do progressives have enough $ to achieve this? Could they overcome the free rider problem to achieve this? I will leave this to others to figure out.

The U.S. Uses More Electricity on Christmas Lights Than These Entire Countries Do All Year -- You’ve got your tree all set, perhaps a few lights strung up around the yard to show the neighbors that life’s good, and you’re dealing with mild, but totally manageable anxiety about whether Amazon’s going to pull through for you today or not. You’ve got a lot of good things on your plate. With all this #gratitude, it seems like an appropriate time for a quick reminder that beneath the veneer of holiday goodness, we’re all still horrible, gluttonous people.  Exhibit A: Your Christmas Lights. (via the Center for Global DevelopmentA 2008 study from the US Energy Department’s Energy Information Administration (EIA) found that decorative seasonal lights accounted for 6.6 billion kilowatt hours of electricity consumption every year in the United States. That’s just 0.2% of the country’s total electricity usage… It’s also more than the national electricity consumption [FOR THE YEAR] of many developing countries, such as El Salvador, Ethiopia, Tanzania, Nepal, or Cambodia. For the year! Maybe you didn't need that last $4 strand of flashing Santa-shaped lights, no? US uses more energy on Xmas lights than Ethiopia does for whole economy. Maybe we shouldn't lecture them on dams?  If you’re feeling comforted by the fact that you are, like, way greener than you were in 2008 when the EIA data was collected—which is so long ago it was a pre-Instagram world (eww)—Todd Moss of the Center for Global Development tells NPR you’re probably sucking down as much now as you always have from the power grid.

New York Times Performs Jerry Brown Spin Control - What do you do if you are a liberal governor trying to present the public image of a concerned environmentalist and then get caught red handed using state employees to find oil on your personal property? Why you have Adam Nagourney of the New York Times perform spin control to paint a picture of yourself as a rugged outdoorsy type surviving as a nature boy on that very same land you wanted to exploit for an accursed fossil fuel. First we find Jerry Brown with his hand caught in the petroleum cookie jar as reported by Breitbart on November 5 followed by the nature boy spin control just now provided by the New York Times. California governor Jerry Brown used state experts to prepare a 51-page report on the prospects for oil development on his family’s private land in Northern California, according to an Associated Press investigation released early Thursday morning.“Senior staffers in the state’s oil and gas regulatory agency over at least two days produced a 51-page historical report and geological assessment, plus a personalized satellite-imaged geological and oil and gas drilling map for the area around Brown’s family ranchland near the town of Williams,” the AP reported. Brown’s office declined to comment, referring the AP instead to the California Division of Oil, Gas and Geothermal Resources, which said that the agency had responded to the governor’s request for information as it would have for any other citizen. Oil company executives and industry executives found that hard to believe, however: “they never heard of regulators carrying out and compiling that kind of research, analysis and mapping for private individuals.”

How 19 Big-Name Corporations Plan to Make Money Off the Climate Crisis -  - Climate change will have some pretty terrifying consequences. Experts have predicted everything from deadly heat waves and devastating floods to falling crop production and even increased political instability and violence. But according to some of the world's biggest companies, these future disasters could also present lucrative business opportunities. In a remarkable series of documents submitted to a London-based nonprofit called CDP, big-name corporations describe global warming as a chance to sell more weapons systems to the military, more air conditioners to sweltering civilians, and more medications to people afflicted by tropical diseases. CDP, which stands for "Carbon Disclosure Project," asks companies all over the world to disclose information about their greenhouse gas emissions and how the changing climate will impact their operations. Each year, thousands of companies send in responses. Below, we've compiled a list of some of the most striking—and, in some cases, disturbing—scenarios laid out by those businesses. It's important to keep in mind that these companies aren't rooting for catastrophic warming. In the same documents, they outline huge risks that climate change poses to humanity—and to their profits. Many of them have also taken significant steps to reduce their own carbon footprints. Still, the fact that corporations have spent so much time thinking about the business opportunities that could emerge as the world warms underscores just how colossal an effect climate change is going to have on our lives.

In the late 1970s, Big Oil worried it could be held accountable for rising carbon emissions - Quartz: In the late 1970s, Big Oil worried it could be held accountable for rising carbon emissions.  Until relatively recently, oil industry officials were among the biggest detractors of climate science, suggesting that some research seemed frivolous. But in the late 1970s and early 1980s, the industry—worried that oil could be held responsible for rising temperatures in the future—conducted one of the world’s most ambitious early studies of climate change. InsideClimate News, an investigative news organization, released a new report on Dec. 22 detailing the oil industry’s research. The study was funded by a climate change task force that included the world’s biggest oil companies—the so-called Seven Sisters, in addition to their lobbying arm in Washington, the American Petroleum Institute (API). These are the corporate predecessors of BP, Chevron and ExxonMobil, in addition to Shell. The task force began work in 1979, a time when only a few academics were deeply familiar with climate science, and worked through 1983.  The task force was an attempt to get out in front of the science, and decide whether it needed to “help develop ground rules for energy release of fuels and the cleanup of fuels as they relate to CO2 creation,” according to a document unearthed by InsideClimate News reporters. Members of the task force conducted independent research themselves as well. In a previous story, InsideClimate News documented the publishing by ExxonMobil of numerous pioneering scientific papers on climate change, beginning in the late 1970s and continuing through the 1980s. In the 1990s, however, API and ExxonMobil reversed course and decided to go on the offensive to undermine some leading climate scientists. This change in tactics included the funding of think tanks and writers who worked to sow doubts about climate science.

Alberta's new carbon tax: On Sunday November 22nd, 2015, Alberta's new centre-left Premier, Rachel Notley, announced that the province would be introducing an economy-wide carbon tax priced at $30 per tonne of CO2 equivalent, to be phased in in 2016 and 2017. Observers had been expecting new efforts to mitigate emissions since Notley's election in May 2015, but the scope and ambition of this policy took many by surprise. Alberta, of course, is the home of the Athabasca oil sands and is one of the largest per-capita GHG emitters of any jurisdiction in the world. The new plan was nevertheless endorsed by environmental groups, First Nations and by the biggest oil companies, an extraordinary consensus that many would not have thought possible. How was this done? I will try and explain the new policy as far as I can (the details are not all available yet), but the short answer is that a huge amount of credit is due to the panel of experts led by University of Alberta energy economist Andrew Leach and his fellow panelists. Not only did they listen to what all Albertans had to say, but they were thoughtful in framing a policy that is acceptable to almost everyone.

Warren Buffett Beats Elon Musk In Nevada -The fight was over solar net-metering in Nevada, a state that has the fifth largest installed solar capacity in the country. Nevada is home to Tesla’s ‘Gigafactory,’ which will produce batteries for electric vehicles. In addition to CEO of Tesla, Elon Musk is also the chairman of SolarCity, and net-metering – the policy that allows homeowners with solar panels to be paid for the power they produce – is central to solar economics. . NV Energy, a major Nevada utility and subsidiary of Buffett’s Berkshire Hathaway, strongly opposed the net-metering provision. Earlier this year the Nevada state legislature ordered the Public Utility Commission (PUC) to formulate a new net-metering payment by the end of 2015 after the state maxed out the allotted 235 megawatt net-metering program. Vivint Solar, another solar developer, pulled out of Nevada last summer after the net-metering program became fully subscribed, which forced solar installations to grind to a halt. The impasse meant that a lot was riding on the PUC’s decision. Just days before a New Year deadline, the Nevada Public Utility Commission (PUC) voted 3-0 to slash the payments that homeowners receive for solar energy and also increase charges on them. The solar industry cried foul, saying that the PUC decision was made without evidence or debate, and that it “flies in the face of Nevada law, which requires the state to 'encourage private investment in renewable energy resources, stimulate the economic growth of this State; and enhance the continued diversification of the energy resources used in this State' through net metering,”  “

Editorial: Placing limitations on solar installations makes no sense - Sometimes things just don’t add up. Apparently, the Weld County commissioners are thinking of requiring all solar facilities to sit on land zoned industrial. So, if a farmer in Weld chooses to allow a solar company to use his or her property to build a solar farm, this ordinance would block it. In countless cases, our commissioners have fought long and hard for property rights. The fact they would even consider a move like this makes no sense. As we look further into this, we find the proposed ordinance also would not allow solar companies to buy land zoned agriculture for a solar farm. As of right now a company called SunShare, a small solar company out of Denver, is working with Xcel Energy. They have plans for three small solar facilities next year in Weld called community gardens. These community solar farms are normally 6-9 acres, producing 1-2 megawatts of energy. This is enough to power around 190 homes. These farms are unique in that they allow people in more urban settings — say, apartment dwellers — to reap the benefits of solar. These residents buy into off-site community gardens and have money knocked off their power bills.

Solar is in, biomass energy is out—and farmers are struggling to dispose of woody waste: It should have been a good year for turning wood and waste into electrons. A record-setting drought forced growers to bulldoze thousands of acres of trees, and hardly anyone in the Central Valley has permission to light bonfires anymore. But more than trees have withered in California's sun. The state's biomass energy plants are folding in rapid succession, unable to compete with heavily subsidized solar farms, many of which have sprouted up amid the fields and orchards of the San Joaquin Valley. Paul Parreira is painfully aware of the irony. The waste-to-energy facilities where he used to send about 50,000 tons of almond shells per year are vanishing, even as he expands a one-megawatt solar array on six acres of his family's property in Los Banos. . Six have closed in just two years, the latest in Delano, which shut down Thursday, after San Diego Gas & Electric ended its power purchase agreement. Twenty-five people were laid off, and 19 will remain to complete closure of the plant, said Dennis Serpa, fuels manager of the 50-megawatt plant, owned and operated by Covanta. The Rio Bravo biomass facility south of Fresno is taking some of the fuel that would have gone to Delano. But short of a miracle, the 25-megawatt plant run by IHI Power Services Corp. will burn its last wood chips in July, when its power purchase agreement with Pacific Gas & Electric Co. expires.

Should we solar panel the Sahara desert? - BBC News: Could one solution to climate change be to harvest the power of sunlight where it shines brightest on the planet? Should we solar panel the Sahara desert? Four experts discuss the radical proposal with the BBC World Service Inquiry programme.

Wind generation seasonal patterns vary across the United States - Today in Energy - U.S. EIA -  Wind plant generation performance varies throughout the year as a result of highly seasonal wind patterns. Nationally, wind plant performance tends to be highest during the spring and lowest during the mid- to late summer, while performance during the winter (November through February) is around the annual median. However, this pattern can vary considerably across regions, mostly based on local atmospheric and geographic conditions.  Unlike conventional fossil-fueled generators, there is no fuel or other variable cost associated with wind power generation. As a result, a wind plant's capacity factor—a measure of the plant's generation as a percentage of its maximum generating capacity—is very closely related to the available wind resource, or average wind speed. In general, wind plant capacity factors tend to be higher during windier periods of the year. Because seasonal wind patterns vary by location, seasonal capacity factor patterns also vary across regions. Capacity factors for most regions of the country rise or are flat January through April, fall through August or September, and increase through the remainder of the year. In California, however, wind capacity factors rise through June and fall from that point through December. Thus, the median winter (November through February) wind plant capacity factor in California for 2001 to 2013 is about 15%—considerably below California's annual median capacity factor of 26%. However, during the late summer months when California tends to experience the highest levels of demand (July, August, and September), monthly median wind capacity factors are closer to 30%—above the annual median.

As hydropower dries up, Tanzania moves toward fossil fuels --– As drought continues to cripple its hydropower plants, Tanzania is struggling to produce enough electricity – and is moving toward using more fossil fuels to make up the shortfall. Hydropower plants normally produce about 35 percent of Tanzania’s electricity needs, with gas and oil plants making up most of the difference. But as demand grows and water shortages hit hydropower production, Tanesco – the state-run power utility firm – is investing in more fossil fuel plants to maintain its electricity supply. In October the east African nation was forced to shut down its main hydropower facility for nearly a month because the water level was too low to run the turbines, officials said. In December, the country’s hydropower plants, which can produce as much as 561 megawatts of power, generated only 110 megawatts, according to Tanesco. “The main challenge we have been facing is over reliance on hydropower as the major source of electricity, which is hard to maintain due to unpredictable weather,” said Felchesmi Mramba, Tanesco’s managing director, in an interview.

Key Funding Source for Miners Is Depleted -- For struggling mining companies, an important source of financing is growing scarce.  Contending with falling profits and hefty debt payments, mining companies such as Glencore and Vale this year increasingly turned for cash to specialist lenders who pay large lump sums in exchange for metal deliveries. But companies that provide the vast majority of this kind of financing through “streaming deals” are running low on capital after striking a record $4.07 billion of deals in 2015, nearly quintuple the level in 2014.  Canadian streaming company Silver Wheaton in November paid Glencore $900 million in exchange for 33.5% of silver production from the Antamina copper mine in Peru. The cash infusion helped Glencore pay down its debt and stave off investor ire that had triggered big swings in the company’s share price. Silver Wheaton, though, doesn’t currently have capacity for another blockbuster deal, said its chief executive, Randy Smallwood. The company has roughly $500 million left in its line of credit after doubling it to $2 billion earlier this year and is reluctant to sell stock or get deeper into debt, he said. Silver Wheaton, Royal Gold and Canada’s Franco-Nevada will start 2016 with an estimated $1.4 billion to deploy, according to an analysis of the companies’ financial statements by Canaccord Genuity analyst Peter Bures. That compares with an estimated $4.7 billion on hand in the first quarter of 2015. A representative of Franco-Nevada declined to comment. Mr. Bures said those three companies account for more than 80% of lending capacity.

China Clamps Down on Coal - China says it will not approve any new coal mines for the next three years. The country’s National Energy Administration (NEA) says more than 1,000 existing mines will also be closed over the coming year, reducing total coal production by 70 million tons. Analysts say this is the first time Beijing has put a ban on the opening of new mines: the move has been prompted both by falling demand for coal as a result of a slowing economy and by increasing public concern about hazardous levels of pollution, which have blanketed many cities across the country over recent months. Beijing, a city of nearly 20 million, issued two red smog alerts—the most serious air pollution warning—in December, causing schools to close and prompting a warning to residents to stay indoors.  A 2015 study estimated that air pollution—much of it from the widespread burning of coal—contributed to up to 1.6 million deaths each year in China.  The country is by far the world’s largest producer and consumer of coal, the mostpolluting fossil fuel. Emissions from coal-fired power plants and other industrial concerns in China have made it the world’s largest emitter of greenhouse gases, putting more climate-changing gases into the atmosphere each year than the U.S. and the European Union combined.

Paris Fails to Revive the Nuclear Dream  -- In Paris, in early December, the advocates of nuclear power made yet another appeal to world leaders to adopt their technology as central to saving the planet from dangerous climate change.  Yet analysis of the plans of 195 governments that signed up to the Paris agreement, each with their own individual schemes on how to reduce national carbon emissions, show that nearly all of them exclude nuclear power. Only a few big players—China, Russia, India, South Korea and the United Kingdom—still want an extensive program of new–build reactors.To try to understand why this is so the U.S.-based Bulletin of the Atomic Scientists asked eight experts in the field to look at the future of nuclear power in the context of climate change.One believed that large-scale new-build nuclear power “could and should” be used to combat climate change and another thought nuclear could play a role, although a small one. The rest thought new nuclear stations were too expensive, too slow to construct and had too many inherent disadvantages to compete with renewables. Amory Lovins, co-founder and chief scientist of the Rocky Mountain Institute, produced a devastating analysis saying that the slow-motion decline of the nuclear industry was simply down to the lack of a business case. The average nuclear reactor, he wrote, was now 29 years old and the percentage of global electricity generated continued to fall from a peak of 17.6 percent in 1996 to 10.8 percent in 2014. . Lovins says nuclear power now costs several times more than wind or solar energy and is so far behind in cost and building time that it could never catch up.

Japan Building "Great Wall" Against Tsunamis   - video - Four years after the tsunami ravaged much of its northeastern coast and killed over eighteen-thousand people, Japan is constructing a nearly 250-mile chain of cement seawalls to fend off future towering waves. Opponents of the 6.8 billion dollar wall, which in some places will reach nearly five stories high, say that the massive concrete barrier will damage marine ecology and scenery and hinder vital fisheries.

Moscow, Cairo to ink $26bn nuclear plant construction deal in Q1 2016 — The contract to construct Egypt’s first nuclear power plant is expected to be signed by Russia and Egypt in the first quarter of 2016, according to a source from Russian nuclear agency Atomstroyexport. “We plan to sign contract worth $26 billion in the first quarter [of 2016 – Ed.],” the source told journalists on Monday. The agreement on building a plant was reached by the two countries earlier this year. As part of it, Russia will provide Egypt with $25 billion in credit to begin construction. It will cover 85 percent of the costs; Egypt has to provide the remaining 15 percent. The plant will be built in Dabaa which is about 130 kilometers south of Cairo, it will comprise four 1200 MW nuclear reactors.  Moscow will also provide staff and scientific research for the project. The Russian nuclear agency Rosatom will construct two of the plant’s reactors using Russian technology.

Russia will start building 2 nuclear reactors in Iran - Russia will start constructing two nuclear reactors in Iran next week, as Tehran seeks to reduce its reliance on oil and gas with 20 facilities over the coming years, an official said Tuesday. The start of construction follows a historic deal between Iran and world powers in July that ends a decade-long standoff over Tehran's nuclear program. And it comes a year after Tehran signed a contract with Moscow to construct two reactors at the existing Russian-built Bushehr power plant. A series of agreements signed between the two countries last year foresees eventually increasing the total number of Russian-built reactors in the country to nine. Work on the two facilities "will commence next week," state television's website quoted atomic energy agency spokesman Behrouz Kamalvandi as saying. Iran plans to build 20 more nuclear plants in the future, including four in Bushehr. The accord does not limit Iran's development of civilian nuclear sites. The two reactors will be financed by Iran, Sergei Kiriyenko, head of Russia's state nuclear company Rosatom, said last year. The two countries are allied in supporting Syrian President Bashar al-Assad against opposition and jihadist groups, mainly the Islamic State group. And they plan to boost trade volume, as they signed several joint development documents last month during Russian President Vladimir Putin's first visit to Iran in eight years.

‘Nuclear Gypsies’ Risk Their Lives to Clean Up Fukushima -- The Fukushima nuclear disaster happened more than four years ago and yet Japan is still reeling from the impacts and spending billions of dollars to clean up what photographers and filmmakers who’ve entered the so-called “no go zone” have described as a “post-apocalyptic wasteland.” More than 100,000 people remain displaced from the disaster, and the Japanese government is still working to decontaminate the area, which it estimates will cost $50 billion. The people on the frontlines of that cleanup are known by some as the “nuclear gypsies,” who are exposing themselves to dangerous amounts of radiation as they attempt to remove the nuclear waste.  Watch the “nuclear gypsies” risk their lives in this video from Seeker Stories:

China's $1 Trillion Nuclear Plan - China, still the world's largest consumer of mineral and energy commodities despite lagging economic growth, appears to be have one foot in the past and another in the future as it embarks on an ambitious plan to install nuclear power stations while at the same time committing to over 100 coal-fired power plants that may never burn a single tonne of the widely-condemned fossil fuel.  The disconnect is a bit of a puzzle, but the evidence lies in a recent report by Greenpeace indicating that in the first nine months of this year, Chinese central and provincial governments issued environmental permits for 155 new coal plants. That's four new plants a week. Greenpeace not surprisingly paints an alarmist picture of what would happen should all these plants go into production (their annual carbon emissions would equal that of Brazil) but then goes on to make the startling conclusion that none will probably get built. That's because China will have no need for the energy they would produce. According to the report, coal use in China hasn't increased in four years and coal plant utilization is declining. More than half of China's coal plant capacity is sitting idle. So why build the plants? According to Greenpeace, it's because China in March decentralized authority for making environmental assessments to the provinces, which have an economic interest in keeping coal plants in their jurisdictions despite concerns over air pollution. The plants give provincial state-owned enterprises a guaranteed source of income, and building new ones raises local economic growth, an important measure by which provincial officials are evaluated, the New York Times reported in November. Importantly, coal-fired power plants provide a steady source of provincial tax revenue, while renewable-energy projects cannot be taxed.

Beijing Warns Children to Stay Indoors as Smog Levels Hit Heavy - Beijing advised children and the elderly to stay indoors today after pollution levels in the Chinese capital reached “heavy” levels.  The concentration of PM2.5 particles -- considered the most hazardous to people’s health -- was 320 micrograms per cubic meter as of 8 a.m. near Tiananmen Square, according to the Beijing Municipal Environmental Monitoring Center’s website. The World Health Organization recommends PM2.5 exposure of no more than 25 over 24 hours.  The center forecast “heavy pollution” levels would persist today as Beijing raised its “blue” pollution alert, the lowest of a 4-grade warning system. That follows two “red” air pollution alerts this month, the highest on the scale that prompts measures including school closures, traffic restrictions and limits on factory operations.

Governor, legislature facing hot button issues in new year - Columbus -- There are plenty of issues that could put Gov. John Kasich and Republican legislative leaders at odds in the new year.The administration and the legislature continue to have different positions on an increase in taxes on oil and gas produced via horizontal hydraulic fracturing.The governor doesn't appear to be on board with legislative proposals to place a billion-dollar bond proposal before voters to pay for water quality improvement initiatives. And Kasich and legislators still have to reach an agreement on renewable energy mandates, which were placed on hold last year pending further review. The governor offered comments on those and other areas during a year-end speech before a small chamber of commerce audience in his suburban Columbus hometown.

Appeal notice filed in Columbus court over injection well plan - A local anti-fracking group has filed a notice of appeal with Franklin County Common Pleas Court over the decision last spring by the Ohio Oil & Gas Commission to allow a third K&H Partners injection well to be drilled in eastern Athens County. An appeal from the same group over the second K&H injection well at the same location is pending in Franklin County Common Pleas Court. The Ohio Division of Oil & Gas Resources Management issued a permit March 18 allowing K&H to proceed with its third injection well on the site near Torch, and the Athens County Fracking Action Network appealed that permit to the Oil & Gas Commission. After the commission dismissed that appeal earlier in November, ACFAN filed its notice of appeal with the Franklin County Common Pleas Court. The state of Ohio and K&H have argued that the permit issued by the ODNR was not appealable because the permit was for the drilling of the well only, and separate permission was needed for K&H to begin injection. That permission has since been granted. ACFAN’s notice of appeal filing seeks the court to overturn the commission’s decision and order a hearing on the permit appeal. This process has played out once before, when the second injection well at the K&H was going through this process, and the commission rejected ACFAN’s appeal in 2014. ACFAN took that case to Franklin County Common Pleas Court as well, where it is still pending.

Latta asks regulators for pipeline details concerning safety -- U.S. Rep. Bob Latta (R., Bowling Green) has asked federal regulators to help address concerns about a natural gas pipeline proposed for northwest Ohio. In the past Mr. Latta has spoken in favor of plans for the NEXUS Gas Transmission line, but in a recent letter to the Federal Energy Regulatory Commission he asked the agency to help “address concerns that I have received from my constituents directly related to the location of compressor stations.” Mr. Latta’s Dec. 17 letter seeks information about safety guidelines, vibrations, contingency plans, and testing. It came as more communities, park districts, school officials, and health boards raised concerns with the commission about plans NEXUS Gas Transmission has made for a major compressor station near the western Lucas County village of Whitehouse.  The pipeline is to carry newly fracked natural gas that would be moved across northwest Ohio along a 255-mile route, much of it through the countryside. Just before Christmas, more parties filed motions to intervene in federal proceedings, including Waterville and Woodville townships, the city of Waterville, and Anthony Wayne Schools. Related: Ontario Energy Board approves two contracts to ship Ohio natural gas to Canada via Nexus Pipeline. Anthony Wayne is concerned about having five of the district’s six school buildings within three miles of the compressor site.

Energy glut, low commodity prices hitting Ohio's Utica Shale; cutbacks are growing in eastern Ohio -  Drilling is slowing down in Ohio’s Utica Shale because of low commodity prices and growing energy supplies. Continued low prices tied to the Organization of Petroleum Exporting Countries’ efforts to derail shale drilling in the United States have put a major crimp into drilling for natural gas and liquids in Ohio and other shale-drilling states. OPEC has continued production, despite an oil glut that has reduced prices to $36 a barrel, in order to maintain its market share. That natural gas-oil glut and low prices are good news for consumers who have cheap natural gas for heating their houses and petroleum for fueling their vehicles, but it has created serious problems for struggling energy companies. And those impacts are also being felt across much of eastern Ohio in hotels, restaurants, gas stations and industries that supply drillers. Warm winter temperatures are also hurting energy producers because there is less demand for Utica natural gas. Some drillers have canceled, scaled back or postponed drilling. Some have voluntarily cut back on production. Less money is earmarked in 2016 on well drilling. Some drillers have moved out of Ohio. Others are trying to sell off non-core assets. Some are seeking financial partners to share the costs. Many have incurred heavy debt. About 20 firms across the country have filed for bankruptcy protection. That includes Magnum Hunter Resources Corp., an active Utica driller.

Natural Gas Drillers Expect Gas Decline To Continue in 2016 - - As 2014 closed, Ohio and West Virginia featured 77 active rigs drilling into the Marcellus and Utica shales. One year later, there are only 30 working rigs between the two states, while natural gas prices are about $1 less per 1,000 cubic feet than last December. And industry leaders believe drillers will continue struggling amid low prices in 2016. They said that even though the New York Mercantile Exchange price for natural gas is now about $2 per 1,000 cubic feet, those working in Ohio and West Virginia are only getting about 75 cents. "The story of 2015 is the crash in oil and natural gas prices. We do not have the pipeline infrastructure to get this gas to markets like New York and Chicago. That puts us at a disadvantage, price-wise," said Shawn Bennett, executive vice president of the Ohio Oil and Gas Association. "The prices are down across the U.S., but are even lower here because of our glut of gas." "If you look at the NYMEX, the price has steadily declined throughout the year. We just can't put any more gas into the market because there is nowhere to put it," DeMarco said. "We have to focus on the infrastructure. We have to get this gas out of here." Bennett said even now, Ohio is producing about 3 billion cubic feet of gas per day. According to Cabot Oil & Gas, that is enough natural gas to run 72,945 homes for an entire year."It is going to be a slow 2016 because of the prices. They are down across the U.S., but even more in Marcellus and Utica Shale because of that glut of gas," Bennett said. "At 75 cents per Mcf, you just can't make it work."

Officials in Pa., W.Va., Ohio hope cracker plants get commitment, go into production -- With companies spending hundreds of millions in 2015 on planning for two potential petrochemical plants along the Ohio River, officials in three states hope 2016 is the year that billions of dollars are committed to their construction. The recent crash in natural gas and related products’ prices cast some doubts on whether decisions on building the so-called ethane crackers will come soon. Proponents of Royal Dutch Shell’s proposed complex in Beaver County and PTT Global Chemical’s possible cracker in Belmont County, Ohio, can point to plenty of recent positive developments. Shell this year closed on the property in Potter, landed key environmental permits, began an $80 million remediation of the former Horsehead Corp. zinc smelter site and started building an access bridge over Route 18. PTT commissioned $100 million in studies to examine the feasibility of building at a shuttered power plant across the river from Moundsville, W.Va. Whether either company makes a final decision on building in 2016, though, will require getting a handle on global commodity markets that became more volatile this year. “These companies are trying to make decisions on what market conditions will be … three to five years from now,” said David Mustine, senior managing director for shale energy and petrochemicals at JobsOhio, a workforce and economic development group in Columbus.

Officials propose injection-well ban - The Monroe County Board of Commissioners is drafting an ordinance that would ban any injection wells in Monroe County near karst geology or Lake Erie. Trendwell Energy Corp., with corporate offices in Rockford, Mich., has proposed a plan to drill a 765-foot-deep well near Ida Center Road and Alcott Road in Summerfield Township to inject saltwater. Philip Goldsmith, legal adviser for the board, is working on a law that would comply with existing federal and state legislation. “We don’t want anything injected back into the ground,” commissioner David Hoffman said. “They keep saying brine water, brine water, brine water. But it takes a lot of chemicals also. We have deep wells for agriculture. The main source of income is for produce, and if we get contamination in the produce, it would be devastating.” An injection well places fluid deep underground into porous rock formations, such as limestone in Monroe County. The fluid may be water, brine water (also known as salt water), waste water, or water mixed with chemicals. “Our biggest challenge in Monroe County is protecting our groundwater in a particularly vulnerable geology,” board chairman J. Henry Lievens said. “Monroe County is not only situated next to Lake Erie, but with our unique sinkholes and karst geology, it presents a challenge coupled with extensive agriculture.” Tests have been conducted at several sinkholes. Test strips and dyes were used and within a matter of hours, marks appeared in people’s tap water. Monroe County does not have an alternative source of drinking water.

Coal losing foothold over Pittsburgh region's river traffic - Pittsburgh’s rivers help tell the story of coal’s waning fortunes. Ten years ago, about 28 million tons of the fossil fuel moved on the region’s three rivers, fueling power plants as well as coke plants where the natural resource was converted into fuel for steel industry blast furnaces. Coal from Pennsylvania and Ohio mines was headed to power plants in the mid-Atlantic, southeast and midwest. Coal from West Virginia and Kentucky mines fed U.S. Steel’s Clairton coke plant. A decade later, just under 22 million tons of coal moved on the rivers in 2014, making floating barges loaded with the black mineral a less common sight in the region, according to preliminary figures from the Port of Pittsburgh Commission. Despite the 22 percent drop, coal remains the major commodity shipped on barges that ply the Monongahela, Allegheny and Ohio. It accounted for 70 percent of the 31.5 million tons of commodities shipped on the rivers in 2014, according to the port commission, which has not yet completed a final tally of 2014 river traffic. Overall river tonnage fell 21 percent between 2003 and 2013, according to the commission. The decline illustrates the ebb and flow of the regional and national economies; the pressure that coal is under from cheap, abundant natural gas, as well as environmental regulations; and the impact of the Great Recession in 2008-09. Coal tonnage averaged 30 million tons in the five years before the economy bottomed in 2009, when only 25.1 million tons of the commodity were shipped on the region’s rivers. Coal traffic slowly trended higher from there, reaching 25.5 million tons in 2012. The next year, when FirstEnergy closed two coal-fired generating plants — Hatfield’s Ferry in Greene County and Mitchell in Washington County — coal traffic fell to 23.7 million tons.

Furious Coal Baron Lashes Out: "Obama Is The Greatest Enemy I've Ever Had. It's Beyond Personal" --  Robert Murray is no fan of Barack Obama.  Murray, you’re reminded, is the CEO of Murray Energy. Earlier this year, the company laid off 21% of its employees, with the majority of the cuts coming in West Virginia, which was staring down a $195 million budget gap thanks to the slide in coal prices.  Around two months after the job cuts, Murray spoke to Republicans at the Lincoln Day Dinner and let it all out. The 75-year old told lawmakers he was “righteously mad” at the President, who he says is on a "bizarre personal and political" quest to destroy not only the coal industry, but the entire country. “Radical environmentalists, liberal elitists, [and] Hollywood characters" aren’t helping, he added, for good measure.  Well, lest anyone should think that Murray has deviated from his position in the five months since those comments were made, Bloomberg is out with a new piece which highlights just how steadfast the coal baron truly is:  At a time when the U.S. coal industry is beset on all sides -- by environmentalists, by regulators, by the economics of shale gas -- Murray has positioned himself as King Coal’s warrior-in-chief. And his main antagonist is the country’s commander-in-chief.He calls Barack Obama “the greatest enemy I’ve ever had in my life.” His fight with the president, he says, has gotten “beyond personal.”Since Inauguration Day in 2009, Murray Energy Corp. has filed no fewer than a dozen separate lawsuits against the federal government, more than any other U.S. coal company. Murray, the man, is trying to beat back Obama administration regulations, which he says are strangling his industry. Someone, he says, has to try. Today he’s responsible for a company with 7,500 employees digging coal out of 13 mines in five states. Not surprisingly, he’s no big fan of the recent Paris climate agreement, dismissing it as “a meaningless fraud that will have no effect on carbon dioxide emissions.”

Environmentalists Call for New Study of Fracking Radiation -- Environmentalists say a state study of radiation in waste from gas drilling is inaccurate and incomplete. The Department of Environmental Protection study found little cause for concern about radioactive materials in waste from drilling operations. But Tracy Carluccio, deputy director of the Delaware Riverkeeper Network, says scientists have known for years, compared with other shale formations, Marcellus shale has high levels of radiation. "The various scientific reports point out that when the Marcellus shale is fracked, that radioactivity, which is naturally occurring in those deep formations, comes back up to the surface," says Carluccio. The Network has published its own report, criticizing the DEP study for inaccurate or incomplete sampling of rock cuttings and waste water, and failing to take action when radiation was detected. A lobbying organization for the gas drilling industry has dismissed the criticisms as "baseless." But according to Carluccio, the samples tested by the company hired to do the DEP study may not reflect the true amounts of radiation present in the waste materials. "For instance, where you have drill cuttings buried at well sites they basically took samples from the surface they did not do push probes," says Carluccio. Push probes, she says, would better sample radiation in the drill cuttings themselves and in the surrounding soil."If radium 226 is ending up in the leachate at these landfills, then it's ending up in our environment and it could even enter our drinking-water sources," she says.

Fracker Protects Rex Energy Site From Gramps in Santa Suit and Videographer of Color (video) This young fracker attempts to give an eloquent and poignant argument in favor fracking and against peaceable protest. And against retired men in Santa suits. And videographers. And people of color. And longish hair. Ad hominem attacks. Racial epithets. Race baiting. He could be a Repuglican candidate for President. The front runner even. Will let you decide whether his logic and rhetoric sway you, but suffice to say that this is what passes for the friendly face of fracking in the Northeast. No wonder New York banned it.  Have no clue who this fellow is, but I am pretty sure he is not a Texan. Or for that matter, an Okie or Cajun or New Mexican. Texas may have been settled by thugs on the run from Oglethorpe’s penal colony, (Georgia), but you’d have to really troll the back woods to find one as lost as this hapless dope. Aside from his accent, he did not say ‘sir’ to an older man, nor ‘mam’ to woman, nor does he refer to a black man in public as a ‘black man,’ or simply a man. Strike 3 as they say in Cooperstown. Clearly, he is no Texan. Texans have standards of civility, low as they may be, but alas, this fellow does not measure up.

Rex Energy : Racist slurs lead to firing after video posted online --The Monday before Christmas, a half dozen people peacefully protesting shale gas drilling near the Mars Area School District campus in Butler County sat in rocking chairs lined up across the well-pad access road off Route 228. Then John Pisone showed up to point out the error of their ways. Mr. Pisone, who worked for a Richland landscaping and property management firm with no connection to Rex Energy's well-drilling operation, angrily denounced the "Rock to Block" protesters as "lazy hippies." He then turned his attention to Tom Jefferson, an African-American freelance photojournalist who was videotaping the confrontation, calling him a "chimp" and using a racial slur before leaving. Mr. Jefferson, a 61-year-old former Navy photographer, posted a 3-minute, 17-second video of the confrontation on YouTube. On Tuesday, a week after the video went viral, Mr. Pisone's employer, MMC Land Management, fired him, saying in an Internet posting that it was "disgusted" by his use of "racial slurs" and "racially charged comments." "We are sorry that this incident occurred," the posting said. "Whether at work or not, we do not condone hate speech -- EVER." The company's statement continued, "Inclusion and diversity are among MMC's core values. We believe in equality for everyone, regardless of race, age, gender identity, ethnicity, religion or sexual orientation."

Marcellus and Utica remain on top at the bottom of 2015 --  Together, the the Marcellus and Utica shales account for 85 percent of U.S. natural gas production growth since 2012 according to the Drilling Productivity Report (DPR) the Energy Information Administration (EIA) released Tuesday. The Marcellus shale, engulfing most of Pennsylvania and West Virginia, soared from producing 6.3 billion cubic feet of natural gas per day in January 2012 to producing 16.5 bcf/d in July 2015. Oil companies like Chesapeake Energy, Southwestern Energy and Cabot Oil and Gas operating in Pennsylvania counties led production in the U.S. for the first 10 months of 2015. According to professional energy analyst Platts Bentek, the Marcellus has the potential to ring in the New Year with more production. “By our estimates, there is up to almost 1.5 billion cubic feet of choked production in the Northeast alone.” However, due to the warm winter, the need for natural gas declined and oil companies are waiting to make their move. “A lot of producers are saying, we’re going to wait until the first quarter of 2016 to come back into the game. They are just waiting for better demand, better prices to bump it out again,” If the demand shoots back up, Marcellus will remain the bright light as more of the unfinished pipelines conclude construction. “Most of the growth is expected to come from the Marcellus Shale, as the backlog of uncompleted wells is reduced and as new pipelines come online to deliver Marcellus natural gas to markets in the Northeast,” the EIA said. The DPR revealed the Utica, nestled below eastern Ohio, increased production 18-fold from January 2013 (0.15 bcf/d) to July 2015 (2.6 bcf/d). Currently, the EIA hypothesizes the shale to grow from 3.1 bcf/d in December to 3.2 bcf/d in January.

Gas companies await rebound as low prices, warm weather trouble producers - Shale gas executives writing budget plans might wish they could just skip 2016. Few analysts predict any rebound before 2017 in the low prices that dogged producers this year and prompted a 40 percent cut in Marcellus drilling in Pennsylvania. Then a warmer-than-normal start to winter sent prices to low points not seen in 15 years, dipping below 75 cents per thousand cubic feet in Appalachia. With storage at historic highs and little boost to demand expected for six to 12 months, companies that relied on 30 percent and 40 percent annual production increases in the past few years will face market pressure to dial that back yet maintain cash flow. “We have an alarming accumulation of spare production capacity. To ensure that product does not come to market … we have to make it painful,” Teri Viswanath, a natural gas analyst at BNP Paribas in New York, said about the low prices she expects will endure until supply finds a balance with demand. That means further cuts to spending plans at shale gas producers that must look for ways to keep the money and gas flowing until new pipelines and increased exports boost demand. “We’re expecting no less than a 20 percent reduction from 2015, which was already 40 percent down from the year before,” said Mark Marmo, president of Zelienople-based Deep Well Services, discussing the contracting work his company does to complete wells for producers. “It’s going to be a battle.”

Natural gas prices snap back on cold weather outlook: Natural gas futures bounced back sharply Monday as forecasts showed colder weather on the horizon that could drive up demand for heating fuels. The latest six-to-10-day National Oceanic and Atmospheric Administration forecast shows more normal temperatures for the East Coast and parts of the Midwest, and cooler weather in the South and Southeast, as well as parts of the West and Midwest. The NOAA forecast map also shows warmer-than-normal temperatures for Alaska, and in a separate band across New York state and into the northern Midwest. Natural gas futures for February soared more than 8 percent to $2.24 per million BTUs Monday. Natural gas futures were at 1999 levels Dec. 17 as the weather outlook promised a balmy December. The front month January contract expires on Wednesday, and it rose 9.8 percent to settle Monday at $2.228/mmBTU. "When you're talking normal temperatures this time of year, you're talking heating demand. Basically, we're going to have to turn the thermostat back up and put a coat on," said Gene McGillian, energy analyst with Tradition Energy. "Whenever you see any kind of cold showing up in a forecast where you haven't seen it, there is a snap back … considering how much gas we have in the ground, the 50 cents rebound shouldn't last too long."  McGillian said short-covering added to the price spike. "We have a pretty sizable speculative short position in the market that would be vulnerable to year-end covering," he said.

Why Natural Gas Prices Have Rallied ahead of Expiration - January natural gas futures contracts rose by 9.8% and closed at $2.23 per MMBtu (British thermal units in millions) yesterday. The cold weather forecast boosted natural gas prices in yesterday’s trade. Natural gas–tracking ETFs like the United States Natural Gas Fund (UNG) moved in the direction of natural gas prices. This ETF rose by 9.5% and settled at $8.42 in yesterday’s trade.  The latest weather forecasts from Weather BELL Analytics show that cold winter weather could hit the United States from Arizona to the Northeast for the next two weeks. In contrast, the weather is expected to be warmer in parts of the East Coast during the same period. Approximately, 50% of US households use natural gas for heating purposes. The cold weather would drive demand for natural gas and benefit natural gas prices. Meanwhile, the EIA (U.S. Energy Information Administration) reported that the natural gas inventory fell by 32 Bcf (billion cubic feet) for the week ending December 18, 2015. The consensus of falling natural gas inventory would continue to benefit natural gas prices. January natural gas futures contracts will expire today. Natural gas prices were boosted by short covering from bearish traders, and natural gas was the top performer across commodities in yesterday’s trade. US natural has risen more than 25% in the last six sessions due to cold winter weather, falling inventory, and improving demand.

This Is The "Big Weather Pattern Change" That Is Sparking NatGas' Massive Rally --  Having collapsed to record lows last week, NatGas futures have soared almost 40% as record warm temperatures in the Northeast (and a record glut) have given way to forecasts of a "big weather pattern change" in January. As The European Centre for Medium-Range Weather Forecasts notes, January will see a huge flip in temperatures compared to December... From 'Hot' to 'Not' And it appears February Nattie is pricing that demand in... In fact, as WLKY reports, in past El Ninos that peaked early like this year and had the core the warm water in the Pacific out in the central part of the ocean... like this year... the last half of winter was much colder than the first half of winter 90% of the time. Bye Bye Q1 GDP!!

Natural gas and energy prices expected to stay low - It is likely that prices of natural gas — now at their lowest in two decades — will be even lower during the home heating season next winter, Purdue University energy economist Wally Tyner says.In another good sign for low energy costs for consumers, Tyner also expects gasoline prices to stay in the range of $2 to $2.50 a gallon for much of 2016. Consumers already are seeing lower heating bills this winter even before the recent price drop. Tyner said that while the price of natural gas in December is the lowest it has been since 1994, consumers won’t see the full benefit of that in their gas bills this winter. That is because most of the natural gas that will be delivered this winter has already been contracted.“However, it likely means that home heating costs will fall more next winter,” he said. Tyner lists several “supply-and-demand drivers” that are keeping the price of natural gas so low:

  • • Natural gas is produced from both conventional and shale oil and gas formations, so the “fracking” boom has led to large supply increases of natural gas.
  • • The large supply increase has been faster than the rate of demand increase, so price has come down. Also, there is little international trade in natural gas, so the export market is quite limited.
  • • While the low price has discouraged additional drilling for natural gas, oil and gas drilling efficiency has increased tremendously the past 2 to 3 years.
  • • Normally, natural gas is put in storage in summer months, and the stored gas is used over the winter months. This year, however, so far the winter has been abnormally warm. Natural gas storage facilities are approaching full capacity, and limited additional storage is putting tremendous downward pressure on prices.

Pipeline planning fuels deals, disputes - Planning for a new pipeline across Pennsylvania has evolved into a statewide string of deals and disputes that runs right past the treehouse in Ron Rock’s Cumru Township front yard and the dog parks in Brecknock Township that help generate a living for Pat Emmett. Rock has made a deal. Emmett has been taken to court. In both cases, the other party is Sunoco Pipeline L.P., which hopes to build one or perhaps two new underground pipelines across much of the state, largely following the same path as other pipelines installed decades ago. As the company tries to get access to more land from property owners, there have been court clashes all the way from Washington County on the Ohio border to the Philadelphia region. Sunoco Pipeline has filed eminent domain proceedings in Berks County Court against Emmett and the owners of 14 other properties. The company is owned by Sunoco Logistics Partners L.P., which is traded on the New York Stock Exchange and logged more than $5.7 billion in revenue in the first six months of the year. In a Washington County case, a judge on Dec. 17 issued a ruling that found Sunoco was a public utility with the power of eminent domain. Emmett said his own attorney, Michael Faherty, still believes Sunoco does not have the legal right to take property.

Towns, residents push back on pipeline -- To energy company Kinder Morgan, it’s called the Northeast Energy Direct Project. Some local residents refer to it differently. The energy company is looking to bring natural gas into the region on a new pipeline mostly occupying current utility rights-of-way. However, several issues are keeping its construction from being a slam dunk. A series of public meetings hosted by the company during the last 12 months brought large numbers of residents out to hear from the company and ask questions about the plan and process. Kinder Morgan is hoping it will be able to stretch a gas pipeline from the Marcellus Shale fields in New York and Pennsylvania through southern New Hampshire and connect to existing lines along I-93. Tennessee Gas Pipeline Company LLC, which is a subsidiary of Kinder Morgan, says it will bring gas to the region as demand increases, and bring jobs along with it. The NED pipeline website says the project “could save New England electricity customers over $3 billion annually,” create “1,000 jobs” and bring millions in tax revenue to the state. It’s not a done deal, as there is vocal local opposition. Information sessions held by the company in several area towns have brought people out to hear from Kinder Morgan, and they in turn have heard from local residents in several affected towns.

Mass. Nurses: No fracking - The Kinder Morgan pipeline project once proposed to run through North Central Massachusetts brought out anti-fracking activists in droves. Now, nurses are joining the fight against fracking elsewhere in Massachusetts. The Massachusetts Nurses Association Board of Directors voted unanimously on Dec. 17 to oppose the construction of a natural gas pipeline and compressor station in and around Weymouth, saying the proposal by Houston, Texas-based Spectra Energy will pollute air and water, and will cause loud noises and smells. The nurses oppose the use of fracked gas, which would be transported through an additional pipeline in Weymouth and Braintree. The Weymouth compressor station would be adjacent to neighborhoods in Quincy and Braintree as well. MNA spokesman David Schildmeier said the union group opposed a project in West Roxbury as well as in Weymouth, because members living in both communities brought the projects up as points of concern. The proposed Kinder Morgan project, which will no longer touch North Central Massachusetts, didn't face formal opposition from the nurses, but Schildmeier said the organization opposes fracking "on a global level." "We have to change our reliance on fossil fuels and from a nursing healthcare prospective, it's a public health issue," Schildmeier said this week.

Big Cypress oil drilling: a few spills, a lot of tanks and pumps -- Deep in a pine forest of Big Cypress National Preserve, past a locked gate and up a rugged 11-mile road, stand a series of cleared fields full of pumps, storage tanks, generators and other equipment. The Raccoon Point oil field, one of two operated at Big Cypress by BreitBurn Energy Partners of Los Angeles, offers a glimpse of what could be in store for more of the Everglades, under two pending oil exploration applications. The Kanter family of Miami has applied for a permit to drill in the Everglades about six miles west of Miramar. At Big Cypress, Burnett Oil Co., of Fort Worth, Texas, has submitted an application to engage in seismic operations, using specially equipped trucks to generate vibrations in the earth, to look for oil across 110 square miles. At Raccoon Point, BreitBurn runs an industrial operation involving dangerous fluids, heavy equipment and rumbling generators among forests and wetlands inhabited by deer, panthers, bears, turkeys and other creatures. Workers, who occupy three trailers at the main pad, put in seven straight 12-hour days and then take seven days off, a schedule designed to accommodate the time involved in reaching the remote area. The wells yield what’s called production fluid, a combination of oil and salt water. The fluid goes through pipes along the ground to a row of tanks as high as upended school buses. These tanks separate the oil and water. The oil flows through a pipeline under western Broward County to the Devil’s Garden Truck Loading Facility on Snake Road, where it’s pumped onto trucks, driven to Port Everglades and taken by ship to refineries on the Gulf of Mexico.

Snow slows truck traffic in Permian, some crude output hit | Reuters: A snowstorm dumped around two feet (60 cm) of snow in parts of the Permian Basin in West Texas and New Mexico over the weekend, crimping some crude output and leaving roads dangerous for trucks heading to and from oil wells, forecasters and companies said on Monday. Snow had stopped accumulating by Monday afternoon but "travel continues to be impacted as most roads are slick and snow-covered," and some roads across southeastern New Mexico were still closed, according to a notice from the National Weather Service's Midland, Texas, office. Exploration and production companies Pioneer Natural Resources Co and Apache Corp, which operate in the top U.S. oil-producing basin, said they were still assessing the storm's effect on operations, which may take several days. "Early signs indicate the downtime is manageable and within our expectations for typical winter-weather-related downtime," an Apache representative wrote in an email. Devon Energy Corp said it was "experiencing some weather-related impact to its production" in Texas, New Mexico and Oklahoma, but the company could not yet provide a detailed assessment, according to a spokesman. Temperatures warmed on Monday, but overnight temperatures were expected to again dip below freezing, causing melting snow and ice on roads to re-freeze. This is expected to make road conditions more hazardous, according to the National Weather Service.

Fracking foes unveil 11 proposed Colorado ballot initiatives, including a ban -  Denver Post: A Boulder County-based citizens group opposed to fracking filed a package of ballot initiatives Tuesday that would circumvent a compromise sought by Gov. John Hickenlooper and U.S. Rep. Jared Polis of Boulder. Coloradans Resisting Extreme Energy Development submitted paperwork for 11 potential ballot questions to provide mandatory setbacks for wells from homes and schools, more local control on drilling decisions or an outright ban on the process of hydraulic fracturing. Eight of the 11 are variations of proposals for mandatory setbacks. Each of the constitutional amendments would need signatures from 98,492 registered Colorado voters to get on November's ballot. A review-and-comment hearing on the language of the ballot questions is set for at 1:30 p.m. Jan. 5 in Room 109 at the Capitol. "If the state will not adequately protect Coloradans and communities, then we, the people of Colorado, must do it, and that requires a change to Colorado law," Tricia Olson, CREED's executive director, said in a statement. "Our beautiful state should not be overwhelmed by wells, pads and other industrial oil and gas operations plunked down next to neighborhoods and schools."

Group seeks fracking ban via ballot box - A coalition group that opposes the use of hydraulic fracturing in oil and natural gas development filed about a dozen proposed ballot measures earlier this week to limit or outright ban the practice. A majority of the measures are aimed at creating a wider setback rule than the 500 feet that’s already in regulation. The group, Coloradans Resisting Extreme Energy Development, said it decided to go ahead with proposing ballot measures because it doesn’t believe that Gov. John Hickenlooper nor the Colorado Legislature have any intention of addressing the issue to their satisfaction. “The oil and gas industry and the state would like us to maintain business as usual,” said Sharon Carlisle, president of one of the coalition groups, Protect Our Loveland. “However, Colorado, as elsewhere, is being destroyed by outsiders under the guise that it is good for us. The research is in. It is not good for us.” Opponents of such ballot measures immediately denounced the group’s proposals, saying they’ve made Santa Claus’ naughty list. “While Santa’s sleigh may be powered by flying reindeer, our cars and home heating rely on American-made energy,” said Peter Moore, chairman of one of the opposition groups, Vital for Colorado. “All of these extreme proposals fall into the naughty category, which will prevent access to our own energy that will cripple family budgets and jeopardize our economy.”

Colorado oil and gas drilling initiatives take a radical turn - Denver Post Editorial -- Every one of 11 ballot initiatives filed last week with the state by foes of hydraulic fracturing has the potential to cripple oil and gas drilling in Colorado, and most almost certainly would do so. Several initiatives mandate setbacks of 4,000 feet between any well and an occupied structure or "area of special concern," defined as everything from a sports field to public open space. If you drew a radius of 4,000 feet around every occupied structure or area of special concern in, say, Weld County, where much of this decade's drilling boom has occurred, you'd eliminate the bulk of potential drilling sites. A setback of that magnitude comes suspiciously close to a ban. And this from alleged advocates of local control. Even a setback of 2,500 feet, which four of the initiatives favor, would amount to a huge rollback of potential sites. That distance also happens to be 500 feet more than even the setback proposed in a controversial ballot measure in 2014 that eventually was withdrawn in order to allow the various sides to sit down and work toward a compromise. That process is now in its final stages before the Colorado Oil and Gas Conservation Commission. Only one of the initiatives appears to be a straightforward grant of total power to local governments over oil and gas development, including the ability to ban it. Were voters to approve such a measure, some local governments would jump at the chance to ban drilling while others would probably accommodate it. The net result is hard to predict. But can state voters authorize the confiscation of mineral rights on such a potentially wide scale without the courts demanding redress?

Top Wyoming oil companies write off $41 billion in assets - The value of oil wells is plunging along with the price of crude. The top five publicly traded oil companies working in Wyoming have written off a combined $41 billion across their operations through the first nine months of 2015, financial filings show. The write-offs, known officially as impairments, represent a recognition that many wells will have shorter productive lives than initially anticipated, analysts said. It also reflects an acknowledgement that companies may have to pay for the cost of plugging and abandoning wells sooner than they expected, they noted. "For some of these companies it may be crippling because instead of spending money to drill new wells, they will have to spend money to plug and abandon wells that have hit the end of their productive life,"  All impairments are not created equal, however. EOG Resources and Devon Energy, Wyoming's first- and second-largest crude producers by volume, recorded impairments of $6.4 billion and $15.5 billion, respectively, through the first nine months of 2015, according to financial filings.  Analysts generally reckon both firms are financially healthy and well-positioned to ride out the downturn. For them, the industry's woes represent an opportunity. Few eyebrows will be raised if they write off already-declining assets at a time when Wall Street is expecting a wave of impairments. But in other instances the losses could signal growing financial stress.  Chesapeake Energy, Wyoming's fourth-largest oil producer, reported impairments of $15.4 billion through the first three quarters of 2015. The Oklahoma City-based producer's woes are primarily tied to natural gas. Chesapeake is the country's top natural gas producer and concerns over its debt have grown at a time when natural gas prices are mired at their lowest levels in more than a decade. 

New year brings changes in North Dakota oilfield waste rules — The new year comes with a new rule in North Dakota that allows elevated levels of oilfield radioactive waste to be disposed of at some landfills, a move regulators and industry officials believe will help curb illegal dumping. Environmental groups aren’t convinced and have threatened lawsuits over the new rule that takes effect Friday, saying the public was not given enough input in its crafting. “We don’t think the state is up to the task of doing this job,” said Don Morrison, executive director of the Dakota Resource Council. “They haven’t had the capability of doing this yet.” The rule raises the allowable concentrations of technologically enhanced radioactive material — or TENORM — to be disposed of at approved landfills from 5 picocuries per gram to 50 picocuries per gram. Picocuries are a measure of radioactivity. North Dakota generates up to 75 tons of radioactive waste daily, largely from oil filter socks, tubular nets that strain liquids during the oil production process. The filter socks can become contaminated with naturally occurring radiation and have been banned for disposal if they surpass the 5 picocurie threshold.

New refinery proposed in Stark County -  Stark County may soon see another diesel fuel refinery rise. California-based Meridian Energy Group Inc. is looking to build a refinery on 620 acres of land west of Belfield. It would refine crude oil produced in the Bakken. The Davis Refinery, if built, would be the nation’s second greenfield refinery constructed in the county — and the United States — since 1976 following the opening of the Dakota Prairie Refinery outside of Dickinson, which began operating in April after a March 2013 groundbreaking. According to an article released Wednesday by the Oil & Gas Journal, the Davis Refinery would begin with a 20,000 barrel a day processing plant and eventually convert around 55,000 barrels per stream day into refined products. By comparison, Dakota Prairie Refining refines an estimated 20,000 barrels a day into diesel fuel, naphtha and other products.

BP buys Devon Energy's Blanco unit — BP has added more San Juan Basin assets to its natural gas portfolio for the first time in seven years. On Dec. 18, BP’s Lower 48 Onshore oil and gas business announced the acquisition of Devon Energy Corp.’s North East Blanco Unit, a collection of 480 natural gas wells across 33,000 gross acres in San Juan and Rio Arriba counties, according to Lisa Houghton, BP spokeswoman. Houghton said the Houston-based company would not disclose the purchase price for those majority ownership rights in the unit. In a statement, BP Lower 48 Onshore CEO David Lawler reiterated the company’s commitment to investment in the San Juan Basin. “This acquisition clearly demonstrates the importance of New Mexico and the San Juan Basin to our future,” Lawler said. “It’s also consistent with our strategy of selectively expanding in BP’s existing onshore basins, where we can link our innovative well design capability with our extensive subsurface expertise to generate industry leading capital efficiency.” One of Lawler’s first moves after taking BP’s U.S. Lower 48 Onshore chief executive post in 2014 was to reverse a decision to sell the gas company’s assets in the San Juan Basin. Those assets included the 2,200 operated and an additional 4,400 non-operated natural gas wells on nearly 2,500 square miles across the southern San Juan Basin. They also included BP’s interest in the ConocoPhillips’ San Juan gas plant in Bloomfield.

Oil-Producing States Battered as Tax-Gushing Wells Are Shut Down -  In Kern County, California, one of the nation’s biggest oil producers, tumbling energy prices have wiped more than $8 billion from its property-tax base, forcing officials to tap into reserves and cut every department’s budget. It’s only getting worse.  Oil Prices The county of 875,000 in the arid Central Valley north of Los Angeles may face another blow in January, when it reassess the oil-rich fields that line the landscape. Last year’s tax bills were based on crude selling for $54 a barrel. It finished Monday at less than $37.  “If it keeps going down and stays down we may have to look at more cuts in the next budget.” As the price of crude falls for a second year, marking the steepest decline since the recession, the impact is cascading through the finances of states, cities and counties, in ways big and small.  Alaska, Louisiana and Oklahoma have seen tax collections diminished by the rout, which has put pressure on credit ratings and led investors to demand higher yields on some securities. In Texas, the largest producer, the state’s sales-tax revenue dropped 3 percent in November from a year earlier as the energy industry exerted a drag on the economy. Further west, Colorado’s legislative forecasters on Dec. 21 estimated that the state’s current year budget will have a shortfall of $208 million, in part because of the impact of lower commodity prices. In North Dakota, tax collections have trailed forecasts by 9 percent so far for the 2015-2017 budget.

'Unprecedented' gas leak in California is the climate disaster version of BP's oil spill A massive natural gas leak in Aliso Canyon, California, about 25 miles north of Los Angeles, has been spewing about 62 million standard cubic feet of methane per day into the air since a well casing mysteriously suffered damage on Oct. 23 of this year.   The leak is unlikely to be squelched for another three to four months, according to SoCalGas, as crews have to drill about 8,500 underground to intersect with the base of the leaking pipe. Already, more than 1,000 people in Porter Ranch and Northridge, California have temporarily relocated due to health complaints related to the fumes from the leak. In addition, the Los Angeles Unified School District's Board of Education decided on Dec. 17 to temporarily relocate two schools for the rest of the 2015-16 school year. The Aliso Canyon leak demonstrates a potential blind spot in the nascent regulatory system for overseeing the country's growing natural gas infrastructure. Companies are being pushed to contain leaks in their natural gas pipelines and at facilities that burn natural gas, but underground storage areas, of which there are more than 300 nationwide, aren't subjected to specific standards that might have prevented this leak.California has been monitoring the air quality in the Porter Ranch community, which is closest to the leak and where many people have complained about health issues. They have found that, so far, the level of pollutants in the air, including benzene, which can be extremely hazardous when present in particularly high levels, has remained below the threshold where they would be considered dangerous.However, natural gas odorants can cause adverse physical symptoms, including nausea and headaches, despite the lack of long-term health risk. A spokesman for SoCalGas told Mashable that the company "recognizes the impact this incident is having on the environment," but said it's unsure exactly how much gas has escaped so far.

Aerial footage shows California methane leak (VIDEO) - Methane gas continues to leak from a California storage facility at a rate of 110,000 pounds per hour. Aerial footage using a specialized infrared camera shows the extent of the leak. The video was taken Dec. 17 and released by the Environmental Defense Fund. The leak emits methane at a rate of about 50,000 kilograms per hour, about one-quarter of all methane emissions in California.  Southern California Gas Co. first discovered the leak at its Aliso Canyon storage facility Oct. 23. Since then, nearby Porter Ranch residents have complained about headaches, nausea, nosebleeds and other symptoms. The gas company is offering free, temporary relocation for nearby residents. So far, hundreds have been moved to escape the fumes.Workers continue to drill a relief well that connects to the leaking well 8,000 feet below ground. Once the relief well is finished, mud and other fluids will be pumped into the well to stop the flow of gas. Cement will then be pumped into the well to permanently plug it. Operations run around the clock. By Saturday, the relief well had reached a depth of 3,800 feet. In case the relief well fails, a backup relief well will be drilled in January.

Why Engineers Can’t Stop Los Angeles’ Enormous Methane Leak -- One of the biggest environmental disasters in US history is happening right now, and you’ve probably never heard of it. An enormous amount of harmful methane gas is currently erupting from an energy facility in Aliso Canyon, California, at a startling rate of 110,000 pounds per hour. The gas, which carries with it the stench of rotting eggs due to the addition of a chemical called mercaptan, has led to the evacuation 1,700 homes so far. . The Environmental Defense Fund (EDF) released the footage ofa geyser of methane gas spewing from the Earth last week, calling it “one of the biggest leaks we’ve ever seen reported” and “absolutely uncontained”: In early December, the Southern California Gas Company said that plugging the leak, which sprang in mid-October, would take at least three more months. “The relief well process is on schedule to be completed by late February or late March.”   Part of the problem in stopping the leak lies in the base of the well, which sits 8,000 feet underground. Pumping fluids down into the well, usually the normal recourse, just isn’t working, said Silva. Workers have been ”unable to establish a stable enough column of fluid to keep the force of gas coming up from the reservoir.” The company is now constructing a relief well that will connect to the leaking well, and hopefully provide a way to reduce pressure so the leak can be plugged.  So far, over 150 million pounds of methane have been released by the leak, which connects to an enormous underground containment system. Silva says that the cause of the leak is still unknown, but research by EDF has also revealed that more than 38 percent of the pipes in Southern California Gas Company’s territory are more than 50 years old, and 16 percent are made from corrosion- and leak-prone materials. Right now, relief efforts have drilled only 3,800 feet down—less than half of the way to the base of the well. At that rate, the torrent of methane pouring into California won’t be stopped any time soon.

Arctic drilling rig expected to leave Port Angeles harbor — An Arctic drilling rig that has made its home in the Port Angeles harbor is expected to depart for Europe. The Peninsula Daily News reports the giant oil drilling platform, the Polar Pioneer, has been welded to a ship owned by a company from the Netherlands. A representative of the U.S. division of that company, Dockwise Shipping, says it is ready to depart on Wednesday. Robb Erickson says the 902-foot semi-submersible heavy-lift ship will take the Polar Pioneer to Norway by following the coast to the Strait of Magellan at the tip of South America. From there it will cross the Atlantic. The Dockwise Vanguard is the largest ship of its type in the world and can lift more than 120,000 tons of cargo.

North Slope companies to keep up spending -- The overwhelming unknown is the price of crude oil, and whether it will continue to go down, stabilize or creep upward as has been predicted. What is causing the slump is well known. There’s too much oil supply on the market and on the demand side, the economic slowdown in China has taken the wind out the world commodities boom, affecting not just oil but also metal prices. Saudi Arabia continues to produce to keep its market share, ditto for Russia and other producing countries. In the U.S., shale oil drillers have upset expectations that they will cut back by finding cheaper ways to produce. Alaska’s good fortune is that the large companies that produce most of the North Slope’s oil have seen slumps like this before and are capable of riding this one out. How many Alaskans remember $8 per barrel oil prices in 1998? Surprisingly, the large companies’ capital investment estimates for Alaska, for 2016 and 2017, have not yet taken a beating. Forecasts given the state Department of Revenue by the industry, a requirement of the state’s production tax law, estimate that $3.32 billion in capital spending will occur in fiscal year 2017, the state budget year beginning next July 1, and $3.24 billion in 2018. That’s down from $3.61 billion estimated for the current budget year, but considering that crude oil prices are nearly a third of what they were not too long ago, the numbers are a signal of confidence.

Oilsands cleanup may not be adequately funded: Alberta AG | CTV News: -- Alberta's auditor general says the province may not be requiring oilsands companies to save enough money to ensure their gigantic mines are cleaned up at the end of their life. "If there isn't an adequate program in place to ensure that financial security is provided by mine operators ... mine sites may either not be reclaimed as intended or Albertans could be forced to pay the reclamation costs," says a report released Monday by Merwan Saher. Saher says current rules could allow companies to overestimate the value of their resources. That allows them to delay increases to the amount of money they sock away to fund cleanup.  Saher says the government hasn't met its own targets when it comes to ensuring each operator is assessed a large enough amount to pay for reclamation. Only about one-quarter of the audits promised in 2011 have been completed. "The level of verification activity has been insufficient," says the report. Alberta Environment Minister Shannon Phillips said the government agreed with Saher's concerns and accepts his recommendations. The Mine Financial Security Program was instituted in 2011 and currently holds security deposits from eight oilsands mines and 19 coal mines. The fund holds $1.6 billion to cover about $21 billion in eventual liabilities.

North Sea Evacuations Due To Barge That Broke Anchor Following Storm; COP Oil Field At Risk  -- From Seeking Alpha:

  • the large unmanned barge that broke anchor last night in the North Sea is drifting further north, threatening an oil field of ConocoPhillips
  • production from the Eldfish and Embla oil fields have now been shut down and 145 people have been evacuated, the company said in a statement
  • BP evacuated Valhall field in North Sea earlier
  • Evacuate! BP has ordered the departure of staff from a North Sea Valhall oilfield as a large unmanned barge broke anchor and drifted towards drilling platforms following a storm
  • "The barge has changed direction and BP has decided to shut production...there are 71 people left on the platform and they are being evacuated as we speak," a BP spokesman told Reuters.

Outrageous behaviour over fracking - In the past week we have seen the Government has successfully sneaked through changes to allow fracking below National Parks, Areas of Outstanding Natural Beauty and World Heritage Sites. Under Labour pressure, they had previously conceded there should be tougher safeguards in place to protect drinking water sources and sensitive parts of our countryside. Now they have gone back on their word and without holding a debate.The Government’s behaviour is outrageous, fracking should not go ahead until we can be sure it is safe and won’t pose a damaging risk to our environment. Neither MPs nor the public have received these assurances, yet Ministers are ignoring people’s legitimate concerns. I’m pleased to say the Labour Party is calling for a moratorium of fracking. In 2016 it’s clear local councils are going to be under a lot of pressure financially. George Osborne’s decision to axe the central government grant to councils over the next four years amounts to a £6.1bn cut by 2019/20. This will surely hit the poorest parts of the country hardest where there are fewer businesses and tax payers to make up for lost Whitehall grants.

Fracking Fluid & Chemicals Market by Chemical Function, by Fluid Type, & by Well Type -  -- The market for fracking fluids and chemicals is projected to witness a tremendous growth during the forecast period which will be driven by exploration and development of reserves for oil and gas extraction across the globe. The demand for fuel is increasing multifold due to high consumption from domestic as well as industrial front. The global market of hydraulic chemicals is projected to register a CAGR of 9.5% between 2015 and 2020. Gelling agent is estimated to account for the largest market size among all the chemical function types and is estimated to account for a market share of 37% in 2020. The oil and gas wells are mainly of two types, horizontal and vertical. High growth is expected in the horizontal wells drilled per year due to E&P activities for unconventional oil & gas, as these reserves are recovered more economically by horizontal drilling. Horizontal well fracturing gives access to the points where the vertical well drilling cannot be reached. With an increase in the demand for the unconventional oil & gas, horizontal fracking is invaluable in securing and bringing these unconventional gases on the surface. Upcoming opportunities such as development of underground shale reserves are projected to increase the fracking activities across the globe. This report also includes market dynamics, such as drivers, restraints, opportunities, burning issues, and winning imperatives. Major companies such as, the players involved in this market are specialty chemical companies, drilling and extraction service providers, namely, Halliburton (U.S.), Schlumberger (U.S.), Baker Hughes (U.S.), DuPont (U.S.), AkzoNobel (The Netherlands), BASF (Germany), Ashland (U.S.) and others have been comprehensively profiled in this report.

Shale's Running Out of Survival Tricks as OPEC Ramps Up Pressure -- In 2015, the fracking outfits that dot America’s oil-rich plains threw everything they had at $50-a-barrel crude. To cope with the 50 percent price plunge, they laid off thousands of roughnecks, focused their rigs on the biggest gushers only and used cutting-edge technology to squeeze all the oil they could out of every well. QUICKTAKE Fracking in EuropeThose efforts, to the surprise of many observers, largely succeeded. As of this month, U.S. oil output remained within 4 percent of a 43-year high. The problem? Oil’s no longer at $50. It now trades near $35. For an industry that already was pushing its cost-cutting efforts to the limits, the new declines are a devastating blow. These drillers are “not set up to survive oil in the $30s,” said R.T. Dukes, a senior upstream analyst for Wood Mackenzie Ltd. in Houston. The Energy Information Administration now predicts that companies operating in U.S. shale formations will cut production by a record 570,000 barrels a day in 2016. That’s precisely the kind of capitulation that OPEC is seeking as it floods the world with oil, depressing prices and pressuring the world’s high-cost producers. It’s a high-risk strategy, one whose success will ultimately hinge on whether shale drillers drop out before the financial pain within OPEC nations themselves becomes too great. Drillers including Samson Resources Corp. and Magnum Hunter Resources Corp. have already filed for bankruptcy. About $99 billion in face value of high-yield energy bonds are trading at distressed prices, according to Bloomberg Intelligence analyst Spencer Cutter.  “You are going to see a pickup in bankruptcy filings, a pickup in distressed asset sales and a pickup in distressed debt exchanges,”

The New Cartel Running The Oil Sector -- As oil prices wallow near multi-year lows, it’s becoming increasingly clear that the new cartel controlling oil prices is not OPEC but world credit markets. From Saudi Arabia’s record $100 billion deficit to shale oil’s continuing reliance on cheap credit funding, it’s clear that no major oil producer or company in the world right now is economically self-sufficient based on oil revenues alone. This situation has left the flow of oil and the decision on when to stop pumping the increasingly tarnished black gold in the hands of banks rather than oil men. The idea that bank loans to oil companies may be in trouble is not new but there are increasing signs of late that these distress energy loans could end up defaulting and leaving banks with a mess to deal with. At the national level, countries like Saudi Arabia won’t forfeit their assets to creditors of course, but their ability to keep running deficit funding is going to increasingly depend on bond market appetite for energy related debt. That could be problematic in 2016. With the Federal Reserve starting to raise interest rates, bond investors may find that they don’t need to invest in energy debt to garner yield as they have in 2015, and this in turn could start to crimp oil production. Economists often like to cite cartels as having the power to control production, but at this point it looks like the only group with any ability to actually curtail (or expand) production are the major banks that direct capital market flows. Of course that production power is indirect, but it is real nonetheless.For some banks that are large enough, it is even possible that a broad pull back in lending could lead to markedly lower production levels across many U.S. firms in particular which in turn might help boost marginally prices. To the extent that banks act in concert to do this, the effects on prices might be more than marginal.

As Canada wavers on pipelines, U.S. gives go ahead for oil exports: As Canadians waver over new oil pipelines and increased exports, the United States — a long-time customer for Canada’s oil, suddenly turned competitor — has seemingly fewer qualms about putting economic interests ahead of environmental concerns and approving exports of crude oil into the global market for the first time in decades. Congress passed an omnibus US$1.1-trillion spending bill Friday that included the lifting of a 40-year-old ban on crude oil exports that goes back to the initial OPEC crisis in the 1970s and is a testament to the remarkable reversal of fortune in recent years for North America’s once-moribund oil industry. The decision to permit exports of unrefined crude is “particularly important at a time when our industry is experiencing a period of extreme volatility and uncertainty,” ConocoPhillips CEO Ryan Lance said in a statement. Concern over security of supply has become a thing of the past in this period of abundant oil after the advances in oilsands technology and, especially, hydraulic fracturing that led to development of previously untapped oil reservoirs. Record volumes of oil production in Canada and resurgent U.S. supply is looking for new markets worldwide even as prices plummet.

"Miracle of American Oil": Continental Resources Courted Corporate Media to Sell Oil Exports -  A document published by the Public Relations Society of America, discovered by DeSmog, reveals that from the onset of its public relations campaign, the oil industry courted mainstream media reporters to help it sell the idea of lifting the ban on crude oil exports to the American public and policymakers.  Calling its campaign the "Miracle of American Oil," the successful PR effort to push for Congress and the White House to lift the oil exports ban was spearheaded by Continental Resources, a company known as the "King of the Bakken" shale oil basin and founded by Harold Hamm. Hamm served as energy advisor to 2012 Republican Party presidential candidate Mitt Romney. The campaign launched on December 16, 2013, the 40th anniversary of the Organization of the Petroleum Exporting Countries (OPEC) oil embargo, and won the prestigious PRSA Silver Anvil Award. According to the document, submitted to PRSA to detail the logistics and reach of the PR effort, it was "designed to influence public policy and/or affect legislation, regulations, political activities or candidacies -- at the local, state or federal government levels."  And it all began with a kick-off dinner in Washington, D.C., hosted by Continental Resources and attended by some of the most influential mainstream media energy reporters in the United States. Regular readers of the Washington oil and gas industry beat will find the names of the dinner attendees, disclosed in the document, familiar. "The campaign not only served as a catalyst to correct public misconceptions, but it also propelled crude oil exports to the top of the U.S. Senate's agenda," Continental boasted on the PRSA document. 

9 Gifts President Obama Gave Big Oil in 2015 -- Big Oil has already received plenty of gifts this holiday season. Despite another year of record-breaking temperatures, the last 12 months have seen a wave of policy wins that could secure an oil drenched status quo for decades to come.  The Obama administration is already touting its second-term climate accomplishments, but from free trade and oil exports to pipelines and Arctic drilling, here are nine Christmas presents President Obama gave Big Oil in 2015:
1. Crude oil export ban - Big Oil won its biggest policy victory in years when President Obama accepted a deal to lift the 40-year crude oil export ban. Over the next 10 years this long-sought goodie could translate into $171 billion in new revenue for the oil industry and as much as 3.3 million barrels of new production per day by 2035.
2. New refining subsidy -- Since lifting the crude oil export ban means that domestic crude can sell for a higher price on the global market, some U.S. refiners may find their margins squeezed as the price of crude itself rises. The Congressional solution? Compliment the lifting of the export ban with a new $1.8 billion tax break for refiners over the next six years.
3. Alberta Clipper - Sure, TransCanada was denied a permit to build the Keystone XL, but a State Department decision could bring almost as much tar sands across the Canadian border. Enbridge, the company responsible for the worst onshore oil spill in U.S. history, was allowed to skirt the normal review process for a cross-border pipeline expansion. The result could double current capacity, sending a total 880,000 barrels per day of Canadian tar sands to refineries in the Gulf Coast.

Big Oil Argued for U.S. Crude Exports to Fend Off Iran, But First Exporter Vitol Group Also Exported Iran's Oil -  The American Petroleum Institute (API) successfully lobbied for an end to the 40-year ban on exporting U.S.-produced crude oil in part by making a geopolitical argument: Iran and Russia have the ability to export their oil, so why not unleash America? What API never mentioned — nor the politicians parroting its talking points — is that many of its member companiesmaintain ongoing business ties with both Russia and Iran. And The Vitol Group, the first company set to export U.S. crude after the lifting of the ban (in a tanker destined for Switzerland), has or had its own ties to both U.S. geopolitical rivals. Who is The Vitol Group? In short, The Vitol Group is the most powerful oil and gas company you've likely never heard of, and one the Telegraph (UK) said “pulls the levers of the global economy.” Vitol makes an appearance in CNBC reporter Kate Kelly's book, “The Secret Club that Runs the World: Inside the Fraternity of Commodity Traders.” As The Telegraph described, Vitol's reach goes far beyond just oil and gas.  “Crude oil, diesel, aviation fuel, benzene, alumina, bitumen, ethanol, methanol, coal, iron ore, liquid natural gas, sugar, maize, wheat, rice, soybeans and rapeseed,” they wrote. “Vitol continually ships thousands of tonnes of nearly every major commodity and raw material around the planet…Simply put, Vitol is one of the biggest trading companies on the planet.” Vitol is the ninth biggest company in the world by revenue, sitting only behind the likes of BP, ExxonMobil, Walmart, Saudi Aramco, Shell and Sinopec.  And it's willing to do business with just about anyone, including but not limited to Russia and Iran.

The Crude Oil Export Ban - "What, Me Worry About Peak Oil?" -- Congress ended the U.S. crude oil export ban last week. There is apparently no longer a strategic reason to conserve oil because shale production has made American great again. At least, that’s narrative that reality-averse politicians and their bases prefer. The 1975 Energy Policy and Conservation Act (EPCA) that banned crude oil export was the closest thing to an energy policy that the United States has ever had. The law was passed after the price of oil increased in one month (January 1974) from $21 to $51 per barrel (2015 dollars) because of the Arab Oil Embargo. The EPCA not only banned the export of crude oil but also established the Strategic Petroleum Reserve.  Above all, the export ban acknowledged that declining domestic supply and increased imports had made the country vulnerable to economic disruption. Its repeal last week suggests that there is no longer any risk associated with dependence on foreign oil. What, Me Worry?  The tight oil revolution has returned U.S. crude oil production almost to its 1970 peak of 10 million barrels per day (mmbpd) and imports have been falling for the last decade (Figure 1). But today, the U.S. imports twice as much oil (97%) as in 1974! In 2015, the U.S. imported 6.8 mmbpd of crude oil (net) compared to only 3.5 mmbpd at the time of the Arab Oil Embargo (Table 1). Production of crude oil is higher today by 7% but consumption has grown to more than 16 mmbpd, an increase of 32%. At the time of the Arab Oil Embaro, consumption was only 12 mmbpd. So, consumption has increased by one-third and imports have doubled but we no longer need to think strategically about oil supply because production is a little higher? We are far more economically vulnerable and dependent on foreign oil today than we were when crude oil export was banned 40 years ago. What, me worry?

First Tanker of U.S. Crude Oil for Export Sails From Texas - The first oil tanker of freely traded U.S. crude launched Thursday afternoon from the Port of Corpus Christi, about 160 miles north of the Texas border with Mexico.  ConocoPhillips and NuStar Energy loaded the tanker with oil pumped from the Eagle Ford Shale of South Texas. The companies have skipped ahead of Enterprise Products Partners EPD 2.73 % LP, which said last week that it expected to load the first oil export cargo in Houston during the first week of January. President Barack Obama signed legislation lifting the long-standing ban on exporting U.S. oil less than two weeks ago. It was put into place during the mid-1970s in the wake of the Arab Oil Embargo, which caused fuel rationing and price spikes for American drivers.  Vitol Group, a Dutch oil-trading powerhouse, is buying the oil cargo, according to NuStar. Vitol also is buying the U.S. crude-oil cargo that will ship out of Houston during the first week of 2016. The company has a subsidiary that owns a refinery in Switzerland.

Corpus’s Future as a Major Hub for Crude Oil and Condensate -- Although the current narrow price differentials between U.S. domestic crude (including Eagle Ford condensate) and international market prices suggest no flood of exports is likely in the short term, the considerable existing marine dock capacity at Corpus is already capable of shipping out over 750 Mb/d of crude and condensate and is still expanding. That could make Corpus a major center of crude exports going forward. Today we conclude our series with a look at infrastructure in the Ingleside area of Corpus Christi and preview our final Drill Down report for 2015 that provides deeper analysis and commentary on Corpus Christi infrastructure.    With crude production soaring over the past few years in regions like the Bakken, Permian and Eagle Ford, the nation’s pipeline networks needed a major re-do. A good deal of that re-plumbing involved developing transportation to deliver booming inland crude production to coastal refineries. In the South Texas Eagle Ford the result was repurposing of existing pipelines and build out of new additions that led to over 1.5 MMb/d of capacity to deliver crude and condensate to Corpus coming online in the space of 3 short years. But the relatively limited capacity to refine that crude at local refineries led to as much as 750 Mb/d of surplus supplies hitting the water at Corpus. Some of that Armada of crude was exported to Canada (where there were no restriction on exports) but the bulk was shipped short distances to Gulf Coast refineries in Texas and Louisiana.  Meantime refineries sought to expand their ability to process light Eagle Ford crude and midstream companies planned condensate splitters to produce refined products that had no export restrictions. Then in 2014 a new interpretation of export regulations to permit the export of condensate processed through stabilization towers led some of the same companies to abandon splitter plans and look at building stabilization capacity at or near Corpus instead. Now the December 2015 lifting of export restrictions could switch the focus again - to understanding where Eagle Ford and increasingly Permian crude can be marketed overseas, if and when the economics allow.

In World With Too Much Crude Oil, 1,100-Foot Steel Monsters Rule - The most destructive oil crash in a generation is giving ship owners a billion-dollar windfall. With the Organization of Petroleum Exporting Countries abandoning output limits in a drive for market share, ships that carry as much as 2 million barrels a trip are in demand to haul crude from the Middle East to Asia and North America. While oil prices fell about 35 percent in 2015, average earnings for these carriers jumped to $67,366 a day, the most since at least 2009, according to Clarkson Plc, the world’s largest shipbroker.  Tanker analysts are predicting the rate boom will persist for many of the same reasons oil forecasters are bearish. OPEC shows no sign of reversing its market strategy, and Iran has outlined plans to ramp up its exports once economic sanctions against the country are lifted. At the same time, the U.S. just repealed a four-decades old limit on its exports. With on-land inventories already at record levels, this could mean more barrels will eventually be stored on ships, further increasing profit, said Tsakos.  While rates are forecast to slip in 2016, the ships will still earn $46,400 a day, the second best year since 2009, according to the median of six analysts surveyed by Bloomberg and historical data from Clarkson. “A scenario in which crude oil prices are suppressed across 2016 could lead to a boom in tanker earnings of comparable magnitude to 2007-08,” At the same time, low oil prices have served to stimulate world oil consumption, which rose by by 1.8 million barrels a day in 2015, the highest in five years, according to the International Energy Agency. With about 40 percent of the world’s crude shipped by sea, that will result in 1.4 million barrels a day more cargoes this year, according to Clarkson data.

Cheniere starts producing at shale gas export terminal, ING says - Cheniere Energy Inc began production at what will become the first terminal to export natural gas from America’s shale formations, according to ING Capital LLC, which helped finance the project. The company is receiving about 50 million cubic feet of the fuel a day, chilling it into liquefied natural gas at the Sabine Pass terminal in Louisiana, and storing it in tanks before the first export, Richard Ennis, head of natural resources at ING, said by email on Wednesday. Ennis said he receives regular updates from the company and that he hadn’t been informed of a delay in the start-up. Cheniere spokeswoman Faith Parker didn’t immediately respond to telephone and emailed requests for comment on Wednesday. Cheniere has previously said the inaugural cargo will leave the complex in January by tanker and that UK-based BG Group Plc is contracted to take the first shipment. Sabine Pass is “on schedule,” Ennis said. “You can’t dock a ship to offtake the LNG, until you have a full ship load of LNG in the tanks, which is planned to happen in January.” The start at Sabine Pass paves the way for other planned liquefied natural gas terminals that are projected to turn the US into one of the world’s largest suppliers. The country may be capable of exporting 7.76 billion cubic feet of gas a day by 2019, a Bloomberg New Energy Finance analysis shows. While the US has been sending gas abroad from Alaska for years, Cheniere’s cargo would mark the first to leave from the lower-48 states, a testament to surging shale supplies that have sent domestic stockpiles to record levels.Cheniere’s export terminal underscores how dramatically the shale boom has reshaped the natural gas market. Before drillers started pulling the fuel out of tight-rock formations using hydraulic fracturing and horizontal drilling, Cheniere was building import terminals in anticipation of a domestic shortage.

End of easy money for mini-refiners splitting U.S. shale? -  Energy companies and oil trading firms that teamed up to build several mini-refineries that convert a swelling surplus of ultra-light U.S. crude into fuels for export seemed like a pretty safe investment bet for a while. The bet was built on several converging dynamics: an ever-rising supply of condensate; a U.S. refining system built to run heavier crudes; and a longstanding ban on crude exports that appeared unlikely to unwind amid partisan paralysis in Washington, D.C. Now, as U.S. oil output reverses its five-year rise and after lawmakers ended the 40-year-old export ban this month, oil executives and analysts question the wisdom of nearly $1 billion worth of so-called condensate splitters built over the past year, and the future of another $1.2 billion planned. Traders are wondering what will happen with existing splitters run by companies such as Kinder Morgan Inc. They also question how the new landscape will affect traders such as BP Plc and Trafigura, which signed long-term contracts to buy all the output from those facilities. Other pending projects without guaranteed buyers could be abandoned, experts say. The once-restricted domestic crude not only faces increased competition. It also is hurt by the inversion of the global oil market, where once-abundant U.S. production is declining while global supplies are rising. This has eliminated the price discount that underpinned their model.

Oklahoma oilman says US market quality reflected in price --  A prominent Oklahoma oilman says the high quality of U.S.-produced oil is reflected in its rising price on international markets. U.S. oil is trading higher than the international standard for the first time since 2010 after President Barack Obama signed a measure last week lifting the nation’s four-decade ban on oil exports, the Oklahoman reported Friday. Domestic oil gained 60 cents to $38.10 a barrel on Thursday while oil produced elsewhere added 53 cents to close at $37.89. Harold Hamm, CEO of Continental Resources, says it’s a sign that the world sees domestic light, low-sulfur oil as superior to international oil, much of which is denser and higher in sulfur. “Now the premium quality of U.S. light sweet crude is being recognized globally and rewarded by the market,” said Hamm, chairman of the Domestic Energy Producers Alliance. Most refineries in Europe and Asia are designed to handle primarily light sweet crude like that produced in the United States. Light sweet historically has traded at a premium to heavy sour blends. But a rapid increase in domestic production over the past decade helped flip the prices, setting domestic prices below the international rate.

WTI Plunges Back Under $37 (Below Brent); Drags Stocks Into Red For 2015 --While everything was awesome last week (apart from the last 10 minutes), it appears lower oil prices this week (WTI just crossed back below Brent's price and under $37 once again) is not "unequivocally good" for US equity markets. Following the bloodbath in China's "B" Shares overnight, traders are hoping this pain will stop once the machines "get back to work" at 930ET...If this holds, S&P 500 will open back in the red for 2015.As Bloomberg reports,Oil in New York falls from 3-wk high as Iran repeats goal of boosting supplies after lifting of sanctions. Iran’s priority is to boost oil shipments to pre-sanction levels once restrictions are lifted, IRNA reports, citing Oil Minister Bijan Namdar ZanganehCountry plans to add 500k b/d of exports 1 wk after sanctions lifted, says Rokneddin Javadi, deputy oil minister and head of NIOC, accord. to Shana news agency“If Iran is able to immediately add 500k b/d of exports, then that will become a huge factor which will push down oil prices in the first half of next year,” says Hong Sung Ki, senior commodities analyst at Samsung Futures.“That decision together with lower demand for heating oil and steady U.S. supplies are poised to be bearish factors for the mkt” Which has knock-on effects on commodity currencies with the Ruble near record lows against the USD and NOK/SEK at 23-year lows.

Oil down 3 percent; Brent near 11-year low as oversupply worries return | Reuters: Oil fell more than 3 percent on Monday, with global benchmark Brent back near 11-year lows as last week's short-covering dried up and players worried that crude prices had more room to swoon in the new year. U.S. gasoline futures slid more than 2 percent as the selloff extended to refined oil products. Heating oil fell 1 percent as expectations of cold weather limited its downside amid a 10 percent rally in natural gas, another heating fuel. Crude futures slumped in Asian trading as Japanese data showed a 46-year low in oil sales in the world's fourth largest crude buyer. They slid more in the New York session, as some traders reckoned the two-day pre-Christmas rebound, where crude rose about $2 a barrel, had been overdone. "Volume isn't great, which is typical for this time of year, and most guys are either flat on their books and positioning themselves for a weaker first quarter in 2016,"  Brent settled down $1.27 at $36.62 a barrel, after falling to a session low of $36.52. It hit $35.98 on Tuesday, its lowest since 2004. Brent also settled below U.S. crude's West Texas Intermediate (WTI) futures for a fourth straight day, showing its waning influence over WTI after this month's decision by the United States to lift a 40-year ban on U.S. crude exports.

Oil prices keep falling — this is the reason why -- There is no reprieve, of late, for the oil market. And U.S. consumers have been reaping the benefits.  The AAA estimated that consumers have saved more than $115 billion on gasoline so far this year. The steady decline of oil prices, which topped a sky-high $100 a barrel last year, had seemed to pause in May and June at above $60 a barrel. That hiatus is over now — prices for both Brent and West Texas Intermediate crude, a U.S. benchmark, are now in the mid $30s. In one sense, this is the same old story: OPEC, Saudi Arabia in particular, declined to cut oil production back in late 2014 in order to maintain market share, and has not changed its tune. Ever since then, oil markets have had to deal with an excess of supply, driving down prices. When OPEC members met earlier this month, on Dec. 4, they merely announced that members of the group “should continue to closely monitor developments in the coming months.” “Every signal the market is getting suggests we’re going to have weak demand,”  In addition, he said, “We have an enormous amount of supply out there.” However, there are some new features now that are driving prices still lower. The U.S. budget compromise that led to lifting a ban on oil exports adds to potential U.S. oil supply on the market, Bordoff said, as does “more certainty that the Iranian oil exports are coming back into the market” with the nuclear agreement in place. What’s more, Bordoff said, El Nino has kept it warm, reducing the need for heating oil. The U.S. shale oil sector, the great OPEC rival of recent years, continues to produce more than expected with prices low.  Other factors that are keeping prices low, according to a Monday analysis by Raymond James, are a “substantial and inexplicable surge” in Iraqi oil and ongoing concerns that China’s economic hiccups will drive down demand. “Oil market sentiment is currently as ugly as it’s been since January,” the analysts wrote, lowering their 2016 price forecast for West Texas Intermediate crude by $10 to $55.

Enjoy the gas ride, then get off - We’ve been hearing that our oil giant “friend,” Saudi Arabia, has declared war on American oil producers who have, through the oil fracking bonanza, freed us from OPEC dependency.They’re turning the screws on American oil producers by pumping enough extra oil to drive prices through the floor and drive American drillers into bankruptcy.These are those same “friends” who brought us the oil embargo in the ‘70s, who brought us 15 radicals to blow up the Twin Towers, who stand for nearly everything we oppose, and who now have openly stated their determination to crush America’s newly found energy independence so they can once again raise prices at will against the American consumer.With friends like these ... you know the rest.  So far, with oil prices well under $40 a barrel and holding, their plot is working as oil operations throughout America are slowing and shuttering down.  Tens of thousands have already lost their jobs and tens of thousands more will follow. This is what’s happening in the background as you and I bathe in the temporary joy of sub-three-bucks-a-gallon courtesy of the Saudi assault.  The Saudis have seen the future, and they don’t like a world with an abundant oil supply. Far better to kill the competition and raise prices for as long as oil holds out as a preferred energy source.

Oil prices edge down as slowing demand adds to high output - Crude oil futures came under renewed pressure early on Tuesday as fears of slowing demand added to near-record global production levels, which have already slashed prices by two-thirds since the middle of last year. Front-month U.S. West Texas Intermediate (WTI) futures CLc1 were trading at $36.75 per barrel at 0105 GMT, down 6 cents from Monday’s close. The international benchmark Brent LCOc1 was at $36.59 per barrel, down 3 cents from their last close and less than a dollar away from 11-year lows reached earlier in December. Both contracts are down by two-thirds since prices started tumbling in June 2014. While output from exporters like Russia, the Organization of the Petroleum Exporting Countries (OPEC) and U.S. shale drillers has been at or near record highs, demand has so far held up strong, preventing oil prices from falling even lower. That may be about to change. Oil analysts JBC Energy said that refined oil “product demand growth in Europe turned negative in October (-170,000 barrels per day year-on-year)” for the first time in 10 months and that diesel and gasoline demand growth in China, one of the strongest price supporters of the past year, was also slowing.

WTI Slides After API Reports Surprisingly Large Inventory Build -- Following last week's huge 5.9mm draw (as entirely expected this time of year given window-dressing) expectations were for a 2.5mm barrel draw this week from DOE. However, API reported a major surprise 2.9mm barrel build, bring December's total to just 1.7mm drawdown (against a 5.5mm average draw in December). This is massively worse than expected given the seasonals (along with a 923k build at Cushing) and while WTI has oscillated up and down around $38 since the API/DOE build 2 weeks ago, it is fading on this data. Sending WTI prices lower off $38 resistance... Do not forget - December ALWAYS see notably drawdowns as firms lighten up inventories on their balance sheet ahead of year-end to reduce tax burdens... And judging from history, as Bloomberg notes, it should resume as soon as the festive season is over: Stocks have built by 3.2 million barrels on average in January since 1921. Charts: Bloomberg

Oil ends up 3 percent on cold weather but glut worry persists - Reuters -  Oil prices jumped 3 percent on Tuesday, recouping the previous day's loss as colder weather encouraged buyers, but traders said prices remained under pressure due to slowing global demand and abundant supplies from OPEC members. After settlement, industry group the American Petroleum Institute (API) reported a weekly rise of almost 3 million barrels in U.S. crude inventories, not the draw expected by many analysts and traders. [API/S] Global oil benchmark Brent and U.S. crude's West Texas Intermediate (WTI) futures settled up more than $1 a barrel, after weather forecasts showed the United States may get some cold winter temperatures following an unusually balmy autumn. Oil prices gave much of the day's gains after the API report. Brent finished up $1.17, or 3.2 percent, at $37.79 a barrel. About 40 minutes after the API numbers, Brent was up only 76 cents at $37.38 WTI closed up $1.06, or 2.9 percent, at $37.87. After the API numbers, WTI was up only 52 cents, at $37.33.

Oil down more than 3 percent on U.S. crude build; Brent near 2004 low - Crude prices fell more than 3 percent on Wednesday, with Brent sliding toward 11-year lows, after an unusual build in U.S. stockpiles and signs Saudi Arabia will keep adding to the global oil glut. Crude inventories in the United States, the world's largest petroleum producer, rose 2.6 million barrels last week, the U.S. Energy Information Administration said. Analysts polled by Reuters had expected a draw of 2.5 million barrels. Stockpiles hit record highs at the Cushing, Oklahoma delivery hub for U.S. crude's West Texas Intermediate (WTI) futures. Gasoline and heating oil also posted larger-than-expected stock builds. "In all the years I have been doing this, I have never seen builds in the last week of December," said Tariq Zahir, crude futures trader at Tyche Capital Advisors in Long Island, New York. "At least for tax consequence reasons, refiners always ramp up runs at the year-end, and there's a draw. This is a first for me.". "This week's EIA data is just another bearish data point in a series of many that have dominated 2015 and will likely continue to do so heading into 2016."

WTI Crude Extends Losses As Production Rises & Inventories Unexpectedly Build - Last night's surprisingly large inventory build reported by API (+2.9mm vs expectations of -2.5mm) sent hopeful crude prices reeling (not helped by comments from Iran and Saudi this morning). Following last week's huge 5.9mm draw, DOE reports a 2.63mm build (confirming API's data). Cushing (which API reported as a 923k build) also saw DOE report a 0.9mm barrel build (pushing closer to its limits). As we have detailed previously, December typically sees major drawdowns in inventory as energy firms attempt to minimize tax burdens into year-end. December 2015 has seen a notably lower-than-expected drawdown. *CRUDE OIL INVENTORIES ROSE 2.63 MLN BARRELS, EIA SAYS”  Total crude inventory rose notably in the last week - very much against the seasonals. This is the month when drawdowns are supposed to be the largest. Cushing inventory rose once again: “CUSHING CRUDE INVENTORIES RISE TO RECORD 63M BBL, EIA SAYS”  As Global oil inventories near storage limits... Crude production has been "steadily rising" for the last few weeks...not what they need at all! WTI Crude prices rallied up to $38 - the scene of the crime before a huge build 2 weeks ago sent prices falling - then tumbled overnight after API. The DOE data has comfirmed that build and losses are extending... * * * Finally, do not forget - December ALWAYS see notably drawdowns as firms lighten up inventories on their balance sheet ahead of year-end to reduce tax burdens... WTI Crude prices rallied up to $38 - the scene of the crime before a huge build 2 weeks ago sent prices falling - then tumbled overnight after API. The DOE data has comfirmed that build and losses are extending...*  *  * Finally, do not forget - December ALWAYS see notably drawdowns as firms lighten up inventories on their balance sheet ahead of year-end to reduce tax burdens...

Total U.S. rig count dips below 700 for first time since 1999 - Fuel Fix: The total number of rigs drilling for oil and natural gas in the U.S. dipped again this week to close the year below 700 rigs for the first time since 1999. The year fittingly ended with the oil rig count declining by two rigs for a 2015 defined by energy austerity as the price of oil plummeted beginning in the latter half of 2014, according to weekly data released by oil field services firm Baker Hughes. After the shale boom years of $100 a barrel oil as recently as the summer of 2014, the benchmark for U.S. oil is now hovering above $37 a barrel. There oil rig count stands at 536 rigs, while there are only a paltry 162 rigs drilling for natural gas, based on the Baker Hughes data. The gas rig count was unchanged from last week. Oil field operators have pulled back 67 percent of the rigs that were operating at the peak of the U.S. oil boom in October 2014, when oil rigs totaled 1,609. Texas and Louisiana gained two rigs each this week, but North Dakota, California, Oklahoma and others counted losses. Texas’ Permian Basin actually saw a jump of five new rigs, but the Eagle Ford and Barnett shale plays each lost one rig.

Oil ends 2015 down 35 percent; long, painful hangover seen - Oil prices rose on Thursday but fell as much as 35 percent for the year after a race to pump by Middle East crude producers and U.S. shale oil drillers created an unprecedented global glut that may take through 2016 to clear. Global oil benchmark Brent and U.S. crude's West Texas Intermediate (WTI) futures rose between 1 and 2 percent on the day on short-covering and buying support in a thinly traded market ahead of the New Year holiday. But for 2015, both benchmarks fell double-digits for a second straight year as Saudi Arabia and other members of the once-powerful Organization of the Petroleum Exporting Countries (OPEC) again failed to boost oil prices. The U.S. shale industry, meanwhile, surprised the world again with its ability to survive rock-bottom crude prices, churning out more supply than expected, even as the sell-off in oil slashed by two-thirds the number of drilling rigs in the country from a year ago. The United States also took a historic move in repealing a 40-year ban on U.S. crude exports to countries outside Canada, acknowledging the industry's growth. "You do have to tip your hat to the U.S. shale industry and their ongoing ability to drive down costs and hang in there, albeit by their fingernails,"

Crude Oil Prices Suffer Biggest 2-Year Bloodbath On Record -- With yet another false-dawn of crude prices blowing in the wind of cash-flow generation desperation, we thought it an appropriate time for a bigger picture glance at the state of the carnage in crude... An ugly 2014 (down 46%)... Brought an avalanche of knife-catching "once in a lifetime" opportunists into ETFs to buy the dip in as levered way as they could... Only to see crude prices collapse another 31% in 2015 for the worst 2 year crash in the history of crude oil trading... And despite this bloodbath, production is rising, demand flailing, and global storage is at its limit... So what happens next?

Why Energy Investors Are Hoping Saudi Arabia And Iran's Oil Price Forecasts Are Dead Wrong -- Yesterday, when Saudi Arabia revealed its "draconian" 2016 budget, boosting gasoline prices by 40%, while trimming welfare programs after forecasting a collapse in oil revenue (even while allocating the biggest part of government spending in next year’s budget to defense and security) Bloomberg reported that "the kingdom’s 2016 budget is probably based on crude prices of about $29 a barrel, according Riyadh-based Jadwa Investment Co." Shortly thereafter Iran's Petroleum Minister Bijan Zangeneh said that the Iran 2016-2017 budget assumes an average oil price of $40 dollars per barrel. "There have been efforts to suggest in the budget the closest and most possible price for oil, though the market is usually in fluctuations," Zangeneh was quoted as saying by the local IRNA news agency. The reality is that nobody knows where oil prices will be in the coming year, especially if the supply glut persists, something which prompted BMO to warn that unless there are dramatic changes in the supply picture, oil prices could collapse as low as $20 in the short-term. "Fundamentally there is simply too much oil" the Canadian bank summarized simply. But now that price expectations have been significantly reset lower to account for an OPEC which will likely continue to exceed its 30 million barrel per day target, one group's implied oil price estimate stands out: that of energy investors.Here is what BMO says is the oil price discount into current equity valuation. At current prices we estimate that valuations for the oil and gas group reflect an implied Brent crude oil price in the range of $65-70/bbl while natural gas leveraged companies reflect a Henry Hub natural gas price in the range of $3.00/Mcf.

Bank of Montreal Asks If "Oil Prices Could Collapse To $20"; Answers: "Yes" --When looking at the price of oil in 2015, Canada's Bank of Montreal admits it was wrong. Very, very wrong. In our "2015 Year Ahead" report we laid out three plausible scenarios: (1) our base case, which forecast Brent crude oil prices of $50-60/bbl over the first half of 2015 and $60-80/bbl over the second half of the year; (2) a bull case, which forecast a Brent trading range of $85-95; and a bear case, which suggested a Brent trading range of $50-60/bbl. The actual trading range in 2015 proved to be even more ‘bearish’ than our bear case, with Brent generally trading between $36 and $60/bbl. So what did we get wrong? The answer: pretty much everything but mostly the fact that in the race to the production bottom ("we'll make up for plunging prices with soaring volumes") only dramatic outcomes, which shock the status quo, have any impact, to wit: "we assumed that Iraq production would average 2.9 million bpd; actual production was roughly 1 million bpd higher. We also assumed that Saudi Arabia would be content to hold production at 9.2 million bpd whereas actual production was roughly 800,000 bpd higher. In our view, this incremental 1.8 million bpd of production was the principal reason that global oil inventories swelled by more than 340 million barrels to a record high of approximately 3.1 billion barrels and why crude oil prices have collapsed."Could oil prices collapse to $20?  The short answer is ‘yes.’ We believe that crude oil prices could fall further unless global oil production is reduced. As shown in Table 2, we estimate that the global oil market could be oversupplied by roughly 920,000 bpd in 2016. The key assumptions are year-over-year growth in global demand of 1.2 million bpd, Saudi Arabia, Iraq and Libya hold production at current levels, Iran ramps up production at moderate pace over the course of the year and the U.S. rig count remains at current levels.

Brent, U.S. crude oil prices battle for premium in weakening market conditions -- International Brent and U.S. crude oil futures battled for a premium on Monday but both benchmarks fell in a market in which there is no end in sight for oversupply that has brought down prices by two-thirds since the downturn began in mid-2014. The international crude oil futures benchmark Brent was trading at $37.58 a barrel at 0739 GMT, down 31 cents from its last settlement. U.S. West Texas Intermediate (WTI) futures were down 47 cents at $37.63 per barrel. The two benchmarks switched between premium and discount to each other several times in post-Christmas trading, yet traders said not to interpret too much into these movements as low liquidity meant that prices could move abruptly without changes in price fundamentals. Trading volumes were down for both contracts in the post-holiday period, with only around 5,500 front-month Brent contracts changing hands by 0735 GMT on Monday versus over 272,000 contracts traded on Dec. 7, the first Monday of the month. There were over 10,000 WTI contracts traded by that time compared with more than 635,000 dealt on Dec. 7.

The Future of the Brent/WTI Spread -- Having seen the big picture lets look more closely at the past year (2015). The chart in Figure #2 shows the same Brent premium to WTI (blue line) between January 1 and December 24, 2015. The spread this year has been characterized by continued falling crude prices that squeezed the Brent premium close to zero in January (purple dashed circle) then saw WTI under greater pressure than Brent between January and March 2015 as U.S. crude inventory built up to record levels in response to the contango incentive (when future prices are higher than today – see Skipping The Crude Contango) pushing the Brent premium back up over $11/Bbl in March. [...] Then in the final month of 2015 a rising expectation and final confirmation that crude export restrictions would be lifted led to WTI crude prices jumping higher as the downtrodden market celebrated this victory over the regulators. As you can see in the green dashed circle – WTI strength closed the Brent premium to less than $1/Bbl and then in the week before Christmas WTI pushed past Brent to trade at a premium that reached 21cents/Bbl on Christmas Eve. The most immediate question at this point is whether the Brent premium over WTI that has existed pretty much uninterrupted since August 2010 has come to an end now that crude can be traded freely between the U.S. and the rest of the world? In theory – with shale production still abundant – U.S. refiners should not need to import light sweet crude. At the same time – in a world awash with surplus crude – there is no obvious market for U.S. shale crude overseas. This suggests a stalemate for Brent/WTI prices with both trading close together. But as we discuss in our next episode there are a number of reasons why this stalemate is not set in stone for the foreseeable future.

OPEC Likely To Keep Pumping Despite Budget Woes Of Some Membersfrom the Dallas Fed - The Organization of the Petroleum Exporting Countries (OPEC) abandoned its traditional role of cutting production to keep the world oil market in balance in November 2014. Faced with declining oil prices and falling market share, the cartel decided to keep on pumping rather than cut supply. The cartel's declared goal was to squeeze competitors that had higher production costs, such as those in U.S. shale plays. Prices have fallen since then, hurting producers in Texas and the U.S. that have trimmed rig counts and reduced employment. OPEC's strategy has also come at a cost to its members. Most are highly dependent on oil and gas sector revenues to finance their government budgets, and low oil prices have led to substantial deficits. OPEC countries' average fiscal balance - the difference between revenues and expenditures, expressed as a share of gross domestic product (GDP) - reversed from a surplus of more than 5 percent of GDP in 2012 to a deficit exceeding 10 percent of GDP in 2015 (Chart 1). The shortfall raises the question of how long OPEC countries can sustain deficits if oil prices stay low. Could this deterioration in fiscal balance prompt the cartel to reverse course?

12,000 Oil Tanker Trucks Parked At Iraq-Turkey Border Aren't Carrying ISIS Crude, Kurds Swear -- In our classic piece “ISIS Oil Trade Full Frontal: "Raqqa's Rockefellers", Bilal Erdogan, KRG Crude, And The Israel Connection,” we discussed how Masoud Barzani and the Iraqi Kurds transport some 600,000 b/d of crude to the Turkish port of Ceyhan in defiance of SOMO amid an ongoing budget dispute between Baghdad and Erbil. Turkey facilitates this trade and we suggested that ISIS (which Turkey is suspected of supporting in order that the group might continue to destabilize Assad) may be using the same networks to get its illicit oil to market.  There’s some evidence that links ISIS to Ceyhan. As documented, tanker rates at Ceyhan seem to spike around significant oil-related events involving Islamic State. Here's the chart: Additionally, an ISIS fighter captured by the YPG in Syria claims to have lived with an Islamic State commander in Adana, home to Ceyhan.  We also highlighted a piece by Al-Araby al-Jadeed that outlines what the site says is a trafficking route that runs through Zakho. Here are some key passages: The information was verified by Kurdish security officials, employees at the Ibrahim Khalil border crossing between Turkey and Iraqi Kurdistan, and an official at one of three oil companies that deal in IS-smuggled oil.The Iraqi colonel, who along with US investigators is working on a way to stop terrorist finance streams, told al-Araby about the stages that the smuggled oil goes through from the points of extraction in Iraqi oil fields to its destination - notably including the port of Ashdod, Israel."After the oil is extracted and loaded, the oil tankers leave Nineveh province and head north to the city of Zakho, 88km north of Mosul," the colonel said. Zakho is a Kurdish city in Iraqi Kurdistan, right on the border with Turkey."After IS oil lorries arrive in Zakho - normally 70 to 100 of them at a time - they are met by oil smuggling mafias, a mix of Syrian and Iraqi Kurds, in addition to some Turks and Iranians," the colonel continued.

Saudi posts record USD 98 billion deficit in 2015: ministry --- Saudi Arabia posted a record USD 98 billion budget deficit in 2015 due to the sharp fall in oil prices, the finance ministry said today. Revenues were estimated at 608 billion riyals (USD 162 billion), well below projections and 2014 income, while spending came in at 975 billion riyals (USD 260 billion), ministry officials announced at a press conference in Riyadh.

Saudi riyal in danger as oil war escalates - Ambrose Evan-Pricthard -- Saudi Arabia is burning through foreign reserves at an unsustainable rate and may be forced to give up its prized dollar exchange peg as the oil slump drags on, the country’s former reserve chief has warned.  “If anything happens to the riyal exchange peg, the consequences will be dramatic. There will be a serious loss of confidence,” said Khalid Alsweilem, the former head of asset management at the Saudi central bank (SAMA).  “But if the reserves keep going down as they are now, they will not be able to keep the peg,” he told The Telegraph.  His warning came as the Saudi finance ministry revealed that the country’s deficit leapt to 367bn riyals (£66bn) this year, up from 54bn riyals the previous year. The International Monetary Fund has suggested Saudia Arabia could be running a deficit of around $140bn (£94bn).  Remittances by foreign workers in Saudi Arabia are draining a further $36bn a year, and capital outflows were picking up even before the oil price crash. Bank of America estimates that the deficit could rise to nearer $180bn if oil prices settle near $30 a barrel, testing the riyal peg to breaking point.

More Bad News For Oil: Saudis Are Handling Oil Price Crash Better Than Expected -- We’ve spent quite a bit of time this year documenting Saudi Arabia’s fiscal bloodbath. In the wake of the kingdom’s move to deliberately suppress crude prices in an effort to preserve market share by bankrupting the US shale complex, Riyadh found itself in a tough spot. Thanks to ZIRP and the wide open capital markets it fosters, US producers were able to stay afloat for longer than the Saudis likely expected. Although the cracks are beginning to show (the US has seen the most oil and gas bankruptcies since the crisis this quarter), the damage was done. Thanks to the fact that the monarchy needs to maintain the everyday Saudi’s standard of living (not to mention continue to feed the American MIC by spending billions on weapons) implementing budget cuts is a tall order, so when oil revenue collapses, the red ink piles up quickly. By the summer, it was readily apparent that the Saudis were set to run a budget deficit on the order of 20% of GDP. Here's a look at deficit forecasts from Deutsche Bank... ...and here's a bit of color on the relationship between reserves and crude prices from BofAML... Maintenance of the riyal peg - which the market pretty clearly thinks may fall - only adds to the pressure. On Monday, we got the official numbers along with projections for 2016. For this year, the deficit will come in at around $98 billion, or, somewhere in the neighborhood of 15-16% of GDP. For 2016, the Saudis say spending could hit $224 billion while revenue should be roughly $137 billion, for a deficit of $87 billion or, about 12.8% of GDP. As you can see from Deutsche Bank's projections shown above, that's markedly better than expectations for this year and basically in line for next. According to Fahad al-Turki, chief economist at Riyadh-based Jadwa Investment, who spoke to Bloomberg by phone, the budget is "probably based on $50 bbl crude," which may well be the best indicator of all when it comes to predicting where prices go from here.

Saudis unveil radical austerity programme - Saudi Arabia on Monday unveiled spending cuts in its 2016 budget, subsidy reforms and a call for privatisations to rein in a yawning deficit caused by the prolonged period of low oil prices. The Gulf kingdom has kept oil production at high levels in an attempt to force out higher-cost producers, such as shale, and retain its market share. But this year’s deficit ballooned to 367bn Saudi riyals ($97.9bn,) or 15 per cent of gross domestic product, as oil revenues fell 23 per cent to Sr444.5bn. Seeking to ward off future fiscal crises, the ministry of finance confirmed wide-ranging economic reforms, including plans to “privatise a range of sectors and economic activities”. Riyadh would revise energy, water and electricity prices “gradually over the next five years” to optimise efficiency while minimising “negative effects on low and mid-income citizens and the competitiveness of the business sector,” it added. The first reforms will be effective from Tuesday, including an increase in gasoline prices, a rise in electricity tariffs for the wealthiest consumers, a modest increase in water costs for all, and changes to all energy prices for industrial users. The government will also seek to implement a plan for the introduction of a sales tax across the six Arab Gulf states. The success or failure of the reforms will help define the legacy of King Salman bin Abdulaziz al-Saud and his influential son, Deputy Crown Prince Mohammed bin Salman, who is overseeing the programme.

Saudis Dismantle Welfare State, Boost Gas Prices by 40% To Wage War With U.S. Shale --Earlier today, we parsed Saudi Arabia’s budget report in order to determine if the kingdom’s fiscal nightmare was better or worse than market expectations.  As it turns out, it was better. This year’s deficit is expected to come in at around 15-16% of GDP, considerably below the 20% some analysts feared. For 2016, it looks as though the number should be somewhere in the neighborhood of 13%, broadly in line with expectations.  Be that as it may, the Saudis are boxed in as long as they insist on, i) keeping oil prices depressed, ii) maintaining the riyal peg, and iii) holding subsidies steady. If something doesn’t give with at least one of those imperatives, then the kingdom will continue to burn through its SAMA reserves which fell by $12.55 billion in November from October. The problem is that deviating from any of the points outlined above has consequences. Allowing oil prices to rise risks putting uneconomic US production back online, dropping the riyal peg would be a significant black swan event for markets and would represent a landmark break with three decades of precedent, and easing up on the subsidies risks creating the type of social unrest that occurred elsewhere in the region during the Arab Spring.  Well it looks like when it came time to choose, the Saudis decided that the people will have to suffer because today, Saudi Arabia raised the price of domestic fuel by up to 40%. And that’s not all.  Prices for gas, diesel, kerosene, water and electricity were also raised.

Saudis Plan Unprecedented Subsidy Cuts to Counter Oil Plunge  - Rigzone - Confronting a drop in oil prices and mounting regional turmoil, Saudi Arabia reduced energy subsidies and allocated the biggest part of government spending in next year’s budget to defense and security. Authorities announced increases to the prices of fuel, electricity and water as part of a plan to restructure subsidies within five years. The government intends to cut spending next year and gradually privatize some state-owned entities and introduce value-added-taxation as well as a levy on tobacco. The biggest shake-up of Saudi economic policy in recent history coincides with growing regional unrest, including a war in Yemen, where a Saudi-led coalition is battling pro-Iranian Shiite rebels. In attempting to reduce its reliance on oil, the kingdom is seeking to put an end to the population’s dependence on government handouts, a move that political analysts had considered risky after the 2011 revolts that swept parts of the Middle East. “This is the beginning of the end of the era of free money,” “Saudi society will have to get used to a new way of working with the government. This is a wake-up call for both Saudi society and the government that things are changing.

Saudi economic shake-up shows it is planning for cheap oil – Saudi Arabia’s planned cuts in spending and energy subsidies signal that the world’s largest crude exporter is bracing for a prolonged period of low oil prices. The OPEC heavyweight shows no signs of wavering in the long-term oil strategy it has orchestrated since last year. Instead, it appears willing to continue tolerating cheap crude to defend market share and wait for the market to balance without cutting supplies, oil sources and analysts say. In one of the strongest signals that the kingdom will stay the course despite the impact on its finances, Saudi Aramco’s chairman Khalid al-Falih said it could outlast others. “We see the market balancing sometime in 2016, we see demand ultimately exceeding supply and soaking up a lot of the excess inventory and prices in due course will respond regardless of when and by how much,” Falih told a news conference late on Monday detailing next year’s budget. “Saudi Arabia more than anyone else has the capacity to wait out the market until this balancing takes place,” he said. Analysts said the plans announced on Monday to shrink a record state budget deficit with spending cuts, reforms to energy subsidies and a drive to raise revenues from taxes and privatization showed Riyadh was expecting lower revenues.

A Breakdown of the 2016 Saudi Budget and Its Implications - Saudi Arabia released a more tightfisted budget for 2016, reflecting scaled-back revenue expectations and lower spending on subsidies because of sinking oil prices and its involvement in the war in neighboring Yemen. Here are some key points in the first spending plan under King Salman, released on Monday by the Ministry of Finance: The government forecasts the deficit will narrow to 326.2 billion riyals ($87 billion) in 2016, from 367 billion riyals this year. The 2015 deficit is about 16 percent of gross domestic product, according to Alp Eke, senior economist at National Bank of Abu Dhabi. The median estimate of 10 economists forecast a shortfall of 20 percent of GDP this year, according to data compiled by Bloomberg. Seventy-three percent of this year’s 608 billion riyals in revenue came from oil, down 23 percent from 2014 and below the 715 billion riyal target. The government says it may resort to local and foreign borrowing to bridge the budget deficit. For 2016, the government estimates revenue of 513.8 billion riyals. It allocated 183 billion riyals in provisions for low oil prices in 2016. The government plans to spend 840 billion riyals in 2016 compared with 975 billion riyals this year. The biggest ticket in the budget was 213 billion riyals allocated for military and security services. Economy Minister Adel Fakeih said Monday that 20 billion riyals of this year’s spending overshoot was due to increased military and security spending related to the military operation against Shiite Houthi rebels in Yemen. The Ministry of Finance said its 2016 budget is based on “extremely low oil prices” that prompted Gulf states to cut spending.

Saudi Arabia's budget blowout sends petrol prices rocketing: Humbled by the slumping oil price, Saudi Arabia, long the world's major oil producer, has been forced to take an axe to government spending by slashing a host of subsidies - including the price of oil. As a result, Saudis will be faced with steep rises in the price of petrol and a host of other charges as a range of government subsidies are reduced. The reality check has seen the domestic oil price rise from 0.60 riyal to 0.98 riyal a litre (36¢), which is still around a quarter the price paid at the bowser by most Australian motorists.Price hikes have been outlined for utilities such as electricity and water, as the country battles slumping revenues thank to the fall in the price of oil, which has collapsed to around $US36 a barrel in recent trading from more than $US100 a barrel as recently as 18 months ago - declining 50 per cent in the past six months alone. Advertisement Saudi, and other members of the Organisation of Petroleum Exporting Countries, better known as OPEC, have failed to curtail output at a time when production from non-OPEC member countries such as Russia and more recently the US, is also rising. And the removal of bans on Iranian oil exports may see the global glut rise further over the next 18 months or so. The shale oil revolution has resulted in the US emerging as the world's largest oil producer, and bans on US oil exports have been removed recently. The UK, long the preferred home of Saudi royal property investment, has seen a spate of sales over the past few years as the falling price oil has brought the days of the high-spending Middle Eastern spending to an end.

Saudi Stocks Drop as World's Biggest Oil Exporter Cuts Subsidies - Saudi Arabian stocks declined after the kingdom announced one of its biggest shakeups in economic policy. The Tadawul All Share Index sank 0.9 percent at the close as the gauge of petrochemical companies slid to the lowest level since July 2009. The kingdom reduced energy subsidies and intends to cut spending in 2016 to 840 billion riyals ($224 billion) from 975 billion riyals this year. Petrochemical companies are among the first to feel the pressure because a "cut in fuel subsidies will drive up the costs,".  Oil prices hovering near their lowest levels since 2004 and a decision to plunge into a war in neighboring Yemen are straining the kingdom’s finances. That’s forced Saudi Arabia to tap its foreign reserves, which dropped for a 10th straight month in November to about $630 billion, a three-year low, and to sell bonds for the first time since 2007 to help plug a budget gap. Saudi forward contracts, which are used to bet whether Saudi Arabia will allow its dollar-pegged currency to weaken in the next 12 months, rose as much as 280 points to 755 points, the highest level since March 1999. They pared the increase to 145 points as of 4:01 p.m. in Riyadh. The government recorded a budget deficit of 367 billion riyals in 2015. That’s about 16 percent of gross domestic product, according to the National Bank of Abu Dhabi, but below the 20 percent forecast by the International Monetary Fund. For 2016, the government expects the deficit to narrow to 326 billion riyals. Revenue is forecast to decline to 514 billion riyals from 608 billion riyals. “Government expenditure is a key driver of growth in Saudi Arabia, so a cut in spending will certainly feed through to domestic output and earnings,”

Something Just Snapped In Saudi Arabia -Following yesterday's budget (deficit) and the 'sacrifice-the-people's-comfort-for-the-death-of-US-Shale' plan that we detailed here, it appears market concerns about Saudi Arabia's forward-looking health are rising. As Bloomberg reports, USDSAR 12-month forwards jumped 250pts (the most since December 2007) to 725bps (the highest level since March 1999) implying expectations of a looming de-pegged, devaluation. Perhaps just as worrying is this is the same pattern that played out in August as Yuan weakness sparked HIBOR stress, leading to SAR forward weakness and then US equity market collapse. Earlier today, we parsed Saudi Arabia’s budget report in order to determine if the kingdom’s fiscal nightmare was better or worse than market expectations.  As it turns out, it was better. This year’s deficit is expected to come in at around 15-16% of GDP, considerably below the 20% some analysts feared. For 2016, it looks as though the number should be somewhere in the neighborhood of 13%, broadly in line with expectations.  Be that as it may, the Saudis are boxed in as long as they insist on, i) keeping oil prices depressed, ii) maintaining the riyal peg, and iii) holding subsidies steady. If something doesn’t give with at least one of those imperatives, then the kingdom will continue to burn through its SAMA reserves which fell by $12.55 billion in November from October. The problem is that deviating from any of the points outlined above has consequences. Allowing oil prices to rise risks putting uneconomic US production back online, dropping the riyal peg would be a significant black swan event for markets and would represent a landmark break with three decades of precedent, and easing up on the subsidies risks creating the type of social unrest that occurred elsewhere in the region during the Arab Spring.  Well it looks like when it came time to choose, the Saudis decided that the people will have to suffer because today, Saudi Arabia raised the price of domestic fuel by up to 40%. And that’s not all.  Prices for gas, diesel, kerosene, water and electricity were also raised.

Saudi Arabia Won’t Change Oil Production Policy - WSJ: —Saudi Arabia won’t change its current oil-production policy, the country’s energy minister said Wednesday, sticking with a strategy of unrestrained output that has helped send oil prices to multiyear lows. “It is a reliable policy and we won’t change it,” Saudi oil minister Ali al-Naimi told reporters on the sidelines of an event in Riyadh. “We will satisfy the demand of our customers. We no longer limit production. If there is demand, we will respond. We have the capacity to respond to demand,” he said. Saudi Arabia, a member of the Organization of the Petroleum Exporting Countries, led the 12-nation group last year on a new course of pumping more oil in the face of crashing prices. That was a historic departure for a cartel that produces a third of the world’s oil and had historically used its muscle to keep supply scarce enough to support desirable prices. With American production flooding the market, the Saudis no longer believed a production cut would be effective. Oil prices have fallen by more than half ever since that November 2014 decision, with Brent crude, the international benchmark, trading at about $37 a barrel on Wednesday in London, its lowest level since the 2008-09 financial crisis. After Mr. Naimi’s comments were reported by The Wall Street Journal, Brent fell to $36.84, before recovering slightly.

Saudi Arabia and Yemen - Slipping Under the World's Radar -- While the world focuses on the ongoing civil war in Syria, another war continues unabated.  This war, between Saudi Arabia and Yemen has more-or-less slipped beneath the radar of the West's mainstream media, however, a recent report by Amnesty International shows that the ongoing violence by one of America's key Middle East allies has led to the killing of hundreds of civilians, many of them school children.    Amnesty International received permission from Huthi authorities to visit five schools that had been targeted by Saudi-led coalition air strikes even though there was no evidence that the schools had been used for military purposes and validated their findings using local witnesses.  In some cases, schools had been targeted more than once even though they were located at a significant distance from possible military objectives.  As background information, Bahrain, Egypt, Jordan, Kuwait, Morocco, Qatar, Sudan and the United Arab Emirates are participating in the Saudi-led coalition with the United States and the United Kingdom providing both logistical support and intelligence to the coalition. Let's open with this map of Yemen showing the nation's governates:

Not Even OPEC Can Fix Oil Glut - WSJ: Surprisingly strong crude output in the U.S. and Mideast over the past year pushed oil prices to their lowest levels in more than a decade. But for investors trying to determine whether the oil market is close to a bottom, the pace of production elsewhere in the world is a key source of uncertainty. Producers in Russia, Brazil and Norway pumped more oil in 2015 than the closely watched forecasters International Energy Agency and Energy Information Administration had projected. Meanwhile, oil-field investments made years ago when prices were higher are set to begin producing, even as exploration-and-drilling projects scheduled to bear fruit in the coming decades are being delayed or canceled outright. Investors’ increased focus on supplies from outside the U.S. and the Organization of the Petroleum Exporting Countries underlines uncertainty about the magnitude of a global oil glut that has erased more than 60% off the value of a barrel of oil in the past 18 months. Given the strength of production around the world in 2015, many investors say it is far from clear when the glut will start to recede, given that OPEC hasn’t stepped in as it has in past downturns to stabilize the market by cutting output and U.S. production remains resilient.“We’re in untested waters,” said Judith Dwarkin, chief economist at RS Energy Group. “This is an oil market that…since commercial trading began, has either been under the sway of monopolies, oligopolies or a cartel.” Without coordinated supply cuts, economists say, it is in each producer’s best interest to pump as much as possible during a price downturn to maximize revenues. “It is not the role of Saudi Arabia, or certain other OPEC nations, to subsidize higher cost producers by ceding market share,” said Saudi Arabia’s oil minister, Ali al-Naimi, in a speech in March.

$10 Trillion Investment Needed To Avoid Massive Oil Price Spike Says OPEC --OPEC says that $10 trillion worth of investment will need to flow into oil and gas through 2040 in order to meet the world’s energy needs.  The OPEC published its World Oil Outlook 2015 (WOO) in late December, which struck a much more pessimistic note on the state of oil markets than in the past. On the one hand, OPEC does not see oil prices returning to triple-digit territory within the next 25 years, a strikingly bearish conclusion. The group expects oil prices to rise by an average of about $5 per year over the course of this decade, only reaching $80 per barrel in 2020. From there, it sees oil prices rising slowly, hitting $95 per barrel in 2040. Long-term projections are notoriously inaccurate, and oil prices are impossible to predict only a few years out, let alone a few decades from now. Priced modeling involves an array of variables, and slight alterations in certain assumptions – such as global GDP or the pace of population growth – can lead to dramatically different conclusions. So the estimates should be taken only as a reference case rather than a serious attempt at predicting crude prices in 25 years. Nevertheless, the conclusion suggests that OPEC believes there will be adequate supply for quite a long time, enough to prevent a return the price spikes seen in recent years. Part of that has to do with what OPEC sees as a gradual shift towards efficiency and alternatives to oil. The report issued estimates for demand growth five years at a time, with demand decelerating gradually.  The reasons for this are multiple: slowing economic growth, declining population rates, and crucially, efficiency and climate change efforts to slow consumption. In fact, since last year’s 2014 WOO, OPEC lowered its 2040 oil demand projection by 1.3 mb/d because it sees much more serious climate mitigation policies coming down the pike than it did last year.

Aramco to build world's largest gas complex — Saudi Aramco intends to build the largest industrial complex for gas in the world a cost of $2.1 billion in Jazan. The new project will supply 20,000 metric tons of oxygen and 55,000 metric tons of nitrogen to its Jazan refinery for 20 years. The production capacity of the new Aramco oil refinery, to open in 2017, would be 400,000 barrels a day, with the production capacity of the gas-to-liquids integrated plant at 3,700 megawatts. The project indicates the strength of the Saudi economy, and public-private partnerships, said Mohamed Abunayan, chairman of the Arabian Company for Water and Power Development (ACWA). He said the financing of the project is Shariah-compliant, and would be developed with the Air Products and Chemicals company, a New York stock exchange-listed firm, in a build, own and operate agreement. Ten international and national banks participated in financing the project with $1.8 billion.

Leviathan partners and BG close to $30b Egypt gas deal - The Leviathan partners and British Gas (BG) are negotiating the final details of a contract for exporting Israeli natural gas to Egypt, and will sign it in the coming weeks, senior sources in the gas companies said today. According to the sources, the plan is to sign the contract before Shell Oil completes its acquisition of BG next month. Representatives of the companies in Israel have been holding marathon meetings with BG representatives in London in recent weeks. The parties signed a letter of intent in June 2014, under which the Leviathan gas reservoir would supply 105 BCM of gas to BG’s gas liquefaction facility in Idku, Egypt over 15 years. The value of the huge deal, involving the export of one sixth of the Leviathan gas reserves, was estimated at $30 billion, and was designed to make it possible to finance Leviathan’s development. The parties have not yet signed a final agreement, due to regulatory problems, mainly in Israel. The entry into the picture of Shell Oil, which intends to acquire BG for $70 billion, raised the question of whether such a deal could take place in the future. Shell Oil does not mention Israel, Egypt, or the Middle East in general in its list of countries on which it plans to focus. The company announced that it planned to sell $30 billion of BG’s assets in order to focus on two main sectors: deep water natural gas reservoirs and liquid natural gas (LNG) (Shell already controls 7.2% of the world’s LNG reserves). The companies, however, assert that the contract will be signed soon. A senior source in one of the gas companies confirmed that the negotiations were in the final stage, and asserted that the final contract would be signed in the first quarter of 2016. A senior source in another gas company asserted that the parties intended to sign the deal before Shell Oil’s acquisition of BG is completed.

Oil Slumps As Saudis "Won't Change" Policy, Russia Rethinks 2016 Price Forecast - On Tuesday, we took a close look at the forecast for the Russian economy given various assumptions about the price of oil in 2016.  While Russia has thus far managed to weather the crude storm relatively well (indeed, Moscow is now pumping more crude than ever before and expects oil exports to rise for the first time in six years in 2015), the numbers do not lie. The ruble is plunging in the face of the oil price slump and if prices hit $30/bbl, the country’s budget deficit is expected to balloon from 3% of GDP to some 4.4% - that would be the second largest deficit in two decades. Indeed, the Russian central bank itself says that in an adverse scenario wherein oil trades at $35/bbl in 2016, GDP will contract by 5% and inflation will run at 7-9%. Say what you will about the country’s penchant for resilience, but that isn’t a pretty picture. The rumored return of former FinMin Alexei Kudrin to the government is evidence of Moscow’s attempts to find a solution sooner rather than later.The interesting thing about Russia’s budget for 2016 is that it’s based on oil prices of $50/bbl. It’s not entirely clear how realistic that is.  For instance, the Saudis are likely basing their 2016 budget on considerably lower prices. As we outlined in great detail earlier this week, Riyadh is expected to run a 13% deficit in 2016. That's actually in line with expectations and comes on the heels of a better than expected 2015 when the red ink somewhat inexplicably came in at between 15% and 16% of GDP as opposed to the 20% the market was expecting. That’s bad news for prices as it means the Saudis are holding up better than most observers anticipated. Riyadh can thus continue its war of attrition with the US shale complex for longer. Also, remember that Saudi Arabia came into 2015 with virtually no debt, which means they can borrow to offset the SAMA burn. At $30/bbl, Saudi Arabia could hold out for nearly two years with no subsidy cuts and more than 3 years as long as they finance 50% of spending in the debt market. Now that the subsidy cuts are a reality, those figures rise materially:Meanwhile, we learn on Wednesday that Kuwait is expecting crude revenue of 7.16b dinars in 2016/2017 budget which translates to around $30/bbl, according to Alrai newspaper.

Russia mulls new tax regime to support Siberian oil production - (UPI) -- A new tax regime in Russia could pave the way to an increase in oil production from fields in Western Siberia, the Russian energy minister said. Russian Energy Minister Alexander Novak said oil production in Western Siberia, once a major contributor to overall output, was declining at an average rate of around 1 percent per year. Changes in a tax system, where so-called excess profits will be taxed at 70 percent, will make Western Siberia commercially viable. Under the current tax regime, Novak said about 73 billion barrels of oil are not economic. "Changes in the tax system are to create conditions to make production of this oil commercially viable," he said in an interview with state-owned television station Rossiya-24.. Last year, a subsidiary of Russian oil company Gazprom Neft said it was assessing the shale oil potential in Western Siberia. The company employed hydraulic fracturing, known also as fracking, at the site in order to improve oil extraction. Fracking is in part used to pull oil from inland shale basins in the United States, where the increase in production has helped push crude oil markets heavily toward the supply side. When coupled with weak global demand, the increase in oil production has pushed crude oil prices to near 11-year lows.

Russia surpasses Saudi Arabia for third time in China crude supply  – Russia overtook Saudi Arabia for the third time this year in November as China’s largest crude oil supplier, customs data showed on Monday, as Russia captures fresh demand from China’s new crude buyers. China brought in about 949,925 barrels per day (bpd) of Russian crude oil in November, compared with 886,950 bpd from Saudi Arabia, data from the General Customs Administration showed. For the first 11 months, Saudi remained the No.1 seller with total supplies at 46.08 million tonnes, or around 1.01 million bpd, up 2.1 percent over the year-ago period. Russia, which ramped up exports by 28 percent over the same period, supplied 37.62 million tonnes, or about 822,200 bpd. China has since July allowed more than a dozen mostly independent companies to import crude oil for the first time, pushing its crude oil purchases to new highs while Beijing has also stepped up its strategic stockpiling. With a rigid allocation system and destination restrictions on contracts, Saudi crude is less appealing to China’s new crude importers when compared to Russian grades, traders have said. Cheaper freight costs for Russian crude versus suppliers from outside the Asia-Pacific region were also helping Russia boost its exports to China, traders said.

Recession, retrenchment, revolution? Impact of low crude prices on oil powers - A glut of oil, the demise of Opec and weakening global demand combined to make 2015 the year of crashing oil prices. The cost of crude fell to levels not seen for 11 years – and the decline may have further to go. There have been four sharp increases in the price of oil in the past four decades – in 1973, 1979, 1990 and 2008 – and each has led to a global recession. By that measure, a lower oil price should be positive for the world economy, with lower fuel costs for consumers and businesses in those countries that import crude outweighing the losses to producing nations. But the evidence since oil prices started falling from their peak of $115 a barrel in August 2014 has not supported that thesis – or not yet. Oil producers have certainly felt the impact of the lower prices on their growth rates, their trade figures and their public finances butthere has been no surge in consumer spending or business investment elsewhere. Economist still reckon there will be a boost from a lower oil price particularly if it looks as if the lower cost of crude will be sustained. “A commodity bubble has deflated three times in the past 100 years: the first was after world war one; the second was after the 1980s oil shock; the third is happening right now.”  For the big producer countries, this is a major headache, the ramifications of which are only starting to be felt. Oil powers base their spending plans on an assumed crude price. The graphic below shows just how far below water their budgets are.

U.S. preparing sanctions on Iran over ballistic missile program: sources | Reuters: U.S. President Barack Obama's administration is preparing new sanctions on international companies and individuals over Iran's ballistic missile program, sources familiar with the situation said on Wednesday. The Wall Street Journal reported earlier that the potential sanctions would target about 12 companies and individuals in Iran, Hong Kong and the United Arab Emirates (UAE) for their suspected role in developing Iran's ballistic-missile program. U.S. officials have said the Treasury Department retains a right under July's landmark nuclear agreement between Iran and six world powers, including Washington, to blacklist Iranian entities suspected of involvement in missile development, the Journal said. Iranian officials have said the country's supreme leader would view such penalties as violating the nuclear accord. "We've been looking for some time‎ at options for additional actions related to Iran's ballistic missile program based on our continued concerns about its activities, including the October 10th launch," an Obama administration official said. "We are considering various aspects related to additional designations, as well as evolving diplomatic work that is consistent with our national security interests," the official said, on condition of anonymity.

White House Delays Imposing New Sanctions on Iran for Missile Program - WSJ: The White House has delayed its plan to impose new financial sanctions on Iran for its ballistic missile program, according to U.S. officials, amid growing tensions with Iran over the nuclear deal struck earlier this year. The officials said the Obama administration remains committed to combating Iran’s missile program and that sanctions being developed by the U.S. Treasury Department remain on the table. They also said imposing such penalties was legal under the landmark nuclear agreement forged between global powers and Iran in July. U.S. officials offered no definitive timeline for when the sanctions would be imposed after the decision was made Wednesday to delay them. At one point, they were scheduled to be announced Wednesday morning in Washington, according to a notification the White House sent to Congress. Republican leaders on Thursday accused the Obama administration of losing its will to challenge Iran after Tehran countered on Thursday that it would accelerate the development of its arsenal. “If the president’s announced sanctions ultimately aren’t executed, it would demonstrate a level of fecklessness that even the president hasn’t shown before,”

U.S. Sanctions Delay Could Open Door for Iranian Weapons Violations - U.S. backpedaling over sanctions related to Iran’s ballistic missile program just a day after they were reported could send a dangerous signal, effectively inviting Tehran to test the boundaries of what violations it can get away with.  Iran had threatened retaliation over the planned sanctions, which would have been the first imposed since the international deal on its nuclear program was announced in July. The measures were intended to show Washington’s willingness to hold Tehran accountable for illicit conduct. Iran tested a new ballistic missile in October. A United Nations panel concluded in December that the Emad rocket was capable of carrying a nuclear warhead, a violation of U.N. Security Council Resolution 1929. Tough sanctions targeting elements of the Iranian defense industry involved in ballistic missile testing and production remain in place under the nuclear deal, as one U.S. Treasury official noted in a speech in September. To Iran, it didn’t matter that the measures did not undermine the major sanctions relief it stands to gain through the nuclear deal or that they were limited to a small number of individuals and companies. A spokesman for Iran’s foreign ministry called the sanctions “unilateral, arbitrary and illegal.” President Hassan Rouhani denounced them and instructed his defense minister to expedite the ballistic missile program. And U.S. wavering in the face of such Iranian pushback opens the door to future violations. Iran has insisted that it will not accept restrictions on its missile program. The text of the nuclear agreement enshrines this position: “Iran has stated that if sanctions are reinstated in whole or in part, Iran will treat that as grounds to cease performing its commitments under the JCPOA in whole or in part.”

NEPCO to float tenders next year to buy more LNG  — The state-owned National Electric Power Company (NEPCO) is scheduled to float several tenders in 2016 to buy liquefied natural gas (LNG) shipments, Abdel Fattah Daradkeh, the company’s director general, said Monday. Shell provides Jordan with about 80 per cent of its energy needs at present and the company will float a tender to buy the remaining 20 per cent of its LNG needs from international markets, Daradkeh said in a phone interview. According to the official, Jordan generates about 80 per cent of its energy needs via LNG after the opening of an LNG terminal in Aqaba in mid this year, which has enabled the Kingdom to start importing LNG for power generation and gradually reduce dependence on heavy fuel and diesel. NEPCO suffered heavy losses over the past five years due to disruption in natural gas supplies from Egypt and relying on expensive heavy fuel for power generation. The return to relying on LNG for electricity production in mid 2015 is a step that the government considers vital to reduce the national power bill and promises a brighter energy future for the country.

LNG shortage elicits emergency response in China — Authorities in North China have implemented an emergency plan due to a temporary shortage of natural gas supplies in recent days caused by transportation and weather problems. The plan includes limiting indoor temperatures at public buildings and suspending supplies to manufacturers. China National Petroleum Corporation (CNPC), the country’s largest oil and gas supplier and producer, ran into difficulties when unloading imported liquefied natural gas (LNG) at ports. This caused a temporary shortage of natural gas supplies in northern areas, the Beijing Commission of City Administration and Environment said. PetroChina, CNPC’s listed arm, said on Monday that a vessel carrying 260,000 cubic meters of liquefied natural gas was unable to discharge its cargo as scheduled at the port of Tangshan in Hebei province because of heavy winds and smog. Lin Boqiang, director of the Energy Research Center at Xiamen University, said there is an oversupply of natural gas in the country, so the shortage in northern areas will be temporary. The LNG supply is sufficient, and domestic LNG plants are operating at about 50 percent this year due to oversupply. “The shortfall will be filled very soon by other means, and the problem is likely to be solved in one or two days,” Lin added. China imports LNG mostly from Turkmenistan, Qatar, Australia, Indonesia and Malaysia.

Modi Seeks to Curb Gas Subsidies to Contain India Budget Gap -  India will offer cooking gas subsidies only to citizens with taxable incomes of less than 1 million rupees ($15,000) a year, part of Prime Minister Narendra Modi’s plan to sustainably curb Asia’s widest budget deficit. The more than 163 million consumers can voluntarily declare their eligibility starting Jan. 1, the Oil Ministry said in a statement on Monday. It didn’t announce steps to enforce the decision. "It definitely is not a well thought out decision," "It is difficult to quantify savings as disclosure is voluntary and not many people would want to reveal their income." Modi’s administration has pledged to narrow the shortfall to an eight-year low without cutting expenditure on roads, ports and railways. The gap reached 74 percent of the full-year target in the first seven months, and the government on Dec. 18 warned it may have to reassess its projection for next year if growth slows. About 6 million people voluntarily gave up their cooking gas subsidies under a campaign started by the government in 2015, and this money is being used to offer supplies to poor households, according to the statement. The administration is also opening bank accounts for the poor to plug leakages and transfer subsidies straight to the beneficiary. For the year through March 2016, India budgeted 300 billion rupees for petroleum subsidies -- including diesel, cooking gas and kerosene -- down 50 percent from the previous 12 months as global oil prices slumped. Of this, cooking gas accounted for 220 billion rupees.

China hits India where it hurts -- Clearly, India’s ruling elites are yet to realize that the zero sum mindset is irrelevant today. The Chinese diplomacy is in a ‘win-win’ situation. If Modi eases pressure on Kathmandu, that is not going to prompt the fiercely independent new leadership there to freeze their deepening engagement with ‘communist China’, while, on the contrary, the present stand-off is only driving them to embrace China’s friendship tightly. The backdrop is one of the mandarins in Indian foreign-policy establishment needling China constantly by butting into the South China Sea problem, flaunting Modi’s bonhomie with Japan’s Shinzo Abe or America’s Barrack Obama, and identifying closer than ever with the US’ rebalance strategy in Asia. (With an eye on China, India is inching close to signing an unprecedented treaty with the US that would provide access for the American forces to Indian bases.) The Modi government estimates that if India joins a trilateral US-Japan-India quasi-alliance in Asia, Beijing will sooner or later read the tea leaves and reach out for a mutual accommodation with India. There is an element of bravado here, because Delhi assumes that the US and Japan see India as a ‘counterweight’ to China in the geopolitics of Asia, and have a strategic interest to build up India as a powerhouse.

China continues suspension of retail fuel price adjustment - (Xinhua) -- China's top economic planner said Tuesday that it will continue suspending price adjustment of domestic refined oil products before a new pricing mechanism is introduced. A special meeting was hosted by the National Development and Reform Commission (NDRD) the same day to invite opinions of relevant departments and work units on a new pricing mechanism. The NDRC also plans a series of symposiums to solicit opinions from experts, industrial associations, petroleum enterprises and drivers. On Dec. 15, the NDRC announced that improvement would be made on the pricing mechanism of refined oil products and it would suspend adjusting prices of gasoline and diesel. Under a mechanism that became effective in March 2013, prices of refined oil products are adjusted when international crude prices translate into a change of more than 50 yuan per tonne for gasoline and diesel prices for a period of 10 working days. The NDRC said on Dec. 15 that it would not adjust fuel prices, though a price cut was expected as international prices fell.

Ending of China's super-boom spells pain with no end seen yet | Reuters: A decade-old commodity boom came crashing to an end in 2015, hurting energy and mining companies as China's industrial rise and appetite for raw materials slowed. The outlook for 2016 is not much better. The Thomson Reuters Core Commodity Index fell by a quarter over the year, to hit its lowest level since 2002 in December, as commodities ranging from iron ore to oil took a battering. And there are few bright spots in sight. "The chances of an optimistic 2016 are bleak," Mark To, head of research at Hong Kong's Wing Fung Financial Group, said. "Slowing economic growth and structural reforms in China might contribute to decreased demand for commodities." Further interest rate hikes by the U.S. Federal Reserve will add to the pain, by strengthening the dollar and making many commodities more expensive for international buyers, To said. Among industrial commodities, iron ore prices have tumbled 40 percent this year due to global oversupply and shrinking Chinese steel demand, for a third year of losses, and the rout is seen stretching into next year. In coal, thermal prices fell almost a third in 2015, hurt by waning Chinese demand and the rise of renewable energy, with Goldman Sachs and the International Energy Agency saying China's coal demand has peaked. Both iron ore and coal have shed around 80 percent in value since their respective historical peaks in 2011 and 2008. The downturn has hammered mining majors like BHP Billiton, Rio Tinto and Anglo American, as well as merchants like Asia's Noble Group and Europe's Glencore, forcing them to slash jobs and sell assets. Benchmark oil and natural gas prices have also slumped, down a third this year and two thirds since the rout began in 2014, as ballooning supply met slowing demand.

IBM and Microsoft jockey for position as China seeks better smog forecasting tech: Air pollution in China could be big business. Two of the world’s largest technology firms, IBM and Microsoft, are vying to tap the nascent, fast-growing market for forecasting air quality in the world’s top carbon emitters. Bouts of acrid smog enveloping Beijing prompted authorities in the Chinese capital to declare two unprecedented “red alerts” this month – a warning to the city’s 22 million inhabitants that heavy pollution is expected for more than three days. Such alerts rely on advances in pollution forecasting, increasingly important for Communist Party leaders as they seek improvements in monitoring and managing the country’s notorious smog in response to growing public awareness. Official interest has also been boosted by China’s preparations to host the Winter Olympics – Beijing’s smog is worse in the colder months – in 2022. “There is increasing attention to the air quality forecast service,” said Yu Zheng, a researcher at Microsoft. “More and more people care about this information technology.”  “If you can predict the weather, it only takes a few more variables to predict air quality,” said Robert Rohde of Berkeley Earth, a U.S.-based non-profit that maps China’s real-time air pollution. “Most of the time pollutant emissions don’t vary very rapidly.”

China police detain 12 in connection with landslide disaster - Police in China have detained 12 people in connection with a deadly landslide last week, including at least one executive from a company that ran a dump for construction waste that swept through an industrial park, state media said on Monday. The government has blamed breaches of construction safety rules for the disaster in the southern city of Shenzhen on Dec. 20, when the dump overflowed and engulfed 33 buildings, and has begun an investigation. At least seven people have been confirmed dead while more than 70 are missing. In a brief report, the Xinhua news agency said police had taken "coercive measures" against 12 people, including "responsible people" from Shenzhen Yixianglong Investment Development, which ran the dump, using an expression which generally refers to detention. Calls to the company seeking comment went unanswered.

Offshore Yuan Tumbles As China Devalues Fix To Weakest Since June 2011 -- On the heels of the collapse in China 'B' shares last night, and continued stress in money-markets, China weakened the the Yuan fix to its lowest since June 2011 tonight. This has sent offshore Yuan spiralling lower breaking above 6.5700 for the first time since trhe August devaluation's collapse. Chinese stocks are on the weaker side, extending losses, and we now await the money-markets to see if this stress is escalating. PBOC fixes the Yuan at new June 2011 lows... Sending offshore Yuan tumbling... The devaluation implied in offshore Yuan is back to recent cycle wides... Charts: Bloomberg

China has made obedience to the State a game - (see video) Sesame Credit measures how obediently citizens follow the party line, pulling data from social networks and online purchase histories.  With a concept straight out of a cyberpunk dystopia, China has gamified obedience to the State. China has created a social tool named Sesame Credit which gives people a score for how good a citizen they are. The system measures how obediently citizens follow the party line, pulling data from social networks and online purchase histories.  As Extra Credits explains on YouTube: "If you post pictures of Tiananmen Square or share a link about the recent stock market collapse, your Sesame Credit goes down. "Share a link from the state-sponsored news agency about how good the economy is doing and your score goes up." Similarly, Sesame Credit can analyse data from online purchases. "If you're making purchases the state deems valuable, like work shoes or local agricultural products, your score goes up."If you import anime from Japan though, down the score goes." Most insidious of all, the app will have real world consequences. According to Extra Credits, high scores will grant users benefits: "Like making it easier to get the paperwork you need to travel or making it easier to get a loan." Although the ratings are currently optional, the social tool will become mandatory by 2020.  There have even been rumours about implementing penalties for low scores: "Like slower internet speeds, or restricting jobs a low scoring person is allowed to hold." The system could also become a powerful tool for social conditioning, as users could lose points for having friends with low obedience scores. A planning document from China's State Council explained the credit will "forge a public opinion environment that trust-keeping is glorious" and warned the "new system will reward those who report acts of breach of trust".

China’s bumpy deceleration has further to run, CNY implications the most worrying – Goldman Sachs- Research Team at Goldman Sachs, expects the bumpy deceleration in China’s growth to extend into 2016, as policymakers wrestle with the aftermath of a massive debt build-up. Key Quotes: “But the slowing in China’s growth trajectory is a pretty well flagged concern at this point, and we see a relatively low likelihood (below 20%) of a hard landing that takes Chinese activity run-rates to below 1% over the coming 12 months. If anything, our forecasts call for growth to improve a bit in the near term as activity recovers from prior shutdowns and is supported by a bout of fiscal spending and rate cuts.”“So there are two distinct market issues. The first is whether the parts of EM that are further ahead in their rebalancing process can stabilise, even as China continues to slow. The domestic demand impulse from China is likely to remain weak on a protracted basis as policy supports become increasingly less effective – capital outflow pressures are keeping liquidity tight, anti-corruption measures are blunting the incentive of local governments to spend their fiscal allocations, and it is hard to see credit expansion drive growth higher on a sustainable basis. So, equities and credit in EMs for whom China is a major source of final demand may struggle to decouple from the slowdown there, and heading into 2016 we prefer EM equities more exposed to DM demand.” “The second related issue is the potential for a significant depreciation of the CNY, which spills over into another leg lower across EM currencies. Given declining growth, there will be limited appetite to stomach significant further trade-weighted appreciation of the CNY through its tight USD peg, especially as it impedes policymakers’ ability to deliver easier financial conditions. Hence, the combination of a stronger USD (driven by policy divergence among the G3) and a deceleration in Chinese growth pushes towards a shift in the way the CNY is managed, with more depreciation the likely outcome. In our view, the fallout from such a shift is the primary risk to the EM FX complex in 2016.”

China suspends forex business for some foreign banks: sources - China's central bank has suspended at least three foreign banks from conducting some foreign exchange business until the end of March, three sources who had seen the suspension notices told Reuters on Wednesday. Included among the suspended services are liquidation of spot positions for clients and some other activities related to cross-border, onshore and offshore businesses, the sources said. The sources, speaking on condition that the banks were not named, said the notices sent to the affected foreign banks by the People's Bank of China (PBOC) gave no reason for the suspension. The PBOC did not immediately respond to a request for comment. Separately, three financial market sources in Europe said Deutsche Bank was one of the banks to have part of its foreign exchange business in China suspended. A spokeswoman for Deutsche in London declined to comment. The measure follows a slew of steps taken by the Chinese government to steady the yuan since it devalued the currency in August. The spread between the onshore and offshore markets for the yuan, or renminbi, has been growing since the devaluation, making it increasingly difficult for the central bank to manage its currency and stem an outflow of capital from an economy that is facing its slowest growth in 25 years. The sources told Reuters that authorities had warned the banks that if they engaged in lucrative carry trade, taking advantage of the different exchange rates, the central bank would move to further block arbitrage channels.

China says AIIB up and running early in the new year - The China-backed Asian Infrastructure Investment Bank (AIIB) has been formally established and is expected to be operational early next year, the official Xinhua news agency said on Friday. The bank's establishment came after 17 funding members of the AIIB, which account for just over 50 percent of its share capital, ratified an agreement on the bank, state television quoted Finance Minister Lou Jiwei as saying. The bank will hold its opening ceremony in mid-January and formally elect its president, state television said. The bank will initially focus on financing projects in power, transportation, and urban infrastructure in Asia, the television quoted the bank's president-elect, Jin Liqun, as saying. First proposed by President Xi Jinping less than two years ago, the bank has become one of China's biggest foreign policy successes. Despite the opposition of Washington, major U.S. allies such as Australia, Britain, Germany, Italy, the Philippines and South Korea have joined.

Dozens Of Protesters Swarm Disputed Island As China Demands Withdrawal Of Filipino Troops - Two days ago, an armed Chinese ship and two other vessels entered the waters north of Kuba Island and encroached on Japanese territorial waters starting at around 9:30 a.m. Kuba is part of the Senkakus which are at the center of a longstanding dispute between Beijing and Tokyo. As BBC wrote last year, “the eight uninhabited islands and rocks in the East China Sea matter because they are close to important shipping lanes, offer rich fishing grounds and lie near potential oil and gas reserves.” Perhaps more importantly - especially in the context of what’s going on in the South China Sea - they are “in a strategically significant position, amid rising competition between the US and China for military primacy in the Asia-Pacific region.” All in all, the waters around China and Japan are becoming an increasingly dangerous place and in the latest kerfuffle, 50 Filipinos have occupied Pagasa in the Spratlys to protest Beijing's island building efforts. The protesters "reached Pagasa in the Spratly archipelago on Saturday, saying they planned to stay for three days [in a demonstration against] Chinese encroachment in a Philippine exclusive economic zone," BBC says.  The island is Philippine-held, but officials were wary of the trip. "The Philippines was also concerned about China's reaction to trip as Manila has been trying to calm tensions," The Sidney Morning Herald wrote, earlier today.

ASEAN leaders accept Obama invitation to Sunnylands summit -  Southeast Asian leaders have accepted an invitation from U.S. President Barack Obama to meet for a summit in the Californian resort of Sunnylands early next year, a spokesman for the White House's National Security Council said on Wednesday. Obama extended the invitation to the leaders of the 10-nation Association of Southeast Asian Nations (ASEAN) during a visit to Asia last month.   Japan's Kyodo news agency on Monday quoted an ASEAN official source as saying the summit was expected to be held Feb. 15-16. Diplomats from two ASEAN countries said they understood this to be the timing, but it had yet to be confirmed. The United States is keen to promote ASEAN unity in the face of increasingly assertive behavior by China in pursuit of territorial claims in the South China Sea. Four ASEAN members - Brunei, Malaysia, Singapore and Vietnam - are also part of the 12-nation Trans-Pacific Partnership trade pact, which is the key economic plank of Obama's economic and security pivot to Asia in response to China' growing power.

US warns Europe over granting market economy status to China -- Washington has warned Brussels against granting China ‘market economy status’, saying the long-sought trade concession could hamper efforts to prevent Chinese companies flooding US and European markets with unfairly cheap goods. Achieving market economy status (MES) at the World Trade Organisation is one of China’s core strategic goals. Among other benefits, it would make it far more difficult for the US or EU to impose steep tariffs on Chinese companies for unfairly dumping low-cost goods on their markets. US officials have warned EU counterparts that granting Beijing MES would amount to “unilaterally disarming” Europe’s trade defences against China. In private, they are scathing about the move, which they see as the latest example of Europeans seeking to curry favour with Beijing to gain billions of euros in investment. But the European Commission, the EU’s executive arm, is growing increasingly sympathetic to China’s pleas. The commission is expected to make its decision as early as February. German chancellor Angela Merkel is supportive of the idea while George Osborne, the UK chancellor who has spearheaded Britain’s courtship of Beijing, is a firm advocate. Other European governments, led by Italy, and a growing swell of European labour unions and traditional industries — including steel, ceramics and textiles — are strongly opposed. Partly at their prompting, senior US trade officials have repeatedly raised their concerns with their European counterparts in recent months. The debate centres on a dispute over the terms of China’s agreement of accession to the World Trade Organisation in 2001. Beijing has long interpreted the accord to mean that it would automatically be designated a market economy at the end of 2016. But many trade lawyers disagree with this reading of the rules. Opponents argue that Beijing’s hand in setting prices, providing subsidies to an array of industries and other statist policies should disqualify it from MES.

TPP is a giftwrapped wealth-transfer to China -- Writing in the Globe and Mail, University of Toronto Munk Chair of Innovation Studies Dan Breznitz explains how the TPP -- negotiated in secret without any oversight or accountability -- will enrich a few multinationals at the expense of US and Canadian growth, making the whole trade zone less competitive and more ripe to be overtaken by Chinese firms. In sealing the broken patent and copyright system, the insane trade secrecy regime, and Investor-State Dispute Resolution systems beneath a lacquer of unbudgeable trade obligations, the US government has hung weights around the necks of new entrepreneurs and businesses. Interestingly, this critique comes from a "Hayekian," right-wing proponent of free market capitalism, who says that by going far beyond trade, this "trade agreement" will cripple the economies of all who sign it. Finally, the TPP continues to enshrine the very questionable usage of investor-state dispute-settlement mechanisms – special courts in which foreign investors can sue countries, states and local authorities but cannot be sued back. This elevates one economic actor (investors) to a status above all others in an economic transaction, and induces strategic behaviour by investors that aims to influence regulatory decisions, instead of letting consumers make their choices known through the market. There is no economic rationale for these mechanisms, only a very questionable (and extremely inefficient, in cost terms) political gamble that some time in the future, they might put China at a disadvantage. It’s time that we put these mechanisms in their proper place – the trash bin of history. 

S.Korea's trade surplus hits record high in 2015 - Xinhua | (Xinhua)-- South Korea's trade surplus hit a record high of more than 90 billion U.S. dollars in 2015 thanks to faster fall in imports than exports, a government report showed Friday. Exports came in at 527.2 billion dollars in 2015, down 7.9 percent from a year earlier, according to the Ministry of Trade, Industry and Energy. Imports declined at a faster pace of 16.9 percent in 2015 from a year ago to reach 436.8 billion dollars. The 2015 trade surplus came to 90.4 billion dollars, marking the largest in the country's history. The sluggish exports were attributed to various factors, such as the global economic slowdown, low oil prices and falling global trade. The International Monetary Fund (IMF) estimated the 2015 global economic growth at 3.1 percent, lower than 3.4 percent in 2014. Dubai crude, South Korea's benchmark, averaged 50.7 dollars a barrel in 2015, down 47.5 percent from a year earlier. Exports of oil and petrochemical products tumbled 36.6 percent and 21.4 percent each in 2015 due to low crude oil prices. Shipments of cosmetics and telecommunication devices jumped 53.5 percent and 10 percent each, but those for auto parts, general machinery, cars, steels, textiles and consumer electronics made a decline.

Private debt’s ratio to GDP exceeds 180%: South Korea’s private sector debt reached a record high in proportion to its gross domestic product at nearly double the national economic output in the third quarter this year, data from the Bank of Korea showed Monday. Loans extended to households and private companies stood at a record 182.6 percent of the country’s GDP at the end of September, hitting the highest level in the country’s history, the data noted. The country’s private debt-to-GDP ratio remained under 180 percent through the first quarter of 2015 at 175.4 percent, but it hit 180.3 percent in the second quarter that ended June 30 and has continued to snowball. The central bank said the data “does not indicate a major risk in a long-term fiscal trend,” but warned that the uptick in the ratio may elevate risks. The BOK calculates its private debt-to-GDP ratio, a barometer of the country’s fiscal soundness, by dividing total private debt by the overall size of the economy, as measured by nominal GDP. The ratio for the household sector reached 74.3 percent in the July-September quarter, up 1.7 percentage points over the same period a year earlier.

Japan output, retail sales slump, dampen recovery prospects -  Japan's factory output fell for the first time in three months in November and retail sales slumped, suggesting that a clear recovery in the world's third-largest economy will be delayed until early in 2016. While manufacturers expect to increase output in coming months, the weak data casts doubt on the Bank of Japan's view that an expected pick-up in exports and consumption will help jump-start growth and accelerate inflation toward its 2 percent target. Industrial output fell 1.0 percent in November from the previous month, more than a median market forecast for a 0.6 percent decline, data by the trade ministry showed on Monday. Separate data showed that retail sales fell 1.0 percent in November from a year earlier, more than a median forecast for a 0.6 percent drop, as warm weather hurt sales of winter clothing. Wary of soft growth, the government plans nearly $800 billion in record spending in the budget for the fiscal year that will begin on April 1. The BOJ has signalled readiness to expand stimulus if risks threaten Japan's recovery prospects. The central bank fine-tuned its stimulus programme on Dec. 18 to ensure it can keep up or even accelerate its money-printing.

Japan Steelmakers Fall as Inventories Rise Despite Output Cuts - Steelmakers led declines in Japan after an increase in stockpiles signaled a slower pace of a recovery as global peers struggle with overcapacity. The nation’s inventories, excluding specialty alloy, increased 1.3 percent to 6.67 million metric tons as of the end of November, compared with a month earlier, the Japan Iron and Steel Federation said Monday on its website. Japan’s trade ministry said last week that steel stockpiles remain at high levels despite output cuts by domestic steel suppliers as demand falls more than anticipated. “Ordinary steel inventories increased in November rather than decreased,” Kazuhiro Harada, a senior analyst at SMBC Nikko Securities Inc., said Tuesday by phone. That’s negative for the market, he said. The global steel industry is suffering from a glut due to a steep decline in demand in China, the world’s biggest producer, which is exporting its surplus. Japanese mills including the largest, Nippon Steel & Sumitomo Metal Corp., and JFE export almost half of their production, according to Bloomberg Intelligence. The trade ministry has forecast Japanese crude steel output will fall 1.6 percent to 26.31 million tons next quarter. Demand for domestic steel products is expected to drop 0.9 percent, dragged down by weakening sales to shipbuilders and industrial equipment makers, while steel exports are set to fall 6.4 percent.

LDP panel to seek establishment of CIA-style intelligence body - Japan Times: A Liberal Democratic Party project team plans to call on the Abe administration to set up a new body to expand Japan’s ability to gather information abroad to combat terrorism, according to LDP sources. The move comes amid growing concern about terrorism ahead of a Group of Seven summit in Mie Prefecture next May, the Rugby World Cup in 2019 and the Tokyo Olympics in 2020. The government launched the Counterterrorism Unit-Japan within the Foreign Ministry earlier this month to collect information on international terrorism. Some government officials have floated the idea of upgrading the unit to the level of an intelligence organization such as the CIA or Britain’s Secret Intelligence Service, known as MI6. But the LDP project team pointed out that such an upgrade could be linked in the public’s mind to Japan’s wartime Special Higher Police, or Tokko, which was in charge of investigating political groups and ideologies deemed a threat to public order, the sources said. Some within the government believe creating such an intelligence organization could negatively impact the ruling camp, including the LDP’s junior coalition partner, Komeito, in next summer’s Upper House election.

1MDB and the Money Network of Malaysian Politics - WSJ: —Malaysian Prime Minister Najib Razak was fighting for his political life this summer after revelations that almost $700 million from an undisclosed source had entered his personal bank accounts. Under pressure within his party to resign, he called together a group of senior leaders in July to remind them everyone had benefited from the money. The funds, Mr. Najib said, weren’t used for his personal enrichment. Instead, they were channeled to politicians or into spending on projects aimed at helping the ruling party win elections in 2013, he said, according to a cabinet minister who was present. “I took the money to spend for us,” the minister quoted Mr. Najib as saying. It still isn’t clear where the $700 million came from or where it went. But a six-month Wall Street Journal examination revealed that public entities spent hundreds of millions of dollars on a massive patronage machine to help ensure Mr. Najib’s United Malays National Organization stayed in power. The payments, while legal, represented a new milestone in Malaysia’s freewheeling electoral system, according to ruling-party officials.

Global growth will be disappointing in 2016 - IMF's Lagarde - Global economic growth will be disappointing next year and the outlook for the medium-term has also deteriorated, the head of the International Monetary Fund said in a guest article for German newspaper Handelsblatt published on Wednesday. IMF Managing Director Christine Lagarde said the prospect of rising interest rates in the United States and an economic slowdown in China were contributing to uncertainty and a higher risk of economic vulnerability worldwide. Added to that, growth in global trade has slowed considerably and a decline in raw material prices is posing problems for economies based on these, while the financial sector in many countries still has weaknesses and financial risks are rising in emerging markets, she said. "All of that means global growth will be disappointing and uneven in 2016," Lagarde said, noting that mid-term prospects had also weakened as low productivity, ageing populations and the effects of the global financial crisis dampened growth. In October the IMF forecast that the world economy would grow by 3.6 percent in 2016. Lagarde said the start of a normalisation of U.S. monetary policy and China's shift towards consumption-led growth were "necessary and healthy" changes but needed to be carried out as efficiently and smoothly as possible.

Brazil primary budget deficit swells, debt seen climbing - Brazil's primary public sector budget deficit widened sharply in November, the central bank said on Tuesday, as falling tax revenues undermined government efforts to shore up public accounts amid a deepening recession. At 19.567 billion reais ($5.07 billion), the November primary shortfall was the third worst on record. The deficit, which represents revenues minus expenditures before debt interest payments, is a closely watched gauge of creditworthiness. The November shortfall surpassed October's 11.5 billion reais and also topped the Reuters poll forecast of 14 billion reais. President Dilma Rousseff has failed to plug a widening deficit, as her left-leaning government seeks to safeguard welfare payments and a restive Congress blocks passage of bills to raise revenues. Including debt payments, Brazil's overall deficit was running at a hefty 9.3 percent of gross domestic product in the 12 months through November. In December, Fitch became the second credit ratings agency to cut its rating on Brazilian debt from investment-grade to junk status, which meant that many foreign investments funds, under their bylaws, could no longer invest in the country. On Tuesday, the central bank said it expects Brazil's gross debt to climb to 70.7 percent of gross domestic product next year, above the 70 percent threshold that ratings agencies see as a debt-servicing risk factor.

Ruble Drops to 2015 Low on Year-End Budget Flows as Oil Tumbles - The ruble fell to its weakest level this year as oil resumed declines and investors speculated a traditional pick up in end-of-year budget spending will hurt the Russian currency by pumping extra cash into companies and banks. The currency depreciated 2.1 percent to 72.154 per dollar by 6:01 p.m. in Moscow, its third day of losses, as Brent crude fell below $37 a barrel. The decline was the biggest among emerging-market peers tracked by Bloomberg and brought the currency’s retreat this year to almost 19 percent. Russia’s currency is on track for its third annual decline after oil sank to the lowest in 11 years and U.S. and European governments kept sanctions in place as punishment for Russia’s role in the Ukraine crisis. Additional pressure before the new year is coming from the Finance Ministry, which typically increases its budget spending in the final few days and provides state companies with ruble cash that they can convert into dollars and euros, according to Denis Davydov, an analyst at Nordea Bank in Moscow.“It will be interesting to see if there’s a reaction from the central bank, government and households to this weakening.” While the Bank of Russia hasn’t bought or sold foreign currency on the market since July, policy makers have repeatedly said they retain the right to intervene if there’s any threat to Russia’s financial stability. Russia abandoned its policy of using a system of regular interventions to manage the ruble last year after it burnt through billions of dollars of reserves defending the currency.

Vladimir Putin Fights the War Party on All Fronts -  Pepe Escobar - Let’s talk about “Russian aggression.” The fight to the death in Moscow’s inner circles is really between the Eurasianists and the so-called Atlantic integrationists, a.k.a. the Western fifth column. The crux of the battle is arguably the Russian Central Bank and the Finance Ministry – where some key liberalcon monetarist players are remote-controlled by the usual suspects, the Masters of the Universe. The same mechanism applies, geopolitically, to any side, in any latitude, which has linked its own fiat money to Western central banks. The Masters of the Universe always seek to exercise hegemony by manipulating usury and fiat money control. So why President Putin does not fire the head of the Russian Central Bank, Elvira Nabiulina, and a great deal of his financial team - as they keep buying U.S. bonds and propping up the U.S. dollar instead of the ruble? What’s really being aggressed here if not Russian interests?It’s clear by now which party profited from the downing of the Russian Su-24 by the Turkish Air Force – a graphic act of war. The immediate result was the suspension – which could lead to the cancelling – of a crucial Pipelineistan plank: Turkish Stream, which is a bête noire for the Masters of the Universe as Turkey was about to become the key alternative bypassing failed state Ukraine for supplying natural gas to southern Europe. On top if it the EU paid Ankara 3 billion euros for its “indirect” services (the official excuse is to allow Turkey to control Syrian immigration to the EU.) And EU sanctions to Russia were extended for another six months. A fitting Russian response would be Moscow defaulting on all debt to Western banks in retaliation for the sanctions. An extreme step would be blocking natural gas shipments to the EU. If Russia even floated one of these moves, not to mention both, sanctions would be lifted in a flash. So who’s really being “aggressed” here?

Vladimir Putin's bank needs a $24.7 billion bailout: For years, Vladimir Putin used Vnesheconombank (VEB) to pay for "special projects," from the Sochi Olympics to covert acquisitions in Ukraine to oligarch bailouts. Now, the state bank needs a rescue of its own and it could be the Kremlin's costliest yet. VEB was supposed to be the financial supercharger of the Russian president's state-directed capitalism, using its government backing to raise billions at low rates on western markets and pumping them into ventures the Kremlin wanted funded, some concealed from public view with code names like "Lily of the Valley." Hit by Western sanctions last year, VEB has stopped new lending. The cost of its bailout could reach 1.3 trillion rubles ($24.67 billion), according to several senior government officials, ballooning the budget deficit at a time when plunging oil prices are forcing spending cuts. "The government can't just leave it alone to face the problems caused by the financial and economic situation in the country, speaking directly, by various kinds of sanction pressures," Prime Minister Dmitry Medvedev told a VEB board meeting discussing rescue options on December 22.

Putin signs bill allowing reciprocal impounding of foreign nations’ property -- President Vladimir Putin has signed amendments to a bill that restricts foreign states’ right not to observe certain Russian legal procedures if these states themselves introduce measures restricting Russia’s legal immunity.  The amendments would change Russian civil and arbitration codes by introducing the principle of limited legal immunity for a foreign state. They detail the procedure of initiating a lawsuit against a foreign nation and serving court warrants to its representatives. The document also prescribes the role of various Russian state agencies in court cases against foreign states.  The amendments are a part of a law that was signed in early November and will come into force on January 1. It allows Russia to impound the property of foreign states, so long as Russian courts rule that these nations have damaged the economic or other interests of the Russian Federation. Before this act was introduced, such steps were only allowed on condition the government of the country in question agreed to them.  The new bill was drafted by the government as a reciprocal measure after several countries this year executed the rulings of international courts and impounded the assets belonging to the Russian state.

Battered, bruised and jumpy — the whole world is on edge -  In 2015, a sense of unease and foreboding seemed to settle on all the world’s major power centres. From Beijing to Washington, Berlin to Brasília, Moscow to Tokyo — governments, media and citizens were jumpy and embattled. This kind of globalised anxiety is unusual. For the past 30 years and more, there has been at least one world power that was bullishly optimistic. In the late 1980s the Japanese were still enjoying a decades-long boom — and confidently buying up assets all over the world. In the 1990s America basked in victory in the cold war and a long economic expansion. In the early 2000s the EU was in a buoyant mood, launching a single currency and nearly doubling its membership. And for most of the past decade, the growing political and economic power of China has inspired respect all over the world. Yet at the moment all the big players seem uncertain — even fearful. The only partial exception that I came across this year was India, where the business and political elite still seemed buoyed by the reformist zeal of prime minister Narendra Modi. By contrast, in Japan, faith is fading that the radical reforms, known as Abenomics, can truly break the country’s cycle of debt and deflation. Japanese anxiety is fed by continuing tensions with China. However, the main source of anxiety is political. President Xi Jinping’s leadership is more dynamic but also less predictable than that of his predecessors. Fear is spreading among officials and business people, who are scared of being caught up in an anti-corruption drive that has led to the arrest of more than 100,000 people. The slowing of the Chinese economy has had global ramifications. When China was fuelling a commodities boom, Brazil was pulled along like a water-skier attached to a speedboat. This year, though, the Brazilian economy sank beneath the waves, contracting by 4.5 per cent.

Carmen Reinhart Warns "Serious Sovereign Debt Defaults" Are Looming -- by Carmen Reinhart - When it comes to sovereign debt, the term “default” is often misunderstood. It almost never entails the complete and permanent repudiation of the entire stock of debt; indeed, even some Czarist-era Russian bonds were eventually (if only partly) repaid after the 1917 revolution. Rather, non-payment – a “default,” according to credit-rating agencies, when it involves private creditors – typically spurs a conversation about debt restructuring, which can involve maturity extensions, coupon-payment cuts, grace periods, or face-value reductions (so-called “haircuts”). If history is a guide, such conversations may be happening a lot in 2016. Like so many other features of the global economy, debt accumulation and default tends to occur in cycles. Since 1800, the global economy has endured several such cycles, with the share of independent countries undergoing restructuring during any given year oscillating between zero and 50% (see figure). Whereas one- and two-decade lulls in defaults are not uncommon, each quiet spell has invariably been followed by a new wave of defaults. The most recent default cycle includes the emerging-market debt crises of the 1980s and 1990s. Most countries resolved their external-debt problems by the mid-1990s, but a substantial share of countries in the lowest-income group remain in chronic arrears with their official creditors. Like outright default or the restructuring of debts to official creditors, such arrears are often swept under the rug, possibly because they tend to involve low-income debtors and relatively small dollar amounts. But that does not negate their eventual capacity to help spur a new round of crises, when sovereigns who never quite got a handle on their debts are, say, met with unfavorable global conditions.

Europe Enters New Year With Nearly $2 Trillion In Sub-Zero Interest Debt --Earlier this month, Mario Draghi disappointed markets by failing to deliver an outsized depo rate cut and an expansion of monthly PSPP purchases.   It’s not that the ECB didn’t ease. They did. It’s just that they didn’t ease enough, becausewhen every DM central banker has gone Keynesian crazy (or, “full Krugman” as it were), a 10 bps cut doesn’t “cut” it (so to speak), and a six month extension of QE had been priced in at least since September.  With EU inflation still stuck in Japan mode and with GDP bumping along at the "new normal" pace of what might as well be 0%, the market expects more from Draghi going forward. Need proof? Just look at yields. “As the European Central Bank wound down its asset purchases for the year, the amount of euro-region government bonds that yield less than zero was at about $1.68 trillion, indicating investors see the potential for further easing of monetary policy in 2016,” Bloomberg writes, adding that “a slump in oil prices is supporting economists’ view that the ECB is unlikely to veer from its accommodative policy stance as it struggles to achieve its inflation goal of just under 2 percent.” "So many sub-zero-yielding securities indicate that there is a belief that there is no real inflationary pressures evident yet, and the ECB will remain ready to do more if required,” Cantor's Owen Callan says.  Perhaps. But remember that at this point, each incremental purchase of EU govies (especially bunds) brings the ECB closer to the endgame wherein there are simply no more core EGBs to buy at which point it's either purchase more from the periphery or move into riskier assets and with political turmoil playing out in Spain and Portugal, it's not entirely clear what's riskier: sub-sovereigns or PIIG debt. For those who need a reminder of just how scarce purchase-eligible core debt is becoming, here's a helpful graphic from Citi:

Inflation expectations in euro zone fall to lowest since October – A closely followed measure of long-term market euro zone inflation expectations fell to its lowest level since October on Wednesday, pushed down by this week’s sharp fall in oil prices to 11-year lows. The five-year, five-year breakeven forward , a measure of where markets expect 2025 euro zone inflation forecasts to be in 2020, fell to 1.6625 percent, although yields in the broader euro zone bond market were largely steady. Even though the measure has been criticised for being too sensitive to short-term moves in oil prices and for being based on illiquid instruments, it remains closely followed by investors and by the European Central Bank (ECB) itself. While oil prices are above this week’s 11-year low, Brent crude has fallen more than 15 percent this month, renewing focus on a benign outlook for inflation in the euro area that may pave the way for further monetary stimulus in 2016. “The five-year, five-year forward is very much linked to oil-price developments,” DZ Bank strategist Daniel Lenz said. “If the oil trend continues in the coming months, the gap between core and headline inflation that was supposed to close could remain wide, keeping up discussions about whether the ECB should come up with extra easing measures,” he said. The ECB, which cut its deposit rate and extended the life of its asset-purchase programme by six months at a Dec. 3 meeting, targets inflation at close to 2 percent. Inflation in the euro zone is running at a year-on-year rate of 0.1 percent.

Pablo Iglesias: How the leader of the leftist Podemos party upset Spain's elites to reach the brink of power  - The brief meeting in April between Pablo Iglesias, leader of Podemos – the insurgent force in Spanish politics – and King Felipe, the country’s youthful king, was always going to create headlines. Felipe, scion of the House of Bourbon, was the very incarnation of old Spain. The Podemos leader, tieless and with his long hair tied back in his trademark ponytail, presented the king with a box set of his favourite television series, Game of Thrones, so the monarch “would understand the key points of the political crisis in Spain”. If the king’s grin masked a little nervousness at meeting the man who would go on to turn Spanish politics on its head, he need not have worried. It has never been Felipe’s throne that has particularly interested Iglesias; his scheming, plotting and calculated political manoeuvres have always had a different target in mind. A couple of months earlier, Podemos held its biggest rally to date, packing upwards of a million people into central Madrid’s Puerta del Sol. The slogan for the event was “tick, tock” and the message behind it was clear: winter was coming for Spain’s political establishment, and its time was running out. Last Sunday, the 37-year-old former politics lecturer delivered on his promise. Not only did Podemos take a fifth of the vote despite never before having contested a general election, it also blew apart the cosy arrangement that has existed in Spain since the return to democracy in the late 1970s, which has allowed the right-wing Popular Party (PP) and the leftist Socialist Workers Party (PSOE) to swap power on regular occasions.

A Crisis Worse than ISIS? Bail-Ins Begin - Ellen Brown  - At the end of November, an Italian pensioner hanged himself after his entire €100,000 savings were confiscated in a bank “rescue” scheme. He left a suicide note blaming the bank, where he had been a customer for 50 years and had invested in bank-issued bonds. But he might better have blamed the EU and the G20’s Financial Stability Board, which have imposed an “Orderly Resolution” regime that keeps insolvent banks afloat by confiscating the savings of investors and depositors. Some 130,000 shareholders and junior bond holders suffered losses in the “rescue.” The pensioner’s bank was one of four small regional banks that had been put under special administration over the past two years. The €3.6 billion ($3.83 billion) rescue plan launched by the Italian government uses a newly-formed National Resolution Fund, which is fed by the country’s healthy banks. But before the fund can be tapped, losses must be imposed on investors; and in January, EU rules will require that they also be imposed on depositors. According to a December 10th article on The rescue was a “bail-in” – meaning bondholders suffered losses – unlike the hugely unpopular bank bailouts during the 2008 financial crisis, which cost ordinary EU taxpayers tens of billions of euros. Correspondents say [Italian Prime Minister] Renzi acted quickly because in January, the EU is tightening the rules on bank rescues – they will force losses on depositors holding more than €100,000, as well as bank shareholders and bondholders. . . [L]etting the four banks fail under those new EU rules next year would have meant “sacrificing the money of one million savers and the jobs of nearly 6,000 people”. That is what is predicted for 2016: massive sacrifice of savings and jobs to prop up a “systemically risky” global banking scheme

The Bail-Ins Are Back! Portugal Slaps Senior Bank Bondholders With €2 Billion Loss -- A little over a week ago, Portugal announced that for the second time in less than two years, Lisbon would be forced to bailout a large lender.  This time around it was Banif, the country’s seventh-largest banking group which ran into trouble when it couldn’t repay a previous government cash injection (so really, this was a bailout of a bailout).  Ultimately, the issue had to be resolved ahead of the new year, when new rules on bank resolutions that would have imperiled uninsured depositors go into effect across Europe. The €2.2 billion cash injection for Banif is set to add at least one percentage point to the country’s budget deficit which is already well wider than Brussels’ target thanks in part to the fact that the cost of last year's Banco Espirito Santo (BES) capital injection had to be placed on the government’s books after Portugal failed to sell Novo Banco (the “good” part of BES) in order to pay back the taxpayer money spent on the bailout. The auction process for Novo Banco - which at one point drew the interest of “China’s Warren Buffett” - fell apart late in the summer after Chinese bidders became cautious in the wake of the country’s market meltdown and US private equity was reluctant to bid for an entity with a mountain of NPLs and an uncertain future. In short, it wasn’t clear if Novo Banco would need more capital. Well, it turns out that under the ECB’s “adverse scenario”, the bank would need to plug a €1.4 billion hole and so, out of options, Lisbon has decided to effectively bail-in senior bondholders.  Some €2 billion in bonds will be transferred to BES (which will be liquidated) from Novo’s books. The move immediately raises the bank's Tier 1 ratio to 13.4% from 9.4% previously. If you own anything on this list, you just had a bad morning:

The Catastrophic Threat of Bail-Ins - It has now been more than two and a half years since the Cyprus Steal , the first “bail-in” perpetrated in the Western world, occurred. The term “bail-in” describes a scenario in which a bank confiscates private property to indemnify itself for losses it has suffered. A bail-in is a totally lawless theft of assets, as there is no principle of law (of any kind) that could authorize such a seizure of private property. And  . As with much of the financial crime jargon, “bail-in” is simply another gibberish euphemism like “quantitative easing” or “derivatives.”  As custodians of the financial assets of their clients, banks represent a form of trustee. The purpose of any trust relationship is to provide absolute security to the beneficiary of the trust (i.e., the legal owner of the property). Thus, one of the most fundamental principles of our legal system is non-encroachment regarding the property held in the custody of a trustee.  From a legal standpoint, it is like there is an invisible and impenetrable wall that surrounds the trust property. The only exceptions to this wall (ever) occur when the trust beneficiary makes a legal request for some disbursement or related transaction, when the trust itself directs some form of action (in the interests of the trust beneficiary), or when the trust allows the trustee to manage the trust assets on behalf of the beneficiary.   Given this context, how did the government of Cyprus respond when its own Big Banks whined and claimed that they “needed” to confiscate deposits in order to pay off their own gambling debts? It meekly rubber-stamped the lawless theft.  How did other Western governments react to the violation of one of the most sacred legal principles in our entire financial system? They simply nodded their heads in unison, and, as a single chorus, called the Cyprus Steal “a precedent” – a template for future systemic financial crime in their own regimes.

Finland blocks refugees from cycling across Russian border into Lapland -- Despite the geographical distance and inhospitable winter weather, Finland has emerged as an unlikely destination for refugees and migrants in recent months. More than 30,000 refugees seeking asylum have traveled to the country this year, a dramatic increase from the typical 3,000 or so. As the year draws to a close, this sharp surge in arrivals has prompted an unusual move from Finnish authorities: a restriction on bicycle border crossings in Lapland. According to the Finnish public broadcaster YLE, guards at Finland's eastern border with Russia began refusing entry to those on bicycles this weekend. "Riding bikes in winter conditions without prior experience is dangerous,"  "We also don't want these people to be crossing the borders with bicycles because it's too cold. We hope to prevent people from putting themselves in harm's way." The decision is a response to the extraordinary lengths that some refugees and migrants have gone to get into Finland and other Scandinavian countries. While many traveled along the Balkan route through Eastern Europe, others opted to make a journey through Russia, traversing its far-northern lands bordering on the Arctic. When these refugees and migrants reached Russia's borders with Finland and Norway, they were forced to take one step into absurdity. Russia doesn't allow people to cross via foot on these borders. Given that almost all of those arriving had no access to a car, they were forced to ride bicycles over the border.

Inside the Arctic Circle, migrants struggle with zero daylight and biting cold - Telegraph: Three days before Christmas, on the winter solstice, the 200 Afghans living in Sweden’s most remote and northerly asylum refuge celebrated their own midwinter festival. Back home, "Yalda", the longest night of the year, lasts 14 hours. At Riksgransan, a converted ski resort deep in Arctic Lapland, the sun did not rise at all. “The last time we saw the sun was a month and a half ago,” complains Hakim Akbary, 31, who worked as a translator for international aid agencies before he fled Kabul “People are feeling depressed, they complain about it to the Migration Agency, saying they want to see the sun — at least sometimes.” The past year has seen an extraordinary influx of migrants to Europe from Asia, the Middle East and North Africa — this week the total for 2015 passed one million, outstripping the record number of European migrants who entered America through Ellis Island in 1907.  Sweden alone has had to find accommodation for nearly 170,000 asylum seekers, roughly the same number of people who live in Uppsala, its fourth largest city. At 17 refugees per 1,000 of population, it is far more than any other European country has taken.  The influx has meant a desperate hunt for rooms, and in October the Swedish Migration Agency struck a deal to house more than 600 refugees 124 miles above the Arctic Circle, in what is the world’s most northerly ski resort.

Switzerland to Vote on Banning Banks from Creating Money: Switzerland will hold a referendum to decide whether its private banks can create money after 110,000 people said they want their central bank to be solely in charge. Seven years after the financial crisis struck, the Swiss federal government confirmed on Christmas Eve that it would ask its people whether the central bank – the SNB – should be the sole institution to be able to create money in its financial system. No date has been set for the referendum yet. The Swiss Sovereign Money campaign is leading the initiative and aims to curtail financial speculation, demanding that commercial banks hold 100 per cent reserves against their deposits. This issue will have to go to a referendum under Swiss law now that the petition has gained more than 100,000 signatures within 18 months of launching. “Banks won’t be able to create money for themselves any more, they’ll only be able to lend money that they have from savers or other banks,” said the campaign group, as reported by The Telegraph.

The Christmas gift from the Irish taxpayers to the super wealthy and vulture funds -- Tis the season for 'good will' and 'giving' and all that but NAMA is giving away too much from Irish taxpayers to property vulture funds and speculators. Last week NAMA outlined how it intends to provide 20,000 ‘starter’ homes by 2020 and invest €1.9bn in Dublin’s Docklands.  But these so-called ‘starter’ homes will be sold to the international vulture funds who currently see Irish property as the ‘hottest’ investment in Europe. NAMA actually has the land and finance to provide 50,000 homes over the next decade. The Minister for Finance should order NAMA to move away from speculative office and residential development with global financial investors to focus instead on providing affordable housing. We are in the midst of the worst housing crisis in decades with over 100,000 on social housing waiting lists, a mortgage arrears crisis and on-going issues of lack of affordability of rental housing and home ownership for families. This is on top of the horrendous homelessness crisis where 1,500 children are living with their families in unacceptable emergency accommodation and 70 to 80 new families are becoming homeless every month. Yet we have the illogical situation where our state agencies and government policy are encouraging the sale of much-needed housing and land to international speculative financial investors and property developers.

Ireland still isn't back - Kenneth Thomas  - Ireland remains, in some circles, a poster child for austerity's success: It paid off its bailout loan early! It regained its 2007 Gross Nation Income per capita in 2014! Unemployment is only 8.9%! Don't believe the hype.  Paul Krugman recently pointed out that Ireland's employment performance continues to be dismal, especially in comparison with currency-devaluing, banker-prosecuting Iceland. Iceland's employment now exceeds its pre-crisis peak by about 2.5% whereas Ireland is still, 8 years later, 8% below its peak. More specifically, Irish employment peaked in Q1 2008 at 2,160,681; in Q3 of 2015, the figure was still only 1,983,000. Not only that, but in 2014-2015 (May-April), Ireland continued with net emigration, as 11,600 more people left than came to Ireland. This was a substantial improvement of 9800 over the April 2014 figure, but still the trend is that Ireland is exporting unemployment literally. Things are obviously getting better in Ireland for those who remain behind. Jobs are being created, and the number of unemployed has fallen. The April 2016 immigration report (the data are only reported once a year) may finally see an end to net emigration. But Ireland is 80% of the way to a lost decade, and isn't out of the woods yet.

It's official — benefits and high taxes make us all richer, while inequality takes a hammer to a country's growth -- The sickening theory of laissez-faire capitalism finally died with the recent report from one of the West’s leading think tanks. The Organisation for Economic Co-operation and Development (OECD) has found that income inequality actually hampers economic growth in some of the world’s wealthiest countries, while the redistribution of wealth via taxes and benefits doesn't. In a nutshell: the reality of what creates and reverses growth is the exact opposite of what the current right-wing, neo-liberal agenda has been espousing ever since its rise to power under Thatcher and Reagan in the eighties. Perhaps worst of all, the report showed evidence that the UK would have been 20 per cent better off if the gap between the rich and poor hadn’t widened since the eighties. To those of us who have only just survived the credit crunch and recession, this evidence will be welcome, but hardly surprising. The surprising thing is how it took this long. To extend a metaphor, why didn’t we realise the patient had already died more than half a decade ago?

UK Iraq veterans 'may face prosecution' - BBC News: UK soldiers who fought in the Iraq War may face prosecution for war crimes, according to the head of a unit investigating alleged abuses. Mark Warwick said there were "lots of significant cases" and that discussions would be held over whether they met a war crimes threshold. Lawyers are continuing to refer alleged abuse by soldiers to the Iraq Historic Allegations Team (IHAT). The Ministry of Defence said it took such allegations "extremely seriously". Two public inquiries have already looked at claims against UK troops in Iraq. Mr Warwick, a former police detective who is in charge of IHAT, told the Independent that the allegations being investigated included ones of murder. The inquiry has considered at least 1,515 possible victims, of whom 280 are alleged to have been unlawfully killed.

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