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

Saturday, May 28, 2016

week ending May 28

Fed Watch: This Is Not A Drill. This Is The Real Thing. -  June FOMC meeting is live. That message came through loud and clear in the minutes, and was subsequently confirmed by New York Federal Reserve President William Dudley. Last week, via Reuters: "We are on track to satisfy a lot of the conditions" for a rate increase, Dudley said. He added, though, that a key factor arguing for the Fed biding its time a little was the potential for market turmoil around Britain’s vote in late June about whether to leave the European Union...."If I am convinced that my own forecast is sort of on track, then I think a tightening in the summer, the June-July time frame is a reasonable expectation," said Dudley, a permanent voting member of the Fed's rate-setting committee. Boston Federal Reserve President Eric Rosengren, the canary in the coal mine that was long ago alerting markets that they were underestimating June, subsequently gave a strong nod to June in his interview with Sam Fleming of the Financial TimesWe are going to get another employment rate in early June. We are going to get a second retail sales report. So I want to be sensitive to how the data comes in, but I would say that most of the conditions that were laid out in the minutes as of right now seem to be . . . on the verge of broadly being met... Clearly, the Fed will be debating a rate hike at the next FOMC meeting. Will they or won't they? To answer that question, I need to begin with my main takeaways from the minutes:

  • 1.) The Fed broadly agrees that the economic recovery remains intact.
  • 2.) A contingent, however, disagreed with the benign scenario:They saw a risk that a more persistent slowdown in economic growth might be under way, which could hinder further improvement in labor market conditions.
  • 3.) There was broad agreement of the obvious - global and financial market threats waned since the previous meeting.
  • 4.) Still, the risks are either balanced or to the downside. Apparently, none of the participants saw risks weighed to the upside.
  • 5.) The question of full employment deeply divides the Fed. Who wins this debate is critical to defining the policy path going forward. One group thinks the economy is not at full employment:
  • 6.) The Fed is also split on the inflation outlook but most believe inflation is set to trend toward target. A nontrivial contingent saw downside risks to the inflation outlook due to soft inflation expectations:
  • 7.) June is on the table. 

Fed's Rosengren sees U.S. on verge of meeting test for rate rise -FT | Reuters: Conditions for a rate increase by the Federal Reserve are "on the verge of broadly being met," Eric Rosengren, president of the Federal Reserve Bank of Boston, told the Financial Times. According to an article on Sunday, Rosengren told the FT he was getting ready to back tighter monetary policy as economic and financial indicators had become more positive. "I want to be sensitive to how the data comes in, but I would say that most of the conditions that were laid out in the minutes, as of right now, seem to be ... on the verge of broadly being met," said Rosengren, a voter this year on the Fed's policy-making Federal Open Market Committee. Minutes of the Fed's April meeting released last week showed Fed officials believed the U.S. economy could be ready for another interest rate increase in June. The Fed raised its benchmark rate from near zero in December but has refrained from hiking again on concerns over sluggish U.S. growth in the first quarter and headwinds posed by a weakening global economy. Financial markets, which had been ratcheting down expectations for further tightening this year, quickly raised bets on a June increase after the minutes were released.   Rosengren told the FT the central bank had set a "relatively low threshold" for improvement on the growth front given that first-quarter growth was estimated at a modest 0.5 percent annualized rate. He also said the United States was making progress on inflation, and noted that global headwinds were becoming less of a problem.

China said to plan asking U.S. on timing of Fed rate hike - Chinese officials plan to ask their American counterparts in annual talks next month about the chance of a Federal Reserve interest-rate increase in June, according to people familiar with the matter.  The Chinese delegation will try to deduce whether a June or a July rate rise is more likely, as the nation’s policy makers prepare for the potential impact on financial markets and the yuan, the people said, asking not to be named as the discussions were private. In China’s view, if the Fed does lift borrowing costs, a July move would be preferable, the people said. A People’s Bank of China press officer later denied that China plans to ask about the timing of a Fed rate hike. China’s exchange rate has already been weakening as expectations rise for the U.S. central bank to boost its benchmark rate for the first time since it ended its near-zero policy in December with a quarter percentage point increase. It’s not unusual for senior officials to press each other on their policies, and any inquiries by the Chinese about the Fed would follow repeated expressions of concern from the U.S. about China’s intentions with its exchange rate. The Treasury Department put China on a new currency watch list last month to monitor for unfair trade advantages.  "The Chinese side will argue that the U.S. should tread cautiously as it tightens monetary policy and avoid any surprises," "The Federal Reserve will make its decision solely on what it deems best for the U.S. economy, but it is clear that concerns about China have influenced its thinking about the balance of risks facing the U.S."

Fed's Bullard: rates too low for too long could be risky | Reuters: U.S. interest rates being kept too low for too long could cause financial instability in future and stronger market expectations for a rate rise are "probably good", St. Louis Federal Reserve President James Bullard said on Monday. A relatively tight labor market in the United States may also exert upward pressure on inflation, raising the case for higher interest rates, Bullard added. His comments come as financial markets have increased expectations for a U.S. interest rate hike in June or July and a range of policymakers are now stating that a rise is firmly on the table for the next policy meeting in June. "I do worry that keeping rates too low for too long could feed into future financial instability even if it doesn't look like we're in that situation today," Bullard, a voting member of the Fed's policy-setting committee, told reporters. Market assessment for a Fed rate rise had been close to zero, and the idea it has come off zero is "probably good", he said. "It does depend on the data and it's certainly not 100 percent, but it's not zero either. Some probability in between is the right thing to think at this point." Bullard said the U.S. labor market was performing well and global headwinds that had partly prevented the Federal Reserve from raising rates again may have waned.

Philly Fed's Harker: June Hike Appropriate With Stronger Econ - (MNI) - Philadelphia Federal Reserve Bank President Patrick Harker said Monday it would be appropriate to raise rates at the June meeting of the Federal Open Market Committee if the economy continues to improve as he expects. "Where I am right now is if the data comes in and it's not consistent with my view of the strengthening of the economy, then I would pause," Harker told reporters following a speech, "but otherwise I think a June rate increase is appropriate." Harker, who is not a voter this year on the policymaking Federal Open Market Committee, added "I would say every meeting is a live meeting at this point." He added the standard policymakers caveat that the decision to raise interest rates will depend on data. Asked what data he is looking at between now and the June 14-15 meeting, Harker pointed to the May employment report, more inflation data and real time measures of second quarter GDP growth, or "nowcasts." Unlike some of his colleagues, Harker did not sound too concerned about the possibility of the coming UK vote to depart the European Union coming just days after the next FOMC meeting. "It's something we have to be aware of, but I don't think it should drive this decision," he said. In his prepared remarks he said he "can easily see the possibility of two or three rate hikes over the remainder of the year." He also warned about the risks of waiting too long saying "if the economy follows the path I expect it to follow, monetary policy will be overly accommodative by historical standards," he said. "That will set in motion the possibility of another risk, which is accelerating inflation and the need for aggressive policy actions." While Harker told reporters he does not think the FOMC is behind the curve, "not yet," he is watching for strong gains in energy prices and faster wage growth. "Those are things that could accelerate inflation quite quickly,"

Is The Case For A June Rate Hike Premature? -- The Federal Reserve continued to press ahead yesterday with its public relations effort of talking up the possibility of a rate hike, perhaps as early as next month. The latest addition to the hawkish-chattering club is the Philly Fed’s Pat Harker, who advised on Monday that “I can easily see the possibility of two or three rate hikes over the remainder of the year.” The comment follows similar remarks from central bankers in recent days, including the New York Fed’s Bill Dudley, who said that “if I’m convinced that my own forecast is on track, then I think a tightening in the summer, the June-July time frame, is a reasonable expectation.”  The market reaction, however, is mixed. The 2-year yield—considered the most sensitive spot on the yield curve for rate expectations—is moving higher. This maturity ticked up to 0.91% yesterday (May 23), based on daily data via That’s the highest rate for the 2-year since mid-March. But the benchmark 10-year yield, which is more sensitive to inflation expectations, has a downside bias these days, settling at 1.84% yesterday—well below the peak for the last two months.  Speaking of inflation expectations, they’re trending lower again, by way of the implied forecasts via spreads in nominal less inflation-indexed Treasuries. The downside bias is especially conspicuous in the 10-year breakeven rate, which eased to 1.54% yesterday, the lowest since mid-March. Note, too, that the softer inflation estimate is accompanied by a  stock market that’s drifting lower this month. That’s not terribly surprising at this late date. The tight correlation between the S&P 500 and the implied inflation forecast via 10-year yields endures. The fact that both are ticking down again suggests that the Fed chatter about squeezing monetary policy is casting a disinflationary effect across markets. That’s not exactly productive at a time when doubts persist about the near-term prospects for economic growth.

Fed Watch: Curious - I find the Fed's current obsession with raising interest rates curious to say the least. The basic argument for rate hikes is that the economy, and in particular the labor market, sustained its momentum in the last two quarters better than market participants believe. Given that the economy is near or beyond full employment, the lack of excess slack will soon manifest itself in the form of inflationary pressures. Hence, to remain ahead of the inflation curve and maximize the chance that rate hikes will be gradual, they need to soon raise rates. For instance, St. Louis Federal Reserve President today, from his press release: “By nearly any metric, U.S. labor markets are at or beyond full employment,” Bullard said. For example, he noted that job openings per available worker are at a cyclical low, unemployment insurance claims relative to the size of the labor force are at a multi-decade low, and nonfarm payroll employment growth has been above longer-run trends. In addition, the level of a labor market conditions index created by staff at the Board of Governors continues to be well above average. In a recent speech, Boston Federal Reserve President Eric Rosengren argued that employment was close to entering the danger zone:However, the unemployment rate is now at 5 percent – relatively close to my estimate of full employment, 4.7 percent – and net payroll employment growth is averaging over 200,000 jobs per month over the past quarter. My concern is that given these conditions, an interest rate path at the pace embedded in the futures markets could risk an unemployment rate that falls well below the natural rate of unemployment. We are currently at an unemployment rate where such a large, rapid decline in unemployment could be risky, as an overheating economy would eventually produce inflation rising above our 2 percent goal, eventually necessitating a rapid removal of monetary policy accommodation. I would prefer that the Federal Reserve not risk making the mistake of significantly overshooting the full employment level, resulting in the need to rapidly raise interest rates – with potentially disruptive effects and an increased risk of a recession. Both these claims appear to me to be hasty. I think this narrative rang true through last summer. But, by my read of the data, since then progress toward full employment has stalled.

Fed Watch: Powell, Data -- Federal Reserve Governor Jerome Powell kept the prospects for a near-term rate hike alive and well in a speech today:For the near term, my baseline expectation is that our economy will continue on its path of growth at around 2 percent. To confirm that expectation, it will be important to see a significant strengthening in growth in the second quarter after the apparent softness of the past two quarters. To support this growth narrative, I also expect the ongoing healing process in labor markets to continue, with strong job growth, further reductions in headline unemployment and other measures of slack, and increases in wage inflation. As the economy tightens, I expect that inflation will continue to move over time to the Committee's 2 percent objective.If incoming data continue to support those expectations, I would see it as appropriate to continue to gradually raise the federal funds rate. Depending on the incoming data and the evolving risks, another rate increase may be appropriate fairly soon. Will these conditions be met for Powell by the time of the next FOMC meeting in June? On one hand, the Atlanta Fed tracking estimate for Q2 is up solidly: That said, the tracking estimate is famously volatile and could easily collapse after the June meeting. So while a hopeful sign, I would not take it for granted yet that Q2 GDP will come in at a 3 percent pace. And given that Powell views this rebound as an "important" signal, I suspect he will want to be more certain of the Q2 results than allowable by the data available on June 14-15. Note also he is expecting "further reductions in headline unemployment and other measures of slack" to justify a rate hike. This echoes my recent theme that stagnating progress toward full employment should be something that stays the Fed's hand for the moment. Powell also identifies evolving risks as an important factor in the timing of the next rate hike. As I said earlier this week, I think FOMC members need to shift to a balanced risk assessment prior to hiking. They were closer in April than March on that point, but I still think will fall short in June. Or at best are balanced in June and thus can justify setting the stage for a July hike. Either way, Powell made clear that if the data holds, he would support a rate hike in the near-term.

Janet Yellen says rate hike would be 'appropriate' in coming months - May. 27, 2016: Janet Yellen gave a big hint Friday that interest rates could go up in June or July. "Probably in the coming months such a move would be appropriate," Yellen, the Federal Reserve chair, told Harvard professor Greg Mankiw at an awards reception in Cambridge, Mass. She didn't specifically say June or July. It all hinges on the economy continuing to hum -- at home and abroad. At the moment, Yellen and her Fed colleagues sound optimistic. "The economy is continuing to improve," Yellen said Friday. "Growth looks to be picking up from the various data that we monitor." It's notable that Yellen did not mention the overseas problems in China or Europe. Concerns about the fragile conditions abroad have kept the Fed on hold. On Friday, U.S. economic growth for the first quarter was revised up slightly to 0.8% from 0.5%. America has often had a lousy start to the year. The key is whether growth picks up in the spring. So far, that looks like it will happen.  The Atlanta Fed forecasts second quarter growth rising close to 3%, and other signs are encouraging. New home sales jumped up significantly in April as did U.S. retail sales, which rose the most in over a year. Even wage growth has shown some signs of life.  Against that backdrop, the Fed has tried to get investors and other world leaders ready for a summer rate hike. As recently as May 13, Wall Street predicted a 7.5% chance of a rate hike in June. Expectations had risen to 24% before Yellen's speech. After her comments Friday, the odds shot up to 34%, according to CME Group.

New Test Finds No Impact of QE on Long-Term Interest Rate – John Taylor - The Fed’s stated purpose of quantitative easing (QE) was to lower long-term interest rates, and many papers have endeavored to test empirically whether it achieved that purpose. Some, such as the paper by Gagnon, Raskin, Remache, and Sack, have looked at the impact of QE announcements, finding the intended impact. Others have questioned estimates based on announcement effects because they may miss reversals that come after the initial effect; a paper by Stroebel and Taylor has instead looked at the direct cumulative effects of bond purchases during QE1, controlling for various risks, and they do not find a significant impact. A recent study by Ansgar Belke, Daniel Gros and Thomas Osowski takes a whole new approach by controlling for global effects on long-term interest rates. They focus on QE1 and they find no significant impact. The paper was presented yesterday by Ansgar Belke at the Conference on Macroeconomic Analysis and International Finance in Crete, where I was the discussant. The basic idea is explained simply at the start of the paper using the following chart of the 10-year US Treasury rate along with comparable rates in Europe.

Federal Reserve Admits that Fed Policy Is Increasing Inequality -- The St. Louis Fed asked last week, “Are Rising Stock Prices Related to Income Inequality?” … and answered affirmatively: Income inequality in the U.S. started to increase in the 1970s, and stock market gains accompanied this increase, according to a recent Economic Synopses essay...increases in stock prices and capital returns may benefit the wealthy more than others, as they have better access to markets.  “Thus, as stock prices and capital returns increase, the wealthy might benefit more than other individuals earning income from labor.” The figure below shows stock prices (as measured by the S&P 500 Index) along with the Gini coefficient, which represents a measure of income inequality.  The authors pointed out that inequality began to rise in the 1970s. The Congressional Budget Office estimated that between 1979 and 2011:

  • Market income grew an average of 16 percent in the bottom four quintiles.
  • It grew 56 percent for the 81st through 99th percentiles.
  • However, it grew 174 percent for the top 1 percent.1

Regarding stock returns, the S&P 500 Index grew from 92 in 1977 to over 1,476 in 2007. By comparison, it grew only 50 percent in the 30 years prior. The authors noted: “As stock prices rise, the gains are disproportionately distributed to the wealthy. Lower- and middle-income families who are also wealth-poor are less likely to expose their savings to the higher risks of equity markets.” Owyang and Shell concluded: “The increase in income inequality in the 1970s was accompanied, in part, by gains in the stock market. In addition, Fed officials have admitted that Fed policy has focused on boosting stock prices. While the mind-blowing corruption of the big corporations is obviously part of the problem, bad government policy may actually be the deeper source of runaway inequality.

The Federal Reserve's $4.3 trillion ticking time bomb - Yahoo Finance -- The Federal Reserve has a big problem if it wants to raise rates again. It will have to pay U.S. and foreign banks enormous sums of money instead of U.S. taxpayers.That’s because the gangbuster profits of $90 billion (plus) per year that the Fed remits to the Treasury could easily dwindle to zero. According to several leading economists, it’s also possible that the Fed will become technically insolvent (though it always has the power to print its way out of such a disastrous state). The putative savior of the financial crisis, quantitative easing, was a Faustian bargain. The Fed got to inject trillions of dollars into the financial sector while simultaneously “sterilizing” the very same money. It did this by incentivizing banks to deposit their digital cash at the Fed, paying above-market interest rates. Currently, the Fed pays 0.50% annually to banks to keep that money out of the economy. It might not seem like much, but the comparable rate paid by the U.S. Treasury for T-bills is 0.28%. In other words, the Fed pays banks nearly twice as much as the Treasury does. But the Fed refuses to acknowledge this.  Both Ben Bernanke and Janet Yellen have used the word, “comparable,” to assert disingenuously that the Fed is paying an amount of interest similar to what banks could earn in the marketplace. It’s possible to “compare” apples to oranges, but it doesn’t mean they’re similar. Currently, the Fed is paying banks about $12 billion per year in interest. If the Fed raises rates two times (by 0.25% each time) and the level of reserves stays the same, that number doubles to $24 billion. If we are to believe San Francisco Fed President John Williams, who targets an eventual 3.0% for short-term rates, then that's $72 billion per year to the banks. This is a huge expenses for the Fed. Subtract from that the $90 billion (plus) per year in operating profits, and the amount of money the Fed pays to the Treasury gets pretty small.

Social Credit and "Neutral" Monetary Policies: A Rant on "Helicopter Money" and "Monetary Neutrality" -- DeLong --  Badly-intentioned or incompetent policymakers can mess up any system of macroeconomic regulation. And we now have two centuries of history of demand-driven business cycles in industrial and post-industrial economies to teach us that there is no perfect, automatic self-regulating way to organize the economy at the macroeconomic level. Over and over again, the grifters, charlatans, and cranks ask: "Why doesn't the central bank simply adopt the rule of setting a "neutral" monetary policy? In fact, why not replace the central bank completely with an automatic system that would do the job?"  Over the decades many have promised easy definitions of "neutrality", along with rules-of-thumb for maintaining it. All had their day:

  • advocates of the gold standard,
  • believers in a stable monetary base,
  • devotees of a constant growth rate for the (narrowly defined) supply of money;
  • believers in a constant growth rate for broad money and credit aggregates;
  • various "Taylor rules".

And the answer, of course, is that by now centuries of painful experience have taught central bankers one thing: All advocates, wittingly or unwittingly, were simply selling snake oil. All such "automatic" rules and systems have been tried and found wanting.

The Fed's Amazing Self-Fulfilling Forecast - Narayana Kocherlakota - The Federal Reserve’s track record of economic forecasting is a lot better than many observers recognize. It might also offer some insight into the central bank’s approach to managing the recovery. Criticism of the Fed’s forecasting has focused largely on its failure to recognize, as late as mid-2008, the depth and persistence of the recession that the global financial crisis would engender. I agree that this error -- which the Fed was not alone in making -- should lead economists at the central bank and elsewhere to do a better job of including financial markets in their forecasting models. That said, the Fed’s forecasters did better after the recession. Consider, for example, the projections they supplied for the central bank’s November 2010 policy-making meeting (the latest for which staff materials have been released to the public). Here’s how their estimates of unemployment and inflation, formulated in October 2010, compare to what actually happened: The forecast accurately captured a slow but steady recovery in the unemployment rate (which was 9.5 percent in the fourth quarter of 2010), and core inflation (excluding food and energy) exceeding 1 percent but still falling short of the Fed’s 2 percent target for many years. Granted, the forecasters made significant errors. They overestimated the fourth-quarter 2015 level of inflation-adjusted gross domestic product by 10 percent, and missed the end-2015 short-term interest-rate target by more than four percentage points. That said, the successes are much more striking: Given all the shocks the economy sustained over the period, how could the Fed’s forecasters have been so right? My (tentative) answer: From 2011 through 2015, the Fed managed the economy with two complementary goals: Get the unemployment rate down to 5 percent (from near 10 percent) and keep inflation in a range between 1 percent and 2 percent. It adjusted monetary policy in response to shocks in order to achieve these complementary goals. In other words, the forecast for unemployment and inflation was accurate because the Fed made it so.

Reluctant partners: the Fed and the global economy - Gavyn Davies - The influence of the global economy on the decisions of the US Federal Reserve has become a topic of frontline importance in recent months. Since the start of 2016, events in foreign economies have conspired to delay the FOMC’s intended “normalisation” of domestic interest rates, which had apparently been set on a firmly determined path last December. This delay has taken the heat out of the dollar. But the key question now is whether weak foreign activity will continue to trump domestic strength in the US. To judge from last week’s surprisingly hawkish FOMC minutes, which I had not expected, the Fed seems to be reverting to type (see Tim Duy). Many committee members have downplayed foreign risks and have returned to their earlier focus on the strength of the domestic US labour market, which in their view is already at full employment.The Fed is a conservative institution, greatly influenced by its own history. It has always objected to being portrayed as “the world’s central banker”. The dual mandate set by Congress in 1977 for US monetary policy refers to domestic inflation and employment, which fuels suspicions that the Fed ignores other economies altogether. The US central bank certainly has no responsibility to take direct account of the welfare of foreigners. But it (reluctantly) takes note of spillovers in the other direction. The impact of events overseas on the dollar and the domestic US economy are too important to be entirely ignored.

The helicopter money drop demands balance - Adair Turner Eight years after the 2008 financial crisis the global economy is still stuck with slow growth, inflation levels that are too low and rising debt burdens. Massive monetary stimulus has failed to generate adequate demand. Money-financed fiscal deficits — more popularly labelled “helicopter money” — seems one of the few policy options left. The debate on its merits can get lost in technical complexities. But the important question is political: can we design rules and responsibilities that ensure monetary finance is only used in appropriate circumstances and quantities? If we lived in a simple world where all money was created by the government or central bank, and if the authorities created more money to increase public expenditure or cut taxes, some of the extra cash in people’s pockets would be spent. If the economy were at full employment, the only consequence would be faster inflation: if below full employment, some increase in economic activity could result. The scale of effects would depend on how much new money was created. If little, a small rise in prices or output would result; if a great deal, hyperinflation might be inevitable. In the real world the technicalities are more complex. Most money is not created by central banks but by the banking system, with the total money supply a big multiple of the monetary base. In this world the initial stimulus to demand can be multiplied later by commercial bank credit and money creation. But the risk of escalation can be offset by imposing reserve requirements on those banks. And the fundamental point remains: the impact will depend on how much new money is created. The crucial political issue is the danger that once the taboo against monetary finance is broken, governments will print money to support favoured political constituencies, or to overstimulate the economy ahead of elections. But as Ben Bernanke, former chairman of the US Federal Reserve, argued recently, this risk could be controlled by giving independent central banks the authority to determine the maximum quantity of monetary finance that was required to meet but not exceed the inflation target. The dangers of too big a stimulus can, in principle, be contained.

The Macro Effects of the Recent Swing in Financial Conditions -- New York Fed -  Credit conditions tightened considerably in the second half of 2015 and U.S. growth slowed. We estimate the extent to which tighter credit conditions last year were responsible for the slowdown using the FRBNY DSGE model. We find that growth would have slowed substantially more had the Federal Reserve not delayed liftoff in the federal funds rate.   The chart below shows the evolution of credit conditions, as measured by the spread between Baa yields and ten-year Treasury bond yields. One can see that spreads rose considerably from 2015:Q2 to 2016:Q1. This increase was largely unexpected. For instance, the FRBNY DSGE model was forecasting a modest decrease over the coming year as of 2015:Q2 (see the red line). The June 1, 2015, Blue Chip Financial Forecasts consensus was projecting essentially the same decline in spreads.   Increases in credit spreads tend to be associated with subsequent slowdowns in economic activity, with the Great Recession being a salient example. In part, such increases reflect investors’ concerns about future economic conditions, changes in firms’ leverage, heightened worries about borrowers’ default, and so on. However, as Simon Gilchrist and Egon Zakrajšek and others have shown in their research, such increases in credit spreads often cause an economic slowdown. A natural question is then: Did the rise in credit spreads reflect deteriorating economic conditions or did the causality run the other way around in this episode?

Paul Krugman and the Bubbles - Dean Baker --Paul Krugman used his column this morning to point out how strong the economy was in the 1990s and how the low unemployment in the second half of the decade allowed for strong wage and income gains at the middle and bottom end of the income distribution. This is all very much on the mark. However, he also distinguished the impact of the stock bubble from the housing bubble by saying that the collapse of the latter had more serious consequences because of the growth of private debt.   There are a few points worth making on this assessment. First the collapse of the stock bubble did have very severe consequences for the labor market. The economy did not gain back the jobs lost in the recession until January of 2005. At the time, this was the longest period without net job growth since the Great Depression. The weakness of the labor market was the reason the Fed kept the federal funds rate at 1.0 percent until the middle of 2004. If Krugman is pointing to the financial crisis as fallout, then of course the issue of private debt is correct. There were a huge amount of mortgage loans and derivative instruments that could go bad with the collapse of house prices. This was not true in the case of stock prices. It's much more difficult to borrow against stocks than housing. (The evil regulators at work.) However, when it comes to the real economy, as opposed to the fun of watching collapsing financial behemoths, we don't have any reason to look to debt. The investment boom sparked by the stock bubble was much smaller than the construction boom sparked by the housing bubble. The share of non-residential investment in GDP fell by 2.6 percentage points from its 2000 peak to its 2003 trough. Residential construction fell by 4.0 percentage points of GDP from 2005 to 2010.

Can Two Wrongs Make a Right? -- Atlanta Fed's macroblog -- In a recent macroblog post, I showed that forecasts from the Atlanta Fed's real gross domestic product (GDP) nowcasting model—GDPNow—have been about as accurate a forecast of the U.S. Bureau of Economic Analysis's (BEA) first estimate of real GDP growth as the consensus from the Wall Street Journal Economic Forecasting Survey. Because GDPNow essentially uses a "bean-counting" approach that tallies the forecasts of the various main subcomponents of GDP, the total GDP forecast error can be broken up into the forecast errors coming from each piece of GDP. For most of the subcomponents of GDP, the contribution to total GDP growth is approximately its real growth rate multiplied by its expenditure share of nominal GDP (the exact formulas are in the working paper for GDPNow). The following chart shows the subcomponent contributions to the GDPNow forecast errors since the third quarter of 2011.   The forecast errors for the subcomponents can sometimes be quite large. For example, for the fourth quarter of 2013, GDPNow underestimated the combined contributions of net exports and inventory investment by nearly 2 percentage points. However, these misses were nearly offset by overestimates of the other contributions to growth (consumption, business and residential fixed investment, and government spending). The pattern of large but largely offsetting GDP subcomponent errors has been attributed to the work of a fictional "Saint Offset," as former Fed Governor Laurence Meyer noted in a 1998 speech. Unfortunately, "Saint Offset" doesn't always come to the forecaster's aid. For example, in the fourth quarter of 2011, GDPNow predicted 5.2 percent growth—well above the BEA's first estimate of 2.8 percent—and the subcomponent errors were predominantly on the high side.

Q1 GDP Revised Up to 0.8% Annual Rate --From the BEA: Gross Domestic Product: First Quarter 2015 (Second Estimate) Real gross domestic product -- the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes -- increased at an annual rate of 0.8 percent in the first quarter of 2016, according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 1.4 percent.  The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 0.5 percent. With the second estimate for the first quarter, the decrease in private inventory investment was smaller than previously estimated ... Here is a Comparison of Second and Advance Estimates. PCE growth was unrevised at 1.9%. Residential investment was revised up from 14.8% to 17.1%.  This was close to the consensus forecast.

Second Estimate 1Q2016 GDP Revised Slightly Upward to 0.8%: The second estimate of first quarter 2016 Real Gross Domestic Product (GDP) is a positive 0.8 %. This is a moderate increase from the advance estimate's +0.5 % if one looks at quarter-over-quarter headline growth. Year-over-year growth declined from the previous quarter. There was no major reason for the improvement in GDP - just minor adjustments. Headline GDP is calculated by annualizing one quarter's data against the previous quarters data (and the previous quarter was relatively strong in this instance). A better method would be to look at growth compared to the same quarter one year ago. For 1Q2016, the year-over-year growth is 2.0 % - unchanged from 4Q2015's 2.0 % year-over-year growth. So one might say that the rate of GDP growth was unchanged from the previous quarter. The table below compares the 3Q2015 third estimate of GDP (Table 1.1.2) with the advance estimate of 4Q2015 GDP which shows:

  • consumption for goods and services declined.
  • trade balance degraded
  • there was significant inventory change removing 0.21% from GDP
  • there was slower fixed investment growth
  • there was slightly more government spending

The arrows in the table below highlight significant differences between 4Q2015 and 1Q2016 (green is good influence, and red is a negative influence). What the BEA says about the second estimate of GDP: Real gross domestic product -- the value of the goods and services produced by the nation's economy less the value of the goods and services used up in production, adjusted for price changes -- increased at an annual rate of 0.8 percent in the first quarter of 2016, according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 1.4 percent.  The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 0.5 percent. With the second estimate for the first quarter, the decrease in private inventory investment was smaller than previously estimated (see "Revisions" on page 2) The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), residential fixed investment, and federal government spending that were partly offset by negative contributions from exports, nonresidential fixed investment, state and local government spending, and private inventory investment. Imports, which are a subtraction in the calculation of GDP, decreased.

First Quarter GDP Revised Higher To 0.8%, Misses Expectations - Following the terrible initial Q1 GDP print of 0.5% released one month ago, there was some hope that following some subsequent favorable inventory and trade data, the number would be revised substantially higher, with the whisper estimate rising as high as 1% or more, above the consensus estimate of 0.9%. Moments ago the BEA reported that in its first revision of Q1 growth, the US economy grew at only 0.8% annualized, a modest rebound from the original GDP report, however still missing consensus estimates. Looking at the components, there was virtually no improvement in the all important personal consumption print, it remained unchanged, rising at 1.9% Q/Q, while core personal spending category, which rose 2.1%, in line with expectations. Consumption contributed 1.29% of the total 0.82% GDP print, virtually unchanged from the 1.27% annualized contribution reported a month ago. Fixed investment likewise did not provide any material bounce either, subtracting 0.25% from the bottom line print, practically unchanged from last month's -0.27%. Where there was improvement was in private inventories, which subtracted a more modest -0.20% from GDP growth, better than tha -0.33% originally expected. Also contributing was net trade, which picked up modestly as well, if still negative, subtracting -0.22% from the annualized GDP print, an improvement on the -0.33% reported originally. Government consumption was unchanged, and added 0.2% to the final print. The full breakdown by component is charted below: Overall, a report with little surprises.  What was, however, curious, is that in a quarter in which corporate profits imploded, the BEA reported that profits from current production (corporate profits with inventory valuation adjustment (IVA) and capital consumption adjustment (CCAdj)) increased $6.5 billion in the first quarter, a 0.3% increase. This compares to a decrease of $159.6 billion in the fourth, or a 7.8% plunge.

US GDP Growth Is Expected To Rebound In Q2 - US economic growth in the second quarter is widely expected to rebound after Q1’s stall-speed rise of just 0.5% (seasonally adjusted annual rate). The question is how much a rebound will we see when the Bureau of Economic Analysis (BEA) publishes this year’s “advance” Q2 GDP report on July 29? It’s still early in the quarter and so there’s a wide range of guesstimates. The good news is that most forecasts currently project a round of improvement. It’s anyone’s guess if those estimates will hold up as the remaining hard data for Q2 rolls in over the next two months. Meantime, let’s get up to speed on the crowd’s outlook at the moment. The Wall Street Journal’s mid-May survey of economists anticipates Q2 GDP growth will revive to 2.2% (based on the average estimate). The Atlanta Fed’s May 17 nowcast is even higher at 2.5%. Goldman Sachs yesterday went further, raising its Q2 growth estimate to 3.0% after the government reported a smaller-than-expected widening of the trade deficit in April. By contrast, the dismal scientists at BMO Capital are looking for a relatively weak rebound of just 1.4%, as of May 20. The New York Fed’s May 20 nowcast isn’t much stronger at 1.7%. Note, however, that PMI survey data for May translates into hardly any revival at all for Q2 growth. Markit Economics is projecting a fractional increase in growth to just 0.7%, the firm advised yesterday.

Dueling nowcasts - The second quarter of 2016 is now more than half over, but we won’t receive the first reading on 2016:Q2 GDP from the BEA until the end of July. A forecast of something that is happening right now is sometimes described as a “nowcast”. The Federal Reserve Banks of New York and Atlanta are providing a valuable service by publishing continuously updated nowcasts of GDP. But what should we do if they’re giving us rather different numbers?  Right now the Atlanta Fed’s nowcast is calling for second-quarter real GDP growth of 2.5% at an annual rate while the New York Fed says 1.7%. That’s actually a smaller disagreement than the two models began with on April 29, when the advance estimate of first-quarter GDP was first released. At that date the Atlanta model was anticipating 1.8% second-quarter growth while the New York model was only predicting 0.8%. The forecast the two approaches start the quarter with is one of the key differences between the two models. The Atlanta model begins with separate forecasts of 13 individual components of GDP, such as personal consumption expenditures on goods, PCE on services, and investment in equipment. The start-of-quarter forecast is based on a regression of each component on 5 quarters’ lags of all the components, with the regression coefficients heavily weighted toward a random walk using a Bayesian prior, according to which the best forecast of next quarter’s equipment investment is probably not too far from whatever the number was for this quarter. By contrast, the New York model begins with a “top-down” approach, starting with a forecast of overall economic activity based on the best current assessment of overall activity. From that starting point, both models then process every major new piece of data as it comes in. Based on the historical correlation between each new measure and any variables of interest both models generate a continuously updated assessment of everything that might matter for the current values of all the variables that we observe. For example, the New York Fed GDP nowcast was lifted up by the solid reports on retail sales and industrial production and capacity utilization for April.

Unsustainable national debt should be tackled at G-7 summit - (Feldstein) — On May 26 and 27, the heads of the Group of Seven leading industrial countries will gather in Japan to discuss common security and economic problems. A major common problem that deserves their attention is the unsustainable increase in the major developed countries’ national debt.   Failure to address the explosion of government borrowing will have adverse effects on the global economy and on debt-burdened countries themselves.  The problem is bad and getting worse almost everywhere. In the United States, the Congressional Budget Office estimates that the federal government debt doubled over the past decade, from 36% of gross domestic product to 74% of GDP. It also predicts that, under favorable economic assumptions and with no new programs to increase spending or reduce revenue, the debt ratio 10 years from now will be 86% of GDP.   Even more worrying, the annual deficit ratio will double in the next decade to 4.9% of GDP, putting the debt on track to exceed 100% of GDP. The situation in Japan is worse, with gross debt at more than 200% of GDP. Japan’s current annual deficit of 6% of GDP implies that the debt ratio will continue to rise rapidly unless action is taken. Conditions differ among the eurozone countries. But three of the European Union’s four largest economies — France, Italy, and the United Kingdom — all have large debts and annual deficits that point to even higher debt ratios in the future. A rising level of national debt absorbs funds that would otherwise be available to finance productivity-enhancing business investment. Businesses now fear that the increasing deficits will lead to higher taxes, further discouraging investment.

No Treasuries Left for Wall Street Dealers Amid Blowout Auctions - After two notes sales this week left primary dealers with the fewest Treasuries on record, investors will get another chance to load up on U.S. government debt Thursday as seven-year securities are auctioned. The Treasury is scheduled to sell $28 billion of seven-year notes, the last of three fixed-rate auctions this week totaling $88 billion. A gauge of demand at a $34 billion sale of five-year securities Wednesday climbed to the highest since 2014 as Wall Street dealers were awarded the lowest percentage for this maturity in data going back to 2003. A $26 billion two-year sale Tuesday also left dealers with the lowest award on record.The offerings follow a two-week advance in Treasury note yields as several Federal Reserve officials said an interest-rate increase next month is possible and the central bank may hike more than once this year. Changes in regulation and market structure have left dealers holding fewer bonds than in the past, while more than $9 trillion in negative-yielding debt around the world has boosted the appeal of Treasuries to global buyers. “It shows that people prefer to buy at the auctions rather than in the secondary market -- they can get a lot of liquidity,” . “Liquidity is not as good as it used to be. If you want to secure large blocks of Treasuries, this is the most efficient way to do it." The five-year notes auctioned Wednesday yielded 1.395 percent as dealers bought 21.8 percent of the securities. Indirect bidders, a class of investors including foreign central banks and mutual funds, scooped up 66.6 percent, the third-most on record. Direct bidders, non-primary-dealer investors that place their bids directly with the Treasury, bought 11.6 percent, the highest since July 2014.

The Obama Years Have Been Very Good to America’s Weapons Makers - The Obama years have been a boom time for America's weapons makers. Since 2009, the United States has approved arms deals worth some $200 billion—more than under any other presidency. The deals include sending Apache helicopters to Qatar, "bunker buster" bombs and cluster munitions to Saudi Arabia, and Hellfire missiles all over the place. Predicting an increase in weapons sales fueled by the war against ISIS, an unnamed American weapons manufacturing executive told Reuters last year: "Everyone in the region is talking about building up supplies for 5 to 10 years. This is going to be a long fight. It's a huge growth area for us." The United States currently controls more than half of the global arms market. Its top five customers are Saudi Arabia, the United Arab Emirates, Australia, Iraq, and Israel. By comparison, Russia, the next biggest global weapons supplier, controls just 14 percent of the market. Some of the factors driving the surge in American exports include a shift toward arming allies instead of putting American boots on the ground, regional threats from ISIS and Al Qaeda, and Obama's 2013 decision to relax arms export rules, a move supported with an estimated $170 million in lobbying by the defense industry. In the past week, the Obama administration announced it was considering expanding weapons sales to Vietnam and easing an arms embargo on Libya.

The real reason America controls its nukes with ancient floppy disks -  America’s nuclear arsenal depends on a surprising relic of the 1970s that few of us may recall: the humble floppy disk.  It’s hard to believe these magnetic, 8-inch data storage devices are what’s propping up the most fearsome weapons humanity has ever created. But the Department of Defense is still relying on this technology to coordinate key strategic forces such as nuclear bombers and intercontinental ballistic missiles, according to a new government report.  The floppy disks help run what’s known as the Strategic Automated Command and Control System, an important communications network that the Pentagon uses to issue launch orders to commanders and to share intelligence. And in order to use the floppy disks, the military must also maintain a collection of IBM Series/1 computers that to most people would look more at home in a museum than in a missile silo.   This isn’t the first time we’ve heard about the military’s reliance on seemingly archaic tech: back in 2014, U.S. nuclear warriors showed CBS’s “60 Minutes” one of the top-secret floppy disks that helps it store and transmit sensitive information across dozens of communications sites. So to hear from the Government Accountability Office that the Pentagon has still not phased out the technology — and doesn’t plan to until the end of fiscal year 2017 — is remarkable.  Still, there is a major reason — other than simply being behind the times — for the military's continued use of floppies: Sometimes, it says, low-tech is safer tech. 

The Dreadful Kagan Clan - Hillary's Warmongers-In-Waiting -- The U.S. is heading straight for a fiscal calamity in the next decade. Even if you believe the CBO’s Rosy Scenario projections - which assume that we will go 207 months thru 2026 without a recession or double the longest expansion on record and nearly 4X the normal cycle length - we will still end up with $28 trillion of national debt and a $1.3 trillion annual deficit (5% of GDP) by 2026.But that’s the optimistic case!  As I demonstrated recently, if you get real about all the enormous headwinds down the road—-including the virtual certainty that the Red Ponzi will have a crashing landing and take the global economy down with it—- you end up with a truly dismal picture.To wit, just assume economic performance during the next ten years is no better or worse than the average of the last ten years, including the last decade’s 2.5% growth rate of wage and salary income. The result is that by the out-years CBO has over-estimated taxable income by more than 20% or $2 trillion per year; and that means, in turn, that CBOs current forecast is built on massive phantom revenues, given that under current law the payroll and income tax take from wages and salaries is just under 35%.Accordingly, with sober economic assumptions and existing policy, the annual deficit is heading for $2-3 trillion per year by the middle of the next decade. This means the nation will accumulate incremental debt of $15 trillion or more in the interim, and that by 2026 the national debt will reach $34 trillion or 140% of GDP.Those are Greek style fiscal ratios. And they would come at the very time that the 78 million strong baby-boom generation is at peak retirement levels.Yet, not only does Hillary Clinton insist that social security benefits are sacrosanct and actually need to be increased, along with lowering the Medicare age to 50 years, she also insists that Washington remain the world’s policeman and imperial hegemon.

A Harvard MBA Guy Is Out to Bring Down the Clintons: Pam Martens - There’s a new Markopolos in town with that same brand of leave-no-stone-unturned tenacity and he has his sights set on the charity operations of Hillary and Bill Clinton, known as the Clinton Foundation and its myriad tentacles. Ortel’s actions come just as Hillary Clinton makes her final sprint for the Democratic nomination for President of the United States with Bill in tow as her economic czar. Like Markopolos, Charles Ortel does not mince words. In a 9-page letter dated yesterday and posted to his blog, Ortel calls the Clintons’ charity the “largest unprosecuted charity fraud ever attempted,” adding for good measure that the Clinton Foundation is part of an “international charity fraud network whose entire cumulative scale (counting inflows and outflows) approaches and may even exceed $100 billion, measured from 1997 forward.” Ortel lists 40 potential areas of fraud or wrongdoing that he plans to expose over the coming days. Like Markopolos, Ortel has an impressive resume. Ortel’s LinkedIn profile shows that he received his B.A. from Yale and an MBA from Harvard Business School. He previously worked as a Managing Director at investment bank Dillon Read and later as a Managing Director at the financial research firm, Newport Value Partners. In more recent years, Ortel has been a contributor to a number of news outlets including the Washington Times and The charges being made by Ortel are difficult to dismiss as a flight of fancy because mainstream media has tinkered around the edges of precisely what Ortel is now calling out in copious detail.

Emails Show TPP ‘Collusion’ Between Big Banks & Obama Administration - A series of emails released Friday show what activists describe as "collusion" between U.S. Trade Representative Michael Froman and Wall Street executives to push for the passage the controversial Trans-Pacific Partnership (TPP). The emails (pdf), obtained through a Freedom of Information Act (FOIA) request by the group Rootstrikers, which organizes against money in politics, include a message to Froman from a managing director at Goldman Sachs urging him to push for "robust commitments" on Investor-State Dispute Settlement (ISDS) provisions—which allow private corporations to sue governments for perceived loss of profits—to be included in the divisive trade deal. "I wanted to underscore how important it is for the financial services industry to get robust commitments on ISDS in the agreement... denying our industry the same rights as enjoyed by every other sector would be terribly unfortunate," the email states.  Froman responded that he would assign a staff member to be in contact with Goldman Sachs' lobbyist team, and that he would "welcome the chance to pick your brain" on the equally controversial Transatlantic Trade and Investment Partnership (TTIP). Rootstrikers—which is part of a newly launched financial reform coalition called Take On Wall Street—also noted that Froman, then chief of staff to the Treasury Secretary, was "instrumental" in the 1999 repeal of the Glass-Steagall Act, which created a firewall between the investment and commercial banking sectors, and has maintained a friendly relationship with the financial industry during his time as trade rep. As the American Prospect reported in June 2015, under Froman's leadership, "more ex-lobbyists have funneled through USTR, practically no enforcement of prior trade violations has taken place, and new agreements like TPP are dubiously sold as progressive achievements, laced with condescension for anyone who disagrees."

WikiLeaks - Trade in Services Agreement -- Today, Wednesday, 25 May 2016, 11:30am CEST, WikiLeaks releases new secret documents from the huge Trade in Services Agreement (TiSA) which is being negotiated by the US, EU and 22 other countries that account for 2/3rds of global GDP. This release includes a previously unknown annex to the TiSA core chapter on "State Owned Enterprises" (SOEs), which imposes unprecedented restrictions on SOEs and will force majority owned SOEs to operate like private sector businesses. This corporatisation of public services - to nearly the same extent as demanded by the recently signed TPP - is a next step to privatisation of SOEs on the neoliberal agenda behind the "Big Three" (TTIP,TiSA,TPP). Other documents in todays release cover updated versions of annexes to TiSA core chapters that were published by WikiLeaks in previous releases; these updates show the advances in the confidential negotiations between the TiSA parties on the issues of Domestic Regulation, New Provisions, Transparency, Electronic Commerce, Financial Services, Telecommunication Services, Professional Services and the Movement of Natural Persons. WikiLeaks is also publishing expert analyses on some of these documents. The annexes on Domestic Regulation, Transparency and New Provisions have further advanced towards the "deregulation" objectives of big corporations entering overseas markets. Local regulations like store size restrictions or hours of operations are considered an obstacle to achieve "operating efficiencies" of large-scale retailing, disregarding their public benefit that foster livable neighbors and reasonable hours of work for employees. The TiSA provisions in their current form will establish a wide range of new grounds for domestic regulations to be challenged by corporations - even those without a local presence in that country.

Testing The Limits on Wealth Inequality -- In this post, I pointed out that we are going to see an empirical test of Piketty’s theory of rising wealth inequality. The theory itself is not well understood, and Piketty has revisited it since the publication of Capital in the Twenty-First Century, and published an economist’s dream of a paper in full mathematical glory here. The American Economics Association devoted space in its journal to arguments about the theory, giving Piketty an opportunity to discuss his theory in what I think is a very readable paper, and one worth the time.   He starts by saying that the relation between r, the rate of return to capital, and g, the rate of growth in the overall economy, are not predictive. They cannot be used to forecast the future, and are not even the most important factor in rising wealth inequality. The crucial factors are institutional changes and political shocks. Neither can the relation tell us anything about the decrease in the labor share of national income. He points to supply and demand for skills and education in this paper, as he does in his book, but this is a at best an incomplete explanation, owing more to the neoliberal view that the problems of workers are their fault than to a clear understanding of social processes in the US. A better explanation lies in tax law changes, changes in labor law and enforcement of labor law, rancid decisions from the Supreme Court, failure to update minimum wage and related laws, and government support for outsourcing and globalization.

Are Rising Stock Prices Related to Income Inequality? - St. Louis Fed  -- Income inequality in the U.S. started to increase in the 1970s, and stock market gains accompanied this increase, according to a recent Economic Synopses essay.  Assistant Vice President and Economist Michael Owyang and Senior Research Associate Hannah Shell noted that increases in stock prices and capital returns may benefit the wealthy more than others, as they have better access to markets. They wrote: “Thus, as stock prices and capital returns increase, the wealthy might benefit more than other individuals earning income from labor.”  The figure below shows stock prices (as measured by the S&P 500 Index) along with the Gini coefficient, which represents a measure of income inequality. (A Gini coefficient of 0 means incomes are perfectly equal, and a coefficient of 1 means incomes are perfectly unequal.) The authors pointed out that inequality began to rise in the 1970s. The Congressional Budget Office estimated that between 1979 and 2011:

  • Market income grew an average of 16 percent in the bottom four quintiles.
  • It grew 56 percent for the 81st through 99th percentiles.
  • However, it grew 174 percent for the top 1 percent.1

Regarding stock returns, the S&P 500 Index grew from 92 in 1977 to over 1,476 in 2007. By comparison, it grew only 50 percent in the 30 years prior. The authors noted: “As stock prices rise, the gains are disproportionately distributed to the wealthy. Lower- and middle-income families who are also wealth-poor are less likely to expose their savings to the higher risks of equity markets.” Owyang and Shell concluded: “The increase in income inequality in the 1970s was accompanied, in part, by gains in the stock market. Comovement between stock prices and income inequality results from the fact that gains in the stock market tend to benefit those in the wealthiest portion of the income distribution, who have better access to and higher participation in these asset markets.”

Senate votes to block financial adviser rule | TheHill: The Senate voted Tuesday to strike down a controversial Obama administration rule for financial advisers, setting up a showdown with the White House. Senators voted 56-41 to overturn the Labor Department’s fiduciary rule, which requires financial advisers to act in the best interest of retirement savers.  The Senate's vote paves the way for a battle with the White House, which has pledged that President Obama will veto the legislation once it reaches his desk. "The final rule reflects extensive feedback from industry, advocates, and Members of Congress, and has been streamlined to reduce the compliance burden and ensure continued access to advice, while maintaining an enforceable best-interest standard that protects consumers," the Office of Management and Budget said in a statement. The expected veto will be the president's 10th. Congress has never been able to get the two-thirds support necessary to override an Obama veto. Republicans were able to clear the joint resolution through the upper chamber despite not having 60 votes by using the Congressional Review Act. The law gives lawmakers 60 days to pass a resolution with a simple majority, though it still has to signed by the president in order for a regulation to be blocked. They argue the Labor Department's "fiduciary" rule hurts the middle class by limiting access to financial advice, calling it another example of regulatory overreach by the Obama administration.

Feds Probing Potential Insider Trading By Senator Bob Corker - Back in December the topic of insider trading by prominent members of Congress hit new highs when as we reported at the time a "Prominent Tennessee Senator Fails To Disclose Millions In Hedge Fund, Real Estate Investments." The politician in question, Tennessee republican Senator Bob Corker, who according to Roll Call was recently the 23rd richest member of Congress..... and the company under focus: a Tennessee-based REIT, CBL & Associates. As a reminder, last November, the Campaign for Accountability (CFA), a D.C. watchdog, called for an SEC and ethics investigation of Corker in connection with his family's trading in shares of CBL & Associates (a REIT based in Tennessee). According to CFA, between 2008 and 2015, Sen. Corker, his wife and daughters made an astonishing 70 trades of stock in the real estate investment giant CBL & Associates Properties – more than triple the number of transactions he made of any other stock. Some of the trades closely preceded company announcements that led to changes in the stock’s price and seemingly resulted in the senator making millions of dollars. CfA Executive Director Anne Weismann stated, “Sen. Corker’s trades followed a consistent pattern — he bought low and sold high. It beggars belief to suggest these trades – netting the senator and his family millions – were mere coincidences.” As the Wall Street Journal has reported, Sen. Corker failed to report numerous trades of CBL stock. Federal law requires members of Congress to report stock trades and file reports disclosing their assets. Many of Sen. Corker’s profitable trades were made in advance of his broker, UBS, issuing reports impacting CBL’s trading price.

Columbia law professor shreds the 'don't ask, don't tell' code of insider trading in NYT op-ed -- Columbia Law School professor John C. Coffee Jr. wrote a blunt condemnation of US laws around insider trading.  In the editorial, published on Monday in The New York Times, Coffee says that the US has "overly complex and burdensome" laws, which impede the ability to properly prosecute some of the main actors involved in insider trading. He writes:Another lurid case of insider trading has been uncovered: The former chairman of Dean Foods has admitted giving insider information to a well-known professional sports bettor ... a second beneficiary of stock tips was the professional golfer Phil Mickelson, who had gambling debts of his own.Neither the United States attorney nor the S.E.C. is prosecuting other people who benefited from the stock tips, including Mr. Mickelson. Why not? A serious shortfall in our law has hampered prosecutors and allowed insider traders — particularly those further down the chain of information — to dance around the rules.Coffee says that US law values market efficiency, which encourages companies and individuals to find information about businesses through legitimate research. As such, Coffee argues, trading on unknown facts ends up being illegal when it's only been "wrongfully obtained or used."That leads to a "don't ask, don't tell" code, Coffee writes, where traders understand that they can't be prosecuted as long as they're unaware of any personal gain to be made from the information. In Mickelson's case, he allegedly received tips from Las Vegas sports bettor Billy Walters about Dean Foods. Mickelson bought stocks in the company and made about $1 million on the deal. The US Securities and Exchange Committee has named only Mickelson as a relief defendant, meaning that while he profited from the information, he wasn't aware of the scheme between Walters and Thomas.

SEC Conference Features Former Official Calling for Fraudsters to be Protected from Career Harm  Yves Smith -The SEC showed its true colors yet again at a panel at Stanford Law School at the end of March, although not as dramatically as last year.[...] As before, the real action came in when the audience members asked questions. They were all fielded by Andrew Ceresney, a former Debevoise & Plympton partner, now head of enforcement. We’re going to look at two questions in succession.  This one, the second in the Q&A section, has an individual investor reiterating objections that Elizabeth Warren, as well as SEC commissioners Kara Stein and Luis Aguilar, made about the SEC’s practice of being far too willing to waive an automatic sanction, that of the loss of “well known security issuer” status for serious violators. Kara Stein’s stinging 2015 dissent to a Deutsche Bank waiver gives a flavor for how the SEC is all too willing to go easy in the face of criminality: Deutsche Bank’s illegal conduct involved nearly a decade of lying, cheating, and stealing. This criminal conduct was pervasive and widespread, involving dozens of employees from Deutsche Bank offices including New York, Frankfurt, Tokyo, and London. Deutsche Bank’s traders engaged in a brazen scheme to defraud Deutsche Bank’s counterparties and the worldwide financial marketplace by secretly manipulating LIBOR. The conduct is appalling. It was a complete criminal fraud upon the worldwide marketplace. Prior Commissions sensibly did not grant WKSI waivers for criminal misconduct.  To put none too fine a point on it, this decline in the SEC’s already low standards took place on White’s and Ceresney’s watch.   Now consider this section from the Stanford Law panel. I’m dispensing with the transcript because it’s important to hear the tone and pacing during this short interaction: You can see that soon the questioner starts speaking, some in the crowd, which was heavy on securities lawyers, start fidgeting about. Members of the audience told me there was also sniggering as soon as he mentioned Elizabeth Warren.  Ceresney didn’t let the older man finish his question. He cut him off and proceeded to give a lengthy, technical answer that amounted to a brushoff. And the retiree had also indicated he had two issues he had wanted to raise. It’s not even clear whether the granting of waivers was one of his two beefs, or whether he was citing that as part of a bigger concern.

SEC Official Defends Weak, Selective Enforcement When Agency Records Show Private Equity Firms Thumb Nose at Agency --  Yves Smith - Yesterday, we looked at a section of a Stanford Law School conference at the end of March. The panel on pre-IPO funding included the SEC/s head of enforcement, Andrew Ceresney. In the question and answer section, Ceresney and a member of the audience, Marc Fagel, the former regional director of the SEC’s San Francisco office, now Gibson Dunn partner, asserted that SEC enforcement actions and speeches were changing the conduct of regulated firms. As we’ll show today, evidence in the SEC’s own public records contradicts that flattering self-assessment.  The reason Fagel posed this question was’t simply to give Ceresney a softball after suffering the indignity of interacting with a lowly retiree, or to reconfirm Fagel’s solicitude for the firms subject to SEC oversight. It was also to try to throw cold water on the information presented by the first audience member to address the panel. As you’ll see, the speaker described how the agency has been letting major private equity firms off the hook for misconduct (you can also watch this segment here from 1:36:30 to 1:40:00)

The SEC's Latest Investigative Tactic: Bar Hopping With Wall Street - The SEC is taking a new approach to uncovering nefarious dealings within the financial markets: bar hopping. In its new strategy to root out any underhanded dealings, the SEC is making an effort to attend more Wall Street conferences. The overall plan: catch Wall Streeters with their guard down at the bar in hopes that after a few drinks everyone will begin to ramble on about just how much screwing of the general public they are doing. Of course, nobody from the SEC is drinking at these conferences, that's against policy. Like a skunk at a garden party, the SEC has been moving in on the fun-loving Wall Street conference circuit in hopes of getting a better handle on who’s up to no good in the world of finance. Officials scour attendee lists to spot the biggest players in advance and, properly wearing name tags, schmooze over drinks. Of course, they don’t accept any - that’s a no-no under SEC policy. The current focus has been on bond conferences, specifically ABS East and ABS Vegas according to Bloomberg. Which is telling, because that's what helped to spark the last financial crisis.The SEC has focused on bond conferences including ABS East and ABS Vegas, said people with knowledge of the matter who asked not to be named because the regulator’s efforts aren’t public. Held at luxury hotels in Miami as well as Las Vegas, the four-day conferences bring together investors and originators of debt backed by everything from car loans to jewelry. The SEC also trolls online networks where people go to discuss who will be in attendance at such conferences, sometimes even spoiling all of the bar scene fun and emailing attendees to try and carve out time to chat at the conference.Most industry gatherings have online networks where participants can communicate with each other and see who plans to attend. The SEC has used those lists to e-mail attendees, asking whether they might be free to chat at the conference, said the people. As the SEC steps up its "efforts" by flying around to nice conferences and schmoozing overdrinks waters, it is also having closed door meetings with investors from companies such as Vanguard Group and BlackRock, trying to get them to feel comfortable sharing information with regulators, particularly when they strike them as inappropriate.

Wall Street Crime: 7 Years, 156 Cases and Few Convictions – WSJ - Gary Heinz is little known on Wall Street, but he belongs to a select club. In 2013, the former UBS Group AG employee was sent to prison on charges of rigging bids tied to the municipal-bond market. Now, he sits at a halfway house in San Antonio, awaiting his release in July. It rarely happens that way. The Wall Street Journal examined 156 criminal and civil cases brought by the Justice Department, Securities and Exchange Commission and Commodity Futures Trading Commission against 10 of the largest Wall Street banks since 2009. In 81% of those cases, individual employees were neither identified nor charged. A total of 47 bank employees were charged in relation to the cases. One was a boardroom-level executive, the Journal’s analysis found. The analysis shows not only the rarity of proceedings brought against individual bank employees, but also the difficulty authorities have had winning cases they do bring. Most of the bankers who were charged pleaded guilty to criminal counts or agreed to settle a civil case, with those facing civil charges paying a median penalty of $61,000. Of the 11 people who went to trial or a hearing and had a ruling on their case, six were found not liable or had the case dismissed. That left a total of five bank employees at any level against whom the government won a contested case. They include Mr. Heinz, the former UBS employee. One of the few successful government cases was overturned Monday. A federal appeals court tossed civil mortgage-fraud charges and a $1 million penalty against Rebecca Mairone, a former executive at Countrywide Financial Corp., now part of Bank of America Corp.   The court also threw out a related $1.27 billion penalty against Bank of America. Representatives of Ms. Mairone and the bank this week welcomed the verdict, while the Justice Department, which brought the cases, declined to comment.

Wall Street Journal Tallies DoJ and SEC’s Pathetic Record in Tacking Wall Street Crime -- Yves Smith - The Wall Street Journal has an important story tonight: Wall Street Crime: 7 Years, 156 Cases and Few Convictions. It does a fine job of assembling the facts. But as one might expect, it treats this crappy track record as defensible.  The Wall Street Journal examined 156 criminal and civil cases brought by the Justice Department, Securities and Exchange Commission and Commodity Futures Trading Commission against 10 of the largest Wall Street banks since 2009. In 81% of those cases, individual employees were neither identified nor charged. A total of 47 bank employees were charged in relation to the cases. One was a boardroom-level executive, the Journal’s analysis found. The analysis shows not only the rarity of proceedings brought against individual bank employees, but also the difficulty authorities have had winning cases they do bring. There are plenty of possible explanations for the small number of successful cases. For starters, much of the institutional conduct during and after the financial crisis didn’t break the law, said law-enforcement officials. Even when the government has been able to prove illegal activity, it has rarely been traced to the upper echelons of big banks. This is utter rubbish. In order to spare you a 10,000 word exegesis, let’s stick to a few high points. The Obama Administration saw its job as protecting the legitimacy and profits of the banking sector. Remember how Obama whipped for the TARP? That he dumped Paul Volcker, who he dragged around during his campaign, with the implication being that Tall Paul would stare down the banks? And then Obama dropped him like a hot potato once elected and brought in Tim Geithner and the Clinton economics team? How Obama told the bankers he was the only thing standing between them and the pitchforks? How he failed to use the $75 billion of TARP money that Hank Paulson had courteously left aside for borrower relief? How Geithner told Neil Barofsky that he’d never intended for the mortgage program to work (as in save borrowers); its real purpose was simply to “foam the runway” as in space out the foreclosures better over time? The “top execs knew nothing” excuse is nonsense. The SEC and DoJ have been deliberately enfeebled. The reality is that an entire, large class of people is not accountable for their actions from the perspective of career performance or legal liability. Yet because they went to the right schools and worked for big brand name institutions, they can pass off failing upwards, or even outright predatory conduct, as the proper workings of a meritocracy. This is a blueprint for widespread delegitimation of authority. And if it does not produce a Trump presidency in 2016, it has high odds of yielding something even worse in 2020.

Fraud in $4 Trillion Trade Finance Turns Banks to Digital Ledger -  The risk posed by fraud in the $4 trillion trade-financing industry has prompted banks to start exploring distributed-ledger technology like the one that underpins bitcoin. Standard Chartered Plc, which lost almost $200 million from a fraud at China’s Qingdao port two years ago, has teamed up with DBS Group Holdings Ltd. to develop an electronic ledger of invoices that uses a parallel platform to the blockchain employed in bitcoin transactions. Lenders such as Bank of America Corp. and HSBC Holdings Plc say they’re looking at blockchain for trade finance and other banking applications. QUICKTAKE Bitcoin and the BlockchainBlockchain proponents argue that the technology will change the face of banking, helping lenders cut billions of dollars in costs. Trade financing, a centuries-old banking mainstay, may become ground zero for blockchain adoption because it promises to do away with paper invoices and the fraud that accompanies them -- if banks can come together around a joint platform. For blockchain applications, “invoices should be considered a leading candidate here, given the high potential for fraud,” said Henry Balani, global head of strategic affairs at Accuity, which provides technology to monitor trade-based money laundering. Lenders typically don’t publish their losses from trade fraud, though almost 20 percent of banks in a 2015 survey by the International Chamber of Commerce reported an increase in fraud allegations.

US companies’ cash pile hits $1.7tn -- Five US tech giants are hoarding more than half a trillion dollars, a record sum that underscores how cash has become increasingly concentrated at a handful of groups seeking to avoid a tax hit. Apple, Microsoft, Alphabet, Cisco and Oracle had amassed $504bn of cash by the end of 2015, nearly a third of the total $1.7tn held on the balance sheets of US non-financial companies, according to a new report from rating agency Moody’s. The top 50 holders accounted for $1.1tn of that amount.US multinationals have left roughly $1.2tn of their earnings overseas in an effort to skirt the tax charge of moving profits back to US shores under the country’s complex tax code. It is the first time the top five cash hoarders have been made up exclusively of tech groups, an industry that generates more of its sales abroad than any other sector and one that has been embroiled in tax disputes in both the US and Europe. The ever increasing amount of cash also highlights how US boardrooms are reticent to invest in their businesses, choosing instead to increase dividends, in a sign of the continued anxiety that economic activity could still slow at home or in China. The report showed the first annual dip in capital spending since the US emerged from recession. Expenditures on things like new equipment slipped 3 per cent to $885bn as energy and mining groups retrenched in the face of sharply lower commodity prices.

A third of cash is held by 5 U.S. companies: The rising cash holdings of U.S. corporations are increasingly in the hands of a few U.S. companies, with just five tech firms having grabbed a third of it. And nearly three-quarters of cash held by non-financial U.S. companies is stashed overseas, outside the long arm of Uncle Sam. Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Cisco Systems (CSCO) and Oracle (ORCL) are sitting on $504 billion, or 30%, of the $1.7 trillion in cash and cash equivalents held by U.S. non-financial companies in 2015, according to an analysis released Friday by ratings agency Moody's Investors Service. That's even more cash concentration than in previous years, as these five companies held 27% of cash in 2014 and 25% in 2013. Apple alone is holding more cash and investments than eight of the 10 entire industry sectors. Corporate America's rising pile of cash is becoming increasingly important to investors as profit growth and the stock market stalls. The amount of cash held by U.S. companies rose 1.8% in 2015. Unfortunately for U.S. investors, 72% of total cash held by all non-financial U.S. companies is stockpiled outside the U.S., up from 64% in 2014 and 58% in 2013, as companies try to avoid paying U.S. tax rates.

Lobbyists Are Behind the Rise in Corporate Profits - HBR -- Profits are up. Operating margins for firms publicly listed in the US show a substantial and sustained rise. Corporate valuations are up as well. That is good news for managers and investors. But is it good news for society?  Economists such as Joseph Stiglitz and Luigi Zingales find the rise potentially troubling for two reasons. First, higher profits create greater economic inequality. Rising aggregate profits correspond to a decline in labor’s share of output, contributing to stagnant wages. Also, greater profits for some corporations but not others may create greater wage inequality. Second, the rise in profits might represent a decline in competition and, with that, a decline in economic dynamism. While a dynamic, competitive economy rewards innovative firms with high profits and punishes poor performers with low profits, sustained aggregate profits suggest, instead, that firms are able to get away with higher prices because competition is limited. Firms engage in political “rent seeking”—lobbying for regulations that provide them sheltered markets—rather than competing on innovation. If so, then high profits portend diminished productivity growth.  In a new research paper, I tease apart the factors associated with the growth in corporate valuations relative to assets (Tobin’s Q) and the growth in operating margins. I account for the roles of R&D, spending on advertising and marketing, and on administrative costs, including IT. I also consider investments in lobbying, political campaign spending, and regulation; and I look for links between rising profits and industry concentration and stock volatility. I find that investments in conventional capital assets like machinery and spending on R&D together account for a substantial part of the rise in valuations and profits, especially during the 1990s. However, since 2000, political activity and regulation account for a surprisingly large share of the increase.

Companies masking $6.6 trillion of debt - Debt can be a good thing. It gets the wheels of the economy moving. Too much debt, however, can be a bit of a problem to say the least (see: the financial crisis). Well, American companies may just have a mountain's worth of problems, according to a new report from Andrew Chang and David Tesher of S&P Global Ratings. "At the same time, the imbalance between cash and debt outstanding we reported on last year has gotten even worse: Debt outstanding increased 50x that of cash in 2015," wrote Chang and Tesher. "Total debt rose by roughly $850 billion to $6.6 trillion last year, dwarfing the 1% cash growth ($17 billion)." To be fair, Chang and Tesher do mention that the $1.84 trillion in cash that the over 2,000 companies they analyzed are holding is the largest amount ever. The issue is, a big pile of cash doesn't help, as the analysts put it, "mask" the much, much larger mountain of debt. Even more worrying, according to the analysts is the distribution of cash and debt among the companies they covered. "Removing the top 25 cash holders from the equation paints an even more concerning picture: Total debt rose $730 billion in 2015, while cash declined by $40 billion," wrote Chang and Tesher. Now to be fair, cash isn't the only way to pay off debt. If necessary, companies can liquidate assets or refinance in order to pay creditors beck. Doing so, however, usually means that the company is in big trouble and is much less preferable. In S&P's case, one of the key factors used to determine a company's credit rating is the ability to pay down debt. So as the cash-to-debt ratio gets even more out of whack, debt problems could be around the corner. "Given the record levels of speculative-grade debt issuance in recent years, we believe corporate default rates could increase over the next few years, especially given diminished growth prospects in China, weak commodity and energy prices globally, and the sizable universe of lower-quality non-financial corporate debt outstanding," said the report. Therefore, the amount of debt and cash on hand to pay for it is not particularly encouraging.

How the “Maximize Shareholder Value” Myth Weakens Companies and Economic Systems - naked capitalism - Yves here. We’ve written from time to time that the notion that companies exist to maximize shareholder value was made up by Milton Friedman in 1970 in an intellectually incoherent New York Times op ed. It started to get traction in the 1980s as the leveraged buyout boom made people like Henry Kravis extremely rich and those who wanted in on the act were in need of intellectual air cover. One minor quibble with this piece: Lynn Stout makes it sound as if the new “maximize shareholder value” has become a duty. If you read any guide for board members, you won’t see it listed among the things they have to worry about. It is more accurate to say that it has become so widely accepted from the standpoint of business practice that CEOs have succeeded in institutionalizing it. It’s considered to be good practice to have share-price linked pay schemes even the author of the theory that executives should be paid like entrepreneurs, Harvard Business School’s Michael Jensen, has repudiated his earlier work. Similarly, compliant compensation consultants and board regularly find ways to justify paying CEOs for non-performance (making excuses for moving the goalposts) and overpaying for what performance there arguably was (when high CEO pay is negatively correlated with performance). In other words, the “maximize shareholder value” regime has served as an excuse for greatly increasing the level of executive pay relative to average worker compensation. often with destructive results.

Life below zero – the impact of negative rates on derivatives activity - One quarter of world GDP now comes from countries with negative central bank policy rates. Practitioners have been forced to update their models accordingly, in many cases introducing greater complexity. But this shift is not just academic. Models allowing for a wider distribution of future rates require market participants to hedge against greater uncertainty. We argue that this hedging contributed to the volatility in global rates in early 2015, but that derivatives can also play an important role in facilitating monetary policy transmission at negative rates. The trend towards negative rates follows a decade of significant growth in financial derivatives. According to the BIS, the total notional outstanding of global FX, interest rate and equity-linked derivatives rose from $72 trillion in 1998, to $522.9 trillion in 2015. The vast majority (nearly 80%) are interest rate derivatives whose theoretical underpinnings are often predicated on the assumption that risk-free rates are bounded at zero. These baked-in assumptions have made it more complicated for financial markets to adjust to life below 0%, particularly where derivatives were priced and risk-managed as if negative rates were not possible. In the world of derivatives, the industry standard model to price options on interest rates (the ‘SABR’ model) relies on an assumed distribution of possible rates.  Traditionally, this distribution is lognormal, meaning rates do not go below zero.  The simplest way to adapt the model to allow for negative rates is to ‘shift’ the distribution of rates lower, such that the lower bound is no longer zero, but somewhere between say -1% and -3%.  Chart 3 below illustrates a stylised shift. But this ad hoc approach has side effects: ‘shifting’ SABR mechanically changes the shape of the entire distribution, including the portion above 0%, in potentially unrealistic ways.

Is the Derivatives Market About to Implode the Big Banks Again? --  The 2008 Crash was caused by the unregulated derivatives markets. And if you think that problem has been fixed, you’re mistaken. Consider Deutsche Bank (DB). DB sits atop the largest derivatives book in the world. This one bank has over $75 trillion in derivatives on its balance sheet. This is over 20 times German GDP and roughly the same size as global GDP. At this size, if even 0.01% of these derivatives are “at risk,” you’ve wiped ALL of the banks’ capital. The bank’s CEO was “very disappointed” when Moody’s recently downgraded its credit rating. Personally, we’d be a lot more disappointed by the share price. DB shares have gone effectively NOWHERE for nearly 20 years. Moreover, this might be the single largest Head and Shoulders topping pattern ever. As we write this, we’re right on the neckline. DB is perhaps the best example of the derivatives problem, but it is by no means the only one. US banks alone have over $200 trillion in derivatives sitting on their balance sheets. And over 77% of these derivatives are based on interest rates. This comes to roughly $156 trillion in interest rate-based derivatives… sitting on the TBTF balance sheets. If even 0.1% of this money is “at risk” it would wipe out 10% of the big banks equity. If 1% were “at risk” it would wipe out ALL of the big banks’ equity. Suffice to say, the Fed cannot afford a spike in interest rates without imploding the big banks: the very banks it has funneled TRILLIONS of dollars to in an effort to prop up. At some point this whole mess will come crashing down just as it did in 2008. The derivatives market remains a $600 TRILLION Ticking Time Bomb.

Five banks sued in U.S. for rigging $9 trillion agency bond market | Reuters: Five major banks and four traders were sued on Wednesday in a private U.S. lawsuit claiming they conspired to rig prices worldwide in a more than $9 trillion market for bonds issued by government-linked organizations and agencies. Bank of America, Credit Agricole, Credit Suisse, Deutsche Bank and Nomura Holdings Inc  were accused of secretly agreeing to widen the "bid-ask" spreads they quoted customers of supranational, sub-sovereign and agency (SSA) bonds. The lawsuit filed in Manhattan federal court by the Boston Retirement System said the collusion dates to at least 2005, was conducted through chatrooms and instant messaging, and caused investors to overpay for bonds they bought or accept low prices for bonds they sold. "Only through collusion could a dealer quote a wider spread than market conditions otherwise dictate without losing market share and profits," the complaint said. "Defendants reaped millions of dollar(s) in profits at the expense of plaintiff and members of the class as result of their misconduct." The proposed class-action lawsuit seeks triple damages, and follows probes by U.S. and European Union antitrust regulators into possible SSA bond price rigging. Those probes are also examining the London-based defendant traders Hiren Gudka of Bank of America, Bhardeep Singh Heer of Nomura, Amandeep Singh Manku of Credit Agricole and Shailen Pau of Credit Suisse, Thomson Reuters' IFR service reported in January.

In Latest Market Rigging Settlement, Citi Fined $425MM For Manipulating Interest Rates | Zero Hedge: Another day, another too-big-to-fail bank gets slapped on the wrist after being busted for blatant rigging of the market. The CFTC Order finds that, beginning in January 2007 and continuing through January 2012 (the Relevant Period), Citibank on multiple occasions attempted to manipulate, and made false reports concerning, the U.S. Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX), a global benchmark for interest rate products. Notably, while a handful of European banks have already settled criminal or civil claims tied to Libor rigging, Citi is the first U.S. bank to do so. The CFTC Order requires Citibank to pay a $250 million civil monetary penalty and to immediately cease and desist from further violations of the Commodity Exchange Act. Further, Citibank is required take specified steps to implement and strengthen its internal controls and procedures, including measures to detect and deter trading potentially intended to manipulate swap rates such as USD ISDAFIX and to ensure the integrity of interest-rate swap benchmarks. “The CFTC’s order demonstrates that we will vigorously continue to investigate any efforts to manipulate financial benchmarks, and we will take action where possible to protect the integrity of these benchmarks,” said Aitan Goelman, the CFTC’s Director of Enforcement. Mr. Goelman further commented, “The terms of this settlement are intended to reflect all aspects of Citibank’s response to the investigation, including the evolving nature of its cooperation.” As the Order sets forth, Citibank attempted to manipulate USD ISDAFIX by making false USD ISDAFIX submissions.  According to the Order, on multiple occasions during the Relevant Period, Citibank, in its role as a panel bank, submitted a rate or spread higher or lower than the reference rates and spreads disseminated to the panel banks on certain days that Citibank had a derivatives position settling or resetting against the USD ISDAFIX benchmark, in an attempt to benefit that derivatives position.

Global Regulators Eye Spotty Shadow Banking Rules | American Banker: — Better coordination and information sharing needs to be fostered between financial regulators worldwide in order to reduce risks posed by so-called shadow banking sector, a group of international supervisors said Wednesday. The Financial Stability Board, an international consortium of regulators and central bankers, published the results of a peer review of countries' implementation of the group's 2013 framework for strengthening oversight and regulation of shadow banks. Ravi Menon, managing director of the Monetary Authority of Singapore and chairman of the stability board's Standing Committee on Standards Implementation that oversaw the preparation of the peer review, said the point of the review was to limit the potential for risk to migrate from banks to other firms because of post-crisis banking reforms.The review found that, while most nonbank financial firms are covered by some measure of regulatory oversight in most jurisdictions, countries observe a wide range of ways of dividing their regulatory functions. Those tasked with regulating firms that perform banklike activities may or may not be collecting data from those firms that is useful to the average investor or to the regulators themselves to identify risks before it's too late, the report said. As a result, the report recommended that jurisdictions improve coordination and communication between agencies, identify and resolve data gaps for regulated nonbanks and increase public disclosure where practicable. The report noted that the United States still accounts for roughly 40% of the global shadow banking industry by assets — by far the single largest jurisdiction

Questions Loom as Bankers Await Dodd-Frank Replacement Plan | American Banker: — As a top Republican lawmaker nears the release of a plan aimed at rolling back and replacing the Dodd-Frank Act, bankers are being cautious about offering any support, fearing it may open the door to changes they oppose. House Financial Services Committee Chairman Jeb Hensarling, R-Texas, is set to offer a preview of his bill June 7 during a speech before the Economic Club in New York. Broadly speaking, the legislation is expected to offer banks a deal: hold more capital in exchange for facing fewer regulations. Although the banking industry has pressed for regulatory relief since Dodd-Frank was enacted in 2010, they are wary of the plan, seeking more specifics on exactly how it would work. "We have heard of the regulatory relief proposal related to higher capital for relief from Dodd-Frank and other regulations, but we have not gotten any details on that, but that could mean many things," said James Ballentine, executive vice president of congressional relations and political affairs at the American Bankers Association. Ballentine raised questions about what trade-offs there would be: "What kind of relief are we talking about?" he said. "If you have this capital [one day] and you don't meet the capital requirements the next day, does the relief disappear in the middle of the night? How are these issues resolved?"

Living Wills: the Biggest Liquidity Rule of Them All - Banking is, at its heart, liquidity transformation. Banks fund themselves with liquid deposits and invest in illiquid loans to businesses and households. Recent decisions by the Federal Reserve and Federal Deposit Insurance Corp. on the living wills of several U.S. banks, while phrased as bank-specific decisions on the credibility of a firm's resolution plan, effectively make important policy decisions about the ability of U.S. banks to engage in liquidity transformation. These decisions, which reinforce other post-crisis regulatory changes, were not subject to notice and comment or mandated by Congress. Nevertheless, they have important ramifications for the ability of the U.S. banking system to fund economic growth. Liquidity transformation can be potentially unstable, however, because each individual depositor or overnight creditor has an incentive to run if there is a whiff of trouble, but the bank can't liquidate its illiquid asset to meet the run. One way to eliminate this inherent risk is, of course, to require banks to make no loans and hold only completely safe and liquid assets such as Treasury bills. Another is to require banks to stop offering savings or checking accounts and fund themselves only with long-term debt. For a variety of reasons, however, modern economies have consistently opted for a banking system in which lending and deposit-taking are combined.

Living Wills Process Is Too Opaque, Data Agency Says | American Banker: — Regulators appear to have made the right call in failing most of the largest banks' living wills, but it's hard to tell given the dearth of publicly available information, a new government report suggests. The "limited data" from public filings, the Office of Financial Research said in a report released Wednesday, "appear to confirm some concerns of regulators." But the OFR, an independent branch of the Treasury Department created under the 2010 Dodd-Frank Act, seemed just as critical of the level of transparency in the living wills process as it was of the banks who had failed to make themselves more resolvable. The report agreed with the Federal Deposit Insurance Corp. and Federal Reserve's findings that most banks were not prepared for resolution without government assistance. In April, the agencies found the bankruptcy plans of five out of eight systemically important banks — including JPMorgan Chase, Bank of America and Wells Fargo — not credible. They disagreed on two banks — Morgan Stanley and Goldman Sachs — while Citigroup was approved by both. The research office based its own analysis mainly on the structure of the banks, concluding that "the largest U.S. bank holding companies have not reduced either their complexity or their interconnectedness." Out of eight banks, the report found, only one — Citigroup — had reduced its number of core businesses from 2013 to 2014. "However," the OFR found, "the public filings do not provide enough information to evaluate companies' cross-border activities or parent company balance sheets."

C&I's Problems Go Well Beyond Energy Loans - The much-maligned energy sector is getting company on the most-wanted list. Nonperforming commercial-and-industrial loans rose 150% to $23.6 billion in the first quarter from a year earlier, according to figures compiled by As a percentage of all C&I loans, nonperformers rose from 0.78% in the fourth quarter to 1.24% in the first quarter. Because banks do not have to report a breakdown of nonperformers by borrower sector, it is easy to assume the blame lies with troubled industries like oil and gas that are grabbing headlines. But interviews with bankers and other experts suggest credit-quality problems extend to other kinds of clients, including construction subcontractors, farmers and taxi operators. The existence of multiple problem areas is almost certain to lead to higher chargeoff rates in coming quarters. "Plumbers, electricians — their profit margins are eroding," said David DePillo, president of First Foundation Bank in Irvine, Calif. "We appreciate the construction space and it's the lifeblood of the West Coast, but there are still a few laggards in the space that haven't recovered from the recession." C&I loans are secured by inventories and accounts receivable, and those assets "tend to liquidate at pennies on the dollar," DePillo said. That will cause chargeoff levels to be higher than normal. At the $2.7 billion-asset First Foundation, nonperforming C&I loans rose from $700,000 in the first quarter of 2015 to $4.95 million in this year's first quarter, representing about 3.1% of the bank's C&I loan book. First Foundation has no exposure to oil-and-gas companies, DePillo said.

FDIC's Ninth Cybersecurity Breach by Former Employee Revealed by Lawsuit | American Banker — As the Federal Deposit Insurance Corp. grapples with a series of newly revealed cybersecurity incidents, the U.S. government is prosecuting a former agency employee over a 2012 breach. In April of that year, Howard P. Zitsman emailed an Excel file from his work to his personal account, the U.S. government has charged. The document he sent himself — labeled "Securities Inventory 2012-04-18" — contained "confidential business information," according to court filings. Zitsman, a former investment banker who was a senior capital markets specialist at the agency from 2010 until 2012, was charged last month in the in U.S. District Court in Northern Illinois with a misdemeanor for his alleged theft of government property. As a contractor, he "was required to protect all data collected and generated while working for the FDIC, and was prohibited form removing sensitive information from the workplace without authorization," the two-page complaint stated. Instead, he knowingly stole the data, which was "confidential and proprietary information belonging to the FDIC," the government alleged. A court hearing has been set for June 6. An attorney for Zitsman did not return calls seeking comment.

North Korea Linked to Digital Attacks on Global Banks - Security researchers have tied the recent spate of digital breaches on Asian banks to North Korea, in what they say appears to be the first known case of a nation using digital attacks for financial gain.In three recent attacks on banks, researchers working for the digital security firm Symantec said, the thieves deployed a rare piece of code that had been seen in only two previous cases: the hacking attack at Sony Pictures in December 2014 and attacks on banks and media companies in South Korea in 2013. Government officials in the United States and South Korea have blamed those attacks on North Korea, though they have not provided independent verification.On Thursday, the Symantec researchers said they had uncovered evidence linking an attack at a bank in the Philippines last October with attacks on Tien Phong Bank in Vietnam in December and one in February on the central bank of Bangladesh that resulted in the theft of more than $81 million.“If you believe North Korea was behind those attacks, then the bank attacks were also the work of North Korea,” said Eric Chien, a security researcher at Symantec, who found that identical code was used across all three attacks.“We’ve never seen an attack where a nation-state has gone in and stolen money,” Mr. Chien added. “This is a first.”  The attacks have raised alarms in the global banking industry because the thieves gained access to Swift, a Brussels-based banking consortium that runs what is considered the world’s most secure payment messaging system. Swift’s system is used by 11,000 banks and companies to move money from one country to another — one reason that it is a tempting target for criminals. Swift has warned publicly that the attacks are part of a broad coordinated assault on banks, though it has not assigned blame. It has also emphasized that it was the banks’ connection points to its network — and not the core Swift messaging network itself — that the attackers were able to breach. Also, American bankers have noted that the security lapses all occurred at banks in third-world countries, which may give some comfort to banking customers in the United States.

Obama Admin. to Supremes: Don't Take Case that Riled Bankers, Online Lenders | American Banker: The Obama administration and an independent federal banking agency are advising the Supreme Court not to review a lower-court ruling that has roiled the marketplace lending sector and caused consternation throughout much of the consumer finance industry. The case hinges on the question of whether nonbanks that buy loans from banks can benefit from a key privilege enjoyed by banks – the right to charge interest rates in excess of state usury caps. Financial industry officials raised loud objections after the 2nd Circuit Court of Appeals ruled against a debt-collection firm that bought credit card debt from a Bank of America subsidiary and was later sued by the borrower for charging excessive interest. In a joint brief to the Supreme Court, the U.S. solicitor general and the Office of the Comptroller of the Currency express agreement with numerous objections that financial industry officials have lodged about the lower court's ruling. The administration even goes so far to call the decision, which has implications for banks' preemption authority, incorrect. Still, the administration officials argue that there is no split between the lower courts on the legal questions raised by the case. And they conclude that the case, Madden v. Midland Funding, would be a poor vehicle for settling those issues. The New York-based appeals court remanded the suit back to the district court, where Midland Funding could still prevail.

Exclusive: New York Financial Regulator Gearing Up to Probe Online Lenders-Source (Reuters) - New York state's financial regulator, which recently launched a probe into LendingClub Corp, is preparing to look into the activities at other online lenders and whether they should be licensed in New York, a person familiar with the matter said on Wednesday. The New York Department of Financial Services (NYDFS) has not yet established which companies it may target, but information it receives in response to a May 17 subpoena sent to LendingClub, one of the largest online lending services, could shed light on broader industry practices that require scrutiny, said the person, who was not authorized to discuss the issue publicly. Last week, NYDFS subpoenaed San-Francisco based LendingClub, a so-called peer-to-peer lender, asking for information about loans it issued to New Yorkers since May 17, 2013. Information demanded by the regulator includes interest rates that LendingClub charges, underwriting standards and details about how the company verifies borrower information. LendingClub has until June 21 to respond. It has said it will cooperate fully with the investigation. Hailed as a "fintech" rival to traditional banks in the wake of the financial crisis, lenders like LendingClub enjoyed rapid growth and attracted plenty of investor dollars through their promise to provide quick and cheap unsecured personal and business loans online. Unlike banks, which retain some of the risk from the loans they make, marketplace lenders sell the loans on to hedge funds, pension funds or individual investors.

Credit Unions, Community Banks Duke It Out Over Planned Rule - WSJ: A long-standing rivalry between U.S. credit unions and community banks has been reignited by a government push to boost credit-union membership. The proposed rule from the National Credit Union Administration, credit unions’ federal regulator, could be completed by this fall. The move comes as both sectors are facing increased competition for loans, as well as regulatory and technology costs, and low interest rates that are crimping profitability and pushing them toward consolidation. For many credit unions, the new regulation will determine whether they can continue to grow without bumping up against regulatory restrictions. Meanwhile, many bankers view stopping that growth as key to preserving their market share, which they see threatened not only by not-for-profit credit unions but also by upstart online lenders such as LendingClub Corp.  Credit unions and community banks often target the same customers, both individuals and small businesses, with local financial services. Under federal law, credit unions enjoy tax-exempt status but have restrictions on their activities and membership, while bankers have more free rein in lending but must pay taxes. The proposed rule would make more than a dozen changes to limits on how credit unions define their “field of membership,” giving the lenders more flexibility to expand. Credit unions serving certain geographic areas could expand their territory without bumping up against population limits or other restrictions. Credit unions serving employee groups could add new members even if the only “service facility” available to them is the credit union’s website. The banking industry has condemned the NCUA’s proposal, saying it risks blurring the lines between credit unions and community banks.

Satan’s Credit Card: What The Mark Of The Beast Taught Me About The Future Of Money -- My choice to get microchipped was not ceremonial. It was neither a transhumanist statement nor the fulfillment of a childhood dream born of afternoons reading science fiction. I was here in Stockholm, a city that’s supposedly left cash behind, to see out the extreme conclusion of a monthlong experiment to live without cash, physical credit cards, and, eventually, later in the month, state-backed currency altogether, in a bid to see for myself what the future of money — as is currently being written by Silicon Valley — might look like. To hear Silicon Valley tell it, the broken-in leather wallet is on life support. I wanted to pull the plug. Which is how, ultimately, I found myself in this sterile Swedish backroom staring down a syringe the size of a pipe cleaner. I was here because I wanted to see the future of money. But really, I just wanted to pay for some shit with a microchip in my hand.   If that doesn’t feel revolutionary or particularly futuristic, it’s because it’s not really meant to. But the future of mobile retail is assuredly dystopian. Just ask Andy O’Dell, who works for Clutch, a marketing company that helps with consumer loyalty programs and deals with these kinds of mobile purchasing apps. “Apple Pay and the Starbucks payment app have nothing to do with actual payments,” he told me. “The power of payments and the future of these programs is in the data they generate.”

Bankers Cry Foul Over CFPB Overdraft Data Collection - The Consumer Financial Protection Bureau is making an end run around existing regulations to collect data on overdraft programs, according to the American Bankers Association.The trade group sent a letter this month urging the CFPB to stop what it deemed an abuse of a process under the Paperwork Reduction Act to collect additional data on overdraft services.Jonathan Thessin, a senior counsel at the ABA's Center for Regulatory Compliance, said so-called "generic clearances" are not meant to be used to collect information that raises "substantive or policy issues." Instead, it wants the agency to put out a proposal allowing the public to comment on what information is being collected and why."If the bureau desires to collect information on a substantive or policy issue, it should seek approval for a standard clearance, which would provide the public with an opportunity to comment on the collection request, including providing suggestions to improve the methodology of the proposed collection," wrote Thessin.Though technical in nature, the issue gets at the heart of various issues with the CFPB, namely accusations that it skirts rules and avoids letting the industry weigh in on issues both minor and major. Paperwork Reduction Act requirements apply in cases where government agencies ask identical questions to 10 or more institutions. But the burden is higher for qualitative questions versus so-called "generic" requests, which are considered to be routine. The ABA claims that the questions on overdraft, however, are far from that. The CFPB has not issued any rules yet on overdraft programs on checking accounts. Yet its generic information request is 43 questions intended to probe consumers' understanding and experiences with overdraft programs.

CFPB Data on Auto Title Loans Is Flawed, Academics Say | American Banker: Academics are challenging the Consumer Financial Protection Bureau's study of auto title loans, calling the findings inconsistent with state data. The agency's study, released May 18, found that one in five borrowers who take out a short-term auto title loan end up having their vehicle repossessed. But some states report vehicle repossessions rates of between 6% and 11%, far lower than the CFPB's figures, said Jim Hawkins, an associate law professor at the University of Houston Law Center. Texas had the highest repossession rate of 9.94% in 2013, said Hawkins, who has analyzed repossession rates in seven of the 25 states that allow single-payment auto title loans.   The study is important because the CFPB is set next week to propose the first national regulations of the $38.5 billion payday lending industry, which includes auto title loans. The debate around the upcoming rules affecting small-dollar lending has prompted the industry to call for further analysis of the underlying data used to support the CFPB's proposal. Auto title loans are short-term, high-cost loans where the consumer uses a paid-off vehicle as collateral. The loans typically are for up to $1,000 and must be paid in full after a month, often consuming 50% of a borrower's gross monthly income. The CFPB's study specifically sought to measure the number of times a loan is reborrowed, and found that 80% of auto title loans are reborrowed the same day an initial loan is repaid. Only one out of eight loan sequences consist of a single loan that is repaid without reborrowing, the CFPB found.

CFPB Bullied Me into $85K Settlement: Former Wells Fargo Officer: — The Consumer Financial Protection Bureau reached an $85,000 settlement Wednesday with a former Wells Fargo mortgage loan officer. The CFPB alleges that David Eghbali, a loan officer for a Wells Fargo branch in Beverly Hills, Calif., developed a scheme to manipulate escrow fees in order to close more mortgages and boost his bonus. "We have taken action against an individual loan officer for illegal mortgage fee-shifting," said CFPB Director Richard Cordray in a press release. "This should send a strong message that the law must be followed not only by large financial institutions, but also by the individuals who work for them." According to a CFPB press release, Eghbali capitalized on an arrangement with New Millennium Escrow between 2013 and 2015 to shift around escrow fees, lowering them for certain customers and making up for the cost by tacking on higher fees for other customers. The CFPB says the plan helped Eghbali close deals by offering "no cost" loans to consumers who otherwise would have shopped around for better deal while charging more to less cost-conscious customers. But Eghbali denied any wrong doing and said he signed the consent order only because of the high cost of litigating the case. "I am deeply shocked that the CFPB chose to pursue a regulatory action against me on a novel and frankly bizarre theory -- that obtaining low or zero fee escrow services for certain of my clients somehow delivered an improper 'benefit' to me at the expense of my clients," said Eghbali in a statement

Wells Fargo Reintroduces 3%-Down Mortgages -- In the wake of its recent $1.2 billion settlement with the government, whereby Wells Fargo admitted to deceiving the government into insuring thousands of risky mortgages (yet nobody went to jail), the bank has decided to break with the Federal Housing Administration and offer its own minimal down payment mortgage program. The new program partners with Fannie Mae in order to allow borrowers with credit scores as low as 620 to make as little as a 3% down payment and use income from family members or renters to qualify. Naturally, the intent is to make more loans to low and middle-income borrowers - in the process pushing up home prices countrywide - without going through the FHA. As a reminder, the FHA insures mortgages made to buyers who would otherwise have a hard time getting loans, but it has been shunned by banks following a wave of lawsuits by the Justice Department that alleged poor underwriting. Wells Fargo made $6.3 billion in FHA-backed loans last year, and is a top 20 originator for the FHA according to the WSJ. It's not just FHA however: as we have shown previously, Wells' own mortgage origination pipeline has been slowing down in recent years, and as such the corner office of the country's largest mortgage originator is desperate to find new and innovative ways to boost lending.  Self-Help Ventures Fund, based out of Durham, NC will now be taking the default risk on these low down payment mortgages originated by Wells Fargo. Self-Help comprises a state and federally chartered credit union as well as the ventures loan fund, and has a total of $1.6 billion in assets. The "fund" has been partnering with Bank of America on insuring loans from their low down payment loan program since February, and hassaid it is on track to make between $300 million and $500 million in its BofA mortgage product within the first year.

Wells Fargo Sponsorship of Black Lives Matter Panel Draws Scorn -- Wells Fargo’s sordid practice of steering minorities into exploitative mortgages burst into public view after the housing crash in 2008. But to a black business group the bank has partnered with — by donating nearly half a million dollars — it’s ancient history. The U.S. Black Chambers (USBC), an organization dedicated to growing black business, has been collaborating on programs with Wells Fargo since 2014. But a Wells Fargo-sponsored USBC luncheon held last week was a bridge too far for some observers. The lunch discussion was titled: “From Black Panthers to Black Lives Matter, the Movement Continues.” One panelist was DeRay Mckesson, a former candidate for mayor in Baltimore and a high-profile Black Lives Matter activist. The Wells Fargo branding was prominent. The event drew scorn from people incensed that black activism would be linked with Wells Fargo. Dwayne David Paul, a minister at St. Peter’s University in New Jersey, tweeted: “Liberal reformist politics in a nutshell. ‘Black liberation brought to you by orgs that prey upon Black folk.'”  Indiana-based writer Fredrik DeBoer drew attention to the event in a post on Facebook, writing, “this is why I drink.”

Appeals court throws out Bank of America $1.27 billion penalty -A U.S. appeals court today threw out a $1.27 billion penalty levied against Bank of America in connection with shoddy mortgages sold by the former subprime giant Countrywide. The loans in question were offered through Countrywide’s “hustle” program in 2007 and sold to now government-owned Fannie Mae and Freddie Mac even though executives knew the mortgages did not meet certain quality standards. Story Continued Below The ruling reverses a lower court decision forcing the bank to pay the penalty and is a defeat for a Justice Department long criticized for not successfully prosecuting mortgage firms and banks for their role in the 2008 crisis. The White House has touted such settlements as evidence that the Obama administration has been tough on the firms that contributed to the implosion of the housing market. Second Circuit Appeals Court Judge Richard Wesley sided with the bank by drawing a distinction between knowingly breaching a contract — in this case with Fannie and Freddie — and knowingly executing a scheme to defraud the government. Wesley also wrote that government lawyers never showed at trial that the executives personally told Fannie and Freddie the loans were safe. "The Government has never argued — much less proved at trial — that the contractual representations at issue were executed with contemporaneous intent never to perform, and the trial record contains no evidence that the three key Individuals — or anyone else — had such fraudulent intent in the contract negotiation or execution," Wesley wrote. "Instead, the Government’s proof shows only post-contractual intentional breach of the representations."

Bank of America's Winning Excuse: "We Didn't Mean To" –- Back in the late-housing-bubble period, in 2007, Countrywide Home Loans, which was then the largest mortgage provider in the country, rolled out a new lending program. The bank called it the “high-speed swim lane,” or HSSL, or, even more to the point, “hustle.”Countrywide, like most mortgage lenders, sold its loans to Wall Street banks or Fannie Mae and Freddie Mac, two mortgage giants, which bundled them and, in turn, sold them to investors. Unlike the Wall Street banks, Fannie and Freddie insured the loans, so they demanded only the ones of the highest quality. But by that time, borrowers with high credit scores were getting scarcer, and Countrywide faced the prospect of collapsing revenue and profits. Hence, the hustle program, which “streamlined” Countrywide’s loan origination, cutting out underwriters and putting loan processors, whom the company had previously deemed not qualified to answer borrowers’ questions, in charge of reviewing loan applications. In practice, Countrywide dropped most of the conditions meant to insure that loans would be repaid. The company didn’t tell Fannie or Freddie any of this, however. Lower-level Countrywide executives repeatedly warned top executives that the mortgages did not fulfill the requirements. Employees changed data about the mortgages to make them look better, sometimes increasing the borrower’s income on the forms until the loan looked acceptable. Then, Countrywide sold them to the mortgage giants anyway. To federal prosecutors—and to a jury in Manhattan—the hustle sounded like fraud.And in 2013, Bank of America, which had by then taken over Countrywide, was found liable for fraud and later ordered to pay a $1.27 billion judgment to the government.  But this week, the 2nd U.S. Circuit Court of Appeals looked at that judgment and asked this question: If a entity (in this case, a bank) enters into a contract pure of heart and only deceives its partners afterward, is that fraud?  The three-judge panel’s answer was no. Bank of America is no longer required to pay the judgment.

US bank branches stay open despite slump in transactions - Only one in 30 US bank and credit union branches has shut since 2009 even as the digital revolution has led to a sharp fall in the number of transactions they handle. The amount of banking business customers do in person has slumped at about ten times the rate of net branch closures, according to data from the consultancy Bancography. The figures highlight the changing role played by bank branches — but also raise questions over the future of lenders’ bricks and mortar networks. Brett King, founder of mobile finance app Moven, said: “If you think about the viability of the branch, the question has to be: are customers visiting? We have a rapid decline in visits.” “People just aren’t using them as much as they used to.” The number of branches across the country has dropped by about 4,000 over the past six years, reducing the total to its lowest since 2006. The decline, however, is equivalent to little more than 3 per cent. By last year there were still 112,000 branches, according to the Bancography data. That equates to roughly one branch for every 1,100 households. Yet in-branch transactions have dropped by more than a third. Six years ago bank branches oversaw an average of 11,200 transactions — such as transferring funds, cashing cheques, or withdrawing cash — per month. That had fallen to 7,200 last year, Bancography estimates. Several leading bankers have, nevertheless, said that branches still have an important function. More than 90 per cent of customers open accounts there.

Watt Warns FHLBs on Reliance on Short-Term Funding: — Federal Housing Finance Agency Director Mel Watt sounded alarm bells Wednesday about Home Loan Banks' reliance on short-term funding in the form of discount notes. During a speech to the FHLB's director's conference, he noted that at yearend 2015, discount notes made up 54% of outstanding Home Loan Bank debt, compared to 43% in 2014 and 39% in 2013. "Short-term funding requires more frequent debt rollover than longer-term funding and this could become a safety and soundness issue if liquidity dries up unexpectedly," Watt said. "The FHLBs and the Office of Finance are having ongoing discussions about how to address this issue." Watt's warning alarmed Jaret Seiberg, a Washington policy analyst at Guggenheim Partners. Forcing the FHLBs to rely on "longer-term financing will boost the cost of advances," Seiberg wrote in a note to clients. "That could be a negative for housing by raising the costs of mortgage lending that is supported with advances." Watt also reiterated concerns regarding insurance companies and large bank members, saying that some FHLBs have large exposures to a few individual members. "Across the system, the top four borrowers accounted for 24% of aggregate advances at the end of 2015,"

Why HUD s Loan Sales Continue to Stoke Concerns: — The Federal Housing Administration's loan sales are drawing more attention after a recent critical report said it was resulting in vulnerable borrowers losing their homes. The Department of Housing and Urban Development began the loan sales in 2012 as a way to pare down a growing portfolio of nonperforming loans. But selling them means that borrowers who might qualify for HUD's loan mitigation programs are suddenly no longer eligible. HUD designed "specific alternatives to foreclosure that lenders and their servicers must consider before they proceed with foreclosures," says a May 10 report by the National Consumer Law Center. But "HUD opted to sell tens of thousands of loans in its foreclosure pipeline, making these loans ineligible for the FHA loss mitigation options." Meanwhile, the private investors who purchase these loans at a discount were under no obligation to provide options to avoid foreclosure. HUD initially sold the loans to reduce losses on delayed foreclosures and restore the health of the FHA insurance. But now it is trying to improve the program to help borrowers. In response to the report, HUD said that "FHA offers a variety of opportunities for a homeowner to remain in their home and ensuring lenders follow the proper procedures."

Why Banks Are Dumping Fannie, Freddie Debt | American Banker: The largest banks are dumping their holdings of Fannie Mae and Freddie Mac debt, and it's contagious. It turns out small banks have been doing the same thing. GSE bonds at all U.S. banks (excluding mortgage-backed securities) fell from $213.5 billion, or 1.47% of total assets, in the third quarter of 2013, to $152.3 billion, or 0.93%, in this year's first quarter, according to data compiled by That is the lowest level in the past decade. Big banks' motivation is easy to pinpoint: the need to comply with recent federal liquidity regulations that are supposed to improve large financial institutions' odds of withstanding the next financial crisis. What's driving community banks to follow their lead is murkier since those rules do not apply to small players. Yet the impact on all banks is clear. Though the bond sales are lessening systemic risk in the eyes of regulators, they are cutting into profits at a time when banks are hard-pressed for growth. Meanwhile, Fannie and Freddie could see the cost of debt issuances rise if the drop in demand from banks remains pronounced. Since the passage of the liquidity coverage ratio requirement almost two years ago, many institutions have steadily unloaded ownership of debt obligations issued by Fannie, Freddie and other government-sponsored enterprises because of the way GSE debt is scored in the liquidity equation. The factors of concern to banks include how the quality of the obligations is judged, and their higher risk weighti

Why Ginnie Mae Plans to Stress-Test Its Issuers: Ginnie Mae spotted the red flags at W.J. Bradley soon enough to have a new loan servicer in place by the time the nonbank mortgage lender failed in March. There were no interruptions in cash flow from the pools of loans Bradley had originated to the investors in the bonds Ginnie guaranteed. The agency had done had its job. But Ginnie wants go one step further in its monitoring of issuers' operations. It plans to model how the liquidity of companies that issue its mortgage-backed securities would look under stress, so it can troubleshoot more effectively. "With rate changes and delinquency changes changing the whole complexion of an issuer, just getting the snapshot of their financials periodically isn't enough," said Ginnie president Ted Tozer. "We need to be more dynamic to understand how close they are to the tipping point. Then we could actually see some of them deteriorating to the point where things are going to happen. That would give us time to remediate. That gives us time to counsel." Ginnie has a ways to go before it can figure out exactly how to implement and budget for stress tests, but it has begun considering how it might conduct them. "We'll come out with a process to stress-test your corporation and give us the feedback or somehow do a stress test ourselves," said Tozer. Ginnie's bank issuers, its traditional customer base, are already subject to stress tests under the post-crisis regulatory regime. But nonbanks are not. While Ginnie is smaller than its secondary market cousins Fannie Mae and Freddie Mac, nonbank servicers account for a greater percentage of Ginnie's mortgage risk.

Fannie, Freddie and the Secrets of a Bailout With No Exit - The New York Times: When Washington took over the beleaguered mortgage giants Fannie Mae and Freddie Mac during the collapse of the housing market and the financial crisis of 2008, it was with the implicit promise that they would be returned to shareholders after being nursed back to health.But now, with the unsealing of documents this week that were produced as part of a lawsuit filed against the government, new evidence is coming to light on how intimately the White House was involved in the Treasury’s decision in August 2012 to keep all the companies’ profits for the government. That move effectively maintained Fannie’s and Freddie’s status as wards of the state.The newly released documents go beyond previous disclosures in the case and make clear that the Obama administration never had any intention of restoring Fannie and Freddie, which enjoyed implicit backing from the government before the takeover, to their status as stand-alone entities.An email from Jim Parrott, then a top White House official on housing finance, was sent the day the so-called profit sweep was announced. It said the change was structured to ensure that the companies couldn’t “repay their debt and escape as it were.”The documents also show the Treasury moving to modify the terms of the mortgage finance giants’ $187.5 billion bailout shortly after a July 2012 meeting when the Federal Housing Finance Agency, Fannie’s and Freddie’s regulator, learned that they were about to enter “the golden years” of profitability.AdvertisementContinue reading the main story Since then, Fannie and Freddie have returned to the Treasury over $50 billion more than they received in the bailout. But the amount they owe to the government remains outstanding.

Confidential’ Memo in the Hedge Fund Battle for Freddie and Fannie Comes Out of Hiding - By Pam Martens There’s a lurking memo among government documents concerning the government takeover of Fannie Mae and Freddie Mac during the 2008 financial collapse on Wall Street that undermines the raging media propaganda wars now taking place. Two writers at the Wall Street Journal have functioned as Diogenes in this churning sea of propaganda: John Carney and Joe Light. Carney has brilliantly and cogently explained why it “would take decades” to build adequate capital at Fannie and Freddie and set them free from the September 2008 conservatorship under which the U.S. government placed them in an effort to save the rest of the financial system. Joe Light has done yeoman’s work in laying bare the lengths to which hedge fund titans like John Paulson (already bathed in shame for his scurrilous acts with the vampire squid) are willing to go to push their greed agenda with Fannie and Freddie’s stock. See here and here.   Then there is the bombshell “confidential” memo which has been resting quietly in the exhibits of the Financial Crisis Inquiry Commission (FCIC). On Saturday, March 8, 2008, White House economist Jason Thomas sent U.S. Treasury Undersecretary, Robert Steel, a 12-page bombshell memorandum explaining in copious detail why Fannie Mae was engaging in “accounting fraud.”  Why is this memo a bombshell? Because Fannie Mae, precisely two months after this memo, issued billions of dollars of new preferred and common stock to the marketplace. We’re pretty sure there was no mention of “accounting fraud” in the offering memorandum. According to the press release at the time of the capital raising, Lehman Brothers, JPMorgan Securities and Citigroup Global Markets were joint book-running managers for the common stock while Goldman Sachs and Morgan Stanley acted as co-managers.

Congress Risks Letting Big Banks Control Housing Finance | Bank Think: It is quite clear that comprehensive legislative reform of the government-sponsored enterprises is not going to happen this year. But Congress is still considering adopting piecemeal housing finance provisions in advance of a broader longer-term proposal. Unfortunately, those piecemeal provisions risk setting GSE reform on the wrong path. Without comprehensive steps mandated by Congress, the Federal Housing Finance Agency and the GSEs have made constructive progress to reform the way they do business that has increased efficiency in the mortgage system and provided taxpayers with more protection.  Unfortunately, piecemeal congressional proposals are pending which would dictate how the FHFA and GSEs' recent actions are carried out, and would potentially limit the progress of these reforms. We oppose these provisions because they appear to benefit the big banks, and in the process would hurt small and midsize lenders and the consumers we serve. Congress shouldn't take incremental steps to prejudge or tilt GSE reform in a certain direction – the wrong direction – before lawmakers and the industry have had a chance to debate a comprehensive housing finance package.The first proposal is a requirement to take the Common Securitization Platform away from the GSEs and turn it over to the private sector. The problem with this idea is, practically speaking, the common platform would then be controlled by the "too big to fail" banks and securities firms that are the only private-sector entities with the infrastructure to control it. The second legislative provision we are concerned about is a directive to FHFA and the GSEs to do upfront risk-sharing. Upfront risk-sharing tied to MBS structures – like the multibillion-dollar deals done by JPMorgan Chase – poses a significant danger to small and midsize lenders, consumers and taxpayers. It would lead to more market share for holding companies that have both a bank to do the origination and a securities firm to do the securitization, whereas smaller lenders must seek outside help to package loans into MBS.

Panama Papers Confirm Miami a Disneyland for Fraud -- Half of every completed complex marking Miami's skyline appears half-empty. At night you can count the dark vacancies, void of any patio furniture, electricity or life. These units aren't owned by snow-birds; they are owned but unoccupied.Foreign investors, we were told, from Brazil and elsewhere. They viewed Miami as a legitimate and safe place to invest. While this might be true to an extent, the recent release of the Panama Papers confirms some things haven't changed: Miami's booming high-end real estate market is at least partially used to launder money and a majority of units purchased are through offshore shell companies that hide true ownership and serve as a legal way to evade taxes.Yet developers keep building at a fast pace, rents continue to increase beyond any local's affordability, all while small businesses close one after another.And there is no end in sight. Those giving their blood sweat and tears to the cultural growth of Miami are being priced out of the neighborhoods they want to grow. This is gentrification and nothing new, except this form of gentrification exists of shadowy non-entities who won't occupy half of the units rather than trendy upscale young urban professionals. And we have to live with the dubious realization that all the construction coming our way will basically house the shadowy assets of the world's richest one percent.   According to the Miami Association of Realtors, as first reported on in the Miami Herald, cash deals accounted for 53 percent of all Miami-Dade home sales in 2015 -- double the national average -- and 90 percent of new construction sales.  Ninety percent!

David Dayen’s Chain of Title Interview Confirms What You Always Suspected: The Game is Rigged --- Chain of Title should be required reading in every college-level business ethics class in America. At a time when “business ethics” is an oxymoron, perhaps the current generation that adores Bernie Sanders might better understand the dangers big banking monopolies hold. David Dayen’s newly released non-fiction book, Chain of Title, unearths a system with the power and collateral to stonewall millions of homeowners from obtaining one very simple answer: Who owns my mortgage?  If you haven’t been able to wrap your head around why the federal government has failed to prosecute one banker for the foreclosure crisis there is a very simple answer that Chain of Titlealludes to. The federal government has a dark secret: the trusts are empty and the falsified notes cannot be traced back to their true owners so they must be “recreated” if a default occurs. This means that the investors, the pensions and the trusts own nothing. It also means that the banks now own everything- including the U.S. federal government. It hardly matters that we have separation of powers if the bankers and elite control all three branches. Salon contributing writer David Dayen and winner of the coveted Ida and Studs Terkel Prize, illuminates how home buyers have ended up illegally evicted from their homes as the result of dishonesty, greed, and deception at the hands of mortgage lenders, servicers, investment bankers, and unscrupulous lawyers. Dayen states that Alan Greenspan “viewed regulations the way an exterminator viewed termites.” If this is true, then 2 Presidents viewed homeowners the way a sunbather views 300 million gnats at the beach.  What is truly amazing about this book is how Dayen, who has never gone through foreclosure himself, is able to recreate the desperation, optimism, and naiveté of homeowners fighting foreclosure while concurrently examining the systematic collapse of the economy. Dayen’s writing explores the possibilities for the housing crash while remaining detached from the outcome. For example, he writes, “There is a rot at the heart of our democracy, rooted in a nagging mystery that has yet to be unraveled. It gnaws at people, occupies their thoughts, leaves them searching for answers in the chill of the night. Americans want to know why no high-ranking Wall Street executive has gone to jail for the conduct that precipitated the financial crisis. The oddest thing about the predominance of the question is that everyone already assumes they know the answer. They believe that too many politicians, regulators, and law enforcement officials, bought off with campaign contributions or the promise of a future job, simply allowed banker miscreants to annihilate the law in pursuit of profit.”

Black Knight's First Look at April Mortgage Data: Lowest Number of Foreclosure Starts in 10 Years --From Black Knight: Black Knight Financial Services’ First Look at April Mortgage Data: Lowest Number of Foreclosure Starts in 10 Years; Prepay Activity Falls Despite Low Rates

• At 58,700, April 2016 saw the lowest number of foreclosure starts since April 2006
• National delinquency rate is up from a 9-year low in March, but still 10 percent below last year’s level
• Prepayment speeds (historically a good indicator of refinance activity) fell in April, despite interest rates being near 3-year lows
• Active foreclosure inventory has now dropped below 600,000 for the first time since 2007According to Black Knight's First Look report for April, the percent of loans delinquent increased 3.8% in April compared to March, and declined 10.3% year-over-year.
The percent of loans in the foreclosure process declined 5.9% in April and were down 27.8% over the last year. Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 4.24% in April, up from 4.08% in Maarch. The percent of loans in the foreclosure process declined in April 1.17%. The number of delinquent properties, but not in foreclosure, is down 235,000 properties year-over-year, and the number of properties in the foreclosure process is down 225,000 properties year-over-year. Black Knight will release the complete mortgage monitor for April on June 6th.

Fannie Mae and Freddie Mac: Mortgage Serious Delinquency rates declined in April -- Freddie Mac reported that the Single-Family serious delinquency rate decreased in April to 1.15% from 1.20% in March.  Freddie's rate is down from 1.66% in April 2015. This is the lowest rate since August 2008. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.  These are mortgage loans that are "three monthly payments or more past due or in foreclosure".   Fannie Mae reported today that the Single-Family Serious Delinquency rate declined in April to 1.40%, down from 1.44% in March. The serious delinquency rate is down from 1.73% in April 2015. This is the lowest rate since June 2008. The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%. Although the rate is generally declining, the "normal" serious delinquency rate is under 1%.   The Freddie Mac serious delinquency rate has fallen 0.51 percentage points over the last year, and at that rate of improvement, the serious delinquency rate will be below 1% until the second half of this year.  The Fannie Mae serious delinquency rate has fallen 0.33 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 2017.  I expect an above normal level of Fannie and Freddie distressed sales through 2016 (mostly in judicial foreclosure states).

Lawler: Table of Distressed Sales and All Cash Sales for Selected Cities in April --Economist Tom Lawler sent me the table below of short sales, foreclosures and all cash sales for selected cities in April. On distressed: Total "distressed" share is down in all of these markets.  Short sales and foreclosures are down in all of these areas. The All Cash Share (last two columns) is mostly declining year-over-year. As investors continue to pull back, the share of all cash buyers continues to decline.

CoreLogic: Far Fewer Low Credit Score Applicants Than Before Housing Crisis --An interesting post from Archana Pradhan at CoreLogic Far Fewer Low Credit Score Applicants Than Before Housing Crisis. An excerpt:  One of the key factors used in mortgage underwriting as well as in our Housing Credit Index is the credit score. The average borrower credit score for home-purchase originations has increased from roughly 700 in 2005 to almost 750 in 2015 (Figure 2). In 2005, the credit score for the first percentile ranged from 520 to 540 and showed a dramatic rise during the Great Recession, and is currently running in a range of 620 to 630. By just gazing at the borrowers’ credit scores, one could conclude that mortgage originations were constrained as a result of tight underwriting standards. But how has loan demand changed, particularly for the borrowers with relatively low credit scores? The origination volume is the end result of an interplay between loan applicants’ demand and lenders’ risk tolerances. Is there a way to disentangle mortgage credit supply conditions from mortgage demand? This graph from CoreLogic shows the significant increase in credit scores for the first percentile of borrowers.  At first glance, this would appear to be due to tighter underwriting standards, but Pradhan looks at denial rates and asks: If Credit Underwriting Has Tightened, Why Have Denial Rates Fallen? The data shows that demand has fallen for low credit score borrowers; either they are more cautious, or - more likely - they are discouraged from even applying. Interesting data.

FHFA: House Prices increased 0.7% in March, New Zip Code HPI Data --From the FHFA: U.S. House Prices Rise 1.3 Percent in First Quarter; 19 Consecutive Quarterly Increases U.S. house prices rose 1.3 percent in the first quarter of 2016 according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI). This is the nineteenth consecutive quarterly price increase in the purchase-only, seasonally adjusted index. House prices rose 5.7 percent from the first quarter of 2015 to the first quarter of 2016. This is the fourth consecutive year in which prices grew more than 5 percent. FHFA's seasonally adjusted monthly index for March was up 0.7 percent from February. The HPI is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. ..."Twelve states and the District of Columbia saw price declines in the quarter—the most areas to see price depreciation since the fourth quarter of 2013. Although most declines were modest, such declines are notable given the pervasive and extraordinary appreciation we have been observing for many years." While the purchase-only HPI rose 5.7 percent from the first quarter of 2015 to the first quarter of 2016, prices of other goods and services were nearly unchanged. The inflation-adjusted price of homes rose approximately 5.6 percent over the latest year. And on local HPIs:  With this quarter's release, FHFA is publishing a set of experimental annual house price indexes for five-digit ZIP codes across the country from 1975―2015.​ The indexes are constructed using the typical "repeat-transactions" methodology. Unlike FHFA's other price indexes, however, the five-digit ZIP code measures are annual price measures, meaning that a single index value is produced for each year. As discussed in FHFA Working Paper 16-01, the new indexes may be valuable to analysts seeking data on localized home price movements.

NAR: Pending Home Sales Index increased 5.1% in April, up 4.6% year-over-year - From the NAR: Pending Home Sales Lift Off in April to Over 10-Year High Pending home sales rose for the third consecutive month in April and reached their highest level in over a decade, according to the National Association of Realtors®. All major regions saw gains in contract activity last month except for the Midwest, which saw a meager decline. The Pending Home Sales Index, a forward-looking indicator based on contract signings, hiked up 5.1 percent to 116.3 in April from an upwardly revised 110.7 in March and is now 4.6 percent above April 2015 (111.2). After last month's gain, the index has now increased year-over-year for 20 consecutive months....The PHSI in the Northeast climbed 1.2 percent to 98.2 in April, and is now 10.1 percent above a year ago. In the Midwest the index declined slightly (0.6 percent) to 112.9 in April, but is still 2.0 percent above April 2015. Pending home sales in the South jumped 6.8 percent to an index of 133.9 in April and are 5.1 percent higher than last April. The index in the West soared 11.4 percent in April to 106.2, and is now 2.8 percent above a year ago. This was way above expectations of a 0.8% 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 May and June.

US pending home sales jump to highest level since early 2006 - (Reuters) - Contracts to buy previously owned U.S. homes surged far more than expected in April to the highest level in more than a decade, another sign the economy has gained steam during the second quarter. The National Association of Realtors said on Thursday its pending home sales index, based on contracts signed last month, increased 5.1 percent to 116.3, a level not seen since February 2006. Economists polled by Reuters had forecast pending home sales rising 0.6 percent last month. Contracts usually become sales after a month or two. The increase in pending home sales for March also was revised marginally upward. Overall pending home sales last month were up 4.6 percent from a year ago. The housing sector has steadily strengthened on the back of an economy near full employment and historically low mortgage rates. Contracts rose in three of the nation's four regions, with the West reporting an 11.4 percent jump and the South showing a 6.8 percent increase. The Midwest reported a 0.6 percent decline, but pending home sales in that region were still up 2.0 percent from a year ago.

The Great Housing Squeeze: Available homes for sale remain tight while rents continue to go up. When capitulation turns into mania. - There seems to be an air of capitulation floating around the air.  No, not the toxic fumes floating over Porter Ranch but something akin to giving up.  It is actually a weak form of giving up since you are talking about hipsters and house humping adults looking to overpay for a crap shack.  Forget about the fact that last month the median price on your typical California home fell.  No, it is time to buy now or be priced out forever.  You get the selection bias going: I bought at X time and now I’m X times richer.  Let us ignore the 7,000,000+ households that recently lost their homes to foreclosure.  At least some are willing to admit their “investment” was basically blind luck.  At a few open houses, you can see people as if they were entering a cult with their eyes dilating like the cat in Shrek.  “Can you please let me buy this place and take on a massive mortgage?  Pretty please?!”  To be honest, it is rather shocking to see people waiving contingencies and throwing caution into the wind.  In many cases, people are buying old crap shacks that actually have a ton of deferred maintenance.  One open house, a standard SoCal stucco box, looked like it hadn’t been touched since the 1970s and the aroma of cat urine and dog poop whiffed around the room as people elbowed each other to “examine” the place.  The only sense you had was of panic of missing out.  In other words, mania.  You’ve heard it before that the masses get skewered at peaks and troughs.  Well it very much looks like the masses are capitulating but many simply can’t afford to buy.  This is why sales volume is low despite rising prices.  Low interest rates have magnified purchasing power but how much lower can you go if the Fed is already near zero?  High priced mega metro areas are completely detached from what most Americans are feeling.  And that is why this year politics are trending to the extremes on both sides.  Why shouldn’t day?  We live in an extreme economy.  You either have big bucks or you are leveraging every penny you have to maintain the pretense of a middle class lifestyle.  You can feel it at open houses in “good” areas.  The sense of desperation is palpable.

Another Fine Mess: Rising Home Prices, Declining/Stagnant Incomes/Regulatory Burdens - Its another fine mess that American households are in. Home prices (including multifamily) have been rising, real median household incomes are flat to falling, and regulatory burdens are rising making housing even MORE expensive. Let’s start with household income. A well-known economic phenomenon is the decline in real median household income (RMINC) in the USA since 1999. Generally, RMINC begins falling ahead of recessions (the gray bars in the following chart) and then starts to rise several years after the end of the recession. But the recovery since The Great Recession has been slow indeed, We saw signs of an increase in 2013, only to be disappointed by a decrease in 2014 (2015 RMINC will not be available until October 2016). Of course, the USA is composed of 50 states. But RMINC for the 50 states differs from RMINC for Washington DC. Since 1999, the USA real median household income fell -7.2% through 2014 while Washington DC’s real median household income rose +24.2%. And the nation’s largest economy, California, saw its real median household income fall -6% from 1999 through 2014 (compared with -7.2% from 1999-2014). Yet, California’s (actually San Francisco’s) home prices are up 125% from 1999 through February 2016.

New Home Sales May 24, 2016: The new home sales report has sealed its reputation as the wildest set of data around. April's annualized rate came in at 619,000 which is not a misprint. This is the highest rate since January 2008 and dwarfs all readings of the recovery. February 2015's rate, way behind at 545,000, is the next highest rate this cycle. The data even include a very large 39,000 net upward revision to the two prior months, a gain that reflects annual revisions which are included in the data. The monthly 16.6 percent surge is not only far beyond expectations but is the biggest monthly gain since way back in January 1992. The data also include a big jump in prices, up 7.8 percent in the month to a record median $321,100 while the year-on-year rate, which was negative in the March report, is at plus 9.7 percent year-on-year. But the surge in sales is a negative for supply as supply relative to sales fell very sharply to 4.7 months from 5.5 months. The total number of new homes for sale was little changed, down 1,000 at 243,000. Regional data show a more than 50 percent jump in the Northeast where however the number of sales relative to other regions is very low. The same is true of the Midwest where sales fell 4.8 percent in the month. The two main regions for new home sales both show outsized gains with the South up 15.8 percent and the West up 23.6 percent. Year-on-year, total sales are suddenly up 23.8 percent, this at the same time that the median price is now well past the 6 percent rate where housing appreciation had been trending. Even though new home sales are volatile, which reflects the report's small sample sizes, and even though low supply will limit future gains, the outlook for housing just got a big boost.

New Home Sales increased sharply to 619,000 Annual Rate in April --The Census Bureau reports New Home Sales in April were at a seasonally adjusted annual rate (SAAR) of 619 thousand.  The previous three months were revised up by a total of 44 thousand (SAAR). "Sales of new single-family houses in April 2016 were at a seasonally adjusted annual rate of 619,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 16.6 percent above the revised March rate of 531,000 and is 23.8 percent above the April 2015 estimate of 500,000." The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate. Even with the increase in sales since the bottom, new home sales are still fairly low historically. The second graph shows New Home Months of Supply. The months of supply decreased in April to 4.7 months. The all time record was 12.1 months of supply in January 2009. This is now in the normal range (less than 6 months supply is normal). "The seasonally adjusted estimate of new houses for sale at the end of April was 243,000. This represents a supply of 4.7 months at the current sales rate." Starting in 1973 the Census Bureau broke inventory down into three categories: Not Started, Under Construction, and Completed. The third graph shows the three categories of inventory starting in 1973.

April 2016 New Home Sales Jump: The headlines say new home sales improved from last month. The rolling averages smooth out much of the uneven data produced in this series - and this month there was a significant improvement in the rolling averages.This data series is suffering from methodology issues. Econintersect analysis:

  • unadjusted sales growth accelerated 18.4 % month-over-month (after last month's acceleraton of 4.4 %).
  • unadjusted year-over-year sales up 27.1 % (Last month was 8.7 %). Growth this month was withinr the range of growth seen last 12 months.
  • three month unadjusted trend rate of growth accelerated 9.1 % month-over-month - is up 13.0 % year-over-year.
  • seasonally adjusted sales up 16.6 % month-over-month
  • seasonally adjusted year-over-year sales up 23.8 %
  • market expected (from Bloomberg) seasonally adjusted annualized sales of 510 K to 530 K (consensus 523 K) versus the actual at 619 K.
  • The quantity of new single family homes for sale remains well below historical levels.

Comments on April New Home Sales -- The new home sales report for April was very strong at 619,000 on a seasonally adjusted annual rate basis (SAAR), and combined sales for January, February and March were revised up by 44 thousand SAAR. This was the highest sales rate since January 2008. Sales were up 23.8% year-over-year (YoY) compared to April 2015. And sales are up 9.0% year-to-date compared to the same period in 2015. This graph shows new home sales for 2015 and 2016 by month (Seasonally Adjusted Annual Rate).  Sales to date are up 9.0% year-over-year, mostly because of the strong sales in April.   I expect lower growth this year, probably in the 4% to 8% range.  Slower growth is likely this year because Houston (and other oil producing areas) will have a problem this year. Inventory of existing homes is increasing quickly and prices will probably decline in those areas. And that means new home construction will slow in those areas too.And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales.  Now I'm looking for the gap to close over the next several years. The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through April 2016. This graph starts in 1994, but the relationship had been fairly steady back to the '60s.   Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.Another way to look at this is a ratio of existing to new home sales. This ratio was fairly stable from 1994 through 2006, and then the flood of distressed sales kept the number of existing home sales elevated and depressed new home sales. (Note: This ratio was fairly stable back to the early '70s, but I only have annual data for the earlier years). In general the ratio has been trending down, and this ratio will probably continue to trend down over the next several years.

Americans Bought The Most New Homes In 8 Years Just As The Median Price Hit An All Time High --There was a lot of headscratching in today's New Home Sales reported released moments ago by the Census Bureau, according to which there was a whopping 619K new home sold in April, up from the upward revised 531K (was 511K), and smashing expectations of a 523K print, driven by a surge in Northeast home sales which soared unexpectedly from 36K in March to 55K in April, a completely unexplained 53% spike. The head-scratching is most prevalent among the 75 economists who attempted to forecast this number... but missed by 17 standard deviations!! Here is what drove the overall surge: a clearly "goalseeked" number resulting from a massive surge in Northeast sales, one which will be promptly revised lower next month. Finally, adding fabricated data insult to intellectual injury, we learn that Americans - the same consumers who according to recent retail data are loath to even go out and buy clothes - rushed out to buy new homes in the month when the median new home sale price just hit an all time high of $321,100.

New Home Prices --As part of the new home sales report, the Census Bureau reported the number of homes sold by price and the average and median prices.  From the Census Bureau: "The median sales price of new houses sold in April 2016 was $321,100; the average sales price was $379,800."  The following graph shows the median and average new home prices. During the housing bust, the builders had to build smaller and less expensive homes to compete with all the distressed sales. When housing started to recovery - with limited finished lots in recovering areas - builders moved to higher price points to maximize profits. The average price in April 2016 was $379,800 and the median price was $321,100. Both are above the bubble high (this is due to both a change in mix and rising prices). The median is at a new high. The second graph shows the percent of new homes sold by price. Less than 2% of new homes sold were under $150K in April 2016. This is down from 30% in 2002. The under $150K new home is probably going away. The $400K+ bracket has increased significantly.

More Young Americans Live With Their Parents Than At Any Time Since The Great Depression -- As we've reported, while millennials continue to earn less and drown in debt, they have resorted to living at home in order to cut costs and save money. The trend of millennials returning home to live with their parents has even gotten to the point where one out of six home buyers have or plan to have a grown child at home, and home builders are building to accommodate that fact. As a matter of fact, the trend of kids living at home with their parents has gotten so strong that home builders are now designing homes with just that in mind. "One out of six buyers have or plan to have a grown child at home" said Richard Bridges, Chicago division sales manager at David Weekly Homes. For a mere $35,000-plus, Richard says the plan can include a bedroom/bathroom suite in a finished basement to accommodate the kids who inevitably will be returning home to live. Chicago area builder PulteGroup says in their new models, kids can enjoy a bedroom/bathroom suite with a kitchenette and separate living space. "Our NexGen option is the greatest in housing since indoor plumbing." said Jeff Roos, western regional president at Lennar Corp. Stunningly, according to new Pew Research Center analysis, 32.1% of all millennials are living with their parents now, which is more than any other time since the great depression!

No Relief in Sight for Minimum-Wage Renters - Simply raising the minimum wage won’t be enough to solve the country’s affordable housing crisis for low-income renters. Even in cities that have raised the hourly minimum wage, the amount earned continues to fall well short of what is needed to afford an apartment, according to a report to be released Wednesday by the National Low Income Housing Coalition.  In Emeryville, Calif., which has one of the highest minimum wages in the country at $14.44, or the equivalent of earning about $30,000 a year, renters would still need to earn nearly $32 an hour working full time to afford a typical one-bedroom apartment. It would take more than $40 an hour to afford a two-bedroom unit, according to the report. In Chicago, where the minimum wage is now $10, workers would still need to earn $19.25 an hour to afford a one-bedroom apartment and $22.62 for a two-bedroom, according to the report.  The report, which the group releases annually, shows that while the rental market overall is starting to cool, there is little relief in sight for low-income renters. A family would need to earn $20.30 an hour working full time to afford a typical two-bedroom apartment in the U.S., compared to $19.35 last year. . That is the equivalent of working 2.8 full-time jobs at minimum wage.

NY Fed: Household Debt Increased in Q1 2016, Delinquency Rates Declined --The Q1 report was released today: Household Debt and Credit Report. From the NY Fed: Household Debt Steps Up, Delinquencies Drop Household indebtedness continued to advance during the first three months of 2016 according to the Federal Reserve Bank of New York’s Quarterly Report on Household Debt and Credit, which was released today. ... The bulk of the $136 billion (1.1 percent) aggregate debt increase came from mortgages, which increased $120 billion from the fourth quarter of 2015 to a four and a half year high. The median credit score for newly originating mortgages increased slightly, and 58 percent of all new mortgage dollars went to borrowers with credit scores over 760. ...  Overall repayment rates generally improved in the first quarter of this year. Five percent of outstanding debt was in some stage of delinquency, the lowest amount since the second quarter of 2007. ..."Delinquency rates and the overall quality of outstanding debt continue to improve," said Wilbert van der Klaauw, senior vice president at the New York Fed. "The proportion of overall debt that becomes newly delinquent has been on a steady downward trend and is at its lowest level since our series began in 1999. This improvement is in large part driven by mortgages."  Here are two graphs from the report: The first graph shows aggregate consumer debt increased in Q1.  Household debt peaked in 2008, and bottomed in Q2 2013. Mortgage debt increased in Q1, from the NY Fed: Mortgage balances, the largest component of household debt, increased in the first quarter. Mortgage balances shown on consumer credit reports stood at $8.37 trillion, a $120 billion increase from the fourth quarter of 2015. Balances on home equity lines of credit (HELOC) dropped by $2 billion, to $485 billion. Non-housing debt balances rose somewhat in the first quarter; increases of $7 billion and $29 billion in auto and student loans, respectively, were offset by a $21 billion decline in credit card balances. The second graph shows the percent of debt in delinquency. The percent of delinquent debt is declining, although there is still a large percent of debt 90+ days delinquent (Yellow, orange and red).   The overall delinquency rate decreased in Q1 to 5.0%.  There are a number of credit graphs at the NY Fed site.

Just Released: Hints of Increased Hardship in America’s Oil-Producing Counties -- Today, the New York Fed released the Quarterly Report on Household Debt and Credit for the first quarter of 2016. Overall debt saw one of its larger increases since deleveraging ended, while delinquency rates for the United States continued to improve and remain at very low levels. Although the overall picture of Americans’ liabilities has continued to improve since the financial crisis, we wondered what the variation looks like at local levels. One advantage of our Consumer Credit Panel (CCP), which is based on Equifax credit data, is that we can examine geographic variation in debt and delinquency rates. Here, we use the CCP to examine the borrowing and delinquency in oil-producing geographies in the United States, where the economic trends since the Great Recession have been very different from those in the rest of the country. Between 2004 and 2013, the United States surpassed Saudi Arabia and Russia to become the world’s largest producer of oil, but in 2014, oil prices fell sharply, causing a decline in oil and gas extraction employment. The chart below depicts the number of active oil rigs in blue. We see a relatively low number until about 2010, when the American oil boom begins. The number of rigs rises sharply until the end of 2014, yet then drops precipitously. The red line depicts the number of employees in oil and gas extraction (NAICS code 211); its dynamics correspond with the oil rig counts, although employment appears to respond somewhat more gradually. Although overall employment has been quite strong in the United States, jobs in oil and gas extraction are concentrated in a small number of geographies. This concentration creates relatively well-defined areas whose local economies are experiencing a sudden downturn after a boom, while the rest of the United States has, on average, experienced relatively steady improvements in employment.

Consumer Delinquencies Spike in Energy-Dependent Regions | American Banker: Consumers in energy-producing regions of the United States are finding it hard to pay their bills. Even as total household debt increased in the first quarter and delinquencies nationwide reached their lowest levels since the start of the housing crisis, the sustained drop in oil and gas prices has hit borrowers in energy-producing regions hard, with delinquencies for automotive loans spiking well above the national average. In areas whose local economies are heavily reliant on energy, 4.6% of auto loans were 90 days or more past due, as compared to an average of 3.4% for the entire U.S., according to a new report from the Federal Reserve Bank of New York. The rise in consumer delinquencies is troubling news for banks in energy-dependent markets that are already dealing with higher commercial-loan delinquencies. As drilling has slowed in those markets, energy firms have been forced to lay off workers, many of whom are now falling behind on their bills. This year, for the first time, the New York Fed analyzed borrowing and delinquency patterns in energy-producing regions—defined as counties in which at least 6% of the jobs are in the oil and gas industry—and published this data separately from the results for individual states and the U.S. as a whole. The counties are spread across more than a dozen states, including Texas, Oklahoma, West Virginia, Kentucky, Kansas and North Dakota.For the first half of the 2000s, mortgage delinquencies in these rural counties were consistently higher the national average, but from 2007 onward, consumers in energy-dependent regions looked to be in much better shape than most Americans. In the fall of 2009, for example, only 3.8% of mortgages in the oil patch were delinquent, as compared to 8.2% of mortgages nationwide. There was a similar pattern in delinquency rates for auto loans. But just as the oil- and gas-rich states weathered the Great Recession better than the rest of the country, so now they are suffering while the U.S. as a whole enjoys a recovery.

US fracking bust sparks car debt surge - --A surge in overdue car loans in oil-rich parts of the US in the past year and a half has exposed the damage done by the collapse in drilling activity and marred broadly positive trends for late debt payments by American consumers. Analysis from the Federal Reserve Bank of New York of 327 counties that are heavily exposed to the fracking boom and bust revealed that the share of car loans with payments that were 90 or more days late rose from late 2014 and now stands near the highest level in five years. Late mortgage payments also rose slightly in those counties, the report said. By contrast, across the nation the share of outstanding debt — including mortgages, student loans and credit card debt — that was overdue in the first three months of the year was the lowest since the eve of the financial crisis in 2007. The research underscores the diverging fortunes between oil-rich areas that have been clobbered by the crash in drilling activity and the broader economic climate, which has seen steady hiring and gradually increasing incomes across the country. The slump in the oil price has led to heavy job losses and falling investment in energy-rich parts of the country that were previously at the forefront of US growth. Since reaching a peak in 2014, employment in mining, including energy-related jobs, has dropped by 191,000, according to the Bureau of Labor Statistics. The oil rig count has plunged near the lowest levels since the 1940s. The New York Fed focused its analysis on counties whose employment comprises at least 6 per cent jobs in oil and gas employment — at least 10 times the national share. In those areas 4.6 per cent of auto loans were 90 days or more overdue in the first quarter, up from 3.2 per cent in the autumn of 2014. By contrast, nationally, the overall share of auto loans that were delinquent was 3.5 per cent in the first quarter, a shade ahead of the share at the end of 2014. 

Auto Loan Debt Tops $1 Trillion | -- Auto loan debt in the U.S. sped past the trillion-dollar mark again this year, according to the Experian State of the Automotive Finance Market report released Thursday. “Automotive financing certainly has started off the year with a bang, seeing steady growth in balances and loan volumes throughout the first quarter,” Melinda Zabritski, senior director of automotive finance for Experian, said in a press release. Outstanding car loans totaled $1.005 trillion in the first quarter of 2016, a substantial increase from the $905 billion outstanding the year prior. The first time the auto loan market hit $1 trillion was in the third quarter of 2015, and it continues to climb, as do car sales.  A new Edmunds report found that prices for used compact and subcompact cars are down, making them the best value for used car—shoppers right now. (If you’re looking to buy a car, check out these car buying mistakes to avoid before signing the dotted line.) According to the report, the cost of used subcompact cars decreased 5.7% year-over-year while used compact cars are down 1.5%. “Low gas prices and easy credit are making SUVs — and their higher price points — more appealing to used car shoppers, but they’re also creating a great opportunity for small car—shoppers, who now have a wider selection at lower prices,” Jessica Caldwell, Edmunds director of industry analysis, said.  The report also found that banks still fund the majority of automotive loans, with an increase of 7.9% over the previous year, but finance companies and credit union loans grew 25.6% and 15.9%, respectively, making them the institutions with the most loan growth.

Vehicle Sales Forecasts: Sales to be Over 17 Million SAAR in May  -- The automakers will report May vehicle sales on Wednesday, June 1st. Note:  There were 24 selling days in May, down from 26 in May 2015. From WardsAuto: May Forecast Calls for Improved Sales, Days’ Supply WardsAuto forecast calls for U.S. automakers to deliver 1.52 million light vehicles in May. The forecast daily sales rate of 63,443 units over 24 days represents a 1.3% improvement from like-2015 (26 days), while total volume for the month would fall 6.5% from year-ago. The 14.4% DSR increase from April (27 days) is ahead of the 7-year average 8% growth. The report puts the seasonally adjusted annual rate of sales for the month at 17.3 million units, slightly above the 17.1 million SAAR from the first four months of the year, but below the 17.6 million SAAR reached in May 2015. From Kelley Blue Book: Despite Memorial Day Sales, New-car Sales To Decrease 6 Percent In May 2016, According To Kelley Blue Book New-vehicle sales are expected to decrease 6 percent year-over-year to a total of 1.53 million units in May 2016, resulting in an estimated 17.4 million seasonally adjusted annual rate (SAAR), according to Kelley Blue Book ... And from J.D. Power: Memorial Day Weekend Is Key to May’s New-Vehicle Retail Sales  The SAAR for total sales is projected at 17.4 million units in May 2016, down from 17.7 million a year ago. Looks like another strong month for vehicle sales, but down from May 2015.

Consumer Sentiment at 94.7  --The University of Michigan consumer sentiment index for May was at 94.7, down from the preliminary reading of 95.8, and up from 89.0 in April:  "Consumers were a bit less optimistic in late May than earlier in the month, but sentiment was still substantially higher than last month. Indeed, there have only been four prior months since the January 2007 peak in which the Sentiment Index was higher than in May 2016, all recorded at the start of 2015. Despite the meager GDP growth as well as a higher inflation rate, consumers became more optimistic about their financial prospects and anticipated a somewhat lower inflation rate in the years ahead. Positive views toward vehicle and home sales also posted gains in May largely due to low interest rates. The biggest uncertainty consumers see on the horizon is not whether the Fed will hike interest rates in the next few months, but the outlook for future government economic policies under a new president. "

Michigan Consumer Sentiment: May Final Substantially Higher Than April - The University of Michigan Final Consumer Sentiment for May came in at 94.7, it's highest reading in nearly a year and a 5.7 point increase from the 89.0 April Final reading. This is its largest increase since 2013. had forecast 95.4. Surveys of Consumers chief economist, Richard Curtin, makes the following comments: Consumers were a bit less optimistic in late May than earlier in the month, but sentiment was still substantially higher than last month. Indeed, there have only been four prior months since the January 2007 peak in which the Sentiment Index was higher than in May 2016, all recorded at the start of 2015. Despite the meager GDP growth as well as a higher inflation rate, consumers became more optimistic about their financial prospects and anticipated a somewhat lower inflation rate in the years ahead. Positive views toward vehicle and home sales also posted gains in May largely due to low interest rates. The biggest uncertainty consumers see on the horizon is not whether the Fed will hike interest rates in the next few months, but the outlook for future government economic policies under a new president. This has increased their emphasis on maintaining precautionary savings, although the savings rate is not expected to increase much beyond its current level. Although small stock gains are anticipated, household wealth is more likely to benefit from rising home prices, with gains now more frequent than in a decade. Overall, the data indicate that inflation-adjusted consumer expenditures can be expected to rise by 2.5% in 2016 and 2.7% in 2017. [More...] See the chart below for a long-term perspective on this widely watched indicator. Recessions and real GDP are included to help us evaluate the correlation between the Michigan Consumer Sentiment Index and the broader economy.

The price of regret | MIT News: Let’s say you’ve just found a nice jacket in a store and are deciding whether to buy it. It’s a little pricey, so should you wait and hope it goes on sale in the future? Perhaps. Then again, the jacket might go out of stock before that happens, and you might never acquire it at all. Is it worth paying more now to avoid that feeling of regret? For many people, evidently, it is. And as a paper co-authored by an MIT scholar suggests, not only do consumers tend to buy goods partly to avoid that feeling of regret, but some retailers fail to notice this behavioral quirk and thus miss an opportunity to increase their revenues. Indeed, some retailers could have profits 7 to 10 percent higher if they pursued different pricing strategies, the study finds. That is, generally higher prices with occasional sales mixed in will yield more revenue than consistently low prices, at least for fashionable goods. “The high-value customers will still buy the product,” says Karen Zheng, an assistant professor of operations management at the MIT Sloan School of Management. “They want to [avoid] this feeling of regret, which would occur if they wait now and then cannot get it in the future.” For such items, the research finds, if retailers fail to recognize consumers’ emotions, they could stock insufficient amounts of merchandise and may forgo up to 14 percent of consumer demand.

The US is badly underinvesting in electricity infrastructure - Vox: The US electricity system is central to the economic life of the country. And and its importance is only going to increase in coming years as: a) more energy uses, like transportation, shift to electricity, and b) more and more people get directly involved in generating and sharing electricity, via distributed energy technologies like rooftop solar panels and home energy storage. Or to put it more bluntly, as I've argued several times: Electricity is the future. A wise country that takes the long view would be investing heavily in electrical infrastructure, laying the foundation for economic health over the next century. But we don't live in that kind of country. Instead we live in the United States, where infrastructure of all kinds is systematically underfunded. That point was brought home yet again by the American Society of Civil Engineers (ASCE) in its report Failure to Act, out this month. It's an update of a series of reports ASCE released in 2011 and 2012. Rather than a direct report on the state of US infrastructure — which you can find in ASCE's Infrastructure Report Card, released every four years — it's an attempt to answer a specific question: What does underinvestment cost America, in GDP and jobs? The overall answers are pretty grim:

  • "From 2016 to 2025, each household will lose $3,400 each year in disposable income due to infrastructure deficiencies."
  • "If this investment gap is not addressed throughout the nation’s infrastructure sectors by 2025, the economy is expected to lose almost $4 trillion in GDP, resulting in a loss of 2.5 million jobs in 2025."

Retailers Fuel a Warehouse Boom, Racing to Keep Up With Amazon -  The first thing online clothing reseller ThredUp did after clinching a new round of funding last year? Hunt for strategic warehouse space to get the goods to its customers as fast as possible. has spoiled them for anything less. Within six months, ThredUp's chief executive officer, James Reinhart, had signed leases on two additional warehouses. The newest facility, outside Atlanta, is now being filled with inventory. The 150,000-square-foot space is ThredUp's gateway to the southeastern U.S., an operations hub where the secondhand clothes are received, inspected, sorted, stored on racks, and then packaged and shipped out the back door. The new need for speed means retailers need more warehouses in more locations. Early on, ThredUp had only one warehouse, in California. "It took forever to get stuff to the East Coast," said Reinhart, 37. "It used to suck for that customer." Over the past year, prime warehouse rents are up 9.9 percent across the U.S. and up by double-digit amounts in some large urban areas, according to a recent report. In some cities, surging demand has helped set off a speculative-building boom unlike anything in recent memory. In the first three months of the year, warehouse developers in the Chicago area broke ground on more speculative projects than in any quarter during the past two decades, according to Ryan Bain, a vice president at CBRE Group. There are currently 28 warehouse users in the market for 18 million square feet of space, triple the available supply, Bain said.

International Trade in Goods May 25, 2016: The nation's goods deficit widened to $57.5 billion in April vs a revised $55.6 billion in March, results that point to a widening for the overall trade deficit which will be reported next week. But the results do point to improvement in cross-border demand with exports up 1.8 percent in the month and imports up 2.3 percent. Exports of industrial supplies rose 5.1 percent reflecting in part higher prices for petroleum-based products. But exports of autos show special strength, up 4.5 percent, with exports of consumer goods up 1.0 percent. Foods also show strength, up 4.4 percent in the month. Exports of capital goods remain soft, at only plus 0.3 percent. Imports show special strength led, in contrast to exports, by capital goods which jumped 4.3 percent in the month. Industrial supplies, again reflecting higher oil costs, rose 4.0 percent with imports of autos up 1.9 percent. Imports of consumer goods, a key category, were up a more moderate but still respectable 0.9 percent.

Industrial Production Had a Good Month, But Still Down for the Year --Robert Oak - The Federal Reserve Industrial Production & Capacity Utilization report reversed itself from last month and had a 0.7% blowout.  March though was revised downward to a -0.9% decline.  Mining is still repressed but manufacturing showed signs of life for the month.  Utilities increase due to the return to seasonal weather from last month.  The G.17 industrial production statistical release is also known as output for factories and mines.Total industrial production has now decreased -1.1% from a year ago.  Currently industrial production is now 4.1 percentage points above the 2012 average.  Below is graph of overall industrial production's percent change from a year ago.  Notice how closely industrial production follows the grey recession bars.  Here are the major industry groups industrial production percentage changes from a year ago.  The percentages for mining have dropped -1.5 percentage points on average for the last eight months. For the month manufacturing overall increased by 0.3%.  For the last three months manufacturing gains are zero.  February was no change and March showed a -0.3% decline.  Manufacturing output is 3.4 percentage points above its 2012 Levels and is shown in the below graph.  Within manufacturing, durable goods had a 0.6% monthly increase.  Machinery gained 2.4% and Motor vehicles & parts increased 1.3% for the month.  Primary metals, on the other hand, declined 1.2%.Nondurable goods manufacturing unchanged percentage points for the month.  Food, beverages and tobacco had a 0.6% increase, plastics 0.4% while others decreased.  Apparel and leather declined -2.3% for the month and is down -8.3% for the year.Mining decreased -2.3% and is now down -13.4% for the year.  Mining includes gas and electricity production and the Fed have a special aggregate index for oil and gas well drilling.  Oil and gas well drilling decreased -6.8% for the month and for the year is down -51.7%.  Coal by itself declined over -40% in the past year. Below is oil and gas well drilling to show the incredible bust in production.

What's Up With Industrial Production? - This past week, the market was treated by relatively good industrial production data from the Federal Reserve. Headline seasonally adjusted Industrial Production (IP) increased 0.7 % month-over-month but was still contracting 1.1 % year-over-year. The question for today - is this the beginning of recovery of industrial production - or just a flash in the pan? Recoveries begin when the night is darkest. Industrial production has been decelerating over one year - and the current situation is continuing to be compared with very bad data from either the previous month or the year prior. At some point deceleration ends, and recovery begins - even though the year-over-year data is in contraction. Industrial Production headline index has three parts - manufacturing, mining and utilities - manufacturing was up 0.3 % this month (up 0.4 % year-over-year), mining down 2.3 % (down 13.4 % year-over-year), and utilities were up 5.8% (up 0.4 % year-over-year). Note that utilities are 10.8 % of the industrial production index, whilst mining is also 10.8 %.  In reality, the manufacturing component of industrial production has not contracted (in any significant amount) - and has simply bounced along the zero growth line. Industrial production is contracting because of mining - which is not caused by economic cycles but environmental reasons. Year-over-Year Change Total Industrial Production - Unadjusted (blue line) and the Unadjusted 3 month rolling average (red line)Economic downturns have been signaled by only watching the manufacturing portion of Industrial Production. Historically manufacturing year-over-year growth has been negative when a recession is imminent. This index is nearing the warning area for a recession - but close is significant with horseshoes and hand grenades, not economic analysis.

May 2016 Chemical Activity Barometer Accelerated for Third Consecutive Month.--The Chemical Activity Barometer (CAB) expanded 1.0 percent in May following a revised 0.8 percent increase in April and 0.1 percent increase in March. All data is measured on a three-month moving average (3MMA). Accounting for adjustments, the CAB remains up 2.3 percent over this time last year, a marked deceleration of activity from one year ago when the barometer logged a 2.7 percent year-over-year gain from 2014. On an unadjusted basis the CAB jumped 0.3 percent in May, following a solid 1.7 percent gain in April. The Chemical Activity Barometer has four primary components, each consisting of a variety of indicators: 1) production; 2) equity prices; 3) product prices; and 4) inventories and other indicators. In May, all four categories for the CAB improved for the second month in a row. Production-related indicators were positive, with improvement in plastic resins used in packaging and trends in construction-related resins, pigments and related performance chemistry still hinting at an ongoing strengthening of the housing sector.

Rail Week Ending 21 May 2016: Rail Remains In Recession: Week 20 of 2016 shows same week total rail traffic (from same week one year ago) declined according to the Association of American Railroads (AAR) traffic data. Month-over-month rolling averages improved (but are still contracting), but longer term averages continued their decline. The deceleration in the rail rolling averages began over one year ago, and now rail movements are being compared against weaker 2015 data - and it continues to decline. A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 506,983 carloads and intermodal units, down 8.5 percent compared with the same week last year. Total carloads for the week ending May 21 were 244,290 carloads, down 10.6 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 262,693 containers and trailers, down 6.5 percent compared to 2015. Four of the 10 carload commodity groups posted an increase compared with the same week in 2015. They included miscellaneous carloads, up 20.7 percent to 10,071 carloads; nonmetallic minerals, up 4.7 percent to 37,326 carloads; and motor vehicles and parts, up 2.1 percent to 19,067 carloads. Commodity groups that posted decreases compared with the same week in 2015 included coal, down 28.8 percent to 66,709 carloads; petroleum and petroleum products, down 21.5 percent to 11,593 carloads; and forest products, down 8.3 percent to 10,341 carloads. For the first 20 weeks of 2016, U.S. railroads reported cumulative volume of 4,803,310 carloads, down 14 percent from the same point last year; and 5,150,727 intermodal units, down 1.7 percent from last year. Total combined U.S. traffic for the first 20 weeks of 2016 was 9,954,037 carloads and intermodal units, a decrease of 8.1 percent compared to last year.

PMI Manufacturing Index Flash May 23, 2016: Highlights: Markit's U.S. manufacturing sample has come to a near standstill, posting a flash May index of 50.5 that is only barely above breakeven 50 and the lowest reading of the economic cycle. The sample's production is in outright contraction for the first time this cycle while growth in new orders is slowing and inventory inputs are falling. The sample is blaming uncertainty over the general economic outlook for the trouble which is causing customers to delay spending conditions. Order weakness is tied in part to reduced foreign demand with new export sales in contraction for a second month in a row. Backlog orders are down for a fourth month in a row. A positive, however, is continued expansion, though only slight, in payrolls. A positive for the inflation outlook is a rise in input costs though selling prices are flat. Today's report follows weakness in last week's Empire State and Philly Fed reports which are all pointing to continuing softness for a factory sector that has yet to get an export boost from this year's depreciation in the dollar nor a boost in energy investment in line with the bounce back in oil prices.

US Manufacturing PMI Collapses To 2009 Lows (As Fed Readies Rate Hike?) --So much for the huge China credit impulse spreading around the world. After this morning's extremely disappointing European data, US Manufacturing's flash PMI for May printed a disappointing 50.5 - its lowest since 2009.Under the surface the state of American manufacturing is even more disastrous as Markit notes, output is falling for the first time since the height of the global financial crisis, with factories hit by slowing growth of order books and falling exports. It's rate-hiking time...A general lack of pressure on operating capacity was signalled by the latest survey data, with outstanding work at U.S. manufacturers falling for the fourth successive month in May.

PMI Survey Data For May Point To Weak US Growth In Q2 -- Survey data published by Markit Economics this week anticipates a weak US economic profile for May. Today’s flash estimate of the Services PMI for this month dipped modestly to 51.2, or just slightly above the neutral 50 mark that separates growth from contraction. The news follows Monday’s preliminary May numbers for the US Manufacturing PMI in May, which is close to a stagnant reading of 50.5. Taken together, the two updates suggest that economic activity decelerated in May.  “A deterioration in the survey data for May deal a blow to hopes that the US economy will rebound in the second quarter after the dismal start to the year,” says Chris Williamson, Markit’s chief economist, in today’s report. “Service sector growth has slowed in May to one of the weakest rates seen since 2009, and manufacturing is already in its steepest downturn since the recession.  Blending the manufacturing and services PMIs into a composite index currently projects GDP growth that’s almost as slow as the first quarter’s tepid 0.5% rise (seasonally adjusted annual rate), according to Markit. “Having correctly forewarned of the near-stalling of the economy in the first quarter, the surveys are now pointing to just 0.7% annualized GDP growth in the second quarter, notwithstanding any sudden change in June,” advises Williamson.

Where American Factories’ Gears Are Stuck - U.S. factories have seen better days. Slow global growth and a strong dollar are weighing on manufacturers’ international ambitions. But a solid U.S. job market and still-low interest rates are supporting factories focused on domestic customers. That divide, as the Journal reported Monday, is showing up throughout recent manufacturing reports. Some recent evidence: New orders for manufacturers have grown for four consecutive months in their best streak since last summer, according to the Institute for Supply Management, a trade group for purchasing managers. That index within the ISM report, a barometer of national manufacturing, registered at 55.8 last month, solidly above the 50 mark that separates expansion from contraction. “New orders drive our system,” said Bradley Holcomb, chair of the ISM manufacturing survey committee. While new orders comprise both domestic and foreign demand, He highlighted particular growth in fabricated metals, wood and furniture, all areas connected to the auto and housing markets.  A break in the dollar’s upward march helped exporters in the past couple of months. But less-bad isn’t the same as good. ISM data shows that the index of new business orders representing foreign demand for U.S. manufactured goods has averaged 49.5 this year, lagging total new orders by five points. Meanwhile, competing data provider Markit said export orders fell back below 50 last month, marking the third contraction in six months. The data indicate domestic demand has driven the pickup in new orders. Further evidence: About a third of firms surveyed by the ISM said the strong U.S. dollar would hurt profits this year. But more than half–likely those that don’t sell much abroad–said the dollar’s impact would be negligible or positive.

Durable-goods orders report, despite boost from plane orders, shows weakness -  Orders for durable or long-lasting goods made in the U.S. jumped 3.4% in April because of a surge in bookings for commercial jets that won’t be built for years. But a key measure of business investment fell again.The increase in new orders last month was powered by a spike in demand for commercial planes, the Commerce Department said Thursday. Those orders accounted for 85% of the increase in April bookings. Typically large planes are built or delivered five years after they are ordered.  Orders for new autos and parts also rose nearly 3%, snapping back from a decline in the prior month. Stripping out transportation, durable-goods orders increased a modest 0.4% in April after a meager 0.1% advance in March. Bookings for heavy machinery fell and orders for primary metals used in a wide variety of goods were flat. In April, orders for a category known as core capital goods that’s viewed as a proxy for business investment declined 0.8%. They’ve fallen in five of the past six months.  Companies have been reluctant to invest more heavily because of a tepid global economy and falling exports, among other things. Some economists also think an increasingly contentious U.S. presidential election tinged by anti-business rhetoric is hurting investment. Core orders are 4.1% lower through the first four months of the year compared with the same period in 2015. Business spending is one of the third main pegs holding up the economy and persistent weakness means the U.S. cannot grow as its fastest potential speed.

Durable Goods New Orders Improved in April 2016: The headlines say the durable goods new orders improved. The unadjusted three month rolling average improved this month and remains in expansion. Our view of this data is mixed as inventories are still in contraction, and inflation adjusted new orders are in contraction year-over-year. . This series underwent its annual revision, and trend lines were not affected. The big driver this month was civilian aircraft (which was the big drag last month). Econintersect  Analysis:

  • unadjusted new orders growth accelerated 2.6 % (after decelerating a downwardly revised 5.9 % the previous month) month-over-month , and is up 1.2 % year-over-year.
  • the three month rolling average for unadjusted new orders accelerated 0.6 % month-over-month, and up 1.4 % year-over-year.
  • Inflation adjusted but otherwise unadjusted new orders are down 1.3 % year-over-year.
  • Backlog (unfilled orders) accelerated 0.7 % month-over-month, but is still contracting 1.7% year-over-year.
  • The Federal Reserve's Durable Goods Industrial Production Index (seasonally adjusted) growth improving 0.6 % month-over-month, up 0.5 % year-over-year [note that this is a series with moderate backward revision - and it uses production as a pulse point (not new orders or shipments)] - three month trend is accelerating, but the trend over the last year is relatively flat.

Core Durable Goods Orders Slump As Inventories Decline For 4th Straight Month -- Core Durable Goods Orders tumbled 0.8% MoM and 6.7% YoY - down 15 of the last 18 months. However, following drastic revisions across the entire time series and thanks to a surge in military spending (+3.7%) and non-defense aircraft (+64.9% - bringing back memories of Boeing's aberration from a year or two back) the headline Durable Goods print rose 3.4% MoM. More worrying for GDP enthusiasts is the 0.2% decline in durable goods inventories in April for the 4th straight month. Not a pretty picture under the hood.... Non-Defense Aircraft New Orders spiked 64.9% - but in context, it's not so impressive...

Richmond Fed Manufacturing Index May 24, 2016: Highlights: The Richmond Fed index fell a sharp 15 points in May to minus 1, adding further evidence of a serious slowdown in manufacturing activity as also indicated in last week's Empire State and Philly Fed reports for May. Several of the survey's key measures dropped steeply and went into contraction from previous strength, with shipments down 22 points from April to -8, backlog orders down 24 points to -13 and capacity utilization down 24 points to -6. New orders which were particularly strong in the previous two months, dropped 18 points to 0. On the employment side, wages remained at a respectable plus 15, but the average workweek fell 4 points to 6 and the number of employees index shed 4 points to 4. Only inventories and prices were a positive for manufacturing in the Richmond Fed region during May, with finished inventories up 5 points to 19 and raw materials inventories up 10 points to 25, while prices received finally showed a small improvement, rising to an annualized rate of 0.77 percent.

Richmond Fed Manufacturing Survey Slips Back Into Contraction In May 2016.: Of the three regional Federal Reserve surveys released to date, all are in contraction. Fifth District manufacturing activity slowed in May, according to the most recent survey by the Federal Reserve Bank of Richmond. Shipments and backlogs decreased, and order backlogs flattened this month. Manufacturing hiring rose modestly, while average wages continued to increase at a moderate pace. Prices of raw materials and finished goods rose more quickly in May, compared to last month. Despite the soft current conditions, firms remained optimistic about future business conditions. Expectations in May were little changed from April readings. Firms expect moderate growth in shipments and in the volume of new orders in the six months ahead. In addition, manufacturers looked for rising backlogs of new orders. Producers anticipated a decline in capacity utilization and unchanged vendor lead times in the next six months. Survey participants looked for modest growth in hiring during the next six months. Wage increases were expected to continue to be widespread. Producers anticipated little change in the average workweek. Looking ahead, manufacturers expected faster growth in prices paid and received. Overall, manufacturing conditions softened in May. The composite index for manufacturing flattened to a reading of −1. The index for shipments dropped sharply, decreasing 22 points to end at −8. Additionally, the new orders index fell 18 points, leveling off at 0.

Richmond Fed Crashes Into Contraction From 6 Year Highs, Biggest Drop In History -- Having spiked mysteriously to 6 year highs in March (from 4 year lows in Feb), Richmond Fed's manufacturing survey crashed back into contraction in May (printing -1 against =14 prior and +8 expectations).Weakness was broad-based across the entire set of subcomponents with New Orders plunging, shipments crashing, employees and workweek tumbling, and worse still future employment and capex expectations dropped precipitously. The drop in the last 2 months is the largest in the 23 year history of the survey. So WTF was that spike in March? Charts: Bloomberg

Kansas City Fed: Regional Manufacturing Activity "declined modestly" in May  - From the Kansas City Fed: Tenth District Manufacturing Activity Declined Modestly The Federal Reserve Bank of Kansas City released the May Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity declined modestly. “Regional factory activity continued to drift down in May, as weakness in energy and agriculture-related manufacturing persisted,” said Wilkerson. “Still, firms expect a modest pickup in activity later this year.”  The month-over-month composite index was -5 in May, which is largely unchanged from April and March readings ...  The Kansas City region was hit hard by lower oil prices.

Kansas City Fed Manufacturing Contraction Continues in May 2016: Of the four regional manufacturing surveys released for May, all are in contraction.  According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity declined modestly.  Tenth District manufacturing activity continued to decline modestly, while producers' expectations for future activity remained slightly positive. Most raw material price indexes rose moderately in May, but selling prices fell slightly The month-over-month composite index was -5 in May, which is largely unchanged from April and March readings. The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Nondurable goods production slowed, particularly for food, chemical, and plastics production. On the other hand, durable goods production improved slightly but remained at low levels. Most month-over-month indexes were stable from the previous month. The production index fell from -8 to -11, while the shipments, news orders, employment and order backlog indexes were stable at low levels. The new orders for exports index decreased from -4 to -8. The raw materials inventory index eased from 0 to -3, while the finished goods inventory index was basically unchanged. Year-over-year factory indexes were mixed, but generally remained weak. The composite year-over-year index was unchanged at -19, while the production, shipments, and order backlog indexes fell moderately. The new orders index improved slightly from -26 to -24, and the capital expenditures index also edged higher. The new orders for exports index moved up from -19 to -15, and both inventory indexes increased modestly

US Services PMI Tumbles, Misses By Most On Record "Dealing Blow To Q2 Rebound Hopes" - After a brief dead cat bounce, the US services economy has tumbled back to 3-month (near 7 year) lows, missing expectations by the most on record. With the slowest pace of hiring since Dec 2014 (signalling a mere 128k rise in payrolls for May), business optimism plunged to record lows (since the survey began in Oct 2009). When hope fades... May data highlighted a renewed fall in business optimism across the service economy.Reflecting this, the balance of service sector firms forecasting a rise in business activity over the year-ahead eased to its lowest since the survey began in October 2009. Anecdotal evidence suggested that uncertainty related to the presidential election and concerns about the general economic outlook had continued to weigh on business confidence. Commenting on the flash PMI data, Chris Williamson, chief economist at Markit said:“A deterioration in the survey data for May deal a blow to hopes that the US economy will rebound in the second quarter after the dismal start to the year. “Service sector growth has slowed in May to one of the weakest rates seen since 2009, and manufacturing is already in its steepest downturn since the recession. “Having correctly forewarned of the near-stalling of the economy in the first quarter, the surveys are now pointing to just 0.7% annualised GDP growth in the second quarter, notwithstanding any sudden change in June. “A deteriorating order book situation and waning business optimism have meanwhile led to a further pull-back in hiring as companies scaled down their expansion plans. The surveys are signalling a non-farm payroll rise of just 128,000 in May.

Markit: Service Sector Weakened in May; Outlier or Warning? - A measure of the strength of service businesses in May showed a small decline Wednesday, troubling some strategists. Markit’s May U.S. services purchasing managers index (PMI) fell to 51.2 from 52.8 in April. In March the reading was 51.3. But the underlying survey data was worse than the index. “This doesn’t read well,” Peter Boockvar of The Lindsey Group wrote as the headline of his note on the topic. He explained: These figures are a definite comedown from the 55.9 average seen in 2015. Business optimism about the future fell to the “lowest recorded since the survey began in October 2009.” Employment dropped to the weakest since December ’14. The new orders component was “one of the weakest recorded” and “Some firms commented on a cyclical slowdown in investment spending and continued unwillingness among clients to commit to new projects.” Backlogs fell “with the rate of decline accelerating to its fastest for just over two years.” He observes that markets are ignoring the weakness. Stocks are rallying and Treasury yields are higher. But Thomas Byrne of Wealth Strategies & Management wasn’t so complacent. He tweeted: Markit data show the U.S. economy is barely expanding in May. New Home Sales = April data. Rebound has peaked

Economics for the Rest of Us Explains NAIRU, Including Its Political Implications -- naked capitalism - Yves hers. Since many of you seemed to like Diptherio’s last podcast, we thought we’d give you his latest installation. This edition covers NAIRU, or the Non-Accelerating Inflation Rate of Unemployment.  The discussion is deliberately at a generalist level, so most of you will already know this terrain well. Nevertheless, it can serve as a helpful introduction to friends and colleagues, as well as illuminating the basis for the Fed’s aggressive position on inflation. One obvious point which does not fit into this discussion’s framework: economists frame wages at the big potential driver of cost increases, when for manufactured goods, direct factory labor (which are in the class of worker most exposed to macroeconomic swings) is a small percentage of total product cost. By contrast, the NAIRU framing leads economists to obsess over unemployment levels (with the new “structural” level curiously higher than in the 1960s, when workers were less mobile than now) and ignore the roles of monopolies and oligopolies.

Weekly Initial Unemployment Claims decrease to 268,000 - The DOL reported: In the week ending May 21, the advance figure for seasonally adjusted initial claims was 268,000, a decrease of 10,000 from the previous week's unrevised level of 278,000. The 4-week moving average was 278,500, an increase of 2,750 from the previous week's unrevised average of 275,750. There were no special factors impacting this week's initial claims. This marks 64 consecutive weeks of initial claims below 300,000, the longest streak since 1973.  The previous week was unrevised. The following graph shows the 4-week moving average of weekly claims since 1971.

Philly Fed: State Coincident Indexes increased in 39 states in April -- From the Philly Fed:   The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for April 2016. In the past month, the indexes increased in 39 states, decreased in seven, and remained stable in four, for a one-month diffusion index of 64. Over the past three months, the indexes increased in 42 states, decreased in seven, and remained stable in one, for a three-month diffusion index of 70 Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:  The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Fast Food Workers Will Vote On Joining Service Workers Union -- Fast food workers are on the cusp of joining one of the country’s largest unions, after staging years of protests that helped revive public interest in the labor movement and turned a $15-an-hour minimum wage into a national political issue. On Saturday, representatives of the Fight For 15 movement met with Mary Kay Henry, leader of the 2-million member Service Employees International Union, at a labor convention held in Detroit. After an agreement reached at the meeting, members of the Fight For 15 will now vote on official affiliation with SEIU, which has supported the movement with its money and resources since its inception. If the cooks and cashiers across the country vote “yes,” the result will be an unorthodox, “twenty-first century union,” in Henry’s words — one formally part of the union system, but with members who will not pay dues to the SEIU, at least for the time being. “We have never let an outdated labor law stand in the way of workers being able to stand together,” Henry told BuzzFeed News. “We did it 90 years ago for janitors, 40 years ago with every public employee, and 15 years ago for home care workers.”

The “middle class” myth: Here’s why wages are really so low today -- The argument given against paying a living wage in fast-food restaurants is that workers are paid according to their skills, and if the teenager cleaning the grease trap wants more money, he should get an education. Like most conservative arguments, it makes sense logically, but has little connection to economic reality. Workers are not simply paid according to their skills, they’re paid according to what they can negotiate with their employers. And in an era when only 6 percent of private-sector workers belong to a union, and when going on strike is almost certain to result in losing your job, low-skill workers have no negotiating power whatsoever. Granted, Interlake Steel produced a much more useful, much more profitable product than KFC. Steel built the Brooklyn Bridge, the U.S. Navy and the Saturn rocket program. KFC spares people the hassle of frying chicken at home. So let’s look at how wages have declined from middle-class to minimum-wage in a single industry: meat processing. Slaughterhouses insist they hire immigrants because the work is so unpleasant Americans won’t do it. They hired European immigrants when Upton Sinclair wrote “The Jungle,” and they hire Latin American immigrants today. But it’s a canard that Americans won’t slaughter pigs, sheep and cows. How do we know this? Because immigration to the United States was more or less banned from 1925 to 1965, and millions of pigs, sheep and cows were slaughtered during those years. But they were slaughtered by American-born workers, earning middle-class wages. Mother Jones magazine explains what changed: “[S]tarting in the early 1960s, a company called Iowa Beef Packers (IBP) began to revolutionize the industry, opening plants in rural areas far from union strongholds, recruiting immigrant workers from Mexico, introducing a new division of labor that eliminated the need for skilled butchers, and ruthlessly battling unions.  Wages in the meatpacking industry soon fell by as much as 50 percent.”

Study dispels myth about millionaire migration in the US- The view that the rich are highly mobile has gained much political traction in recent years and has become a central argument in debates about whether there should be "millionaire taxes" on top-income earners. But a new study dispels the common myth about the propensity of millionaires in the United States to move from high to low tax states. "The most striking finding in our study is how little elites seem willing to move to exploit tax advantages across state lines," said Cristobal Young, an assistant professor of sociology at Stanford University and the lead author of the study. ... In any given year, Young and his fellow researchers found that roughly 500,000 individuals file tax returns reporting incomes of $1 million or more (constant 2005 dollars). From this population, only about 12,000 millionaires change their state each year. The annual millionaire migration rate is 2.4 percent, which is lower than the migration rate of the general population (2.9 percent). The highest rates of migration are seen among low-income tax filers: migration is 4.5 percent among people who earn around $10,000 a year. ... The study finds that family responsibilities are a key factor that limit migration among top-income earners. "Very affluent people are much more likely to be married and to have school-age children, which makes moving more difficult," Young said. ... "When millionaires do migrate, they are more likely to move to a state with a lower tax rate, and that state is almost always Florida," Young said. ...As for policy implications, Young said "millionaire taxes" result in minimal tax flight among millionaires and help states raise revenue to improve education, infrastructure, and public services, while reducing inequality. "Our research indicates that 'millionaire taxes' raise a lot of revenue and have very little downside," Young said.

Vinod Khosla wants $30 million for Martins Beach access --The billionaire owner of Martins Beach near Half Moon Bay has drawn a new line in the sand over public access to the picturesque cove, and it would cost more seashells than the state is willing to pay. Vinod Khosla, a venture capitalist who co-founded Sun Microsystems, said in a letter to the State Lands Commission that an easement leading over his property in San Mateo County to the beach would cost California about $30 million, not including the enormous additional costs for road repairs, annual operations and maintenance. Khosla’s lawyer, Dori Yob, offered the estimate in a letter submitted Feb. 3 to the state Court of Appeal, which is handling one of several lawsuits over the 89-acre property. Yob did not return a phone call seeking comment Monday, but the estimate was not well received. Khosla bought two parcels, including the beach, for $32.5 million in 2008.“The $30 million figure is rather amusing,” said Gary Redenbacher, a lawyer for Friends of Martins Beach, which says the state Constitution makes all beaches public property. “I don't know if anybody would really take it seriously. He bought 89 acres for $32 million and is asking for $30 million for an easement over a road that is 2,500 feet long. That’s approximately 1 acre."

Cash for Criminals - Here’s a CNN story on “Cash for Criminals”: And so Operation Peacemaker was born. Loosely based on an academic fellowship, the ONS program invites some of the most hardened youth into the fold: often teenage boys suspected of violent crimes but whom authorities don’t have enough evidence to charge criminally. These fellows must pledge to put their guns away for a more peaceful life. They are hooked up with mentors — the reformed criminals-turned-city workers — who offer advice, guidance and support to get jobs. If the fellows show good behavior after six months, they can earn a stipend of up to $1,000 a month. Since the fellowship started, the city has seen dramatic results, including a low of 11 gun homicides in 2014 — the fewest number of people killed in Richmond in four decades. The program has caught the attention of cities hoping to model programs with similar success, from Sacramento, California, to Toledo, Ohio, to Washington. Later in the article: Boggan believes the vast majority of youth in rough inner-city neighborhoods are inherently good and need to be exposed to new opportunities. With ex-felons as his change agents, he says, the teens are more likely to respond.“That translates into trust on the street,” Boggan says. “And trust is a major commodity with what we do.”At one point, he employed seven full-time mentors, but cutbacks reduced his staff to four full-time and two part-time mentors.   2015 saw gun homicides nearly double to 21, from the low of 11 in 2014. Boggan says staffing cuts may have played a role. “Less people touched, and the people touched are not being touched as often,” he says. “That’s certainly an impact.” If I was designing programs to convert as many Democrats as possible into Republicans, I imagine something like this would come in near the top of my list. About the only changes I would recommend would be to run this program more broadly, and to increase the size of the stipends.

The TPP Is ‘Disastrous for Working Families’ and Central to the 2016 Campaign | The Nation: The popular fury over trade policies that have devastated American communities is rarely taken seriously by the political and media elites that keep trying to narrow the national political discourse into an endless loop of empty discussions about personalities and tactics. But trade is a huge issue on the ground in states where Americans actually vote. The races for both the Republican and the Democratic presidential nominations have exposed the intensity of concern about the damage done by the North American Free Trade Agreement, normalization of trade relations with China and a host of lesser global agreements to workers in battleground states across the country. Indeed, the “surprise” results in Democratic primaries in states such as Michigan and Indiana can be traced in no small measure to a sense that the winner of those primaries, Vermont Senator Bernie Sanders, was firmer in his opposition to the next big trade deal: the proposed Trans-Pacific Partnership agreement. Voters are justifiably angry about past trade deals, which were written to favor the interests of multinational corporations over those of workers, the environment, labor rights, human rights, and democracy. And they are justifiably frightened by the prospect that the TPP could make things much worse.

Disposable Americans: The Numbers are Growing - As often noted in the passionate writings of Henry Giroux, poor Americans are becoming increasingly 'disposable' in our winner-take-all society. After 35 years of wealth distribution to the super-rich, inequality has forced much of the middle class towards the bottom, to near-poverty levels, and to a state of helplessness in which they find themselves being blamed for their own misfortunes. The evidence keeps accumulating: income and wealth -- and health -- are declining for middle-class America. As wealth at the top grows, the super-rich feel they have little need for the rest of society.According to Pew Research, in 1970 three of every ten income dollars went to upper-income households. Now five of every ten dollars goes to them.  The Social Security Administration reports that over half of Americans make less than $30,000 per year. That's less than an appropriate average living wage of $16.87 per hour, as calculated by Alliance for a Just Society. Numerous sources report that half or more of American families have virtually no savings, and would have to borrow money or sell possessions to cover an emergency expense. Between half and two-thirds of Americans have less than $1,000. For every $100 owned by a middle-class household in 2001, that household now has just $72. Not surprisingly, race plays a role in the diminishing of middle America. According to Pew Research, the typical black family has only enough liquid savings to last five days, compared to 12 days for the typical Hispanic household, and 30 days for a white household.

Unemployed Detroit Residents Are Trapped by a Digital Divide - — In downtown Detroit, start-ups and luxury retailers are opening up and new office buildings are being built as the city works to recover from its deep economic problems.Six miles to the north, in the neighborhood of Hope Village, residents like Eric Hill are trying to participate in that progress but are running into hurdles.His difficulties were apparent on a recent Tuesday when he entered a crowded public library to use the computers to look for a new job. With no Internet service at home or on his mobile phone, Mr. Hill had few options to search work listings or file online job applications after losing his stocking job at a pharmacy five months ago.“Once I leave, I worry that I’m missing an email, an opportunity,” Mr. Hill, 42, said while using a library computer for a free one-hour session online. He cannot afford broadband, he added; his money goes to rent, food and transportation.As one of the country’s most troubled cities tries to get back on its feet, a lack of Internet connectivity is keeping large segments of its population from even getting a fighting chance.

How the Puerto Rico Bill Attacks the Minimum Wage - The Obama administration’s push to secure debt relief for Puerto Rico to boost the island’s sagging economy is clashing with its effort to push for higher U.S. wage floors. Legislation moving through Congress to tackle Puerto Rico’s debt crisis would exempt the island from new overtime-pay rules unveiled by the Obama administration. A separate provision in the legislation would allow the island’s government to reduce its minimum wage for younger workers. Both provisions have been pushed by Republicans and drawn criticism from labor groups and some Democrats. Now, employers in Puerto Rico can pay a sub-minimum wage to workers under age 20 of no less than $4.25 an hour. This “youth opportunity wage” can only last for the first 90 days of employment. The Puerto Rico legislation would raise the age limit to 25 years. It also would allow the governor of Puerto Rico, with the agreement of a federal oversight board, to increase the 90-day limit on the sub-minimum wage to up to four years. It isn’t clear whether any governor of Puerto Rico would approve such a change. Indeed, Rep. Pedro Pierluisi, the island’s nonvoting representative in Congress, said that because the authority was unlikely to ever be invoked, “its practical impact would be zero.” The provision has received strong criticism from labor groups and others on the left who have been pushing for a higher federal minimum wage. Josh Earnest, the White House press secretary, called the provision “mean-spirited,” though he said the White House still supports the broader bipartisan compromise.

Thousands Held in Federal Prisons for Too Long, Report Finds - — More than 4,300 federal inmates were kept in prison beyond their scheduled release dates from 2009 to 2014 — some of them for an extra year or more, according to a report released on Tuesday that highlighted wide confusion in the prison system.The findings by the Justice Department’s inspector general are a potential embarrassment for the United States Bureau of Prisons at a time when the Obama administration has assailed what it says are unfair and unduly harsh sentences for many inmates, particularly minorities and nonviolent offenders.While it is unusual for an inmate to be held past his sentence, the consequences “can be extraordinarily serious,” the report said. The delayed releases “deprive inmates of their liberty,” and have led to millions of dollars in added prison costs and legal settlements with former inmates, it concluded.The investigation found that in the most egregious cases, avoidable errors by prison staffers led to 152 inmates being imprisoned beyond their release dates.In a number of cases blamed on staff errors, prison officials failed to properly give inmates credit for time they had spent behind bars before their sentencing or they misinterpreted the terms of the sentence imposed by the judge, the report said.  The bulk of these cases led to inmates being kept behind bars for up to an additional month, but 61 were held for an extra month or longer, and three inmates were kept for more than a year beyond their scheduled release. In nearly 4,200 other cases, inmates were held for extra time for reasons that prison officials said were beyond their control, such as a judge’s shortening a prisoner’s sentence to less than the time he had served, or a state or local court’s imposing a sentence that was not included in the federal system. The report did not break out the extra time served by these inmates.

Machine Bias: There’s software used across the country to predict future criminals. And it’s biased against blacks. - Prater was the more seasoned criminal. He had already been convicted of armed robbery and attempted armed robbery, for which he served five years in prison, in addition to another armed robbery charge. Borden had a record, too, but it was for misdemeanors committed when she was a juvenile. Yet something odd happened when Borden and Prater were booked into jail: A computer program spat out a score predicting the likelihood of each committing a future crime. Borden — who is black — was rated a high risk. Prater — who is white — was rated a low risk. Two years later, we know the computer algorithm got it exactly backward. Borden has not been charged with any new crimes. Prater is serving an eight-year prison term for subsequently breaking into a warehouse and stealing thousands of dollars’ worth of electronics. Scores like this — known as risk assessments — are increasingly common in courtrooms across the nation. They are used to inform decisions about who can be set free at every stage of the criminal justice system, from assigning bond amounts — as is the case in Fort Lauderdale — to even more fundamental decisions about defendants’ freedom. In Arizona, Colorado, Delaware, Kentucky, Louisiana, Oklahoma, Virginia, Washington and Wisconsin, the results of such assessments are given to judges during criminal sentencing.

Illinois has nearly $213 billion in unpaid bills, $40.4 billion in hidden debt: Illinois taxpayers are on the hook for billions and billions of dollars more in unpaid bills than what gets reported on the balance sheet, according to a new report. Truth in Accounting’s annual financial state of the state report found Illinois has amassed nearly $213 billion in unpaid bills, including more than $40 billion in hidden pension debt. Despite new accounting rules put in place by the Governmental Accounting Standards Board that require state and local governments to report all of its pension liabilities, Illinois continues to omit billions in unfunded pension obligations, says Truth in Accounting CEO Sheila Weinberg. “Because of budgeting and accounting gimmicks the state uses, Illinois has been able to exclude massive debts off its balance sheet and hide related costs from taxpayers,” Weinberg said in a news release. “Unfortunately all of these financial problems are coming to a head in Illinois.” While the Illinois comptroller’s Comprehensive Annual Financial Report for fiscal year 2015 puts the state’s net pension liability at $108.6 billion, Truth in Accounting’s analysts say that figure is underreported by about $8.1 billion, meaning Illinois’ unfunded pension liabilities are actually $116.7 billion. The report also found an additional $32.3 billion in hidden retiree health care debt, bringing the state’s total hidden debt to $40.4 billion. From the report: Despite the balanced budget requirement, the state has accumulated bonded debt of $40.9 billion and other liabilities of $25.3 billion. The calculation of assets available to pay bills does not include capital assets, so $14.4 billion of related debt is removed from the calculation of state bills.

State Of The States: New Jersey's Problems Are Not "Mathematically Solvable" -- While the warning flags are raging in Illinois and Connecticut, JPMorgan's Michael Cembalest states that New Jersey's problems are "not mathematically solvable." The stunning admission from a status-quo-sustaining bank that is “very focused on the total indebtedness of US states," should be worrisome enough but as Cembalest explains the answer to a debt problem is not always piling up more debt; the issue is to address the root of the problem, which can be a delicate and at times politically incorrect topic.  Reviewing the JPMorgan research might lead to several conclusions, one of them being that when any government starts to get ahead of logical debt ratios investors might best be advised to proceed with caution. As's Mark Melin continues, Cembalest takes a step back and looks at the servicing cost for the mounting state debt. What he does is look at unfunded liabilities and given several formula factors, including an allowance to return 6% on assets. Using this formula, he projects what starts are currently paying and what they might be paying on a 30-year accrual basis. Such forward modeling helps investors determine debt sustainability much more so than does an institutional research report that might seem to omit or de-emphasize material facts. Using this as a measure a group of bad-boy states that have been abusing their debt privileges appears to emerge. On top of this list and over the projected danger threshold of 25% are heavyweight states such as Illinois, New Jersey, Connecticut who sit next to relatively rural Kentucky.

Plunging Personal Income Tax Revenues Slam State Budgets In April - This April, personal income tax revenue fell by an average of 9.88 percent compared to the same period last year in the 32 states for which Reuters has data (Puerto Rico as well). April is the most important revenue month for states because it contains the tax filing deadline and taxpayers tend to wait until the last minute to pay any taxes that may be owed from the prior year. Due to the drop in income taxes, and April being near the end of the fiscal year for many states, states that were depending on a strong inflow of revenues in April are now left scrambling to fill budget gaps. The narrative being used to paper over the real issue of the economy only producing lower paying jobs, is that the drop is being driven by less capital gains taxes, as Don Boyd, Director of Fiscal Studies at the Rockefeller Institute of Government in Albany, NY. puts forward: "The kinds of income that are kind of driving this are particularly capital gains related to the stock market. If you had to find a No. 1 culprit, that's it." To be sure, a flat market in 2015 hurt capital gains taxes that states collected in April. However, an even bigger reason for the dip is that despite what we're told about strong fundamentals underlying the economy, the fact of the matter is that jobs are being created have been in low paying sectors, and jobs that were created in higher paying sectors were mostly part-time, which pay less than the average sector wage. As a reminder, since January 2015 the economy has added primarily bartender and waiter jobs.

NYC faces $3.8B budget gap by 2019, bigger than mayor's claim - The city will face a $3.8 billion budget gap by 2019 — bigger than Mayor de Blasio is banking on, City Controller Scott Stringer said Tuesday. Stringer projected a gap $800 million larger than the $3 billion the mayor expects that year because the city will have to shell out more on a rescue plan for public hospitals, homeless shelters, and overtime. The budget gap will hit $3.3 billion in 2018, compared to $2.7 billion projected by the de Blasio administration, and $3.1 billion in 2020, compared to $2.3 billion projected by the administration, he said at a City Council budget hearing. Stringer also criticized de Blasio’s $2.3 billion savings plan — saying only a quarter of the money comes from actual program changes, while the rest is automatic savings on items like lower interest payments on debt.“The current plan is too dependent on savings that would have occurred regardless,” he said. “Only 25% of the savings in the plan would come from agency actions, and even less from true efficiencies and productivity.” The mayor’s view is too rosy on the city’s reeling Health and Hospitals System — and the city may be on the hook for another $365 million in 2017 to keep it afloat, Stringer said. “Despite the unprecedented level of assistance and the release of a broad turnaround plan, substantial risks remain,” he said. “The current strategy for restoring H&H to financial health relies heavily on securing additional state and federal revenue, increasing patient market share, and implementing efficiencies, all of which have historically proved challenging.” He also said the city would need another $130 million a year to run homeless shelters — even if the number of people staying in the shelters stabilizes.

More Young Adults Are Living With Their Parents Than At Any Time Since the Great Depression -- Pew reports: More young adults in the U.S. are living with their parents than at any time since around 1940, according to a new Pew Research Center analysis of census data. Across the European Union’s 28 member nations, nearly half (48.1%) of 18- to 34-year-olds were living with their parents in 2014 …. Similar long-term trends have been observed elsewhere. Canada’s most recent census, in 2011, found that 42.3% of adults ages 20 to 29 lived in their parents’ homes, up from 32.1% in 1991 and 26.9% in 1981. In Australia, about 29% of 18- to 34-year-olds were living with one or both of their parents (but without a partner or child) in 2011, up from 21% in 1976. And in Japan, the share of 20- to 34-year-olds living with their parents grew from 29.5% in 1980 to 48.9% in 2012. There are many other measurements which are the worst since the Great Depression …  For example, we noted in 2009 that more Americans will be unemployed than during the Great Depression.

Impoverished children with access to food stamps become healthier and wealthier adults: Adults who participated in the Food Stamp Program, renamed the Supplemental Nutrition Assistance Program (SNAP) in 2008, as children are healthier and better off financially than poverty-stricken families who did not have access to the program, according to findings in joint work with Douglas Almond and Diane Schanzenbach.  Children with access were more likely as adults to graduate from high school, earn more, and rely less on government welfare programs as adults than impoverished children who did not have access to SNAP. Women, in particular, are substantially more likely to self-report they are in good health and are more economically self-sufficient in adulthood. We find no additional long-term health impacts for children from more exposure to the program during middle childhood, but individuals with access to food stamps before age 5 had measurably better health outcomes in adulthood with significant impacts for those in early childhood. ...In terms of policy, it’s important to recognize that the benefits of SNAP not only include improved food security in the short-run, but the program also helps prevent negative, long-term, and lasting effects of deprivation during childhood, such as less education and earnings as adults, along with health problems like obesity, heart disease, or diabetes.  Because these individuals are healthier and more financially sound, the benefits also pay out to taxpayers. Healthier Americans leads to less cost when it comes to future health care for the average taxpayer. Additionally, by increasing self-sufficiency, SNAP today can reduce the future costs of safety net programs and also increase tax revenues in the long run.

The one thing rich parents do for their kids that makes all the difference - Wealthy parents are famously pouring more and more into their children, widening the gapin who has access to piano lessons and math tutors and French language camp. The biggest investment the rich can make in their kids, though — one with equally profound consequences for the poor — has less to do with "enrichment" than real estate.They can buy their children pricey homes in nice neighborhoods with good school districts."Forty to fifty years of social-science research tells us what an important context neighborhoods are, so buying a neighborhood is probably one of the most important things you can do for your kid," says Ann Owens, a sociologist at the University of Southern California. "There’s mixed evidence on whether buying all this other stuff matters, to0. But buying a neighborhood basically provides huge advantages."Owens's latest research, published in the American Sociological Review, suggests that wealthy parents snapping up such homes have driven the rise of income segregation in America since 1990. The rich and non-rich are less and less likely to share the same neighborhoods in the United States, a trend shaped more by the behavior of the wealthy than the poor or middle class. Owens's work, though, adds another twist: The recent rise of income segregation, she finds, is almost entirely caused by what's happening among families with children.Since 1990, income segregation hasn't actually changed much among households without kids. That's two-thirds of the population.

Portland public schools ban textbooks that cast doubt on climate change -- The Portland Public Schools board voted last week to ban any materials that cast doubt on climate change, the Portland Tribune reported. According to the resolution passed May 17, the school district must remove any textbooks and other materials that suggest climate change is not occurring or that says human beings are not responsible for it. “A lot of the text materials are kind of thick with the language of doubt, and obviously the science says otherwise,” said Bill Bigelow, a former Portland public school teacher who worked to present the resolution. Bigelow says textbook publishers are yielding to pressure from fossil fuels companies. “We don’t want kids in Portland learning material courtesy of the fossil fuel industry.” One commenter to the Portland Tribune story responded to the news, saying, “I have never seen a case for homeschooling more clearly put forward. This is further proof that public schools are not interested in education, only political indoctrination.”

How We Got the Tanks and M-16s Out of LA Schools - Today, after 18 months of ferocious uphill organizing the Labor/Community Strategy Center reached an agreement with the Los Angeles Unified School District and the Los Angeles School Police Department. They agreed:  To return all military grade weapons to the Department of Defense “Excess Military Equipment Program” AKA the 1033 Program that is arming police departments all over the U.S. In particular, they returned 1 Tank, a Mine Resistant Ambush Protected (MRAP) vehicle, 3 grenade launchers (“37 mm less less-lethal launch platforms” and 61 M-16 rifles).To withdraw completely from the 1033 Program.To provide a complete inventory to the Strategy Center and the public of every weapon they received under the program, when it was received, the serial numbers, and when and where it was returned. To apologize for the policy that brought the weapons to Los Angeles in the first place. The Strategy Center is the first group in the U.S. that we know of to win such demands. The LAUSD and the LASPD are the first government agencies that we know of— a police force of 500 officers and staff— to return all the weapons, withdraw from the program altogether, give a complete inventory of every weapon received and returned, and to issue a public apology a civil rights organization and the Black and Latino students and communities whose lives were threatened by the program. Let me tell you the story of how we won this grueling battle of ideas and arms and some lessons for organizers in the U.S. who understand that the battle against the police/warfare state is the cutting edge of transformative organizing.

Exposing Detroit's "No School Administrator Left Behind" Program -- Federal investigators revealed another blow to Detroit Public Schools this week. Meet Carolyn StarkeyDarden - the system’s former grant-development director - who has just been charged on suspicion of obtaining nearly $1.3 million by lying about children’s tutoring services. As The Burning Platform's Jim Quinn rages, this is called the “No School Administrator Left Behind” Program. As CNN reports, Carolyn StarkeyDarden set up a company and allegedly ran a scheme between 2005 and 2012 in which she submitted fake invoices for tutoring services that were never provided to students, according to charges filed by the U.S. Attorney’s Office in Michigan’s Eastern District.StarkeyDarden, 69, was charged Monday with federal program theft, for which she could receive up to 10 years in prison and fines of up to $250,000 if convicted. “Ms. StarkeyDarden cheated the students of Detroit Public Schools out of valuable resources by fraudulently billing for her company’s services,” said David P. Gelios, special agent in charge of the FBI in Detroit. “In fact, Detroit students were cheated twice by this scheme. “Students that needed tutoring never received it, and money that could have been spent on other resources was paid to Ms. StarkeyDarden as part of her fraud scheme.” Calls made by CNN to StarkeyDarden and her lawyer were not immediately returned Wednesday evening. The charge is not the first to be leveled this year against school officials in Michigan’s most populous city. In March, 13 principals were charged with bribery in an alleged kickback scheme, the U.S. Attorney’s Office said. A vendor paid bribes and kickbacks to the principals to allow their schools to be charged for supplies that were never delivered, authorities say.

High School Debaters Bring Surveillance, Encryption Arguments to Capitol Hill -- Over 30 high school students debated the pros and cons of surveillance in the post-Snowden world on Capitol Hill on Wednesday, the culmination of a 2016 competitive debate season that saw nearly 20,000 young people across the country dissect the topic with more intensity and sophistication than Congress has. The students temporarily took over a House Judiciary Committee hearing room, sitting in the same seats as the people who craft policy on issues they’ve been picking apart all year — with some of the people who work there in the audience. One hot topic was the legislation recently proposed by Sens. Dianne Feinstein, D-Calif., and Richard Burr, R-N.C., which would require tech companies presented with a court order to provide access to encrypted data — effectively outlawing end-to-end encryption.“We need to define encryption policy now or face even worse solutions down the road,” said Zach Mohamed from Edgemont High School in New York, assigned to argue in favor of the legislation.Arjun Srinivasan of Woodward Academy in Georgia argued against, noting that U.S. decisions about encryption would do nothing to force other countries to do likewise – so terrorists will always have other options, like burner phones and their own encryption, not to mention face-to-face communications. And he said the Feinstein-Burr proposal has few fans among people who understand technology. “Do you know one scientist, mathematician or cryptographic expert who supports the CCOA?” Arjun asked.

On negative effects of vouchers  Brookings Institution -  Executive summary: Recent research on statewide voucher programs in Louisiana and Indiana has found that public school students that received vouchers to attend private schools subsequently scored lower on reading and math tests compared to similar students that remained in public schools. The magnitudes of the negative impacts were large. These studies used rigorous research designs that allow for strong causal conclusions. And they showed that the results were not explained by the particular tests that were used or the possibility that students receiving vouchers transferred out of above-average public schools.Another explanation is that our historical understanding of the superior performance of private schools is no longer accurate. Since the nineties, public schools have been under heavy pressure to improve test scores. Private schools were exempt from these accountability requirements. A recent study showed that public schools closed the score gap with private schools. That study did not look specifically at Louisiana and Indiana, but trends in scores on the National Assessment of Educational Progress for public school students in those states are similar to national trends. In education as in medicine, ‘first, do no harm’ is a powerful guiding principle. A case to use taxpayer funds to send children of low-income parents to private schools is based on an expectation that the outcome will be positive. These recent findings point in the other direction. More needs to be known about long-term outcomes from these recently implemented voucher programs to make the case that they are a good investment of public funds. As well, we need to know if private schools would up their game in a scenario in which their performance with voucher students is reported publicly and subject to both regulatory and market accountability. ...

North Carolina school board votes to stop naming valedictorians --  Apparently working your hardest to be the best you can be -- and being recognized for the effort -- is one lesson a North Carolina school board no longer believes is worth teaching. Citing what it calls "unhealthy" competition among students, the Wake County school board is the latest in the country to make valedictorians and salutatorians a thing of the past, The News & Observer of Charlotte reports. The school board unanimously gave initial approval last week to a policy that would prohibit high school principals from naming valedictorians and salutatorians – titles reserved for the two graduating seniors with the highest grade-point averages – after 2018, according to the newspaper. “We have heard from many, many schools that the competition has become very unhealthy,” school board Chairman Tom Benton told the paper. "Students were not collaborating with each other the way that we would like them to. Their choice of courses was being guided by their GPA and not their future education plans," Benton said.

A conspiracy theory-loving Texas candidate might be unstoppable : Mary Lou Bruner has suggested that President Obama was a prostitute and that humans roamed the earth with dinosaurs, all without hurting her status as the frontrunner for an open seat on the Texas Board of Education. Comments she made recently to a group of superintendents referencing questionable statistics and non-existent meetings with school officials have provided the only glimmer of hope for her opponents that she could be defeated in the runoff election Tuesday.  Bruner, a 68-year-old retired teacher who has never held public office before, earned 48 percent of the vote in the March primary with fierce anti-Common Core rhetoric and a call for "truth in education not political correctness." In a February open letter on her campaign website, Bruner proposed a return to the basics like phonics, cursive, and times tables, which her Republican runoff opponent, Keven Ellis, has pointed out are already included in the state curriculum.“I am very concerned that our students are not getting an education that will prepare them to be independent minded, productive citizens,” Bruner wrote. “Liberals want to eliminate time-proven methods such as phonics, grammar and spelling rules, and cursive handwriting. Some of them want to eliminate the memorization of the times tables except for the 2’s, 5’s, and 10’s.”  Her rallying cry to boot the federal government from public schools has earned her the support of Texas Tea Partiers, and her outlandish claims and indulgence in conspiracy theories has drawn the attention of the national media.

Students With Nowhere to Stay: Homelessness on College Campuses: Sara Goldrick-Rab, a professor at the University of Wisconsin-Madison, has been studying college affordability and its connection to retention since 2008. Her initial research involved analyzing the impact of the Fund for Wisconsin Scholars. "My team went out to get the lay of the land from students, and asked them how it was going paying for college," she said. "We expected to hear them tell us that they were having trouble affording their books or buying a laptop but what we heard about was food insecurity; one student told us that she was living in a shelter. This stunned us and we had to ask whether this was happening on a larger scale." " Shortly thereafter, Goldrick-Rab's team interviewed 4,300 students at 10 geographically diverse community colleges. In parsing the results, they discovered that homeless and hungry students were a varied lot: Some had not had enough to eat or had been homeless throughout their childhoods; some had aged out of foster care and had no family to turn to; and some had a falling out with their parents or guardians, or had their family ties altered by deportation or incarceration. Another cohort had grossly underestimated the cost of college and come up short. Lastly, Goldrick-Rab found students living with a host of mental illnesses. For some, completing coursework while living independently proved nearly impossible.

The Big Uneasy - What’s roiling the liberal-arts campus? During this academic year, schools across the country have been roiling with activism that has seemed to shift the meaning of contemporary liberalism without changing its ideals. At Yale, the associate head of a residence balked at the suggestion that students avoid potentially offensive Halloween costumes, proposing in an e-mail that it smothered transgressive expression. Her remarks were deemed insensitive, especially from someone tasked with fostering a sense of community, and the protests that followed escalated to address broader concerns. At Claremont McKenna, a dean sparked outrage when she sent an e-mail about better serving students—those of color, apparently—who didn’t fit the school’s “mold,” and resigned. In mid-November, a thousand students at Ithaca College walked out to demand the resignation of the president, who, they said, hadn’t responded aggressively enough to campus racism. More than a hundred other schools held rallies that week. Protests continued through the winter. The president of Northwestern endorsed “safe spaces,” refuges open only to certain identity groups. At Wesleyan, the Eclectic Society, whose members lived in a large brick colonnaded house, was put on probation for two years, partly because its whimsical scrapbook-like application overstepped a line. And when Wesleyan’s newspaper, the Argus, published a controversial opinion piece questioning the integrity of the Black Lives Matter movement, some hundred and seventy people signed a petition that would have defunded the paper. Sensitivities seemed to reach a peak at Emory when students complained of being traumatized after finding “TRUMP 2016” chalked on sidewalks around campus.  Such reports flummoxed many people who had always thought of themselves as devout liberals. Wasn’t free self-expression the whole point of social progressivism? Wasn’t liberal academe a way for ideas, good and bad, to be subjected to enlightened reason? Generations of professors and students imagined the university to be a temple for productive challenge and perpetually questioned certainties. Now, some feared, schools were being reimagined as safe spaces for coddled youths and the self-defined, untested truths that they held dear.  At some point, it seemed, the American left on campus stopped being able to hear itself think.

Oberlin students want to abolish midterms and any grades below C  -- Students at Oberlin College are asking the school to put academics on the back burner so they can better turn their attention to activism. More than 1,300 students at the Midwestern liberal arts college have now signed a petition asking that the college get rid of any grade below a C for the semester, and some students are requesting alternatives to the standard written midterm examination, such as a conversation with a professor in lieu of an essay. The students say that between their activism work and their heavy course load, finding success within the usual grading parameters is increasingly difficult. "A lot of us worked alongside community members in Cleveland who were protesting," Megan Bautista, a co-liaison in Oberlin's student government, said, referring to the protests surrounding the shooting death of 12-year-old Tamir Rice by a police officer in 2014. "But we needed to organize on campus as well — it wasn't sustainable to keep driving 40 minutes away. A lot of us started suffering academically." The student activists' request doesn't come without precedence: In the 1970s, Oberlin adjusted its grading to accommodate student activists protesting the Vietnam War and the Kent State shootings, The New Yorker reports. But current students contend that same luxury was not granted to them even though the recent Rice protests were over a police shooting that took place just 30 miles east of campus. "You know, we're paying for a service. We're paying for our attendance here. We need to be able to get what we need in a way that we can actually consume it," student Zakiya Acey told The New Yorker. "Because I'm dealing with having been arrested on campus, or having to deal with the things that my family are going through because of larger systems — having to deal with all of that, I can't produce the work that they want me to do. But I understand the material, and I can give it to you in different ways."

Universities oppose paying their postdocs overtime, but will pay football coaches millions of dollars --Colleges and universities have made the indefensible argument that they can’t afford to pay their low-level salaried employees for their overtime under the Department of Labor’s new overtime rule. Universities have singled out postdoctoral researchers, many of whom spend 60 hours a week or more running the labs that turn out the nation’s most important scientific advances, as a group of employees that would just cost too much if they had to be paid for the extra hours they work each week.  Analyzed on their own, these postdocs—who are among the best-educated and most valuable employees in the nation, on whom our future health and prosperity depend, in part—obviously deserve to be paid for their overtime hours. After all, at a salary of $42,000 a year, these postdocs are being paid about $13.50 an hour (less than fast food workers are demanding). When juxtaposed against the inflated salaries of university administrators with less stellar academic credentials making $200,000 to $3 million a year, the case for overtime compensation is only stronger. The comparison that really drives home how unfairly universities are treating their postdocs, however, is with the universities’ football coaches:  (table of coach's salarys by state)

What Student Loans Are Used For: Vacations, iPads, Kegs, Entertainment -- Between student loan debt projected to hit $17 trillion (the same today's US GDP) by 2030, and the fact that over 40% of student borrowers aren't making any payments on their loans, the table is already set for a new financial crisis of epic proportions. Of course, current college students who are taking on student debt today load aren't concerned with that - those things are for economists, money managers, and bank CFO's to worry about. No, college students have other concerns, such as who is going to be responsible for booking the spring break vacation in Cancun this year, and who is buying the ice luge for the party the night before everyone leaves. According to a survey, about one in five American students graduating this year who carry debt said they used student loans to pay for expenses such as vacations, dining out, and entertainment reports Bloomberg. Texas A&M graduate Eric Hazard recalls the excitement of student loan refund day. "Checks were celebrated across the campus as almost like a bonus for being a college kid. [Students] would go directly to the bank to cash it. I bought electronics for my dorm room and drinks were on me for a month or two. In an abstract way, I knew I would have to pay it back. But you don't have a timeline in your mind about what that was going to look like. I just knew it would happen later." Ah later, later is good. However, if Visa has anything to say about it college debt is just phase one, those millennials who are graduating will be ushered into a plan where they will be saddled with a lot more debt throughout life, so that "later" may have to turn into "much later", or perhaps "never."  Does taking the left over student loan money and blowing it on electronics, booze, and vacations violate lending agreements? Not necessarily says Mark Kantrowitz, publisher of a student loan informational website Cappex.  "If someone is using it for something like going out on a date, to see a baseball game, it's not a legal violation," he said. "Once that money is in the student's hand, there is no control to ensure that they're spending it on textbooks, apartments, or food. There's nothing to prevent them from buying an iPad, and technically an iPad might be OK." How about spring break, or a six-pack? Kantrowitz said it might violate the letter of the lending contract, but the student wouldn't face repercussions.

How Much are Young Americans Paying a Month on Student Debt? Less than You Think - Many Americans are struggling under huge monthly student-debt bills. But they are a sizeable minority, not the norm. That’s the conclusion of research from the Federal Reserve Bank of Cleveland. The typical borrower between ages ages 20 and 30 pays $203 a month toward student debt. Three-quarters of borrowers pay no more than $400 a month, the study shows. The figures are likely surprising for anyone who’s followed the public discourse over student debt in recent years. Student debt nearly tripled over the last decade, after inflation, to north of $1.2 trillion, New York Fed data show. Many activists and elected leaders say huge bills are preventing Americans from saving for retirement and buying a home. Yet for most, monthly bills are still quite manageable, roughly in line with what people pay on a car loan. Several factors are tamping down monthly student-debt bills, not all of them benign.The median monthly payment–the point at which half of all payments are higher and half are lower–rose 63% from early 2005 to $203.71 as of the second quarter of 2015. The average payment rose 53% to $351.03. (The average is much higher than the median because a substantial slice of borrowers took out jumbo loans to attend graduate school.)One caveat: Many borrowers in their 20s are still in college or grad school and thus aren’t required to be making payments yet. Mr. Elvery says even when excluding all borrowers with monthly bills of $0, the median and average figures only go up a few dollars.

Pensions May be Cut to ‘Virtually Nothing’ for 407,000 People --  The Central States Pension Fund has no new plan to avoid insolvency, fund director Thomas Nyhan said this week. Without government funding, the fund will run out of money in 10 years, he said. At that time, pension benefits for about 407,000 people could be reduced to “virtually nothing,” he told workers and retirees in a letter sent Friday. In a last-ditch effort, the Central States Pension Plan sought government approval to partially reduce the pensions of 115,000 retirees and the future benefits for 155,000 current workers. The proposed cuts were steep, as much as 60% for some, but it wasn’t enough. Earlier this month, the Treasury Department rejected the plan because it found that it would not actually head off insolvency. The fund could submit a new plan, but decided this week that there’s no other way to successfully save the fund and comply with the law. The cuts needed would be too severe. Normally, when a multi-employer fund like Central States runs out of money, a government insurance fund called the Pension Benefit Guaranty Corporation (PBGC) kicks in so that retirees still receive some kind of benefit. But that’s not a great solution in this case. For one thing, the amount is smaller than what pensioners would have received under the Central States reduction plan, and is based on the number of years a retiree worked. A retiree would receive a maximum $35.75 a month for each year worked, according to the fund’s website. (That amounts to $1,072.50 a month for retiree who worked 30 years.) But there’s yet another problem. The PBGC itself is underfunded and isn’t expected to be able to cover all the retirees in the Central States Pension Fund.

The 7 Biggest Myths and Lies About Social Security -- Social Security is bankrupting us. It’s outdated. It’s a Ponzi scheme. It’s socialism. It’s stealing from young people. The opponents and pundits determined to roll back the United States to the “good old days” before the New Deal regularly trot out a number of bogeymen and bigfoots to scare Americans into not supporting their own retirement well-being. That hasn’t worked too well. Americans of all political stripes remain strongly supportive of Social Security and other so-called “entitlements” like Medicare. But the other reason for plastering the media waves with a chorus of myths and lies is to stir up a political climate that causes politicians of both parties to cease looking for better alternatives other than to cut, cut, cut, or even to maintain the inadequate status quo. Below are rebuttals to some of the biggest whoppers regularly told about one of the most popular and successful federal programs in our nation’s history.

Why Obamacare's "Cadillac tax" is so contentious: Thoma - President Obama's signature health care law is called the Affordable Care Act... One of its provisions that aimed at chipping away health care's high costs is a tax that attempts to remove a hidden subsidy for the most expensive employer-paid health insurance plans. The highly controversial 40 percent surcharge on these plans quickly became known as the "Cadillac tax," but its implementation has been anything but quick: Congress has delayed its effective date from 2018 to 2020, given the misgivings many lawmakers have about its wisdom -- and possible effects. Indeed, it's not at all clear that the provision will ever become effective.The Republican opposition is based upon the party's overwhelming aversion to everything about Obamacare, and the Democrats' resistance arises from concerns over how the tax will affect employee benefits. Unions are also concerned that health insurance benefit increases they've bargained for in lieu of wage increases will be lost. Of course, economists have opinions on this topic as well, with a recent poll of economists finding strong support for the Cadillac tax on high-price employer-provided health plans. The tax was intended to raise revenues to help fund Obamacare and, because it provides an incentive for employers to reduce their spending on health care, function as a cost-control measure. ...

Health-care costs for families top $25,000 — triple 2001: The costs of providing health care to an average American family surpassed $25,000 for the first time in 2016 — even as the rate of health cost increases slowed to a record low, a new analysis revealed Tuesday. The $25,826 in health-care costs for a typical family of four covered by a employer-sponsored "preferred provider plan" is $1,155 higher than last year, and triple what it cost to provide health care for the same family in 2001, the first year that Milliman Medical Index analysis was done. And it's the 11th consecutive year that the total dollar increase in the average family's health-care costs exceeded $1,110, actuarial services firm Milliman noted as it released the index.actuarial services firm Milliman noted as it released the index.  A significant cost driver identified by the index was the rapid growth in what health plans and insured people are paying for prescription drugs, which now comprise almost 17 percent of the total spending on health care, or an average of $4,270 annually. That's four times the prescription drug costs borne by an average family in 2001, although the index did not factor in the effect of pharmaceutical company rebates, which can reduce the total drug costs and which are becoming more common.

Obama Signs Draconian New Drug Law | High Times -- To little fanfare, President Barack Obama on May 16 signed into law the Transnational Drug Trafficking Act—further extending the global reach of U.S. narcotics enforcement. The law criminalizes manufacture of drugs anywhere in the world if the producers "intend, know, or have probable cause to believe" the substances will be illegally imported into the United States. The language has been attacked as over-broad, potentially applying to any link of the production chain—down to lowly peasant growers of cannabis, coca leaf or opium. Co-sponsor Sen. Dianne Feinstein boasted in a press release: "Drug traffickers and criminal organizations in other countries consistently find new ways to circumvent our laws, and the Transnational Drug Trafficking Act gives the federal government the tools it needs to aggressively pursue and prosecute those outside the United States who traffic illegal—often deadly—drugs. This new legal authority is critical as we work to address the opioid epidemic. For example, drug kingpins from countries like Colombia and Peru often use Mexican trafficking organizations as mules to bring illegal narcotics into the United States. Now, the Justice Department will be able to take legal action against these kingpins. This bill also allows penalties to be imposed on individuals from other countries who bring chemicals into the United States knowing they will be used to make illegal drugs like meth and heroin. These changes will help law enforcement keep illegal narcotics out of the United States."  Colombian media raised the spectre of mass extradition of thousands of peasant cocaleros. The notion of mass extradition demands from Washington is especially sensitive as Colombia attempts to negotiate peace with the FARC rebels.

Purdue Pharma’s OxyContin: Corporate Fraud With a Body Count - The LA Times investigation of Purdue Pharma’s manufacture and marketing of the narcotic painkiller OxyContin published last week should be regarded as a standard case study in corporate fraud.  Except this particular tale also features a body count. This fact does nothing to call into question the validity of corporate fraud framework for understanding the story of OxyContin; it only makes its principal victims more visible, and the misbehavior in question more abhorrent, than is typical for the genre. All the major features of Purdue’s handling of OxyContin conform to similar acts of corporate fraud perpetrated in recent years: it encompasses not only what the company did (lie to generate profit), but what government regulatory agencies failed to do (detect and expose those lies), as well as the absence of any serious legal or other penalties imposed on Purdue Pharma as a result (a $634.5 million fine on a drug that has earned it $31 billion in revenue, or 2 percent of earnings).   Many times corporate fraud originates in some fairly innocent business model. Not so with OxyContin, a dubious affair from the start. As the LA Times investigation shows, Purdue formulated the drug because a patent on another its painkillers was set to expire. The problem was, although the innovation was real, the claims made on its behalf did not materialize for many of the drug’s users. In early drug trials, OxyContin failed to ensure twelve hours of pain relief in a substantial number of patients. But without twelve hour scheduling, the drug represented no genuine innovation, and no comparative advantage, when compared to other less expensive, long-lasting drugs. So Purdue Pharma chose to simply ignore inconvenient data, and the Food and Drug Administration (FDA) chose to let them.

Elderly man kills wife because they couldn’t afford her medicine - William J. Hager of Port St. Lucie, Florida is a 86 year old man who confessed to shooting his 76 year old wife, Carolyn Hager, in her sleep, because the couple could no longer afford her medications, leaving her in pain and wanting to die. America is the only industrialized country in the world without universal health care. Mr Hager surrendered himself to the local law and expects to go to prison. Mr. Hager said he had killed her at 7:30 a.m. while she was asleep, according to the affidavit. He placed the gun, a Colt .32 revolver, on a dresser, went into the kitchen of their home and drank coffee. He then called his daughters to tell them what he had done before calling 911 in the afternoon. Mr. Hager apologized to deputies for not calling them earlier in the day but said he had wanted to let his children know what had happened first. He said that his wife had told him in the past that she wanted to die, and that he had been thinking of killing her for several days because she was in pain, the affidavit said.

White, Middle-Age Suicide In America Skyrockets -- Suicide, once thought to be associated with troubled teens and the elderly, is quickly becoming an age-blind statistic. Middle aged Americans are turning to suicide in alarming numbers. The reasons include easily accessible prescription painkillers(link is external), the mortgage crisis(link is external) and most importantly the challenge of a troubled economy(link is external). The Center for Disease Control and Prevention(link is external) claims suicide rates now top the number of deaths due to automobile accidents. The suicide rate for both younger and older Americans remains virtually unchanged, however, the rate has spiked for those in middle age (35 to 64 years old) with a 28 percent increase(link is external) from 1999 to 2010. The rate for whites in middle-age jumped an alarming 40 percent during the same time frame. According to the CDC, there were more than 38,000 suicides(link is external) in 2010 making it the tenth leading cause of death in America overall (third leading cause from age 15-24).  The US 2010 Final Data(link is external) quantifies the US statistics for suicide by race, sex and age. Interestingly, African-American suicides(link is external) have declined and are considerably lower than whites. Reasons are thought to include better coping skills when negative things occur as well as different cultural norms(link is external) with respect to taking your own life. Also, Blacks (and Hispanics)(link is external) tend to have stronger family support, community support and church support to carry them through these rough times.  While money woes definitely contribute to stress and poor mental health, it can be devastating to those already prone to depression -- and depression is indeed still the number one risk factor for suicide. A person with no hope and nowhere to go, can now easily turn to their prescription painkiller and overdose, bringing the pain, stress and worry to an end. In fact, prescription painkillers were the third leading cause of suicide (and rising rapidly) for middle aged Americans in 2010 (guns(link is external) are still number 1).

Mortality for middle-aged white men going down, not up -  There’s this story going around that the world isn’t so good for white men: disappearing industrial jobs, social changes that have reduced some of the traditional advantages of being male, etc. A problem for all men, perhaps, but relatively speaking maybe more of a problem for middle-aged white men in this country: the middle-aged having the difficulty to adapt to a new economy and society in mid-life, and white men seeing a negative relative status change in recent decades.With this as background, it’s perhaps no surprise that last year’s much-publicized paper by Anne Case and Angus Deaton — reporting an increase in death rates among middle-aged whites in the United States alongside a steady decrease in death rates among other ethnic groups and in other countries — was taken as further evidence of white men’s distress.It turned out, though, that (a) the trends in death rates among men was much different then women, and, in fact, (b) after adjusting for age composition (the “middle-aged” category in the United States has had an increase in average age during the past two decades as the baby-boom generation has moved through), the death rate among middle-aged white men has actually decreased during the past few years.The comparison with other ethnic groups and other countries still seems strong — Case and Deaton’s main findings hold up — but it’s just wrong to report that middle-aged white men are dying off. No matter how you slice it, it’s white women who are having the problem:

Baby Boomers Will Become Sicker Seniors Than Earlier Generations -- The next generation of senior citizens will be sicker and costlier to the health care system over the next 14 years than previous generations, according to a new report from the United Health Foundation. We're talking about you, baby boomers. The report looks at the current health status of people ages 50 to 64 and compares them to the same ages in 1999. The upshot? There will be about 55 percent more senior citizens who have diabetes than there are today, and about 25 percent more who are obese. Overall, the report says that the next generation of seniors will be 9 percent less likely to say they have good or excellent overall health. That's bad news for baby boomers. Health care costs for people with diabetes are about 2.5 times higher than for those without, according to the study. It's also bad news for taxpayers. "The dramatic increase has serious implications for the long-term health of those individuals and for the finances of our nation," says Rhonda Randall, a senior adviser to the United Health Foundation and chief medical officer at UnitedHealthcare Retiree Solutions, which sells Medicare Advantage plans. Most of the costs will be borne by Medicare, the government-run health care system for seniors, and by extension, taxpayers

Alcohol intervention programs ineffective on fraternity members  -- Interventions designed to reduce alcohol use among fraternity members are no more effective than no intervention at all, according to an analysis of 25 years of research involving over 6,000 university students published by the American Psychological Association. "Current intervention methods appear to have limited effectiveness in reducing alcohol consumption and alcohol-related problems among fraternity and possibly sorority members," said lead researcher Lori Scott-Sheldon, PhD, of The Miriam Hospital and Brown University. "Stronger interventions may need to be developed for student members of Greek letter organizations." The study appears in the journal Health Psychology, which is published by APA. The researchers conducted a meta-analysis of 15 studies looking at 21 different interventions involving 6,026 total participants (18 percent women) who were members of fraternities and sororities. They found no significant difference between students who received an intervention and those who did not for alcohol consumption per week or month, frequency of heavy drinking, frequency of drinking days or alcohol-related problems. In some cases, alcohol consumption even increased after an intervention. Alcohol use is common among U.S. college students, but especially among those in fraternities and sororities, according to the study. It also notes that members of the Greek system consume higher quantities of alcohol, report more frequent drinking and experience more alcohol-related consequences compared to students outside the Greek system.

The Rogue Immune Cells That Wreck the Brain - MIT Technology Review -- Microglia are part of a larger class of cells—known collectively as glia—that carry out an array of functions in the brain, guiding its development and serving as its immune system by gobbling up diseased or damaged cells and carting away debris. Along with her frequent collaborator and mentor, Stanford biologist Ben Barres, and a growing cadre of other scientists, Stevens, 45, is showing that these long-overlooked cells are more than mere support workers for the neurons they surround. Her work has raised a provocative suggestion: that brain disorders could somehow be triggered by our own bodily defenses gone bad. In one groundbreaking paper, in January, Stevens and researchers at the Broad Institute of MIT and Harvard showed that aberrant microglia might play a role in schizophrenia—causing or at least contributing to the massive cell loss that can leave people with devastating cognitive defects. Crucially, the researchers pointed to a chemical pathway that might be targeted to slow or stop the disease. Last week, Stevens and other researchers published a similar finding for Alzheimer’s. All of this raises intriguing questions. Is it possible that many common brain disorders, despite their wide-ranging symptoms, are caused or at least worsened by the same culprit, a component of the immune system? If so, could many of these disorders be treated in a similar way—by stopping these rogue cells?

Investigation: NFL 'improperly attempted to influence' concussion research: A congressional investigation claims NFL officials “improperly attempted to influence the grant selection process” in a concussion study led by the National Institutes of Health (NIH), according to a report released on Monday. The investigation was launched after ESPN reported in December that the NFL, which had promised as much $30 million for the study of the debilitating brain disease chronic traumatic encephalopathy (CTE), withheld funding from the NIH due to the involvement of researchers from Boston University. “The NFL’s interactions with NIH and approach to funding the BU study fit a longstanding pattern of attempts to influence the scientific understanding of the consequences of repeated head trauma,” the report released by the Democratic members of the House Committee on Energy and Commerce states. “These efforts date back to the formation of the NFL’s now-discredited (Mild Traumatic Brain Injury) Committee, which attempted to control the scientific narrative around concussions in the 1990s.” The NFL said it "rejects the allegations" laid out in the report, according to a statement provided to USA TODAY Sports.

Financial crisis caused 500,000 extra cancer deaths, according to Lancet study: The global financial crisis may have caused an additional 500,000 cancer deaths from 2008 to 2010, according to a new study, with patients locked out of treatment because of unemployment and healthcare cuts. The figures were extrapolated from an observed rise in cancer deaths for every percentage increase in unemployment, and every drop in public healthcare spending. "From our analysis we estimate that the economic crisis was associated with over 260,000 excess cancer deaths in the OECD (34-member Organisation for Economic Cooperation and Development) alone, between 2008-2010," said Mahiben Maruthappu of Imperial College London. "This suggests that there could have been well over 500,000 excess cancer deaths worldwide during this time." For the European Union alone, the estimate was 160,000 additional deaths - a term used to describe people who would not otherwise have died. For the United States, the estimate was 18,000 and for France 1,500. For Spain and Britain, which provided universal healthcare, no additional deaths were calculated. The study was published in The Lancet medical journal on Thursday.

U.S. Cellphone Study Fans Cancer Worries - WSJ: For almost as long as people have had cellphones, scientists have been debating whether the now-ubiquitous devices cause health effects. More than a decade ago, the U.S. government set in motion a study to help answer the question. Its initial findings were released this week. The researchers said the findings were significant enough that they felt the urgency to release the results before the entire study was complete. The study found “low incidences” of two types of tumors—one in the brain and one in the heart—in male rats that were exposed to the kinds of low-level radio waves that are emitted by cellphones. The researchers, as well as scientists not involved in the study, said it was still too soon to draw sweeping conclusions about whether cellphones cause cancer.  “Much work remains to be done to understand the implications, if any, of these findings on the rapidly changing cellular technologies that are in use today,” said John R. Bucher, the associate director of the Department of Health and Human Services run National Toxicology Program, which conducted the study. Yet “we felt it was important to get the word out.” Scientists pointed out some of the studies’ unusual findings: Tumors weren’t observed in female rats exposed during the tests. And rats that were exposed to radio-frequency energy lived longer than the control group, which had no exposure. “There is a long way to go from the findings reported here…and a finding that radio-frequency [electromagnetic radiation] is a human carcinogen,” said Jonathan Samet, who was chairman of the World Health Organization committee that in 2011 determined cellphones were possibly carcinogenic.

Teen cancer death rate causes alarm - BBC News: Too many teenagers and young adults are dying of some types of cancer, a Europe-wide report warns. Their survival rates for cancers such as leukaemia are much lower than in younger children, says a report in the Lancet Oncology. The researchers suggest differences in tumours, delays in diagnosis and treatment and a lack of clinical trials for that age group are to blame. Cancer Research UK said it was crucial to find out what was going wrong. The study analysed data from 27 countries on nearly 57,000 childhood cancers and 312,000 cancers in teenagers and young adults. Overall, five-year survival rates were higher in teenagers and young adults at 82% compared with 79% in children. But those better prospects were largely driven by the older age-group getting cancers with a better prognosis. The overall rate concealed areas of concern where survival was "significantly worse" for eight cancers commonly found in both age groups.  The five-year survival rates for:

  • acute lymphoid leukaemias were 56% in teenagers and young adults & 85.8% in children
  • acute myeloid leukaemias 50% in teenagers and young adults & 61% in children
  • Hodgkin's lymphoma 93% in teenagers and young adults & 95% in children
  • non-Hodgkin's lymphoma 77% in teenagers and young adults & 83% in children
  • astrocytomas (a brain cancer) 46% in teenagers and young adults & 62% in children
  • Ewing's sarcoma of bone 49% in teenagers and young adults & 67% in children
  • rhabdomyosarcoma (soft tissue tumours) 38% in teenagers and young adults & 67% in children
  • osteosarcoma (bone cancer) 62% in teenagers and young adults & 67% in children

Why cancer is more deadly if you're black -- Next month, Joe Biden will convene cancer experts, donors and patients for the “National Cancer Moonshot Summit”. The vice-president’s son Beau died of brain cancer a year ago. It’s a well-meaning effort to better the lives of Americans, but fails to recognize that cancer is not one disease but hundreds. To prevent cancer deaths we’ll need different plans of attack based not just on the type of cancer, but also the population affected. We’ll score the biggest (not to mention most cost-effective) wins against cancer not through scientific study, but by finally recognizing and addressing socioeconomic inequities in this country. Almost two-thirds of my colleagues acknowledge that patients receive poorer quality healthcare due to their race or ethnicity.  Lung cancer – the leading cause of cancer death in this country – is more deadly to African Americans than white people, especially in the midwest and south. Colorectal cancer – not only the third most common cause of cancer among Americans, but also highly preventable if routine screening is applied – is especially deadly for African Americans in the south. Half the disparity comes down to late diagnosis. Liver cancer – which is growing in importance due to higher rates of hepatitis C among baby boomers – is also more likely to kill black people than white people. Liver cancers tend to be detected later among black people, when the tumors are bigger and patients are worse candidates for lifesaving liver transplants.

Mutant Superbug Has Been Discovered In The U.S. - A mutant strain of E. coli, resistant to even the toughest antibiotics, has been found in the United States, federal health officials said Thursday. The bacteria, discovered last month in a 49-year-old Pennsylvania woman with a urinary tract infection, contains a gene known as mcr-1, making it resistant even to colistin, a decades-old antibiotic that has increasingly been used as a treatment of last resort against dangerous superbugs. The discovery -- the first time the strain has been found inside the U.S. -- "heralds the emergence of truly pan-drug resistant bacteria," according to a report released Thursday by Department of Defense researchers. The woman, now recovered, has a military connection, authorities said without elaborating. The woman hadn't traveled outside the U.S. in the previous five months, according to the report. Doctors treated the infection using another antibiotic, but said they were alarmed by the discovery of the mcr-1 gene inside the U.S."The fear is that this could spread to other bacteria and create the bacterium that would be resistant to everything," Dr. Beth Bell, director of the Centers for Disease Control and Prevention's National Center for Emerging and Zoonotic Infectious Diseases, told ABC News.  "The more we look at drug resistance, the more concerned we are," Dr. Tom Frieden, CDC director, said Thursday. "The medicine cabinet is empty for some patients. It is the end of the road for antibiotics unless we act urgently."

The world’s worst superbug has made its way to the US - A new superbug that is resistant to the antibiotic of last resort has been spotted in the United States. Twice. US researchers reported Thursday that the mcr-1 gene has been found in E. coli bacteria found in a woman from Pennsylvania. Separately, the US Department of Agriculture reported that the gene had been found in a sample of intestine from a pig. It did not provide details of where the pig had been raised. The mcr-1 gene was first discovered last fall by Chinese scientists. In the weeks that followed, a cascade of scientific articles emerged from a range on countries reporting on finding the gene in animals, commercial meat, and occasionally in people. Researchers from the Walter Reed Army Institute of Research in Silver Springs, Md., said the resistance gene was discovered in E. coli bacteria found in the urine of a woman from Pennsylvania who had symptoms of a urinary tract infection. The unidentified woman, seen at a clinic in late April, had not traveled outside the country in the previous five months, they reported.Denmark, Britain, the Netherlands, Canada, Laos, Algeria, Thailand, and France have all reported finding this resistance gene. There is also reason to suspect it has been circulating in Bolivia, Peru, Tunisia, Portugal, Malaysia, and possibly Vietnam and Cambodia.  Researchers who track the battle of bacteria vs. antibiotics have predicted it was only a matter of time before the mcr-1 gene would be found in the US as well. Mcr-1 is a gene that gives bacteria that carry it resistance to a drug called colistin, the last antibiotic that can cure infections caused by bacteria that have developed resistance to multiple antibiotics. The gene is carried on a plasmid, a mobile piece of DNA that that can be swapped from one bacterium to another, not just within a family of bacteria such as E. coli, but among different types of bacteria.

Can we plan for the next pandemic? --From Ron Klain, the former Ebola czar, in the Washington Post: If it seems like the world is being threatened by new infectious diseases with increasing frequency—H1N1 in 2009-2010, MERS in 2012, Ebola in 2014, Zika in 2016, yellow fever on the horizon for 2017—that’s because it is. These are not random lightning strikes or a string of global bad luck. This growing threat is a result of human activity: human populations encroaching on, and having greater interaction with, habitats where animals spread these viruses; humans living more densely in cities where sickness spreads rapidly; humans traveling globally with increasing reach and speed; humans changing our climate and bringing disease-spreading insects to places where they have not lived previously. From now on, dangerous epidemics are going to be a regular fact of life. We can no longer accept surprise as an excuse for a response that is slow out of the gate. … Klain’s op-ed makes a terse, compelling case for urgency when it comes to pandemic preparation. He expands on that case over at Pulse Check, Dan Diamond’s podcast at Politico. It’s mind-boggling to Klain—and to me—that pandemic response has become a partisan issue. If Zika can’t bring us together, what the hell can? As Congress dithers, the World Bank has picked up on Klain’s suggestion. It’s trying something new and very smart to finance outbreak response. From the Financial TimesOutbreaks of diseases such as ebola will trigger a $500m fund to help countries and health agencies fight infection after the World Bank launched the first insurance market for pandemic risk. The aim of the Pandemic Emergency Financing Facility, unveiled at a G7 finance ministers meeting in Japan, is to make funds instantly available for curbing the spread of particular infectious diseases, thereby saving lives and money over the longer-term.

Lowering the Bar: Medicine in the 21st Century - As many as 16 million Americans are prone to screaming and pounding on the dashboard when someone cuts them off in traffic. Another 7 million are fully capable of devouring a whole box of cookies in front of the TV.There are 14 million men with low testosterone, 9 million women with low sexual desire -- and tens of millions of people with bladders that are too active and blood sugar that's a little too high.The common thread: All have non-life-threatening conditions that for most of the 20th century were not considered a part of mainstream medicine. Some did not exist at all as formal disorders. Each of the conditions, from intermittent explosive disorder to overactive bladder disorder, is the product of a new or expanded definition. These definitions come from medical societies or researchers who get money from drug companies. And those companies stand to profit when millions of people -- often overnight -- are labeled as ailing. What's more, the drugs involved can be costly, can carry serious health risks, and often do not work well, a Milwaukee Journal Sentinel/MedPage Today investigation has found.

Inside Madagascar's 'City of Flies'  (photo essay) last August, but about 3,000 people who live in a garbage dump on the outskirts of the country's capital, Antananarivo, are still in close proximity to the disease. The inhabitants of "Ralalitra" (the "City of Flies") spend their days scavenging amid debris, rats, and dead bodies. SAMVA, the private company the government contracts to run the facility, denies the squatter settlements' existence and has threatened photographers and journalists who try to document life there. The luckiest among the dumpsite dwellers moved to work in the nearby porphyry mine. They now work ten hours a day and earn much less than before, but dignity has its price, they said. From there they can still see the smoke from the dumpsite (at the end of the rainbow), a constant reminder that inspires them to work harder with no complaints.  A doctor working here as volunteer reported many cases of pneumonic plague from this area, due to the toxic fog coming from the dumpsite. Around 3,000 people currently live and work here, collecting plastic (sold for $0.05/ Kg) and metals ($0.50/Kg). Many of them came to Antananarivo hoping to find better living conditions and fortune, now they live in one of the place on Earth with more unreported cases of pneumonic plague, the most infective type of the so called Black Death.

"I Am Not Your Experiment" - Thousands Around The World Protest GMO Giant Monsanto -- A little over a year ago, GMO giant Monsanto was furious at the World Health Organization for linking glypshophate, the chief ingredient in weed killer Roundup, to cancer.  As a result Monsanto immediately demanded that WHO retract said report, saying that the report was biased and contradicts regulatory findings that the ingredient, glyphosate, is safe when used as labeled. A working group at WHO said after reviewing scientific literature it was classifying glyphosate as "probably carcinogenic to humans." Howeber Monsanto was relentless and said that "we question the quality of the assessment," according to Philip Miller, Monsanto vice president of global regulatory affairs. "The WHO has something to explain." In retrospect it may have been Monsanto who had something to explain, which it did, indirectly, when last week another report was released, this time from the U.N.'s Food and Agriculture Organization (FAO), according to which Roundup's glyphosphate is unlikely to cause cancer in  people. Continuing the explanation, diazinon and malathion, two other pesticides reviewed by the committee, which met last week and published its conclusions on Monday, were also found to be unlikely to be carcinogenic. "In view of the absence of carcinogenic potential in rodents at human-relevant doses and the absence of genotoxicity by the oral route in mammals, and considering the epidemiological evidence from occupational exposures, the meeting concluded that glyphosate is unlikely to pose a carcinogenic risk to humans from exposure through the diet," the committee said. As Reuters itself notes, the conclusions appear to contradict the abovementioned finding by the WHO's Lyon-based International Agency for Research on Cancer (IARC), which in March 2015 said glyphosate is "probably" able to cause cancer in humans and classified it as a 'Group 2A' carcinogen. This is when the alarm bells at Monsanto went off and, according to some, the company's spending on favorable reports shot through the roof. The result was immediate.

Photos of Global Protests Against Monsanto May 2016 -- Big Picture Agriculture -- This week, I am doing two food and agricultural global news photos threads. This one covers the protests that were held around the world against Monsanto on May 21, 2016.

GMOs Are Complicated, And Our Food System Is Not Designed To Handle Complicated. That’s A Problem. This month, the National Academy of Sciences (NAS) — an independent group created by Congress — released what is, to date, one of the most extensive reviews of genetically modified crops. The nearly 400-page report looks at everything from genetically modified crops’ potential impact on human health to their impact on the environment. It’s a massive, hulking piece of scientific literature — the panel spent two years pouring over more than 1,000 existing studies on genetically modified crops, interviewing 80 witnesses, and analyzing more than 700 comments submitted by the public.  The report comes at an important time in the overall debate about GMOs and their place in the American food system. In a country almost constantly polarized, an overwhelming majority of Americans think that GMOs should be labeled. According to a Pew poll, more than half of Americans believe that GMOs are unsafe. At the same time, proponents of the technology argue that GMOs are safe for human consumption and will help farmers meet growing demands for food, even as population increases and climate change intensifies.  So are GMOs good? Or are they bad?  The NAS report resists making broad generalizations one way or the other, trading black or white distinctions for a detailed and nuanced picture of the pros and cons of GMO crops. But our food system isn’t set up to handle the kind of nuance that appears in the NAS report. And that’s a problem — for farmers, for scientists, and, above all, for consumers.  Broadly, the report concludes the genetically modified crops available to date — mostly staple crops like corn or soy that have been engineered to resist either herbicides or pests — are safe for human consumption. But the conclusions are just broad summaries of a massive, complex scientific inquiry. The better takeaway from the NAS study might be that GMOs are really, really complicated.

Taiwan Recalls Quaker Oats Products Imported From U.S. After Detecting Glyphosate -- More bad news for Quaker Oats. A random inspection from Taiwan’s Food and Drug Administration (FDA) detected glyphosate in 10 out of 36 oatmeal products it tested, exceeding the country’s legal limit. The 10 products, including those from the Quaker Oats brand, were found to have glyphosate residue levels between 0.1 parts per million (ppm) and 1.8ppm, the agency said, prompting a recall of nearly 62,000 kilograms of oatmeal. Taiwan does not permit residues levels of glyphosate to exceed 0.1 ppm, and the companies that violated the regulated standard may face fines between NT$60,000-$200 million (USD$1,800-$6 million). Taiwan’s FDA said that glyphosate is an herbicide often used in other countries, but because Taiwan does not produce their oats it has a zero tolerance policy on glyphosate residue in oatmeal products in the absence of a set maximum residue limits, the Taipei Times reported.  Glyphosate is the main ingredient in Monsanto’s flagship herbicide Roundup, which is sprayed on “Roundup Ready” crops that are genetically modified to resist the weedkiller. As it happens, Taiwan has strict regulations on genetically modified organisms (GMOs). ommercial cultivation of genetically modified crops is banned in Taiwan, and the country has mandated labels on all food products containing GMO ingredients. Additionally, as EcoWatch reported, in December 2015, Taiwan banned schools across the nation from serving GMOs to students, citing health and safety concerns.

Minn. farmers warned not to plant Monsanto's latest Roundup soybeans - Across Minnesota, grain buyers and sellers have been warning farmers this spring to be wary about planting Monsanto’s latest biotech soybean. The product was launched in U.S. and Canadian markets for the first time this year, but it has not been approved yet for sale in the European Union. Traders and others say that uncertainty, if not resolved, will cause price declines, confusion and disruption in international trade.  “We do not encourage the planting of this because of the risk involved.” The product in question is Roundup Ready 2 Xtend, a genetically modified soybean seed that is resisistant to a pair of herbicides called glyphosate and dicamba. It was developed because weeds have become resistant to Roundup Ready varieties with traits that used glyphosate alone. The genetic modifications in the new seed allow both pesticides to be used without harming the soybeans.  The reason it’s a risk is because unapproved soybeans and approved soybeans often get mixed together in grain elevators, unit trains or ships when they’re exported, and it’s difficult and expensive for grain buyers and sellers to try to keep them separate. “At the grain elevator level it makes it very challenging because when we’re buying soybeans from the producers, we have no idea what market it’s going to,” said Bob Zelenka, executive director of the Minnesota Grain and Feed Association. “So we could very easily end up shipping to the European market and then potentially be refused to enter that market.”

Monsanto Ordered to Pay $46.5 Million in PCB Lawsuit in Rare Win for Plaintiffs  - A St. Louis jury has awarded three plaintiffs a total of $46.5 million in damages in a lawsuit alleging that Monsanto and three other companies were negligent in its handling of polychlorinated biphenyls, or PCBs, a highly toxic and carcinogenic group of chemicals.This case, which went on trial April 28, involved only three of nearly 100 plaintiffs claiming that exposure to polychlorinated biphenyls, or PCBs, caused non-Hodgkin lymphoma.  Yesterday’s 10-2 verdict in St. Louis Circuit Court awarded $17.5 million in damages to the three plaintiffs and assessed an additional $29 million in punitive damages against Monsanto, Solutia, Pharmacia and Pfizer, the St. Louis Dispatch reported. PCBs were used to insulate electronics decades ago. Before switching operations to agriculture, Monsanto was the sole manufacturer of the compound from 1935 until 1977. The U.S. Environmental Protection Agency (EPA) banned PCBs in 1979, due to its link to birth defects and cancer in laboratory animals. PCBs can also have adverse skin and liver effects in humans. PCBs linger in the environment for many decades. The lawsuit claims that Monsanto continued to sell the compounds even after it learned about its dangers and falsely told the public they were safe. Indeed, internal documents have surfaced showing that Monsanto knew about the health risks of PCBs long before they were banned. A document, dated Sept. 20, 1955, stated: “We know Aroclors [PCBs] are toxic but the actual limit has not been precisely defined.” The verdict is the first such victory in the city of St. Louis and a seemingly rare win overall. Monsanto has historically prevailed in similar lawsuits filed against the company over deaths and illnesses related to PCBs, as MintPress News noted. “This is the future,”

Bayer: Chemical Firm Makes $62 Billion Offer for Monsanto: — German drug and chemicals company Bayer AG announced Monday that it has made a $62 billion offer to buy U.S.-based crops and seeds specialist Monsanto.The proposed combination would create a giant seed and farm chemical company with a strong presence in the U.S., Europe and Asia.Bayer said the all-cash offer values shares of Monsanto at $122 each. That compares with a closing price Friday of $101.52 and is 37 percent higher than the closing price of $89.03 on May 9, the day before Bayer made a written proposal to Monsanto.Bayer had said on Thursday that its executives met recently with their Monsanto counterparts “to privately discuss a negotiated acquisition” of the specialist in genetically modified crop seeds, which is headquartered in St. Louis, Missouri. Monsanto said then that it was reviewing Bayer’s proposal. Bayer said it plans to finance the acquisition with a combination of debt and equity. It said that it “is prepared to proceed immediately to due diligence and negotiations and to quickly agree to a transaction.”“Monsanto is a perfect match to our agricultural business,” Bayer CEO Werner Baumann said in a video message posted on his company’s website. “We would combine complementary skills with minimal geographic overlap.” Both companies are familiar brands on farms around the globe. Bayer’s farm business produces seeds as well as compounds to kill weeds, bugs and fungus. Monsanto has some 20,000 employees and produces seeds for fruits, vegetables and other crops including corn, soybeans and cotton, as well as the popular weed-killer Roundup.

Bayer ‘Confident’ It Can Still Strike Deal with Monsanto, Merger Could Spell Disaster for Farmers and Global Food Supply - Two days after Monsanto rejected Bayer AG’s takeover attempt because $62 billion wasn’t enough money, the German drug and crop chemical giant says it’s confident it can still strike a deal.  Almost everything you eat could be controlled by a single mega-corporation, if Bayer gets its way and buys Monsanto.  Once the deal goes ahead it could spell disaster for our food supply and farmers, ushering in a new era of sterile crops soaked in dangerous pesticides. If the deal is successful, it’ll make the new corporation the biggest seed maker and pesticide company in the world—and it will have almost total control of the most important aspects of our food supply. The pharmaceutical giant itself has been subject to criticism over its widely used insecticide, imidacloprid, which belongs to a controversial class of chemicals called neonicotinoids, and is linked to deaths of bees.   “At the center of Bayer and Monsanto’s corporate agribusiness model is the indiscriminate, widespread use of pesticides linked to the massive global bee die-off,” the petition reads. “Monsanto rejected the first offer from Bayer, but the negotiations are far from over. Once a merger like this goes through, Bayer and Monsanto will be even harder to stop—we need to act now to block the creation of this massive corporate bee-killer.” Experts also warned that the possible merger of Bayer and Monsanto—which would claim 30 percent of the global crop-inputs business if successfully executed—could significantly and negatively impact farmers and food production. Monsanto controls 80 percent of the U.S. corn market and 93 percent of the U.S. soy market.

Free Trade in Rhetoric, Not in Practice -- Western countries commonly proclaim the great benefits of free trade and the evils of protectionism.  In reality, many developed countries practise double standards, insisting on free trade in areas where they are strong, whilst using protectionist measures in sectors where they are weak. In the worst case, within the same sector they have designed rules that impose liberalisation on developing countries but allow themselves to maintain high protectionism.  But in reality, WTO’s agriculture agreement allowed them to have both high tariffs and high subsidies. The subsidies have enabled far­mers to sell their products at low prices, often below production cost, yet allowed them to get adequate revenues (which include the subsidies) that keep them in business. This has four negative effects on developing countries. Firstly, those countries that are agri­­culturally competitive cannot pe­­netrate the rich countries’ markets. Secondly, the developing countries are deprived of other markets because the United States and Europe can export the same farm products at artificially cheap prices. This is a complaint of African cotton-producing countries. Thirdly, by exporting a product cheaply, the developed country reduces the demand for a competitor substitute product. If the US did not subsidise its soybean, enabling soybean oil to be cheaper, Malaysian or Indonesian palm oil would have a bigger market.  Fourthly, these cheap products (such as chicken from US and Europe) have entered many deve­loping countries, damaging the livelihoods of their local farmers.

Undercover Investigation Exposes Shocking Neglect at Third Largest Pig Farm in U.S. -- “Progressive Farming. Family Style.” It sounds like the slogan of a brand you could trust to embrace the public’s growing consideration of animal welfare in animal agriculture, but a new undercover investigation blows that idyllic family farm image out of the water. The tagline belongs to The Maschhoffs, which is the third largest pig producer in the U.S. and enjoys business from Hormel Foods, one of its largest customers. One of the company’s Nebraska big breeding facilities is at the center of newly released undercover footage from the Animal Legal Defense Fund, the nation’s leading legal animal protection organization. The footage is sickening. Mother pigs and piglets alike are shown suffering and dying from a wide array of gruesome ailments. Undercover investigators documented pigs suffering for days or weeks with extreme prolapsed rectums, intestinal ruptures, large open wounds and huge, bloody ruptured cysts. The investigation also revealed that the pigs are left to go long stretches of time—up to three days—without food as the result of a failure of the electronic feeding mechanism. The footage reveals that The Maschhoffs workers were aware of the malfunction but still did not pursue alternate ways to feed the pigs. The footage includes particularly haunting images of “thumping,” a practice considered to be industry standard. Thumping is a method of killing piglets deemed sickly or too small. Their skulls are “thumped,” i.e., smashed against the floor. It’s a brutal act to watch and it’s even more difficult to watch the aftermath—many piglets don’t die immediately. The footage shows piglets conscious and looking around frantically or moving and convulsing—dying slowly.

Chicken Giant Perdue Just Nixed a Nasty Clause from Its Contracts with Farmers -- Until recently the company, the nation's fourth-largest chicken processor, was presenting farmers with a contract that included a provision that would clamp down on such rare public glimpses behind the walls of contract poultry farming. I obtained a leaked copy of such a contract, one that forbid  farmers from taking photos or audiotapes of the chickens in their own facilities without company permission. Bruce Stewart-Brown, Perdue's senior vice president of food safety, quality and live operations, confirmed that this language has been included in all new contracts since October 2014—before the release of the Watts video. But then, just as I was finishing reporting and writing this story, a Perdue spokesperson told me that "we plan to remove that clause from our contracts going forward," because "we recognize that this may cause some confusion based on where we are going as a company and our commitment to transparency."  Here's the clause:

Wyoming Law Criminalizes Collecting Evidence Of Pollution -- A law passed by Wyoming Republicans officially makes it illegal for citizens to collect evidence of pollution on public land that could lead to a government investigation of environmental destruction.   Wyoming Governor Matt Mead signed Senate Bill 12 into law in March making it a criminal offense to “collect resource data,” such as photographs of polluted waterways and land that is private, public, or federal outside of city limits. Violators of the law could face a $5,000 fine and/or prison time. According to ThinkProgress, Under the law “collect” means to “take a sample of material, acquire, gather, photograph or otherwise preserve information in any form from open land which is submitted, or intended to be submitted to any agency of the state, or federal government.” The laws says that only citizens who are given express permission to collect such evidence can actually do so, which quite frankly makes it easier for public and private employees to cover up environmental wrongdoing. For example, if a cattle rancher allows his herd to graze too close to public waterways on public land and the cattle cause an E. coli outbreak in the water that could poison people, citizens who collect evidence of this to report to government agencies would be subject to prosecution. In short, the law is an effort to silence and censor whisteblowers and environmental activists from proving that landowners are illegally polluting public lands.  The Wyoming Sierra Club condemned the law in a statement to ThinkProgress as a broad effort to prevent scientific research and other efforts to help protect the environment. This effort by Wyoming Republicans happened at the same time that Republicans in the United States Senate voted unanimously to sell public lands, including national forests and waterways, to states whose conservative governments will likely turn around and sell those lands to private industry for mining, logging, and drilling.

Flint had many betrayers -- PUNDITS EXPRESS astonishment at the perdition of Flint, Michigan, as if the degeneration of a renowned American city is rare rather than emblematic of municipalities throughout the nation. Where have they been? Do they not recall the collapse of the Interstate 35W bridge in downtown Minneapolis during rush hour in 2007? Can a head in the sand feel so comfortable that they can't feel the tremors, quakes and reverberations? New Orleans flooded in 1915, 1940, 1947, 1965, 1969 and 2005. Love Canal, Hinkley, California, and the Louisiana Industrial Corridor aren't anomalous cancer alleys. The United States is riddled with environmental depredation. The calculated failure of American institutions not only to invest in vital infrastructure but to provide basic care for citizens isn't a shock, it's status quo. Every four years, the American Society of Civil Engineers [ASCE] publishes a report card for the nation's infrastructure. In 2013, the U.S. got Ds in drinking water, wastewater, inland waterways, roads, schools, dams, levees, aviation, transit and energy.I guess it's uncivil for engineers to flunk an American marvel of mediocrity like Interstate 35W and other bridges, which were ranked at a C+. The overall D+ grade point average indicates that we did get some Cs in a few less precarious spots, like ports, parks and bridges. Take your hat off, hold your breath and pray to the EPA--we are about to cross the river of denial.

House Republicans Are Using Zika As An Excuse To Allow More Pesticides In Water -  Despite the fact that Congress has yet to pass a fully-funded Zika emergency bill, the House of Representatives passed the Zika Vector Control Act Tuesday evening, a bill ostensibly aimed at helping to fight the potential spread of the Zika virus throughout the United States. But House Democrats and environmental organizations are crying foul, arguing that the bill uses the threat of Zika as a cover for rolling back crucial EPA regulations that protect bodies of water from pesticides. “The reality is that the majority has been pushing this legislation for years under whatever name is convenient at the time,” Rep. Raul Ruiz (D-CA) said during the floor debate Tuesday. “This bill has nothing to do with combating Zika.” Opponents of the bill noted that it would do nothing to help emergency responders have more flexibility with regard to pesticides and Zika, arguing that vector control agencies already have the authority to apply pesticides in emergency situations to prevent the spread of infectious diseases without the need to apply for a permit. If the bill becomes law, users can discharge pesticides into bodies of water without having to first apply to a permit with the EPA, and users won't have to tell the EPA if their pesticides end up in bodies of water. Currently, there are over a thousand waterways in the United States that are impaired because of pesticide use. But if this bill becomes law, that number could increase -- and users could end up spraying pesticides in bodies of water used for fishing or recreational activities.

Climate Change Could Make Crops Toxic - By now, it’s fairly well-established that climate change is going to be a major challenge for food production.  Rising temperatures are set to severely damage crop yields, lessen the nutritional value of important crops, and make large portions of the planet inhospitable to crop production.  Now, we can add one more terrible thing to that growing list: climate change could actually make important crops toxic to animals and humans. That’s the conclusion of a new report released this week by the United Nations Environmental Program (UNEP), which warns that warming temperatures could cause crops to accumulate mycotoxins — poisons produced by fungi that can lead to cancer and death — at higher rates. Mycotoxins are already found in crops like wheat, maize, and barley — a 1998 estimate suggested that mycotoxins exist in at least 25 percent of cereal grains worldwide. They’re the toxins that come from mold, and a big reason why we avoid food that’s gone bad. Mycotoxins mainly occur in tropical areas, where warm temperatures encourage fungal growth. One particularly dangerous mycotoxin is aflatoxin, which is produced by a species of Aspergillus fungi; long periods of exposure can lead to cancer, while acute exposure can cause death. If aflatoxin-contaminated crops are fed to livestock, it can severely hinder their productivity, and the toxin can persist in livestock-sourced products, like dairy. According to a study of Serbian maize, particularly warm weather and a prolonged drought in 2012 led to a greater occurrence of aflatoxin in the maize crop, even though Serbia’s climate typically does not encourage the growth of aflatoxins. If the climate warms by 2 degrees Celsius, the UNEP warns that aflatoxins could become a major food safety issue for Europe.

Water Levels in Lake Mead Reach Record Lows - The water levels in Lake Mead, the man-made reservoir that serves about 20 million residents in Nevada, Arizona and California, is at an all-time low, according to the U.S. Bureau of Reclamation. Lake Mead’s water level — currently at an elevation of 1,074 feet — is expected to drop even more in the coming weeks, with Bureau of Reclamation’s Lower Colorado Region estimating a loss of another 5 feet by the end of June, Public Affairs Officer Rose Davis told ABC News. But, she expects it to return to 1,078 feet by the end of the year. The elevation was measured at 1,074 feet at 4 p.m. ET Thursday, the lowest since the basin was built in 1937, Davis said. Photos taken today show dried-up portions of the basin. A buoy lies high and dry above the water line at the now defunct Echo Bay Marina in the Lake Mead National Recreation Area, May 19, 2016. Lake Mead’s surface was at its lowest level Wednesday since the reservoir was created. more + The lake’s record-low level hasn’t affected the water contracts that depend on it, which are being delivered as scheduled, Davis said.The Colorado River Basin is in the midst of a 16-year drought, which is the worst in its 100 years of recorded history, Davis said. The drought and a continuing warming climate has contributed to the low runoff levels from the Colorado River to Lake Mead, she added. An image taken in 2000, before the drought began, shows the basin filled with water

Lake Mead helps supply water to 25 million people. And it just hit a record low. - It's a good time to revisit the slow-motion water crunch in the American Southwest. Last week, Lake Mead — a key reservoir that helps supply water for 25 million people in Nevada, Arizona, and California — shrunk to its lowest level ever. And the question of how to grapple with water scarcity is making headlines yet again. Back in the 20th century, the United States built an army of dams across the West to tame rivers, generate electricity, and store water in reservoirs for cities and farms. This intricate system is why metropolises like Los Angeles, Las Vegas, and Phoenix have been able to survive in what's basically a desert. Large-scale farming is really only possible in California's Imperial Valley or central Arizona because of these dams. But rising demand and 16 years of drought have put a severe strain on this system. Dean Farrell has created a terrific interactive map showing how key reservoirs in the West have seen their water levels drop dramatically of late: Check out California first. Many of the state's reservoirs fell below 50 percent during its recent (and brutal) drought. Last winter's El Niño brought heavy rains to the northern part of the state, refilling reservoirs there. But reservoirs in the south remain depleted — and the state's water woes, while partly alleviated, haven't gone away.  Now let's focus on those two huge red circles near Arizona: Lake Mead and Lake Powell. These gigantic reservoirs, which help store and supply water from the Colorado River to farmland and cities throughout the Southwest, are in rough shape. On Thursday, Lake Mead officially hit its lowest level ever, just 1,074.6 feet above sea level. (The last record low came a year ago, in May 2015.)

Drought be Dammed - ProPublica - Wedged between Arizona and Utah, less than 20 miles up river from the Grand Canyon, a soaring concrete wall nearly the height of two football fields blocks the flow of the Colorado River. There, at Glen Canyon Dam, the river is turned back on itself, drowning more than 200 miles of plasma-red gorges and replacing the Colorado’s free-spirited rapids with an immense lake of flat, still water called Lake Powell, the nation’s second largest reserve.  When Glen Canyon Dam was built — in the middle of the last century — giant dams were championed as a silver bullet promising to elevate the American West above its greatest handicap — a perennial shortage of water. These monolithic wonders of engineering would bring wild rivers to heel, produce cheap, clean power, and stockpile water necessary to grow a thriving economy in the middle of the desert. And because they were often remotely located they were rarely questioned.   Such was the nation’s enthusiasm for capturing its water that even the lower part of the Grand Canyon seemed, for a time, worth flooding. Two more towering walls of concrete were proposed there, and would have backed up water well into the nation’s most famous national park.  But today, there are signs that the promise of the great dam has run its course.  Climate change is fundamentally altering the environment, making the West hotter and drier. There is less water to store, and few remaining good sites for new dams.  Many of the existing dams, meanwhile, have proven far less efficient — and less effective — than their champions had hoped. They have altered ecosystems and disrupted fisheries. They have left taxpayers saddled with debt.  And, in what is perhaps the most egregious failure for a system intended to conserve water, many of them lose hundreds of billions of gallons of precious water each year to evaporation and, sometimes, to leakage underground. These losses increasingly undercut the longstanding benefits of damming big rivers like the Colorado, and may now be making the West’s water crisis worse.   In no place is this lesson more acute than at Glen Canyon.

Donald Trump Tells Drought-Stricken Californians There Is No Drought -  (video) Speaking to an audience in California on Friday, presumptive GOP nominee Donald Trump told the crowd “there is no drought” in their state. Trump claimed there isn’t a real water shortage. Instead, he said, state officials are intentionally denying water to farmers in the middle of the state — choosing to reroute the water to the ocean to protect an endangered California fish called the delta smelt. “It is so ridiculous where they’re taking the water and shoving it out to sea,” Trump said. “There is no drought. They turn the water out into the ocean.”  Trump appears to be attempting to draw a distinction between using water for agricultural purposes and for environmental purposes, the two main categories that California balances. The fish that he referenced is nearing extinction and has become a source of controversy in California as some water has been allocated to maintain its habitat.

Thanks El Niño, But California’s Drought Is Probably Forever - – Drought is a tricky thing to define. It is not just a matter of how little water falls out of the sky. If it were, you would be forgiven for believing that California’s wettish winter had ended, or even alleviated, the worst drought in state history. But no. Despite the snow in the Sierra Nevada, the water filling Lake Shasta, and the rapids in the Kern River, California is still in a state of drought. For now, maybe forever.  Even the governor thinks so. On May 9, Jerry Brown issued an executive order that makes permanent certain emergency water cuts from the past few years. “Now we know that drought is becoming a regular occurrence and water conservation must be a part of our everyday life,” Brown said in a prepared statement.  The most impactful part of Brown’s order requires that cities submit monthly water use, conservation, and enforcement reports to state officials. The order also promises updates to both urban and rural drought preparedness guidelines, and bans wasteful things like washing your car without a shut-off nozzle, or hosing down sidewalks. However, at the same meeting officials from the State Water Resources Control Board—California’s water police—indicated that cities would no longer be required to meet strict efficiency goals that the governor ordered last year.   So, obviously, the largest urban water district in the state went ahead and made it easier to drink. The Metropolitan Water District of Southern California is home to 19 million thirsty residents in a near contiguous suburban sprawl reaching from north of Los Angeles to the Mexican border. On May 10, the MWD eliminated stiff rationing and overuse fees for the cities and smaller sub districts that buy from it.  Which is kind of insane. The entire Metropolitan Water District is in either Extreme or Exceptional Drought. Those are technical terms, by the way, defined by a government agency. They mean a region’s precipitation, streamflow, reservoir storage, and soil moisture are in the 1 to 5 percent ranges of normal. [more]

Utah Is Trying To Get Rid Of The Public Lands In Its Own ‘Visit Utah’ Ads - The quixotic efforts of Utah politicians to seize and sell national forests and other public lands poses a dire risk to tourism and visitor spending in the state, according to a new public awareness campaign that launched this week. The campaign, called “U-turn Utah,” notes that the Utah Office of Tourism is spending millions of dollars on a national television ads that call Utah’s five National Parks and other public lands an American “birthright.” Yet the state’s elected officials are also planning to spend millions of dollars of taxpayer funds in an attempt to seize many of those same lands from federal agencies so they can be sold and privatized.  “The parks and public lands inside of Utah belong to all Americans, whether you live in Nevada, Colorado, Ohio, or Utah — these are your public lands. But Utah politicians have plans to sue the federal government in an irresponsible attempt to take over outdoor spaces that belong to all of us,” explained Jennifer Rokala, Executive Director at the Center for Western Priorities in a statement. “As Americans make their summer vacation plans, we want people across the country to know what Utah politicians have planned for our public lands.” Representative Rob Bishop (R-UT), leader of what has been coined the congressional “Anti-Parks Caucus,” has been a vocal advocate for disposing of American public lands. He argues that national forests, national monuments, wildlife refuges, and other national public lands should be transferred to state and local interests. Critics argue that between fighting forest fires, maintaining infrastructure, and cleaning up abandoned mines, states won’t have the funds to manage these lands and will therefore have to auction them off.

What Happens When Water for 30 Million People Disappears? -- There is, for example, the Lake Chad Basin in Africa, which is probably where our next humanitarian disaster is about to happen. Nine million people live in the region, which also happens to be where Boko Haram has been on the rampage, slaughtering people and burning people out of their homes. And Boko Haram is only one of the existential problems that exist in that piece of the planet. The United Nations would like the world to notice, if the world isn't too busy. From Nigeria's TodayGiving the warning yesterday in Borno State at the end of his four-day visit to Niger and Nigeria, United Nations Under-Secretary-General for Humanitarian Affairs and Emergency Relief Coordinator, Mr. Stephen O'Brien, said efforts must be made to stem the tide of humanitarian crisis in the Lake. "Environmental degradation, poverty, under-development and violent extremism are converging to create a complex and multi-faceted crisis, and only with comprehensive coordination from humanitarian, development and security actors will we be able to deliver for people who are suffering so terribly in Lake Chad."  One of the other problems in the Lake Chad Basin is that Lake Chad has been disappearing for several years. The food supplies are withering from drought. The cows are dying of thirst and the vultures are eating them. From Lake Chad basin is one of the most important agricultural heritage sites in the world, providing a lifeline to nearly 30 million people in four countries—Nigeria, Cameroon, Chad and Niger. Lake Chad is located in the far west of Chad and the northeast of Nigeria. Parts of the lake also extend to Niger and Cameroon. It was once Africa's largest water reservoir in the Sahel region, covering an area of about 26,000 square kilometres, about the size of the US state of Maryland and bigger than Israel or Kuwait. By 2001 the lake covered less than one-fifth of that area. "It may even be worse now,"

Farmer suicides soar in India as deadly heatwave hits 51 degrees Celsius - India has set a new record for its highest-ever recorded temperature – a searing 51 degrees Celsius or 123.8F – amid a devastating heatwave that has ravaged much of the country for weeks. Hundreds of people have died as crops have withered in the fields in more than 13 states, forcing tens of thousands of small farmers to abandon their land and move into the cities.Others have killed themselves rather than go to live in urban shanty towns. Rivers, lakes and dams have dried up in many parts of the western states of Rajasthan, Maharashtra and Gujarat.India's previous record high was 50.6C (123 F), which was set in 1956 in the city of Alwar, also in Rajasthan. The world record temperature is 56.7C, which was recorded in July 1913, in Death Valley, California. Human body temperature is normally 37C.The India Meteorological Department (IMD) warned that heatwave conditions were expected to continue for much of the next week in parts of central and north-west India, interspersed with dust and thunder storms in places. Dr Laxman Singh Rathore, the IMD’s director general, firmly pinned the blame for the rising temperatures on climate change, noting the trend dated back about 15 years. “It has been observed that since 2001, places in northern India, especially in Rajasthan, are witnessing a rising temperature trend every year,” he said in a statement

World War III will be fought over water — In 2015, NASA’s satellite data revealed that 21 of the world’s 37 large aquifers are severely water-stressed. With growing populations, and increased demands from agriculture and industry, researchers indicated that this crisis is only likely to worsen.  Rajendra Singh, known as the “water man of India,” believes that critically depleted aquifers around the world can be revived with community effort. For the past 32 years, through his NGO Tarun Bharat Sangh (Young India Organization), Singh has led community-based water harvesting and water management initiatives in the Alwar district of Rajasthan, an arid, semi-desert state in the northwest of India. For his work, Singh was awarded the Ramon Magsaysay Award for community leadership in 2001, and the Stockholm Water Prize in 2015. The following interview with Singh has been edited for clarity:

La Niña coming? Deep pool of cool water is making its way across tropical Pacific -- One of the strongest El Niños on record has been dominating the tropical Pacific Ocean for the past year. But beneath the surface, a deep pool of cool water has been sliding slowly eastward for the past couple of months. This massive, slow-motion wave is a favorable sign that La Niña—the cool phase of the ENSO climate pattern—might develop. This animated gif shows where temperatures in the top 300 meters (~1,000 feet) of the Pacific Ocean at the equator were warmer or cooler than average during 5-day periods centered on three dates this spring: March 14, April 13, and May 3.   As the weeks pass, the layer of warm water at the surface contracts to the central Pacific and becomes very shallow, a sign that the current El Niño is on its way out. By the final frame of the animation, the cold pool is just breaching the surface of the eastern Pacific off South America. ENSO (which scientists pronounce “en-so,” like a word) is short for El Niño-Southern Oscillation. ENSO is a natural climate pattern in which the central-eastern tropical Pacific swings back and forth between a warm and rainy state (El Niño) and a cooler and drier state (La Niña). ENSO’s impacts on wind, air pressure, and rain throughout the tropics can have cascading side effects around the whole globe, including shifting the location of the mid-latitude jet streams that guide storms towards the United States. El Niño and La Niña also tend to have seesawing impacts on the Atlantic and eastern Pacific hurricane seasons.

Sydney And Melbourne Copping Record May Heat. The Reason Why Is Scary: As the world warms, the weather is changing in ways far more dramatic than a little extra heat there, a little less rain there. Entire weather patterns are shifting, and we're already seeing the results in Australia this autumn. First up, some dramatic statistics to illustrate the unprecedented Australian temperature anomalies being experienced in Australia this month. Then we'll hear from an expert on why it's happening. Sydney is a whopping 4.9 degrees above average for May. Sydney's average May daily maximum temperature is usually 19.5. The average is 24.3 degrees so far this month. In fact, the Sydney maximum has topped 20 every day in May so far. Tuesday hit 28. The COLDEST day of the month was 1.3 degrees ABOVE the average. Hot streaks do not usually last this long. Not even close. Melbourne temperatures are also way up this month. It's May 2016 average of 20.3 degrees (to date) is 3.6 degrees above the long term May daily average of 16.7. It's a similar picture across Australia.  The world is warming far quicker in the last year than at any time in recorded human history.   But even though warming is accelerating, we're still talking "only" a degree or two warmer than usual in most places. But four to five degrees above normal in Australia's two largest cities for the first 20 days of a month? . So why is that happening? Agata Imielska is a climatologist with the Australian Bureau of Meteorology. Here's what she told The Huffington Post Australia. "With climate change one of the things we have been observing is a shift in some weather systems. We are seeing high pressure systems sitting further south and those cold pressure and rain-bearing systems tracking to the south of the continent."

‘Heart wrenching’: India’s coral reefs experiencing widespread bleaching, scientist says -  Coral reefs around the world are in deep trouble. Last month, scientists reported that Australia’s Great Barrier Reef corals were experiencing “the worst mass bleaching event in its history”. Of the 500 coral reefs they observed while flying over 4,000 kilometers (~2,485 miles) of the Great Barrier Reef, only four reefs did not show any sign of bleaching. Terry Hughes, convenor of Australia’s National Coral Bleaching Taskforce, called it the “saddest research trip” of his life.  Other scientists have called the underwater sight of widespread bleaching “catastrophic”.  In other parts of the world too, similar “catastrophic” scenes are playing out. Off the south-western coast of India, the lesser-known coral reefs of the Lakshadweep Archipelago in the northern Indian Ocean are struggling to survive.  A small team of six field biologists from the Nature Conservation Foundation in India, have observed soaring sea surface temperatures and widespread coral bleaching this year. In every reef that the team has surveyed in 2016 so far, corals are turning white or pale. Moreover, the heat stress has already killed many corals in the region, the team said in a statement.  Lakshadweep’s corals are not new to bleaching. In 1998 and 2010, similar El Niño events have had calamitous impacts on the reefs. While the Lakshadweep reefs recovered from the 1998 event, recovery following the 2010 event has been slower. And with the ongoing El Niño event, scientists are seriously concerned. […]  Mongabay spoke with Arthur about the state of coral reefs in the Lakshadweep Archipelago and their ability to bounce back.

New photos show the rapid pace of Great Barrier Reef bleaching – ‘We are currently experiencing the longest global coral bleaching event ever observed’ -- The massive bleaching hitting the Great Barrier Reef off the coast of Australia is likely that country's "biggest ever environmental disaster," says Dr. Justin Marshall, who has studied the reef for three decades.  Only 7 percent of the reef has escaped bleaching, according to researchers at the ARC Center of Excellence. Marshall, a professor at the University of Queensland, says the destructive phenomenon is happening in an area the size of Scotland.   "Before this mass bleaching started, we already were at the point of losing 50% of the coral cover on the Great Barrier Reef. This, I think, will probably take another 50% off what was left," Marshall says.  Over the course of the last six months, Marshall and his colleagues with the citizen science project Coral Watch have documented the degradation of reef structures near Lizard Island, one of the worst-hit areas.   They photographed the same formations of coral multiple times, showing clearly the pace of the destruction.  "It was a beautiful, wonderful paradise of reef structure and animals, and it's not there anymore. Or it is — but it's a slime ball, it's a gloomy place," Marshall says.  In this series of photos, you can see first that the coral is healthy – then, bleached. Algae begin to grow on the coral, which later intensifies, eventually resulting in disintegration of the coral and the loss of a habitat. […]  Scientists are concerned about reefs worldwide. "We are currently experiencing the longest global coral bleaching event ever observed," C. Mark Eakin, the Coral Reef Watch coordinator at the National Oceanic and Atmospheric Administration in Maryland, tells The New York Times. "We are going to lose a lot of the world's reefs during this event." […]  He adds: "I will probably never see the Great Barrier Reef in the state that it was in six months ago ever again."

The Great Barrier Reef will be 'terminal' within five years  -- Australia’s Great Barrier Reef will be in a “terminal condition” within five years, according to scientists from James Cook University. In a new report, published by researcher Jon Brodie and professor Richard Pearson, without a $10 billion commitment during this federal election campaign, the iconic natural wonder will not survive. If climate change continues at its current pace, or another crown of thorns outbreak — associated with poor water quality — occurs, it’s likely the GBR will be wiped out. “If we want to provide resilience against the current climate impacts, water management needs to be greatly improved, both in terms of money made available and a cohesive strategy, by 2025,” said Brodie. “It takes time for change to happen and we need to start fast. If something is not done in this election cycle then we may not see good coral again within our children’s lifetime.” The scientists have estimated that $1 billion per year over the next 10 years is needed to fund catchment and coastal management programs to save the reef. “It may seem like a lot of money, but we know that amount would be effective and it’s small by comparison to the economic worth of the GBR – which is around $20 billion per year,” said Brodie.

Great Barrier Reef axed from UN climate change report after Australian government intervention -- Australian references were scrubbed from an Unesco report on climate change and world heritage sites after the country's government intervened, objecting that the information could harm tourism, it has been reported. The World Heritage and Tourism in a Changing Climate report lists 31 sites "that are vulnerable to increasing temperatures, melting glaciers, rising seas, intensifying weather events, worsening droughts and longer wildfire seasons." The 100-page-document doesn't however mention Australia's Great Barrier Reef once, even though underwater heating has led to devastating coral bleaching which has damaged or killed 95 per cent of the northern reefs. The event has been described by experts as the worst coral bleaching event in the Great Barrier Reef’s history. Coral bleaching was discussed in the report, however the only specific reef ecosystems referenced was that of the French islands of New Caledonia in the Western Pacific.  The report, which Unesco (UN Educational, Scientific and Cultural Organisation) jointly published with the United Nations environment program and the Union of Concerned Scientists, initially had a key chapter on the Great Barrier Reef, as well as small sections on Kakadu and the Tasmanian forests, Guardian Australia reports. The publication revealed that every reference to Australia was scrubbed from the final version of the report after the Australian government intervened, objecting that the information could harm tourism. It added that no sections about any other country were removed from the report.  When the Australian Department of Environment saw a draft of the report, it objected, and every mention of the country was removed by Unesco, Guardian Australia reported, making Australia the only inhabited continent on the planet with no mentions. “Recent experience in Australia had shown that negative commentary about the status of world heritage properties impacted on tourism,”

Mangrove dieback worries scientists (AAP) – Scientists are worried about an "unprecedented" dieback of mangroves in northern Australia and the link with large-scale coral bleaching of the Great Barrier Reef. The widespread damage to mangroves around the Gulf of Carpentaria has been highlighted at an international wetland conference held this week in Darwin. While a detailed scientific survey has yet to be undertaken, photographs revealed hundreds of hectares of mangroves dying in two locations along both the west and east coastlines of the gulf. Professor Norm Duke, spokesman for Australian Mangrove and Saltmarsh Network, said the scale and magnitude of the loss appears "unprecedented and deeply concerning". Prof Duke said the damage was particularly alarming given this year's severe coral bleaching of the Great Barrier Reef, as it appeared to correlate with extreme warming events in the region.Until more extensive research is done, the James Cook University professor isn't sure if the mangroves are beyond saving but is warning more needs to be done."Shoreline stability, and fisheries values, amongst other benefits of mangrove vegetation, are under threat," he said. Prof Duke has called for increased monitoring of mangroves, particularly in the remote areas of northern Australia, so scientists can establish baseline conditions and isolate and manage any dieback. Australia is home to seven per cent of the world's mangroves.

Why these old-growth forests shouldn't be on the chopping block - Old-growth forests are like time machines. Through their ancient ecosystems, we are able to go back hundreds or even thousands of years, back to a time when our wild environments remained free of an industrial footprint. These exquisite lands are known under a variety of names depending on where you live, including primary forests, ancient woodlands, primeval forests and virgin forests, to name a few. One outstanding example of an old-growth woodland is the Białowieża Forest. Stretching 1,191 square miles across the border of Poland and Belarus, Białowieża boasts a diverse array of biomes and represents one of the last bastions of ancient woodlands in northeastern Europe. It's also home to 900 European bison — that's about 25 percent of the world's total population of this rare species.Despite the ecological and cultural value of Białowieża, only a small portion of it is protected as a national park. About 84 percent of this gorgeous ancient forest is located outside of that jurisdiction, leaving it unprotected from exploitation. Because of this, its integrity is now on a literal chopping block due to a controversial new logging law passed by the Polish government. "Poland’s new far right government says logging is needed because more than 10 percent of spruce trees in the UNESCO world heritage site of Białowieża are suffering from a bark beetle outbreak," Arthur Neslen writes for The Guardian. "But nearly half the logging will be of other species. Oak trees as high as 150 feet that have grown for 450 years could be reduced to stumps under the planned threefold increase in tree fells."

Poland starts logging primeval Białowieża forest despite protests - Poland has started logging in the ancient Białowieża forest, which includes some of Europe’s last primeval woodland, despite fierce protests from environmental groups battling to save the World Heritage site. “The operation began today,” national forest director Konrad Tomaszewski said of the plan to harvest wood from non-protected areas of one of the last vestiges of the immense forest that once stretched across Europe.  He said the goals were to stop forest degradation by combating what the environment ministry says is a spruce bark beetle infestation, and protect tourists and rangers from harm by cutting down trees that risk falling on trails. However, the only published inventory shows that nearly half of the trees earmarked for logging may be non-spruce varieties, which have been unaffected by the beetle outbreak. And environmental campaigners warn that the tree chopping will destroy an ecosystem unspoiled for more than 10,000 years that is home to the continent’s largest mammal, the European bison, and its tallest trees. “We’re calling on the European commission to intervene before the Polish government allows for the irreversible destruction of the Białowieża forest,” said Greenpeace Poland activist Katarzyna Jagiełło. “We need to halt this [bark beetle] disease in its tracks,” said Poland’s environment minister Jan Szyszko. “We need to ensure that there is a healthy logging of trees, something that is planned.  Campaigners have taken issue with the government rationale for the project, saying the beetle’s presence does not pose any threat to the forest’s ecosystem. “The minister does not understand that this insect is a frequent and natural visitor, that it has always existed and the forest has managed to survive,” Jagiełło said.

Climate Change Has Raised The Sea Level And Pushed Salt Water To Contaminate The Florida Everglades -- The Florida Everglades is a swampy wilderness the size of Delaware. In some places along the road in southern Florida, it looks like tall saw grass to the horizon, a prairie punctuated with a few twisted cypress trees.  But beneath the surface a different story is unfolding. Because of climate change and sea level rise, the ocean is starting to seep into the swampland. If the invasion grows worse, it could drastically change the Everglades, and a way of life for millions of residents in South Florida.  As sea level rises," Troxler explains, "the saltwater wedge moves inland." And it infiltrates the bedrock."  Our underlying rock is limestone," Troxler says. "That limestone is very porous; it's almost like Swiss cheese in some areas."We walk out into the test site — through the saw grass and the underlying peat, which is a fancy name for muck. It's rich stuff, full of nutrients and microorganisms that feed this river of grass. And, like the plants, the peat also is affected by salt water.The team has laid out a metal boardwalk, so you can walk around the muck without sinking up to your waist. Out here the grass is patchier, and in some places the peat is slumping — collapsing.  Troxler says there's lots of this slumping going on. "When we start to lose the structure of the plants," she explains, "essentially this peat, which is otherwise held together by roots, becomes a soupy pond."In response to the salt, the plants actually pull up some of their roots — out of the peat. The roots look like teeth protruding from receding gums.  This could be the future of the Everglades, Troxler says. And here's the thing: The Everglades acts like sponge, feeding off the Biscayne aquifer — a giant cell of freshwater that lies underneath the land.  "We get over 90 percent of our freshwater from the Biscayne aquifer," Troxler says, "we" meaning millions of people in South Florida.As seawater seeps up from underneath, through the limestone bedrock, it is contaminating the aquifer and the Everglades above it.

Man-eating crocodiles surface in Florida swamps - Researchers at the University of Florida have found a man-eating African species of crocodile among native populations in the state’s swamps and Everglades. It is unclear how the Nile crocodile, Crocodylus niloticus, which can grow up to 5.5 metres (18 feet) in length and was blamed for at least 480 attacks on people and 123 fatalities in Africa between 2010 and 2014, arrived in the state. But DNA analysis has confirmed that three juveniles have been identified in the state, including one that was relaxing on a house porch in Miami. The local alligators do not prey on humans, but the unwelcome imports have unsurprisingly made headlines in the state. Kenneth Krysko, a herpetology collections manager at the Florida Museum of Natural History, confirmed that the specimens are linked to native populations in South Africa. He told the journal Herpetological Conservation and Biology that the species can survive and potentially thrive in sub-tropical Florida.Florida has the world’s largest number of invasive species. The spiny lionfish, believed to have been released during Hurricane Andrew in 1992, has caused devastation to native populations of reef-dwelling fish across the Caribbean. There is also the Cuban tree frog, which has been found as far north as Jacksonville. Short of the latest visitor, the invasive species that attracts the greatest attention is the Burmese python. These monsters are now common enough for authorities to organise and license python hunts. The Miami Herald reported in March that biologists bagged more than 2,000 pounds of Burmese pythons – in just one county. One snake, measuring almost 5 metres and weighing about 63kg (140 pounds), set a new record for males caught in the wild in Florida. Using radio trackers, scientists found the snakes like to occupy gopher tortoise burrows, and found six males and a female squeezed into a “mating ball”. They are so numerous they have become one of the region’s top predators. Research suggests the pythons are responsible for a sharp decline in the population of Everglades marsh rabbits and for a decrease in deer.

We’re kidding ourselves if we think we can ‘reset’ Earth’s damaged ecosystem -  Earth is in a land degradation crisis. If we were to take the roughly one-third of the world’s land that has been degraded from its natural state and combine it into a single entity, these “Federated States of Degradia” would have a landmass bigger than Russia and a population of more than 3 billion, largely consisting of the world’s poorest and most marginalised people.The extent and impact of land degradation have prompted many nations to propose ambitious targets for fixing the situation – restoring the wildlife and ecosystems harmed by processes such as desertification, salinisation and erosion, but also the unavoidable loss of habitat due to urbanisation and agricultural expansion. In 2011, the Global Partnership on Forest and Landscape Restoration, a worldwide network of governments and action groups, proposed the Bonn Challenge, which aimed to restore 150 million hectares of degraded land by 2020.  This target was extended to 350 million ha by 2030 at the September 2014 UN climate summit in New York. And at last year’s landmark Paris climate talks, African nations committed to a further 100 million ha of restoration by 2030. These ambitious goals are essential to focus global effort on such significant challenges. But are they focused on the right outcomes? Many projects use measures that are too simplistic, such as the number of trees planted or the number of plant stems per hectare. This may not reflect the actual successful functioning of the ecosystem. Meanwhile, at the other end of the scale are projects that shoot for outcomes such as “improve ecosystem integrity” – meaningless motherhood statements for which success is too complex to quantify.

French minister warns of mass climate change migration if world doesn't act - Global warming will create hundreds of millions of climate change migrants by the end of the century if governments do not act, France’s environment minister has warned. Ségolène Royal told ministers from 170 countries at the UN environment assembly in Nairobi that climate change was linked to conflicts, which in turned caused migration. “Climate change issues lead to conflict, and when we analyse wars and conflicts that have taken place over the last few years we see some are linked to an extent to climate change, drought is linked to food security crises,” she said. “The difficulty of having access to food resources leads to massive migration, south-south migration [migration within developing countries]. The African continent is particularly hit by this south-south migration. “If nothing is done to combat the negative impact of climate change, we will have hundreds of millions of climate change migrants by the end of the century.”  Royal’s comments followed dramatic footage from the southern Mediterranean of a people smuggler’s boat capsizing with scores of migrants on board. The Italian navy rescued 550 migrants from the water.  The latest incident served to highlight the flow of people from Syria and North Africa into Europe. The International Organisation for Migration estimates that 39,000 people have been pulled from the sea since the beginning of the year.

In Case You Forgot, Canada's Massive Fort McMurray Fire Is Still Burning -- THE FORT MCMURRAY fire—the one you probably forgot about—is still burning. In addition to the city it consumed to earn its name, the fire has burned forest over 500,000 hectares of land across northern Alberta. Which is roughly equal to: three and a quarter Oahus; one point six Rhode Islands; or all of Long Island plus Manhattan, Staten Island, the Bronx, Yonkers, Newark, Hoboken, Jersey City, Elizabeth, Fort Lee, Monache, you get the picture. This is—has been—a very big fire. The question at this point is whether it will remain so. So far, wind and heat have made the burn nearly impossible to contain. But this weekend’s forecast calls for rain and cooler temperatures. “We can fight as long and hard as we want, but the only thing that will stop a wildfire this size is rain,” says aptly named Travis Fairweather, wildfire information officer with the government of Alberta. Let’s recap. Fort McMurray is—was—a city of some 80,000 people in the heart of Canada’s oil country. The fire broke out on May 1, in the woods southwest of town. It jumped to a trailer park the same day, and by May 3 had consumed a quarter of the city. Officials declared a total evacuation. May is a strange time for a wildfire in the Canadian taiga forest. But this has been an El Niño year, and the winter brought little snow. That, combined with unseasonably hot weather, low humidity, and high winds, turned the fire into an inferno.The still-burning fire stretches 370 miles long—as of yesterday it breached Saskatchewan. Over 1,000 forest fire fighters from nearly every Canadian province are working to hold that line. They have 50 helicopters, and 170 pieces of heavy equipment. They have dug containment barriers along a mere 38 miles of that total. These guard lines are about the width of a two-lane highway of cleared vegetation. “That is good for a fire that is calm and creeping, but if it is burning hot and heavy the guard lines won’t be able to stop it,”

Black bears flock to claim food in evacuated Fort McMurray homes -- First came the wildfire; raging through the northern Alberta city of Fort McMurray and prompting the frenzied evacuation of more than 88,000 people.  Then came the bears.  Authorities say black bears have been roaming the evacuated city in greater numbers, disoriented by the destruction of their natural habitat and lured by the scent of garbage and rotting food in the city. “What we’ve got is tons of spoiling food inside houses in the heart of prime black bear range,” Lee Foote, a conservation biologist at the University of Alberta, told Canadian broadcaster CTV News. “You couldn’t create a better potential to attract black bears from a large area … and there are a lot of black bears in the area.” The province of Alberta is home to an estimated 40,000 bears, many of which live in the boreal forests that surround Fort McMurray. The fire – which now covers more than 522,000 hectares – came just as black bears were emerging from their dens after six months of hibernation and finding ashes or dusty conditions where they would normally encounter food. A smorgasbord of tantalising scents – from rotting fish and meat to leftover casseroles – brought many of them into nearby Fort McMurray, where food-filled refrigerators and freezers now sit sweltering in homes often left without power. “They are smart and adaptive. They can smell food from kilometers away,”

What created the Fort McMurray wildfire? El Niño, scientist says -- Too much rain in summer? Blame global warming. Too little rain? Blame global warming. Heck, even if there’s a chinook in January in southern Alberta, blame global warming. Just ask actor Leonardo di Caprio. It was no surprise then when a wildfire raged in the oilsands city of Fort McMurray, the first response from many was to blame global warming. But climate scientist Paul Roundy of the University at Albany in New York state says global warming wasn’t the main culprit in the Fort McMurray wildfire. Instead, Roundy blames El Niño, a weather phenomenon that’s been around for ages. El Niño events come every two to seven years, based on fluctuations in the surface temperature of the Pacific Ocean around the equator. The latest event started early last summer and has been massive. “By some measures it was the strongest ever recorded,” Roundy says. One major impact has been to create conditions leading to warmer and drier weather in Western Canada, especially in the key month of April, creating conditions perfect for wildfires. “It’s been clear that in general this kind of impact has been in the making since last summer,” Roundy said of the Fort McMurray wildfire. Roundy explained his position in detail in a post at The Conversation, a public forum for academics to analyze news event. His conclusion? “Climate change is unlikely to explain the specific timing of this event in April to May, instead natural variability associated with an extreme El Niño event likely enhanced the dry warm conditions that generated the extreme fire.”

The Fort McMurray fire’s stunning pulse of carbon to the atmosphere --The Fort McMurray wildfire, which seems likely to be the costliest disaster in Canada’s history, continues to grow. According to the government of Alberta, as of Friday morning it had burned over 500,000 hectares of land, or more than 1.2 million acres.These are preliminary numbers, to be sure, and shouldn’t be taken as precise. They’re also likely to change. “There will be wet areas, boggy areas that don’t burn. But it’s not out yet, either, so . . . even without any major runs, by the time it is contained, it will likely grow some more,” said Steve Taylor, a research scientist with the Canadian Forest Service.Taylor said the fire already ranks in the top six or seven largest fires seen in Canada in the satellite era, starting in 1970, when observations became most reliable. Especially since this is occurring in May, early in the wildfire season, that’s pretty incredible.And so is another detail about this fire — the amount of carbon that it is apparently pouring into the atmosphere.Taylor’s colleague, Werner Kurz, is a senior research scientist at the Canadian Forest Service and heads its carbon accounting team. He said he generally estimates that for every hectare of forest land consumed in a fire like this one, about 170 tons of carbon-dioxide-equivalent emissions — so dubbed because they actually include not only carbon dioxide but also methane and nitrous oxide, two other greenhouse gases — head into the atmosphere.That would mean that this single fire has contributed — for a rough estimate — some 85 million tons of carbon-dioxide-equivalent emissions.The fire has also, at least temporarily, worsened the entire nation of Canada’s emissions of carbon dioxide.In 2014, the last year for which statistics are currently available, Canada emitted a net of 732 million tons of carbon dioxide equivalent into the atmosphere. This single wildfire thus may have given off enough carbon to account for over 10 percent of Canada’s total emissions.

The world's largest cruise ship and its supersized pollution problem - When the gargantuan Harmony of the Seas slips out of Southampton docks on Sunday afternoon on its first commercial voyage, the 16-deck-high floating city will switch off its auxiliary engines, fire up its three giant diesels and head to the open sea. But while the 6,780 passengers and 2,100 crew on the largest cruise ship in the world wave goodbye to England, many people left behind in Southampton say they will be glad to see it go. They complain that air pollution from such nautical behemoths is getting worse every year as cruising becomes the fastest growing sector of the mass tourism industry and as ships get bigger and bigger. The Harmony, owned by Royal Caribbean, has two four-storey high 16-cylinder Wärtsilä engines which would, at full power, each burn 1,377 US gallons of fuel an hour, or about 66,000 gallons a day of some of the most polluting diesel fuel in the world.  In port, and close to US and some European coasts, the Harmony must burn low sulphur fuel or use abatement technologies. But, says Colin MacQueen, who lives around 400 yards from the docks and is a member of new environment group Southampton Clean Air, the fumes from cruise liners and bulk cargo ships are “definitely” contributing to Southampton’s highly polluted air.  “We can smell, see and taste it. These ships are like blocks of flats. Sometimes there are five or more in the docks at the same time. The wind blows their pollution directly into the city and as far we can tell, there is no monitoring of their pollution. We are pushing for them to use shore power but they have resisted.”

Shock impacts hit Greenland’s ice - Seismic waves that race through Greenland’s bedrock may help answer questions about the pattern of melting and freezing over the Northern Hemisphere’s biggest single sheet of ice. Scientists need answers because Greenland remains a puzzle: the glaciers may be accelerating their pace towards the sea − but, despite rising temperatures, the interior is not losing ice, according to a second study.And a third study presents a new paradox: there may be little ice melt over most of the icecap, but changing climatic conditions suggest that less snow is falling. There is enough ice packed on Greenland to raise global sea levels by seven metres if it melts. Right now, the flow from the island’s glaciers is probably pushing up sea levels by 0.6mm a year. There is repeatedly confirmed evidence that glaciers are melting at an accelerating rate, and several consequences of global climate change that suggest that this process should go on accelerating. But research in Greenland’s harsh conditions is challenging, and year-round continuous observation so far has been almost impossible, even with airpower and satellite studies. But German Prieto, assistant professor of geophysics in the department of Earth, atmospheric and planetary sciences at the Massachusetts Institute of Technology, and colleagues report in Science Advances journal that they could exploit the one source of evidence that would never falter. The waves that crash on the coastline send tiny seismic shudders through the rock, and seismic wave velocity changes with rock density. So the reasoning is that changes in the mass of ice pressing down on the rocks could be revealed by changes in the speed of the waves through the rock.

Even for the fast-melting Arctic, 2016 is in ‘uncharted territory’ -- One of the oldest and best-established ideas about global warming is that it will hit the Arctic the hardest. The concept, which goes back to papers published decades ago, is called “Arctic amplification,” and the basic idea is that there’s a key feedback in this system that makes everything worse.  It works like this: Warmer air melts more of the sea ice cover that sits atop the Arctic ocean, especially during summer, which is, of course, ice melt season. That means the ocean is able to absorb more solar radiation than before, when it was covered with ice that reflected this sunlight away. That means there’s more heat retained in the system — and so on, and so on.  So Arctic amplification has long been understood — and, confirming the theory, the Arctic has already been warming much faster than the more temperate latitudes. Even in this context, though, scientists have been noting that there seems to be something especially stark about what’s happening atop the world this year, which has seen overall temperatures soar to new highs.  “We’re in record breaking territory no matter how you look at it,” says Jennifer Francis, an Arctic specialist at Rutgers University who has published widely on how Arctic changes affect weather in the mid-latitudes. “The ice is really low, the temperatures are really high, the fire seasons have started earlier,” she says. Indeed, NASA and other keepers of planetary temperatures have documented staggering warmth in the region this year — not just 1 or 2 degrees Celsius above average, but more than 4 degrees above average across much of the Arctic during the first quarter of this year:

Earth Is Tipping Because of Climate Change - Scientific American - The north pole is on the run. Although it can drift as much as 10 meters across a century, sometimes returning to near its origin, it has recently taken a sharp turn to the east. Climate change is the likely culprit, yet scientists are debating how much melting ice or changing rain patterns affect the pole’s wanderlust.The geographical poles—the north and south tips of the axis that the Earth spins around—wobble over time due to small variations in the sun’s and moon’s pulls, and potentially to motion in Earth’s core and mantle. But changes on the planet’s surface can alter the poles, too. They wobble with every season as the distribution of snow and rain change, and over long stretches as well. Roughly 10,000 years ago, for example, Earth woke up from a deep freeze and the massive ice sheets sitting atop what is now Canada melted. As ice mass fled, and the depressed crust rebounded, the distribution of the planet’s mass changed and the north pole started to drift west. This pattern can be clearly seen in data from 1899 onward. But a recent zigzag in the north pole’s path (and the opposite movement in the south pole) suggests a new change is afoot.Around 2000 the pole took an eastward turn; it stopped drifting toward Hudson Bay, Canada, and started drifting along the Greenwich meridian in the direction of London. In 2013Jianli Chen, a geophysicist at The University of Texas at Austin, was the first to attribute the sudden change to accelerated melting of the Greenland Ice Sheet. The result startled his team. “If you're losing enough mass to change the orientation of the Earth—that's a lot of mass,” says John Ries, Chen’s colleague at U.T. Austin. The team found that recent accelerated ice loss and associated sea level rise accounted for more than 90 percent of the latest polar shift. Of course that includes ice lost across the world, but “Greenland is the lion's share of the mass loss,” Ries says. “That's what's causing the pole to change its nature.”

Global warming won’t just change the weather—it could trigger massive earthquakes and volcanoes - Bill McGuire is not optimistic about humanity’s future. In his book, Waking the Giant: How a changing climate triggers earthquakes, tsunamis, and volcanoes, he explains why. By his estimation, carbon dioxide emissions from human activity since industrialization began have changed the trajectory of earth’s climate for the next 100,000 years. We are already experiencing the mayhem and destruction that these changes can wreak, and, in the long term, things are only going to get worse. On the face of it, the hypothesis that a few degrees’ rise in the average temperature of the atmosphere can cause the earth’s tectonic plates to move sounds ludicrous. Yet, McGuire, professor of geophysical and climate hazards at University College London, shows through careful analysis of historical records that the relationship between the weather and the “solid” earth is incontrovertible. We caught up with him recently to talk about his hopes and fears. Here’s an edited and condensed version of our conversation.

Few Britons have ever heard of ocean acidification -  If you’ve heard of ocean acidification, you’re in the minority. If you know that ocean acidification is caused by carbon pollution from burning fossil fuels and cutting down rainforests, you’re practically a scholar. A new poll published in Nature Climate Change finds that around 80% of the British public has never heard of ocean acidification. “It is sobering to think that few people are aware of this process given its widespread risks for the natural environment, and the potential knock-on effects for people and economies,” Stuart Capstick, co-author of the paper and a research associate at Cardiff University’ School of Psychology, said. While awareness of climate change has grown widely in recent years, the other major impact of burning fossil fuels – ocean acidification – is largely occurring beneath the public radar in the UK. “We weren’t all that surprised that there was an overall lack of awareness,” Capstick said. “Unlike with topics such as climate change or air pollution, this is not an issue that has been covered much in the media.”The world’s oceans sequester around a third of the carbon dioxide emitted into the atmosphere. And as global society has emitted more CO2, the oceans have kept pace. But that comes with a big price: seawater chemistry is literally changing. Over time the carbon in the oceans turns into carbonic acid, lowering pH levels and making the water more acidic. Over the last thirty years, the ocean’s acidity has jumped 30%.

Far From Turning a Corner, Global CO2 Emissions Still Accelerating - The level of carbon dioxide in the atmosphere is not just rising, it's accelerating, and another potent greenhouse gas, methane showed a big spike last year, according to the latest annual greenhouse gas index released by the National Oceanic and Atmospheric Administration. CO2 emissions totaled between 35 and 40 billion tons in 2015, according to several agencies. Some of that is absorbed by forests and oceans, but those natural systems are being overwhelmed by the sheer volume of new CO2. As a result, the inventory shows, the average global concentration increased to 399 parts per million in 2015, a record jump of almost 3 ppm from the year before.  Methane levels jumped 11 parts per billion from 2014 to 2015, nearly double the rate they were increasing from 2007 to 2013. Methane, and other greenhouse gases like nitrous oxide and tropospheric ozone,  are measured in parts per billion because the concentrations are lower. The index, now in its 10th year, measures how much of the sun's warmth is trapped in the atmosphere by gases like CO2, methane and nitrous oxide. NOAA's index shows that CO2 concentration has risen by an average of 1.76 parts per million since it was established in 1979, and that increase is accelerating. In the 1980s and 1990s, it rose about 1.5 ppm per year. Over the last five years, the rate of increase has been about 2.5 ppm, said Ed Dlugokencky, a senior scientist with NOAA's Earth Systems Research Laboratory who helped compile the inventory. That means since 1990, global atmospheric CO2 has resulted in a 50 percent increase in its direct warming influence on climate, Dlugokencky said. "This isn't a model. These are precise and accurate measurements, and they tell us about how humans are changing the balance of heat in the Earth system," said Jim Butler, director of NOAA's Global Monitoring Division, in a statement. "We're dialing up Earth's thermostat in a way that will lock more heat into the ocean and atmosphere for thousands of years."

Analysis: Only five years left before 1.5C carbon budget is blown - In its most recent synthesis report, published in early 2014, the Intergovernmental Panel on Climate Change (IPCC) laid out estimates of how much CO2 we can emit and still keep global average temperature rise to no more than 1.5C, 2C or 3C above pre-industrial levels. That same year, Carbon Brief used these estimates to calculate how many years of current emissions were left before blowing these budgets. Updating this analysis for 2016, our figures suggest that just five years of CO2 emissions at current levels would be enough to use up the carbon budget for a good chance – a 66% probability – of keeping global temperature rise below 1.5C.  The IPCC estimates carbon budgets for 1.5C, 2C and 3C. For each temperature limit there are three budgets. The first gives a 66% probability of staying below the given temperature, the second a 50% chance, and the last a 33% chance.  The IPCC’s synthesis report presented the total carbon budget from the beginning of the industrial revolution and said what was remaining, as of the beginning of 2011. Using data from the Global Carbon Project, Carbon Brief has brought these budgets up to date. In 2015, for example, worldwide CO2 emissions from fossil fuel burning, cement production and land use change were 39.7bn tonnes – slightly lower than the 40.3bn from 2014. As of the beginning of 2011, the carbon budget for a 66% chance of staying below 1.5C was 400bn tonnes. Emissions between 2011 and 2015 mean this has almost halved to 205bn tonnes. The result is that, as of the beginning of 2016, five years and two months of current CO2 emissions would use up the 1.5C budget.

Soaring Electricity Demand Poses Climate Change Threat --  One of the biggest drivers of climate change is the on-going development of third world nations. Around the globe, countries that have spent centuries with economies largely built on subsistence agriculture are slowly starting to advance into the modern world. This is bad news for those concerned about climate change. As modern economies develop, electrical use outstrips population growth which, in turn, is creating more and more need for energy. The World Bank notes that while the global population grew 36 percent between 1990 and 2013, worldwide energy use increased by 54 percent. At this point around 85 percent of the world’s population has electricity, but that still leaves 15 percent of people without it. The remaining segments of the global population without basic amenities of modern life are likely to eventually advance enough to acquire them, which will put even more strain on the global energy infrastructure. While clean energy sources have made significant strides over the last 30 years, fossil fuels are still responsible for more than 80 percent of the world’s total energy generation. What’s more, the largest share of renewable energy actually comes from traditional biomass like wood fuel, agricultural by-products, and dung. This is not sustainable over the long run because, as much as trees are theoretically a renewable resource, the reality is that they renew too slowly to serve as a primary substitute for oil and natural gas. Traditional biomass use is not being done out of environmental concerns in most cases, but out of necessity and lack of options. Solar and wind power only account for around 1 percent of total energy generation needs each, which shows that despite the progress made in both areas, neither is even close to be a replacement for fossil fuels at this point.

Tracking the 2°C Limit - April 2016 - April is starting to come down off the shockingly high anomalies of the first couple of months of this year. GISS is clocking in a still strong warm anomaly of 1.11°C. This is by far the hottest April in the record, beating the previous April record in 2010 by a full 0.24°C. (Full size graph.) The Ocean Nino Index is continuing to fall and model expectations are forecasting La Niña later in the year. The satellite data in both the RSS and UAH data fell slightly from last month but I'd expect next month to pop back up just a touch, if past data is any indication. (Full size graph.) We also have a very nice snapshot of what the 2015/16 El Nino looked like as it progressed over the past year in the following sea surface temperature anomaly and equatorial ocean-heat anomaly graphs.  Researchers are already confidently projecting that 2016 will beat 2015 as the warmest year on record. We're still a few more months before models show us dropping into La Niña territory. If 1997/98 is any indication of how the following months will play out, it's not going to significantly impact 2016 temps.

New Study Predicts an Intolerably Hot World - Our grandchildren and great-grandchildren may live on a planet even hotter than we feared if countries fail to slash carbon emissions now, according to a new study.  “Our key finding is that if we continue to burn our remaining fossil fuel resources, the Earth will encounter a profound degree of global warming, of 6.4 to 9.5 degrees Celsius [about 11 to 17 degrees Fahrenheit] over 20th-century averages by 2300,” said Katarzyna Tokarska, a climate scientist at the University of Victoria in Victoria, British Columbia, who led the study. The Arctic’s mean temperature could rise about 15 to 20 degrees Celsius (27 to 36 degrees Fahrenheit) over the next century if such trends continue. Sea levels, which are on a trajectory to rise one to three feet by the end of the century, would increase catastrophically under such high temperatures, drowning coastlines and low-lying regions that are home to most of the world’s population. Food supplies and farming worldwide would be disrupted, potentially throwing tens of millions of people back into poverty.Based on current climate trends alone, a recent Princeton University study suggested that up to 200 million people, including many children, could become environmental refugees in the next half-century. Some earlier studies with relatively simple ocean and land vegetation modeling have suggested that climate change–driven heat increases would flatten out over time despite rising carbon emissions. But Tokarska and her colleagues, using more detailed ocean and plant-cover scenarios, found a linear relationship—that is, as long as the total amount of carbon in the atmosphere keeps rising, so will the temperature.

World could warm by massive 10C if all fossil fuels are burned - The planet would warm by searing 10C if all fossil fuels are burned, according to a new study, leaving some regions uninhabitable and wreaking profound damage on human health, food supplies and the global economy. The Arctic, already warming fast today, would heat up even more – 20C by 2300 – the new research into the extreme scenario found.  “Even though we have the Paris climate change agreement, so far there hasn’t been any action..” The carbon already emitted by burning fossil fuels has driven significant global warming, with 2016 near certain to succeed 2015 as the hottest year ever recorded, which itself beat a record year in 2014. Other recent studies have shown that extreme heatwaves could push the climate beyond human endurance in parts of the world such as the Gulf, . In Paris in December, the world’s nations agreed a climate change deal intended to limit the temperature rise from global warming to under 2C, equivalent to the emission of a trillion tonnes of carbon. If recent trends in global emissions continue, about 2tn tonnes will be emitted by the end of the century. The new work, published in Nature Climate Change, considers the impact of emitting 5tn tonnes of carbon emissions. This is the lower-end estimate of burning all fossil fuels currently known about, though not including future finds or those made available by new extraction technologies.

 Burning All Fossil Fuels Would Lead to a 17 C Rise in Arctic Temperatures --Burning all the fossil fuels we know to exist on Earth could push global temperature an average of 8 C above preindustrial levels, according to new research. The Arctic would bear the brunt of the warming, with temperatures potentially rising 17 C, said the authors.  The new paper, published Monday in Nature Climate Change, looks at would happen over the next 300 years or so if the world continues to burn coal, oil and gas with no efforts to limit emissions. Dr. Malte Meinshausen from the Potsdam Institute for Climate Impact Research, who was not involved in the research, told Carbon Brief:“The study is yet another reminder about the profoundly different planet we would create by burning all fossil fuels … It is hard to imagine a single ecosystem that would remain untouched.” The paper is in stark contrast to the tone of conversation in Bonn, where climate talks are taking place on how to meet the Paris agreement‘s goal of keeping warming “well below” 2 C or even 1.5 C. The starting point for the new study is a world in which there are no efforts to curb emissions. Under this scenario, CO2 stabilizes at roughly 2,000 parts per million (ppm) in 2300.  For context, this is more than five times higher than today’s level (~399ppm) and seven times what it was before humans started industrializing (~280ppm).

Climate change puts 1.3bn people and $158tn at risk, says World Bank -- The global community is badly prepared for a rapid increase in climate change-related natural disasters that by 2050 will put 1.3 billion people at risk, according to the World Bank. Urging better planning of cities before it was too late, a report published on Monday from a Bank-run body that focuses on disaster mitigation, said assets worth $158tn – double the total annual output of the global economy – would be in jeopardy by 2050 without preventative action. The Global Facility for Disaster Reduction and Recovery said total damages from disasters had ballooned in recent decades but warned that worse could be in store as a result of a combination of global warming, an expanding population and the vulnerability of people crammed into slums in low-lying, fast-growing cities that are already overcrowded.“With climate change and rising numbers of people in urban areas rapidly driving up future risks, there’s a real danger the world is woefully unprepared for what lies ahead,” said John Roome, the World Bank Group’s senior director for climate change. “Unless we change our approach to future planning for cities and coastal areas that takes into account potential disasters, we run the real risk of locking in decisions that will lead to drastic increases in future losses.” The facility’s report cited case studies showing that densely populated coastal cities are sinking at a time when sea levels are rising. It added that the annual cost of natural disasters in 136 coastal cities could increase from $6bn in 2010 to $1tn in 2070. The report said that the number of deaths and the monetary losses from natural disasters varied from year to year, but the upward trend was pronounced. Total annual damage – averaged over a 10-year period – had risen tenfold from 1976–1985 to 2005–2014, from $14bn to more than $140bn. The average number of people affected each year had risen over the same period from around 60 million people to more than 170 million.

In-depth: Experts assess the feasibility of ‘negative emissions’: To limit climate change to “well below 2C”, as nations agreed to do in Paris last December, modelling shows it is likely that removing carbon dioxide emissions from the atmosphere later on this century will be necessary. Scientists have imagined a range of “negative emissions” technologies, or NETs, that could do just that, as explained by Carbon Brief yesterday. But are any of them realistic in practice? Carbon Brief reached out to a number of scientists, policy experts and campaigners who have studied both the necessity and feasibility of negative emissions. We sent them the following identical email: The Paris Agreement calls for “holding the increase in the global average temperature to well below 2C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5C above pre-industrial levels”. However, as the IPCC AR5 report showed, the majority of modelling to date assumes a significant global-scale deployment of negative emissions technologies in the second half of this century, if such temperature limits are to be achieved. 1) What negative emissions technologies offer the most promise – and why? 2) Is it feasible to achieve the scale of deployment required to meet the aims of the Paris Agreement? If so, how? If not, why? These are the responses we received, first as sample quotes, then, below, in full:

Exxon, Chevron shareholders reject climate resolutions  (AP) — Shareholders at Exxon Mobil and Chevron rejected resolutions backed by environmentalists that would have pushed the companies to take stronger stands in favor of limiting climate change. Environmentalists took solace, however, that some of their ideas gained considerable support. At Chevron Corp., a resolution asking for an annual report each year on how climate-change policies will affect the company received 41 percent of the vote. A similar resolution at Exxon got 38 percent. Also, Exxon Mobil Corp. shareholders voted to ask directors to adopt a proxy-access rule, which would make it easier for shareholders to propose their own board candidates. Backers including the New York City comptroller said it could result in the election of independent directors who could help the company address risks like climate change. The meetings Wednesday — Exxon’s in Dallas, Chevron’s in San Ramon, California — came as the companies are trying to dig out from the collapse in crude prices that began in mid-2014. Exxon earned $16.15 billion last year, its smallest profit since 2002. Chevron’s annual profit plunged 76 percent to $4.59 billion and included the company’s first money-losing quarter since 2002.   Exxon is also dealing with investigations by officials in several states into what the company knew and allegedly didn’t disclose about oil’s role in climate change.

Naomi Klein argues climate change is a battle between capitalism and the planet - ‘The climate crisis, by presenting the species with an existential crisis and putting us on a firm and unyielding science-based deadline, might just be the catalyst we need to knit together the great many powerful movements bound together by the inherent worth and value of all people, and united by the rejection of the ‘sacrifice zone’ mentality.” Canadian writer and activist Naomi Klein made these remarks in London last week in a lecture (available online) commemorating Palestinian theorist Edward Said. She was inspired by his argument that many peoples have been classified by imperial powers as “the other” – less than fully human – and said the climate crisis was entrenching inequality across the globe.  As a result many neglected populations – either left behind or exploited by capitalism’s relentless appetite for growth and profit – reside in “sacrifice zones” where pollution, extreme weather events, poverty and political disempowerment are now commonplace. It will not be just the poor and disenfranchised who pay the price.“Wealthy people think that they are going to be okay, that they will be taken care of. But we all will be affected,” she said. In a lecture in Dublin on the same evening Klein spoke, US environmental sociologist John Bellamy Foster delivered a parallel message. His subject was “the anthropocene and the crisis of civilisation: climate change and capitalism”.  He argues that scientists’ adoption of the anthropocene as a new geological epoch succeeding the post-Ice Age Holocene epoch, which lasted 12,000 years, signifies a radical change in humanity’s relationship with the rest of the Earth’s systems. Global-scale social and economic processes are now becoming significant features of its geo-biological functioning.

This Is Why We Can’t Have Nice Things: Energy Bill Now Full Of Horrible Environmental Provisions -- When the Senate first started debating an energy bill, the legislative proposal was light on broad attacks on environmental protections, and concentrated on infrastructure improvements and energy efficiency. Environmentalists, in turn, expressed cautious optimism about the first major update to the nation’s energy policy in eight years.  This cautious optimism quickly turned into full-blown opposition when lawmakers made myriad controversial amendments to the bill that went on to pass the Senate. A month has passed since then, but opposition to congressional energy bills has only intensified. The House voted Wednesday to replace the Senate’s more bipartisan Energy Policy Modernization Act of 2016 with the House’s more controversial version, and groups said this bill attacks a long list of green policies, including core provisions of the National Environmental Policy Act intended to ensure forest conservation, and more. "This is the legislative equivalent of the middle finger," Radha Adhar, a federal policy representative for the Sierra Club, told ThinkProgress. Lawmakers "are obviously not serious about working in a bipartisan way on energy policy." Indeed, the final tally was 241 to 178. Only eight House Democrats voted in favor of the amended version of the bill that the House and Senate will try to reconcile in June, according to published reports.  To start, both bills aim to modernize energy infrastructure like the electric grid, streamline the permitting process for pipelines and natural gas exports, increase investment in fossil fuel research, and improve job training in energy.  But environmentalist said the bill puts barriers to energy efficiency standards for buildings, locks in fossil fuel generation and consumption well into the future, and creates new subsidies for coal and nuclear power.

Environmental lawsuits and the vengeance donors - There are so, so many environmental lawsuits, often brought by non-profits backed by philanthropists.  These institutions, among other things, target polluting corporations and bring lawsuits against them for purposes of constructing a deterrent against yet more pollution.  The Sierra Club and Greenpeace would be two examples, and of course a big chunk of the funds comes from the relatively wealthy.  How is this for one example of many?On 7 October, Greenpeace filed a lawsuit in Superior Court for the District of Columbia against Dow Chemical, Sasol North America (owned by the South African State Oil Company), two public relations firms – Dezenhall Resources and Ketchum – and four individuals.  On top of that, it is easy enough to be an anonymous donor to these groups, and to stay anonymous.  That said, I have heard tales — apocryphal perhaps — of donors who gave to environmental causes because they too earlier in their lives had suffered under the adverse effects of pollution.  In back room whispers they are sometimes called “vengeance donors,” and it is suggested that because of the vengeance donors soon enough all companies will go out of business or at the very least be at the mercy of the whims of the wealthy. Now, to be sure, many of these environmental lawsuits are excessive, or unfair, or would fail both a rights and cost-benefit test and we should condemn them, as indeed you see happening with equal frequency on the Left and on the Right.  Many companies have gone out of business because of environmental lawsuits or the threat thereof,  or perhaps the companies never got started in the first place because they couldn’t afford large enough legal departments.  I can safely say that just about everyone sees the problem here.

EPA Just Declared War On Millions of Car Owners - The EPA’s proposal to increase the amount of ethanol that must be blended into gasoline is a trifecta of regulatory abuse. It will do nothing for the environment, it will do nothing for energy security, and it could wreck millions of car engines.  The decision stems from a misbegotten 2007 energy bill signed by President Bush that requires ever-increasing amounts of ethanol to be included in gasoline. Not an increasing percentage, but an actual amount.  The EPA’s proposal would require refineries to blend in almost 19 billion gallons of ethanol and other “biofuels” by 2017, which is 700,000 gallons more than they do now. But there’s a problem. Americans aren’t consuming enough gasoline. In fact, consumption this year is well below the 2007 forecast, both because cars are more efficient and because people are driving less than expected. So, if oil refiners are to pump 19 billion gallons of ethanol into their gasoline supplies, they won’t be able to keep ethanol ratio below 10%. Why does that matter? Because ethanol is corrosive and can degrade plastic, rubber and metal parts. And the more ethanol in gasoline, the most likely this damage will occur. So going above 10% can wreak havoc with car engines — as well as those in motorcycles, lawnmowers, power boats, you name it — that aren’t built to handle the higher ethanol levels. As Popular Mechanics put it: “Gummed-up fuel systems, damaged tanks and phase separation caused by stray moisture infiltrating fuel systems have plagued many consumers since this mixture debuted, and the problems will only get worse if government policy to increase the proportion of ethanol to gasoline is implemented.”  Oh, and by the way, diverting so much corn into gasoline tanks has raised the price of food, which hurts the poor.

As Drought Grips South Africa A Conflict Over Water and Coal --  Until a ferocious drought withered crops, turned rivers to trickles, and dried up municipal drinking water supplies, one of Limpopo province’s distinctions was the ample sun and good soil that made it South Africa’s premier producer of fruits and vegetables.  Another distinction was that the province’s farmers made an informal agreement to share scarce water with coal companies developing the Waterberg Coalfield that lies beneath dry central Limpopo.  The drought, the most extreme in South Africa since the start of the 20th century, shattered the fragile equilibrium between the agricultural and coal sectors. Pitched street clashes between farmers and police, who back the coal interests, have broken out south of Musina, where Coal Africa proposes to build a $406 million mine in an area where some of the country’s most productive vegetable farms operate. The mine would consume 1 million gallons of water a day, according to company disclosures. Both the mine and neighboring irrigated farms are dependent on the Nzhelele River, which has dwindled to a shallow stream.  Higher temperatures and diminished rainfall, which many scientists attribute to climate change are wreaking havoc in two of South Africa’s largest economic sectors — agriculture and energy. Yet in the face of this growing crisis, South Africa’s leaders continue to display unyielding allegiance to the nation’s water-guzzling coal sector, whose 50-plus billion tons of coal reserves fuel 90 percent of the country’s electrical generating capacity and provide a third of its liquid fuels. Coal also generates hundreds of millions of metric tons of climate-changing carbon emissions annually that aggravate South Africa’s warming and drying.

China to replace direct coal combustion with electricity in new plan | Reuters: China will reduce the amount of coal burned directly in industrial furnaces and residential heating systems in order to tackle a major source of smog, the country's energy regulator said on Wednesday. The National Energy Administration (NEA) said in a joint announcement with other government bodies that around 700 million to 800 million tonnes of coal is burned directly in China every year, much of it in the countryside, where access to electricity is limited. Directly burned coal amounts to about 20 percent of China's total coal consumption volume, much higher than the 5 percent rate in Europe and the United States. China will aim to replace direct burning with electricity, including renewable power as well as ultra-low emission coal-fired generators, the NEA said. China currently relies on coal for around 64 percent of its total primary energy needs and for three-quarters of its total power generation. Emissions from the direct combustion of coal are around five times higher than those from coal-fired power plants, which are subject to strict anti-pollution regulations. During the 2016-2020 period, China plans to raise electricity's share of the country's overall energy mix to 27 percent, up about 1.5 percentage points from now and raising total power consumption by around 450 billion kilowatt-hours a year, the NEA said.

Nuclear Shutdowns Could Ramp Up U.S. Carbon Emissions - MIT Technology Review --  The average age of the U.S. nuclear fleet is 35 years, and many of those plants are nearing the end of their operating licenses. Many will renew their licenses, but some will close due to economic reasons and environmental concerns. Replacing those plants with natural gas plants will add millions of tons of carbon dioxide to the atmosphere. Replacing nuclear with wind and solar power, of course, does not add to carbon dioxide emissions. But history shows that the constant supply of electricity from nuclear plants tends to be replaced by new natural gas generation—indeed, the low price of natural gas is a major factor driving the closing of older nuclear plants. According to the Nuclear Energy Institute, additional emissions resulting from the closure of four nuclear plants in the last few years, along with the three that are scheduled to be shut down, will total 25 million tons of carbon dioxide a year, assuming they are replaced by new, modern natural gas plants. Another five plants are likely to shut down in the next two years, resulting in another 19 million tons.  According to the Breakthrough Institute, a San Francisco-based research organization that supports nuclear power to limit climate change, the 2013 closing of the San Onofre nuclear plant added nearly 11 million tons of carbon dioxide annually to the atmosphere. Closing Diablo Canyon would result in a similar amount. In his remarks yesterday, Moniz summed up the problem. The importance of keeping nuclear plants operating "is very clear,” he said, “but the solutions are less clear."

Scientists Say Nuclear Fuel Pools Pose Safety, Health Risks -  NBC News: Ninety-six aboveground, aquamarine pools around the country that hold the nuclear industry's spent reactor fuel may not be as safe as U.S. regulators and the nuclear industry have publicly asserted, a study released May 20 by the National Academies of Sciences, Engineering, and Medicine warned. Citing a little-noticed study by the Nuclear Regulatory Commission, the academies said that if an accident or an act of terrorism at a densely-filled pool caused a leak that drains the water away from the rods, a cataclysmic release of long-lasting radiation could force the extended evacuation of nearly 3.5 million people from territory larger than the state of New Jersey. It could also cause thousands of cancer deaths from excess radiation exposure, and as much as $700 billion dollars in costs to the national economy. The report is the second and final study of Japan's Fukushima Daiichi power plant, which was pummeled from a tsunami on March 11, 2011. The authors suggest the U.S. examine the benefits of withdrawing the spent fuel rods from the pools and storing them instead in dry casks aboveground in an effort to avoid possible catastrophes. The idea is nothing new, but it's been opposed by the industry because it could cost as much as $4 billion. The latest report contradicts parts of a study by Nuclear Regulatory Commission staff released two years after the Fukushima incident. The NRC staff in its 2014 study said a major earthquake could be expected to strike an area where spent fuel is stored in a pool once in 10 million years or less, and even then, "spent fuel pools are likely to withstand severe earthquakes without leaking."

New Complaints of Exposures Emerge at Hanford Site - WSJ: A fresh spate of worker complaints about exposures to noxious vapors from waste tanks at the closed Hanford nuclear-weapons complex in Washington has brought renewed calls for action and renewed criticism of the Energy Department’s handling of the giant cleanup project. Since the last week of April, more than 40 workers have complained of being exposed to vapors while working in an area containing scores of large underground waste storage tanks at Hanford, said officials at the now-closed complex that once produced plutonium for the nuclear-weapons program. Most described symptoms that include headaches, scratchy throats, nausea and nosebleeds. The new exposures have caught the attention of state officials, who are pushing the federal government to address the issue.  The Energy Department’s efforts to protect Hanford workers have been “inadequate to put it mildly,” said Washington Attorney General Bob Ferguson. “This has been going not just for months, not just for years, but for decades.” Last September, Mr. Ferguson’s office filed a still-pending federal-court suit against the Energy Department and one of its contractors, claiming that the handling of the vapor issue at Hanford “presents an imminent and substantial endangerment.” The suit said the vapors could cause health effects ranging from headaches to cancer. It asked the court to require better tank-vapor protections. The latest instances of worker exposures come at a time when Hanford officials are working to complete the emptying of a 740,000-gallon underground tank that has a leakage problem, though the Energy Department said there isn’t evidence the waste has reached the environment. Some observers believe the recent worker complaints could be related to that effort.

10 Near Misses at U.S. Nuclear Power Plants Considered Precursors to a Meltdown -- Following the 30th anniversary of the Chernobyl nuclear disaster, Greenpeace USA released a new report Tuesday on the 166 near misses at U.S. nuclear power plants over the past decade. Of the incidents identified in Nuclear Near Misses: A Decade of Accident Precursors at U.S. Nuclear Plants, 10 are considered by the Nuclear Regulatory Commission (NRC) to be important precursors to a meltdown.Greenpeace Nuclear Policy Analyst Jim Riccio said. “Thirty years after Chernobyl and five years after Fukushima, it is clear that these kinds of disasters could absolutely happen here. It is time for the NRC to listen to the whistleblowers within its own ranks and address these longstanding issues and vulnerabilities.”  In addition to the 163 accident precursors or near misses documented by the NRC, Greenpeace identified three significant near misses that NRC risk analysts failed to review under the agency’s Accident Sequence Precursor Program (ASP): the triple meltdown threat to Duke Energy’s Oconee Nuclear Station west of Greenville, South Carolina. According to NRC’s risk analysts, if nearby Jocassee Dam had failed, all three of the nuclear reactors at Oconee were certain to meltdown.  The report identified the following incidents as the top 10 near misses at nuclear plants between 2004-2014:  (list)

Five Years Later, TEPCO Still Can't Locate 600 Tons Of Melted Radioactive Fuel --Five years after the Fukushima tragedy, TEPCO's chief of decommissioning Naohiro Masuda admits that the company still has no idea exactly where 600 tons of melted radioactive fuel from three nuclear reactors is located. As we discussed when we profiled the status of Fukushima on its five year anniversary, the radiation at the plant is still so powerful that it is impossible to get deep enough into the area to find and remove the melted fuel rods. The situation is so severe that even the robots that were sent in to find the highly radioactive fuel have died.   Masuda went on to say that the company still hopes to locate and remove the missing fuel, but the fuel extraction technology is yet to be determined - that assumes they are able to locate it of course. "Once we can find out the condition of the melted fuel and identify its location, I believe we can develop the necessary tools to retrieve it." said Masuda. Of course, this is easier said than done as everyone knows - as RT points out, if the radioactivity flux killed the robots that were sent in to find the material, human exploration is obviously out of the question. As a reminder, when the 2011 tsunami caused the meltdown, uranium fuel of three power generating reactors gained critical temperature and burnt through the respective reactor pressure vessels, concentrating somewhere on the lower levels of the station that is currently filled with water.The company's decommission plan implies a 30-40 year period before the consequences of the meltdown are fully eliminated, however experts are skeptical that the technology is sufficient enough right now to deal with the task. Given the fact that nobody knows where the radioactive fuel is at this point, it may be a possibility that it's left there.

$3.7M grant awarded to Lake Erie wind turbine project: (AP) — The U.S. Department of Energy has awarded a $3.7 million grant to a company doing engineering work on a proposed wind turbine project in Lake Erie. Lake Erie Energy Development Corp. is aiming to build a 20-megawatt demonstration wind farm in the lake northwest of downtown Cleveland. Current cost estimates are between $120 million and $128 million. The DOE grant is the third the department has given LEEDCo, bringing the total in federal funding to $10.7 million, reported ( The department wrote in a memo to the Ohio congressional delegation that the additional funding will support the company’s offshore wind research and development progress. The grant depends on a partnership between LEEDCo and a Norwegian wind developer that provides a $1.9 million cost share, bringing the total funding available to nearly $5.6 million. The DOE had made LEEDCo a runner-up when it announced in 2014 that it would be awarding $47 million in grants to offshore projects in the Atlantic Ocean. LEEDCo is hoping the department will declare it a finalist and move a primary grant to the project since others have fallen behind the government’s engineering development schedule. David Karpinski, an engineer and LEEDCo vice president, said the current goal is to complete detailed electrical and mechanical engineering designs. The company wants to have the wind turbines built and functioning by the end of 2018, he said.

Activists want extended comment, hearing on Wayne drilling - Akron Beacon Journal (blog) -- Organized by Athens County Fracking Action Network (ACFAN), representatives of eight grassroots environmental groups held press conferences on Wednesday, first at Wayne National Forest Headquarters and later in downtown Marietta. Speakers from Torch Can Do, Buckeye Forest Council, Ohio Sierra Club, Mid-Ohio Valley Climate Action, Ohio Valley Environmental Coalition, Green Sanctuary of the First Unitarian Universalist Society of Marietta, Wayne Oil and Gas Organizing Group, andACFAN called for an extension of the Bureau of Land Management (BLM) comment period and a public hearing on BLM/Wayne plans to open the Wayne to deep-shale, high pressure horizontal drilling and fracturing (“fracking”). Heather Cantino of ACFAN stated, “The BLM as a federal agency is charged with involving the public in such an important decision as opening our Forest to fracking. Fracking was not in the 2006 Wayne National Forest Plan so must be fully evaluated with full public input, according to federal law. I’ve spent 8 hours trying to decipher the BLM’s so-called Environmental Assessment (EA) and so far find itto begobbledegook.” She cited a couple of examples: “They cite an unpublished Masters' thesis (Fletcher 2012, funded by BP) that says ‘small spills are more common than big spills’ and then (mis)use this meaningless statement to say that they don't need to consider the risk of spills! Water contamination from drilling with toxic chemicals, as Ohio allows, through unmapped aquifers? Well failure? Waste injection? Truck accidents? Blow-outs? Not considered. It will take me many more hours to figure out if there’s any science in this document. So far I can’t find any.”Cantino added,“We also can't expect everyone to read these confusing documents and make sense of them by themselves. We need a public hearing so that the public can share its extensive knowledge of the issues and our various attempts at understanding these confusing and consequential documents –– with one another, with our community, and with federal officials. We must then have time to write meaningful comments.”

Forest fracking views still sought - Marietta Times  - Tempers have flared as local environmental activist groups, state officials and oil and gas companies debate drilling and fracking wells in parts of the Wayne National Forest, with the comment period for the proposed actions set to close at the end of May. Over the past three months, the federal Bureau of Land Management has been performing a comprehensive environmental assessment on a proposal to offer more than 18,000 acres of Wayne National Forest located in Washington County for sale for oil and natural gas development. The assessment found "no significant impacts" to the Forest, but these findings have some residents concerned. "The biggest issue here is not the drilling, it is the fracking," said Loran Conley, a member of Torch Can Do!, an oil and gas watchdog group based in Little Hocking. "These drillers use approximately 4,000,000 gallons of water to frack a single well, and once that water comes back up, it is toxic. Where do they get the water?" Tom Thompson, administrator of District Resources-Mineral and Uses for Wayne National Forest in the Marietta Unit, said the Forest Service does have concerns about fresh surface water, but the water falls under the purview of the state. However, according to Randy Anderson, the assistant district manager for the Northeast States - Bureau of Land Management, the proposal is not for drilling and hydraulic fracturing, but for the leasing of mineral rights under national forest land only.. "The assessment was only for the leasing of parcels and to identify any impacts of the leasing process. Environmental impact studies would be completed for both the drilling process and the fracking process, but those come at a much later date." The Wayne National Forest is federal land intermingled with a patchwork of properties held by private landowners governed only by the impact they could have to federal resources, said Thompson.

Detroit activists oppose increased fracking waste - Detroit residents and community activists have been organizing since last year to oppose the increased processing and dumping of hazardous and radioactive fracking waste at a US Ecology facility in their neighborhood. On May 18, members of the Coalition to Oppose the Expansion of US Ecology (COE-USE) joined with other activists at a demonstration at the main office of the Detroit Water and Sewerage Department. They opposed the dumping of fracking and other industrial waste liquids into Detroit’s sewer system while also demanding a moratorium on residential water shutoffs.  USE operates several hazardous waste processing facilities in Detroit. The company has requested a permit from the Michigan Department of Environmental Quality to increase tenfold the processing and disposal of radioactive and carcinogenic fracking waste at its US Ecology North facility, which is located in the middle of Detroit at 6520 Georgia St.  At a meeting with community activists on May 11, MDEQ representatives stated that they anticipate approving the permit on Oct. 1 because what USE wants to do is legal. This is the same state agency that played a major role in poisoning the water and the people of Flint. This is the same MDEQ that has allowed southwest Detroit to be the most polluted zip code in Michigan for decades, despite strong and vigorous opposition from residents. Many Detroiters have no confidence in the MDEQ, and, in fact, accuse it of a pattern of environmental racism.

Fracking Wastewater Is Cancer-Causing, New Study Confirms - The fracking industry likes to call its product “natural gas,” but the natural consequence of its activity is the production of billions of gallons of cancer-causing wastewater. A new study published in Toxicology and Applied Pharmacology titled, “Malignant human cell transformation of Marcellus Shale gas drilling flow back water,” is the first study of its kind to confirm widely held suspicions concerning the carcinogenicity of fracking pollution. The new collaborative study was conducted by scientists at esteemed institutions in both the U.S. and China and found that so-called “flow back” fracking wastewater induced malignant changes in human bronchial epithelial cells consistent with the cancerous phenotype. The same fracking wastewater was injected into mice, with 5 of the 6 developing .2 cm to .6 cm tumors as early as 3 months after injection, and with the control mice forming no tumors after 6 months. The authors concluded that their results indicate “flow back water is capable of neoplastic transformation in vitro,” i.e. fracking wastewater is capable of producing cancer in mammals. The implications of the data presented above are truly harrowing. Pennsylvania, alone, has over 7,700 active wells in use at present. Over 4,000 violations have been reported, and over 6 million in fines paid out thus far. The operation of these Pennyslvania wells require about 42 billion gallons of water, and according to the figures above, would together produce between 1.4 and 6 billion gallons of flow back wastewater

Leaky Abandoned Wells a Hidden Climate Threat - Researchers with the state and at various universities and institutions are trying to determine what risk the old wells pose to the climate, the surrounding soil and water, and human health. The most acute risks are well known — abandoned wells have channeled gas into homes, creating the conditions for explosions.The scale of the wells’ less visible hazards is still emerging. A 2014 study by Princeton University researchers of 19 old plugged or abandoned wells in Pennsylvania found that all of them were emitting methane and some were spewing significant amounts of the potent greenhouse gas.The historical wells are not counted in official greenhouse gas emissions inventories, but taken together the state’s estimated 300,000 to 500,000 abandoned oil and gas wells could be releasing as much as 4 percent to 7 percent of the total human-caused methane emissions in Pennsylvania,the study suggested.Now, a group within the Pennsylvania Department of Environmental Protection is embarking on a study of 208 wells that were abandoned before modern oil and gas plugging requirements were established in the state in 1984.The DEP study’s leaders hope both to calculate the total potential methane emissions from the state’s abandoned wells and to identify emissions trends. Perhaps wells from certain eras, regions or depths, or those that used particular materials or plugging techniques, will emerge as high emitters that should be addressed first.

Activists Ask President Obama to End Fracking in Film - Mark Ruffalo fielded a question from Ray Beiersdorfer, geology professor at Youngstown State University, during an online Q&A following a screening of the film “Dear President Obama.” “This [question] comes from Youngstown, Ohio,” Ruffalo said. “Do I think you should give up? No!” Actor Mark Ruffalo answers questions before an audience gathered in Moser Hall to watch the documentary film. Beiersdorfer asked if he should stop pursuing a fracking ban within the city of Youngstown, Ruffalo said he would win next time. He said more people will be emboldened to join as efforts increase, and documentaries work as tools to help revolutionize communities. Students, faculty and members of the community gathered in a room in Moser Hall to watch a free screening of the film, which was executive produced by Ruffalo. Ruffalo and director Jon Bowermaster fielded questions from several colleges and environmental groups afterwards. The film focuses on Barack Obama’s claim that fossil fuels extracted through fracking could power America for the next century. Experts in the documentary say that fossil fuels will not sustain us longer than 20 years. This documentary examined this problem and the effects of fracking across the United States and how Obama’s policies have increased the prevalence of fracking. Beiersdorfer said the film crew for the documentary interviewed him and toured injection sites in Youngstown, but he didn’t make the final edit. Ohio wasn’t mentioned in the movie. Beiersdorfer said he likes to educate people on energy and the environment. “One of the two major threats that we have are nuclear war and climate change,” Beiersdorfer said. “So I’m doing what I can to help educate the community.”

FERC Called Biased Against Local Concerns / Public News Service: - The federal agency that approves or denies gas pipelines is oriented against the concerns of landowners and communities, according to people working on the issues. The Federal Energy Regulatory Commission (FERC) will decide on the huge pipelines competing to bring natural gas through West Virginia and Virginia to eastern markets.   Spencer Phillips, chief economist for Key-Log Economics, studied the impact of the Mountain Valley Pipeline (MVP). He estimates it will hurt folks along the line to the tune of more than $8 billion. But Phillips says FERC is not designed or inclined to consider those costs. "FERC's approval process for the Mountain Valley Pipeline is really a rigged game," says Phillips. "The agency's procedures themselves, as well as their track record, mean that they ignore some really important cost to people and communities." According to a Washington lawyer who specializes in cases like these, FERC's orientation is built into its legal DNA. Carolyn Elefant, an energy attorney in Washington D.C., says the 1930s Natural Gas Act was passed at a time when the government wanted to encourage the development of needed infrastructure. She says it gave regulators the power to use eminent domain to overcome landowner opposition. So, Elefant says FERC now assumes if most landowners make a deal with the developers, the folks along the line have received fair compensation. "That's very inaccurate," says Elefant. "Many times people enter into the agreements because they feel like they have no choice, they're not going to be able to fight a huge gas company, and they figure they might as well take what they can get."

New York senators continue to question gas pipeline expansion - (AP) — New York’s U.S. senators are urging the federal government to halt the expansion of a gas pipeline project that runs beside a nuclear power plant. Sens. Charles Schumer and Kirsten Gillibrand want the Algonquin pipeline project halted until independent health and safety reviews are completed. The two Democrats say the project poses a threat to the quality of life in the region and doesn’t come with any long-term benefit to the communities it would affect. Both senators are asking the Federal Energy Regulatory Commission not to approve any proposal until a thorough, independent review of the project’s potential impacts is completed. The project would nearly double the size of the current natural gas transmission line on a route that travels through Rockland, Putnam and Westchester counties in southeastern New York.

Market impact of 2016 northeast natural gas demand trends -- Northeast natural gas production has been averaging nearly 3.0 Bcf/d higher this year than last year, while demand has lagged behind due to mild weather. At the same time, storage inventories are running well above normal and there is little new takeaway capacity due online this summer. This means the Northeast is under pressure to balance excess supply in the region. In today’s blog, we wrap up our analysis of the Northeast supply/demand balance with a closer look at recent demand trends. We started this series in Part 1 with a look at the Northeast supply/demand balance (production versus demand) this past winter (November 2015 through March 2016), which marked the first winter that the Northeast was net long supply on a seasonal average basis. All but one month – January 2016 – posted net positive balances (production higher than demand) in the 2015-16 winter. Northeast production in the period averaged about 21 Bcf/d, while regional demand averaged about 19 Bcf/d, leaving the regional balance over 2.0 Bcf/d supply long, compared to a more than 4.0-Bcf/d supply deficit in the winter of 2014-15.

Industrial and electric power sectors drive projected growth in U.S. natural gas use - Today in Energy (EIA) - U.S. consumption of natural gas is projected to rise from 28 trillion cubic feet (Tcf) in 2015 to 34 Tcf in 2040, an average increase of about 1% annually, according to EIA's Annual Energy Outlook 2016 (AEO2016) Reference case. The industrial and electric power sectors make up 49% and 34% of this growth, respectively, while consumption growth in the residential, commercial, and transportation sectors is much lower.  Much of this growth in natural gas consumption results from relatively low natural gas prices. In the AEO2016 Reference case, average annual U.S. natural gas prices at the Henry Hub are expected to remain around or below $5.00 per million British thermal units (MMBtu) (in 2015 dollars) through 2040. The Henry Hub spot price averaged $2.62/MMBtu in 2015, the lowest annual average price since 1995.  Prices rise through 2020 in the AEO2016 Reference case projection as natural gas demand increases, particularly for exports of liquefied natural gas (LNG). Currently, most U.S. natural gas exports are sent to Mexico by pipeline, but LNG exports, including those from several facilities currently built or under construction, account for most of the expected increases in total U.S. natural gas exports through 2020.  The persistent, relatively low price of U.S. natural gas is the primary driver for increased natural gas consumption in the industrial sector. Energy-intensive industries and those that use natural gas as a feedstock, such as bulk chemicals, make up most of the increase in natural gas consumption.  Low natural gas prices also support long-term consumption growth in the electric power sector. Natural gas use for power generation reached a record high in 2015 and is expected to be high in 2016 as well, likely surpassing coal on an annual average basis. However, a relatively steep rise in natural gas prices through 2020 (rising 11% per year) and rapid growth in renewable generation—spurred by renewable tax credits that were extended in 2015—also contribute to a decline in power generation fueled by natural gas between 2016 and 2021.

NYMEX June gas rolls off board at $1.963/MMBtu, down 2.9 cents -  Platts - The NYMEX June natural gas futures contract rolled off the board Thursday at $1.963/MMBtu, down 2.9 cents. Earlier Thursday, US natural gas in storage climbed 71 Bcf to 2.825 Tcf for the week that ended Friday, a build that was above analyst consensus expectations of a 68-Bcf injection to stocks. "The 71-Bcf net injection for the week ended May 20 was slightly more than the consensus expectation, but still supportive compared [with] the 97-Bcf five-year average for the date," said Tim Evans, energy future specialist at Citi Futures Perspective. In the corresponding week a year ago, EIA reported a 106-Bcf injection, while the five-year average build is 97 Bcf. As a result, stocks were 756 Bcf, or 36.5%, higher than the year-ago level of 2.069 Tcf, and 769 Bcf, or 37.4%, more than the five-year average of 2.056 Tcf.The National Weather Service's six- to 10-day outlook projected above-average temperatures over significant portions of the Northeast, Southeast, Upper Midwest and the entire West Coast, possibly spurring more cooling demand in major markets heading into June. Total dry gas production is expected to rise to 70.8 Bcf/d, making Tuesday's production total of 70.3 Bcf/d once again the 2016 year-to-date low. Dry production is on pace to average around 70 Bcf/d in May, reflecting a reduction in production for three months in a row from February's high of more than 73 Bcf/d, according to data from Bentek Energy, a unit of Platts.

U.S. natural gas futures extend losses after bearish U.S. storage data - - U.S. natural gas futures extended losses in North America trade on Thursday, after data showed that natural gas supplies in storage in the U.S. rose more than expected last week. Natural gas for delivery in June on the New York Mercantile Exchange dropped 4.4 cents, or 2.02%, to trade at $2.137 per million British thermal units by 14:34GMT, or 10:34AM ET. Prices were at around $2.172 prior to the release of the supply data. The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended May 20 rose by 71 billion cubic feet, compared to expectations for a gain of 68 billion. That compares with a gain of 73 billion cubic feet in the prior week, an increase of 112 billion cubic feet in the same week a year earlier and a five-year average rise of around 97 billion cubic feet. Total U.S. natural gas storage stood at 2.825 trillion cubic feet, 26.8% higher than levels at this time a year ago and 27.2% above the five-year average for this time of year. Meanwhile, the latest U.S. weather model called for mild temperatures over the next two weeks, which should reduce heating demand during that time. Natural gas prices have closely tracked weather forecasts in recent weeks, as traders try to gauge the impact of shifting outlooks on spring heating demand. Gas use typically hits a seasonal low with spring's mild temperatures, before warmer weather increases demand for gas-fired electricity generation to power air conditioning. Unless intense summer heat boosts demand from power plants, stockpiles will test physical storage limits of 4.3 trillion cubic feet at the end of October.

Shale Boom Royalties Come Back to Bite Chesapeake - Chesapeake Energy Corp. has agreed to pay nearly US$53 million dollars to settle a suit over unpaid royalties in north Texas, according to Oklahoma state media reports. A total of US$29.4 million in cash will be paid to the plaintiffs in the class-action suit and another US$10 million will be distributed through a promissory note payable in three years. French Total SA, Chesapeake’s joint venture partner, agreed to pay US$13.1 million on top of its partner’s offerings. “We are pleased to have reached a mutually acceptable resolution of this legacy issue and look forward to further strengthening our relationships with our royalty owners,” Gordon Pennoyer, a spokesperson for Chesapeake said in a statement carried by the Oklahoman.  At least 90 percent of the plaintiffs have to approve the deal for the money to be split and distributed. If adopted, the agreement would end the lawsuit lodged by landowners in Tarrant and Johnson counties. The plaintiffs said the company underpaid royalties for natural gas extraction on their land in the Barnett Shale by several hundred million dollars. Chesapeake has been accused of deducting post-production costs from the royalty payments, which the plaintiffs say is against the terms of their contract with the company.

Natural gas faces increasing competition in Texas -- With storage inventories soaring to record-high levels and production remaining relatively flat, the U.S. natural gas market is in dire need of record demand this summer to balance storage. All eyes are on power generation to soak up the gas storage surplus. Low gas prices and increased gas-fired generating capacity makes natural gas the go-to generation fuel this year.  However, in the largest summer demand market – Texas – natural gas is facing increasing competition from wind. Wind power still provides a much smaller share of Texas’s power than natural gas, but the addition of several big wind farms in 2015 gives wind a stronger footing in the Texas market this year. Today we take a closer look at the potential impact of growing wind generating capacity on natural gas demand, particularly in Texas. We talked about the market’s dire need for incremental, even record demand recently in our “Carry That Weight” series of blogs. The gas market started the storage injection season in April (2016) with a record storage overhang, and mild weather since then has suppressed demand and limited the market’s ability to whittle down the surplus. However, if we discount the effects of the milder-than-normal weather, demand actually has been exceptionally strong on a degree day basis and could easily reach record highs this year if we get a normal-to-hotter summer weather. But now there is another potential factor that could blunt demand as well – wind generation, especially in Texas. Before we get to that though, first let’s put Texas power generation and wind into perspective.

Let's Go to Eaglebine, Texas - What It Might Take to Revive a Middle-Tier Shale Play -- Drill-rig counts and crude oil production are down sharply in the Eaglebine, one of many less-than-stellar shale plays that drillers and producers have mostly abandoned in favor of superstar counties in the Permian Basin, the southern Eagle Ford and the STACK play in Oklahoma. It’s understandable; in today’s low-oil-price/high-stress environment, everyone’s chasing the sky-high initial production (IP) rates that provide the biggest, quickest returns and help pay the bills. Still, as we will discuss today, there are at least a few glimmers of hope in the Eaglebine, including a possible pipeline restart and a new pipeline tie-in that will reduce crude-delivery costs. Now all we need is $60+/bbl oil.  The Eaglebine is an “emerging” shale play that never quite emerged, mostly because the oil price collapse that started in mid-2014 sucker-punched Eaglebine drillers and producers just as they were ramping up their output, benefiting from new pipeline takeaway capacity, and dreaming big. As we said in our We Heard It Through the Eaglebine series a while back, the play is located within an 11-county area east of Austin, TX, south of Dallas and north of Houston, where the Eagle Ford Shale meets the Woodbine Sandstone (hence the clever combo-name). The play got off to a slower start than the Eagle Ford, in part because the Eaglebine formation (up to 1,000 feet thick, and found at depths of between 6,500 and 15,000 feet) has been more complex for drillers to exploit. The Eaglebine and Eagle Ford share similar geology--both are situated above the Buda Formation and below the Austin Chalk—but the Eagle Ford is a carbonate rich organic, while the Eaglebine contains a large percentage of silica-rich sands interlaced in the organic rich shale—a characteristic that makes Eaglebine completion and production a tad (or two, or three) more complicated.

George P. Bush Paid Fired Employees $1 million to Keep Them from Suing -- Texas Land Commissioner George P. Bush has paid out nearly $1 million in taxpayer dollars to dozens of people his administration fired in exchange for their promise to not sue him or the agency, a new report finds. Bush, the first-term Republican Land Commissioner, has directed his office to keep at least 40 people on the payroll for as long as five months after termination, according to ananalysis of records by The Houston Chronicle. The fired employees did not have to use vacation time, but rather continued to accrue more time as long as they were on the state’s payroll. The Chronicle reports that in return, the employees agreed in writing not to sue the agency or discuss the deal. Many recipients were top aides to former Land Commissioner Jerry Patterson who Bush fired when he took over the agency and replaced more than 100 employees.State employees are required to work to be paid — no severance packages are given for state jobs even though they are common in the private sector. “I can understand the thinking of an agency head who wants to get rid of someone and thinks that this is an easy way to do it, but this is not the way to do it,” Buck Wood, an ethics expert and former deputy state comptroller, told The Chronicle. “Keeping someone on the payroll when they’re not coming to work so you can avoid the hassle of a lawsuit is just illegal.”

Bakken pipeline permit yanked over possible sacred burial grounds  -- Federal and state authorities have yanked a construction permit for a segment of the Dakota Access crude oil pipeline route to investigate reports it crosses ancient sacred tribal burial grounds in northwestern Iowa. The U.S. Fish and Wildlife Service notified the Iowa Department of Natural Resources on Wednesday it was revoking approval of a Sovereign Lands Construction Permit, which had been issued to pipeline developer Dakota Access on March 3. The permit granted construction, maintenance and operation in lands under U.S. Fish and Wildlife and Iowa DNR jurisdiction. It was one of several permissions Dakota Access needed for its $3.8 billion Bakken pipeline, which promises to deliver up to 570,000 barrels of crude oil per day 1,168 miles underground from North Dakota oil fields through South Dakota and Iowa to a distribution hub in Illinois. A significant archaeological site was identified within the Big Sioux River Wildlife Management Area in Lyon County and “all tree clearing or any ground-disturbing activities within the pipeline corridor pending further investigation” should stop, James B. Hodgson, chief of the agency’s Wildlife and Sport Fish Restoration Programs wrote to Iowa DNR Director Chuck Gipp. The Iowa DNR issued a “stop work order” Thursday.

Top Democrats Ally With Oil and Gas Industry to Fight Colorado Anti-Fracking Ballot Measures  - Oil and gas companies are spending heavily to crush three Colorado ballot initiatives that would limit fracking. And some of the state’s most powerful Democrats are helping them. The stakes are particularly high for several Colorado communities that have voted to limit or ban oil and gas development locally. Those limits were nullified in two cities by state Supreme Court decisions earlier this month. So the ballot initiatives may be their last best chance to slow development whose speed has surprised even cities that initially supported oil and gas projects. “We feel it is a last ditch effort,” said Tricia Olson, director of Coloradans Resisting Extreme Energy Development, or CREED, which is pushing to get two of the measures on the ballot. One measure would allow cities to pass rules to limit or even ban oil and gas development locally; the other would disallow companies from building oil and gas facilities closer than 2,500 feet from “occupied structures.” A third, supported by a separate group called Coloradans for Community Rights, would empower communities to make all kinds of decisions, including whether to frack. The groups are currently in the process of gathering the 98,000 signatures required to get on the ballot. Campaign finance filings released this month indicate just how much oil and gas companies are willing to pony up to drill freely. An industry-backed committee created just to defeat fracking ballot measures in Colorado, called Protecting Colorado’s Environment, Economy, and Energy Independence, collected more than $6.3 million in the first five months of this year. Most of the pro-fracking group’s money came from two, $2.5 million donations, one each from Anadarko Petroleum and Noble Energy. Smaller contributions came from a dozen or so other oil and gas companies and industry groups.

Shell Pipeline Leaks 20,000 Gallons of Oil in California’s Central Valley - For the second time in two weeks, Shell has spilled thousands of gallons of oil, this time in California’s Central Valley.  Less than two weeks after dumping nearly 90,000 gallons of oil into the Gulf of Mexico, Shell Oil is at it again. The company’s San Pablo Bay Pipeline, which transports crude oil from California’s Central Valley to the San Francisco Bay Area, leaked an estimated 21,000 gallons into the soil near in San Joaquin County this week.    Responders are on the scene to clear oil that’s reached the surface, which county officials say covered roughly 10,000 square feet of land. As of today, Shell representatives claim the pipeline has been repaired, but have not resumed operations. Local government officials and Shell responders are investigating the cause of the leak and currently report that no oil has entered drinking water sources or populated areas. While two large oil spills in two weeks may seem like a pretty epic failure—particularly for a company that just said “no release [of oil] is acceptable“—in reality this is what business as usual looks like for an industry built on polluting our environment and driving climate disaster. In fact, this same pipeline sprung a leak just eight months ago in almost the same location, spilling roughly the same amount of oil into the ground. Adding irony to injury, the spill occurred on the site of one the state’s largest wind energy developments, the Altamont Pass Wind Farm. Wind energy, it should be clarified, does not release toxic chemicals into the soil or contribute to runaway climate change. Perhaps Shell responders on the scene will take note.

Toxic chemicals from fracking wastewater spills can persist for years | Chemical & Engineering News - In North Dakota’s Bakken region, the fracking boom has generated nearly 10,000 wells for unconventional oil and gas production—and along with them, almost 4,000 reported wastewater spills resulting from the activity. A new study shows that these spills have left surface waters in the area carrying radium, selenium, thallium, lead, and other toxic chemicals that can persist for years at unsafe levels (Environ. Sci. Technol. 2016, DOI: 10.1021/acs.est.5b06349). Soils and sediments at spill sites also harbored long-lasting radium contamination, the study found. During production, the well brings up a brine that carries the fingerprint of the rock formation below, including naturally occurring toxic or radioactive elements like selenium and radium. This wastewater, called produced water, may be reused, injected underground for disposal, or processed—though not always successfully—in water treatment plants. But as fracking has increased in the Bakken region, so has the incidence of wastewater spills, often resulting from leaks in pipelines that transport the brine to injection wells. The team used several geochemical tracers, including strontium isotopes, to detect wastewater residue at the spill sites. The ratio of 87Sr to 86Sr in fracking wastewater carries a distinctive signature of the rock formation where it was produced. By measuring strontium isotopes in the produced water and in water samples taken from spill sites, the researchers could identify brine residue from a spill. Other tracers present in both types of samples confirmed the link. In the water samples from spill sites, the team found that high concentrations of salts, trace metals, and other toxic contaminants persisted from the spills. Selenium, thallium, and radium exceeded maximum contaminant levels for drinking water in some samples. Additionally, ammonium and selenium concentrations were above recommended levels for aquatic life. In soil and sediment samples downstream from the Blacktail Creek spill site, radium concentrations were up to 100 times as great as in samples upstream.

Shale oil industry a 'Ponzi scheme' or can it boom again? -- Oil prices are rallying on the back of a drawdown in U.S. crude oil inventories but analysts are questioning whether the country's shale oil industry can ever boom again. The drawdown in crude oil inventories has led to hopes that a global glut in oil supply that has caused prices to plummet since mid-2014 could be finally working its way out of the system.  The sharp decline in oil prices, which has been exacerbated by major oil producers such as OPEC refusing to cut production, has claimed many victims in the oil industry over the last two years, particularly in the U.S. where the shale oil industry has seen many producers cut and close down production.  Dominic Haywood, an oil analyst at Energy Aspects, told CNBC on Thursday that "there will be a lot of guys (U.S. shale oil producers) that don't come back into the market. I think we've already lost around 35 to 40 independent shale oil or shale oil and gas producers and those producers won't come back," Haywood said. "They would need about a $70-$80 barrel of oil to cover drilling, extraction and capex costs," he said.: One analyst told CNBC that he doubted the very foundation of the U.S. shale oil industry which he said had been founded and expanded on cheap money and had effectively been a "Ponzi scheme" – an investment operation that generates returns for older investors by acquiring new investors. "I think in ten years' time someone is going to write a great book and make a great movie about the shale industry in the U.S. because I think it is, quite frankly, one of the biggest Ponzi schemes known to mankind," Gavin Wendt, founding director & senior resource analyst at MineLife, told CNBC on Thursday.

Would Regulated Oil Prices, Argentine-Style, Help U.S. Shale? -- U.S. shale oil companies are filing for bankruptcy at an alarming rate, whereas, their counterparts in Argentina are having a gala time. When the U.S. shale oil drillers were struggling to earn $39 per barrel of oil, Argentina was offering $67.5 per barrel to their producers.  Due to the oil price crash, the world’s capital spending in oil and gas has reduced by approximately 20 percent in 2015. By comparison, U.S. oil and gas companies have reduced spending by 40 percent last year, according to Moody’s Investors Service.  On the other hand, Argentina’s state-run oil company YPF increased spending by only 4 percent during the same period. Is this model of regulated oil prices in Argentina replicable in the U.S.? Though this seems to be a good solution, this is not sustainable or beneficial in the long-term.Prior to 2014, when oil prices were high, the cost of U.S. shale oil production was estimated to be between $70-$90/b, according to different analysts. But when crude prices declined, shale oil producers were forced to innovate and reduce costs, which has decreased the cost of production to $60/b in the third quarter of 2015. As the oil prices continued to drop further, shale drillers continued to modernize, further reducing the cost of production in 2016. Along with the technological advances, the productivity of the companies has also increased.  Hence, there are many experts who believe that oil prices are unlikely to touch $100/b again.  On the other hand, the biggest oil trading company, Vitol, has forecast a likely range of $40-$60/b for the next decade. Had the U.S. protected the shale oil producers, they would not have taken steps to cut costs.

United States remains largest producer of petroleum and natural gas hydrocarbons - Today in Energy - U.S. Energy Information Administration (EIA): The United States remained the world's top producer of petroleum and natural gas hydrocarbons in 2015, according to U.S. Energy Information Administration estimates. U.S. petroleum and natural gas production first surpassed Russia in 2012, and the United States has been the world's top producer of natural gas since 2011 and the world's top producer of petroleum hydrocarbons since 2013. For the United States and Russia, total petroleum and natural gas hydrocarbon production, in energy content terms, is almost evenly split between petroleum and natural gas. Saudi Arabia's production, on the other hand, heavily favors petroleum. Total petroleum production is made up of several different types of liquid fuels, including crude oil and lease condensate, tight oil, extra-heavy oil, and bitumen. In addition, various processes produce natural gas plant liquids (NGPL), biofuels, and refinery processing gain, among other possible liquid fuels. In the United States, crude oil and lease condensate accounted for roughly 60% of the total petroleum hydrocarbon production in 2015. An additional 20% of the U.S. production was natural gas plant liquids. Biofuels and refinery processing gain make up most of the remaining U.S. petroleum and other liquids production volumes. Throughout 2015, U.S. crude oil prices remained relatively low, with the spot price of West Texas Intermediate crude oil declining from $47 per barrel in January to $37 per barrel in December. Despite low crude oil prices and a 60% drop in the number of operating oil and natural gas rigs, U.S. petroleum supply still increased by 1.0 million barrels per day in 2015. U.S. natural gas production increased by 3.7 billion cubic feet per day, with nearly all of the increase occurring in the eastern United States.

Why Cheap Shale Gas Will End Soon -  Art Berman - Enthusiasts believe that shale gas is simultaneously cheap, abundant and profitable thus defying all rules of business and economics. That is magical thinking. The recently released EIA Annual Energy Outlook 2016 sparkles with pixie dust as it forecasts almost unlimited gas supply at low prices out to 2040 and beyond. Exuberant press reports herald a new era of LNG exports that will change the geopolitical balance of the world and make America great again. But U.S. shale gas production is declining because of low prices and shale gas companies are in deep financial trouble because in the real world, price and cost matter. That is not magical. The financial performance of shale gas-weighted E&P companies in the first quarter of 2016 was a disaster. Chesapeake Energy, the biggest shale gas producer in the world, had negative cash from operations. That means that oil and gas sales didn’t even cover operating costs much less capital expenditures like drilling and completion. Other shale gas-weighted companies including Anadarko, Comstock and Petroquest also had negative cash from operations. Goodrich and Sandridge are in bankruptcy and Exco and Halcon will soon follow. Ultra, Forest, Quicksilver, Swift and Talisman were lost in action last year. On average, surviving companies out-spent cash flow by two-to-one both in 2015 and 2016 but many normally strong companies greatly increased negative cash flow this year (Figure 1). Devon Energy has been cash-flow neutral through much of the shale gas revolution but disturbingly increased capex-to-cash flow 5-fold in the first quarter of 2016. Similarly, Southwestern Energy has had an excellent record of near-cash flow neutrality but doubled its negative cash flow in 2016. The debt side of first quarter earnings is far more disturbing. The average debt-to-cash flow ratio for shale gas companies increased almost 4-fold to more than 7, up from less than 2 in 2015 (Figure 2).

International Markets Prove Hard To Conquer For U.S. LNG - The latest drilling productivity report from the Energy Information Administration (EIA) has shown that the Marcellus shale continues to be the largest source of natural gas in the U.S. by a wide margin, with daily amounts that put it on par with leading international producers such as Iran and Qatar. This is despite a serious dip in production that began last year as the market became saturated and prices plunged. The domestic gas market is still saturated, according to the EIA, which has projected that gas output in the Marcellus and elsewhere will continue to decline. International markets are the natural alternative for shale gas producers, but there are a few issues with this alternative, and these issues mean that the huge output in the Marcellus is not such good news.   First, there is the competition. The European market is an attractive destination for U.S. gas as it is looking to diversify away from Russia’s Gazprom. Asia, with its high levels of demand, is also an attractive prospect. However, there are suppliers with an established presence in both these markets, which are likely to cut prices in a bid to preserve their market share. U.S. exporters, on the other hand, have less space for maneuvering. The only way U.S. companies can transport their gas is after liquefying it and shipping it to Europe or Asia. Cheniere Energy is already doing this. There are several liquefaction terminals in construction across the country, driven by hopes for gas demand growth across the world. However, these hopes have not yet proved realistic. To complicate things further, pipeline projects at home are being delayed, adding to the pressure on gas producers.   There is a glut on the international gas market comparable to that in oil, although various sources claim the oil glut is on the wane with the recent production outages in Canada and Nigeria.

US LNG exports to be loss-making with '100% probability': Gazprom - US LNG exports will be a loss-making enterprise at some point in the next 20 years "with 100% probability", a leading official at Russian gas giant Gazprom said this week, as the monopoly continues to hit out at the prospect of US LNG competing with Russian gas in Europe. Valery Nemov, deputy head of contract structuring and price formation at Gazprom Export, also warned that US Henry Hub prices could soar in the future, rendering US LNG exports even less profitable. Nemov, writing in Gazprom's monthly newsletter published Thursday, said: "We can assume that a scenario when the market is short, prices in the US are at similar levels to those in Europe or Asia, and thus LNG exports from the US would be loss-making, is likely to happen in the next 20 years with 100% probability." Nemov also made the case that tolling fees for liquefaction at US LNG plants should not be considered "sunk costs" and that the economics of US LNG look considerably worse as a result. Many of the contracts signed by buyers of future US LNG include a tolling fee which the buyer pays to cover the cost of liquefaction. These currently equal $2.37-$3/MMBtu ($85-125/1,000 cu m) and under certain contracts must be paid regardless of whether buyers take delivery or not. "We would say that investments into liquefaction plants are 'sunk costs', but tolling fees are not," Nemov said. "The 'sunk costs' logic would only work if contracts are revised so as to exclude a 'liquefy-or-pay' condition and to stipulate buying liquefaction capacities on spot. In that case, money would be permanently lost for those who have invested in liquefaction," he said. Nemov said Gazprom did not exclude this scenario. "We know better than others that there are no buyers in the market that are ready to incur losses for decades," he said.

Why US LNG Doesn't Stand a Chance Against Russian Gas in Europe: U.S. oil drillers have been hollowed out from what has been described as a price war waged by OPEC. But a separate price war might soon descend upon the U.S. natural gas industry, which is already reeling from a downturn in prices.  A global surge in natural gas export capacity is making the gas trade a lot more competitive. That is especially true in Europe, where U.S. LNG threatens to challenge Russia’s long-held customer base. Cheniere Energy is putting the finishing touches on its Sabine Pass LNG export facility in the Gulf of Mexico, and several more export terminals are under construction and will come online in the years ahead. These terminals are seeking to export LNG to Asia, as well as to customers in Europe. Russia has traditionally had a captive market in Europe, but with American LNG coming on the market, state-owned gas giant Gazprom is reportedly weighing an aggressive response. According to a new report from the Oxford Institute for Energy Studies (OIES), Gazprom might consider a strategy to flood Europe with cheap gas in 2016 to kill off U.S. LNG.  Such a scenario would be possible because Gazprom has 100 billion cubic meters of annual gas production capacity sitting on the sidelines in West Siberia, which can effectively be used as spare capacity, not unlike the way Saudi Arabia can ramp up and down oil production to affect prices. Gazprom’s latent capacity is equivalent to 3 percent of global production. This large volume of capacity is the result of investments that were made in a major project on the Yamal Peninsula back when gas markets looked much more bullish. The approach would mirror Saudi Arabia’s strategy of keeping oil production elevated in order to protect market share, forcing the painful supply-side adjustment onto higher-cost producers. Crucially, Gazprom can produce and export gas to Europe at a much lower cost than LNG from across the Atlantic.

Shell to cut at least another 2,200 jobs globally (AP) — Anglo-Dutch oil company Royal Dutch Shell says it will trim at least 2,200 jobs globally amid challenging times in the oil industry. The losses are in addition to cuts already being implemented because of the energy company’s merger with BG. The losses will include some 475 positions in the North Sea. Oil companies around the world are slashing jobs and postponing investments to adjust to lower energy prices. Prices have fallen because production remains high even as slower economic growth, particularly in China, reduces consumption. Paul Goodfellow, Shell’s vice president for the U.K. and Ireland, told staff on Wednesday that these are “tough times for our industry and we have to take further difficult decisions to ensure Shell remains competitive through the current, prolonged downturn.”  In related news, Shell: Skimmers in Gulf to clean up 88,200 gallon oil spill

Shell jobs facing axe rise to 5000 after BG deal - -Royal Dutch Shell on Wednesday announced plans to cut an additional 2,200 jobs after its £35bn takeover of BG Group in February. The energy company had previously said it expected to shed 2,800 staff as a result of the BG deal, on top of 7,500 Shell jobs and contractor roles it was already planning to remove because of the oil price collapse. But now Shell, which is listed in the UK and the Netherlands, is increasing the number of jobs going after the BG takeover to 5,000. At the end of last year, Shell had 90,000 employees, while BG had 4,600. Some investors have criticised the BG takeover, accusing Shell of overpaying for its smaller rival, particularly at a time of low oil prices. Shell declined to say where the latest job losses would be focused, except that 475 were in the UK and 150 in Norway. The affected jobs in the UK were mainly in its exploration and production operations, but also involved back-office staff. Paul Goodfellow, Shell’s vice-president for UK & Ireland, said: “Despite the improvements that we have made to our business, current market conditions remain challenging. “Our integration with BG provides an opportunity to accelerate our performance in this ‘lower for longer’ environment. We need to reduce our cost base, improve production efficiency and have an organisation that best fits our combined portfolio and business plans.”

GE announces deals worth over $1.4 billion with Saudi Arabia (AP) — General Electric Co. says it has made a series of deals with Saudi Arabia worth over $1.4 billion. GE made the announcement Monday, saying it is part of a plan by the kingdom to diversify its economy. Saudi state-run media did not immediately report on the deals. The deal comes as part of the kingdom’s Vision 2030 plan to wean itself off dependence on oil production. The plan, pushed by Deputy Crown Prince Mohammed bin Salman, the son of King Salman, also calls for floating a stake in the world’s largest oil company, Saudi Arabian Oil Co., and setting up one of the world’s biggest government investment funds.

Saudi Arabia is planning for the post-oil era, why not the United States? -- The world's largest exporter of crude oil, the Kingdom of Saudi Arabia, recently announced a plan for its post-oil future. If a country almost synonymous with the oil economy can see the need for such a plan, how can the rest of the world, particularly the United States, the world's largest consumer of petroleum, not see the necessity of such foresight? The kingdom's plan includes sale of part of Saudi Aramco, the world largest oil company and currently wholly-owned by the Saudi government. The company controls all oil development in Saudi Arabia. That the Saudis want to sell part of the most valuable company in the world means they have a different view about the future of oil than those who will be buying. Commentators often report that markets rise because investors are optimistic or fall because they are pessimistic. But this is complete nonsense because for every buyer there is always a seller. Each side of a trade believes in a different future for the investment being traded. Certainly, there are many reasons for selling a minority stake in Saudi Aramco. But one of them can't be that the rulers of the kingdom have an unalloyed bullishness about Saudi capabilities and oil resources. As recently as 2007 the U.S. Energy Information Administration (EIA) believed Saudi Arabia would be supplying the world with 16.4 million barrels per day (mbpd) of oil by 2030. (And, that was down from 23.8 mbpd projected for 2025 in a 2003 report.) In 2008 the Saudi king appeared to embrace a policy of 12.5 mbpd and no more. Since then long-term projections for Saudi production have come down with a range of 10.2 mbpd to 15.5 mbpd for 2040 (in a 2013 EIA report) depending on which of three scenarios you choose. No explicit range has been included in subsequent EIA reports. 

The long twilight of the big oil companies The annual meetings of some of the world’s largest oil companies this week were like therapy sessions for an industry that is suffering from existential angst. The international objective of holding the increase in global temperatures to “well below” 2C, agreed at the Paris climate talks last year, implies the obsolescence of all fossil fuel production within the next few decades. The oil companies have not yet reconciled themselves to quite what this means. If governments stick to that commitment, fossil fuel companies will either have to find ways to stop greenhouse gas emissions from their products, or shift into renewable energy, or go out of business. At the annual meetings of oil groups including ExxonMobil and Royal Dutch Shell, that prospect was argued over by executives and shareholders, without conclusive result. In their public presentation, at least, the European groups including Shell and Total are more willing to face up to the threat of climate change than their US rivals. While accepting the conclusions of climate science, Exxon and Chevron stress the importance of energy security and affordability over reducing emissions. Calls from investors for the US companies to assess how their operations would fare under policies for a 2 degrees temperature rise were opposed by their boards and rejected in shareholder votes, albeit with substantial minority support. The leading European oil companies have started publishing their views of how such constraints would bite, but they remain reluctant to explore in detail what that outlook would mean for their investment decisions and future profits. Modelling published in the journal Nature last year suggested that to stay inside the 2 degree limit, about a third of the world’s oil reserves and half its gas reserves would have to remain unburned. That does not mean oil companies have to give up on all investment in future production. Different reserves have differing prospects, depending on production costs. Shale oil in the US, for example, probably has more growth potential than Canada’s oil sands. Overall, though, the message is one that is always hard for investors and management teams to hear: room for growth is tightly constrained, and in the long term output will have to fall rather than rise.

Hillary Clinton’s Energy Initiative Pressed Countries to Embrace Fracking, New Emails Reveal -  Steve Horn - BACK IN APRIL, just before the New York primary, Hillary Clinton’s campaign aired a commercial on upstate television stations touting her work as secretary of state forcing “China, India, some of the world’s worst polluters” to make “real change.” She promised to “stand firm with New Yorkers opposing fracking, giving communities the right to say ‘no.’”  But emails obtained by The Intercept from the Department of State reveal new details of behind-the-scenes efforts by Clinton and her close aides to export American-style hydraulic fracturing — the horizontal drilling technique best known as fracking — to countries all over the world. Far from challenging fossil fuel companies, the emails obtained by The Intercept show that State Department officials worked closely with private sector oil and gas companies, pressed other agencies within the Obama administration to commit federal government resources including technical assistance for locating shale reserves, and distributed agreements with partner nations pledging to help secure investments for new fracking projects.The documents also reveal the department’s role in bringing foreign dignitaries to a fracking site in Pennsylvania, and its plans to make Poland a “laboratory for testing whether US success in developing shale gas can be repeated in a different country,” particularly in Europe, where local governments had expressed opposition and in some cases even banned fracking.  The campaign included plans to spread the drilling technique to China, South Africa, Romania, Morocco, Bulgaria, Chile, India, Pakistan, Argentina, Indonesia, and Ukraine.In 2014, Mother Jones reporter Mariah Blake used diplomatic cables disclosed by WikiLeaks and other records to uncover how Clinton “sold fracking to the world.” The emails obtained by The Intercept through a separate Freedom of Information Act request provide a new layer of detail.

Article: FOIA Reveals SoS Clinton Promoted Global Fracking  -- My guest today is investigative reporter, Steve Horn. Welcome back to OpEdNews, Steve.  Steve Horn: Thanks for having me again! Okay, so it's important to differentiate our article with those based on the emails Hillary Clinton handed over that were on her private server. I've written articles based on those emails (known these days thanks to Bernie Sanders as the "damn emails," which he said "America is sick and tired of hearing about") too.  My stories on those "damn emails" centered around how she pushed oil/gas sector privatization in Mexico and how the State Department -- in handing over those emails she had stored on her private server at her private home over, which the State Department Inspector General recently berated-- redacted the entire job description of David Goldwyn, who headed up the Global Shale Gas Initiative that's the centerpiece of our article. Goldwyn now works as an industry lawyer, consultant and unregistered lobbyist.   The emails we tapped into for our story on The Intercept were obtained, like the private server ones, via the Freedom of Information Act. Tellingly, as our request was made before the private server request took place, there are NO emails in our hundreds of pages we received that emanate from Clinton or her closest aides that used the email domain names. But we still got back interesting stuff, which expanded upon the great 2014 Mother Jones investigation about how Hillary Clinton's State Department sold hydraulic fracturing ("fracking," a horizontal drilling technique) of shale oil and gas around the world. Our emails show that GSGI involved coordination among a plethora of federal agencies and it's important to note it wasn't just a State Department thing, but a "whole of government" approach touted by Goldwyn as such. State Department created its own Bureau of Energy Resources, under which sat GSGI. GSGI brought in delegations to the U.S. and sent delegations abroad for the purpose of selling U.S.-style fracking around the world.  Clinton now campaigns as a cautious supporter of fracking (and aired a fairly secretive anti-fracking ad in New York State that her campaign hasn't put up on YouTube like the rest of the ads its run), given certain conditions only under which she'd support it, but there's no evidence these conditions were part of her team's plan for selling fracking under the auspices of GSGI. So, it could just be pandering and to be honest, it probably is. Why wouldn't it be? This is U.S. electoral politics after all!

Clinton Chasing Votes With Fracking U-Turn  -- Leaked emails obtained by The Intercept reveal Hillary Clinton’s multiple stances on fracking—which apparently differ depending on whether we’re talking about fracking on U.S. soil or abroad. At a debate with Bernie Sanders in New York in early April, Hillary Clinton said she doesn’t support fracking, unless certain conditions are met, such as acceptance from the community and full disclosure of the chemicals that will be used in the process of releasing oil and gas from shale rock.  Just four years ago, however, she was quick to point fingers at communities abroad who were fighting proposed fracking projects in Poland, Romania, and Bulgaria, as leaked emails obtained by The Intercept reveal. At that time, she promoted fracking – more specifically gas fracking – as a way for any country, especially those in Europe, to achieve energy independence (from Russia). During her term as Secretary of State, Hillary Clinton made no attempt to hide her international energy ambitions, which could be easily summed up as more locally produced gas for everyone, and more profits for the American companies that would pump that gas. Pretty much the usual run-of-the-mill approach to nurturing large corporate taxpayers and campaign supporters. Now, it seems, Clinton is ready to antagonize these same corporate campaign supporters in order to win more liberal votes. This approach risks alienating more than just the energy industry, as Jude Clemente rightly noted in an article for Forbes that offers a comprehensive summary of all the benefits the U.S. has reaped from fracking (although it fails to mention the risks). He warned that she might lose Ohio and Pennsylvania with her new anti-fracking position, but Clinton won both states, which are heavily dependent on gas fracking. In Ohio, she got the upper hand before declaring her new anti-fracking stance, but her Pennsylvania victory came after the New York debate. Apparently, the strategy of changing positions to suit the moment and the target audience is working, distasteful as it may seem to observers.

Donald Trump vows to undo Obama’s climate agenda, says US will not beg for oil again | The Indian Express: Donald Trump, the presumptive Republican presidential nominee, promised on Thursday to roll back some of America’s most ambitious environmental policies, actions that he said would revive the ailing US oil and coal industries and bolster national security. Among the proposals, Trump said he would pull the United States out of the UN global climate accord, approve the Keystone XL oil pipeline from Canada and rescind measures by President Barack Obama to cut US emissions and protect waterways from industrial pollution. “Any regulation that’s outdated, unnecessary, bad for workers or contrary to the national interest will be scrapped and scrapped completely,” Trump told about 7,700 people at the Williston Basin Petroleum Conference in Bismarck, the capital of oil-rich North Dakota. “We’re going to do all this while taking proper regard for rational environmental concerns.”It was Trump’s first speech detailing the energy policies he would advance if elected president. He received loud applause from the crowd of oil executives. The comments painted a stark contrast between the New York billionaire and his Democratic rivals for the White House, Hillary Clinton and Bernie Sanders, who advocate a sharp turn away from fossil fuels and toward renewable energy technologies to combat climate change. Trump slammed both rivals in his speech, saying their policies would kill jobs and force the United States “to be begging for oil again” from Middle East producers. “It’s not going to happen. Not with me,” he said.

Donald Trump's energy plan: Regulate less, drill more - May. 26, 2016: Donald Trump has a simple formula to get America's energy industry back on its feet: stop overregulation and start drilling a lot more for oil and gas. In his first in-depth speech about energy policy, Trump on Thursday promised to make American energy "dominance" a strategic economic and foreign policy goal of the U.S. "America's incredible energy potential remains untapped. It's a wound that is totally self-inflected," Trump said during a speech at a North Dakota oil industry conference. Here's what you need to know about Trump's energy plan: America first: Trump promised that the U.S. will achieve "complete" independence from foreign sources of oil. "Imagine a world in which our foes and the oil cartels can no longer use energy as a weapon. Wouldn't that be nice?" Trump said, adding that the U.S. is "loaded" in oil and gas resources. A key Trump adviser, Rep. Kevin Cramer of North Dakota, has co-sponsored a bill that would create a commission to investigate whether OPEC is manipulating oil prices through anti-competitive behavior. Regulate less: Trump said any regulation that is "outdated, unnecessary, bad for workers" or deemed "contrary to the national interests" will be scrapped completely. And here's Trump's criteria for future restrictions: "Is this regulation good for the American worker?" Trump also promised to make policy decisions in a public way and very transparently, adding they won't be "made on Hillary Clinton's private email account." Trump said he'd approve Keystone XL, which was blocked by President Obama. However, Trump would do it differently. He wants a cut of the profits because the controversial pipeline from Canada wouldn't be possible without U.S. approval.

Trump's Energy Plan: Save Coal by Unleashing Fracking? - Scientific American: In a nearly hourlong speech marking the first major energy policy address of his campaign, the Republican presidential nominee pledged to expand oil and gas production, “cancel” the Paris global warming accord and roll back President Obama’s executive actions on climate change. He described regulations to cut carbon dioxide emissions as ruinous to the economy and a trespass against personal freedom. He latched them closely to Democratic presidential candidate Hillary Clinton, whom Trump accused of supporting a radical environmental agenda. “As bad as President Obama is, Hillary Clinton will be worse,” Trump said. “She’ll escalate the war against the American worker like never before and against American energy, and she’ll unleash the EPA to control every aspect of our lives, and every aspect of energy.” The Republican nominee pledged to roll back a list of executive actions within the first 100 days of his presidency. The first one he mentioned was Obama’s Climate Action Plan, a guiding document that led the administration’s efforts to cut greenhouse gas emissions, increase adaptation and pursue international negotiations. “We’re going to rescind all the job-destroying Obama executive actions,” Trump said, “including the Climate Action Plan and the Waters of the United States rule. OK, remember that. We’re going to save the coal industry. We’re going to save that coal industry, believe me. We’re going to save it.”

There's a lot to unpack in just one of Donald Trump's answers about energy policy - If you're going to talk about energy in the United States, you might as well do it in North Dakota. The western part of the state had the good sense to be situated above a gigantic shale formation known as the Bakken, in which an enormous amount of natural gas and oil was trapped. Trapped, that is, until people figured out how to drill holes sideways through the shale and break it all up, sucking the oil and gas up to the surface. That's fracking, and it has made North Dakota one of the brightest spots in the American economy -- and the fastest-growing state in population year after year. It is not a place where any politician, much less the Republican nominee for president, would disparage the use of fossil fuels. Donald Trump, who held a brief press conference there  Thursday, would perhaps be less inclined than most to say bad things about the oil industry, especially since his friend Harold Hamm -- energy industry titan and one-time Mitt Romney presidential adviser -- was standing next to him. So when asked about fracking, Trump took a lot of disparate threads of energy policy and politics in general and wove them together with his silver tongue. Here is what he said, in its entirety.

U.S. Gas Exports Poised to Surpass Imports for First Time Since 1957  -- For the first time since Ike was in the White House and lead was in gasoline, exports of U.S. natural gas will outstrip imports in a shift that could occur as soon as the end of this year, the head of the U.S. Energy Information Administration said last week. The change will mark a significant milestone – the latest in America's transformation into the world's biggest oil and gas producer and one long-awaited by policymakers who hope it will drive U.S. job growth and expand American influence abroad, even in the face of a global gas market slowed by anemic demand and excess supply. As imports plummeted 40 percent last year from their peak in 2007, American gas exports soared 116 percent during the same period, buoyed by a flood of natural gas unleashed by fracking and horizontal drilling, according to the EIA. The trends are on a collision course, with exports set to plow past imports in roughly a year's time, leading to potential ramifications beyond simply the energy sphere.  "This pickup in growth in the United States leads to the U.S., in the very near future – later this year, next year – becoming a net exporter of natural gas,” EIA Administrator Adam Sieminski said of surging gas exports Wednesday, while presenting the EIA's International Energy Outlook at a think tank in the nation's capital. "That was something that most people would've thought impossible just 10 years ago."

The Devil Fossil Fuel Industry Has Us By the Short-hairs (and what are we going to do about it?) - Dissident Voice -- A new film by Gasland filmmaker proves greenies tied to Capitalism are the enemy, too A simple documentary premiere, in a small town north of Vancouver, WA, on the Columbia, a town called Kalama, near Longview, where millions of stripped logs from the Pacific Northwest’s forests are stacked 20 stories high, waiting for markets (sic) in Asia to be turned into lumber and cardboard and stuffing and paper and snot sheets for the U S of A. Amazing disconnect, how unsustainable and horrific Capitalism is as it plays out, guts communities – both that of Consumopithecus Sapiens and the natural world – while people will argue over some village square tree about to be cut down for the new mini-strip mall.  So, this east coast Jewish boy, Josh Fox, came to town with his new fresh-from-the-white-movie-festival-Sundance documentary (sic)/anti-documentary, as a way to rally the people of Kalama (all white, all retired, more or less, excluding the activists from Portland) to keep fighting against a methanol refiner for fracked gas coming from Oh Canada’s Earth Genocide fields in Alberta. Lots of Beatles and Dylan songs, with the director Fox strumming the banjo and his sidekick Gabriel Mayers playing guitar and in the film singing one incredible song in a New York Subway, really, the highlight of the movie, in three minutes. That is the back story for me, wherever I go, in so-called “Indian Country,” how a town which is paved over with pathetic buildings and more cars than inhabitants will quickly forget how the original people existing in peace and on their people’s spirits’ river have been pushed off their sacred land through the will of the Iron Horse Galloping, Coal Spewing, Toxin Brewing, Gun Toting, Disease Spreading, Cement Setting White Peoples.  The irony is those townies now living in Kalama, some with 4,000 square foot homes, on a hill, overlooking the river, all those eagles and great blue herons aloft at sunset, with outbuildings for 40-foot RVs and 10 meter long pontoon boats, lovely rose lined gardens, humming bird feeders and VW beetle sized barbecue sets, they are worried about another Iron Horse Crashing into/on top of/over their town: the oil and gas industry, those thugs we all love to hate but depend on for those jet trips to Vegas and weeks in the woods with our Air Streams.

Analysts: Oil Sands Cos Losing up to $50M a Day as Fires Rage  (Reuters) - Out-of-control wildfires that have consumed over a million acres of land in Canada's Alberta are costing oil companies as much as $50 million a day in lost production, according to analysts. Alberta's oil producers curtailed production by May 5 as fires prompted the evacuation of Fort McMurray, a central production hub. By May 9, more than 1 million barrels of daily oil output had been halted. "We estimate total daily pre-tax profit loss at $45 to $50 million," Barclays analyst Paul Cheng said in an email to Reuters. For many companies, the shut-ins will translate directly to lower revenue in the second quarter, said Chris Feltin, an analyst at Macquarie Capital in Calgary. "The big thing here is that business interruption insurance is unlikely to be claimed because the damage isn't direct to their facilities, so this is something that is going to roll through on a revenue and cash-flow basis on the second quarter," Feltin said. There is no guarantee on how soon production will return to normal. Both more expensive light synthetic crude and cheaper heavy bitumen from oil sands production have been shut in, with a total of more than 1.2 million barrels of production offline, said Feltin. "That's a fair amount of production for both crude slates that is offline." Syncrude trades at a premium to benchmark U.S. crude futures, while Western Canadian Select crude trades at a discount, and bitumen is offered for even less. The spot price of Syncrude is currently $51 a $52 a barrel, said Cheng. Syncrude for June delivery is trading at $3.20 a barrel above the price of U.S. crude futures. WCS is trading at about $37 to $38 a barrel, he said, and bitumen is currently at about $33.50 a barrel.

Fire evacuation orders lifted north of Fort McMurray  (AP) — Alberta officials on Saturday lifted mandatory evacuation orders in some areas north of Fort McMurray, where a raging wildfire has forced the evacuation of more than 80,000 people and the closure of oil sands operations. Officials said conditions have improved in some parts north of the oil sands city. Suncor Energy Inc. and Syncrude will now be able to resume their idled northern oil sands operations and bring back evacuated workers. About 8,000 oil sands workers in camps north of Fort McMurray were evacuated last Tuesday after gusting winds and high temperatures caused the fire to move rapidly toward them. That was in addition to the 80,000 people ordered to evacuate Fort McMurray nearly 2 ½ weeks ago. Northern Alberta is the heartland of Canada’s oil sands industry and the effects of the enormous wildfire on the oil sector have prompted forecasters to trim their 2016 economic growth predictions for the entire country. The Alberta oil sands have the third-largest reserves of oil in the world behind Saudi Arabia and Venezuela. Its workers largely live in Fort McMurray, a former frontier outpost-turned-city whose residents come from all over Canada. The blaze, which began May 1, has covered 1,930 square miles (5,000 square kilometers), including areas that are still burning and those where the fire has already been put out, along with nearly three square miles (eight square kilometers) in the neighboring province of Saskatchewan.

Canada’s oil sands producers near re-entry to evacuated sites - Mandatory evacuation orders were lifted today for the last of Alberta's oil sands production sites endangered by wildfires, Bloomberg reports, which starts the process of inspections by forestry and health officials to make sure the facilities safe for workers to return. Since late Friday, Alberta has removed orders that had prevented all but critical staff from remaining on sites connected with the operations of Suncor Energy (NYSE:SU), ConocoPhillips (NYSE:COP), Enbridge (NYSE:ENB) and Cnooc's (NYSE:CEO) Nexen unit, among others. The SU-controlled Syncrude joint venture says it is making progress on a plan to return to operations and will be able to give an update later  on the timing for production restart.  COP, which had shut down production at its Surmont project on May 5, says it has started the process of bringing workers back after getting approval.

Canadian fire points to Alberta's infrastructure weakness: - It’s been about three weeks since a wildfire broke out in the heart of Alberta’s oil sands production area in the Athabasca region in Fort McMurray, and it is still raging. Some 1,950 fire fighters, 208 helicopters, 29 air tankers and countless heavy equipment have been relentlessly fighting the “Beast” (as it has been nicknamed by firefighters), which has grown to engulf over 500,000 hectares.The Alberta government was also successful in its Herculean task of evacuating over 90,000 residents without a single loss of life. The oil industry didn’t fare so well as in a span of just three days, oil sands producers responded by either curtailing output or completely shutting production totaling roughly 1.03 million b/d. The hasty pull-back raises strategic questions about the reliability of Athabasca as a growing oil production center on the world stage. One of the questions is whether some of the shut-ins and ensuing force majeures could have been avoided as no production sites are directly impacted by the fire. The shutting of condensate and diluted bitumen lines, crude-by-rail loaders and power, as well as a lack of storage all point to where industry and government need to focus. “There is certainly a case for more tankage, and longer term, there is a need to manage it better,” “While mining facilities have adequate storage facilities on site, SAGD [steam-assisted gravity drainage] projects usually tend to use the Cheecham South terminal.” With a nameplate capacity of 1 million b/d, that terminal was one of the first few to be shut. Since it is the only major local storage option for SAGD producers, and pipelines and rail loading facilities were also shut, it was only a matter of time before production got backed up and producers had no choice but to stop output.

Will the oil sands need more takeaway capacity? -- Production in Alberta’s oil sands region is gradually rebounding after devastating wildfires that forced output scale-backs and temporary shutdowns of some production facilities, terminals and pipelines. It may be a while before life—and production—in the oil sands are back to normal, but Canada’s National Energy Board, producers and others expect the region’s output to continue to rise (if only gradually) the next few years, reflecting long-term oil sands expansion projects committed to when oil prices were more than double what they are today. There are very different views, though, about whether the oil sands will eventually need more takeaway capacity in the form of new or expanded pipelines. Today, we continue our look at the oil sands post-wildfires with a review of existing and proposed pipeline capacity. Wildfires are notoriously unpredictable and, sure enough, as soon as the worst seemed to be over in the Fort McMurray, AB area, new flare-ups in mid-May threatened oil sands production areas north of the city. Thanks to heroic efforts by Alberta fire crews, no production area has experienced any significant damage (so far at least—fingers crossed), but a few work camps have been destroyed or damaged, and will need to be rebuilt. Good news is trickling in though, such as Imperial Oil’s May 19 announcement that it has restarted limited operations at its Kearl oil sands site. If, as everyone hopes, the wildfires are brought under control within the next few days, it seems likely that oil sands production will ramp up gradually over the next few weeks, and that by mid-summer Alberta’s output might be close to the 3.1 MMb/d that the province was producing before the fires were sparked.

Oil sands found to be a leading source of air pollution in North America - The Globe and Mail: A cloud of noxious particles brewing in the air above the Alberta oil sands is one of the most prolific sources of air pollution in North America, often exceeding the total emissions from Canada’s largest city, federal scientists have discovered. The finding marks the first time researchers have quantified the role of oil sands operations in generating secondary organic aerosols, a poorly understood class of pollutants that have been linked to a range of adverse health effects. The result adds to the known impact of the oil sands, including as a source of carbon emissions that contribute to climate change. It also comes on the same day that the Bank of Canada delivered a sobering message about the country’s economy, saying the devastating Alberta wildfires that hit Fort McMurray – leading to production cuts in the oil industry and the destruction of thousands of buildings – will cause a drop in Canada’s gross domestic product in the second quarter. Given the economic circumstances and the political sensitivities currently surrounding the oil sands, the air pollutant study, published Wednesday in the journal Nature, offered the strongest test yet of the Trudeau government’s promise to allow scientists in federal labs to speak freely with journalists about their results. The pollutants the scientist measured are minute particles that are created when chemical-laden vapours from the mining and processing of bitumen react with oxygen in the atmosphere and are transformed into solids that can drift on the wind for days. While researchers have long thought that the oil sands must be a source of such particles, the new results show that their impact on air quality is significant and of potential concern to communities that are downwind.

New Brunswick extends fracking ban indefinitely - The New Brunswick government has extended for an indefinite period its ban on hydraulic fracturing, saying the jury is still out on the risks to public health and environment from the controversial practice. The province has faced major divisions over proposed shale gas development, with industry arguing it would spur the economy and boost job creation, but many residents and First Nations activists fearful of the potential environmental impact of fracking – the technique of using chemically laced water under high pressure to break rock and extract natural gas or oil. “I think more work needs to be done” on the safety case, Energy and Mines Minister Donald Arseneault said on Friday in a telephone interview. “These issues are not resolved and they’re not getting the buy-in or confidence of Canadians or New Brunswickers that we can mitigate some of these issues.” In imposing a ban on fracking, New Brunswick joins Nova Scotia and Quebec as well as several U.S. states, including New York. By allowing the practice, states like Pennsylvania, West Virginia and Ohio have seen a boom in shale gas production that has helped drive down North American energy costs. The province is believed to have a significant amount of commercially recoverable shale gas, but companies have been unable to establish the extent of it because of public resistance to drilling. One Halifax-based firm, Corridor Resources Ltd., does produce gas in the province, both by conventional means and, previously, by limited amounts of fracking.

Speculators boost net length as NYMEX crude rallies: CFTC - A rallying crude complex spurred speculative traders to massively increase net length in NYMEX crude futures over the most recent reporting week, Commodity Futures Trading Commission data showed Friday. While money managers added net length by cutting 20,594 shorts, the other reportables group added 23,296 longs as well as cutting 23,418 shorts. This left them net long 146,943 crude contracts, up 46,714 contracts on the week. Prompt crude futures rose $3.65 to $48.31/b over the reporting week. Money managers, meanwhile, increased their net long position 30,095 contracts to 221,826 contracts.Swap dealers and producer/merchants were active as well, likely taking much of the offsetting positions. Swap dealers net short position increased drastically, up 48,049 contracts to 56,136 contracts. Producer/merchants net short increased 11,759 contracts to 295,293 contracts. While total open interest in NYMEX crude futures Thursday fell to 1.632 million contracts -- lowest since November and down sharply from mid-February -- producer/merchant short positions have soared. This suggests that while easing volatility -- which peaked in mid-February as prompt crude futures tumbled to around $26/b -- may have pushed some opportunistic traders to the sidelines, it has not kept hedgers -- largely the producers accounted for in the producer/merchant category -- from locking in a floor to prices in lock step with the rally in futures.

Oil Traders Are Borrowing From Banks to Store Crude at a Loss - The waters between Singapore and Malaysia used to heave with wooden ships carrying exotic spices. Now the Straits of Malacca are filled with vessels carrying a very different sort of commodity. Oil traders awaiting a recovery in crude are turning to floating storage after benchmark Brent prices more than halved over a span of two years, according to Morgan Stanley analysts led by Adam Longson. Unlike previous oil storage trades, however, this one is unusual in that current oil prices and storage costs ought to make it unprofitable. Morgan Stanley estimates that the one-month Brent storage arbitrage currently produces a loss of $0.48 per barrel, while its six-month equivalent loses $6.11 per barrel. That suggests "no incentive to store oil on ships," the analysts write. "Yet, banks are seeing a sharp uptick in interest to finance storage charters. This storage is not happening for profit. Rather, the market is looking for places to store oil. To profit, traders need to hope for oil prices to rise enough to pay for the new debt incurred for this storage." The prospect of debt-fueled oil storage trades may raise concern should crude prices fail to rise enough to offset costs. Moreover, the 'Singapore supply glut' means the recent price rally may prove fragile. "The increase in floating oil comes despite disruptions in the Atlantic Basin and an out-of-the-money floating storage arb[itrage], suggesting markets are not as healthy as sentiment suggests," the Morgan Stanley analysts write. "It also highlights the speculative nature of much of the oil bounce this year."

Forecasting global oil demand -- Exxon doesn't seem to be incorporating all available information:  At the company’s planned annual meeting on Wednesday in Dallas, shareholders will vote on a resolution to prod Exxon Mobil to disclose the risks of climate change to its business. Such resolutions have been floated before, and they typically do not pass. But there is a growing chorus of investors, many of them large institutional shareholders, who say they are worried that Exxon Mobil, the largest publicly traded energy company in the world, is not adequately preparing for tighter times if countries start acting on the pledges they made last December as part of the Paris climate change accord. Exxon Mobil, for example, projects that global demand for oil will keep growing — by just over 13 percent from today, to 109 million barrels of oil a day by 2040. But the International Energy Agency’s projections include one situation where demand could drop by 22 percent, to 74 million barrels a day by 2040, if measures are put in place to keep global warming at levels that, while still dangerous, could avoid the most devastating consequences. The shareholder resolution calls for Exxon Mobil to publish an annual assessment of impacts of various climate change policies, including ones that would lead to the steep drops foreseen in the most severe energy agency’s forecast. Another resolution calls for the company to give shareholders a bigger say over governance. Exxon Mobil previously tried to block the climate change resolution, but the Securities and Exchange Commission ruled in March that shareholders must be allowed to vote.

The Return of Fracking to UK? First Fracking Permit in Five Years - In a 7-4 vote, Councilors of the county of North Yorkshire approved industrial tests on Monday in a move that will allow fracking in Britain for the first time in five years. The Guardian reported that the go-ahead “swept aside” vocal protests from residents and environmentalists who feared “catastrophic seismic activity, health problems, and pollution” if hydraulic fracturing was introduced. The shale gas tests will occur in the village of Kirby Misperton by the British firm Third Energy.   The council’s decision followed a two-day hearing during which supporters and opponents of the proposal voiced their hopes and concerns. The last fracking incident in Britain occurred in 2011, when the U.K.-based oil and gas company Cuadrilla Resources admitted that two minor earthquakes in north-west England had been caused by the company’s use of the controversial drilling practice. Two other high-profile applications to frack in the Lancashire area have been rejected by councilors since late-2011, but the companies have lodged appeals to reverse the decisions. The council that allowed the new tests in North Yorkshire received 4,375 objections to the proposal and 36 letters in support of the company’s plan to frack for shale gas near an existing well in the area, according to The Guardian’s report. David Cameron and his ministers are set to welcome the tests, as the prime minister said in 2014 that his “government was going all out for shale.”

North Yorkshire has approved the UK’s first fracking tests in five years. What does this mean?: Is fracking the answer to the UK's energy future? Or a serious risk to the environment?By India Bourke Follow @@india_bourke Print HTMLShale gas operation has been approved in North Yorkshire, the first since a ban introduced after two minor earthquakes in 2011 were shown to be caused by fracking in the area. On Tuesday night, after two days of heated debate, North Yorkshire councillors finally granted an application to frack in the North York Moors National Park. The vote by the Tory-dominated council was passed by seven votes to four, and sets an important precedent for the scores of other applications still awaiting decision across the country. It also gives a much-needed boost to David Cameron’s 2014 promise to “go all out for shale”. But with regional authorities pitted against local communities, and national government in dispute with global NGOs, what is the wider verdict on the industry? Opponents claim that the side effects include earthquakes, polluted ground water, and noise and traffic pollution. The image the industry would least like you to associate with the process is this clip of a man setting fire to a running tap, from the 2010 US documentary Gasland:  Advocates dispute the above criticisms, and instead argue that shale gas extraction will create jobs, help the UK transition to a carbon-neutral world, reduce reliance on imports and boost tax revenues. So do these claims stands up? Let’s take each in turn...

BP's oil search strategy shrinks with budget cuts | Reuters: The surprise departure of BP's exploration boss has turned the spotlight on an oil search strategy that, after years of spending cuts, is focusing mainly on expanding existing fields rather than venturing expensively into the unknown. That caution reflects a firm chastened by the $55 billion cost of its 2010 Gulf of Mexico spill, and needing to squeeze every last drop out of a sharply reduced exploration budget at a time of low oil prices. "Exploration doesn't necessarily have to look like (nature broadcaster) David Attenborough standing on a brand new frontier," a BP source told Reuters. While BP's total reserves and fields coming onstream in the next four years look healthy compared to the other majors, its long-term project pipeline is the slimmest among its peers and its break-even costs are the highest, according to some analysts, among them Macquarie. Several BP sources said Chief Executive Bob Dudley and his team were hammering out a new long-term strategy, with investors expecting an update on its post-2020 plans later this year or early next. The plan is likely to chime with a phrase that Dudley is fond of using: "Big is not necessarily beautiful." After asset sales forced on it by the Gulf disaster shrank the company by a third, BP is today focusing its operations on five regions -- Angola, Azerbaijan, Egypt, the Gulf of Mexico and the North Sea.

Argentina seeks to spur natural gas production with incentives - Argentina is seeking to rebuild natural gas production after years of decline, offering higher prices on output from new developments, an Energy Ministry source said Friday. "The program is designed to encourage exploration and increase production," the source said on the condition of not being named. The program took effect Thursday and will run until December 31, 2018, according to a resolution in the Official Bulletin, the newspaper of record. The output from new projects can be sold at $7.50/MMBtu, according to the resolution. That's up from a current average of $5.20/MMBtu."It is necessary to continue with programs to increase gas production in the short term, reduce imports and encourage investment in exploration and production from new deposits that will make it possible to recover reserves," the Energy Ministry said in the resolution. Argentina has been ramping up gas imports since production started to decline from a record 143 million cu m/d in 2004, now down 16% at 120 million cu m/d. This has led to shortages as consumption has surged to 130 million cu m/d, with peaks of 180 million cu m/d during the cold months of May to September. The country is importing about 30 million cu m/d from Bolivia, Chile and off the global LNG market to help make up the shortfall, and plans to bring in more supplies next year from a floating regasification terminal in Uruguay. Argentina relies on gas to meet 50% of its energy needs.

France Hit By Gas Shortages, Rationing After Refinery Workers Go On Strike -- In the wake of French president Francois Hollande using an obscure article of the constitution in order to bypass parliament and force through labor reforms that are viewed as unfavorable to workers, protests have been ongoing in the country. Now, French refinery workers have launched a strike to hit the government where it hurts the most. Protesters have blocked deliveries to gas stations from at least half of France's eight refineries, and workers at three Total refineries have voted to halt all output by Tuesday according to France 24. The news sent drivers rushing to gas stations in order to fill up their tanks while they could.About 820 stations out of 11,500 in France were out of fuel on Sunday, and another 800 were lacking at least one type of fuel. Prime Minister Manuel Valls said that the situation is fully under control, and that there are enough fuel reserves to deal with the blockade. "We have the situation fully under control. I think that some of the refineries and depots that were blocked are unblocked or will be in the coming hours and days. In any case, we have the reserves to deal with these blockades." Kristine Petrosyan, an oil market analyst for refining at the International Energy Agency adds "there is a noticeable fuel shortage in the North West and North of the country, including parts of the greater Paris region."

Shutdowns spread to five French refineries, some depots unblocked - Oil | Platts News Article & Story: Industrial action against changes in labor legislation is spreading further across French refineries Monday, with at least five out of eight plants halting units, according to labor union sources. However, many of the 189 oil products depots that were blocked by demonstrators have been unblocked by police forces between Sunday and Monday, according to French newspaper Le Figaro. "I think that some of the refineries and depots that were blocked are unblocked or will be in the coming hours and days," French Prime Minister Manuel Valls told journalists on Sunday. Total's 247,000 b/d Gonfreville refinery in Normandy has been in the process of halting its units since Friday, a source at the site said. Staff at the 219,000 b/d Donges refinery in the west of France also voted for a shutdown Friday. Total's 153,000 b/d La Mede, 109,000 b/d Feyzin and 101,000 b/d Grandpuits refineries are also in the process of shutdown, union sources said. No products are leaving the plants, as deliveries by truck are blocked. Total was unavailable for comment. Product deliveries are also currently blocked by external protesters outside ExxonMobil's 140,000 b/d Fos refinery near Marseilles, but operations on the site continue. ExxonMobil's 235,000 b/d Port Jerome-Gravenchon refinery in Normandy has not been affected by the strike either, and loadings have been ongoing since Friday afternoon, the company said. Previously loadings had also been blocked by protests outside. Separately, operations at Petroineos' 210,000 b/d Lavera refinery near Marseilles in the south have also been affected by the strike, a union source said. The refinery declined to comment on the status of operations.

European oil market unfazed by French refinery strikes -  - Europe's physical oil markets have yet to react in a big way to ongoing industrial action at French refineries and oil depots, though the disruptions were high on traders' radar Tuesday. Protests against changes in French labor law, which saw refineries start halting units over the weekend, was spreading Tuesday, with ports joining the action sooner than expected, sources said. The price of crude oil and refined products in Europe Tuesday was little changed from a week ago when the first disruptions to the supply chain in France started being felt. The action by workers comes at the end of the refinery maintenance season in France and the rest of Europe, when demand for crude from refiners and output of oil products from their plants are both lower.France is the world's largest importer of ultra low sulfur diesel and one of the largest consumers in Europe. Any shortfall in refinery production will need to be covered in the spot market and traders said the impact would be felt there first. "The European football championship starts on June 10 in France and we do not think that the government will allow for all retail [road fuel] stations to be empty for that event," analysts at Petromatrix said in a note.

French strike hits refinery output in labour reform showdown | Reuters:   France's Socialist government drew battle lines with one of the country's biggest trade union's on Tuesday over labour market reforms as a strike by oil workers forced at least five refineries to halt or slow down operations. Riot police fired tear gas and water canon to break up a picket line blocking access to Exxon Mobil Corp's refinery outside the southern port city of Marseille, as scores of petrol stations nationwide ran dry of fuel. "Enough is enough," said Prime Minister Manuel Valls. The pre-dawn swoop drew a sharp riposte from the hardline CGT union, which wants to force President Francois Hollande's government to rethink the labour reforms designed to make it easier for companies to hire and fire employees. The CGT described the police operation as an act of "unprecedented violence" as it and other unions served notice of a June 3-5 strike by air traffic controllers that will dovetail with walkouts by state rail employees, port workers and staff on the Paris metro and suburban rail networks. The CGT, traditionally one of France's most powerful and influential trade union groups, says the reforms will unravel France's protective labour regulations, allowing firms to lay off staff more easily in hard economic times and by providing further exemptions from rules on pay and working conditions.

French refinery, port strikes continue; strategic stocks released - Strikes are continuing at French refineries and ports Wednesday and fuel storage sites remain blockaded across the country as France began to delve into its strategic stocks to avoid fuel shortages. Total's refineries are all on strike with operations either halted or in the process of halting, according to the CGT labor union and the company. A limited number of employees have joined the national movement at ExxonMobil's Gravenchon, but operations and supply of products are not affected, the company said. At ExxonMobil's Fos refinery, operations are also running normally and some loadings were proceeding during the night but have been blockaded this morning.The French government said it had started using strategic stocks, with three days' worth out of 115 used up to now, radio station Europe1 cited the country's transport minister as saying. To avoid fuel shortages the government had started using strategic stocks, industry group UFIP said in a statement. France currently has strategic stocks sufficient to cover demand for three months, of which crude represents one third, UFIP also said, adding that stocks used to cover shortages in one location where storages are blocked are subsequently replenished elsewhere. The French government said it had started using strategic stocks, with three days' worth of stocks out of 115 used up to now, radio Europe1 cited the transport minister as saying. Europe1 also quoted the government as saying that blockades had been removed at 11 storages. Police intervened to unblock storages at Fos-sur-Mer in the south and Douchy-les-Mines in the north, the station reported. After intervention by the government to unblock storage sites, the Federation of Dock and Port workers at the CGT called on all port staff to stop work for 48 hours on Thursday and Friday. Tug boats will stop working across France Thursday morning, shipping sources said. The oil terminals Fos and Lavera at the Mediterranean port of Marseilles have been on strike since May 23, shipping sources said.

France Goes Dark? Staff In 19 French Nuclear Power Plants To Go On Strike Tomorrow -- Following strikes over the unpopular French labor reform, that started over the weekend and crippled the French refining industry leading to gasoline shortages and rationing, things are about to get far more serious for the country whose economy has already been threatened with a sharp slowdown as a result of a relentless wave of labor unrest. According to Reuters, staff in France's 19 nuclear plants - which by definition we assume is essential - have voted to go on strike on Thursday as part of protests over a labour reform, according to a CGT union official. While industry experts say planned strikes are unlikely to provoke blackouts because of legal limits on strike action in the nuclear industry and France's ability to import power from neighbouring countries, it would not be at all surprising to see the opposite outcome. "It will start tonight at 2100 (1900 GMT) and last 24 hours," CGT spokesman Laurent Langlard told Reuters on Wednesday. "Our goal is not to bring down the network,” general secretary of the CGT-Energie de l'Aube, Arnaud Pacot, told Francetv Info. On the other hand, considering that France derives about 75 percent of its electricity from nuclear energy, it is difficult to envision a different outcome.

Militants attack Agip pipeline in Nigeria's Bayelsa state | Reuters: A crude oil pipeline in Nigeria's southern state of Bayelsa operated by the local subsidiary of Italy's Eni was attacked on Sunday, the Nigeria Security and Civil Defence Corps (NSDC) said. The attack comes just days after President Muhammadu Buhari said he had heightened the military presence in the oil-rich Niger Delta region, where attacks in the last few weeks have driven the country's oil output to a more than 20-year low. Desmond Agu, a spokesman for the NSDC, a government agency, said the Agip pipeline was attacked in the early hours of Sunday, around 12:30 a.m. (2330 GMT Saturday). "A gang of armed youths ... vandalised pipeline along Azuzuama axis of the Tebidaba-Brass pipeline with dynamite and ignited fire on the line," he said, adding that one of the suspected attackers had been arrested. Eni, which operates in Nigeria through its subsidiary Nigerian Agip Oil Company, could not be immediately reached to comment on the attack. Former militants have called for a halt to a resurgence of attacks in the Niger Delta, saying it is an unnecessary distraction for Buhari's administration.

Niger Delta Avengers militants shut down Chevron oil facility  --  Members of the Nigerian militant group the Niger Delta Avengers have shut down facilities owned by one of the world’s biggest oil companies. People living near Chevron’s Escravos terminal in the oil-rich southern Nigerian region of the Niger delta reported hearing a loud blast during the night. Chevron confirmed on Thursday morning that the attack, which was on its main electricity power line, had shut down all its onshore activities. “It is a crude line which means all activities in Chevron are grounded,” a company source told Reuters. It was the latest in a string of attacks by the Avengers, who have demanded that foreign oil companies leave the Niger delta before the end of the month, and say they are fighting to protect the environment and to win locals a bigger share of the profits. The group has helped push the country’s oil output to its lowest level in decades. According to Emmanuel Ibe Kachikwu, head of the state-run oil company, the attacks have reduced the number of barrels produced a day from 2.2m to 1.4m. As well as hitting Nigeria’s economy – which, analysts have warned, is headed for a full-blown crisis – the attacks on Africa’s biggest petroleum producer have led to a rise in global oil prices.Under an amnesty deal reached in 2009 with other militants who were attacking oil facilities, the government paid millions of dollars to the leaders to “guard” oil companies’ infrastructure – in effect paying them not to attack it. Buhari has extended the deal, but cut its budget, giving rise to a potential source of anger in the region. It is not known who finances the Niger Delta Avengers, but it has issued threats via its website and social media.

Chevron Facility Goes Offline In Nigeria Following Tweeted Attack By Mysterious Militant Group -- Recently we presented a profile of latest scourge to haunt Africa's former oil producing powerhouse Nigeria, namely the Niger Delta Avengers, who not only maintained a regularly updated blog, but were perhaps the most social media savvy "freedom fighting" organization, with a twitter account that constantly updated on the group's ongoing activities. In fact, just yesterday the NDA may have been the first such group to pre-announce a terrorist act before any of the major media outlets caught it.  We Warned #Chevron but they didn't Listen. @NDAvengers just blow up the Escravos tank farm Main Electricity Feed PipeLine.— Niger Delta Avengers (@NDAvengers) May 25, 2016 It wasn't a joke. As Reuters reported this morning, Chevron's onshore activities in Nigeria's Niger Delta have been shut down by a militant attack at its Escravos terminal, the company confirmed on Thursday.As Reuters observes, the Niger Delta Avengers, which has told oil firms to leave the Delta before the end of May, said late on Wednesday it had blown up the facility's mains electricity feed."It is a crude line which means all activities in Chevron are grounded," the source told Reuters, without elaborating. There was no immediate official confirmation from Chevron.Zebo Austin, who lives nearby, told Reuters: "We heard a loud blast at the Abiteye to Escravos crude pipeline which was blown up last night by yet-to-be identified militant group." The Avengers and other militants, who say they are fighting for a greater share of oil profits, an end to pollution and independence for the region, have intensified attacks in recent months, pushing oil output to its lowest in more than 20 years and compounding the problems faced by Africa's largest economy. Abuja has responded by moving in army reinforcements but British Foreign Minister Philip Hammond said this month President Muhammadu Buhari needed to deal with the root causes of the conflict.

Kurdistan turns to the US and others to help fund the future of its crude oil (audio) Iraq's semi-autonomous Kurdistan region has been hard hit by the oil price plunge of late, but it is attempting to pull its oil industry out of the shadows and toward legitimacy. Platts senior editors Herman Wang and Brian Scheid are joined by Ben Lando, founder and editor-in-chief of the Iraq Oil Report, and Jared Levy, director of the Iraq Oil Report-s custom research division, to dig into the region's complicated role in the crude landscape. They discuss the state of Iraq's crude production and exports, the Kurdistan Regional Government-s efforts to get the US to help with its $100 million deficit caused by low oil prices, and the impact of ISIS attacks on the country-s oil infrastructure. Lando and Levy, who also write for Platts, look at where Iraq's crude industry is headed and the major hurdles it currently faces.

This Week's Main News From The Oil Sector - For those who need a quick and easy recap of all the main events that took place in the oil and gas services sector, here it is courtesy of Credit Suisse's James Wicklung who present the various "things we've learned this week." According to Bloomberg, in the final gathering of OPEC officials prior to the June 2 meeting, no discussions of a production cut took place. Officials at the meeting concurred with OPEC's most recent research report that supply and demand will start to balance in the second half 2016. . Sunday, Iranian Deputy Oil Minister Rokneddin Javadi noted that the country has no plans to slow oil production, saying, "Currently, Iran's crude oil exports, excluding gas condensates, have reached 2M bpd; Iran's crude oil export capacity will reach 2.2M barrels by the middle of summer." Prior to economic sanctions, Iran produced 4.5M bpd, which is down from peak production of ~7M bpd in the 1970s. . Volatile oil and natural gas prices have accelerated planning by energy executives to change their business models; KPMG Global Energy Institute said in a May 24 release of annual survey results of US senior energy executives. Of more than 150 executives responding, 94% said commodity pricing coupled with the regulatory environment will require significant changes to their business models in 3-5 years.. Baker Hughes announced it is consolidating its previous regional operations structure into one global organization and, in conjunction, is making leadership changes. Most importantly, there was no change to the CEO position.   SLCA announced it completed the purchase of a fully permitted, 327 acre parcel of land adjacent to its existing mine in Ottawa, Illinois. The land is expected to add 30M tons of proven reserves. In addition to oil and gas, the Ottawa facility serves multiple end  markets such as glass, building products and chemicals….

IHS: Conventional discoveries outside N. America drop to lowest level since 1952 - Oil & Gas Journal: Just 12 billion boe of estimated recoverable resources were discovered from conventional wells outside of North America in 2015, representing the lowest level since 1952, according to IHS analysis. The volume of conventional oil alone discovered in 2015 totaled just 2.8 billion bbl, also a record low since the ramp-up of oil and gas exploration began following World War II. More than 9 billion boe of conventional natural gas was discovered globally during the year, marking the fifth straight year in which gas volumes discovered exceeded oil volumes discovered. “The fall in discovered volumes for conventional oil outside North America, in particular, has been steady and dramatic during the last few years,” commented Leta Smith, director, IHS Energy, upstream industry future service and lead author of the IHS Energy Conventional Exploration and Discovery Trends analysis. “We’ve seen 4 consecutive years of declining oil volumes, which has never happened before,” Smith explained. “The bottom has completely fallen out for conventional exploration, and the result portends a supply gap in the future that is going to be challenging to overcome. In the current cost-cutting environment, the outlook for 2016 discovery volumes is not likely to be better, either.”IHS notes exploration and appraisal (E&A) drilling for conventional resources fell sharply in 2015, exacerbating the annual drop in resources found. Last year, slightly fewer than 4,300 conventional E&A wells were drilled outside North America as exploration budgets were cut. That figure compares with the slightly more than 5,200 conventional E&A wells drilled globally in 2014 and 5,300 in 2012, the latter of which was the peak year for E&A wells drilled during 2005-15. The number of deepwater E&A wells drilled worldwide dropped more than 20%, while ultradeepwater E&A drilling declined more than 40%, compared with 2014. Deepwater activity in 2015 also showed a marked shift toward appraisal drilling as a portion of total exploration compared with prior years, and IHS researchers expect this trend to continue into 2016.

Four Consecutive Years Of Declining Oil Volumes Which Has Never Happened Before -- IHS -- May 23, 2016  - Oil & Gas Journal is reporting that the conventional discoveries of oil and gas outside North America have fallen to the lowest level since 1952. Some data points:
outside of North American in 2015: just 12 billion boe recoverable resources were discovered from conventional wells

  • lowest level since 1952 (about the time I was born)
  • wow: the volume of oil alone discovered in 2015 totaled just 2.8 billion bbl -- also a record on the downside -- since the ramp-up of oil and gas exploration following WWII
  • 9 million boe of conventional gas discovered: fifth straight year that gas discoveries have exceeded oil discoveries
  • the fall in discovered volumes for conventional oil outside North America has been stead and dramatic during the past few years
  • four consecutive years of declining oil volumes, which has never happened before
  • the bottom has completely fallen out of conventional exploration
  • the supply gap in the future is going to be challenging to overcome

A 4.5-Million-Barrel Per Day Oil Shortage Looms: Wood Mackenzie | A report by Wood Mackenzie has warned the world may face a daily oil shortage of 4.5 million barrels by 2035. The amount represents around 5 percent of global consumption estimate of the International Energy Agency (IEA) for 2016. In other words, a true crisis is looming—and for the moment, there is no apparent way around it. The most obvious reason is that energy companies don’t want to spend money on exploration when prices are so disappointingly low. Many of them simply can’t afford to spend on exploration if they want to survive in today’s price environment. Ironically, their long-term survival can only be guaranteed by further exploration spending. A lot of costly projects have been shelved since the summer of 2014 when oil prices started falling, with the initial investments basically written off. Reviving these projects will cost more money. Where this money will come from is unclear—there is no certainty where oil prices are going in the near term, let alone any longer period, and the European Commission today forecasted $41/barrel oil for the rest of this year and just over $45 for 2017.Another part of the answer to the question, “How did we get ourselves into this mess?” has to do with the knee-jerk reaction of E&Ps in times of crisis. That knee-jerk reaction is generally “fire at will”. Layoffs in oil and oilfield services are piling up at speed, well into six-figure territory to date. Cost-cutting has become the daily mantra of oil companies, and it’s easy to see why.

When We Can Expect The Next Oil Shock -- The scenario above shows an Oil Shock Model with a URR of 3600 Gb, EIA data from 1970 to 2015, and the Annual Energy Outlook (AEO) 2016 early release reference projection from 2016 to 2040. The oil shock model was originally developed by Webhubbletelescope and presented at his blog Mobjectivist and in a free book The Oil Conundrum.  The World extraction rate from producing reserves must rise to 15 percent in 2040 to accomplish this for this “high” URR scenario. This high scenario is 100 Gb lower than my earlier high scenario because I reduced my estimate of extra heavy oil URR (API gravity<10) to 500 Gb. The annual decline rate rises to 5 percent from 2043 to 2047 creating a “Seneca cliff”; the decline rate is reduced to 2 percent by 2060. The scenario presented above uses BP’s Energy Outlook 2035, published in Feb 2016. This outlook does not extend to 2040 and maximum output is 88 Mb/d in 2035 at the end of the scenario. This scenario is still optimistic, but is more reasonable than the EIA AEO 2016. Extraction rates rise to 10.6 percent and the annual decline rate rises to 2.5 percent in 2042 and is reduced to less than 2 percent by 2053.  A problem with the BP Outlook is the expectation that U.S. light tight oil (LTO) output will rise to 7.5 Mb/d from 2030 to 2035, the BP forecast for U.S. LTO from 2013, 2014, 2015, and 2016 is shown below. A more realistic forecast would be a peak of 6 Mb/d in 2022 with output declining to 3 Mb/d by 2035. The scenario below shows roughly what World output might be with this more realistic, but still optimistic scenario. There is a plateau in output at 85 Mb/d from 2025 to 2030 with annual decline rate peaking at 2.1 percent in 2044 and then falling under 2 percent per year from 2048 to 2070.

Calling OPEC: The IEA's crude production forecasting dilemma - The Barrel Blog: Since its creation more than 40 years ago, the International Energy Agency has side-stepped predictions of OPEC crude production, acutely aware that the producer group’s output quotas made the job at best tricky, at worst politically inexpedient. But this may be about to change. Next month, the IEA is considering publishing “scenario” forecasts of OPEC crude production for the first time in a move likely to be seen as a nod to the cartel’s radical new free-wheeling output policy. The IEA, set up in response to the 1973 oil shock, is also rethinking longstanding, and much-cited, forecasts for the expected demand for OPEC’s crude. From next month, the IEA’s closely-watched monthly Oil Market Report could contain a scenario for OPEC crude output through to the end of 2017, Neil Atkinson, head of the IEA’s oil market division, told Platts. The change is being considered amid growing evidence that OPEC’s Saudi-led abdication of its traditional supply management role since late 2014 has become the “new normal” for the producer group. With OPEC producers essentially pumping flat out to maximize market share over prices, the job of forecasting OPEC production has apparently become less precarious. Indeed, since the oil price downturn of late 2014, the IEA has already broken with protocol giving some tentative predictions of OPEC’s future oil production for the purposes of mapping the potential timing of a return to market balance.

Why One Bank Is Urging Its Clients To Dump. Oil. Now -- Back in March we demonstrated how much of a historical outlier recent energy stock prices are, when we showed the ridiculous forward P/E multiple associated with energy stocks, whose earnings have collapsed not only historically but also on a forward multiple basis, resulting in a 50+ P/E forward multiple: something unprecedented in history. Overnight, Deutsche Bank recreated the same analysis in an even easier to digest chart, one which shows energy stock valuations based on an even more appropriate - because it focuses on cash flow - valuation metric, EV to EBITDA. As shown below, the US energy sector is now trading at a roughly 7x EBITDA multiple compared to a historical average between 1x and 2x. Notably, the bank also presents what the implied valuation is assuming $45 oil: roughly 3 EBITDA turns lower, implying the market is pricing energy companies on oil back in the $70-80 range, if not higher.But more than just equities, the risk of a sharp repricing is just as evident in the junk bond space, where energy is by far the largest sector amounting to just shy of 16% of all outstanding issues.As a result perhaps it is not surprising that the biggest driver to sharply tighter high yield spreads has been the recent rebound in oil prices, which has also led to a dramatic tightening in the HY index spread from north of 800 bps to approximately 600 bps today.As DB shows in the chart below, the biggest correlation (if not direct causation) to lower oil prices over the past year was the stronger dollar, which having eased in recent months thanks to the Fed's recent relent, has allowed oil to rebound. However, if indeed the Fed is again set on tightening financial conditions, what will happen to the dollar, whether DXY or trade-weighted, and how will this impact the price of not just oil, but the HY and equity market as well? To Deutsche Bank the answer is "not good."

Morgan Stanley Notices The Strange Thing Taking Place Off The Singapore Coast -- Last Friday we first reported on two surprising developments: one was a record accumulation of offshore crude tankers just off the coast of Singapore in the Straits of Malacca, awaiting higher oil prices to offload their precious cargo; the second was that as a result of previously profitable contango trades now flattening and making storage no longer profitable, oil shippers are now forced to ask for bank loans to fund offshore storage costs. Over the weekend Morgan Stanley's analyst Adam Longson also noticed our report, and released a report focusing on the problem of floating storage which continues to grow, especially in Asia, and how he thinks it will impact the price of oil. This is what he said, most of which is a recap of what we said on Friday.Floating storage continues to grow despite outages and poor economics.According to Reuters reports, at least 40 supertankers laden with crude are anchored offshore Singapore as floating storage. In fact, according to Reuters, the volume stored offshore Singapore is up 10% WoW despite outages, to 47.7 mmb. The increase in floating oil comes despite disruptions in the Atlantic Basin and an out-of-the-money floating storage arb, suggesting markets are not as healthy as sentiment suggests. It also highlights the speculative nature of much of the oil bounce this year (recent disruptions aside). Southeast Asia is getting worse, with offshore volumes reaching the highest level in at least 5 years. According to Poten & Partners, “the volumes of oil stored at sea in South East Asia - predominantly Singapore and Malaysia - appear to have increased significantly”. Remember that the Straits of Malacca, carry 15+ mmb/d of ~56 mmb/d of world oil maritime trade – or ~27% of all seaborne oil - primarily from the Persian Gulf.

Year-over-year Change in Oil Prices -- Oil prices are "only" down about 20% year-over-year (YoY), and the YoY decline has been decreasing. So I thought I'd look at the YoY change in oil prices over the last few decades. This graph shows the year-over-year change in WTI based on data from the EIA.Five times since 1987, oil prices have increased 100% or more YoY.  And several times prices have almost fallen in half YoY.  Oil prices are volatile!  And it seems likely the YoY change will turn positive later this year.

Crude Spikes Above $49 After Biggest Inventory Draw Since 2015 - Following last week's surprise draw (from the DOE data), API reported a huge 5.14mm draw (against expectations of a 2mm barrel draw) - the biggest since Dec 2015. Bear in mind that last week API reported a large build only to se a major draw in DOE data so perhaps this is catch down from the Canada interruption. Cushing saw its first draw in 4 weeks but Gasoline inventories rose dramatically (+3.06mm vs -1.5mm exp). Crude prices are exuberantly looking to run last week's high stops on the news, breaking above $49 again. API:

  • Crude -5.137mm (-2mm exp)
  • Cushing -189k (-400k exp)
  • Gasoline +3.06mm (-1.5mm)
  • Distillates -2.92mm (-750k exp)

This is the biggest inventory draw since Dec 18th...

WTI Crude Nears $50 After Bigger Than Expected Inventory Draw, Production Cut - The July WTI contract neared $50 for the first time since early November ahead of this morning's DOE data, extending gains from last night's API-reported biggest draw since 2015 (which we warned seemed like catch up from a big build last week). DOE confirmed the big draw with a 4.22mm drop in inventories (less than API's 5.13 but more than 2mm expected) and further an even bigger draw at Cushing. Gasoline saw an unexpected build as Distillate inventories fell for the 6th week in a row. Production fell for the 18th week in a row, holding at Sept 2014 lows. Crude's reaction was chaotic, testing up over $49.60 and down to a $48 handle. DOE:

  • Crude -4.22mm (-2mm exp)
  • Cushing  -649k (-400k exp)
  • Gasoline  +2.04mm (-1.5mm)
  • Distillates -1.28mm (-1m exp)

The biggest headline is not the significant draw in crude but the very unexpected build in gasoline inventories... Production - down for the last 18 weeks - is hovering at its lowest since Sept 2014 (though some context is in order - at around 8.8m bbl/day, it is still up 60-70% from pre-2011 levels) The chaos... as we suspect the gaosline draw is bringing doubts over demand... After nearing $50... Since the last time WTI traded at $50, the rest of the curve has collapsed amid aggressive hedging...

Oil ends session up; misses $50-target amid profit-taking | Reuters: Oil prices rose about 2 percent on Wednesday after the U.S. government reported a larger-than-expected drop in crude inventories, but profit-taking after the data kept prices below the $50 a barrel level that oil bulls had been hoping for. The U.S. Energy Information Administration said crude inventories fell 4.2 million barrels in the week to May 20. While the decline was steeper than the 2.5 million barrels forecast by analysts in a Reuters poll, it was not as much as the 5.1 million expected by trade group American Petroleum Institute.  Crude futures fell briefly after the EIA data showed the steepest weekly drop in seven weeks, then consolidated and traded at the lower end of the day's gains. Brent settled up $1.13, or 2.3 percent, at $49.74 a barrel. Prices climbed as high as $49.96 in post-settlement trading. U.S. crude's West Texas Intermediate (WTI) settled 94 cents higher at $49.56, after peaking at $49.62, a seven-month high. Profit taking heading into the U.S. Memorial Day weekend also pressured prices, traders said. Oil bulls have been hoping in recent weeks that crude would rise to $50 a barrel or more, after global crude flows declined nearly 4 million barrels per day due to wildfires in Canada's oil sands region, a near economic meltdown in OPEC member Venezuela and a spate of violent attacks against the Libyan and Nigerian energy industries.

Brent Crude Rises Above $50 a Barrel -- The move above $50 was seen as a key moment by many analysts as providing a psychological boost to a market that has been trading below that level for six months now. Oil prices hit decade-lows below $30 a barrel earlier this year.  “Oil prices continue to improve since the beginning of the year and breaking $50 is an important milestone,” said Julian Jessop, analyst at Capital Economics. Bjarne Schieldrop, chief commodities analyst at SEB Markets, said that as long as oil stayed below $50 his bank’s clients believed the price would fall back down to around $45. “Now we have $50 that is the reference point,” he said. “So when it dips below 50 that will be seen as a buying opportunity.” Thursday’s gains came after inventory data released by the U.S. Department of Energy on Wednesday showed a 4.2 million barrel reduction in oil stocks. Analysts polled by The Wall Street Journal had expected a decrease of only 2.5 million barrels.  A weaker U.S. dollar also supported prices on Thursday. The Wall Street Journal Dollar Index, which tracks the greenback against a basket of other currencies, fell 0.2%. As oil is priced in dollars, it becomes more attractive for holders of other currencies as the dollar falls. This added to a mostly positive sentiment in the oil market in recent weeks, which has been propped up by supply disruptions around the globe. Wildfires in Canada and unrest in a key oil-producing region of Nigeria have helped balance the oversupplied market and boosted prices.

The Consequences Of $50 Oil - On Thursday Brent crude rose above $50 while the WTI rose to $49.85. The rise in prices came after the EIA reported a dramatic fall in U.S. inventories. The weekly drop of 4.2 million barrels, far more than the 2 million that was expected, triggered a sharp rise in a market which had been growing increasingly bullish, sending the Brent price above $50 on Thursday morning. It is the first time in seven months that the price has reached this level. It’s a recovery that came much more quickly than analysts expected. Since reaching a low of $27 in January, both Brent and WTI have risen by nearly 80 percent, an impressive achievement considering the general slump in commodities. Concerns from the Energy Information Agency (EIA) that the world would “drown in over-supply” in 2016 have been allayed. The new price reflects disruptions in world production. Wildfires in Canada have affected imports to the U.S., while persistent violence in Nigeria has caused that country’s exports to fall from 2.2 million bpd to less than 1.4 million bpd according to the Nigerian oil minister. Canadian crude is the single largest U.S. oil import, and the sudden fall in Canadian production was bound to have an impact on U.S. inventories.  The gradual decline in U.S. production may be partially arrested if the price hovers over $50 for long enough. Shale production, which has proven surprisingly resilient considering the enormous pressure placed on shale producers, could tick back up, triggering an eventual fall from $50 in the weeks or months ahead. Then again, some analysts have pegged the break-even for U.S. shale at a higher level, anywhere from $100 to $75 to maintain profitability. This indicates that the decline in the shale sector will continue, along with the sweeping bankruptcies that have plagued the U.S. oil patch since last year.

OilPrice Intelligence Report: Oil On Firm Footing at $50? -- Oil hit a milestone this week, with Brent crude briefly touching $50 per barrel on May 26 before falling back again. Supply outages continue to tighten the market in Canada and Nigeria. But the catalyst for price gains this week came from the EIA, which reported a surprisingly strong drawdown in crude oil stocks – down 4.2 million barrels – which beat estimates. Also, U.S. oil production fell by another 24,000 barrels last week as the contraction continues. Oil prices appear to be on sound footing more than at any time during the nearly two-year downturn.  Of course, higher prices raise the specter of a resumption in drilling. Short-cycle shale drilling allows for quicker response times than, say, offshore projects that have long lead times. Shale was the first to go offline because of low oil prices, but drillers could once again open up the taps if they feel that they can turn a profit. The jury is out on whether $50 oil is enough to do the trick, but oil slipped back on May 26 as traders grew concerned that drilling could pick up again.   Pioneer Natural Resources said in in its earnings release in April that it would consider adding five to ten rigs this year if oil prices rebound to $50. "I think it is fair to say we're more optimistic than we were last month and even the month before that. . Now that oil is back at $50, will Pioneer add rigs? "It's not so much getting to $50 at a particular point in time. It's having a view that oil at $50 will stay at $50. The industry supply/demand fundamentals have to improve. "What's really going to convince us is that inventory levels continue to come down," he said. The EIA just reported a strong 4.2 million barrel drawdown in inventories. A few more weeks of numbers like that, and Pioneer could be set to resume drilling.

U.S. Oil Rig Count Fell by Two in Latest Week - WSJ: The U.S. oil-rig count fell by two to 316 in the latest reporting week, according to oil-field services company Baker Hughes Inc., BHI 1.41 % keeping up a broad trend of declines. The number of U.S. oil-drilling rigs, viewed as a proxy for activity in the sector, has fallen sharply since oil prices began to tumble in 2014. The number of oil rigs in the U.S. peaked at 1,609 in October 2014. According to Baker Hughes, the number of U.S. gas rigs rose by two in the latest week to 87. The U.S. offshore-rig count was 24 in the latest week, unchanged from last week and down five from a year earlier. Oil prices fell further below the key $50 threshold Friday, as investors took profits from the recent rally and the dollar strengthened. U.S. oil breached $50 a barrel Thursday for the first time since October. Analysts now wonder whether Friday’s fall is a temporary pullback or indicative of a market still facing a problem with oversupply. U.S. crude was recently down 0.4% to $49.27 a barrel.

U.S. Oil Rig Count Declining Again After Single-Week Reprieve -  The oil rig count fell again this week from 318 to 316 after last week’s slight reprieve, coming in at the lowest at any point in time since Baker Hughes has been keeping track.The 2-count loss in the number of active oil rigs was offset by an increase in U.S. gas rigs, up from 85 to 87, holding the total U.S. oil and gas rig count steady at 404. The U.S. oil rig count fell by two, as reported by Baker Hughes’ latest oil rig count, while the U.S. gas rig count climbed slightly to 87. This week’s slight fall in the number of active oil rigs comes after last week’s unchanged figures, which was preceded by eight weeks of free-falling.  The total number of active oil rigs in the US of 316 represents less than 50 percent of last year’s U.S. oil rig count. Baker Hughes total oil and gas rig count for this time last year was 864 rigs. Oil rigs are now 49 percent of what they were a year ago, while gas rigs are 39 percent of what they were a year ago. In recent weeks, Baker Hughes stated that it did not expect U.S. rig counts to really stabilize until the latter half of the year, and this week’s decline, although slight, supports the notion that last week’s stable figures were clearly temporary.

Oil slips for 2nd day as $50 level sparks new output fears: Oil prices dipped for a second day in a row on Friday as some investors took profit on a surge to seven-month highs while others worried about higher production with the market hovering near $50 a barrel. A stronger dollar also weighed on demand for dollar-denominated oil from holders of other currencies. The dollar spiked after Federal Reserve Chair Janet Yellen said a U.S. rate hike was probably appropriate in coming months. A three-day weekend for the United States, owing to Monday's Memorial Day holiday, further discouraged investors from holding bullish bets. Also on Friday, oilfield services firm Baker Hughes reported the number of rigs operating in U.S. fields fell by 2 to 316 in the previous week. At this time last year, drillers had 646 oil rigs online. Brent fell 22 cents to $49.37 a barrel, retreating further from the previous session's $50.51 peak, its highest since early November. U.S. crude settled down 0.3 percent, or 15 cents, at $49.33 a barrel, and last dropped 6 cents to $49.42 a barrel after touching $50.21 on Thursday, its highest since early October. "People are worried crude production will come roaring back at these prices,"

Saudi Aramco Lifted 2015 Oil Output to Record in Market Spat  |  Rigzone - Saudi Arabian Oil Co., the world’s largest crude producer, increased output to an all-time high last year while keeping its reserves unchanged as the kingdom battles for market share. Saudi Aramco, as the state-owned company is known, produced 10.2 million barrels a day of crude in 2015, up from 9.5 million in 2014, according to an annual review posted on its website Thursday. Natural gas output rose to 11.6 billion standard cubic feet a day from 11.3 billion. The company discovered three oil deposits last year, the same as in 2014, while gas field discoveries declined to two from five. “Expanding oil and gas supplies to meet the needs of domestic and international markets is at the core of Saudi Aramco’s business, and in 2015 the company delivered on its commitments, reaching record levels of oil production and gas processing,” Chairman Khalid Al-Falih said in the review. Saudi Arabia’s rising production, along with increased output from shale plays in the U.S. last year, exacerbated a global supply glut that drove down benchmark prices by more than 30 percent in 2015. OPEC, led by Saudi Arabia, chose in November 2014 to keep pumping crude to protect its share of the market rather than cutting output to boost prices. Last month, the Organization of Petroleum Exporting Countries and other major producers including Russia failed to reach an agreement over a proposal to freeze output after Saudi Arabia insisted that it couldn’t sign up to a deal without the participation of Iran, which has pledged to boost its own oil production to pre-sanctions levels before considering a cap. The Saudi company’s oil reserves were unchanged at 261.1 billion barrels, while those of gas increased to 297.6 trillion standard cubic feet from 294 trillion. The company said it maintains an oil-production capacity of 12 million barrels a day.

Saudi Market Share Takes A Hit As Russia Doubles Oil Exports To China | Russian oil exports to China more than doubled in April 2016 compared to numbers from the same month last year, according to a report by Russia’s state-run news agency Russia Today. By the calculations of General Administration of Customs for the People’s Republic of China (PRC), the 52 percent year-over-year increase amounted to a transfer of 4.81 million metric tons between the two BRICS countries. In March, the imports reached 4.65 million tons. Two of the PRC’s three major oil suppliers—namely, Saudi Arabia and Iran—saw their Chinese oil orders decline year-over-year. Saudi Arabian oil imports fell by 22 percent to 4.12 million tons, and the Iranian figures dropped by 5.1 percent to 2.76 million tons in the same monthly comparison.   China’s third major supplier, Angola, increased its business with China by 39 percent to 3.98 million tons in an April year-over-year analysis. A recent report by the International Energy Agency (IEA) said Russia had overtaken Saudi Arabia as China’s leading supplier of crude oil at the end of last year. Russia Today’s analysis says its home country’s exports to the PRC had more than doubled over the course of the past years—an increase equivalent to 550,000 barrels a day. The “oil friendship” between Russia and China is two-sided: the Polish Centre for Eastern Studies said China became Russia’s main oil customer in 2015 as well. New projects worth several billion dollars between Moscow and Beijing have led the two countries to cooperate closely regarding energy industry issues.

Iran Closes In On Saudis As Oil Exports Soar | Market data from Reuters shows that Iranian crude oil exports in April reached 2.3 million barrels per day, exceeding forecasts, while May exports are expected to be around 2.1 million barrels per day—or almost 60 percent higher than a year ago. In May last year, by way of comparison, Iran was exporting about 1.3 million bpd, according to Reuters.  Logistics were holding up Iranian exports, with tankers being a key problem and indications now that this has been partially resolved. A week ago, Iranian officials announced that sanctions on the country’s shipping lines have been completely removed, and that Iranian tankers are now free to dock at any port in the world. “Accordingly, all tankers that are under Iran’s ownership as well as any [foreign] tanker that enters Iran’s ports will not have any problem with regards to the issue of insurance,” Iranian media quoted an official as saying. It’s a tough pill for rival Saudi Arabia to swallow, as the two fight for market share. Iran has regained almost half of its pre-sanctions European market, and exported 1.7 million bpd to Asia in April. Last week, Iran introduced a discount on the June contract for its heavy crude going to Asia, just a few days after Saudi Arabia announced a price increase for its own June contract for the continent. With the discount, Iranian oil will be noticeably cheaper for Asian clients than both Saudi and Iraqi crude.

Iran Won’t Freeze Oil Output Before OPEC Meeting -- Iran, which is due to meet with OPEC partners on June 2, has no plan to join any freeze in crude output as the country won’t be done ramping up oil exports to pre-sanctions levels before the second half of the year, the head of the state oil company said. The Persian Gulf state’s oil exports will likely surpass 2.2 million barrels a day by the middle of the summer, Rokneddin Javadi, managing director of National Iranian Oil Co., told Mehr news agency. Iran last exported at this level before sanctions were imposed on the country for its nuclear program more than four years ago. Sanctions were eased in January, and Iranian officials said they won’t discuss any output freeze or cut before reaching pre-sanctions levels. “The government has no plans for the time being to freeze or interrupt its increase in oil output and exports based on plans that are being carried out,” Javadi said. “In the current context, the oil ministry and the government have issued no policy or program to halt the increase in production and exports and so, the country’s plans to increase crude output continues.” Iran is rebuilding its energy industry and restoring crude sales after the lifting of international restrictions. The country declined last month to join other nations in a push to freeze output at a meeting between fellow members of the Organization of Petroleum Exporting Countries and other major producers in Doha, Qatar. The talks ended in disagreement after Saudi Arabia refused to limit production without the participation of all OPEC members, including Iran. OPEC is due to meet next on June 2 in Vienna.

‘’Iran Will Not Freeze’’ -Plans To Ramp Up Oil Production Through 2016 | Iran plans to ramp up oil production over the course of 2016, and there is no chance of the country joining any output freeze, Iranian Deputy Oil Minister Rokneddin Javadi confirmed on Sunday. "Under the present circumstances, the government and the Oil Ministry have not issued any policy or plan to the National Iranian Oil Co. (NIOC) towards halting the increase in the production and exports of oil," Javadi, who also runs the nationalized National Iranian Oil Co. (NIOC), said. The Iranian official added that the country has been implementing a plan to raise oil production and crude exports to pre-sanctions levels since sanctions were lifted in January.  Saudi Arabia has previously demanded that Iran join the other members of OPEC in freezing oil production in order to rebalance the market. Iran declined to participate in the OPEC summit last month due to the disagreement. "If prices went up to $60 or $70, that would be a strong factor to push forward the wheel of development,” an oil ministry official told the International Business Times during the dispute in April. "But this battle is not my battle. It’s the battle of others who are suffering from low oil prices.” The 169th meeting of OPEC is set to take place in Vienna on June 2nd and will include Iran - Saudi Arabia’s main regional rival. NIOC currently exports two million barrels per day, according to Javadi’s numbers, and by the middle of this summer, the figure will increase to 2.2 million barrels a day.

Russia Inks $1B Offshore Rig Contract with Iran -- Iran has awarded a contract worth more than US$1 billion to a Russian shipbuilder for the construction of five offshore drilling rigs to be used in Iran’s section of the Persian Gulf shelf, a company official told Reuters. The company, Krasnye Barrikady, had been in discussions with the Iranian government regarding the project for almost two years. The terms of the contract dictate that the project will also make use of Russian funds. Iran is set to make a 15 percent down payment on the US$200 million price of the first rig it has ordered. Russia and Iran have signed several memoranda of understanding regarding a broad range of energy issues, including power plant construction, oil exploration and production projects and trade agreements for petroleum products. Earlier this week, Iranian Deputy Oil Minister Rokneddin Javadi confirmed plans to ramp up oil production over the course of 2016, and said there is no chance of the country joining any output freeze. "Under the present circumstances, the government and the Oil Ministry have not issued any policy or plan to the National Iranian Oil Co. (NIOC) towards halting the increase in the production and exports of oil," Javadi, who also runs the nationalized National Iranian Oil Co. (NIOC), said

OPEC’s Ability to Ease An Oil Supply Shock is Now Fading - WSJ:  For half a century, the Organization of the Petroleum Exporting Countries has buffered global crude markets, curtailing production to ease oil gluts and boosting output to prevent shortages. Now, as it heads into a June 2 meeting to discuss how to stabilize world oil markets, the cartel has neither the political consensus to cut output nor the technical capability to significantly raise production.  This year, OPEC’s spare pumping capacity—the amount it can bring online within 30 days and sustain for at least 90—will be at its lowest level since 2008, the U.S. Energy Information Administration estimates. It said OPEC spare capacity will decline more than 22% in the current quarter compared with the previous quarter.Since last year, OPEC members haven’t been able to agree on supply cuts to stem a glut that drove prices down by more than 50% since 2014. Instead they kept pumping full blast. The result: With recent supply outages sending the oil price back up, the cartel has little flexibility to boost production. Saudi officials have long said they can boost production by about 2 million barrels a day over today’s record daily production of 10.2 million barrels. But that 2 million barrels might not be possible in short order, a Saudi oil industry official said. “If there was a big crisis tomorrow, then the maximum Saudi Arabia can do would be around 500,000, maybe 700,000 maximum,” the official said.

OPEC's Death Knell -- May 23, 2016 Bloomberg/Rigzone is reporting: Saudi Arabia, one of the founders of OPEC, is sounding the group’s death knell. The world’s biggest crude exporter has already undermined OPEC’s traditional role of managing supply, instead choosing to boost output to snatch market share from higher-cost producers, particularly U.S. shale drillers, and crashing prices in the process. Now, under the economic plan known as Vision 2030 promoted by the king’s powerful son, Deputy Crown Prince Mohammed bin Salman, the government is signaling it wants to wean the kingdom’s economy off oil revenue, lessening the need to manage prices. Moreover, the planned privatization of Saudi Arabian Oil Co. will make the nation the only member of the Organization of Petroleum Exporting Countries without full ownership of its national oil company.  “The main take-away from Saudi Vision 2030 is that there’s just no role for OPEC,” Seth Kleinman, head of European energy research at Citigroup Inc. in London, said by phone on May 16. “Or, you can have an OPEC without Saudi Arabia, which just isn’t much of an OPEC.” The first change of oil ministers in more than 20 years may also recast the country’s relationship with OPEC. The group’s 13 members, which contribute about 40 percent of the world’s supply, gather in Vienna on June 2.

"The Freeze Is Finished" - Why Did Saudi Arabia Kill OPEC? - The OPEC meeting is only a week away, but the chances of a positive result are as remote as ever. Rising oil prices, the heightened rivalry between Saudi Arabia and Iran, and Saudi Arabia’s willingness to go it alone will make a deal all but impossible. First of all, Iran is not in a cooperative mood. According to the IEA, Iran has managed to boost oil production to 3.56 million barrels per day in April, its highest level since November 2011. Oil exports also jumped 600,000 barrels per day to 2 million barrels per day. Importantly, Iran’s output now stands at pre-sanctions levels, a key threshold that the Iranian government says it needs to reach before it would consider any cooperation on production limits with OPEC. However, Iran thus far does not see it that way, insisting that it still has more ground to make up. More importantly, however, is Saudi Arabia’s shift in attitude. In a once unthinkable development, Saudi Arabia is backing away from OPEC. The cartel’s largest, most important, and most influential member will leave the group rudderless. Saudi Arabia’s spurning of OPEC has been building for some time. In November 2014 it abandoned any plans to limit production in order to prop up prices, a strategy to pursue market share that has led to some downsides, but has largely achieved its goals. Saudi Arabia has seen revenues plummet, but it is producing at record levels and outlasting rival producers. U.S. shale, for instance, is down about 1 million barrels per day (mb/d) from the April 2015 peak, and more than 70 North American drillers have gone bankrupt. But Saudi Arabia has gone further to distance itself from OPEC. In April, Saudi Arabia scuttled the production freeze deal in Doha, killing what would have been only a modest agreement that put limits on oil output. By all accounts, the emergence of the young Deputy Crown Prince Mohammed bin Salman led to a harder line from Saudi Arabia. The replacement of long-time oil minister Ali al-Naimi a few weeks later solidified perceptions of a new era in Saudi Arabia. The Saudi government has very little inclination to limit its output just as its strategy is bearing fruit, and even less of a willingness to work with Iran, its regional rival, who it is battling in proxy wars in Yemen and Syria. Saudi Arabia is going it alone and oil production is now close to record levels, above 10.2 mb/d.

Saudi Officials Crackdown On FX Market As Currency Peg Starts To Strain --As we warned previously, the devaluation, or breaking of the Saudi Riyal peg to the dollar, could be the black swan event for crude oil and the recent weakness in SAR forwards - while not as violent as Nigeria's Naira - certainly signals a renewed market fear that breaking the peg is imminent. It appears Saudi officials are none too pleased with the free markets speculating on this devaluation and as Bloomberg reports, banks in Saudi Arabia are coming under fresh pressure over products that allow speculators to bet against the kingdom’s currency peg, according to people with knowledge of the matter, which were supposedly banned in January. As Bloomberg reports, The Saudi Arabia Monetary Agency has asked lenders to explain why they are offering dollar-riyal forward structured products to customers less than four months after the regulator banned options contracts that let speculators place wagers on a currency devaluation, the people said. The authority, known as SAMA, didn’t reply to requests for comment. There has been renewed speculation that the world’s biggest oil exporter won’t be able to maintain the riyal’s peg to the dollar as revenue plunges and the kingdom weighs paying government contractors with IOUs. Riyal forwards for the next 12 months rose to 590 points, the highest since Feb. 19, according to data compiled by Bloomberg, signifying increased speculation of a devaluation.SAMA is asking banks to explain the rationale and relevance of the structured products for the economy and explain why they’ve entered into the products without informing the central bank, according to the people. It also wants transaction details of the derivatives since Jan. 18.It’s also seeking to understand the impact of the products on Saudi banks’ U.S. dollar buy positions from the central bank as well as the risks to customers and banks, they said. The central bank warned any future structured derivative product should be submitted to SAMA for review and approval before they’re launched.As The Telegraph's Ambrose Evans-Pritchard recently wrote, Saudi Arabia faces a vicious liquidity squeeze as capital continues to leak out the country, with a sharp contraction of the money supply and mounting stress in the banking system.

Saudi Press: U.S. Blew Up World Trade Center To Create 'War On Terror': The Saudi press is still furious over the U.S. Senate’s unanimous vote approving a bill that allows the families of 9/11 victims to sue Saudi Arabia. This time, the London-based Al-Hayat daily has claimed that the U.S. planned the attacks on the World Trade Center in order to create a global war on terror. The article, written by Saudi legal expert Katib al-Shammari and translated by MEMRI, claims that American threats to expose documents that prove Saudi involvement in the attacks are part of a long-standing U.S. policy that he calls “victory by means of archives.” Al-Shammari claims that the U.S. chooses to keep some cards close to its chest in order to use them at a later date. One example is choosing not to invade Iraq in the 1990s and keeping its leader, Saddam Hussein, alive to use as “a bargaining chip” against other Gulf States. Only once Shi’ism threatened to sweep the region did America act to get rid of Hussein “since they no longer saw him as an ace up their sleeve.” He claims that the 9/11 attacks were another such card, enabling the U.S. to blame whoever suited its needs at a particular time; first it blamed Al-Qaeda and the Taliban, then Saddam Hussein’s regime in Iraq, and now Saudi Arabia. The intention of the attacks, writes al-Shammari in his conspiracy article, was to create “an obscure enemy – terrorism – which became what American presidents blamed for all their mistakes” and that would provide justification for any “dirty operation” in other countries.

Peak Petro-State - The Oil World In Chaos -- Pity the poor petro-states. Once so wealthy from oil sales that they could finance wars, mega-projects, and domestic social peace simultaneously, some of them are now beset by internal strife or are on the brink of collapse as oil prices remain at ruinously low levels. Unlike other countries, which largely finance their governments through taxation, petro-states rely on their oil and natural gas revenues. Russia, for example, obtains about 50% of government income that way; Nigeria, 60%; and Saudi Arabia, a whopping 90%. When oil was selling at $100 per barrel or above, as was the case until 2014, these countries could finance lavish government projects and social welfare operations, ensuring widespread popular support.  Now, with oil below $50 and likely to persist at that level, they find themselves curbing public spending and fending off rising domestic discontent or even incipient revolt. At the peak of their glory, the petro-states played an outsized role in world affairs. The members of OPEC, the Organization of the Petroleum Exporting Countries, earned an estimated $821 billion from oil exports in 2013 alone. Flush with cash, they were able to exert influence over other countries through a wide variety of aid and patronage operations.   That, of course, was then, and this is now. While these countries still matter, what worries these presidents and prime ministers now is the growing likelihood of civil violence or even state collapse. Take, for example, Venezuela, long an ardent foe of U.S. policy in Latin America, but today the potential site of a future bloody civil war between supporters and opponents of the current government. Similar kinds of internal strife and civil disorder are likely in oil-producing states like Algeria and Nigeria, where the potential for the further growth of terrorist violence amid chaos is always high. Some petro-states like Venezuela and Iraq already appear to be edging up to the brink of collapse. Others like Russia and Saudi Arabia will be forced to reorient their economies if they hope to avoid such future outcomes. Whatever their degree of risk, all of them are already experiencing economic hardship, leaving their leaders under growing pressure to somehow alter course in the bleakest of circumstances -- or face the consequences.

Loan defaults spike at Gulf banks after oil slump: More than two-thirds of Gulf banks reported an increase in unpaid loans in the first three months of the year and more defaults are likely as oil-dependent governments slash spending to adjust to lower crude prices. After several years in which banks' profits jumped thanks to the region's petrodollar boom, the oil markets' two-year malaise is taking its toll. New global accounting standards from 2018 will make lending even harder. "The days of double-digit profits and expansion plans are gone," said one United Arab Emirates-based banker. "Now, it's all about single-digit growth and controlling costs as bad loans are going to keep getting higher. It's the new normal." Two of the region's largest banks show how tough things have become. National Commercial Bank (NCB), Saudi Arabia's largest bank by assets, put aside 58.8 percent more money to cover bad loans during the quarter, analysts estimate, partly due to delays in government payments to its customers. The bank has close links to the government and construction giant Saudi Binladin Group, which like many building companies, has been hit by a slump in the building sector as the state slows spending. One of the most visible signs of the slowdown is the King Abdullah financial district in Riyadh, where gleaming tower blocks are still unfinished a year after they were supposed to be completed.

Debt repayments in crude cripple poorer oil producers (Reuters) - Poorer oil-producing countries which took out loans to be repaid in oil when the price was higher are having to send three times as much to respect repayment schedules now prices have fallen.This has crippled the finances of countries such as Angola, Venezuela, Nigeria and Iraq and created a further division within the Organization of the Petroleum Exporting Countries.Ahead of an OPEC meeting next week, poorer members have continued to push for output cuts to lift prices but wealthier Gulf Arab members such as Saudi Arabia, which are free of such debts, are resisting taking any action despite prices falling 60 percent in the past 2 years.Angola, Africa's largest oil producer has borrowed as much as $25 billion from China since 2010, including about $5 billion last December, forcing its state oil firm to channel almost its entire oil output towards debt repayments this year.This year Angola, Nigeria, Iraq, Venezuela and Kurdistan are due to repay a total of between $30 billion and $50 billion with oil, according to Reuters calculations based on publicly disclosed information and details given by participants in ongoing restructuring talks.Repaying $50 billion required only slightly over 1 million barrels per day (bpd) of oil exports when it was trading at $120 per barrel but with prices of around $40, the same repayment would require exports of over 3 million bpd."All of those oil nations - Angola, Nigeria, Venezuela - have taken money for survival but haven't got any money left for investments. That is very damaging to their long-term growth prospects," said Amrita Sen from Energy Aspects think-tank."People tend to look at current production volumes but if you have committed your entire production to China or other buyers under loans - then you cannot invest to keep growing and won't benefit from higher prices in the future."

Why China Is Being Flooded With Oil: Billions In Underwater OPEC Loans Repayable In Crude -- When the price of oil was above $100, many of the less developed oil exporting OPEC members decided to capitalize on the high price and cash out by taking loans using the precious liquid as collateral very much the same way corporate CEOs use their inflated stock (thanks to buybacks they authorize) to issue loans against said stock. And why not: even if the price of oil were to drop, they could just pump more until the principal is repaid. However, few oil exporters anticipated such an acute oil plunge in such as short time span, which resulted in the value of the collateral tumbling by 70%, and now find themselves have to repay the original loan by remitting as much as three times more oil! According to Reuters, this is precisely what happened in the years preceding the great 2014-2015 oil bust: "poorer oil-producing countries which took out loans to be repaid in oil when the price was higher are having to send three times as much to respect repayment schedules now prices have fallen." As a result, the finances of countries such as Angola, Venezuela, Nigeria and Iraq have been crippled, in the process creating further division within the Organization of the Petroleum Exporting Countries.  But while these already poor and corrupt OPEC nations were the biggest losers, one country was a huge winner, the country that provided the billions in virtually risk-free, oil-collateralized loans to any country that requested them. China. The same China which has once again proven smart enough to not demand repayment in fiat but in physical commodities, be they oil, copper or gold. Take Angola for example: Africa's largest oil producer has borrowed as much as $25 billion from China since 2010, including about $5 billion last December, which according to Reutersforced its state oil firm to channel almost its entire oil output toward debt repayments this year. Or Venezuela: ever since 2007, China, which has become Venezuela's top financier via an oil-for-loans program, has funneled an amazing $50 billion into the Chavez first and then Maduro regimes, in exchange for repayment in crude and fuel, including a $5 billion deal last September.  While details of the loans have not been made public, analysts from Barclays estimate Caracas owes $7 billion to Beijing this year and needs nearly 800,000 bpd to meet payments, up from 230,000 bpd when oil traded at $100 per barrel.

Analysis: Russia grabs top supplier's crown with record crude oil sales to China - China's crude oil purchases from Russia jumped 52.4% year on year to a record high in April, propelling it to the top spot for the second time in 2016 and displacing Saudi Arabia, but May purchases from the European supplier could slow because of higher flat prices, traders said. Russia shipped 4.81 million mt, or 1.17 million b/d, of crude to China in April, about 36,910 b/d higher than the last peak of 1.14 million b/d recorded in December last year, according to data released by the General Administration of Customs Tuesday.It was the sixth time Russia has moved to the top spot as China's crude supplier, since capturing that spot for the first time in May, 2015. On the other hand, volumes to China from Saudi Arabia was 1 million b/d in April, dropping 21.8% year on year, despite an increase of 3.5% from March. Russia in April sent nearly 2 million mt of crude via pipeline to the northeastern city of Daqing in China, up 8.2% from 1.84 million mt in the same month last year, according to the Central Dispatching Unit, the statistical arm of Russia's energy ministry. The volume would translate into 488,000 b/d, taking a conversion factor of 7.33 barrels per metric ton. Most of those barrels go to PetroChina's refineries. The remaining 686,600 b/d from Russia were seaborne arrivals, which flowed to Sinopec, CNOOC as well as independent refineries. Most of the cargoes were loaded from the Far East port of Kozmino.

China Sinopec to triple Chongqing shale gas capacity to 15 Bcm/year by 2020 - China's Sinopec said Monday it targets tripling its shale gas capacity in Chongqing in southwest China to 15 Bcm/year by 2020 from the current 5 Bcm/year. It also aims to increase its shale gas output in Chongqing to 10 Bcm/year by 2020, the end of China's 13th five-year plan that runs 2016-2020, according to a news release on a strategic cooperation agreement signed with the Chongqing city government that was posted on Sinopec's website. The targets are in the line with Sinopec's plan unveiled in March to double its total domestic gas output to 40 Bcm in 2020 from 20.81 Bcm in 2015, with 10 Bcm to come from shale gas -- all of it from Chongqing -- 29.5 Bcm from conventional gas and 0.5 Bcm from coal bed methane. The company completed construction of the 5 Bcm/year Phase I of its flagship Fuling project in Chongqing last year and will begin building the second phase this year, Platts reported earlier. The proven developed reserves in Fuling stood at 28.77 Bcm at end 2015, more than doubling from 13.37 Bcm a year earlier, according to the company's annual report. Proven undeveloped reserves surged to 5.13 Bcm from 2.49 Bcm over the same period.

China coal imports from North Korea dip 35 percent as sanctions bite | Reuters: China's imports of coal from its neighbor North Korea reached 1.53 million tonnes in April, down 35 percent on the month and 20.5 percent year-on-year as Beijing sought to comply with a tougher sanctions regime against the country. North Korean shipments over the first four months of the year remain 23.2 percent higher than the same period of 2015, data from China's General Administration of Customs showed on Monday. China's Ministry of Commerce announced at the beginning of April that it would ban North Korean coal imports to comply with new United Nations sanctions on the country, though it made exceptions for deliveries intended for "the people's wellbeing" as well as coal originating from third countries like Mongolia. Mongolia was the chief beneficiary of the decline in shipments from North Korea, with the country supplying 1.98 million tonnes to China in April, up 34.7 percent on the year. Australia remained China's biggest supplier, though the April volume of 5.74 million tonnes was down 12.9 percent compared to last year.

"Everything Is Plunging" - China Commodity Carnage Continues --Hot on the heels of Trumpian-size tariffs imposed by The Obama administration on a desperately glutted and mal-invested steel industry, the entire panic-buying "well the market is always right", "China is recovering" narrative based rally in Chinese commodities has crashed back down to earth with an incredible thud. As one veteran trader in the China commodity markets put it "everything is plunging... except cotton," with Iron Ore, and Rebar down 7% today... At least one industry executive "got it" - Baosteel's Zhang: "The price rebound is not beneficial to the overcapacity situation.... It will delay the shutdown of (inefficient) capacity." How right he was... Dalian Iron Ore has collapsed 30% in a month, down 7% today...Steel Rebar has crashed 32% in a month, down 5% today... (it seems the brief BTFD support has completely collapsed)... Hot Rolled Coil -28% in a month, down 6% today... One word to describe mainland commodities: TIMBERRR??? — Simon Ting (@simonting) May 23, 2016 Makes one wonder what the world's only marginal-buyer-of-crude could do 'retaliate' to a nation imposing tariffs like that which is also dependent on a bounce in oil prices to supports its 'wealth-creating' stock market?

Furious China Slams "Irrational" US Trade War, Warns "Will Take Steps" - The main reason stocks in the steel sector are on fire today is because overnight the Commerce Department escalated its trade war with China when it implemented the latest clampdown on a glut of steel imports, when it announced that corrosion-resistant steel from China will face final U.S. anti-dumping and anti-subsidy duties of up to 450%. The final U.S. anti-dumping duties on the Chinese products replace preliminary ones of 256% issued in December 2015. The department also issued anti-dumping duties of 3 percent to 92 percent on producers of corrosion-resistant steel in Italy, India, South Korea and Taiwan. The duty hit producers of the flat-rolled steel, which is coated or plated with zinc, aluminum or other metals to extend its service life, with anti-subsidy duties in China, South Korea, Italy and India. Taiwan was exempted. This follow last week's 522% duty imposed by the US on cold-rolled steel imports from China used in automobiles and other manufacturing, which led to the latest angry rebuke from Beijing: "There's too much trade friction and it's not good for the market," Liu Zhenjiang, secretary general of the China Iron and Steel Association told Reuters when asked if China will appeal U.S. anti-dumping duties at the World Trade Organization. "High taxes are unfair .... China doesn't have a large market share in the United States," Zhang Dianbo, deputy general manager at Baosteel Group, said recently during a Singapore conference. Fast forward to today when China escalated the war of words. Cited by Reuters, China's Commerce Ministry said it was extremely dissatisfied at what it called the "irrational" move by the United States, which it said would harm cooperation between the two countries. "China will take all necessary steps to strive for fair treatment and to protect the companies' rights," it said, without elaborating.

China Has Quietly Bailed Out Over $220 Billion In Bad Debt In The Past 2 Months -  Two months ago we were amazed to read that according to the latest "deus ex machina" proposed by the PBOC, China would "sweep away" trillions in bad loans by equitizing them in the form of debt-for-equity exchanges. This is how we tried to explain this unprecedented move on March 10 when Reuters first hinted it was coming: […] And then today we learned that not only was China going through with this epic debt-for-equity swap, but it has already equitized over $220 billion in non-performing loans.Note: these are not traditional, Chapter 11 prepacks where the debt is converted into equity and the debt holder gets the keys to the company. In this case, it is the Chinese government itself which indirectly via state-owned banks, has become the de facto owner of countless companies.As the FT reports:"Beijing has stepped up its battle against bad debt in China’s banking system, with a state-led debt-for-equity scheme surging in value by about $100bn in the past two months alone. The government-led programme, which forces banks to write off bad debt in exchange for equity in ailing companies, soared in value to hit more than $220bn by the end of April, up from about $120bn at the start of March, according to data from Wind Information."As we said two months ago, and as the FT now confirms, this is nothing short of a state-led bailout of virtually every troubled, overindebted industry. The latest figures for the debt-to-equity swap, and a debt-to-bonds swap initiated last year, show a subtle bailout is already under way. “One can argue the government-led recapitalisation is already happening in an atypical way and thus reducing the need for recapitalisation in its written sense,” said Liao Qiang, director of financial institutions at S&P Global Ratings in Beijing.

In China’s New Austerity, Ghosts Now Haunt Government Offices - China Real Time Report - WSJ: The great retreating tide of wasted credit that defined China’s development in the last seven years has left behind, in forgotten byways, a landscape of ghostly urban desolation. They come like snapshots of de Chirico paintings: Clusters of condominiums towering over dusty towns. Vast shopping malls where the echoes are louder than footfall. Metal mines in rust-belt country with piles of excavated minerals still waiting for delivery trucks that never came. Now, more than three years after the Communist Party began to tighten up on austerity measures, add to the list the dull gray hulls of the Chinese government office. In once prosperous seaboard provinces, an interdiction on “office buildings that don’t meet requirements” – as the official terminology goes – is coining a new term among local residents: “sleeping buildings.” The front yards of these ghost buildings, China’s official Xinhua News Agency reported, have been turned into vegetable plots, sheep farms or trash dumps.  These are the remains of what took shape in July 2013 as a collective repudiation by the Communist Party on an era of excess. The State Council, China’s equivalent to a cabinet, ruled that there would be no more banquets, gifts or waste.

China Is Executing To Plan: Foxconn Replaces 60,000 Workers With Robots - Last month we discussed the fact that officials had approved the latest Five Year Plan for China's economy. The ultimate goal of the plan is to overtake Germany, Japan, and the United States in terms of manufacturing sophistication by 2049, the 100th anniversary of the founding of the People's Republic of China. To make that happen, the government needs Chinese manufacturers to adopt robots by the millions. It also wants Chinese companies to start producing more of these robots, , and to enable that there is an initiative making billions of yuan available for manufacturers to upgrade to technologies including advanced machinery and robots. The manufacturing hub for the electronics industry, Kunshan, in Jiangsu province is proving that that initiative is well underway. As the South China Morning Post reports, thirty five companies, including Apple's key supplier Foxconn, spent a total of 4 billion yuan on artificial intelligence last year, and more companies are going to follow suit. Spurred by the initiative and a desire to cut down on labor costs, Foxconn has reduced its workforce by a whopping 60,000 people thanks to the introduction of robots. Foxconn's headcount went from 110,000 down to 50,000 (adding to the mass layoffs that we have warned will cause further social unrest in China). We're not sure how all of this will play out in the grand scheme of the Five Year Plan that was put together, but what is clear is that China is wasting no time in executing the early stages of the plan. That is just the beginning.The transition from human to robot workers may upend Chinese society. Some displaced factory workers could find employment in the service sector, but not all of the 100 million now employed in factories will find such jobs a good match. So a sudden shift toward robots and automation could cause economic hardship and social unrest. “You can make the argument that robotic technology is the way to save manufacturing in China,” says Yasheng Huang, a professor at MIT’s Sloan School of Management. “But China also has a huge labor force. What are you going to do with them?”

Chinese officials ‘create 488m bogus social media posts a year’ -- The Chinese government is fabricating almost 490m social media posts a year in order to distract the public from criticising or questioning its rule, according to a study.  China’s “Fifty Cent Party” – a legion of freelance online trolls so-named because they are believed to be paid 50 cents a post – has long been blamed for flooding the Chinese internet with pro-regime messages designed to defend and promote the ruling Communist party. However, the study by Harvard University researchers (pdf) claims many of those comments are not posted by ordinary citizens, as previously thought, but by civil servants who double as online stooges.   An analysis of nearly 43,800 posts found that 99.3% were the work of government employees working for more than 200 agencies, including tax and social security and human resources bureaux.  The researchers believe such comments are usually posted in “bursts”, timed to coincide with politically sensitive periods, such as Communist party meetings, outbreaks of unrest and public holidays.  For example, hundreds of pro-Beijing messages were posted after the outbreak of deadly ethnic rioting in the western province of Xinjiang in June 2013. A similar deluge of positive messages emerged during a major political summit in Beijing in November the same year.  The study, based on a cache of documents leaked from a government propaganda office in eastern China, claims about half of the 488m propaganda messages posted each year appear on government websites. The remainder are fed into the social media networks of a country which has about 700 million internet users.

China urges faster local government spending to support economy -  (Reuters) - China's local governments must quicken spending to help reduce the size of unspent budget funds and support the economy that faces downward pressure, the Ministry of Finance said on Monday.The comment came after data showed China's fiscal expenditures in April rose 4.5 percent from a year earlier, slowing sharply from a 20.1 percent jump in March. The government has pledged to ramp up fiscal support this year, boosting the fiscal deficit to 3 percent of gross domestic product (GDP), after economic growth last year cooled to a 25-year low. "We must continue to implement a pro-active fiscal policy as the downward pressure on the economy remains relatively big," the ministry said in a statement published on its website. Local governments must speed up spending to reduce the size of unspent local government budget funds, it said. Some local governments are complaining about funding shortfalls, but they are slow in disbursing fiscal funds, the ministry said. The ministry took back 365.8 billion yuan ($55.83 billion) in fiscal funds that were unspent as of the end of November, it has said.

China lacks urgency about its debt problem, IMF says from Hong Kong | South China Morning Post: The new resident representative at the International Monetary Fund’s Hong Kong office has sounded an alarm that China lacks a of sense of crisis and urgency in dealing with its current round of debt overhang that has now pushed the time companies can pay their bills to an punishing average of 72 days. The IMF estimates that puts a total 14 per cent of all Chinese company debt at risk of becoming uncollectable. It would equate to 7 per cent of the country’s economy. Unlike the last major debt crisis in the late 1990s, this time the risks are concentrated in China’s local banking systems, rather than their national peers, poor supervision and largely inaccessible data to monitor and control risks, the IMF said. And given the extent that these local banks are connected with China’s new economy — local institutions have been the key lenders to private enterprises and small and medium-sized companies that power the new economic sectors —the representative warned the potential risks of local bank failures will increase and cause disruption across the whole financial system. That may bring greater capital flight and endanger China’s rebalancing efforts to transition to a high value-added economy, especially under China’s new regime that is allowing some companies go under. “We are now looking at a long-term decline in productivity capacity for China. We are not just looking at a decline from 10 per cent growth to 6.7 per cent right now but potentially a much lower figure going forward,” said Sally Chen, resident representative at the IMF’s office in Hong Kong who arrived in the eye of the storm of yuan-led global market turmoil in January. She said the current decline in growth in China is not just cyclical but also structural.

Chinese banks sitting on $1.7 trillion debt time bomb - Chinese banks are looking down the barrel of a staggering RMB 8 trillion - or $1.7 trillion - worth of losses according to the French investment bank Societe Generale. Put another way, 60 per cent of capital in China's banks is at risk as authorities start the delicate and dangerous process of reining in the debt-bloated and unprofitable state-owned enterprise (SOE) sector. Disturbingly though, debt is not only not shrinking, it is accelerating, making the eventual reckoning far worse. China's overall non-financial debt grew by 15.2 per cent in 2015 to RMB 167 trillion ($35 trillion) or almost 250 per cent of gross domestic product (GDP). That is up from 230 per cent of GDP the year before and the 130 per cent it was eight years ago before the global financial crisis hit. The problem is largely centred on China's 150,000 or so SOEs, which suck-up an entirely disproportionate amount of the nation's capital.

China's economic planner warns against irregular offshore debt issuance | Reuters: Some Chinese firms are improperly issuing offshore debt, China's economic planning agency said on Thursday, warning that violators will be punished and signaling concern over firms' offshore debt as the yuan resumes its slide against the dollar. The National Development and Reform Commission's notice also said that issuing firms, underwriters and law offices that do not follow proper notification and registration procedures will be added to a national blacklist and punished. Firms issuing foreign debt should carefully consider trends in international capital markets and strengthen risk management, the commission added in a notice posted on its website. The yuan's weakness against the dollar exposes Chinese companies who have borrowed dollars overseas - or engaged in hedging contracts - to rising risk of forex-related losses. China experienced record net capital outflows of around $463 billion in 2015, according to a recent report by the Washington, D.C.-based Institute of International Finance. Much of that, analysts said, was due to Chinese corporates paying off foreign currency debt in the fear that further yuan depreciation would expose them to unmanageable risks.   Earlier this week, the Shanghai Securities News reported that China's insurance regulator was cracking down on illegal sales of foreign insurance products to Chinese nationals. The purchase of such products, which can sometimes be used as collateral for foreign currency loans, has been one popular way to move capital out of the country.

China’s Monstrous Bubble Capital: Shenzhen is located just north of Hong Kong and has a population of over 10 million people. The city is a major manufacturing center, home to the second-tallest building in all of China, and boasts one of the highest-volume container ports in the world. In June 2015, I examined how the Shenzhen Stock Exchange (SSE) was in the latter stages of a historic stock market mania. The Shenzhen equity bubble was, by some measures, even more egregious than the U.S. technology stock bubble back in 2000. Valuations have retreated somewhat, although the market cap weighted average price-to-earnings ratio on the SSE is still around 95 times. In other words, valuations are only obscene now – rather than ludicrous as they were in mid-2015. But, if a bursting stock market bubble wasn’t enough to contend with, now Shenzhen has an even bigger problem. Top-Tier Mania In China’s major cities, the real estate markets are on fire. Charted below are the average sales price increases for Shanghai, Beijing, and Shenzhen real estate since the beginning of 2010:China bulls would argue that rising real estate prices are healthy because they reflect a mass migration from the rural areas into cities, facilitated by job opportunities and increased incomes. However, this narrative is highly suspect. As you can see in the chart, real estate prices were basically unchanged from the beginning of 2010 until the end of 2013. Keep in mind that Chinese economic growth subsequently slowed. Then, in early 2015, real estate prices started to skyrocket in tandem with the Chinese stock markets. In less than 18 months, prices in Shenzhen have risen by over 75%. This rapid ascent is a speculative mania rather than simply a supply-demand imbalance.

Warning sign: China’s currency at 5-year low - On Wednesday, China's central bank weakened its currency. It set the reference rate for the yuan at the lowest level in five years. The actual cut was small: only about 0.3%. It didn't send world markets into a downward spiral like in August, when China devalued its currency by nearly 2%, or in early January, when it cut by about 0.5%. Nevertheless, it's a warning sign. The reference rate is the level that the People's Bank of China sets each day, although the yuan is allowed to trade in a range around that price. "Whether China stress reemerges is a key unknown," wrote the economics team at Deutsche Bank Research Wednesday.  China's Communist Party still claims the country is growing 6.5% to 7% a year. Capital Economics, among other independent forecasters, believes the real number is 4.2%.  Some believe China's latest currency move was to get ahead of a Federal Reserve interest rate hike, which will probably make the U.S. dollar even stronger. Others point to a slew of ho-hum economic data from China. The bottom line is: the chiefs of the world's No. 2 economy are still on edge.

Currency War Resumes - China Devalues Yuan To 5-Year Lows --  After a brief hiatus from the ongoing currency wars, China fired another salvo at The Fed tonight by devaluing the Yuan fix to 6.5693 - its weakest against the USD since March 2011. After eight days higher in a row for The USD Index, it seems PBOC has turned its currency liberalization plan off, stabilizing the broad Renminbi basket (which has been steadily devalued) and turning its attention to devaluing against the USD. Having unleashed turmoil in August (pre-Sept FOMC) and January (post Dec rate-hike), it appears the rising rate-hike probabilities jawboned by The Fed are decidedly disagreeable to "authoritative persons" in China.  The Yuan Fix was driven down to March 2011 lows...

Cold Feet: China’s Experiment With Freer Yuan Again Gets Cut Short - China Real Time Report - WSJ: China has a long history of trying, but failing, to loosen its grip on the yuan. For the past two decades, the value of the Chinese yuan has consistently been driven more by Beijing’s political needs than by the vagaries of the market. And a few attempts by the country’s reform-minded central bank to make the currency more market oriented have all invariably been pulled back by Communist Party leaders who resent the idea of losing control. But the result of a sharply-appreciated currency has run up against China’s own economic headwinds. From September 2008 through March 2009, the yuan’s effective exchange rate, measured against the currencies of China’s major trading partners, jumped 15%. On the other hand, derivatives trading at the time indicated that the yuan would have depreciated as much as 7% if let alone. Around early 2010, the central bank floated a proposal to make the yuan largely free of the dollar. But the country’s powerful state-planning agency convinced the leadership to shoot it down, according to officials familiar with the matter, on grounds that a freer yuan at the time would have only meant an even stronger yuan, which would have been to the greater detriment of Chinese exporters. Last year, it was time for another stab at exchange-rate reform. On Aug. 11, the central bank moved to make the yuan more market-driven. Just four months later, China again flip-flopped on currency reform as the need to maintain stability trumped the desire for change.

Follow the Money » China Is Pivoting Away From Imports, Not Just Rebalancing Away From Exports: China’s stated policy goal is to rebalance away from both investment and exports. That is not all that easy to do. After the crisis, China rebalanced away from exports (exports fell significantly as a share of China’s GDP, and China’s manufacturing trade surplus also fell relative to China’s GDP) mostly by juicing up investment (investment rose from around 45 percent of GDP to 50 percent of GDP; see Figure 19 of this Goldman report, among other sources). Downsizing investment typically means slower growth, and more of a temptation to look to exports for growth. No matter. Over the past few years, China does seem to have become less reliant on exports for growth. Since 2012, exports of manufactured goods (*) have fallen from 23 to 19 percent of China’s GDP. China’s manufacturing surplus though has hardly moved since 2012 — the manufacturing surplus was 9 percent of China’s GDP in 2012, dipped under 8.5% of China’s GDP in late 2013, then rose to 9 percent in 2014. Even with the recent export slump, it has remained close to 9 percent. The explanation for the ongoing surplus is straight forward: China’s imports of manufactures have also been moving down. They have gone from 14 to 11 percent of GDP since 2012, and are way down from their peak back in 2003.

Trade With Japan Collapses: Exports Decline 7th Month, Imports Plunge Most Since 2009 --  Abenomics was back in the spotlight tonight. Global trade with Japan has collapsed. Exports are down and imports are down even more. The result is an unexpected rise in Japan’s trade surplus, yet another failure of abenomics. Japanese Output Shrinks at Fastest Pace Since 2012. The Markit Japanese PMI shows Output falls at fastest rate in over two years, underpinned by a sharp
drop in new orders.

  • Flash Japan Manufacturing PMI™ at 47.6 (48.2 in April). Flash headline PMI signals sharpest decline in operating conditions since December 2012.
  • Flash Japan Manufacturing Output Index at 46.9 (47.8 in April). Production decreases at most marked rate in over two years.

Bloomberg reports Japan April Trade Surplus 823.5 Billion Yen, Beats EstimatesJapan’s exports fell for a seventh consecutive month in April as the yen strengthened, underscoring the growing challenges to Prime Minister Shinzo Abe’s efforts to revive economic growth. Overseas shipments declined 10.1 percent in April from a year earlier, the Ministry of Finance said on Monday. The median estimate of economists surveyed by Bloomberg was for a 9.9 percent drop. Imports fell 23.3 percent, leaving a trade surplus of 823.5 billion yen ($7.5 billion), the highest since March 2010.

Slumping Japan exports, factory orders add to headaches for PM Abe, BOJ | Reuters: Japan's exports fell sharply in April and manufacturing activity suffered the fastest contraction since Prime Minister Shinzo Abe swept to power in late 2012, providing further evidence that the premier's Abenomics stimulus policy is struggling for traction. The bleak readings on the health of the world's third-largest economy follow Japan's failure last week to win support from its global counterparts to weaken the strong yen, which Tokyo fears could do further damage to the sputtering economy. They also add pressure on both Abe and the Bank of Japan to do more to rev up flagging growth, even as economists and global investors worry that central banks may be reaching their limits with radical experiments that have yet to kick-start growth. Data on Monday showed Japan's exports fell 10.1 percent in April from a year earlier, the fastest decline in three months as a stronger yen and weakness in China and other emerging markets take their toll on the country's shipments. Imports shrank more than 23 percent, reflecting not only lower commodity prices but stubbornly weak domestic demand that has defied a massive asset-buying program by the BOJ which is now into its fourth year. The decline was likely exaggerated by a drop in U.S.-bound car exports due to supply-chain disruptions caused by earthquakes in Japan last month, but a firmer yen and lackluster global demand are clouding the outlook for 2016. Some analysts fear the economy could contract this quarter after dodging a return to recession early in the year.

Japan core CPI inflation falls in April: Japan's core consumer prices fell 0.3 percent in April from a year earlier, the second straight month of declines, keeping the central bank under pressure to deploy additional stimulus to achieve its ambitious 2 percent inflation target. The data underscores the fragile nature of Japan's recovery and may give Prime Minister Shinzo Abe justification to delay a scheduled increase in sales tax next year. The drop in the nationwide core consumer price index (CPI), which includes energy but excludes volatile fresh food costs, was slightly smaller than a median market forecast for a 0.4 percent fall, data from the Internal Affairs Ministry showed on Friday. It matched the pace of decline in March."The current decline in CPI is driven not just by oil prices but price declines of other goods," said Junichi Makino, chief economist at SMBC Nikko Securities. "This marks a change in the price trend and is a sign Japan is reverting back to deflation," he said, adding that the BOJ may ease policy at next month's rate review. Core consumer prices in the Tokyo area, which is a leading indicator of nationwide price trends, fell 0.5 percent in the year to May, more than a median market forecast for a 0.4 percent decrease, the data showed.

G7 summit: Why 'Helicopter money' could be next move for desperate central banks—commentary: The G7 countries' finance ministers recently ended their two-day meeting in Sendai, Japan, without an agreement on any economic policy issues, including those surrounding the recent sharp appreciation of the yen. The unwillingness of policymakers to address Japan's fervent appeals for exchange rate intervention may inadvertently hasten the implementation of "helicopter money" by Japan and other industrialized nations. "Helicopter money"—named after Milton Friedman's colorful metaphor for an increase in public spending or a tax cut that is financed by a permanent increase in the money stock—is a central bank's last resort to stoke inflation, devalue the currency and induce consumer spending. Stuck with a moribund economy and a strengthening yen, if the Bank of Japan's (BOJ) monetary policy cannot get sufficient support from fiscal policymakers or from other central banks around the world, it may not be left with any other choice. The Bank of Japan surprised markets with the unexpected adoption of negative interest rates earlier this year. This came after its long slog of large scale asset purchases failed to sufficiently boost inflation and inflation expectations.  Since January's negative-rate announcement, policymakers have been startled by the stark appreciation of the yen, an unwelcome outcome that, as of last week, had taken back about a third of the 40 percent Japanese currency depreciation against the U.S. dollar since the beginning of Abenomics. As the yen began its sharp rebound, the U.S. Treasury Secretary suddenly announced that if Japan intervened to slow or smooth the currency's rapid ascent, Washington would view it as currency manipulation.

Japan, Canada agree on need for fiscal stimulus to boost economy- -- Prime Minister Shinzo Abe and his Canadian counterpart Justin Trudeau agreed Tuesday on the need for boosting fiscal stimulus to bolster global growth ahead of the summit between the Group of Seven advanced economies in central Japan, a Japanese official said. The agreement comes as Abe seeks to strike an accord with his G-7 peers, including Canada, on coordinated fiscal action toward spurring world economic growth at the summit, though he may face opposition from Germany, which insists on fiscal discipline. "I am glad that with Justin, we have reached an agreement on key agenda items at the G-7 summit, including on the world economy," Abe told a joint press conference after his meeting with Trudeau in Tokyo. Trudeau told Abe that investment is important when it is compared with austerity measures, according to the official. Abe also said he shared with Trudeau "serious concerns about unilateral acts that escalate tensions" in the South China Sea, in an apparent reference to China's militarization of the contested waters through the building of artificial islands and the construction of outposts. "We agreed to cooperate to secure free and safe waters based on the rule of law," Abe said. The two leaders also confirmed to accelerate efforts for an early entry into force of the Pacific free trade pact, Abe said. Canada and Japan are among the 12 countries that signed the Trans-Pacific Partnership initiative in February.

Weak April for air cargo in Asia Pacific - Asia Pacific air cargo markets remained weak in April, failing to keep pace with rising passenger demand, according to the latest monthly statistics from the Association of Asia Pacific Airlines (AAPA). April saw the region's airlines carry 24.2m international passengers, a 4.8% increase compared to the same month last year, on the back of continued strong regional demand. By contrast, said AAPA, air cargo demand was “flat”, with volumes in freight tonne km (FTK) terms similar to those registered in the same month last year. The AAPA stated: “Expansion in available freight capacity continued to outpace the growth in demand. As a result, the average freight load factor for the region's carriers fell by 1.7 percentage points to 61.7%, after accounting for a 2.8% expansion in offered freight capacity.” Earlier this month, global airline association IATA reported that Asia-Pacific carriers saw a 5.2% drop in demand in March 2016 compared to the same month last year. The decline is exaggerated by the effects of last year’s US seaport disruption. “Nonetheless, demand is weak with export volumes from emerging Asian economies having contracted in annual terms for 11 of the past 12 months,” IATA said at the time. Commenting on the AAPA results, director general Andrew Herdman said: “International air cargo markets are still weak, with year to date demand registering a 4.8% decline compared to the same period a year ago, reflecting the lacklustre global trade conditions."

India to invest $500 million in the port of Chabahar as part of trilateral cooperation with Iran, Afghanistan: Indian Prime Minister Narendra Modi announced on Monday the availability of about $500 million to invest in the development of the strategic southern Iranian port of Chabahar. The objective: Develop a sea-land access route to central Asia while bypassing neighbor Pakistan, with which India's historically had thorny relations. The announcement was part of a number of agreements to boost economic ties with Iran that Modi signed with President Hassan Rouhani, during an official state visit. Based on the agreements, India would build and operate two terminals and five berths with cargo handling in the Chabahar port. Later Monday, India also signed a trilateral agreement with Iran and Afghanistan to develop a transport and transit corridor between the three countries through Chabahar, which Modi said would allow for the unhindered flow of commerce, capital and technology through the region."Today, the watch-words of international ties are trust not suspicion; cooperation not dominance; inclusivity not exclusion," he said, describing the Chabahar agreement as a "corridor of peace and prosperity for our peoples." The development of the corridor through Chabahar will open two-way access between allies India and land-locked Afghanistan. From Chabahar, India could access Afghanistan, and vice versa, through existing Iranian road networks and the Zaranj-Delaram highway that India previously helped Afghanistan to build. It would also bypass relatively unstable corridors in neighboring Pakistan.

Unsafe Cars Can Save Lives --Jalopnik: If seeing that a vehicle has a zero-star safety rating isn’t enough to frighten a person out of his or her mind, seeing said vehicle in a wreck probably is. Five cars designed for India—which has minimal safety requirements for vehicles—just received that number in crash testing… The tests come from the London-based Global New Car Assessment Program…The group tested seven cars made for the Indian market and handed five of them—the Renault Kwid, Maruti Suzuki Celerio, Maruti Suzuki Eeco, Mahindra Scorpio, and Hyundai Eon, all with no airbags—a rating of zero out of five stars for adult safety… David Ward, secretary general of Global NCAP told the Wall Street Journal: Global NCAP strongly believes that no manufacturer anywhere in the world should be developing new models that are so clearly sub-standard,” Let’s take a closer look. These cars are very inexpensive. A Renault Kwid, for example, can be had for under $4000. In the Indian market these cars are competing against motorcycles. Only 6 percent of Indian households own a car but 47% own a motorcycle. Overall, there are more than five times as many motorcycles as cars in India. Motorcycles are also much more dangerous than cars. The [U.S] federal government estimates that per mile traveled in 2013, the number of deaths on motorcycles was over 26 times the number in cars. Similar ratios are found in the UK and Australia. I can think of several reasons why the ratio might be lower in India–lower speeds, for example, but also several reasons why the ratio might be higher (see picture above). The GNCAP worries that some Indian cars don’t have airbags but forgets that no Indian motorcycles have airbags. Even a zero-star car is much safer than a motorcycle. Air bags cost about $200-$400 (somewhat older estimates here a, b, c) and are not terribly effective. At $250, airbags would increase the cost of a $5,000 car by 5%. A higher price for automobiles would reduce the number of relatively safe automobiles and increase the number of relatively dangerous motorcycles and thus an air bag requirement could result in more traffic fatalities.

Welcome to the Great Australian Scab Grab -- I’m not telling you anything that you don’t know when I observe that Australia is in the grip of the greatest economic scab grab of my lifetime. By that I mean that the national economic pie is being torn apart by the multitudinous grasping hands of rent seekers. MB does it’s best to chronicle the frenzy but, honestly, it’s impossible to keep up. Here’s a list off the top of my head of those interests currently deploying their all to rip out a slice:

  • banking (obviously) is fighting a much needed royal commission;
  • real estate has embarked upon a vast anti-negative gearing reform agenda;
  • super industries are in uproar over a minor pull back their concessions;
  • grey groups are the same;
  • the taxi industry is enraged and campaigning against disruption;
  • pathologists are threatening ballot box strikes;
  • pharmacists are the same;
  • oil and gas is outraged at meaningless national interest tests;
  • mining has all manner of complaints: royalties, diesel rebates, demands for inquiries;
  • steel is seeking a future;
  • farmers are screaming for support versus screaming supermarkets;
  • unions are howling against penalty rate reform;
  • its raining defense pork;
  • its raining infrastructure pork.

This outlandish scab grab is universally aimed not at winning business, nor competing successfully but at policy protections to secure or preserve economic rents. Why has the great scab grab come about? I see eight reasons.

U.S. lifts arms ban on old foe Vietnam as regional tensions simmer | Reuters: The United States announced an end to its embargo on sales of lethal arms to Vietnam on Monday, an historic step that draws a line under the two countries' old enmity and underscores their shared concerns about Beijing's growing military clout. The move came during President Barack Obama's first visit to Hanoi, which his welcoming hosts described as the arrival of a warm spring and a new chapter in relations between two countries that were at war four decades ago. Obama, the third U.S. president to visit Vietnam since diplomatic relations were restored in 1995, has made a strategic 'rebalance' toward Asia a centerpiece of his foreign policy. Vietnam, a neighbor of China, is a key part of that strategy amid worries about Beijing's assertiveness and sovereignty claims to 80 percent of the South China Sea. The decision to lift the arms trade ban, which followed intense debate within the Obama administration, suggested such concerns outweighed arguments that Vietnam had not done enough to improve its human rights record and Washington would lose leverage for reforms.

The Vietnam War Is Still Killing People - On Saturday, President Obama will set out on a trip to Vietnam, for a visit that’s being billed as looking forward to the future rather than back at the bitter history of the past. On the same day, a funeral will be held in Quang Tri province for a man named Ngo Thien Khiet.Khiet, who died at the age of forty-five, and who leaves behind a wife and two sons, was an expert on the unexploded ordnance, or U.X.O., left over from the Vietnam War. He was particularly skilled at locating, removing, and safely destroying cluster bombs found in the farm fields of Quang Tri, an impoverished agricultural province that straddles the old Demilitarized Zone, or D.M.Z., which once divided North and South Vietnam.More ordnance was dropped on Quang Tri than was dropped on all of Germany during the Second World War. The province was also sprayed with more than seven hundred thousand gallons of herbicide, mainly Agent Orange. Since the end of the war, in 1975, more than forty thousand Vietnamese have been killed by U.X.O. About three and a half thousand of these deaths have occurred in Quang Tri. But thanks in large measure to the work of Project RENEW, the numbers of fatalities in the province have been in steady decline. While most of the victims used to be farmers working their fields, these days, with more of the countryside cleared, those most at risk are scrap-metal scavengers, who cut up rusted bombs and shells in the hope of earning a few dollars.

Cash for questions: Can freer trade soften Vietnam’s thuggish ways? -- The Economist -  No nation stands to gain more from the TPP than Vietnam, which, the World Bank guesses, will get a GDP boost of 10% by 2030. Lower foreign tariffs would increase exports such as garments and shoes. The deal would also spur local production of fabric and much else that is currently imported. The TPP is popular with ordinary Vietnamese. They like any effort that reduces their dependence on China, Vietnam’s big northern neighbour, with which it has a big trade deficit and a bitter territorial dispute. Meanwhile, reformers in government hope that TPP membership will hasten the privatisation of bloated state-owned enterprises, which have long weighed on the economy but which vested interests make difficult to slim. More sensitive is the obligation to liberalise Vietnam’s labour laws. A side agreement signed with America—and designed to satisfy critics in the American Congress—requires Vietnam to pass a law allowing workers to form independent trade unions at the factory level by the time the TPP comes into force; and after five years these unions must be allowed to form national and industrial federations. Some of the valuable tariff exemptions on offer to Vietnam will be held back until after this five-year target has been met.The stipulations stand to end a monopoly long held by the Vietnam General Confederation of Labour, a fusty arm of the party under which all unions are presently herded. Its affiliates and its 8,000 full-time staff transmit the party line and organise morale-raising shindigs. It is common to find union leaders holding down jobs in company personnel departments. But the confederation has become less effective at averting strikes, which have grown to 4,000 in the past ten years, a fourfold increase on the previous decade.

Child Labor Defended by the Left -- Well, some of the left, but they probably represent the main currents of progressive thought among intellectuals.  Those who not part of the charmed circle of researchers, activists and policy-makers in the realm of child labor may not know that a storm has been whipped up over regulation of children’s work.  A number of academics and heads of NGOs have stepped forward to say that lots of child labor is OK, and the blanket condemnation of it is oppressive.  They want to scrap international agreements that set restrictions on the employment of children, and they support efforts at the national level to repeal child labor regulations. The flashpoint is Bolivia, where the laws were rewritten to allow children as young as 10 to work alongside their parents and to enter formal employment at 12.  “To eliminate work for boys and girls would be like eliminating people’s social conscience,” says Bolivia’s president, Evo Morales.  This was the culmination of a campaign led by UNATsBO, an organization representing Bolivian working children, led by children with advice from adults.  One of their adult advisors is Manfred Liebel, a German political scientist.  His writings combine familiar radical tropes with passionate belief in the virtue of child labor.

Brazil: Temer Orders Military to Surround Residence of Dilma Rousseff: enate-imposed Interim President Michel Temer has deployed military troops to cordon off the area surrounding the Palácio da Alvorada, residence of the suspended President Dilma Rousseff, Brazilian Senate Vice President Jorge Vianna said on Thursday. Vianna said there’s a checkpoint at the Palácio do Jaburu, where Temer currently resides, and which is very close to Rousseff' residence in the capital of Brasilia. “Anyone visiting President Dilma has to go through a checkpoint installed at Jaburu, with several heavily armed military (personnel)… I just made a visit to President Dilma. I was with the president of the National Congress. And we had to identify ourselves and wait a long time before getting the access,” Vianna said. “This means that the elected president is under siege? What country is this? What provisional government is this?” the senator added.

New Political Earthquake in Brazil: Is It Now Time for Media Outlets to Call This a “Coup”? -  Brazil today awoke to stunning news of secret, genuinely shocking conversations involving a key minister in Brazil’s newly installed government, which shine a bright light on the actual motives and participants driving the impeachment of the country’s democratically elected president, Dilma Rousseff. The transcripts were published by the country’s largest newspaper, Folha de São Paulo, and reveal secret conversations that took place in March, just weeks before the impeachment vote in the lower house was held. They show explicit plotting between the new planning minister (then-senator), Romero Jucá, and former oil executive Sergio Machado — both of whom are formal targets of the “Car Wash” corruption investigation — as they agree that removing Dilma is the only means for ending the corruption investigation. The conversations also include discussions of the important role played in Dilma’s removal by the most powerful national institutions, including — most importantly — Brazil’s military leaders. The transcripts are filled with profoundly incriminating statements about the real goals of impeachment and who was behind it. The crux of this plot is what Jucá calls “a national pact” — involving all of Brazil’s most powerful institutions — to leave Michel Temer in place as president (notwithstanding his multiple corruption scandals) and to kill the corruption investigation once Dilma is removed. In the words of Folha, Jucá made clear that impeachment will “end the pressure from the media and other sectors to continue the Car Wash investigation.” Jucá is the leader of Temer’s PMDB party and one of the “interim president’s” three closest confidants.

Brazil: Coup or Fiasco? - The President of Brazil, Dilma Rousseff, has been suspended from her office while she goes on trial by the Senate. If convicted, she would be removed from office, which is what is meant in Brazil by “impeachment.” Anyone, even Brazilians, who have been trying to follow the last several months of political maneuvering may be excused if they are somewhat confused by the many turns this process has taken. What is really at issue here? Is this a constitutional coup as Pres. Rousseff has called it repeatedly? Or is this a legitimate act of holding the president responsible for grave misdeeds by her and members of her cabinet and advisors, as the “opposition” claims? If the latter, why is this occurring only now and not, say, in Rousseff’s first term as president before she was easily re-elected in 2015 by a significant margin? Rousseff is a member of the Partido dos Trabalhores (PT) that has been long led by her predecessor in office, Luiz Inácio Lula da Silva (Lula). One way to view these events is to see it as part of the story of the PT – its coming to power and now, quite probably, its ouster from power. From the point of view both of the military and of the traditional Establishment parties in Brazil, the PT was a dangerous revolutionary party, which threatened the conservative economic and social structures of the country. The United States viewed its “anti-imperialism” as directed primarily at the U.S. dominant role in Latin American politics, which indeed it was.

Brazil’s Congress Approves Revised Budget Plan - WSJ: Brazil’s interim government has pledged to fix a widening budget deficit, but its first victory in Congress was to get permission to make that gap even wider. Lawmakers approved on Wednesday a revised budget plan for the rest of this year, allowing a primary deficit, which excludes bulky interest payments, of 163.9 billion reais ($45.9 billion) in 2016. That would represent 2.65% of gross domestic product, the worst fiscal result on record. The broader nominal deficit, which includes interest payments, was 579 billion reais as of March, or 9.7% of GDP, according to central bank data. In 2015, the primary deficit was 111.2 billion reais, or 1.9% of GDP. It took Congress 17 hours to vote, in the first test of interim President Michel Temer’s political prowess in a legislature all but paralyzed by political stalemate. Mr. Temer has pushed for controversial economic measures, and Wednesday’s vote has sparked some hopes that other potentially unpopular measures could make it through Congress. “This is a victory for Michel Temer and shows he has political strength,” said Luciano Rostagno, a Latin America strategist at Banco Mizuho, in São Paulo. “An important step has been taken,” he said. Mr. Temer has been in the job since May 12, when President Dilma Rousseff was temporarily suspended to face an impeachment trial, which pundits expect to last at least a few months. Ms. Rousseff is accused of illegal accounting of public finances, an allegation she denies. She has said her impeachment was plotted by her vice president and former ally Mr. Temer, who denies the accusation.

US trade rep threatens Colombia’s peace process over legal plan to offer cheap leukemia meds -  Colombia wants to produce Novartis's leukemia drug imatinib under a compulsory license, something it is allowed to do under its trade agreement with the USA, to bring the price down from $15,161/year (double the annual average income) to prices like those charged in India ($803/year). This is totally legal, and the government has only taken the step because Novartis has refused to come to the table to negotiate. But that doesn't mean Novartis has sat on its hands: ever since Colombia announced this plan, the Swiss and US governments have been leaning on the country. Most recently, a top Orrin Hatch staffer from the Senate Finance Committee went to the Colombian embassy in DC and threatened to yank America's $450M in support for Paz Colombia, the peace process that offers the first hope in decades for stability in a country where America has fought a vicious, high-casualty proxy war on drugs. Bernie Sanders and Sen Sherrod Brown (D-OH) have written to the US Trade Rep, demanding that they cut this shit out. But the meetings at the Colombian embassy have sparked protest from some Democratic lawmakers. Yesterday, 15 House Democrats fired off a letter to Froman to complain. And in their own missive, Sanders and Brown wrote that the warnings given to Colombian officials contradict the rights that countries have under a World Trade Agreement to issue compulsory licenses. The lawmakers also noted that an existing trade agreement between the US and Colombia reiterates this right. “Attempts to dissuade Colombia … would be inconsistent with the goals of these agreements and would signal that the US is not committed to living up to the standards of our free-trade agreements when it does not suit corporate interests,” they wrote.

Venezuela Opposition Calls for Coup, Protests Turn Violent -- The opposition has demanded a referendum to remove President Nicolas Maduro be ensured to force snap elections  Opposition protesters hit the streets of Caracas and other cities across Venezuela—and in some cases attacked police—as part of a national day of action Wednesday to demand that electoral authorities speed up the process of scheduling a recall referendum against President Nicolas Maduro.   Thousands of demonstrators in Caracas gathered on the central Plaza Venezuela with plans to march a few blocks to the nearby National Electoral Council (CNE). Anti-government protesters, who waged a similar protest a week ago, are putting pressure on authorities to move quickly to validate signatures submitted last week to fulfill requirements for a recall referendum.   The opposition is pushing for the recall referendum to happen this year to ensure that removing Maduro from office would result in Some of the protesters have attacked police officers, who are safeguarding the nearby of the Electoral Council. Caracas Mayor Jorge Rodriguez said protesters also destroyed a library and doused police with gasoline. 

Price of corn flour in Venezuela up 900%: – Venezuelans on Tuesday, May 24, woke up to discover that the government-controlled price of corn flour – used to make corn patty arepas, a staple of local cuisine – has risen 900%. The socialist government of President Nicolas Maduro had kept the price of corn flour frozen for 15 months at 19 bolivares a kilo. But late Monday the government's Superintendent of Fair Prices increased the price to 190 bolivares a kilo, or $19 at the government rate used for imports like medicine and scarce food. Flour is one of the most scarce food basics, and the Venezuelan Association of Corn Flour Industrialists has been asking for a price increase, arguing that the low government-set price does not cover the cost of production. The Superintendent also said that the price of chicken would rise, up 13 times from 65 bolivares a kilo to 850 bolivares ($85). The price of chicken had also been frozen since February 2015. Venezuela is enduring the world's highest inflation rate: 180 percent in 2015, and a projected 700 percent for 2016. Officials said in early May that the price of controlled products would be updated to better reflect the cost incurred by producers. A "Law of Just Prices" sets a maximum profit margin of 30 percent for all goods and services. But in the case of food and medicine, a senior official said that profits are "compressed" to between 14 and 20 percent. Venezuela's oil-dependent economy has been crippled by the plunge in price of petroleum on global markets.

Bank of Canada: Economy will shrink due to Alberta wildfires (AP) — Canada’s central bank said Wednesday the Canadian economy will shrink in the second quarter because of Alberta’s devastating wildfires, which shut down its oil sands production. The Bank of Canada, which kept its key interest rate on hold, said its preliminary assessment is that the destruction and halt to oil production will knock about 1 1/4 percentage points off real GDP growth in the second quarter. In April, the bank had forecast 1 percent growth in the quarter. The bank expects the economy to rebound in the third quarter as oil production resumes and the rebuilding starts. Officials hope to start a phased in return of more than 80,000 evacuees to the main oil sands city of Fort McMurray starting June 1. The fire and mass evacuation has forced a quarter or more of Canada’s oil output offline. The Alberta oil sands have the third-largest reserves of oil in the world behind Saudi Arabia and Venezuela. Its workers largely live in Fort McMurray, a former frontier outpost-turned-city whose residents come from all over Canada. About 1,921 structures were destroyed in Fort McMurray, but 90 percent of the city remains intact, including essential infrastructure like the hospital, water treatment plant and the airport. Oil sands facilities were largely untouched. The effects on the oil sector have also prompted private sector forecasters to trim their 2016 economic growth predictions for the entire country. “The spillover is a shock to Canada I think it highlights the importance of the sector,” said Craig Wright, the chief economist for the Royal Bank of Canada. “When a community that has 90,000 people is impacted like this and it drives down Canada’s GDP it drives home the point fairly sharply.”

Israel's ex-defense minister: 'Extremist and dangerous elements have overrun Israel' - (Reuters) - Israel's defense minister resigned on Friday, saying the nation was being taken over by "extremist and dangerous elements" after Prime Minister Benjamin Netanyahu moved to replace him with a far-right politician in an effort to strengthen his coalition. Political sources say Netanyahu has offered long-time rival Avigdor Lieberman the defense portfolio, a post crucial for a country on a perennial war footing and which runs civil affairs in the occupied West Bank, where Palestinians struggling for statehood live in friction with Jewish settlers. "To my great regret, I have recently found myself in difficult disputes over matters of principle and professionalism with the prime minister, a number of cabinet members and some lawmakers," a grim-faced Moshe Yaalon said in a televised statement at the defense headquarters in Tel Aviv. "The State of Israel is patient and tolerant toward the weak among it and minorities ... But to my great regret extremist and dangerous elements have overrun Israel as well as the Likud party, shaking up the national home and threatening harm to those in it," he said, in a hint he might defect from the party.

Is fascism rising in Israel? - A military affairs commentator interrupts his broadcast to deliver a monolog: I'm alarmed by what's happening in Israel, he says, I think my children should leave. Former Prime Minister Ehud Barak warns of "the seeds of fascism." Moshe Arens, who served as defense minister three times, sees it as a turning point in Israeli politics and expects it to cause a "political earthquake."...The past five days have produced tumult in Israeli politics, since conservative Prime Minister Benjamin Netanyahu unexpectedly turned his back on a deal to bring the center-left into his coalition and instead joined hands with far-right nationalist Avigdor Lieberman, one of his most virulent critics. Lieberman, a West Bank settler, wants to be defense minister. So on Friday, Netanyahu's former ally and confidant, Defence Minister Moshe Yaalon, resigned and quit Netanyahu's Likud party in disgust. After a weekend to digest the developments, which are expected to be finalized in an agreement between Netanyahu and Lieberman on Monday to form the most right-wing government in Israel's 68-year-old history, commentators have tried to put it in perspective and found themselves alarmed. Arens, who has served as defense minister, foreign minister and ambassador to the United States, and is one of Netanyahu's early political mentors, said the machinations would have far-reaching repercussions. Israel has been "infected by the seeds of fascism," said former Prime Minister Ehud Barak.

Israeli forces Continue Collective Punishment Policy against fishermen, Arrest 10 Fishermen and Confiscate 5 Boats - The Palestinian Center for Human Rights (PCHR) strongly condemns the Israeli escalation of attacks against fishermen in the Gaza Sea; the last of which was against a group of fishing boats in the northern Gaza Sea.  During this attack, Israeli naval forces arrested 10 fishermen and confiscated 5 fishing boats.  PCHR considers these attacks as part of the collective punishment forms Palestinian civilians in the Gaza Strip and target fishermen’s livelihoods.  PCHR calls upon the International community to intervene to protect Palestinian fishermen and violations against them and direct attacks against them and their property. According to PCHR’s investigations, at approximately 05:40 on Sunday, 22 May 2016, Israeli gunboats stationed off al-Wahah shore, northwest of Beit Lahia in the northern Gaza Strip, heavily opened fire at Palestinian fishing boats.  Two gunboats then surrounded two fishing boats sailing within 1 nautical mile.  One of these boats belongs to Ishaq Mohammed Mohammed Zayed (54) who was on its board at that time along with his two sons, Rasem (29) and Mohammed (19).  Meanwhile, the other fishing boat belongs to Younis Diab Mousa Zayed (53), who was on its board at that time along with his two sons, Saqer (20) and Ayman (18).  The Israeli soldiers ordered all of fishermen on both boats to take off their clothes, jumped into the water and swim towards the two gunboats.  The Israeli soldiers roped the two boats with the gunboats and took them to an unknown destination. (more of the same)

Islamic State advance near Turkish border, civilians trapped | Reuters: Islamic State fighters captured territory from Syrian rebels near the Turkish border on Friday and inched closer to a town on a supply route for foreign-backed insurgents fighting the jihadists, a monitoring group said. The hardline group has been fighting against rebels in the area for several months. The rebels, who are supplied via Turkey, last month staged a major push against Islamic State, but the group counter-attacked and beat them back. The United States has identified the area north of Syria's former commercial hub Aleppo as a priority in the fight against the Islamic State group (IS). The British-based Syrian Observatory for Human Rights said Friday's advance was the biggest by IS in Aleppo province for two years. It brought the jihadists to within 5 km (3 miles) of Azaz, a town near the border with Turkey through which insurgents have been supplied. Islamic State said in a statement it had captured several villages near Azaz. International medical charity Medecins Sans Frontieres said it evacuated patients and staff from a hospital in the area as the fighting got closer, and that tens of thousands of people were trapped between the frontlines and the Turkish border. A Syrian NGO operating in the area said the latest assault by IS had displaced 20,000 more people toward Turkey.

The Destabilizing Consequences of Globalization: It is not possible to coherently discuss the "New Normal" economy without discussing financialization--the substitution of credit expansion and speculation for productive investments in the real economy--and its sibling: globalization. Globalization is the result of the neoliberal push to lower regulatory barriers to trade and credit in overseas markets. The basic idea is that global trade lowers costs and offers more opportunities for capital to earn profits. This expansion of credit in developing markets creates more employment opportunities for people previously bypassed by the global economy. Though free trade is often touted as intrinsically positive for both buyers and sellers,in reality trade is rarely free, in the sense of equally powerful participants choosing to trade for mutual benefit. Rather, “free trade” is the public relations banner for the globalization of credit and markets that benefit the powerful and wealthy, not the impoverished. Financialization and mobile capital exacerbate global imbalances of power and wealth. Trade is generally thought of as goods being shipped from one nation to another to take advantage of what 18th century economist David Ricardo termed comparative advantage: nations would benefit by exporting whatever they produced efficiently and importing what they did not produce efficiently.

Why Citi Is "Becoming More And More Convinced That The System Won't Stabilize" -- After taking a three month leave of absence, Citi's Matt King has stormed right back to the front lines of financial reporting where his original perspective is very critically needed, and following up on his latest must read presentation which we posted two weeks ago and dubbed "the tipping point", overnight Citi's chief credit strategist is out with a new note titled "The race to the bottom", which focuses on the negative feedback loop world in which "liquidity breeds liquidity and illiquidity breeds illiquidity" (we are now in the latter phase), and how this impacts both global markets and the global economy, and how central banks are desperately struggling to prevent it all from crashing down.  In this note we will layout King's thoughts on the market; his observations on the economy will be presented at a later time.  From Citi's Matt King: No, we’re not talking about currency wars, though they do illustrate the phenomenon. Nor are we thinking about € credit spreads and yields rapidly converging on (and in some cases surpassing) the zero bound. Rather, a significant theme of our research in recent years has been the tendency of investors to assume they live in a zero-sum world, only to face a rude awakening when they discover that markets think otherwise. Think of the reaction to falling (and now rising) oil prices, for example. What ought just to be a redistribution of wealth between oil producers and oil consumers has turned out not to be. Both markets and the global economy have proved an awful lot happier when prices have been rising than when they have been falling. The same applies in multiple other spheres. We talk about money flowing from one market to another as though there is a fixed amount of it. Yet we have argued elsewhere that it is constantly being created through credit expansion in the private sector and on central bank balance sheets, or destroyed through deleveraging and defaults, and that changes in the multipliers – as opposed to the flows themselves – are at least as important as a driver of market movements and economic growth.

IMF Lays Out Bleak Prospects for Greek Debt Without Restructuring -- The International Monetary Fund believes Greece’s debt will rise toward 300% of gross domestic product in the long term, unless the country’s loans are deeply restructured, according to an IMF document shared with eurozone governments last week. The IMF’s debt sustainability analysis, presented at a May 12 meeting of eurozone finance officials in Brussels, says that without debt relief, Greece’s debt-to-GDP ratio will reach 294% in 2060, and that maturing debts and interest payments will take up 67% of GDP by then. With major debt relief, however, the IMF document says Greek debt can fall steadily toward 100% in the long term, and its gross financing needs would stay below 20% in the forecast period. The IMF is at odds with eurozone governments led by Germany over Greece’s debt, which the Washington-based fund says is unsustainable. Germany is insisting that the IMF must rejoin the Greek bailout program as a lender if Europe is to disburse any more aid loans to Athens. The IMF, which has been on the sidelines since last summer, says it can only rejoin if Germany agrees to debt relief, and if Greece offers more targeted fiscal retrenchment measures than hitherto. German officials, although keen on IMF involvement, are seeking to delay any loan restructuring until the end of the current Greek bailout program in 2018, so that Germany’s parliament, the Bundestag, would pass such measures only after Germany’s 2017 elections. A deal that either bridges the IMF-German gap or that leaves the IMF outside the bailout is needed by June, or July at the latest, so that Greece can be kept afloat with rescue loans. The IMF paper calls on Greece’s eurozone creditors to restructure their €200 billion-plus of bailout loans to Greece by delaying all payments until after 2040, stretching loan maturities out until as late as 2080, and locking in interest rates of no more than 1.5% for over 30 years.  The IMF’s analysis is bleaker than the most pessimistic European institution forecast. The biggest difference in the forecasts’ assumptions is that the IMF believes Greece won’t be able to achieve primary budget surpluses, excluding interest, of more than 1.5% in coming years and decades.

Greece: Creditors out to crush any trace of Syriza disobedience - It has taken only nine months for the third memorandum between the near-bankrupt Greek state and its creditors — the “Quartet” of the European Union (EU), European Central Bank (ECB), International Monetary Fund (IMF) and European Stability Mechanism (ESM) — to lurch to the brink of crisis. That deal, which the Syriza-led government of Prime Minister Alexis Tsipras felt forced to swallow despite the Greek people rejecting an earlier version by over 60% in a referendum last July, will provide the country with €86 billion. About 90% of this will go to paying off debt. In turn, the tightly policed Greek government must continue to implement a package of strict austerity “reforms”. These cover pension cuts, tax rises, privatisations and labour market deregulation. On April 22, Jeroen Dijsselbloem, Dutch president of the Eurogroup of finance ministers, said that an in-principle agreement had been reached. This involves the Greek government committing to implement a “contingent” €3 billion bundle of extra cuts if the country fell behind on its debt reduction targets. The supposed compensation for Greece was a statement that the Eurogroup was “ready to begin discussions on possible options for granting Greece some debt relief”. At the same time, the persistent differences between the Eurogroup and IMF over how best to extract “good behaviour” from Greece were resolved. The majority Eurogroup stance, imposed by the German government, was that Greece under a Syriza-led government would always be a repeat offender. It would grasp at any debt relief to lapse back into “bad habits” of public sector waste, excessive wages and social welfare dependence and chronic tax evasion.

The IMF and calling Berlin’s bluff over Greece Wolfgang Münchau, FT --  At one level, the recurring Greek crises fit the idea from Karl Marx of history repeating itself, first as tragedy then as farce. Greece came close to a eurozone exit last summer. While it will probably come close this year, it is unlikely to leave. But prepare for some tense moments in the next few weeks and months as Greece and its creditors struggle to agree the first review of last year’s bailout. The International Monetary Fund has concluded that Greek public debt, at 180 per cent of gross domestic product, is unsustainable; as is the agreed annual primary budget surplus, before interest payments, of 3.5 per cent of GDP. The fund insists on debt relief, but Germany resists. A year ago Angela Merkel, German chancellor, and Wolfgang Schäuble, her finance minister, sold the Greek bailout to their party and parliament as a loan only. They argued that once you accept a debt writedown, you turn a loan into a transfer. And once you accept the principle of a one-off transfer to Greece, you are on a slippery road to what the Germans call a transfer union, one where they pay and others receive. In private, senior German government officials agree that Athens needs debt relief. They are not blind. But they are trapped in the lie that Greece is solvent, which is what their own backbenchers were told. Without that lie, Greece would no longer be a eurozone member. But the lie cannot be sustained. IMF insistence on debt relief is what could expose this lie. Christine Lagarde, managing director, last year set debt relief talks as a condition for the fund’s participation in a bailout. Mr Schäuble reluctantly agreed yet managed to insert the words “if needed”, which give him wriggle room. But Berlin imposed another condition: the IMF must participate in the bailout, too. This is what makes the German position vulnerable. We know IMF staff are steadfast in their opposition to being involved in a bailout without an agreement on debt relief. The trouble is that the policies are not determined by the staff but by the IMF shareholders.

Greece passes fresh austerity measures in bid to secure bail-out cash: Greek MPs last night approved fresh austerity measures that will pave the way for new eurozone rescue loans and an agreement to reduce the country’s massive debt burden. The ruling coalition, led by prime minister Alexis Tsipras’s Syriza party, backed the last part of a €5.4bn austerity package that includes further tax hikes as well as automatic spending cuts if budget targets are missed. Eurozone finance ministers will meet on Tuesday to discuss disbursement of an €11bn loan tranche which the country needs before July to avoid a debt default. Jeroen Dijsselbloem, the head of the Eurogroup, said this weekend that he was confident that Greece’s creditors could agree on a debt relief deal for the cash-strapped country. The International Monetary Fund (IMF) has proposed a moratorium on payments until 2040, while European creditors are in favour a a three-stage process which ties debt relief to short and long-term progress on reforms.  The IMF is refusing to participate in the third Greek bail-out without “substantial debt relief”. Mr Katrougalos said: “Ideally I think it would be Europeans arranging European affairs. "But with regards to debt relief, I think the IMF has a very clear position that we support ourselves. That it is not sustainable, and serious measures should be taken in order to face the situation.”

Greece: Creditors out to crush any trace of Syriza disobedience -  It has taken only nine months for the third memorandum between the near-bankrupt Greek state and its creditors — the “Quartet” of the European Union (EU), European Central Bank (ECB), International Monetary Fund (IMF) and European Stability Mechanism (ESM) — to lurch to the brink of crisis. That deal, which the Syriza-led government of Prime Minister Alexis Tsipras felt forced to swallow despite the Greek people rejecting an earlier version by over 60% in a referendum last July, will provide the country with €86 billion. About 90% of this will go to paying off debt. In turn, the tightly policed Greek government must continue to implement a package of strict austerity “reforms”. These cover pension cuts, tax rises, privatisations and labour market deregulation. On April 22, Jeroen Dijsselbloem, Dutch president of the Eurogroup of finance ministers, said that an in-principle agreement had been reached. This involves the Greek government committing to implement a “contingent” €3 billion bundle of extra cuts if the country fell behind on its debt reduction targets.  The supposed compensation for Greece was a statement that the Eurogroup was “ready to begin discussions on possible options for granting Greece some debt relief”. At the same time, the persistent differences between the Eurogroup and IMF over how best to extract “good behaviour” from Greece were resolved.

Operation “looting of Greece” reaches final stage - One of the key targets of the Greek experiment, which is the looting of the Greek public property from the global financial mafia "investors", is about to be completed. In the front stage, the puppets of the European Financial Dictatorship (EFD) and IMF mafia continued their usual disorientation games. In the backstage, they continue to execute their mission, absolutely united and dedicated to the timeline of the Greek experiment. They forced the "Leftist" government to accept massive privatizations of unprecedented scale, opening the door to international predators.  From Naftemporiki : A new privatization fund unveiled by the leftist Greek government on Thursday will include various urban mass transit companies, the Athens Olympic Stadium (OAKA), national rail subsidiaries, the light rail operator and even the Greek post offices (EL.TA) in its portfolio. The new “super fund”, with the Greek-language abbreviation of “EDIS”, was one of the many addendums added to a massive 7,200-page omnibus draft bill submitted to Parliament for approval.The voluminous bill is the third tranche of a 5.4-billion-euro package of measures aimed at meeting memorandum-mandated fiscal targets through 2018 and ensuring a continuing flow of bailout loans by Greece’s institutional creditors. Other state-owned and operated entities headed for the new fund are the Athens and Thessaloniki water and sewerage utilities – the former already listed on the Athens Stock Exchange – an ammunitions and weapons manufacturer, the Athens metro operator, the listed Public Power Corp (PPC), the pre-eminent power utility, and a very large number of properties around Greece.   For six years now, the plutocrats' puppets used various methods to force their debt colony walk towards this one-way: financial coups, closed banks, loyal to the big interests officials in key positions and governments of technocrats.

Eurozone and IMF Strike Deal on Greek Debt - WSJ: Eurozone finance ministers and the International Monetary Fund patched together a deal in the early hours of Wednesday that clears the way for fresh loans for Greece and sets out how the country could get debt relief in the future. The ministers, who held an 11-hour meeting in Brussels, said Greece had done what was necessary to unlock the next slice of financial aid, concluding a review of its bailout that was delayed for months. The new payouts will save Greece from defaulting on big debt redemptions to the IMF and European Central Bank in July. “On the package of reforms Greece had committed to last summer, we now have full agreement,” said Jeroen Dijsselbloem, the Dutch finance minister who presided over the meeting of finance ministers. Once all 19 eurozone countries have formally signed off on the new deal, Greece will get €10.3 billion ($11.48 billion) in fresh loans, starting with a €7.5 billion installment in the second half of June. The ministers also agreed on a road map to ease Greece’s mountain of debt, moving to end a long-standing standoff with the IMF over the type and scale of relief Athens needs. “It is an important moment for Greece after so much time,” said Greek Finance Minister Euclid Tsakalotos. Wednesday’s deal required all key parties in the negotiations to let go of some of their demands and go further on other elements than they had said was possible: Greece had to adopt more austerity than it had signed up for last summer; Germany had to promise more measures to ease Greece’s payment burden; and the IMF had to accept that the most important debt-relief measures wouldn’t be enacted until at least 2018, when Greece’s current bailout deal ends. Among the steps that will be considered in 2018 are caps and deferrals on interest rates as well as the return to Athens of profits from Greek government bonds held by eurozone central banks, Mr. Dijsselbloem said. The eurozone may also use leftover funds from its own bailout to repay earlier other official loans, for instance from the IMF.

Germany Calls IMF’s Bluff and Wins: Greece Screwed Again -- In a “breakthrough” agreement to kick the can until after the next German elections, the IMF backed down on its demand for immediate debt relief for Greece now. According to the agreement, Greece will have to maintain a primary budget surplus of 3.5% of GDP, a condition the IMF argued as impossible, just a few days ago. Please consider Greece Reaches Debt Relief Breakthrough with Creditors. Creditors have decided on measures to provide short, medium and long-term debt restructuring on Greece’s 180 per cent debt mountain, having been locked in eleven hours of negotiations in Brussels, ending at 2am local time, writes Mehreen Khan in Brussels.As part of its measures, Greece will gain a short-term re-profiling of its loans, while more expensive debt could be “swapped” with cheaper loans to bring down the country’s overall financing costs.A statement from finance ministers said:“The Eurogroup agreed today on a package of debt measures which will be phased in progressively, as necessary to meet the agreed benchmark on gross financing needs and will be subject to the pre-defined conditionality of the ESM programme.” "We achieved a major breakthrough on Greece which enables us to enter a new phase in the Greek financial assistance programme,” said Mr Dijsselbloem.  [Mish Translation: We called the IMF’s bluff and won. Hooray!]Greece could also receive around €1.9bn in profits held by the European Central Bank to pay back its loans by mid-2018. Creditors also agreed on a “mechanism” to provide further long-term restructuring to keep the country’s financing costs below 20 per cent of GDP by 2060 – a key threshold

Yet ANOTHER Greek bailout! Angela Merkel approves £9 BILLION fund for debt-ridden Greece -- ANGELA Merkel has assured Greece it can expect to receive around £9 billion in emergency loans today - after the debt-addled country's government promised to tighten its belt with a series of new austerity measures last weekend.The huge bailout is expected to be rubber-stamped at today's Eurogroup meeting, where the country's leftist Prime Minister Alexis Tsipras will detail Greece's new money-saving methods. These include £1.4bn in new taxes, a VAT increase from 23% to 24% and a new privatisation policy, in which EU bureaucrats will oversee the sale of 72,000 individual pieces of public property. These austerity measures were blasted by opposition politicians and supporters, who accused the government of selling out to Brussels and sacrificing both its past and future. They are, with the exception of the Acropolis, selling everything under the sun Protestors marched in Athens following the announcements of the new measures, which also includes tariffs on beer.

Greece bailout: IMF queries eurozone debt relief deal - BBC News: The International Monetary Fund (IMF) has announced it is not yet ready to join the EU's new bailout for Greece, saying it needs further details. A senior IMF official told reporters in Washington that EU creditors had yet to specify what debt relief measures they planned to take. Earlier, eurozone finance ministers agreed on debt relief for Greece. They had long been at odds over the issue, with Germany in particular opposed to forgiving debt. As a result of that agreement in Brussels, the ministers agreed with Greece to unlock a further 10.3bn euros ($11.5bn; £7.8bn) in loans. Athens needs this tranche of cash to meet debt repayments due in July. The Greek government owes its creditors more than €300bn - about 180% of its annual economic output (GDP). Debt relief is considered by the IMF to be essential for Greece. A third bailout, worth €86bn, was agreed last year.The IMF required a "clear, detailed Greek debt restructuring plan" before it could approve the bailout, the senior official was quoted as saying by The Wall Street Journal."Greece is in a situation where it needs a disbursement, and so we were certainly willing to concede on some points," the official, who was speaking on condition of anonymity, was quoted by AFP news agency as saying. "But we have not conceded on the point that we need adequate assurances regarding debt relief before we go to our board."

IMF Not Funding July Greece Deal, Still Wants Serious Debt Relief Before Committing New Dough  -  Yves Smith - While Germany and in particular Wolfgang Schauble scored a win in getting a deal cobbled together so that Greece will get more extend and pretend, um, bailout funds, as of July, it’s much less of a win that the high fives at the Eurogroup meeting on Tuesday would lead one to believe. The IMF participating in the rescue was a condition for Germany providing more funding. The Bundestag has stipulated that earlier; proceeding in any other manner would require the government to go back to the Bundestag to get approval of a bailout without IMF involvement, which would be an extremely hard sell, particularly with a short lead time to work on public opinion as well as individual legislators. Six other Eurogroup members in theory require parliamentary approval for forking more dough over to Greece, but at past decision points, most of these governments, like Finland, have punted on having the supposedly required vote. The latest maneuver looks like even more of a finesse that the usual European high optics to substance arrangement. The IMF merely signed the memorandum; the agency is not providing any new money. From the Wall Street Journal: A senior International Monetary Fund official Wednesday said it can’t help Europe with fresh emergency financing for Greece because Athens’s creditors haven’t yet committed to detailed debt relief. The comments show that the agreement touted by European finance ministers last night to release fresh bailout cash for Greece hasn’t nailed down the key elements the IMF says are critical to finally return the debt-laden country to health. Rather, the IMF’s reserved support for the deal has paved the way for Germany to approve new funds and sets the stage for more tough negotiations later this year…. The IMF had recognized back in April that it and the Germans (and the European Commission, which also endorsed the fantastical idea that Greece could achieve a primary surplus of 3.5% by 2018); that’s why it leaked the notes of the conference call between the European program chief Poul Thomsen and the head of the Greek negotiating team. The call participants discussed exactly what happened: a deal of some sort would need to be patched up in the May Europgroup meeting just past, or else be cobbled together in early July, after the Brexit vote, since no Eurocrat wanted a tough negotiation over Greece to give the Leave campaign talking points.

France’s Guillotining of Global Free Speech Continues – Lauren Weinstein's Blog: The war between France and Google — with France demanding that Google act as a global censor, and Google appealing France’s edicts — shows no signs of abating, and the casualty list could easily end up including most of this planet’s residents. As soon as the horrific “Right To Be Forgotten” (RTBF) concept was initially announced by the EU, many observers (including myself) suspected that the “end game” would always be global censorship, despite efforts by Google and others to reach agreements that could limit EU censorship to the EU itself. This is the heart of the matter. France — and shortly we can be sure a parade of such free speech loathing countries like Russia, China, and many others — is demanding that Google remove search results for third-party materials on a global basis from all Google indexes around the world. What this means is that even though I’m sitting right here in Los Angeles, if I dare to write a completely accurate and USA-legal post that the French government finds objectionable, France is demanding the right to force Google (and ultimately, other search engines and indexes) to remove key references to my posting from Google and other search results. For everyone. Everywhere. Around the world. Because of … France.

French labour dispute: Widespread strikes cause disruption - BBC News: France is being hit by serious disruption as unions lead strike action at oil refineries, nuclear power stations, ports and transport hubs. Motorways, bridges and tunnels have been blockaded, and flights and rail services affected. Nuclear power production has slowed, and fuel remains in short supply. PM Manuel Valls has again insisted that labour reforms at the heart of the dispute would not be withdrawn, but suggested they could be "modified". The French government is under increasing pressure to give ground as the country prepares to host the Euro 2016 championships in two weeks' time, correspondents say.The unions have called for rallies in most major cities. Hundreds of workers marched into the port city of Le Havre, in Normandy, having blocked off the nearby Bridge of Normandy. To the east, a nuclear submarine base was also blocked off by striking workers. Flights to and from Paris, Nantes and Toulouse have been affected, and a rolling strike by train drivers has brought further disruption to regional and commuter rail services.

Outages Hit French Nuke Plants as Workers on Strike Nationally -- Nuclear power plants across France were hit with unplanned outages on Thursday after unionized workers at utility EDF (EDF.PA) joined a rolling nationwide strike against planned government reforms.  At least 11 of France's 58 reactors suffered outages, according to grid operator RTE, lowering output by about 5 gigawatts (GW) or 6 percent of the country's nuclear capacity. Members of the CGT union at all 19 of France's nuclear power stations voted on Wednesday to join the strike which has already paralyzed businesses and disrupted fuel supplies, causing shortages in some places. State-controlled EDF is required to maintain a minimum output level so as to prevent power cuts during any strike action and the public may not notice the lower nuclear power output. However, the fall does mean higher costs for EDF as it must start up more expensive coal- and gas-fired power plants and boost electricity imports. France's power imports, mostly from Germany and Switzerland, had by 1100 GMT jumped to about 3.3 GW from approximately 800 MW around the same time a day earlier, RTE data showed. Nearly 10 percent of EDF's staff were participating in the strike, a company spokeswoman said, declining to comment on output except to say the utility continued to supply its clients.

Front Runner Marine Le Pen’s campaign to make France great again : In 2014, Marine Le Pen campaigned for a seat in the European parliamentary elections on an unapologetically anti-Europe platform. The F.N. asked to be sent to an institution whose legitimacy it did not accept, and French voters rewarded the party with first place in the election. Illustration by Matthew RichardsonOn a mild morning last November, I met Le Pen in Strasbourg, at her office on the sixth floor of the parliament. She wore a dark jacket, dark jeans, and a gray paisley scarf coiled loosely around her neck. Her blond hair was pulled back in a hasty ponytail, and she occasionally inhaled from an e-cigarette with a gawky green filter. When I told her that I’d last seen her in 2012, at one of the earliest press conferences for her first presidential campaign, she smiled and said, “A lot has changed since then.” Le Pen was tired, and it quickly became clear that I had found her at a profoundly ambivalent moment, both for her and for the F.N. Eleven days earlier, on November 13, three teams of young men who were associated with the Islamic State had murdered 130 people in Paris and blown themselves up with suicide vests. The deaths of so many Parisians sent the devastated nation into a panic. But during the state of emergency that followed the attacks, which continues today, the French government proposed or enacted a number of policies that the F.N. had advocated for years, such as reinstating controls at intra-European borders and staging preemptive raids on suspected radicals. For perhaps the first time, Le Pen had a taste of the legitimacy that she had long sought. Speaking of her political opponents, she told me, “It will be difficult for them to continue to treat the National Front as a fringe movement, or as unrepresentative or insignificant.”

For First Time Since World War II, "Right-Wing, Anti-Immigrant, Euroskeptic" Set To Become President Of Austria -- One month ago, pro-European voices in Austria, and all of Europe, were suddenly muted when in the first round of the Austrian presidential election, Norbert Hofer head of Austria Freedom Party (FPO), described as a "Euroskeptic, right-wing, anti-immigrant party" crushed his opposition buoyed by a migration crisis that has heightened fears about employment and security across the continent, and gathered a whopping 35% of the vote leaving the other five legacy candidates far behind. Today, Austria holds the decisive run-off round between Norbert Hofer and former Greens leader Alexander van der Bellen, which according to preliminary opinions polls was set to be a close vote, although probably not that close. According to Reuters, a far-right victory would resonate across the 28-member EU, where migration driven by conflict and poverty in the Middle East and elsewhere has become a major political issue. Support for groups like the Euroskeptic, anti-immigration Freedom Party (FPO) has been rising in various countries, whether they have taken in many migrants in the recent influx, like Germany and Sweden, or not, like France and Britain. Most are still far from achieving majority support. The FPO has been in government before, serving as a coalition partner in the early 2000s when it was led by the late Joerg Haider. But whoever wins the presidential election, it is likely to be a new high-water mark for Austria's and Europe's far right, all the more significant for being in a prosperous country with comparatively low, albeit rising, unemployment.

Greece starts moving migrants from squalid border camp | Reuters: Greece sent in police and bulldozers on Tuesday to knock down tents and relocate hundreds of migrants who had been stranded for months in a squalid makeshift camp on the border with Macedonia. Several busloads of people, most of them families with children, left the sprawling expanse of tents at Idomeni to move to state-run centers further south. Buses were lined up ready to take more, Reuters witnesses said. By the latest count, at least 8,000 people were camped at Idomeni in difficult, overcrowded conditions with poor sanitation, ignoring previous calls by the government to leave. As many as 12,000 people, most of them Syrians, Afghans and Iraqis, were stuck there at one point after Balkan countries shut their borders in February, barring them from crossing to central and northern Europe. Greece was the main entry point for more than a million migrants who made it to Europe last year, most after perilous sea crossings. New arrivals there have slowed sharply since the European Union struck a deal with Turkey to get it to curb the flow, but the government says there are still more than 54,000 migrants on Greek soil. It plans to move people gradually to state-supervised facilities which have a capacity of about 5,000. A total of 2,031 people were moved on Tuesday, police said, 1,273 of them Kurds, 662 Syrians and 96 Yazidis.

Libya migrants: Ship capsizes in Mediterranean - The delicate balance of an overcrowded boat carrying hundreds of migrants turned into a frightening roll as an Italian navy ship approached Wednesday. Passengers had rushed to the port side, a shift in weight that proved too much. People began tumbling into the Mediterranean Sea. Images taken by Italian sailors showed people clinging to the rails of the teetering ship, while others grabbed the closest person to them.   As the ship was on its side, some of those in the water seemed to sense the danger and began to swim away. People still on board climbed to the starboard side, now the highest point. Read More There was no stopping the momentum and the ship capsized, sending the rest of the migrants fleeing the Mideast into the sea off the coast of Libya. The Italian crew threw life jackets and rings into the churning water. About 562 migrants were rescued, but five people died, the navy said. The number of dead initially was given as seven. Rescuers used dinghies, a helicopter and a second navy ship.

Markit Euro Area PMI Lowest in 16 Months: Markit’s latest Purchasing Manager’s Index (PMI) has reinforced the picture that the euro area is growing at a slow pace, as the index posted its lowest score in 16 months. For May, this index scored 52.9, a fall from the 53 that was reached in April. As the average of the first quarter of this year was 53.2 from the financial research company, the weaker data from the past two months suggests that euro area growth will be sluggish for the second quarter. The survey found that with new business growth also sliding to the lowest since January 2015, Markit’s research points to a strong likelihood of output growth remaining subdued or even weakening further in June. The level of business activity in the vital service sector was unchanged for the third consecutive month. There was also the smallest rise in new businesses in the service industries since January 2015. When asked about their views over the future of their businesses in the service sector, there was little room for optimism, as expectations plummeted to a ten month low. The rate of manufacturing growth was also disappointing Markit found, as the output in the sector was the second weakest since February lat year. The growth of new orders that was received by factories also eased the survey found. Producers said that the domestic market within domestic markets it remained a tough environment to trade in. International trade flows have also floundered, as the smallest rise in new export business for 16 months.

While euro zone banks regain footing, Italian lenders still in shambles -- Eight years after the start of the financial crisis, the Italian bank bloodbath continues unabated even as other European banks are returning to health. The latest indication that the Italian banks are still in trouble is to come on Tuesday, when UniCredit, Italy’s biggest bank and one of Europe’s top lenders, is set announce the ouster of its CEO, Federico Ghizzoni, according to several published local and international reports. Mr. Ghizzoni has been working hard to shore up the bank’s capital, cut costs and boost profits, but apparently not hard enough to satisfy investors. UniCredit’s shares are down more 40 per cent since the start of the year, making them the fourth-worst performer in the Bloomberg Europe Banks index. A weak core capital ratio means it will soon have to raise about €6-billion ($8.8-billion) through a rights offering and asset sales in Italy and across its European network – no easy feat for a bank mired in a weak financial services market. Italy, the euro zone’s third-largest economy, is no longer in recession but the economic downturn that preceded the recovery was so long and nasty, and the bank rescue efforts so inadequate, that the Italian banks as a whole have yet to shed their zombie status. Their fragile state is dampening the revival in both Italy and the wider European economy. In a recent report, analysts at the German bank Berenberg said Italy’s bank repair job “will shape not just the future of the Italian banking system but that of the European one as well.” The deep Italian recession, lack of productivity and slow-motion bank fix-it job – the banking crisis was mostly ignored until Matteo Renzi became Prime Minister in early 2014 – have left the industry with deep wounds. The collective non-performing loan tally is €360-billion, equivalent to about 20 per cent of gross domestic product, the highest among the Group of 20 countries.

Dollar will be the winner when the EU volcano erupts: Europe's apparent inability to secure its monetary union leaves the world without any credible dollar alternatives. Those who were expecting that a legal tender of an economic system nearly matching the size of the American economy would offer an effective instrument of portfolio diversification have to accept a simple reality: The dollar remains an irreplaceable global transactions currency and, by far, the world's most important reserve asset. The pious hopes of the French President François Mitterrand and the German Chancellor Helmut Kohl that a common currency would bond their countries and the rest of Europe into a peaceful and prosperous union could soon be dashed. Their political offspring has become a symbol of European discord and a cause of seemingly irreconcilable French-German economic and political divisions. These historical divides are now aggravated by violent street demonstrations and frightening civil war rhetoric in France, where the country's mainstream politicians are trying to fight off extreme right and left parties, commanding nearly half of the popular vote and demanding an immediate exit from the EU and the euro. Investors would be well advised to take this seriously. Even if relatively moderate French center-right forces were able to keep the anti-EU parties at bay, a long-brewing clash with Germany appears inevitable. For many French politicians of all stripes, Germany has gone too far in bossing the rest of Europe around, and in causing a huge economic, social and political damage to France, Italy, Spain, Portugal and Greece with the imposition of its mean-spirited and misguided fiscal austerity.

In a social experiment watched by the world, Swiss may pay people $2,500 a month for doing nothing - The Swiss are discussing paying people $2,500 a month for doing nothing. The country will vote June 5 on whether the government should introduce an unconditional basic income to replace various welfare benefits. Although the initiators of the plan haven’t stipulated how large the payout should be, they’ve suggested the sum of 2,500 francs ($2,500) for an adult and a quarter of that for a child. It sounds good, but — two things. It would barely get you over the poverty line, typically defined as 60 per cent of the national median disposable income, in what’s one of the world’s most expensive countries. More importantly, it’s probably not going to happen anyway. Plebiscites are a common part of Switzerland’s direct democracy, with multiple votes every year. The basic income initiative is taking place after the proposal gathered the required 100,000 signatures, though current polls suggest it won’t get any further. The idea of paying everyone a stipend has also piqued interest in other countries, such as Canada, the Netherlands and Finland, where an initial study began last year.

Why the death of cash may have been exaggerated -- Izabella Kaminska - The Cambridge Security Initiative has released a report on cashless society, authored by Alfred Rolington and the verdict is… cash is still king, and don’t expect to see it disappear any time soon. This, however, runs contrary to the rhetoric of some central bankers these days, among them Andy Haldane, the BoE’s chief economist who has floated the idea of having the central bank issue its own digital cash as a means of combatting the zero lower bound. Haldane has also said central bank–issued digital currencies form a core part of the Bank’s research agenda as a result. In more recent weeks, the ECB has ruled it will stop issuing the €500 note, on concerns it was being abused by criminals and used by militants to finance their activities — though some suspect the note was also compromising the central bank’s ability to institute negative interest rates, with large notes making it easier to hold vaulted cash for the purpose of dodging interest rate charges.Separately, the Danish and Swedish governments have announced their intention to go entirely cashless in the years to come.But despite the general push towards a fully digital and data-traceable monetary universe by those in monetary authority, the CSI study finds it’s unlikely the endeavours will be successful. For one thing the security challenges in going entirely cashless — as recent hacks on the Swift network emphasise — are significant. The scale of recent cyber-attacks is such and the improvements in physical note protections and forgery detection are big enough to suggest transferring cash digitally may have become more dangerous than transferring it physically.

Treasury prepares to unleash final salvo in Brexit debate -  Households will face a devastating blow to their finances if Britain leaves the European Union, George Osborne will warn this week. The Treasury is expected to predict a perfect storm of soaring inflation, rising joblessness and falling house prices if voters choose to abandon the political bloc, as it unveils its latest analysis on the economic impact of Brexit. Government economists are preparing to publish a major report this week, the latest in a series of interventions intended to convince the public to choose to remain within the EU. It is believed that the analysis will highlight the risk of rising prices if voters opt for Brexit, as the decision could knock the pound, forcing up import costs. The resulting rise in inflation would eat into workers’ purchasing power, reducing households’ living standards. Mr Osborne has previously said the analysis will show house prices could fall after a vote for Brexit, and that “tens of thousands” of City jobs could be at risk. The Treasury is expected to expand on its analysis in this area, with a warning that millions of jobs linked to Europe would be at risk. Will the UK leave the EU? How to track the odds of a Brexit It is the Chancellor’s last opportunity to sway undecided voters, as the Government’s self-imposed curfew on campaigning comes into force on Friday. It is thought that the Treasury report will be published early in the week, to give MPs time to interrogate the department’s findings. The Treasury select committee has called Greg Hands, the Chief Secretary to the Treasury, to give evidence on the report ahead of the committee’s own analysis of EU membership. The committee has previously pressed Mr Osborne to release Treasury work on the issue sooner rather than later, so committee members have time to grill officials before the “purdah” period of government silence begins..

The Economic Arguments Against Brexit -  On Monday, Her Majesty’s Treasury released a report claiming that a “Leave” vote in the June 23rd referendum on whether the United Kingdom should leave the European Union would plunge the British economy, which has been growing modestly for the past couple of years, into a slump. The report says that, in the event of “Brexit,” the unemployment rate would jump, while G.D.P., house prices, the stock market, and the value of the pound sterling would all be hit hard. To emphasize this message, the Treasury posted a big headline on the home page of its Web site: “UK economy would fall into RECESSION if Britain leaves the EU.” In case the message wasn’t clear, the word “RECESSION” was printed in red, with cracks in the letters.What Treasury mandarins of the old school thought of this, I have no idea: they dealt in understatement and sangfroid. But, with the direction of the country at stake, not to mention the political fates of Prime Minister David Cameron and the Chancellor of the Exchequer, George Osborne, the government is doing all that it can to raise fears about the consequences of a decision to quit the E.U. Appearing alongside Osborne at a home-improvement store in Eastleigh, Hampshire, Cameron described Brexit as the “self-destruct option,” adding, “It’s about you, about your money and your life. The stakes couldn’t be higher; the risks couldn’t be greater.”  No sooner had the Treasury report been released than leaders of the Leave campaign tried to discredit it. Campaigning in York, Boris Johnson, the former mayor of London, denounced it as propaganda. Nigel Lawson, who was Chancellor under Margaret Thatcher, claimed that the Treasury officials who prepared it had been “made to prostitute themselves in the cause of a political campaign.” More damagingly, the report was also criticized by some less partisan sources. Oxford Economics, a respected consultancy, said that the Treasury’s central forecast—that G.D.P. would fall 3.6 per cent in the case of a decision to quit the E.U.—was “a worst-case scenario,” and almost three times as large as its own estimate.

Chancellor suffers double blow as Government borrows more than expected -- The Chancellor suffered a double blow on Tuesday after official figures showed public borrowing was higher than expected in April, while the previous year's deficit was also larger than first thought. Public sector net borrowing, excluding public sector banks, stood at £7.2bn in April. While this was £0.3bn lower than the deficit in April 2015, it was well above economists' estimates of a fall to £6.4bn, despite the data showing a rise in income tax, stamp duty, national insurance and VAT receipts. Alan Clarke, an economist at Scotiabank, described the figures as a "disappointing start to the year" as the Government attempts to reduce its borrowing bill to £55.5bn in 2016-17. "To hit the Chancellor's borrowing goal for this year we needed to see borrowing down by an average of £1.5bn per month compared with the same month a year ago so we are running behind schedule already," he said. The Office for National Statistics (ONS) also revised up the March borrowing figure to £6.7bn, from a previous estimate of £4.8bn. This helped to push up the public sector’s total borrowing in the 2015-16 financial year to £76bn - £2bn higher than previously estimated and some way above the £72.2bn projected by the Office for Budget Responsibility (OBR) in March. While public borrowing data are volatile and often revised, economists said the data unscored the challenge faced by George Osborne as the Government attempts to eliminate the deficit before the end of the decade. "April’s bloated borrowing number provides an early sign that the Chancellor will struggle to reduce borrowing this year as much as set out in the Budget, let alone achieve a budget surplus by the end of this parliament,"  Public sector net debt, excluding public sector banks, now stands at almost £1.6 trillion, or 83.3pc of gross domestic product (GDP).

TTIP symbolises the worst of global capitalism. Cameron pushes it at his peril -- David Cameron narrowly avoided the parliamentary defeat of his Queen’s speech this week – an event that, theoretically, triggers the fall of a government and hasn’t happened since 1924. That was only achieved through an embarrassing U-turn on TTIP, the Transatlantic Trade and Investment Partnership, which he ardently supports. One of the primary concerns about TTIP is that it could pave the way to further privatisation of the NHS. Yesterday, a group of MPs gave notice that they would table an amendment to the Queen’s speech, lamenting the fact that the government had not included a bill to protect the NHS from TTIP in its programme. The cross-party group was led by Peter Lilley, a long-time supporter of free trade and a former minister under Margaret Thatcher and John Major, and was supported by at least 25 Tory MPs – easily enough to overturn the government’s majority. Though many were Brexiters, by no means all were, and some, such as Sarah Wollaston, appear to have changed their position on TTIP.Realising he faced one of the most embarrassing defeats of his premiership – one not suffered since a similar motion removed Stanley Baldwin from office in 1924 – Cameron quickly said he’d support the amendment. Make no bones about it, this is a humiliation. The prime minister has repeatedly told MPs that TTIP poses no threat to the NHS. Yet to avoid the abyss, his government has supported an amendment contrary to these assertions. We must be under no illusions that he has any intention of moving to protect the NHS in TTIP.

Want to end corruption? Crack down on tax havens. It is a sign of progress that a Nigerian leader was able to come to London this month and, with a straight face, publicly accuse Western countries of promoting corruption on a global scale.“African countries have all too often been the victims of international corruption planned and executed from abroad using our own resources,” said Nigerian President Muhammadu Buhari in a prepared speech at a London anti-corruption summit May 12, in which he took aim at tax havens backed by rich countries. “Every dollar siphoned through dirty deals and corruption to offshore tax havens makes the livelihood and survival of the average African more precarious.”British media coverage of the summit, just weeks after the “Panama Papers” scandal erupted, was dominated by the theme of tax havens and their connections to corruption, embarrassing the summit’s host, British Prime Minister David Cameron, who had recently been forced to admit that he had profited personally from a Panama-based offshore trust set up by his father. And while the sums were modest and he did nothing illegal, Cameron faced a meatier problem: The Panamanian law firm at the center of the scandal, Mossack Fonseca, set up the largest number of its shell companies not in Panama but in the British Virgin Islands (BVI), part of a network of British-controlled overseas territories and crown dependencies that also includes the Cayman Islands, Bermuda and Jersey — all major tax havens. These places sport the queen’s visage on their banknotes and stamps, and their laws are approved in (and their final court of appeal is in) London.

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