week ending May 14

 Wall Street gives up on June rate hike by Fed after payrolls disappoint: poll | Reuters: Wall Street's top banks have all but abandoned any expectation that the Federal Reserve will raise interest rates in June, and most now see the U.S. central bank's next rate hike coming in September, according to a Reuters survey conducted on Friday. Friday's weaker-than-expected payrolls report for April acted as the catalyst for several economists at primary dealers to back away from their previous predictions for an interest rate increase at the Fed's next meeting in June. Moreover, conviction among primary dealers that the Fed would pull off more than one hike in 2016 is quickly eroding as well, with the soft employment data standing as only the latest indicator that U.S. economic growth is far from robust. U.S. employers added 160,000 jobs in April, the fewest in seven months. Economists had anticipated more than 200,000 jobs had been added last month. "This report did very little to make the case for a June rate hike," . "The data today really underscores our view that the Fed will want to see more data before hiking rates further."

New York Fed Chief Believes the Central Bank Is on the Right Track - William C. Dudley, the Federal Reserve Bank of New York president, who helped pilot the Fed’s post-crisis stimulus campaign, sounded pretty calm about the nation’s current economic situation. In an interview on Friday, Mr. Dudley said he foresaw continued growth despite bumps in the early months of the year — enough growth for the Fed to get back to slowly raising its benchmark interest rate. And if growth should falter, he said, there is plenty of medicine in the Fed’s chest.It remains a “reasonable expectation” that the Fed will raise its benchmark interest rate twice this year, Mr. Dudley said.“I think the general story of the economy over the last few years is very much intact,” he said during the conversation at the New York Fed’s ornate fortress in Lower Manhattan. “I think we’re still on track.”The Fed in recent months has faced some criticism that it moved prematurely by raising rates in December for the first time since the 2008 financial crisis. In the months after the move, both domestic and global growth weakened unexpectedly, and volatility increased across a wide range of financial markets.The Fed had held rates near zero to encourage borrowing and risk-taking, which stimulated economic growth. As it increases rates, those incentives are dwindling.In Mr. Dudley’s view, the Fed is keeping its balance by moving slowly.He said he still expected roughly 2 percent growth over the next year. He described the global situation as “dramatically better,” and said financial conditions have eased “considerably.”

Fed's Evans favors 'wait and see' on more rate hikes | Reuters: The U.S. economy's fundamentals are solid and growth this year should pick up to around 2.5 percent, but the Federal Reserve's current 'wait and see' approach to monetary policy is appropriate, a Fed policymaker said on Monday. Charles Evans, president of the Chicago Fed, also said he would welcome a temporary overshoot in inflation to lift consumer price growth up to the Fed's longer-term target of 2 percent and raise overall inflation expectations from current low levels. "While the fundamentals for U.S. growth continue to be good, uncertainty and risks remain. In my opinion, the continuation of 'wait and see' monetary policy response is appropriate to ensure that economic growth continues," he told a conference in London. Those risks include weak business investment and the low level of inflation, which has been below the Fed's 2 percent target on a core measure for most of the time since the 2008 financial crisis. "Overshooting a little bit just to make sure you get to 2 percent strikes me as being quite sensible," he said. The most recent indications from Fed officials point to two more interest rate hikes this year. Financial markets, however, are barely pricing in one more and that is not expected until December, after the U.S. presidential election.

Fed Watch: June Fades Away --At the beginning of last week, monetary policymakers were trying to keep the dream of June alive. Via Bloomberg:“I would put more probability on it being a real option,” Lockhart told reporters when asked about the low implied odds of a move next month. “The communication of committee participants and members between now and mid-June obviously should try to prepare the markets for at least a realistic range of possibilities” for the next policy meeting......Williams, a former head of research to Fed Chair Janet Yellen, said he would support raising rates at the next meeting, provided the economy stayed on track.“In my view, yes, it would be appropriate, given all of the things that we’ve talked about, to go that next step,” Williams told Kathleen Hays. “But you know, a lot can happen between now and June.” Williams is also not an FOMC voter this year.Later in the week, however, financial market participants took one look at the employment report and concluded the Fed was all bark and no bite. Markets see virtually no possibility of a Fed rate hike in June.That - a desire to keep June in play coupled with insufficient data to actually make June happen - all happened faster than I anticipated. But don't think the Fed will go down without a fight. New York Federal Reserve President William Dudley played down the April employment numbers. Via his must-read interview with Binyamin Applebaum of the New York Times: I wouldn’t make too much about the headline payroll number being a little softer, because there’s other things in the report that are more positive. For example, total hours worked were up quite a bit; average hourly earnings were up quite a bit. So there’s actually a lot of income being generated from the labor market. And the data on payrolls is quite volatile month to month — 160,000 sounds like a lot weaker than the 200,000 people were expecting, but it’s actually well within what you’d expect in terms of normal volatility. It’s a touch softer, maybe, than what people were expecting, but I wouldn’t put a lot of weight on it in terms of how it would affect my economic outlook.

Update on the Fed’s current thinking - The Fed has temporarily disappeared from the centre of the markets’ focus, as the probability of a June rate hike has receded. Even the earlier hawks among the analyst community have been sharply reducing the number of rate hikes to be expected this year. The Federal Open Market Committee has not entirely given up on June, as thesestatements from Dennis Lockhart, the Atlanta Fed president, and John Williams of the San Francisco Fed indicate. But since the latest employment report, which was widely taken to have dovish implications, there has been no attempt among the inner circle surrounding Janet Yellen to prepare the market for a shock.The most recent evidence for this is the important interview with Bill Dudley, head of the New York Fed, by Binyamin Appelbaum at the New York Times. Tim Duy, a professor at the University of Oregon and close Fed watcher, rightly says this is a “must read”, but it has created remarkably little interest in the markets. Since this is the first detailed piece of analysis from the heart of the FOMC for some time, it is worth taking careful note of the main points that Mr Dudley raises.I think that the following points are important:

• The Fed has finally become fully “data dependent”. Sensibly, there is no longer any attempt to given calendar guidance to the markets on when to expect rate hikes.
• The FOMC’s infamous “dot plots” now mean very little. They are a median expectation based on current data, nothing more.
• Mr Dudley wants to see the market adjust its rate expectations as the data evolve. This is healthy, because it reduces the risk that the market will view the Fed as being determined to “normalise” rates whatever is happening to the economy..
• Gross domestic product growth at 2 per cent is important. This is the new benchmark for the FOMC. Mr Dudley thinks that this is now above the trend rate of growth in the economy, and is consistent with a gradual further tightening in the labour market.

Fed Watch: Fed Speak, Claims --The Fed is not likely to raise rates in June. But not everyone at the Fed is on board with the plan. Serial dissenter Kansas City Federal Reserve President Esther George repeated her warnings that interest rates are too low:I support a gradual adjustment of short-term interest rates toward a more normal level, but I view the current level as too low for today’s economic conditions. The economy is at or near full employment and inflation is close to the FOMC’s target of 2 percent, yet short-term interest rates remain near historic lows.Her motivation stems primarily from concerns about financial imbalances:Just as raising rates too quickly can slow the economy and push inflation to undesirably low levels, keeping rates too low can also create risks. Interest-sensitive sectors can take on too much debt in response to low rates and grow quickly, then unwind in ways that are disruptive. We witnessed this during both the housing crisis and the current adjustments in the energy sector. Because monetary policy has a powerful effect on financial conditions, it can give rise to imbalances or capital misallocation that negatively affects longer-run growth. Accordingly, I favor taking additional steps in the normalization process.Separately, Boston Federal Reserve President Eric Rosengren, currently in a post-dove phase, reiterated his warning that financial markets just don't get it:In my view, the market remains too pessimistic about the fundamental strength of the U.S. economy, and the likelihood of removing monetary accommodation is higher than is currently priced into financial markets based on current data. He does see benefits from the current stance of policy:I believe that one of the benefits of our current accommodative monetary policy, even as we approach full employment, is that it fosters continued gradual improvement in labor markets. As I have noted in the past, it is quite appropriate to probe on the natural rate of unemployment to see how low it might be, given the benefit to workers. We have seen workers rejoin the labor force, many of them previously having given up looking for work.

The U.S. Federal Reserve's risky new mandate | The Japan Times: “In this world, there are only two tragedies,” Oscar Wilde once wrote. “One is not getting what one wants, and the other is getting it.” As the U.S. Federal Reserve inches closer to achieving its targets for the domestic economy, it faces growing pressure to normalize monetary policy. But the domestic economy is no longer the Fed’s sole consideration in policymaking. On the contrary, America’s monetary authority has all but explicitly recognized a new mandate: promoting global financial stability. The U.S. Congress created the Fed in 1913 as an independent agency removed from partisan politics, tasked with ensuring domestic price stability and maximizing domestic employment. Its role has expanded over time, and the Fed, along with many of its developed-country counterparts, has engaged in increasingly unconventional monetary policy — quantitative easing, credit easing, forward guidance, and so on — since the 2008 global financial crisis. Now, the unconventional has become conventional. A generation of global market participants knows only a world of low (or even negative) interest rates and artificially inflated asset prices. But the Fed’s dual mandate remains in force. And while the Fed’s recent rhetoric has been dovish, the fundamentals of the U.S. economy — particularly those that supposedly matter most for the Fed — indicate a clear case for further rate hikes.

Committee Behavior and the Federal Reserve - Frustration with committees is a way of life. "A group of the unwilling, chosen by the unfit, to do the unnecessary." "A group of people who individually can do nothing but as a group decide that nothing can be done." "A body that keeps minutes and wastes hours." But committees persist, because they have advantages besides time-wasting and diffusion of responsibility. When informed people with disparate knowledge can engage with each other in a substantive and comprehensive way, it is at least possible that errors can be avoided, insights sharpened, and outcomes improved. The Federal Reserve Open Market Committee is, yes, a committee. How well does it work? Kevin M. Warsh has had a front-row perspective. Warsh was a member of the Federal Reserve Board of Governors from 2006 to 2011--and thus, right through the heart of the Great Recession. He was asked by the Bank of England to review the deliberations of its own decision-making Monetary Policy Committee, and to study and consider how other central banks work as well. Warsh describes his insights in "Institutional Design: Deliberations, Decisions, and Committee Dynamics," which appears as Chapter 4 in Central Bank Governance And Oversight Reform, edited by John H. Cochrane  and John B. Taylor, and just published by the Hoover Institution.   How do you set up a committee to have the highest chance of reaching a wise conclusion? Warsh suggests that a combination of high-quality inputs, genuine deliberation, and optimal committee design all play a role. Otherwise, outcomes can fall short.

The Fed Made the Poor Poorer - Narayana Kocherlakota -- Have the U.S. Federal Reserve’s policies contributed to wealth inequality? Probably, but not in the way the central bank’s detractors think. Critics of the Fed’s efforts to support economic growth often argue that policies such as low interest rates and asset purchases have disproportionately benefited the rich. After all, they work in part by pushing up the values of stocks and bonds, most of which belong to wealthy households. Logical as this may seem, I can’t find much support for it in the relevant data. Consider the three-year period after 2010, when the Fed started the second round of a bond-buying program designed to stimulate spending by pushing down long-term interest rates. Asset values soared: The Standard & Poor’s 500 Index rose by about 50 percent from November 2010 to the end of 2013. If the hypothesis that easy money helps the rich were true, wealth inequality should have risen as well. That’s not what happened. Judging from the 2013 Survey of Consumer Finances , the rich didn’t fare particularly well. From 2010 to 2013, the typical family in the top 10th of the wealth distribution saw a 6.3 percent decline in wealth. The decline was greater than for the median family in almost any subgroup of poorer families, though the differences were not very large. Here’s a table showing the evolution of the distribution of wealth over time: The picture was very different between 2007 and 2010 -- a period during which the global financial crisis and associated recession took a heavy toll. What drove this increase in inequality? It wasn’t the result of the Fed propping up housing or stock markets, which declined sharply from 2007 to 2010. Rather, it seems that the poor would have been better off if the Fed had done more to support asset prices -- and particularly home prices. In other words, inequality rose because monetary policy was too tight, not because it was too easy. All told, Americans have slid backwards in time in terms of their economic capabilities -- and the poorer families have lost the most.

Helicopter Money In Operation - The great inventive minds of modern economics (GIMME) have been busy talking about helicopter money as an option they could try in future as another unconventional monetary policy (UMP) to avoid “deflation” or “lowflation” (Lagarde, 2013).  Actually, helicopter money is a very old idea and already has been in operation for several years.  But nobody, not even some prominent critics of central banks, seems to have recognized it yet.  What is helicopter money?  What is it for?  Has it worked? Will it work? To answer these questions, it is necessary to review briefly what has happened so far and why the idea of helicopter money is being resuscitated.  Since the global financial crisis (GFC), all sorts of extreme policy measures – including zero interest rate policy (ZIRP), negative interest rate policy (NIRP), quantitative easing (QE), fiscal stimulus packages, etc. – have been deployed to try to revive global economic growth. To implement these extreme measures, many trillion units of major currencies have been created by printing money.

Helicopters on a Leash -  Adair Turner - Faced with a slowing global economy, a number of observers – including former US Federal Reserve Chair Ben Bernanke and Berkeley economist Brad DeLong – have argued that money-financed fiscal expansion should not be excluded from the policy toolkit. But talk of such “helicopter drops” of newly printed money has produced a strong counterattack, including from Michael Heise, the chief economist of Allianz, and Koichi Hamada, the chief economic adviser to Prime Minister Shinzo Abe and one of the architects of Japan’s “Abenomics” economic-recovery program.  I disagree with Heise and Hamada, but they rightly focus on the central issue – the risk that allowing any monetary finance will invite excessive use. The crucial question is whether we can devise rules and responsibilities to guard against that danger. I believe we can and must, and that in some countries the alternative will not be no monetary finance, but monetary finance implemented without discipline.  As I argued in a recent International Monetary Fund paper, the technical case for monetary finance is indisputable. It is the one policy that will always stimulate nominal demand, even when other policies – such as debt-financed fiscal deficits or negative interest rates – are ineffective. And its impact on nominal demand can in principle be calibrated: A small amount will produce a potentially useful stimulus to either output or the price level, whereas a very large amount will produce excessive inflation.  That is not to deny important complexities in implementing helicopter drops. If money creation finances tax cuts rather than increased public expenditure, the impact will depend on how much consumers decide to spend versus save – a balance that may be unstable over time. And, because money creation by central banks increases commercial banks’ reserves, there is a risk that lending will increase little at first, but then rapidly. But these complexities simply argue for a cautious approach to the scale of monetary finance and the careful use of tools – such as mandatory-reserve requirements – to constrain subsequent knock-on effects.

The Role of the U.S. in the Global Financial System --The mandate of the Federal Reserve is clear: “…promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.” How to achieve those goals, of course, has been the subject of great debate: should the central bank use interest rates or monetary aggregates? should it rely on rules or discretion? The ongoing controversy within the U.S. over the benefits and costs of globalization opens up the issue of the geographic scope of the Fed’s responsibilities: does the Fed (and for that matter the U.S. Treasury) need to worry about the rest of the world?  Stanley Fischer, Federal Reserve Vice Chair (and former first deputy managing director of the IMF) sees a role for limited intervention. Fischer acknowledges the feedback effects between the U.S. and the rest of the world. The U.S. economy represents nearly one quarter of the global economy, and this preponderance means that U.S. developments have global spillovers. Changes in U.S. interest rates, for example, are transmitted to the rest of the world, and the “taper tantrum” showed how severe the responses could be. Therefore, Fischer argues, our first responsibility is “to keep our own house in order.” It also entails acknowledging that efforts to restore financial stability can not be limited by national borders. Fischer cautions, however, that the Fed’s global responsibilities are not unbounded. He acknowledges Charles Kindleberger’s assertion that international stability can only be ensured by a financial hegemon or global central bank, but Fischer states, “…the U.S. Federal Reserve System is not that bank.”

Why being the king of currencies has its pitfalls (Reuters) - The world is getting an object lesson on the problems of having one dominant global currency and even the supposed prime beneficiary, the United States, can see the downside. Alarming bouts of volatility in world financial markets over the past 12 months have been rooted in a fear of what happens when a world with its highest-ever peacetime debt pile faces even a hint of higher interest rates. Despite a constant narrative about U.S. households and banks paying down debts ever since the global credit crash eight years ago, any 'deleveraging' that did happen was more than offset by higher government, corporate and personal debt around the globe in Europe, China and across emerging markets. In fact, aggregate world debt is now far higher than it was before the 2007-08 crash. "The saga of debt is far from over," says a report from Morgan Stanley. It goes on to explain why Morgan Stanley expects demographic-led shifts in savings and investment to soon push interest rates higher and transform that debt mountain into additional deadweight on world growth over next five years. But the role of the U.S. dollar as the world's main reserve currency denominating large chunks of that debt pile is showing up as complicating factor that's added to risk of instability. The first U.S. interest rate increase in almost a decade in December - just a quarter of a percentage point - was enough to trigger a convulsion in world markets that led to the worst start to a year for global stocks since World War Two.  Underlining 'cause and effect', the subsequent recovery only came about once the Federal Reserve hastily made clear it was pressing the pause button precisely because of seismic events in world finance.

Fed’s Dudley: More Reserve Currencies Would Make for Stronger Financial System - WSJ: Federal Reserve Bank of New York President William Dudley said Tuesday he would welcome more currencies achieving reserve status, noting the more countries that meet the requirements, the more insulated the financial system could be from destabilizing capital flights. “Will more reserve currencies strengthen the international monetary system? My answer can be summed up in one word: yes,” said Mr. Dudley in remarks prepared for the High-Level Conference on the International Monetary System in Zurich. “The greater the number of countries that have such attributes [meeting the criteria of reserve currencies], the more stable and sound the global financial system is likely to be,” he said in remarks for the conference, which is co-sponsored by the International Monetary Fund and the Swiss National Bank. Mr. Dudley’s remarks come less than six months after China won inclusion in the elite basket of currencies that make up the IMF’s lending reserves, marking a milestone in the nation’s efforts to establish the country as a global economic power. The IMF’s decision, which becomes effective in October, will put the yuan alongside the U.S. dollar, euro, pound and yen in the fund’s reserve-currency basket. Currently, the yuan still trades onshore in China within a narrow band around a value set daily by the central bank. Mr. Dudley said perceptions about reserve currencies are evolving but the stature “must be earned.” There have been costs associated with the U.S. dollar being the dominant reserve currency, he said, adding that valuation shifts are increasingly related to developments abroad. Those moves in the dollar can be inconsistent with investors’ perceptions about conditions in the U.S. economy, he said. At times, this has forced policymakers at the central bank to pay more attention to expected and actual moves today than in the past when making decisions about the path of interest rates.

Dollar rises to two-week high on positive U.S. data | Reuters: The dollar climbed to a two-week peak against a basket of currencies on Friday, as stronger-than-expected U.S. economic data appeared to boost expectations the Federal Reserve may raise interest rates more than once this year. The move was the best two-week gain for the dollar since late February. The greenback also rose to a two week-high against the euro and Swiss franc. Data on Friday showed U.S. retail sales gained 1.3 percent in April, the largest rise in more than a year, suggesting the economy was regaining momentum after growth almost stalled in the first quarter. Excluding automobiles, gasoline, building materials and food services, retail sales shot up 0.9 percent last month after an upwardly revised 0.2 percent gain in March. The retail sales report "is likely to rekindle arguments from the hawkish camp in the ongoing debate among policy makers about why the Federal Reserve should consider maintaining its rate normalization efforts," said Samarjit Shankar, head of iFlow and quant strategies at BNY Mellon in Boston. The dollar, he added, is likely to continue garnering support from the market's interest rate expectations.

Impact of Chinese Slowdown on U.S. No Longer Negligible - Dallas Fed Economic Letter - China has become a systematically important economy in the world, accounting for about one-sixth of the global economy.1 It is, therefore, of no surprise that a slowdown of Chinese economic activity impacts many economies globally, including the U.S. Reliably quantifying these effects is very challenging. Most notably, data quality and availability and changing relationships between economies over time complicate efforts. There are also some technical (but nevertheless important) problems arising from modeling the global economy that features many interdependent individual economies. Using an econometric technique that examines interdependence of individual economies in the global economy, the Chinese slowdown and its impact on U.S. output growth can be assessed, as well as changes in the relationship since 2000. Thus, it appears that the impact of slowdown in China on the U.S. economy has increased over time—at the turn of the century, slower growth in China would have had a small effect on the U.S. Today, reducing Chinese output growth by 1 percentage point shaves about 0.2 percentage points from U.S. output growth. ...

Fiscal Policy to the Rescue? -- When appearing before their political masters, central bankers, invariably, urge them to adopt an expansionary fiscal policy. Ben Bernanke, and now his successor, Janet Yellen have pleaded with Congress to adopt a more simulative fiscal policy. Mario Draghi continuously stresses the need for fiscal policy in support of the ECB's easy money policy. Most recently, the head of the IMF, Christine Lagarde, stated that some countries “may have room for fiscal expansion", citing Canada as one country that has "made the most of this space." Indeed, the Governor of the Bank of Canada (BoC) has made it a selling point that they believe that Canada's latest fiscal stimulus measures will have a positive effect on the real GDP. In part, the fiscal policy shift has allowed the BoC to refrain from cutting its lending bank rate.  Monetary policy is reaching its limits in terms of stimulating economic activity and has carried that burden well beyond what was envisioned immediately after the 2008 crisis. This blog looks at the issue of fiscal policy, especially the fiscal multipliers that are considered to be the drivers behind the movement towards fiscal expansion. The Keynesian multiplier is at the centre of  the analytical debate regarding the impact of a central government's budget on promoting growth. Simply put, the multipliers measure the bang one gets for the fiscal buck .That is, the amount of short-run economic expansion one gets from a dollar of government spending, or, from changes in tax policy. Multipliers can be calculated to measure any kind of expenditure change on GDP. Thus, for example, if government spending were to increase by $100, leading to an expansion of $150 in GDP, then the spending multiplier is 1.5. Other types of multipliers can measure the impact of government transfers or of specific tax changes affecting profits and wages.

CBO Head: Deep Spending Cuts or Steep Tax Hikes Required to Tame Debt | The Fiscal Times: Congressional Budget Office Director Keith Hall on Wednesday painted a grim picture of the country’s long-term budget outlook, warning that the steady growth of spending on government health care programs and Social Security have created “a long-term trend in budget [that is] unsustainable.” Speaking in Washington, at the 2016 Fiscal Summit sponsored by the Peter G. Peterson Foundation, Hall warned, “In 2016, the federal budget deficit will increase, in relation to the size of the economy, for the first time since 2009.... If current laws generally remained unchanged, the deficit would grow over the next 10 years, and by 2026 it would be considerably larger than its average over the past 50 years.” Related: Why You’re Not Getting a Raise Anytime SoonLooking forward, Hall warned, current projections show the amount of federal debt held by the public as a percentage of Gross Domestic Product jumping dramatically from less than 80 percent in 2015 to more than 130 percent in 2040. The effects of a much higher level of debt as a share of GDP, Hall said, would have cascading effects throughout the economy, hampering the ability of lawmakers to respond to crises, reducing individual workers’ earnings, and limiting the government’s spending on a variety of its functions as debt service become a larger and larger share of the government’s outlays.

Trump On Debt Renegotiation: "You Never Have To Default Because You Print The Money" -- Following Donald Trump's Thursday comments that rising interest rates would be disastrous for the economy, saying that "we're paying a very low interest rate. What happens if that interest rate goes up 2, 3, 4 points?" hinting that the U.S. should "renegotiate longer-term debt" with creditors and that if the economy crashes he "can make a deal", various media outlets went to town on Trump, most notably the NYT, which took Trump to task: Asked on Thursday whether the United States needed to pay its debts in full, or whether he could negotiate a partial repayment, Mr. Trump told the cable network CNBC, “I would borrow, knowing that if the economy crashed, you could make a deal.” Such remarks by a major presidential candidate have no modern precedent. The United States government is able to borrow money at very low interest rates because Treasury securities are regarded as a safe investment, and any cracks in investor confidence have a long history of costing American taxpayers a lot of money. As the NYT admits, when "pressed to elaborate on his remarks, Mr. Trump did appear to step back. He said that he was not suggesting a default, but instead that the government could seek to repurchase debt for less than the face value of the securities. The government, in other words, would seek to repay less money than it borrowed." In any case, the confusion about Trump's intentions continued and ultimately led to his latest CNN appearance in which he explained what he meant.  "If interest rates go up, we can buyback debt at a discount if we are liquid enough as a country. People say I want to default on debt - these people are crazy. First of all you never have to default because you print the money I hate to tell you, so there is never a default. It was reported in the NYT that I want to default on debt - you know I am the king of debt, I love debt, but debt is tricky and its dangerous. But let me just tell you: if interest rates go up and bonds go down, you can buy debt - that's what I'm talking about. So here is the story, if we have an opportunity where interest rates go up and you can buy back debt at a discount. I always like to be able to do that if you can do that. That's all I was talking about, they have it like I'm going to go back to creditors and I am going to renegotiate or restructure debt. It's ridiculous."

Trump's Right - Paying Back The National Debt With "Discounts" Is Already Official Policy - by David Stockman Donald Trump says a lot of whacko things, and his recent wild pitches about defaulting on the national debt and replacing Yellen because she is not a Republican sound as if they were coming right out of his wild man wheelhouse. Certainly these statements have gotten mainstream financial journalists and editorial writers in high dudgeon. Said the NYT editorial page about Trump’s observation that if things got bad enough he’d seek to negotiate “discounts” on Uncle Sam’s towering debt, Such remarks by a major presidential candidate have no modern precedent. The United States government is able to borrow money at very low interest rates because Treasury securities are regarded as a safe investment, and any cracks in investor confidence have a long history of costing American taxpayers a lot of money. Well, now. These “very low rates” could not have anything to do with the fact that the Fed has vacuumed-up $3.5 trillion of Treasury debt and its close substitute in GSE securities since September 2008. Apparently, the law of supply and demand has been suspended until further notice—-except for the fact that when Bernanke even hinted that the Fed might sell-down some of its grossly bloated balance sheet in April 2013 treasury yields erupted higher in the infamous taper tantrum. The fact is, ultra low rates on Uncle Sam’s mountainous debt have everything to do with central bank manipulation of interest rates; and “confidence” in Washington’s fiscal rectitude is but an empty platitude. There has been a central bank Big Fat Thumb on the scales for nearly two decades, and it now includes the $1.7 trillion of treasury debt owned by the People’s Bank of China (including its off-shore accounts), the $1.2 trillion owned by the BOJ and the nearly $7 trillion owned by central banks and their affiliates as a whole.

April 2016 CBO Monthly Budget Review: Total Receipts Were Less Than Expected: from the Congressional Budget Office The federal budget deficit was $352 billion for the first seven months of fiscal year 2016, the Congressional Budget Office estimates - $69 billion more than the shortfall recorded in the same span last year. Outlays were 4 percent higher than they were at this time last year and receipts were 1 percent higher. If not for shifts in the timing of certain payments (which otherwise would have occurred on a weekend), the deficit for the first seven months of fiscal year 2016 would have been $28 billion larger than it was last year.  Receipts for the first seven months of fiscal year 2016 totaled $1,917 billion, CBO estimates— $25 billion more than those in the same period last year. But those receipts were roughly $50 billion, or 2.5 percent, smaller than CBO expected when it published its March 2016 report Updated Budget Projections: 2016 to 2026. The bulk of that shortfall reflects payments of individual income taxes—both final payments with tax returns (net of refunds) for 2015 and, to a lesser extent, amounts withheld from paychecks for 2016 taxes. Corporations' estimated payments of income taxes for 2016 also have been smaller than anticipated. The sources of the shortfall in receipts for final payments of 2015 taxes will be better understood once data from tax returns start to become available later this year. Smaller-than-expected receipts could continue in coming months, further reducing revenues for the fiscal year relative to CBO's March projections

Donald Trump’s Plans Don’t Add Up. Do Voters Care? -  Donald Trump would slash taxes by trillions of dollars, leave entitlements alone, boost spending on infrastructure and defense, and, claims an advisor, deliver a budget surplus of $4.5 trillion to $7 trillion. There is no credible way to reconcile these claims. Mr. Trump’s proposals will, if enacted, dramatically raise the debt, not decrease it, much less produce a surplus. Politically, though, it doesn’t appear to matter. As Mr. Trump understands well, voters care a lot less than wonks and journalists do about policy details. Mr. Trump and Bernie Sanders, Hillary Clinton’s competitor for the Democratic nomination, are riding high not because of their policies but because they aren’t the establishment. This affords both men extraordinary freedom to make more extravagant promises than their more arithmetically deferential rivals. It also enables Mr. Trump to change those positions at will to neutralize his rivals’ lines of attack. In others, this would be called flip-flopping or prevarication. To Mr. Trump’s supporters, it’s candor. “He talks before he thinks,” one supporter said, “so he doesn’t have time to think up something and lie to you.”

Senate approves $37.5B measure to fund energy, water: (AP) — The Senate on Thursday approved a $37.5 billion measure to fund energy and water programs next year, the first of the 12 spending bills lawmakers must approve to keep the government operating. On a vote of 90-8, senators backed the legislation that would fund the Energy Department as well as infrastructure projects administered by the U.S. Army Corps of Engineers and Bureau of Reclamation. Spending on energy and water programs beginning Oct. 1 would increase by $355 million over current levels. Supporters said the measure would strengthen U.S. nuclear deterrence, promote energy security and improve flood-control projects nationwide. The legislation includes a pilot program to allow storage of nuclear waste at private facilities, such as one proposed in western Texas. The bill must be reconciled with a version of the bill being considered in the House. Sen. Lamar Alexander, R-Tenn., chairman of a subcommittee that oversees energy and water spending, praised the bill as “proof that the appropriations process is working” in the Senate. The vote marked the first time the Senate has approved a stand-alone bill to fund energy and water programs since 2009. Senate Majority Leader Mitch McConnell, R-Ky., has repeatedly made an orderly appropriations process his No. 1 goal for 2016. It is a key element of his election-year effort to show voters that Republicans can govern.

Pentagon report reveals confusion among U.S. troops over Afghan mission | Reuters: Amid fierce fighting after the Taliban captured the northern Afghan city of Kunduz last year, U.S. special forces advisers repeatedly asked their commanders how far they were allowed to go to help local troops retake the city. They got no answer, according to witnesses interviewed in a recently declassified, heavily redacted Pentagon report that lays bare the confusion over rules of engagement governing the mission in Afghanistan. Afghan National Army soldiers fire artillery during a battle with Taliban insurgents in Kunduz, Afghanistan, April 29, 2015. Reuters/Stringer/File Photo KABUL Amid fierce fighting after the Taliban captured the northern Afghan city of Kunduz last year, U.S. special forces advisers repeatedly asked their commanders how far they were allowed to go to help local troops retake the city. They got no answer, according to witnesses interviewed in a recently declassified, heavily redacted Pentagon report that lays bare the confusion over rules of engagement governing the mission in Afghanistan. As the Taliban insurgency gathers strength, avoiding enemy fire has become increasingly difficult for advisers, who have been acting as consultants rather than combatants since NATO forces formally ceased fighting at the end of 2014. In the heat of the battle, lines can be blurred, and the problem is not exclusive to Afghanistan: questions have arisen over the role of U.S. troops in Iraq after a U.S. Navy SEAL was killed by Islamic State this month. "'How far do you want to go?' is not a proper response to 'How far do you want us to go?'" one special forces member told investigators in a report into the U.S. air strikes on a hospital in Kunduz that killed 42 medical staff, patients and caretakers.

Pentagon Allowed to Supply Military Gear Directly to Homeland Security Dept. for ‘War on Immigrants’ -- Amendments to a controversial Pentagon program to sell military gear to domestic police forces have quietly extended the scheme to provide war on terror weaponry directly to the U.S. Department of Homeland Security (DHS).  The amendments for FY2016, passed by Congress in late 2015, were highlighted in a briefing note published by the Congressional Research Service in February 2016. Under the controversial “1033” program, the Department of Defense (DoD) is able to provide “surplus” military-grade equipment to law-enforcement agencies. The program, legislated for in the National Defense Authorization Act (NDAA), provided local police forces access to billions of dollars worth of high-tech military equipment, including armoured tanks, rocket launchers, automatic weapons, night-vision goggles, and other supplies traditionally used by the U.S. Army in foreign war theaters. The DHS often provided multimillion-dollar grants to law-enforcement agencies to purchase the military equipment.  Excessive police brutality in cases like Ferguson and Baltimore put the 1033 program under the spotlight, and led widespread calls for greater accountability over the way domestic police departments are able to access military-grade equipment through the Pentagon scheme. In May 2015, the Obama administration moved to impose more robust oversight processes for the program, one of the consequences of which was a recall order compelling police departments to return equipment that was considered to be excessive. The new provisions were, however, wide enough that military-grade equipment can still be acquired from the Pentagon by law-enforcement agencies if they can justify its necessity. Further amendments to the NDAA later that year expanded these provisions further, but their alarming scope has gone unreported until now.

Trump Slams US Wars in the Middle East -- Yves Smith There are good reasons to harbor serious reservations about The Donald, given that he changes his position as frequently as most people change their clothes. But so far, he has been consistent in making an argument that is sorely underrepresented in the media and in policy circles: that our war-making in the Middle East has been a costly disaster with no upside to the US. Trump even cites, without naming him, Joe Stiglitz’s estimate that our wars have cost at least $4 trillion.  As Lambert put it, “I hate it when Trump is right.” If you think Trump is overstating his case on Hillary’s trigger-happiness, read this New York Times story, How Hillary Clinton Became a Hawk.  And on Clinton’s role in Libya, which Obama has since called the worst decision of his presidency: Mrs. Clinton’s account of a unified European-Arab front powerfully influenced Mr. Obama. “Because the president would never have done this thing on our own,” said Benjamin J. Rhodes, the deputy national security adviser.Mr. Gates, among others, thought Mrs. Clinton’s backing decisive. Mr. Obama later told him privately in the Oval Office, he said, that the Libya decision was “51-49.”“I’ve always thought that Hillary’s support for the broader mission in Libya put the president on the 51 side of the line for a more aggressive approach,” Mr. Gates said. Had the secretaries of state and defense both opposed the war, he and others said, the president’s decision might have been politically impossible.   And yes, that’s this Ben Rhodes. (video)

Clinton Commits: No TPP, Fundamentally Rethink Trade Policy -  As reported in The Hill, in “Clinton opposes TPP vote in the lame-duck session,” Clinton replied to a questionnaire from the Oregon Fair Trade Campaign, which consists of more than 25 labor, environmental and human rights organizations. When asked, “If elected President, would you oppose holding a vote on the TPP during the ‘lame duck’ session before you take office?” she replied, “I have said I oppose the TPP agreement — and that means before and after the election.”  There has been concern that TPP will come up for a vote in the lame-duck session of Congress after the election, and before the next Congress is sworn in. This special session enables votes with little accountability to the public. Members who have been voted out can vote in ways that help them get lobbying jobs and members who were re-elected with corporate money can reward their donors. A statement from the Oregon Fair Trade Campaign describing Clinton’s responses, explains the importance of Clinton opposing a “lame duck” vote, “The Democratic candidates agree that attempting to sneak the TPP through during lame duck is completely and totally inappropriate,” . “Popular opposition to job-killing trade agreements is at an all time high. The votes clearly do not exist to pass the TPP before the election, and TPP proponents’ plan to try to get just-voted-out-of-office, looking-for-corporate-lobby-work Congress members to rubber stamp it after the election is something that more-and-more politicians are speaking out against."
The Washington Post explains, in “Clinton does not back Obama trade vote in postelection congressional session,” that this will make it more difficult for President Obama to push TPP through the lame-duck session:

When secular stagnation meets protection -This period of opposition to autarky might, however, be coming under threat. Two of the three candidates left in the American presidential race are clearly protectionists. Although Hillary Clinton, the likely winner, has always leaned towards free trade agreements, she has recently hedged her previous support for the Trans Pacific Partnership because of the developing political climate.Betting markets think there is a 30 per cent chance of a President Trump. He has called for a 45 per cent tariff, no less, on imports from China. His presumptive nomination, according to Edward Luce, overturns decades of Republican support for free trade.And he would have a lot of sway in this area, because the usual checks and balances in the US political system do not really apply in the case of protectionist trade policy. In that field, the president has been accorded unusual powers to act, ever since President Roosevelt’s Reciprocal Trade Agreements Act in 1934. Even under Barack Obama, who is clearly a convinced proponent of free trade deals, the US has been edging nearer to interference in trading relationships, under the guise of “currency manipulation”. Two weeks ago, the US Treasury reported that five of America’s largest trading partners – China, Japan, Germany, Taiwan and Korea – might be guilty of some aspects of currency manipulation, though no partner transgresses on all the criteria used by the Treasury. The legislation does not specify the action that should be taken by the US government against a currency manipulator, but it clearly might include direct controls over imports into America. Furthermore, the US Treasury is making it very clear that excessive reliance by foreign economies on monetary easing will not be accepted, especially if this devalues their exchange rates against the dollar. Instead, these countries are expected to use other measures to support growth, including fiscal expansion.

Obama: TTIP Necessary So As To Protect Megabanks From Prosecution -- On May 7th, Deutsche Wirtschafts Nachrichten, or German Economic News, headlined, "USA planen mit TTIP Frontal-Angriff auf Gerichte in Europa” or “U.S. Plans Frontal Attack on Europe’s Courts via TTIP,” and reported that, “America’s urgency to sign TTIP with Europe has solid reason: Megabanks must protect themselves from claims by European investors who allege that they were cheated during the debt crisis. … The U.S. Ambassador to Italy has now let the cat out of the bag on this — probably unintentionally.” In this particular case, the megabank that’s being sued isn’t American but German, Deutsche Bank, which the U.S. Ambassador to Italy has cited as his example to defend, perhaps so as to appeal to Germans to protect their megabanks against lawsuits from foreign investors (such as Italians) who complain. Reuters headlined on May 6th, "Italian prosecutor investigates Deutsche Bank over 2011 bond sale”, and reported that, "An Italian prosecutor is investigating Deutsche Bank (DBKGn.DE) over its sale of 7 billion euros ($8 billion) of Italian government bonds five years ago, an investigative source told Reuters. A prosecutor in Trani, a town in southern Italy, is investigating because Deutsche Bank allegedly told clients in a research note in early 2011 that Italy's public debt was no cause for concern, and then sold almost 90 percent of its own holding of the country's bonds.” The U.S. bond-rating agencies are also subjects in this suit, because Trani had relied upon their ratings of those bonds. The Obama Administration (through its Italian Ambassador) seems thus to be saying, in effect, that unless TTIP is passed into law, Europe’s megabanks (and the U.S. bond-rating agencies, S&P, Moody’s and Fitch) will be able successfully to be sued by cheated investors, just as has been happening with such American banks as JPMorgan/Chase and Goldman Sachs in the United States, which — since TTIP hasn’t yet been in force anywhere, including in the U.S. — were forced to pay billions to cheated investors. Apparently, Obama would be happier if those suits had been impossible in the U.S.

Wall St. groups threaten to sit out trade pact push | TheHill: Power players in the financial services industry are threatening to sit out the push for President Obama’s Pacific Rim trade deal unless the administration addresses one of their main objections to the pact. Banks, insurance companies and other financial companies oppose a provision in the 12-nation Trans-Pacific Partnership (TPP) that would give foreign governments the ability to require that U.S. businesses maintain data servers within their borders, fearing it could create high costs and security risks.The Securities Industry and Financial Markets Association (SIFMA) and the Financial Services Roundtable (FSR) say that while they are prepared to devote substantial resources to lobbying Congress in support of the TPP, the Obama administration must first rework the data provision to guarantee that their electronic data can move freely across borders. Francis Creighton, executive vice president of government affairs at the FSR, praised the trade deal but said group won’t begin lobbying Congress for it until the data flow issue is resolved. “We can’t actively go up to Capitol Hill and push for it even though we want to get this done,” Creighton said. “That’s how serious this is. We would rather see nothing happen than pass TPP with this provision.” The financial groups have been working for months with the Obama administration to fix the issue. U.S. Trade Representative Michael Froman Michael FromanWall St. groups threaten to sit out trade pact push Overnight Finance: Dem seeks info on Panama Papers companies US mounts challenge to China's high tariffs on chicken imports MORE has reported progress, but a resolution has not yet been reached.

Chinese state entities argue they have 'sovereign immunity' in U.S. courts | Reuters: Some Chinese state-owned entities, backed by the key government agency that oversees major state industrial companies, have adopted a controversial defense when they face U.S. lawsuits: You can't touch us because we enjoy sovereign immunity. Aviation Industry Corporation of China (AVIC), China's biggest state-owned aerospace and defense company, has used the strategy twice, while state-owned China National Building Materials Group Co (CNBM), a state-owned building products company, successfully used it in a case involving allegations that Chinese-made drywall led to health problems for U.S. homeowners. China's Foreign Ministry in October complained to the U.S. government over attempts by plaintiff lawyers to serve the drywall lawsuit on the State-owned Assets Supervision and Administration Commission (SASAC), which is responsible for 106 government-owned enterprises with 4.7 trillion yuan ($722 billion) in assets, including CNBM and AVIC. The ministry argued in a diplomatic note that U.S. courts have no jurisdiction over suits against a country's "state-owned properties." The legal argument concerns whether companies controlled by the Chinese government can be protected under the U.S. Foreign Sovereign Immunities Act (FSIA), which was passed by Congress in 1976, even when their U.S. subsidiaries are involved in commercial disputes. The use of sovereign immunity by Chinese state-owned conglomerates is a reflection of how China's state capitalism and legal regime is increasingly running into conflict with Western regulation and jurisprudence, particularly as the country's overseas investment rapidly grows.

Panama Papers affair widens as database goes online - BBC News: The Panama Papers affair has widened, with a huge database of documents relating to more than 200,000 offshore accounts posted online. The database became accessible from 18:00 GMT at offshoreleaks.icij.org. The Panama Papers have shown how some wealthy people use offshore firms to evade tax and avoid sanctions. The papers belonged to Panama-based law firm Mossack Fonseca and were leaked by a source simply known as "John Doe". The company denies any wrongdoing. Last week it issued a "cease and desist " order to prevent the database being made public but the organisation that has the documents, the International Consortium of Investigative Journalists (ICIJ), went ahead.The documents have revealed the hidden assets of hundreds of politicians, officials, current and former national leaders, celebrities and sports stars. They list more than 200,000 shell companies, foundations and trusts set up in more than 20 tax havens around the world.

Donald Trump Named in Latest Panama Papers Leak -- Republican presidential nominee Donald Trump has been linked to anonymous companies created by the Panamanian law firm Mossack Fonseca, according to documents released by the International Consortium of Investigative Journalists known as the ICIJ, according to an NPR report.  The leaked documents show that the Trump empire is linked to 32 offshore companies, including the real estate project Trump Ocean Club International Hotel and Tower in Panama. His name appears 3,540 times in the database, but according to media reports that doesn’t mean he is directly involved since Trump has sold his name to other investors in different countries. The  latest release of documents includes the names of more than 320,000 people and companies around the world, including politicians, businesspeople and movie stars.   Among the people named in the papers are Argentine President Mauricio Macri, British Prime Minister David Cameron, Saudi Arabian King Salman bin Abdulaziz bin Abdulrahman Al Saud, and actress Emma Watson. Offshore companies are not illegal, but are often used to evade taxes. Mossack Fonseca has rejected the publishing of this database, which they say was stolen from their offices. They have announced legal actions against ICIJ, according to a statement.  “Beside being obtained illegally, the database is filled with errors and leads to wrong conclusions among people, companies and middlemen,” said Mossack Fonseca in a statement. “The use of stolen private information is a crime in every state that we work in.”

Tax-Dodging Corporate Inversions Accelerating -- Corporate “inversions”—the fast-accelerating phenomenon of major U.S. firms moving their official headquarters to low-tax nations through complex legal maneuvers—are causing an annual loss of about $100 billion in federal tax revenues.  But new rules imposed in early April by the U.S. Treasury Department scuttled the mammoth $162 billion deal between pharmaceutical giant Pfizer and Allergan, based on relocating the official headquarters to low-tax Ireland. The Treasury rules are designed to inhibit “serial inverters”—corporations that repeatedly shift their official headquarters to cut U.S. taxes—and to discourage “earnings stripping,” where firms use loans between their American units and foreign partners to reduce U.S. profits subject to federal taxation.  However, with firms like Johnson Controls and Tyco moving ahead with their inversion plans, stronger measures will clearly be needed to halt the tide. U.S. corporations have pulled off about 60 inversions over the last two decades, according to Fortune. In the last five years alone, corporations have executed 40 inversions, the New York Times stated. This fast-rising dimension of corporate globalization has immense implications for Americans. The industrial powerhouse Eaton Corp. (#163 on the Fortune 500), Medtronic, Accenture (formerly the consulting wing of Arthur Andersen), Burger King, and AbbVie (the world’s 11th-largest drug maker) are among the firms that have repudiated their U.S. nationality and shifted their official headquarters to lowtax nations. The annual toll to the U.S. Treasury from corporate inversions is about $100 billion, based on the studies of Reed College economist Kimberly Clausing. This impact is likely to worsen significantly in the near future. Another dozen or more inversions are currently under consideration, according to conservative New York Times business columnist Andrew Ross Sorkin.

Does the U.S. Have the Highest Corporate Tax Rate in the World? - Paul Krugman reports on his Twitter war with Donald Trump:  Yesterday I tweeted a response to Donald Trump’s claim that America is the highest-taxed nation in the world. Actually, he’s been busted on that claim repeatedly, which makes it even more shameful that TV interviewers just let it slide. But I’m also interested in the responses I’ve been getting, which I think tell you something about the broader situation – maybe call it the politics of epistemology.  Um, guys, maybe you shouldn’t make confident pronouncements about stuff you’ve never looked at. Paul is noting that total taxes as a share of GDP is not really that high by international standards. I’m sure some conservative might scream “that’s average” and then go on some rant about marginal rates. My focus will be on corporate tax rates. KPMG has a handy comparison even if it is very incomplete. It claims that the corporate tax rate in the U.S. is the sum of a 35% Federal rate and an average state tax rate equal to 5%. Of course even domestic firms can get all sorts of tax breaks and likely pay less in state taxes. Multinationals are particularly adept at reducing their effective tax rates. Oil multinationals realize that several foreign tax authorities impose high surcharges on oil profits. I want to focus, however, on the battle between Wal-Mart and Puerto Rico. Puerto Rico imposes a 20% corporate tax but also includes a surcharge that can be up to 19% of profits if the firm’s revenues are high enough. The effective tax rate for the Puerto Rican affiliate of Wal-Mart is 39%. The 10-K filing for Wal-Mart notes that its U.S. tax rate is 37% even when one includes state taxes.

Bribery Taints $2 Trillion of Transactions Globally, IMF Says -  Roughly $2 trillion worth of projects, permits and other transactions around the world were tainted by bribery last year in countries such as Sudan, Afghanistan and Venezuela. That new estimate from the International Monetary Fund amounts to about 2% of global economic output. But the broader cost of graft, fraud and other forms of official corruption is likely much higher, the IMF warned in a new staff paper.  “While the direct economic costs of corruption are well known, the indirect costs may be even more substantial and debilitating, leading to low growth and greater income inequality,” said IMF Managing Director Christine Lagarde in a new essay ahead of the U.K.’s Anti-Corruption summit. (That’s the event where officials from some “fantastically corrupt” countries will attend, according to U.K. Prime Minister David Cameron.) An era of low growth, rising political strife and a series of high-profile corruption cases (think Brazil, Mozambique and the Panama Papers) are forcing the issue to the fore. The new paper could give IMF staff greater discretion to use the fund’s economic surveillance and lending as leverage to overhaul corrupt political and economic systems in member countries. The IMF is already using its bailout power in trying to change deeply entrenched corruption in some nations.

Privacy Rules Shouldn’t Handcuff the S.E.C. - AMERICANS rely on both criminal and civil law enforcement to bring wrongdoers to justice. The Securities and Exchange Commission is responsible for holding those who commit securities fraud accountable, including Ponzi con artists and insider traders who harm investors and defraud our markets.But a section of a bill passed recently by the House of Representatives would make it considerably easier for those who would steal hard-earned money from investors looking to save for their mortgage, retirement or children’s education.The bill, called H.R. 699, is an update of the Electronic Communications Privacy Act of 1986, which provides additional protections for individuals. Under the new bill, the government would be required to get a warrant to obtain someone’s electronic communications from an Internet service provider and other companies that provide or store electronic communications for the public.If the bill, as written, becomes law, civil law enforcement would be deprived of existing tools to obtain critical electronic evidence of wrongdoing, and people committing fraud could make their digital trail vanish with a single keystroke.In carrying out its mandate, the S.E.C. frequently subpoenas emails and other records directly from those under investigation. And these communications and records often provide powerful evidence of wrongdoing.So it should come as no surprise that lawbreakers are frequently reluctant to produce evidence, and often delete or attempt to destroy their incriminating communications. As a result, in some cases, the S.E.C. can gather relevant evidence only by obtaining those communications from the Internet service provider and other third parties.

Financial Sector Gives Hillary Clinton a Boost - WSJ: Hillary Clinton is consolidating her support among Wall Street donors and other businesses ahead of a general-election battle with Donald Trump, winning more campaign contributions from financial-services executives in the most recent fundraising period than all other candidates combined. The Democratic front-runner has raised $4.2 million in total from Wall Street, $344,000 of which was contributed in March alone. According to a Wall Street Journal analysis of fundraising data provided by the nonpartisan Center for Responsive Politics, the former secretary of state received 53% of the donations from Wall Street in March, up from 32% last year and 33% in January through February, as the nominating contests began. The analysis of campaign-finance reports shows that some Wall Street donors have shifted their financial support from Republican candidates who dropped out of the race, such as former Florida Gov. Jeb Bush and Florida Sen. Marco Rubio, to Mrs. Clinton in recent months. Mr. Trump, by contrast, hasn’t garnered more than 1% of Wall Street contributions in any month through March. To be sure, it is still early in the general election money race, and Mr. Trump hasn’t aggressively pursued the finance sector for funds so far. He self-financed about three-quarters of his primary campaign and said last week that he planned to more actively solicit donations for the general election in order to keep pace with Mrs. Clinton.

Where is Amy Klobuchar? How Democratic Indifference is Squandering a Unique Moment on Antitrust Policy -- David Dayen - It’s been a good few weeks for opponents of further market concentration. Oil services firms Halliburton and Baker Hughes called off their merger amid a Justice Department lawsuit. New rules on corporate inversions led to an abandonment of the Pfizer-Allergan merger. The White House issued a directive to federal agencies to take steps to foster competition, with an opening salvo of ending the monopoly of cable set-top boxes. The Economist, of all places, started agitating for increased competition amid record corporate profits. The antitrust movement, in short, has gone mainstream. And yet, even as this happens, Charter and Time Warner finalized their approval to create more concentration in the cable and internet sector, where something like 90 percent of all broadband cable comes from one of two companies. While the mergers being stopped or resisted by the Justice Department fall under the category of extreme concentration, where the potential harm to consumers and the supply chain is obvious, those that fall just outside that, or even well within it in the case of Charter/Time Warner, are given the go-ahead. The amazing stat in my long profile of antitrust policy from last year is that the Obama Administration willingly gave up on the types of mergers that create market concentration:  The only way to get the current or future Administration to move on that is through bipartisan pressure from Congress. We’ve already seen the example. Since the March antitrust hearing by the Senate Judiciary Committee, the first in three years, the enforcement agencies – the Antitrust division of the Justice Department and the Federal Trade Commission – have been noticeably more aggressive in challenging merger deals. The question is, where’s the follow-up? And at this point, I have to single out Amy Klobuchar, the Democratic ranking member of the antitrust subcommittee.

Jamie Dimon Wants to Protect You From Innovative Start-Ups - Last month, the JPMorgan Chase shareholders’ letter went up online, and the bank’s chief executive, Jamie Dimon, had some harsh words for start-ups selling services that try to improve upon his bank’s offerings.  To the Mints and the Acorns and the Pennys and the scores of other services and their partners that use Chase checking and credit card data in their work — and, more important, to their customers — he declared the following:

• ■ These start-ups take more of your data than they need to.
• ■ Many of them sell the data to outsiders in a way that benefits them but not you.
• ■ They often take your data every day, for years, even if your account is inactive.
• ■ If your money disappears because of fraud, it’s on you, not the bank.

His broadsides make for great theater, even if the statements are debatable. But because it’s Jamie Dimon talking, you have to take the letter seriously. After all, an ever-growing number of consumers don’t mind letting third parties see their financial information, like their debit card transactions or investment choices, if it means getting new investment or budgeting advice or services that the banks haven’t thought of themselves.

Smart Money Doing Private Equity in House as General Partners Warn of Lower Returns, Dumb Money Pours IN -- Yves Smith - I’m late to a Bloomberg story that ran under the anodyne headline, Wealthy Families Have $4 Trillion Up for Grabs. The Washington Post used the more apt World’s Rich Families Are Putting Private Equity Firms on Notice.   The message is simple: super rich families are figuring out that private equity firms are charging more that they are worth. The very rich, starting in a serious way in the 1980s, have brought more of their investing in house in the form of “family offices”. At the small end, they replicate what a private banker would do, as in put them in various investments, without the conflicts of interest or (hopefully) the ego issues (as in a private banker would have incentives to recommend in house products and actively-managed stock and bond funds). They might also oversee direct investments, such as in real estate or angel/venture investments.  The biggest families are getting more serious about doing private equity on their own. Given total annual fees estimated at 7%, they don’t have to hit home runs to beat private equity performance. In addition, they don’t have the bad incentives of private equity.   From Bloomberg: In December, a half-dozen of some of the richest families in the U.S., from agriculture to beverages, gathered in a conference room on the 10th floor of an office building in Miami... they listened to a dealmaker for billionaire brothers J.B. and Tony Pritzker talk about how to buy companies…. Now, following the likes of Buffett, Michael Dell and Bill Gates, many are acting like private equity firms, buying large stakes in companies or acquiring them outright. Families can exert tighter control over their money, give the kids something to do and cut their deal fees. But the trend has meant that private equity shops have been forced to scramble to make sure they don’t lose a critical source of money for their buyout funds. And here is the real threat: the family investors are putting the soi disant pros of private equity to shame: Almost 70 percent of family offices engage in direct investing, according to an April survey of 80 offices by the Family Office Exchange. And in 2015 they outperformed buyout firms. Direct deals returned them 15 percent on average, the survey showed — more than double private equity results that year.

New Study Blasts Private Equity Fee Abuses, SEC and IRS Enforcement Failures, Limited Partner Capture -- Yves Smith - Eileen Appelbaum and Rosemary Batt have released a new report, Fees, Fees and More Fees: How Private Equity Abuses Its Limited Partners and U.S. Taxpayers, which we have embedded at the end of this post. The study covers the major developments in private equity since the publication of their landmark book, Private Equity at Works, namely, the SEC’s and media’s exposure of widespread misconduct in the private equity industry. Even though Appelbaum and Batt use a judicious academic writing style, the information they marshall is damning. Even though much of the terrain will be familiar to NC regulars, I encourage you to read it in full, since it recaps a wide range of abuses in a compact form, It also discusses the weak enforcement efforts of the SEC, the IRS’ tardy moves to target loopholes and abuses, and limited partner complacency and capture.

Chelsea's Husband to Close Greek Hedge Fund After Losing 90% of Value -- Chelsea Clinton's husband is reportedly closing his Greek hedge fund. The news from Marc Mezvinsky comes after the fund is said to have lost 90 percent of its value. "It was a hedge fund portfolio pitched by Hillary Clinton's son-in-law, Marc Mezvinsky, as an opportunity to bet on a Greek economic revival," the New York Times reports. "Now, two years later, the Greece-focused fund is shutting down, after losing nearly 90 percent of its value, according to two investors with direct knowledge of the matter who spoke on the condition of anonymity. "Investors were told last month that the fund would close. The fund, Eaglevale Hellenic Opportunity, had raised $25 million from investors to buy Greek bank stocks and government debt. "Eaglevale Partners, a Manhattan hedge fund firm founded by Mr. Mezvinsky and two former Goldman Sachs colleagues, raised money for the Hellenic fund at a time when some on Wall Street had hopes for a revival in the Greek economy. For a time, Mr. Mezvinsky appeared at hedge fund conferences promoting the Greece investment thesis." The fund failed despite high profile boosters. "Some of the firm's earliest investors were Goldman partners, including Lloyd C. Blankfein, Goldman's chief executive officer, who let Eaglevale use his name in marketing the flagship fund. "It is not clear why Eaglevale waited until this year to close the Hellenic fund, which already had lost about 40 percent of its value by early last year."

Hedge Funds Faced Choppy Waters in 2015, but Chiefs Cashed In -- JPMorgan Chase paid its chief executive, Jamie Dimon, $27 million in 2015. In another Wall Street universe, the hedge fund manager Kenneth C. Griffin made $1.7 billion over the same year. Even as regulators push to rein in compensation at Wall Street banks, top hedge fund managers earn more than 50 times what the top executives at banks are paid. The 25 best-paid hedge fund managers took home a collective $12.94 billion in income last year, according to an annual ranking published on Tuesday by Institutional Investor’s Alpha magazine. Those riches came during a year of tremendous market volatility that was so bad for some Wall Street investors that the billionaire manager Daniel S. Loeb called it a “hedge fund killing field.” A few hedge funds flamed out; others simply closed down. Some of the biggest names in the industry lost their investors billions of dollars. Yet for the biggest hedge fund managers, these men (and the occasional woman) have more money and more influence than ever before. Their firms do more business in some corners of the financial world than many banks, including lending to low-income homeowners and small businesses. They lobby members of Congress. And they have put large sums of money behind presidential candidates, at times pumping tens of millions of dollars into super PACs.

Investors fleeing $9 trillion of negative yields fuel bond binge - There's no shortage of demand in the $100 trillion market for global debt, as investors crowd into corporate and long-term sovereign obligations to steer clear of negative yields. Yield-hungry bidders are snapping up government bonds. Auctions of long-term debt by the U.S., Spain and Portugal all drew strong demand Wednesday, with the Treasury sale seeing unprecedented appetite from one class of investors. Buyers are also clamoring for company bonds, in a week that may be the busiest this year for corporate borrowing in the U.S. and Europe. The driving force behind the bond binge is the growing universe of negative-yielding securities, which has expanded above $9 trillion since the European Central Bank and Bank of Japan cut interest rates below zero. J.P. Morgan Chase & Co. predicts that with the supply of debt falling, conditions in the global bond market will be so favorable in 2016 that record-low yields are probably in store. “In a yield-starved world, where a significant percentage of global government debt is yielding zero or something less, investors are reaching for yield by extending maturities, buying credit, or some combination thereof,”    The broad global bond market's effective duration reached an all-time high this month, according to Bank of America Merrill Lynch Indexes. That leaves investors at risk if views on the path of the Federal Reserve change. Traders are essentially counting out another Fed interest-rate increase for the time being -- futures don't fully reflect the next hike until August 2017, according to data compiled by Bloomberg.

With A Historic -150% Net Short Position, Carl Icahn Is Betting On An Imminent Market Collapse -- Over the past year, based on his increasingly more dour media appearances, billionaire Carl Icahn had been getting progressively more bearish. At first, he was mostly pessimistic about junk bonds, saying last May that "what's even more dangerous than the actual stock market is the high yield market." As the year progressed his pessimism become more acute and in December he said that the "meltdown in high yield is just beginning." It culminated in February when he said on CNBC that a "day of reckoning is coming." Some skeptics thought that Icahn was simply trying to scare investors into selling so he could load up on risk assets at cheaper prices, however that line of thought was quickly squashed two weeks ago when Icahn announced to the shock of ever Apple fanboy that several years after his "no brainer" investment in AAPL, Icahn had officially liquidated his entire stake. As it turns out, Icahn's AAPL liquidation was just the appetizer of how truly bearish the legendary investor has become.

New York Fed President Is Worrying About the Next Crash; He Should Be -- Pam Martens --On May 1, William Dudley, the President of the New York Fed delivered a speech to the Atlanta Fed’s 2016 Financial Markets Conference.  Dudley, who was previously hauled before Congress to examine his Wall Street cronyism, spent two-thirds of his talk meandering around the academic nuances of liquidity in a stressed market and then zeroed in for the kill. Dudley wants to extend the powers of the Federal Reserve as the lender of last resort beyond just banks to (wait for it) include broker-dealer stock trading operations. Under that scenario, Bernie Madoff’s market-making operation (that was also a fraud according to the Madoff Trustee Irving Picard) might have been borrowing from the Fed during the crisis of 2008. Maybe Madoff could have even borrowed enough from the Fed to still be operating. Dudley’s exact words from the speech posted at the New York Fed’s web site were as follows: “Now that all major securities firms in the U.S. are part of bank holding companies and are subject to enhanced prudential standards as well as capital and liquidity stress tests, providing these firms with access to the Discount Window might be worth exploring. To me, this is a more reasonable proposition now than it was prior to the crisis when the major dealers weren’t subject to those safeguards.”Dudley’s push to further deform Wall Street is outrageous on multiple levels. First, it should be remembered that the strongest advocates of the public interest like Senators Elizabeth Warren and Bernie Sanders are pressing Congress to remove the safety net completely from securities firms by forcing them to be split off from banks holding insured deposits that are backstopped by the taxpayer. They want to restore the Glass-Steagall Act that protected this country for 66 years until its repeal in 1999. That legislation would completely bar stock-trading firms known as broker-dealers from being owned or affiliated with banks holding insured deposits.

Once Again, Thieves Enter Swift Financial Network and Steal - Thieves have again found their way into what was thought to be the most secure financial messaging system in the world and stolen money from a bank. The crime appears to be part of a broad online attack on global banking. New details about a second attack involving Swift — the messaging system used by thousands of banks and companies to move money around the world — are emerging as investigators are still trying to solve the $81 million heist from the central bank of Bangladesh in February. In that theft, the attackers were able to compel the Federal Reserve Bank of New York to move money to accounts in the Philippines.The second attack involves a commercial bank, which Swift declined to identify. But in a letter Swift plans to share with its users on Friday, the messaging network warned that the two attacks bore numerous similarities and were very likely part of a “wider and highly adaptive campaign targeting banks.” The unusual warning from Swift, a copy of which was reviewed by The New York Times, shows how serious the financial industry regards these attacks to be. Some banking experts say they may be impossible to solve or trace. Swift said the thieves somehow got their hands on legitimate network credentials, initiated the fraudulent transfers and installed malware on bank computers to disguise their movements.“The attackers clearly exhibit a deep and sophisticated knowledge of specific operation controls within the targeted banks — knowledge that may have been gained from malicious insiders or cyberattacks, or a combination of both,” Swift said

Details Emerge on Global Bank Heists by Hackers - New York Times: Just how securely are banks moving money around the world? New details emerged on Friday about a pair of related attacks on banks that use the Swift message service, which allows financial firms and companies to transfer payments around the world.Computer security researchers briefed on the investigation into one of the attacks, on the Bangladesh Bank, raised several theories about the crime, including the possibility that groups from Pakistan and North Korea may have been spying on the bank. Other analysts investigating the attacks said there were striking similarities between the “multiple bespoke tools” used by the hackers in both the banking cases and the attack on Sony Pictures in 2014.The latest breach detailed by Swift in a letter to its users on Friday occurred at a commercial bank that appeared, according to a leading online security firm BAE Systems on Friday, to be located in Vietnam.  In both attacks on banks, the intruders obtained legitimate credentials to sign in to the Swift network. They initiated fraudulent money transfers, then covered their tracks using tailor-made malware.

FDIC Employee Took Big Banks' Living Wills on the Way Out | American Banker: — The confidential living wills of several large banks were taken from the Federal Deposit Insurance Corp. by a departing employee who downloaded the data as part of tens of thousands of records on a zip drive, according to information revealed Thursday by a House subcommittee. The event took place during the 2015 fiscal year, but was not separately disclosed to Congress until the agency's federally mandated annual report on information security. Even then, the FDIC provided only vague details on what happened. (Federal agencies are required to report to Congress annually on all cybersecurity incidents.) "In one instance, sensitive business information regarding a limited number of large financial institutions was taken off premises by a departing employee," states the report, which was sent to Congress. "The sensitive information was recovered, and there is no evidence that the data was disseminated." The confidential report, a copy of which was obtained by American Banker, did not detail what kind of data was compromised. But an investigation by the House Science, Space and Technology Committee revealed it included the living wills of several banks, according to panel staff.

The US economy is grinding to a halt -  Lending standards for business loans are getting tighter, according to the Federal Reserve's "Senior Loan Officer Opinion Survey" (SLOOS). "Banks have been tightening standards for both commercial and industrial (C&I) and commercial real estate (CRE) loans over the past few quarters and the latest data from the Senior Loan Officer Opinion Survey shows the most severe tightening in lending standards for these types of loans so far in the expansion," said Daniel Silver, economist at JPMorgan. C&I loans are a catch-all category for loans that help finance purchases or upgrades of equipment. Essentially, the Fed surveys people in charge of giving out loans at financial institutions and asks them if it's getting harder or easier to get a loan. For the past two quarters, these officers have been reporting standards tightening at a faster rate. On net, 11.6% of respondents reported tighter lending conditions to midsize or large firms (13% reported tighter standards with 1.4% reporting eased standards), up from 8.2% net tighter in the first quarter of 2016. In fact, in the second quarter of 2015, a net 5.3% of lenders reported an easing of standards, so in a year's time it has swung 16.9% on net toward tighter standards. Or, as Bespoke Investment Group put it in a note Monday, "Both reported demand and reported supply of C&I loans are suggesting that credit will stop flowing to business from banks in the near future, if history is any guide."

Chart of the Day: Dividend Cuts Hit a Seven-Year High -- When it comes to corporate actions in times of financial duress, one of the hardest decisions for a company to make is cutting its dividend. In companies known for paying dividends, the dividend is considered sacrosanct, so the last thing the company wants to do is lose credibility with investors by cutting it. In spite of that, when times are tough companies often have no other choice, and as the last couple of years have shown, it has become increasingly common for companies to cut their payouts. Based on data from the Standard and Poors monthly dividend report, through the first four months of the year, 213 US companies have announced dividend cuts (upper chart right), which is the most cuts through April since the depths of the Financial Crisis in 2009, when 298 companies cut their payouts. In today’s Chart of the Day, we highlight prior periods where the revisions spread turned positive after extended periods of a negative spread including how the overall equity market performed going forward.

Beware the “Proven 15-Year Track Record” on Wall Street -- Pam Martens --The commercial that is airing regularly on the business news channel, CNBC, starts out like this:  “The power of 100 of the world’s top companies. The power of a proven 15-year track record.”    The web site for the PowerShares QQQ, the subject of the commercial, explains that it’s an Exchange Traded Fund (ETF) based on the Nasdaq-100 Index, noting that the “Index includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization.”  What we could not find within the commercial or the front page of the web site for the PowerShares QQQ was anything like the chart posted below. Following the burst of the infamous dot.com bubble, from its peak on March 27, 2000 to its trough on October 7, 2002, the Nasdaq 100 lost over 80 percent of its value. To some minds, that might constitute more than a pesky detail when talking about “proven” track records. Then there were the two huge accounting frauds within the Nasdaq 100.  In 2002, WorldCom was removed from the Nasdaq 100 amidst one of the largest accounting frauds in U.S. history. Its CEO, Bernie Ebbers, was sentenced to a 25-year prison term while its CFO, Scott Sullivan, received a 5-year prison term. Other WorldCom executives also went to jail. . The company’s common stock, at one point worth $100 billion in market cap, became worthless.  Adelphia Communications was also removed from the Nasdaq 100 in 2002. According to the SEC, the company, at the direction of members of the Rigas family, “(1) fraudulently excluded billions of dollars in liabilities from its consolidated financial statements by hiding them on the books of off-balance sheet affiliates; (2) falsified operations statistics and inflated earnings to meet Wall Street’s expectations; and (3) concealed rampant self-dealing by the Rigas Family, including the undisclosed use of corporate funds for Rigas Family stock purchases and the acquisition of luxury condominiums in New York and elsewhere.”

Report: 2008 Bank Bailouts Are Still Alive --Pam Martens - The U.S. is now in its eighth year since the Wall Street bank collapse of 2008 and most members of the general public believe the bailouts are long finished. That’s a fallacy. Last Friday, the Government Accountability Office (GAO) released a report showing that there are 16 banks still involved in the original bailout program – one of which, First Bancorp, owes the government $124.97 million or 49 percent of the funds owed by the other 15 banks combined. First Bancorp continues to trade on the New York Stock Exchange under the stock symbol, FBP. The common stock of First Bancorp has declined from over $150 a share in 2009 to close last Friday at $3.72. According to the company’s 10K filed with the Securities and Exchange Commission for year-end December 31, 2015, the U.S. government still owned 4.8 percent of the company’s common stock at that time.In addition, as Wall Street On Parade reported last month, the U.S. Treasury agreed to pump in an additional $258.1 billion going forward if Freddie Mac or Fannie Mae run into trouble, on top of the $187.5 billion they have already received from the U.S. taxpayer. In their first quarter earnings reports, both companies reported significant losses in their derivatives books but did not tap their Treasury lifelines further – at least for now. Freddie Mac and Fannie Mae were put into conservatorship by the U.S. government during the 2008 crisis. Wall Street banks are entangled with Freddie Mac and Fannie Mae because they serve as counterparties to each other’s trillions of dollars in derivatives. Then there is the Federal Reserve’s balance sheet which pre-crisis stood in the neighborhood of $800 billion and today stands at $4.5 trillion. Making up the bulk of the assets on the Federal Reserve’s books are the U.S. Treasury securities and mortgage-backed securities (MBS) issued by Fannie Mae, Freddie Mac and Ginnie Mae that the Fed sopped up from markets choking on the stuff during the crash. According to the Fed’s March 2016 balance sheet report, it currently holds $2.46 trillion of Treasuries and $1.76 trillion in agency MBS.

Kudos to Fed for Targeting Shadow Bank Systemic Risk | Bank Think: On May 3 the Federal Reserve issued a proposed rule that would require global systemically important banks, or GSIBs, in the U.S. to amend their derivatives contracts in ways that will make it easier to resolve them should they fail in the future. The proposal is a very important step in continuing progress toward a post-crisis framework where even the largest banks can be allowed to fail in an orderly way and without risk to taxpayers. Early opposition to this proposal from unusual quarters is a good occasion to study its merits. The issue underlying the Fed proposal is as technically complicated as it is important. The Fed proposal attempts to deal with a very specific but meaningful source of systemic risk – namely, the ability of counterparties to immediately tear up derivatives contracts when a GSIB fails. This is a cause of concern, as it can create a potentially destabilizing liquidity drain at the bank, spark fire sales of commonly held assets and transmit risk across the financial system. This ability is a special right that is enjoyed by derivatives counterparties under the bankruptcy code. Unlike most other creditors, who are subject to bankruptcy stays, parties to a derivative are permitted to immediately "close out" their positions and seize related collateral when their counterparty fails. These cross-default provisions can be a potential problem in the resolution of a GSIB. The prevailing resolution framework developed by the Federal Deposit Insurance Corp. and other global regulators is the so-called single-point-of-entry, or SPOE, approach. That approach is predicated on the idea that, if a GSIB were to fail, its holding company would be placed into resolution and the long-term creditors of that holding company would be bailed in, having their debt instrument converted into equity.

Satyajit Das: “Stay in the Name of Reform” – The Fed and ISDA’s Derivative Bankruptcy Initiative -- In early May 2016, the US Federal Reserve’s (“Fed”) proposed new measures which would, if implemented, require derivative contracts to be altered requiring counterparties to waive their right to terminate open positions and claim amounts owed, for a period of up to 48 hours when a bank enters bankruptcy. The proposal is consistent with a voluntary protocol introduced by the International Swaps and Derivatives Association (“ISDA”), which represents the derivatives industry, in 2014 and subsequently amended in 2015.  ‘Stay’ means: a delay, pause, stop or to suspend or postpone. It also means a device used as a brace or support, such as a corset made of two pieces laced together and stiffened by strips originally of whalebone. Interestingly, the proposal for a ‘stay’ encompasses all of the above meanings.  The proposed measures are part of the rapid resolution regimes (“RRRs”) (also known as living wills) created to reduce systemic risk, where a default by a large and/ or well connected bank rapidly spreads through the financial markets and into the real economy.  The basic idea is to provide the State with the power to resolve a failed bank, without recourse to bankruptcy, liquidation or public bail-outs. Resolution would entail sale or transfer of assets, restructure of the entity (isolating bad assets) or recapitalisation (including a ‘bail-in’ to convert the bank’s quasi capital instruments or debt to equity). A principal objective is to avoid recourse to taxpayer funding and socialisation of the costs of failure.

Shadow banking’s enduring perils - Perry Mehrling  -- In the immediate aftermath of the global financial crisis, most people thought that shadow banking was all in the past, and good riddance! Today, however, it is becoming clear that shadow banking is also in our future, even centrally so. The crisis was just one step toward that future, revealing weakness in order to force necessary restructuring. Of course the future won’t be the same as pre-crisis, but we can already dimly see its outlines emerging.  In retrospect, the Global Financial Crisis of 2007-2009 can be understood as a stress test of the emerging new system of market-based credit, so-called Shadow Banking, which collapsed under the stress. Central banks caught the falling knife just in time, and have been providing life support ever since (QE, ZIRP, NIRP), keeping the system alive while regulators on the one side and bankers on the other have been busy creating a new, and hopefully more robust, market structure.  Today, as the Fed celebrates “liftoff”, it is just barely possible to detect the outlines of the newly emerging market structure. It’s not a done deal by a long shot, but we can begin to connect some dots and to imagine how the new system might work once it is complete. Most important, we can begin to consider the possible resilience of that new system in the face of the next stress test. 

Negative Interest Rates: A Tax in Sheep's Clothing - Many foreign central banks—such as the European Central Bank, the Bank of Japan and the Swiss National Bank—have implemented negative interest rates on bank reserves as a policy tool to stimulate demand for goods and services. If a bank holds a dollar of reserves, the central bank may take, say, half a cent.The hope is that a negative interest rate will induce firms to lend out the reserves by charging a lower interest rate on loans. In short, “use it or lose it.” More lending would stimulate spending on goods and services, which would lead to higher output and upward pressure on inflation. But a negative interest rate is just a tax on the banks’ reserves. The tax has to be borne by someone:

• The banks can choose not to pass it on and just have lower after-tax profits. This will depress the share price of banks and weaken their balance sheets by having lower equity values.
• The banks can pass the tax onto depositors by paying a lower interest rate on deposits or charging them fees for holding the deposits. In either case, depositors have less income to spend on goods and services.
• The bank can pass the tax onto borrowers by charging them a higher interest rate on a loan or higher fees for processing the loan. In either case, it is more costly to finance purchases of goods and services by borrowing.

None of this sounds very “stimulative” for consumer spending. But then, no tax ever is.

Fed Worries About Deflation but Pays Banks Billions Not to Lend QE Proceeds!?! - In October of 2006, the Federal Reserve was given authority to pay interest on reserve balances held by depository institutions in Federal Reserve Banks. But not just reserve balances, which were required to be held, but also on excess reserves. Interestingly, excess reserves at the Fed had never been held in significant quantities. However, all this changed upon the implementation of FSRA (which was implemented ahead of schedule in conjunction with Secretary Paulson's Emergency Economic Stabilization Act of 2008 or EESA). The impact was a shocking increase in excess reserves. The FSRA law supposed intention was, according to the Fed's Oct. 6, 2008 press release..."The payment of interest on excess reserves will permit the Federal Reserve to expand its balance sheet as necessary to provide the liquidity necessary to support financial stability while implementing the monetary policy that is appropriate in light of the System’s macroeconomic objectives of maximum employment and price stability." The implication I took from this very convoluted Fed speak was that absent the Interest on Excess Reserves or IOER...that the Fed was concerned that the banks (by banks I mean Primary Dealer banks that directly buy the Treasury's from the government with the intention of reselling the Treasury's into the market) would actually utilize this money?!? The Fed's intent seems to have been to utilize QE to buy (remove) assets from the banks and then pay the banks not to lend this money, keeping it from entering the economy (chart below). Still, why would banks go along for this mere pittance of a 0.25% (significantly less than the banks were earning) when the funds could earn so much more if allocated? When the largest, most influential / connected banks in the land do something that looks dumb with $2.4 trillion dollars, it's pretty clear something has changed and we (I) simply haven't caught up yet. Was this some fashion of quid pro quo, collusion, or have the rules of capitalism changed?

Banking’s New Normal -- If you listened only to speeches from the Presidential campaign trail, you’d come away with the strong impression that, eight years after the financial crisis, Wall Street reform has been a bust. Every Republican candidate called Dodd-Frank, the centerpiece of the Obama Administration’s reform effort, a dismal failure. Hillary Clinton has been tepid in her defense of Dodd-Frank, and Bernie Sanders called it “a very modest piece of legislation” that changed little about the way the Street does business. Tell that to the bankers. Banks performed dismally last year, and their 2016 first-quarter-earnings reports show that this one is off to an even worse start. Returns on equity have fallen. Bonuses and salaries are being slashed; in the past quarter, Goldman Sachs cut the amount it set aside for compensation by forty per cent. Payroll is down, too: banks have eliminated tens of thousands of jobs in the past couple of years and are now embarking on a new round of severe job cuts. Some of these struggles can be attributed to short-term factors, such as low interest rates and unusually volatile markets. But there’s no avoiding the deeper conclusion: regulations have simply made banking less profitable than it once was. Before the financial crisis, financial companies (not including the Federal Reserve banks) accounted for nearly thirty per cent of U.S. corporate profits. By 2015, that number had fallen to just seventeen per cent.

The Trump Effect: Jamie Dimon Calls Fellow Banker a “Jerk”; Facebook Death Threats Against Obama --Pam Martens -- Donald Trump’s brash, unfiltered mouth, which he is leveraging to stay in the media spotlight 24/7, may be taking root in broader society. On Wednesday, Jamie Dimon, the Chairman and CEO of the largest bank in the U.S., with buttoned-down, old money clients, called a fellow banker a “jerk” during an on-air conversation at CNBC.  Dimon’s school boy rhetoric was directed at Camden Fine, President and CEO of the Independent Community Bankers Association, who has accused Dimon of attempting to “link the interests of megabanks to community banks in order to mitigate the political heat” that is on the Wall Street behemoths. After Dimon’s “jerk” insult on CNBC, Fine said in a statement to CNBC that Dimon’s remarks “reflect Wall Street’s inability to take responsibility for the economic crisis it caused and the taxpayer-funded guarantee against failure it continues to enjoy.” Dimon has never been a paragon of etiquette but calling an industry head a “jerk” on TV sets a new low, even for him.  On Wednesday, the same day that Dimon was calling a fellow banker a jerk on TV, Trump’s estate historian had this to say about the President of the United States on his Facebook page: “To all my friends on FB, just a short note to you on our pus headed ‘president’ !!!! This character who I refer to as zero (0) should have been taken out by our military and shot as an enemy agent in his first term !!!!! Instead he still remains in office doing every thing he can to gut the America we all know and love !!!!! Now comes Donald J Trump to put an end to the corruption in government !!!! The so called elite, who are nothing but common dog turds from your front lawn are shaking in their boots because there is a new Sheriff coming to town, and the end to their corruption of the American people (YOU) is at hand …”

How FASB's Loan-Loss Plan Will Hurt Small Banks - American Banker - short video -  Daniel Schrider, chief executive of Sandy Spring Bancorp in Olney, Md., discusses a controversial change to loan-loss accounting rules — known as the Current Expected Credit Loss standard, or CECL — and why it will be a burden for community banks.

Regulations and Growth - -- Bentley Coffey, etal have an interesting new paper on The Cumulative Cost of Regulations. They attack two of the big problems in quantifying the effect of regulations on the economy.  First, measurement. To get past regulatory horror stories,  just how do we measure the problem? They use the Mercatus Center's new RegData database, which is based on textual analysis of the Federal Register. Second, functional form. How should we relate regulations to output? Here they use a detailed industry growth model. You may object, as to any model, but at least the mechanisms are explicit and you can choose different ones if you want. (I haven't plowed through all the equations, and am interested to hear comments from those of you who have.) Third, estimation. They use the variation in industry outcomes related to differential regulation of those industries to estimate the  effects of regulation on investment. The bottom line is pretty startling:  Economic growth in the United States has, on average, been slowed by 0.8 percent per year since 1980 owing to the cumulative effects of regulation: If regulation had been held constant at levels observed in 1980, the US economy would have been about 25 percent larger than it actually was as of 2012. This means that in 2012, the economy was $4 trillion smaller than it would have been in the absence of regulatory growth since 1980. This amounts to a loss of approximately $13,000 per capita,... A graphical summary:

Banks see more pain despite crude’s rally -- The recent rally in the price of oil is doing little to improve the prospects of overstretched borrowers in the oil patch, say banks and their advisers, raising the prospect of further pain for companies and their lenders in the months ahead. Trouble in the energy sector was one of the themes of the first quarter for the big US banks, where provisions for loan losses leapt an average 61 per cent from the same period a year earlier, according to DBRS, the credit rating agency. Now, with many banks deep into the twice-annual process of resetting borrowing limits for their energy customers, they say they are cutting facilities by between 20 and 25 per cent — a deeper contraction than the 15-20 per cent cuts late last year. The squeeze comes despite a recovery in the price of oil, which has risen more than 60 per cent from its February lows. It is likely to mean that more cash-strapped borrowers tip into bankruptcy. “At the margin, the higher spot price has helped, but it has definitely not fixed companies with too much leverage in their capital structure,” said one senior Texas-based banker, speaking on condition of anonymity. Another banker at a rival bank noted that, unlike late last year, most customers no longer had the option of refinancing via equity markets or high-yield bond markets. “It’s a little trickier this spring,” he said. “The market is running out of places to go for money.” April was the heaviest month for energy company bankruptcies since the oil price started to turn in late 2014, according to Haynes and Boone, a Dallas-based law firm. Eleven companies filed for Chapter 11 protection during the month with total debts of $14.9bn — a significant increase from March, which saw seven collapses with total debts of $1.9bn.

Oil bankruptcies rack up as banks cut credit lines | Fuel Fix – Oil-company bankruptcies surged over the past two months as drillers ran into hefty interest payments amid one of the toughest financial squeezes for the industry in decades. Eighteen North American oil companies filed for bankruptcy in March and April, a big two-month haul that included two of Houston’s midsized public drillers, Energy XXI and Ultra Petroleum Corp. Several of the 18 producers chose not to make quarterly interest payments on a combined $8.9 billion in debt while banks cut oil company credit lines, part of a semi-annual review by lenders. “There’s no point in paying the interest to bond holders at that point,” said Buddy Clark Jr., an attorney at Dallas law firm Haynes & Boone. “They’ve got to conserve cash. A lot of the bondholders will be out of the money.” Since the start of the downturn, 69 oil companies in the United States and Canada have filed court papers seeking Chapter 11 bankruptcy protection, according to Haynes & Boone. Eleven of them filed in April. And 27 filed this year, compared to just eight that filed in the first four months of 2015.

Major Banks Shrug Off Concerns Of Bad Energy Debt | OilPrice.com: The latest survey by the Federal Reserve among senior loan officers has revealed a pessimistic picture. Banks operating in the U.S. are still skeptical about the ability of their energy industry clients to pay back their loans, and they are taking a variety of steps now to minimize the damage.  Last month, the Wall Street Journal quoted data from Barclays that showed American banks are saddled with over $140 billion in unfunded loans to E&Ps in oil and gas. They cautioned this will very likely weigh down on banks’ first-quarter earnings and plunge them even deeper into the abyss of unfunded, non-repayable debt. Fortunately for the lenders, their first-quarter results largely beat expectations, which were understandably low in light of this degree of exposure to an industry in distress.  Citigroup, for instance, booked a healthy $3.5 billion in net earnings, which although lower than the result for Q1 2015 was still good, especially given that its exposure to the energy industry is close to $60 billion. Bank of America actually reported an increase in both revenues and earnings on an annual basis, despite over $40 billion of exposure to energy industry loans, both funded and unfunded. JPMorgan’s net earnings were slightly down on the year at $5.5 billion versus $5.9 billion, but still above analyst expectations.

US Treasury warns on online lenders’ business models  The US Treasury Department has warned of the fragility of the business models of a new crop of online lenders, a day after revelations of alleged mis-selling of loans at Lending Club shook confidence in the sector. A white paper released on Tuesday  represented the first attempt by a US regulator to produce a framework for supervising an industry which sprang up in the wake of the financial crisis. Operating under a patchwork of state and federal rules, online lenders such as SoFi and OnDeck Capital have grown rapidly. They have been winning over consumers and small businesses by claiming to provide faster cash at better rates than the lumbering brick-and-mortar lenders. In the paper, more than nine months in the making, the Treasury noted that much of the innovation from the upstarts had been positive. But it added that many of the new platforms — some 400 or so in the US, at the latest estimate — had no experience of operating “through a complete credit cycle”. It warned ofdeterioration in the loans they are selling on to individual and institutional investors. “New business models and underwriting tools have been developed in a period of very low interest rates, declining unemployment, and strong overall credit conditions,” the Treasury said. “Higher charge-off and delinquency rates for recent vintage consumer loans may augur increased concern if and when credit conditions deteriorate.” Online lenders have had a tougher time in recent months. Tighter credit markets and rising delinquencies among the riskiest classes of borrower have fed fears that sources of funding will dry up, potentially forcing platforms to pull down their shutters. Such concerns were magnified this week after Lending Club — the former sector favourite — booted out its chief executive over alleged mis-selling of loans and lack of disclosure on a personal investment.

Marketplace Lenders Draw Line in Sand: No Legislation | American Banker: Even before the Treasury Department released its policy recommendations for the marketplace lending sector, an industry-backed campaign opposing new rules for small-business credit was underway. Industry lobbyists anticipated — correctly, as it turned out — that the Treasury would express concern about the rapid proliferation of small-business lenders online while their better-regulated counterparts in the consumer realm appeared less worried. So it was not a surprise that the Treasury declared its willingness Tuesday to work with Congress on legislation to develop new protections for small-business borrowers. The department's 45-page white paper argues that business loans under $100,000 have much in common with consumer loans but do not come with the same protections. "Focusing on these common characteristics below this size threshold, combined with effective oversight, would protect self-employed and microbusiness owners while minimizing the compliance burden on larger small business loans," the paper states. But industry representatives swiftly rejected the idea that new legislation is needed to protect small-business owners. "There are numerous laws today that ensure small business loans are made responsibly. What is needed is proactive oversight to ensure that rules are followed and borrowers are treated fairly regardless of the provider," Rob Nichols, president of the American Bankers Association, said

Time for Online Lenders to Get Serious About Regulation | Bank Think: With the focus on alternative small-business lending growing more and more intense, the threat to innovation is not just from over-regulation. It is also from a number of new small-business lenders that are indeed unscrupulous and predatory in their practices targeting cash-strapped businesses. Here I am focusing predominantly on merchant cash advance businesses and other business-to-business lenders which are earning a reputation for adding to businesses' long-term financial difficulties when providing short-term financing. Their misguided pricing and other predatory practices are squandering these lenders' chance to play a constructive role in alternative lending's legal and regulatory future. This miscalculation can have devastating effects on future innovation in small-business lending. Some city and state governments are already focusing efforts on online small-business lenders, which may put the practices of MCA companies even more under the microscope. In Chicago, Mayor Rahm Emanuel launched an initiative last year aimed at preventing small businesses from taking out loans they couldn't afford. The Consumer Financial Protection Bureau will likely pay more attention to unscrupulous small-business lenders after establishing a new position of assistant director for the CFPB's Office of Small Business Lending Markets.  Illinois, New York and California have moved to regulate this industry.

Don't Ignore This FDIC 'Request for Comment' | Bank Think -- In today's highly active regulatory environment, it feels like the banking agencies send us daily emails asking for comments on a particular industry topic. And the requests don't always relate to a proposed rule under consideration. For most banks and industry representatives, there are many day-to-day tasks that are more important than providing input to regulators on these subjects. But the latest letter from the Federal Deposit Insurance Corp., asking for comment on the agency's plan to explore the economic inclusion potential of mobile financial services, is different. The request is an opportunity to convince regulators that emerging technology is the best approach to engaging the underserved. In so doing, banks will be able to overcome challenges – related to the Community Reinvestment Act – in completing mergers and acquisitions. Most stalled merger transactions result from consumer advocacy groups criticizing a bank's record in providing banking services to underserved communities within its market area.

The CFPB's Proposed Rules on Consumer Financial Arbitration -- As has been expected for some time, the Consumer Financial Protection Bureau has issued a proposed rule that would prohibit companies providing consumer financial services from pairing arbitration clauses with clauses that prohibit consumers from bringing or participating in class actions. The rule also imposes disclosure requirements on companies that use arbitration. The CFPB's announcement is here; the proposed rule is here. There are two main components.  First, covered providers of consumer financial products can still include pre-dispute arbitration clauses in their contracts, but those who do must explicitly state that the consumer retains the right to bring or participate in a judicial class action. The rule requires that the following language be included in the contract: "We agree that neither we nor anyone else will use this agreement to stop you from being part of a class action case in court. You may file a class action in court or you may be a member of a class action even if you do not file it." Second, the Bureau proposes to require covered providers to submit information about claims filed by or against them in arbitration, including copies of the arbitration demand, any response, and the arbitrator's award (see p. 362-363 of the proposal). The Bureau apparently hasn't made up its mind about whether it will make this information public or will merely use it to monitor arbitration proceedings.

CFPB Accuses Check Casher All American of Deceptive Acts | American Banker: The Consumer Financial Protection Bureau has charged a Mississippi company with refusing to disclose check-cashing fees to consumers, deceptively pressuring borrowers into taking out multiple payday loans and keeping overpayments. The CFPB's proposed order, filed Wednesday in U.S. District Court for the Southern District of Mississippi Northern Division, accuses All American Check Cashing, Mid-State Finance and owner Michael Gray of using deceptive tactics and statements to hide fees and pressure borrowers into loans. The company also used deception to stop consumers from backing out of transactions, the CFPB said. The CFPB's lawsuit seeks to end the practices, obtain redress for consumers and impose penalties. Dale Danks Jr., an attorney for Gray, declined to comment. All American Check Cashing, which operates 50 stores in Mississippi, Alabama and Louisiana, collects more than $1 million in fees annually, the CFPB said.

Banks' Secret Plan to Disrupt the Payday Loan Industry | American Banker: — At least three U.S. banks are preparing to go to market with new small-dollar installment loan products in a move that could potentially disrupt the payday lending industry. Their plans, the details of which were provided to and confirmed by American Banker on condition the institutions not be named, depend on the upcoming Consumer Financial Protection Bureau proposal that would place new restrictions on payday-lending-type products. The proposal may exempt lenders from having to conduct certain underwriting requirements as long as the loan term is between 46 days and six months and the monthly payments do not exceed 5% of the borrower's gross monthly income, according to an outline released last year. That exemption is key for the banks, two of which are among the top 10 banks in the country by number of branches.  Banks have largely stayed away from small-dollar consumer loans since the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency discouraged deposit advance products in 2013 because they viewed them as expensive to consumers and carried reputational risks. But the banks said if the 5% exemption is part of the proposal, they believe they can offer a product that would satisfy regulators. A mockup of what the product could look like would be a $500 five-month loan for a borrower with an annual income of $30,000 and monthly payments of $125 (or 5% of the borrower's $2,500 average monthly income). After assuming a 6% loss rate (which would be comparable to similar installment loans currently on the market), automation expenses and servicing fees, a bank could net roughly $70 while the borrower would be on the hook for $125. The average cost of a similar payday loan product would be closer to $750.

Payday Lenders Seek Gov't Intervention After Google Ad Ban | American Banker: Payday lenders on Wednesday pushed back against Google's plan to ban payday loan advertisements, calling the search engine's policy discriminatory and urging state and federal regulators to intervene. Google said that beginning July 13 it will no longer allow ads for payday loans with annual percentage rates of 36% or higher, or where repayment is due within 60 days of the date of issue. Google's new policy was the culmination of several months of discussions with consumer and civil rights groups that have long sought to rein in payday loans. While consumer advocates praised Google for setting a standard for search engines — one they hope to expand to Yahoo, Microsoft's Bing and elsewhere — payday lenders suggested the ban was illegal. "This unprecedented abuse of power by a monopoly player should concern lawmakers at both the state and federal levels and should invite scrutiny of state and federal regulators," said Lisa McGreevy, president and CEO of the Online Lenders Alliance. "The policy discriminates against those among us who rely on online loans, especially the large number of Americans who cannot raise $2,000 in case of emergency." ... Google is making a blanket assessment about the payday lending industry rather than discerning the good actors from the bad actors," Cantu said in a statement. "This is unfair towards those that are legal, licensed lenders and uphold best business practices."

Quicken Loans CEO tells Justice Department to pound sand on mortgage allegations: Quicken Loans CEO Bill Emerson said Monday that the Detroit-based housing lender won't settle with the government over allegations of filing false claims on federally insured mortgages. "For us, that's not something we can even begin to stomach," he told CNBC's "Squawk Box," saying he welcomes a jury trial. "[To] look our 12,000 team members in the eye and say, 'guess what, we committed fraud against the United States government' … we didn't. We won't say it." Last year in a complaint, the Justice Department accused Quicken Loans of submitting or causing the submission of claims for hundreds of improperly underwritten loans insured by the Federal Housing Administration from September 2007 to December 2011. On the same type of issues, the DOJ has gone after many other lenders, which resulted in more than $100 million in mortgage settlements. "The largest, most well-capitalized lenders in the country have been systematically targeted by the DOJ. And they go in and take a look and threaten and they shame ... and try to put pressure on people to settle," Emerson said. He admitted simple mistakes are made when writing loans. "An example, we miscalculated income by $2.10. We over-lent somebody $26 on a loan program. Those are the type of things the Department of Justice is saying is committing fraud against the United States government. And it's just dead wrong."

MBA: "Foreclosures Continue to Decrease, Delinquencies Flat" in Q1 -- From the MBA: Foreclosures Continue to Decrease, Delinquencies Flat  The delinquency rate for mortgage loans on one-to-four-unit residential properties remained unchanged from the previous quarter at a seasonally adjusted rate of 4.77 percent of all loans outstanding at the end of the first quarter of 2016. This was the lowest level since the third quarter of 2006. The delinquency rate was 77 basis points lower than one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.  The percentage of loans on which foreclosure actions were started during the first quarter was 0.35 percent, a decrease of one basis point from the previous quarter, and down 10 basis points from one year ago. This foreclosure starts rate was at the lowest level since the second quarter of 2000.  The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the first quarter was 1.74 percent, down three basis points from the previous quarter and 48 basis points lower than one year ago. This was the lowest foreclosure inventory rate seen since the third quarter of 2007.  The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 3.29 percent, a decrease of 15 basis points from previous quarter, and a decrease of 95 basis points from last year. This was the lowest serious delinquency rate since the third quarter of 2007.

MBA: "Mortgage Applications Slightly Increase in Latest MBA Weekly Survey"  -- From the MBA: Mortgage Applications Slightly Increase in Latest MBA Weekly Survey Mortgage applications increased 0.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 6, 2016.  ...The Refinance Index increased 0.5 percent from the previous week. The seasonally adjusted Purchase Index increased 0.4 percent from one week earlier. The unadjusted Purchase Index increased 1 percent compared with the previous week and was 14 percent higher than the same week one year ago. ..The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 3.85 percent from 3.83 percent, with points increasing to 0.35 from 0.32 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.  The first graph shows the refinance index since 1990. Refinance activity was higher in 2015 than in 2014, but it was still the third lowest year since 2000. Refinance activity increased a little this year when rates declined. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is 14% higher than a year ago.

Mortgage applications up just 0.4%, despite rates near three-year lows: Despite the lowest interest rates in nearly three years, the number of people applying for a mortgage barely moved last week. Total volume increased 0.4 percent from the previous week on a seasonally adjusted basis, according to the Mortgage Bankers Association (MBA). Applications to refinance, which are most rate-sensitive on a weekly basis, rose 0.5 percent. They are now 23 percent higher than one year ago, when interest rates were slightly higher.The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 3.82 percent from 3.87 percent, with points decreasing to 0.34 from 0.36 (including the origination fee) for 80 percent loan-to-value ratio loans, according to the MBA. Rates moved even lower at the start of this week, hitting their lowest level in three years, according to Mortgage News Daily. Rates stayed low despite some strength in the stock market, which usually pushes bond yields down; mortgage rates loosely follow the yield on the 10-year Treasury. Three years ago, when the Federal Reserve hinted it would begin to "taper" its investments in mortgage-backed bonds, rates moved decidedly higher quickly. "Despite expectations that rates would slowly rise this year, the 30-year fixed rate last week was 18 basis points lower than a year ago, continuing to provide a favorable rate environment for the housing market," said Lynn Fisher, MBA vice president of research and economics.

"Mortgage Rates Steady Near 3-Year Lows"  - From Matthew Graham at Mortgage News Daily: Mortgage Rates Steady Near 3-Year Lows -- Mortgage rates moved sideways today, taking them one step closer to officially claiming the title of "3 year lows." Tomorrow marks the three year anniversary of the Wall Street Journal article that began the early days of the 'taper tantrum'--the jarring move higher in rates that resulted from markets coming to terms with the end of the Fed's asset purchases.  While rates aren't as low today as they had been before the taper tantrum, the current rate environment is excellent in its own right. Apart from being fairly close to the all-time lows seen in 2012-2013, today's low rates exist without any Fed asset purchases and without any risk that the Fed will surprise the world with a shift toward stricter monetary policy. In fact, if there's any risk for financial markets, it's that the Fed will continue to back away from their rate-hike campaign that began with the first and only hike in nearly a decade this past December. Most lenders are right in line with rates seen on Friday. The most prevalent conventional 30yr fixed quote continues hovering around 3.625% with more than a few lenders already back down to 3.5%.

Home Prices This Year Post Steady But Not Spectacular Gains - Home prices grew moderately in cities across the U.S. in the first quarter, as the market heads for steady, but not spectacular growth in 2016. The median price for an existing, single-family home increased in 87% of 178 metropolitan areas across the U.S. in the first quarter compared to a year earlier, according to the National Association of Realtors. That is a slight increase from the fourth quarter, when 81% of metro areas saw prices rise. Nonetheless, the market has pulled back from the frantic pace at which prices were increasing at the beginning of last year. Just 28 metro areas boasted year-over-year double-digit price increases in the first three months of 2016, about half the 51 metro areas in the first quarter of last year. Thirty metro areas posted double-digit gains in the fourth quarter of 2015. The double-digit gains were concentrated in smaller metro areas, such as Rockford, Ill. at 22% and Youngstown, OH at 20.5%. Nationally, the median home price increased by 6.3% to s $217,600, compared with a 7.4% in the first quarter of last year. Economists have anticipated a slowdown in the housing market this year, driven by a lack of available homes for sale and buyers’ wariness about continued price increases. At the end of the first quarter, there were 1.98 million existing homes available for sale, down from 2.01 million homes for sale at the end of the first quarter in 2015.

Q1 2016 GDP Details on Residential and Commercial Real Estate -- The BEA has released the underlying details for the Q1 advance GDP report.  In April the BEA reported that investment in non-residential structures decreased at a 10.7% annual pace in Q1. The decline was due to less investment in petroleum exploration. Investment in petroleum and natural gas exploration declined from a $64.6 billion annual rate in Q4 to a $38.7 billion annual rate in Q1.  "Mining exploration, shafts, and wells" investment is down 68% year-over-year.  Excluding petroleum, non-residential investment in structures increased at a 10.2% annual rate in Q1.  That is solid growth. The first graph shows investment in offices, malls and lodging as a percent of GDP. Office, mall and lodging investment has increased a little recently, but from a very low level. Investment in offices increased in Q1, and is up 28% year-over-year -increasing from a very low level - and is now above the lows for previous recessions (as percent of GDP). Investment in multimerchandise shopping structures (malls) peaked in 2007 and is unchanged year-over-year. The vacancy rate for malls is still very high, so investment will probably stay low for some time. Lodging investment increased further in Q1, and with the hotel occupancy rate near record levels, it is likely that hotel investment will increase further in the near future. Lodging investment is up 32% year-over-year. The second graph is for Residential investment components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, Brokers’ commissions and other ownership transfer costs, and a few minor categories (dormitories, manufactured homes). . However - even though investment in single family structures has increased from the bottom - single family investment is still very low, and still below the bottom for previous recessions as a percent of GDP. I expect further increases over the next few years. Investment in single family structures was $234 billion (SAAR) (about 1.3% of GDP), and is up 10.4% year-over-year.

Rising U.S. Rents Squeeze the Middle Class - WSJ: Rising rents in cities across the nation are hurting the poorest residents, but those who are higher on the income ladder might be bearing the brunt of the pain. A study set to be released on Monday shows that a far bigger proportion of middle-class renters in New York were squeezed by rising rents than were the lowest-income renters. The study by New York University’s Furman Center examined rapidly gentrifying neighborhoods such as Brooklyn’s Williamsburg section and Harlem, where rents jumped 80% and 53%, respectively, between 1990 and 2014. While the share of the poorest families struggling to afford rent in those sections increased by 7.6 percentage points from 2000 to 2014, the share of middle-income households struggling to afford rent jumped 18 percentage points. One main reason for the disconnect, the authors suggest, is that many of the poorest residents live in public housing or receive rental subsidies for which middle-income households don’t qualify. They might also be more likely to leave neighborhoods altogether when rents rise. “We focus so much on the poor and the displacement of the poor. Maybe in a lot of these neighborhoods … it’s moderate-income households that are more vulnerable,” said Ingrid Gould Ellen, faculty director at the Furman Center.

The rise of household debt in the U.S., in five charts.: With mortgage debt creeping back up and student debt ballooning, American families are in the midst of a debt crisis. While we needlessly fret about overconsumption and hyperconsumerism, we miss a bigger picture: rising housing, medical, and education costs. Here are five charts that show the extent of the country’s debt problem. To learn more about how we got here—and how we can get out—check out the United States of Debt, a Slate Academy.

• 1. Although household debt relative to GDP has declined since the recession, it remains higher than it was for almost all of postwar history.
• 2. Nonmortgage debt, which includes student loans, credit card debt, and auto loans, is creeping up. Meanwhile, mortgage debt is creeping back up, having fallen after the housing bubble popped.
• 3. Student loan debt now exceeds credit card debt, auto loans, and other nonmortgage debt.
• Data source: Federal Reserve Bank of New York | * The "other" category includes consumer finance (sales financing, personal loans) and retail (clothing, grocery, department stores, home furnishings, gas, etc.) loans.
• 4. Household debt relative to GDP is greater in the U.S. than in Germany, France, Italy, and Spain.
• 5. The average household that has credit card debt owes $16,000. That number is $27,000 for auto loans, $48,000 for student loans, and $169,000 for mortgages.

March 2016 Consumer Credit Rate of Growth Rate Improves On The Back Of Downward Revisions: The headlines say consumer credit rate of annual growth improved - and came in well above market expectations. The backward revision was downward, and this month consumer credit is where pundits thought they were last month. What is interesting this month is that both revolving and nonrevolving credit are growing at nearly the same rate. The headline said: Consumer credit increased at a seasonally adjusted annual rate of 6-1/2 percent during the first quarter. Revolving credit increased at an annual rate of 6 percent, while nonrevolving credit increased at an annual rate of 6-1/2 percent. In March, consumer credit increased at an annual rate of 10 percent.Overall takeaways from this month's data:

• There were significant backward revisions. The published data values for consumer credit growth last month was 6.7 % (unadjusted) and 5.75 % (seasonally adjusted) Vs. the current revised values of 6.5 % (unadjusted) and 4.8 % (seasonally adjusted).
• Student loan year-over-year growth rate has been decelerating gradually since the beginning of 2013.
• Student loans growth rate decelerated 0.1 % month-over-month and year-over-year growth is now 11.2 % year-over-year.
• Revolving credit (credit cards and this series includes no student loans) and has been slightly accelerating since 2010..

Consumer Sentiment May 13, 2016: Consumer sentiment is absolutely soaring so far this month, up nearly 7 points to 95.8 for the mid-month flash. This is the best reading since June last year. Expectations, which have been pulling down the headline index most of this year, jumped nearly 10 points to 87.5. The month-to-month turnaround for this reading is the best of the cycle, since 2006. Current conditions are also moving higher, to 108.6 from 106.7. Readings on inflation expectations are mixed with the 1-year outlook, despite the rise underway in gas prices, falling a very steep 3 tenths to 2.5 percent, offset in part by a 1 tenth uptick to 2.6 percent for the 5-year outlook. Federal Reserve policy makers will not be pleased with the 3 tenth decline in near-term inflation expectations, one however that looks suspiciously like an outlier and will have to be repeated in subsequent reports. Otherwise this report is very strong and, driven by the fundamental strength of the labor market, points to renewed confidence in the economic outlook.

Consumer sentiment pops as income gains lead to rosier views of the future -  Consumer sentiment surged in early May as Americans’ views of the future brightened. The University of Michigan’s index surged 7.6% to 95.8. Economists surveyed by MarketWatch had expected a reading of 89.5. Most of the gain was due to the expectations index, which soared 12.8% to 87.5, its highest in nearly a year. The current conditions component also rose, by 1.8%, to 108.6. The largest gains were centered in lower-income and younger households, who may be more sensitive to income gains and the jobs outlook, the Michigan researchers noted in a release.

Preliminary May 2016 Michigan Consumer Sentiment At Highest Level in Nearly a Year: The University of Michigan Final Consumer Sentiment for May came in at 95.8, it's highest reading in nearly a year and a 6.8 point increase from the 89.0 April Final reading. This is its largest increase since 2013. Investing.com had forecast 90.0. Surveys of Consumers chief economist, Richard Curtin makes the following comments: Consumer sentiment rebounded in early May due to more frequent income gains, an improved jobs outlook, and the expectation of lower inflation and interest rates. The largest gains were recorded among lower income and younger households, although the gains were recorded among all income and age subgroups as well as across all regions. Nearly all of the gains were in the Expectations Index, which rose to its highest level in nearly a year. To be sure, the data still indicated the negative impact of uncertainty about future economic policies associated with the Presidential election, but its overall impact was overwhelmed by favorable economic developments. It is too early to judge the potential impact of the election on consumers' expectations, and one month's rebound in consumer confidence is insufficient to increase the current forecast for inflation-adjusted consumer expenditures from 2.5% during 2016. 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.

Retail Sales increased 1.3% in April -- On a monthly basis, retail sales were up 1.3% from March to April (seasonally adjusted), and sales were up 3.0% from April 2015. From the Census Bureau report: The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for April, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $453.4 billion, an increase of 1.3 percent from the previous month, and 3.0 percent above April 2015. ... The February 2016 to March 2016 percent change was revised from down 0.4 percent to down 0.3 percent. This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). Retail sales ex-gasoline were up 1.2%. The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Retail and Food service sales ex-gasoline increased by 4.1% on a YoY basis. The increase in April was above expectations for the month, and retail sales for February and March were revised up. A strong report.

US Retail Sales Post Sharp Rebound In April - Consumer spending revived in April after slumping in March, the US Census Bureau reports. Today’s update offers new support for arguing that economic growth will strengthen in the second quarter after virtually grinding to a halt in Q1, based on GDP data.  Retail spending jumped 1.3% last month, delivering a healthy contrast to March’s 0.3% slide. More importantly, the year-over-year rate picked up for headline spending. Consumption increased 3.0% for the 12 months through April—a healthy rebound after March’s weak 1.7% year-over-year advance. “This is all part and parcel of the consumption numbers coming more in line with the income numbers we’ve been seeing,” advises Jacob Oubina, senior US economist at RBC Capital Markets in New York. “The breadth of this report was extremely constructive.” That’s a reasonable view, but note that the growth trend still appears to be slowing, as the annual pace in the chart above reminds. Even so, it’s harder to argue that consumer spending is falling off a cliff in the wake of today’s release. In turn, the day’s retail numbers boost the case for expecting modestly firmer Q2 growth for the US economy overall. The macro trend is still relatively sluggish compared with last year. But as the April data continues to roll in, the early clues suggest that the bias for modest growth is intact as of last month. The next opportunity to revise the outlook for good or ill, arrives in Tuesday’s (May 17) updates on housing starts and industrial production for April.

Staples Office Depot Merger Blocked by U.S. Judge: — A federal judge has blocked the proposed merger of Staples and Office Depot, saying the government had made the case that the merger had a “reasonable probability” of hurting competition in office supplies.The injunction issued Tuesday by U.S. District Judge Emmet Sullivan likely means the last two national office-supply chains will drop their $6.3 billion merger plan. The companies had said they would do so if the ruling went against them.The Federal Trade Commission has sought to block the merger, contending it would allow the new combined company to dictate the price of supplies, especially for corporate customers that buy in bulk.

The post office lost $2 billion in 3 months -- The U.S. Postal Service reported a fiscal second-quarter loss of $2 billion, primarily due to costs it said were out of its control. When considering only its business operations, the post office said “controllable” earnings for the three months ending March 31 jumped 84% to $576 million from $313 million in the same period a year ago. Revenue grew 4.7% to $17.7 billion, as 1.9% growth in standard mail, a 0.7% increase in first-class mail and an 11% jump in shipping and packages, offset a 5.6% decline in periodicals. In comparison, United Parcel Service Inc. UPS, -0.22% reported revenue growth for the quarter ended March 31 of 3.2%, while FedEx Corp. FDX, -0.45% said revenue for the quarter ended Feb. 29 increased 8%.

Crop Prices Rally as Report Points to Easing of Glut - WSJ - U.S. crop prices surged Tuesday, extending an unexpected run in agricultural prices that has drawn in big investors like hedge funds. The gains promise much needed relief for a farm economy battered by the slump in prices for major row crops over the past three years. At the same time, they could mean higher prices for consumers going into the summer. “This is fantastic news for the agricultural sector,” Terry Reilly, an analyst at brokerage Futures International LLC in Chicago, noting that some U.S. farmers who earlier this year were anticipating losses on their soybean crop may now make money instead. “Planting soybeans is profitable now,” he said. The catalyst was a closely watched government report that said rising exports would eat into the glut in farm commodities by next year. The big surprise was a projection that U.S. soybean inventories would fall by a steep 24%. Soybean futures rose so sharply on the Chicago Board of Trade that they hit the trading limit imposed by the exchange. They ended the day up 5.6% at $10.84 a bushel, gains that left them up 25% so far this year. Corn and wheat futures followed, even though the USDA forecast a further ballooning of supplies for those grains. In the case of corn, the supply forecast wasn’t as big as traders had feared. Money managers have poured into the sector this year, attracted by rising and often volatile prices that pushed up soybean trading volumes by 25% at the Chicago Board of Trade in April from a year earlier. The number of outstanding futures contracts rose almost a fifth. The Agriculture Department report offered the first official forecast for the new season’s production and consumption around the world. It said poor weather in South America would contribute to a surge in soybean exports.

Wholesale Trade May 10, 2016: Highlights: March was a healthy month for inventories in the wholesale sector, up only 0.1 percent at the same time that sales jumped 0.7 percent to keep the stock-to-sales ratio unchanged at 1.36. Autos are closely watched with inventories up 1.0 percent at the same time that sales fell 0.7 percent to drive the stock-to-sales ratio for this component to 1.83 from 1.80. Strong sales of autos in April should limit any further increase for this ratio in the next report. Also showing a big build was apparel as sales fell 6.2 percent. Draws relative to sales include metals, where inventories fell a sharp 2.0 percent, and petroleum products as sales surged 13.5 percent in the month. Periods of economic slowing focus close attention on inventories and the risk of unwanted overhang. Watch for the business inventories report on Friday which will include data from the retail sector.

March 2016 Wholesale Sales Strongly Improve: The headlines say wholesale sales were up month-over-month with inventory levels remaining at levels associated with recessions. Our analysis shows an improving trend of the 3 month averages AND inflation adjusted data is now positive. Note that Econintersect analysis is based on the change from one year ago. Econintersect Analysis:

• unadjusted sales rate of growth unchanged month-over-month.
• unadjusted sales year-over-year growth is up 0.8 % year-over-year
• unadjusted sales (but inflation adjusted) up 2.0 % year-over-year
• the 3 month rolling average of unadjusted sales accelerated 1.7 % month-over-month, and down 1,7 % year-over-year.
• unadjusted inventories unchanged year-over-year (unchanged month-over-month), inventory-to-sales ratio is 1.28 which is historically is at recessionary levels.

US Census Headlines based on seasonally adjusted data:

• sales up 0.7 % month-over-month, down 0.2 % (last month was reported down 3.1 %) year-over-year
• inventories up 0.1 % month-over-month, inventory-to-sales ratios were 1.32 one year ago - and are now 1.36.
• the market (from Bloomberg) expected inventory month-over-month change between 0.0 % to 0.5 % (consensus +0.3 %) versus the 0.7 % reported.

Wholesale Inventories-Sales Ratio Holds Near Record Highs As Automakers Suffer -- While wholesale sales rose modestly MoM, the continued stagnation in wholesale inventories (lowest since 2010) bodes poorly for Q2 GDP. At 1.36x, the wholesale inventories-to-sales remains near record highs, but Automotive inventories to sales soared to cycle highs at 1.83x (as Auto sales dropped 0.7% MoM but inventories rose 1.0% MoM). Leaving inventories-to-sales near record highs...  Either sales must massively surge or inventory destocking (and thus recession-creating production cuts) begins soon.

March 2016 Business Sales and Inventories Data Is Mixed.: Econintersect's analysis of final business sales data (retail plus wholesale plus manufacturing) shows unadjusted sales degraded compared to the previous month which was very strong. There was am improvement in the rolling averages. Inventory growth was surprising large. The inventory-to-sales ratios remain at recessionary levels. Econintersect Analysis:

• unadjusted sales rate of growth decelerated 1.8 % month-over-month, and up 0.3 % year-over-year
• unadjusted sales (but inflation adjusted) up 2.0 % year-over-year
• unadjusted sales three month rolling average compared to the rolling average 1 year ago accelerated 1.0 % month-over-month, and is down 0.5 % year-over-year.

• unadjusted business inventories growth up 0.5 % month-over-month (up 1.4 % year-over-year with the three month rolling averages showing inventory build), and the inventory-to-sales ratio is 1.34 which is at recessionary levels (well above average for this month).

US Census Headlines:

• seasonally adjusted sales up 0.3 % month-over-month, down 1.7 % year-over-year (it was reported down 1.4 % last month).
• seasonally adjusted inventories were up 0.4 % month-over-month (up 1.5 % year-over-year), inventory-to-sales ratios were up from 1.37 one year ago - and are now 1.41.
• market expectations (from Bloomberg) were for inventory growth of 0.1 % to 0.3 % (consensus +0.2 %) versus the actual of +0.4 %.

Business inventories rise 0.4% in March - — Inventories at U.S. businesses rose 0.4% in March, the Commerce Department said Friday. This is the largest increase since last June and above economist’s expectations of a 0.2% gain. Business sales rose 0.3% in March. As a result, the inventory-to-sales ratio, an indication of demand, remained steady at 1.41 in March, a seven-year high. One new piece of information was retail inventories, which jumped 1% in March compared with a 0.3% drop in sales. Excluding autos, retail inventories rose 0.4%. The inventory-to-sales ratio for retailers, rose to 1.52 in March from 1.50 in February. Some of this boost in inventories may be reduced by the stronger-than-expected gain in retail sales for April. Earlier in Friday the government reported that retail sales jumped in April.

U.S. business inventories post largest gain in nine months | Reuters: U.S. business inventories rose more than expected in March as automobile stocks recorded their biggest increase since 2013, suggesting that the first-quarter's weak economic growth estimate could be revised higher. The Commerce Department said on Friday that inventories increased 0.4 percent in March, the largest rise since June, after an unrevised 0.1 percent dip in February. Auto inventories surged 2.3 percent, the biggest increase since October 2013, following a 1.6 percent rise in February. The inventory-to-sales ratio for motor vehicles rose to 2.30 in March, the highest since April 2009. Inventories are a key component of gross domestic product. Retail inventories excluding autos, which go into the calculation of GDP, rose 0.4 percent in March after increasing 0.2 percent in February. The government reported last month that inventories subtracted three-tenths of a percentage point from first-quarter GDP growth, helping to restrict economic growth to a 0.5 percent annualized rate. Data on retail sales, construction spending and factory orders have suggested the advance first-quarter GDP growth estimate could be raised to a 0.9 percent rate when the government publishes its revision later this month. The economy grew at a 1.4 percent pace in the fourth quarter of 2015.

Business sales and producer prices add to evidence that shallow industrial recession is ending: Since the beginning of this year, I have taken the position that the industrial portion of the economy was likely to make a rebound from its shallow recession by the end of the second quarter. This started with last autumn's LEI's, and has since flowed through to ISM and regional Fed new orders, the flattening out of the trade weighted US$, a big decline in corporate bond yields, and a similar big decline in spreads. These are the types of data that historically - going back 100 years in some cases - precede the end of a slowdown or recession via an increase in sales and production. Another good sign of a bottom in production - particularly in a deflationary type scenario, and again with data going back 100 years - is a bottom in the YoY% change in commodity prices. And with this morning's PPI report, we can update that series. With today's advance, the YoY% change in commodity prices is only half of its decline at the worst point about half a year ago, meaning it is likely that the bottom is in. Retail sales were also strong, up +1.3% in part due to motor vehicle sales rebounding in April from a relatively poor March.  We don't have the consumer inflation adjustment yet, but CPI is expected to be up about 0.2% when reported next week.  This makes for a strong rebound in real retail sales, likely to a new record high, another good sign (note that April is not shown on the graph below): Finally, let's look at wholesaler and entire business inventories and sales. Note that this week's reports were for March, not April.  Remember that sales typically lead inventories at both peaks and troughs.  So we are looking for sales to advance. In summary, all of the reports this week suggest that the pattern of the last 100 years is holding true: all of the precursors to sale have turned positive, and the data suggests that sales are following suit, i.e., the shallow industrial recession is ending.

This Won't End Well - Business Inventories Signal Recession Imminent Autos & parts inventories-to-sales ratios soared to 2.30x from 2.18x - levels that have only been higher during the financial crisis. This, combined with a rise in clothing inventories to sales, held overall business inventories at their highest to sales since the crisis and deep in pre-recessionary territory.  Retail inventories rose 1.0% MoM despite a 0.3% drop in sales (with motor vehicles inventories up 2.3% as sales tumbled 3.2%) leaving the inventories to sales ratio at cycle highs... Simply put, this won't end well.

April 2016 Producer Prices Year-over-Year Inflation Is Now Zero.: The Producer Price Index year-over-year inflation is zero. The intermediate processing continues to show a large deflation in the supply chain. The PPI represents inflation pressure (or lack thereof) that migrates into consumer price. The BLS reported that the headline Producer Price Index (PPI) finished goods prices (now called final demand prices) year-over-year inflation rate improved from -0.1 % to 0.0 %.. In the following graph, one can see the relationship between the year-over-year change in crude good index and the finish goods index. When the crude goods growth falls under finish goods - it usually drags finished goods lower.Econintersect has performed several tests on this series and finds it fairly representative of price changes (inflation). However, the headline rate is an average - and for an individual good or commodity, this series provides many sub-indices for specific application. A very good primer on the Producer Price Index nuances can be found here.

US producer prices rise in April for first time in 3 months: (AP) — Prices charged by U.S. manufacturers, farmers and other producers rose for the first time since January, lifted by higher costs for gas, steel and medicines. The Labor Department said Friday that the producer price index, which measures price changes before they reach the consumer, increased 0.2 percent in April. That followed small declines in February and March. Producer prices were unchanged from a year ago. That suggests inflation at the consumer level is likely to remain low. Excluding the volatile food and energy categories, producer prices ticked up 0.1 percent last month and 0.9 percent from a year ago. The figures suggest that overall inflation remains tame. Sluggish economic growth, modest wage increases, and sharp competition among retailers have kept inflation low since the Great Recession ended in 2009. Wholesale gas prices jumped 5.5 percent in April, while food costs slipped 0.3 percent. The cost of some types of steel jumped 22.1 percent, while pharmaceutical prices rose 1 percent.

U.S. Producer Prices Rose 0.2% in April -- The prices that U.S. businesses receive for their goods and services rose last month, a tentative sign of firming inflation across the economy. The producer-price index for final demand increased a seasonally adjusted 0.2% in April from the prior month following a 0.1% decline in March, the Labor Department said Friday. Economists surveyed by The Wall Street Journal had expected a 0.3% increase. Excluding food and energy prices, the index rose 0.1% in April, matching economists’ expectations. Excluding food, energy and an often-volatile measure of margins known as trade services, prices rose 0.3% last month. The headline price index was unchanged in April from a year earlier after a 0.1% annual decline in March. Excluding food and energy, prices rose 0.9% on the year. Prices excluding food, energy and trade services also rose 0.9% from April 2015. The producer-price index measures changes in the prices received by businesses from customers like consumers, other businesses and the government. Like other broad gauges of U.S. prices, it sank in late 2014 as global oil prices tumbled, and has remained subdued. Oil prices, though, have moved higher in recent months. U.S. inflation has undershot the Federal Reserve’s 2% annual target for roughly four years. Policy makers are watching for signs of firming prices as they debate the timing of the central bank’s next increase in short-term interest rates; officials are scheduled to meet in mid-June, late July and mid-September. The Labor Department’s closely watched consumer-price index rose 0.9% in March from a year earlier, while prices excluding food and energy were up 2.2%. The Fed’s preferred inflation gauge, the Commerce Department’s personal-consumption expenditures price index, rose 0.8% in March from a year earlier; core prices climbed 1.6%.

U.S. import prices rise 0.3% for second straight month -— The cost the U.S. paid for imported goods rose 0.3% in April, largely because of higher oil prices. The increase was the second in a row. The last time import prices rose two straight months was almost one year ago. Over the last 12 months, import prices are 5.7% lower, but the trend is slowly shifting higher. Aside from oil, import prices for food and industrial supplies also rose and the cost of foreign autos edged higher. Consumer goods were somewhat cheaper, though. Stripping out fuel, import prices increased 0.1% to mark the first advance since July 2014. Cheap oil and a strong dollar have acted to push import prices sharply lower over the past two years, though the impact of both appear to be fading. That could lead to some upward if modest pressure on low U.S. inflation in the near future. Over the past year, import prices excluding fuel have dropped 2%. American exporters also saw the biggest increase in prices since May 2015. Export prices rose 0.5%. Still, U.S. export prices are down 5% over the past year.

Import and Export Prices May 12, 2016: The rise in oil prices gave a second straight but still limited boost to cross-border inflation pressures in April. Import prices rose 0.3 percent to match March's revised gain. These are the first back-to-back monthly gains since June and May last year. The year-on-year change, at minus 5.7 percent, is the best since December the year before, 2014. Petroleum imports are behind the improvement, up 4.1 percent in April following a big 9.6 percent gain in March. Higher petroleum prices have boosted industrial supplies the past two months though durable goods, less directly affected by oil, also show two straight solid gains. The gains haven't helped finished prices yet which, in low single-digit decline, show no improvement. Export prices rose 0.5 percent in April for the best showing since May last year. The year-on-year rate at minus 5.0 percent is the best since January last year. Agricultural prices boosted April but are still down nearly 10 percent on-the-year. One sign of strength, echoing the durables gain on the import side, is a rare monthly jump in capital goods prices which, year-on-year, are still down but only fractionally. Country data show improvement across most trading partners but are still in the negative column. Import prices with China are down 1.9 percent year-on-year with the EU down 1.6 percent. The decline underway this year in the dollar is another major factor that should help lift import prices which, though still concentrated in oil, are showing improvement and will help what has been a stubbornly weak inflation outlook.

Import and Export Price Year-over-Year Deflation Moderated in April 2016.: Trade prices continue to deflate year-over-year - although the rate of deflation declined this month. Import Oil prices were up 3.3 % month-over-month, and export agricultural prices increased 0.5 %.

with import prices up 0.3 % month-over-month, down 5.7 % year-over-year;

and export prices up 0.5 % month-over-month, down 5.0 % year-over-year..

There is only marginal correlation between economic activity, recessions and export / import prices. Prices can be rising or falling going into a recession or entering a period of expansion. Econintersect follows this data series to adjust economic activity for the effects of inflation where there are clear relationships. Econintersect follows this series to adjust data for inflation.According to the press release: The consecutive 0.3-percent increases in April and March were the first monthly advances since the index ticked up 0.1 percent in June 2015 and the largest increases since a 1.1-percent rise in May 2015. Higher fuel prices drove the April advance although nonfuel prices also contributed to the overall increase in import prices. Import prices declined 5.7 percent over the past year, the smallest over-the-year drop since the index fell 5.6 percent in December 2014. Prices for U.S. exports rose 0.5 percent in April, the first monthly advance for the index since a 0.5-percent increase in May 2015. Those advances are the largest 1-month rises since the index increased 0.9 percent in March 2014. The price index for U.S. exports fell 5.0 percent for the year ended in April, the smallest 12-month decline since the index decreased 5.0 percent from January 2014 to January 2015.

US Import Prices Tumble For 21 Months In A Row As China Exports Most Deflation Since 2009 -  For a near record 21 months in a row, US Import Prices dropped in April compared to last year (down a worse than expected 5.7% YoY, and rising only 0.3%, less than the 0.6% expected rebound from March) with China exporting deflation at the fastest pace since 2009. Looking at the breakdown, while a major culprit for the collapse in imported deflation remains sliding energy prices, it wasn't the only reason for the slowdown as imports ex-fuel and food fell a notable 2% Y/Y in April. Additionally, industrial supplies prices rose 1.5% after rising 2.7% in March; capital goods prices fell 0.1% after falling 0.1% in March; consumer goods prices fell 0.3% after falling 0.3% in March. As for the biggest culprit, it remains a well-known one: China. According to the BLS, China's import price index dropped again, sliding from 101.4 to 101.3, the lowest print since 2010...

Rail Week Ending 07 May 2016: Rail Continues To Move Deeper Into Contraction: Week 18 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. Rolling averages continue moving deeper into contraction. The deceleration in the rail rolling averages began one year ago, and now rail movements are being compared against weaker 2015 data - and it continues to decline. There were port labor issues one year ago which affected intermodal movements - which skew the results both positively and negatively (this week again negatively as it is being compared to the shipping surge at the end of the strike). HOWEVER, one can ignore the strike which only affects intermodal - and concentrate on carloads - the data is very soft. We are now at the very end of the strike impact.A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 492,923 carloads and intermodal units, down 10.6 percent compared with the same week last year. Total carloads for the week ending May. 7 were 233,047 carloads, down 14.8 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 259,876 containers and trailers, down 6.4 percent compared to 2015. Three of the 10 carload commodity groups posted an increase compared with the same week in 2015. They were miscellaneous carloads, up 6.7 percent to 9,839 carloads; chemicals, up 1.6 percent to 31,075 carloads; and grain, up 0.1 percent to 18,004 carloads. Commodity groups that posted decreases compared with the same week in 2015 included coal, down 33.5 percent to 62,394 carloads; petroleum and petroleum products, down 26.4 percent to 11,394 carloads; and metallic ores and metals, down 12.8 percent to 20,569 carloads.

Rail Traffic Depression: 292 Union Pacific Engines Are Sitting In The Arizona Desert Doing Nothing -- We continue to get more evidence that the U.S. economy has entered a major downturn.  Just last week, I wrote about how U.S. GDP growth numbers have been declining for three quarters in a row, and previously I wrote about how corporate defaults have surged to their highest level since the last financial crisis.  Well, now we are getting some very depressing numbers from the rail industry.  As you will see below, U.S. rail traffic was down more than 11 percent from a year ago in April.  That is an absolutely catastrophic number, and the U.S. rail industry is feeling an enormous amount of pain right now.  This also tells us that “the real economy” is really slowing down, because less stuff is being shipped by rail all over the nation. One of the economic commentators that I have really come to respect is Wolf Richter of WolfStreet.com.  He has a really sharp eye for what is really going on in the economy and in the financial world, and I find myself quoting him more and more as time goes by.  If you have not checked out his site yet, I very much encourage you to do so. On Wednesday, he posted a very alarming article about what is happening to our rail industry.  The kinds of numbers that we have been seeing recently are the kinds of numbers that we would expect if an economic depression was starting.  The following is an excerpt from that article…Total US rail traffic in April plunged 11.8% from a year ago, the Association of American Railroads reported today. Carloads of bulk commodities such as coal, oil, grains, and chemicals plummeted 16.1% to 944,339 units. The coal industry is in a horrible condition and cannot compete with US natural gas at current prices. Coal-fired power plants are being retired. Demand for steam coal is plunging. Major US coal miners – even the largest one – are now bankrupt. So in April, carloads of coal plummeted 40% from the already beaten-down levels a year ago.

Record-Breaking Container Ship Ends Brief U.S. Service - WSJ: The Benjamin Franklin can carry nearly 18,000 twenty-foot shipping containers, or TEUs, marking a capacity record when it docked at the Port of Los Angeles late last year. On a second trip to neighboring Long Beach in February, CMA CGM held inaugural festivities, including tours of the ship, and named Shelley McMillon, wife of Wal-Mart Stores Inc. Chief Executive Doug McMillon, “Godmother” of the vessel. At the time, CMA CGM founder and Chief Executive Jacques Saadé told the crowd that the company was so confident in the U.S. economy and the demand for freight capacity that the carrier planned to launch six more vessels of the same size on its trans-Pacific “Pearl River Express” route. It soon became clear the extra capacity wasn’t needed on the Trans-Pacific lane, where a glut of shipping capacity has driven freight rates to record lows. The decision, which CMA CGM disclosed in April, also came as the company arranged a new capacity-sharing alliance with China’s Cosco Group and other rivals. Some analysts speculated that CMA CGM’s partners weren’t interested in adding a fleet of giant ships to the already well-serviced trans-Pacific route.  And across much of the West Coast ports, despite being the largest on the continent, terminal equipment and land-side infrastructure isn’t big or efficient enough to handle the world’s largest container vessels. On its first sailings, the Benjamin Franklin wasn’t loaded to capacity. Today, seven ships operate the Pearl River Express service between South China and California, all of which—including Leo—now offer a maximum capacity of about 11,400 TEUs.

Civil Engineers Find Trillion-Dollar Infrastructure Funding Gap - The U.S. needs to invest $1.4 trillion in infrastructure between now and 2025 and $5.2 trillion by 2040, a civil engineering trade group said Tuesday, almost double what the country is projected to spend over that period. The report from the American Society of Civil Engineers paints a dismal picture of the country’s economy in the decades ahead unless local, state and federal governments dramatically increase their infrastructure spending. Funding gaps could cost the economy almost $4 trillion and 2.5 million jobs by 2025 and $14.2 trillion and 5.8 million jobs by 2040, the report said. Poor infrastructure forces people to sit in longer traffic jams, leads to higher shipping costs and can reduce overall productivity, the group said. Last year’s five-year highway bill did not significantly increase funding levels.“Our nation’s infrastructure bill is overdue,” said Greg DiLoreto, the group’s past president. “We are paying a high price for infrastructure that is deficient and beyond its useful life.” In the four years since the last report, the group found the gap in funding for roads, bridges and transit had widened, even though road conditions have improved overall as government focus increasingly on maintenance.

NFIB: Small Business Optimism Index increased in April --From the National Federation of Independent Business (NFIB): Small Business Optimism Increases One Point in April The Index of Small Business Optimism rose 1 point in April to 93.6 ... according to the National Federation of Independent Business’ (NFIB) monthly economic survey released today. ... Fifty-three percent reported hiring or trying to hire (up 5 points), but 46 percent reported few or no qualified applicants for the positions they were trying to fill. Hiring activity increased substantially ... Twenty-nine percent of all owners reported job openings they could not fill in the current period, up 4 points, revisiting the highest level for this expansion.
This graph shows the small business optimism index since 1986.

Small-business owners have a thing for Donald Trump.: Late last year, David McNeer, the owner of a small ad agency, took the stage at a Donald Trump campaign event in Newton, a city in central Iowa. In 2010, McNeer told the crowd, he’d appeared on 60 Minutes because his business cratered after a major client, Maytag, closed a nearby factory, sending many of the jobs to Mexico.  “I did not get one call from one politician,” McNeer said. But McNeer did hear from one bold-faced name: Donald Trump, who promised work and delivered. Most recently, McNeer’s firm got the contract to provide Trump’s Iowa campaign with T-shirts, campaign signs, and buttons. It’s not shocking, of course, that business owners would back the one business owner in the race. But they’ve proven over the course of this long campaign to be one of the strongest planks of Trump’s coalition—something that was true even last summer, when there were many, many Republican candidates to choose from. In multiple polls conducted by Manta, a social-networking site for small-business owners, Trump has repeatedly come out on top. In a survey asking about both major parties’ fields conducted at the end of February, Trump won with 34 percent, double that of Hillary Clinton, who came in second with 17 percent. OnDeck, an online lending platform specializing in loans to small businesses, found last month that 37 percent of its small-business-owner respondents felt Trump was the most likely candidate in either party to keep their interests in mind.

Unemployment Report Reverts as Half a Million Drop Out of Labor Force...Again  --  The April 2016 unemployment report shows some disturbing developments behind the numbers.  While the official unemployment rate did not change and stayed at 5.0%, over half a million dropped out of the labor force during the month and over three hundred thousand are no longer employed.  The labor participation rate dropped by 0.2 percentage points as did the civilian participation rate.  That said, one month does not a pattern make, yet seeing over half a million drop out of the labor force is quite disconcerting.  This article overviews and graphs the statistics from the Employment report Household Survey also known as CPS, or current population survey.  The CPS survey tells us about people employed, not employed, looking for work and not counted at all.  The household survey has large swings on a monthly basis as well as a large margin of sampling error.  This part of the employment report is not about actual jobs gained but people and their labor status. Those employed now stands at 151,004,000, a monthly decline of -316 thousand.  From a year ago, the ranks of the employed has increased by 2.495 million.  That's almost half a million less annual gain than last month but still a very solid showing of annual growth. Those unemployed number 7,920,000, a monthly -46,000 decline.  From a year ago the unemployed has decreased by -603,000.   Those not in the labor force is 94.044 million.  The monthly increase was an astounding 562,000.  The below graph are the not in the labor force ranks.  Those not in the labor force has increased by 810,000 in the past year, obviously the majority of that gain occurring this month.  The labor participation rate is 62.8%.  This is a -0.2 percentage point decrease from last month.  Pre-recession, the January 2008 labor participate rate was 66.2% a far cry from what we see today and a good explanation of why most feel the economy is still horrific for them. Below is a graph of the labor participation rate for those between the ages of 25 to 54, which decreased by -0.2 percentage points from last month.  The rate is 81.2%, a level not seen since May 1985, discounting events after 2008.  These are the prime working years where people are not in retirement or in school full time commonly, so one should not see record low participation rates.  In January 2008 the prime working years labor participate rate was 83.3%.

Why April’s hiring slowdown may show caution on US economy (AP) — American employers signaled their caution about a sluggish economy by slowing their pace of hiring in April after months of robust job growth. At the same time, companies raised pay, and their employees worked more hours — a combination that lifted income and, if sustained, could quicken the U.S. expansion. As a whole, the government's report Friday pointed to an American job market that continues to generate steady hiring, though at a rate that may be starting to slow. Employers added 160,000 jobs in April, well below the average gain of 243,000 in the prior six months. But the unemployment rate remained a low 5 percent, roughly where it's been since last fall. "Employment was never going to continue rising at more than 200,000 a month indefinitely," said Paul Ashworth, an economist at Capital Economics, a consulting firm. "Those monthly gains are simply unsustainable" at a time of tepid economic growth. Over the past six months, the economy has expanded at an annual pace of just 1 percent. Anecdotal evidence suggests that some employers have become concerned that sluggish growth could weaken customer demand and limit the need for more employees. Still, most economists said they were not worried about the weaker hiring in April. In large part, it reflected declines in retail and construction hiring, an expected pullback after hiring in those areas surged in the first quarter of 2016. And job gains have slipped before — most recently in January — without signaling any persistent slump. April's hiring slowdown may also reflect a long-expected shift to a more sustainable pace of job creation. The job market has added 200,000-plus jobs a month for more than three years. That's harder to achieve once unemployment falls to 5 percent, consistent with a nearly recovered economy. "The good news is that more people were employed, they worked longer hours and got paid more for it," The slowdown in economies in the United States and overseas has led to volatility in financial markets and complicated the Federal Reserve's plans to gradually raise interest rates. Many analysts had expected the Fed to raise the short-term rate it controls as early as June. But Friday's figures may make that less likely.

Update: "Scariest jobs chart ever" -- During and following the 2007 recession, every month I posted a graph showing the percent jobs lost during the recession compared to previous post-WWII recessions. Some people started calling this the "scariest jobs chart ever". I retired the graph in May 2014 when employment finally exceeded the pre-recession peak. I was asked if I could post an update to the graph, and here it is through the May 2016 report. This graph shows the job losses from the start of the employment recession, in percentage terms, compared to previous post WWII recessions.  Since exceeding the pre-recession peak in May 2014, employment is now 4.0% above the previous peak. Note: I ended the lines for most previous recessions when employment reached a new peak, although I continued the 2001 recession too on this graph.  The downturn at the end of the 2001 recession is the beginning of the 2007 recession.  I don't expect a downturn for employment any time soon (unlike in 2007 when I was forecasting a recession).

More Employment Graphs: Duration of Unemployment, Unemployment by Education, Construction Employment and Diffusion Indexes  by Bill Mcbride - By request, a few more employment graphs ... This graph shows the duration of unemployment as a percent of the civilian labor force. The graph shows the number of unemployed in four categories: less than 5 week, 6 to 14 weeks, 15 to 26 weeks, and 27 weeks or more. The general trend has been down for all categories, and the "less than 5 weeks", "6 to 14 weeks" and "15 to 26 weeks" are all close to normal levels. The long term unemployed is below 1.3% of the labor force, however the number (and percent) of long term unemployed remains elevated. This graph shows the unemployment rate by four levels of education (all groups are 25 years and older). Unfortunately this data only goes back to 1992 and only includes one previous recession (the stock / tech bust in 2001). Clearly education matters with regards to the unemployment rate - and all four groups were generally trending down - although the rate has somewhat flattened out recently. This says nothing about the quality of jobs - as an example, a college graduate working at minimum wage would be considered "employed". This graph shows total construction employment as reported by the BLS (not just residential). Since construction employment bottomed in January 2011, construction payrolls have increased by 1.24 million. Construction employment is still below the bubble peak, but close to the level in the late '90s.

BLS: Jobs Openings increased in March -- From the BLS: Job Openings and Labor Turnover Summary The number of job openings was little changed at 5.8 million on the last business day of March, the U.S. Bureau of Labor Statistics reported today. Hires edged down to 5.3 million while separations were little changed at 5.0 million. Within separations, the quits rate was 2.1 percent, and the layoffs and discharges rate was 1.2 percent.... ..The number of quits was little changed in March at 3.0 million. The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS. . Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for March, the most recent employment report was for April.  Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover. When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs. Jobs openings increased in March to 5.757 million from 5.608 million in February. The number of job openings (yellow) are up 11% year-over-year compared to March 2015. Quits are up 9% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits"). This is another strong report, and job openings are just below the record high set in July 2015.

Job Openings at Highest Level Since 2001, But Churn in Job Market Ebbs in March - Here’s the good news: The number of new job openings is at the highest level dating back 15 years. Less good: The number of workers who started a new job or left an old job both declined in March, a sign of diminished churn in the job market. In March, 5.3 million Americans were hired to a new job, compared to 5.5 million in February. About 5 million left a job, down from 5.2 million in February. In both months, the difference was about 200,000 which is a healthy pace of job growth. But the amount of underlying change — which economists generally consider a sign of labor market health — decreased.Today’s report shows that the number of unemployed people per available job listing has continued to decline. Today there are about 1.4 unemployed workers for every job opening, down from about 6.7 workers for every available job during the worst of the recession. In March there were 5.8 million job openings, according to the report, matching the record number of job openings in July of 2015. The data comes from the Labor Department‘s monthly Job Openings and Labor Turnover Survey, or Jolts. The main monthly jobs report shows the net change in the total number of jobs, but the Jolts report shows the underlying turnover in the U.S. economy — the millions of people who quit or are fired and the millions who are hired every single month. The Jolts report only goes through March, whereas the main jobs report has already been released for the month of April.

March 2016 JOLTS Job Openings Year-over-Year Growth Rate Improved: The BLS Job Openings and Labor Turnover Survey (JOLTS) can be used as a predictor of future jobs growth, and the predictive elements show that the year-over-year growth rate of unadjusted private non-farm job openings improved from last month. The growth rate trends marginally improved in the 3 month averages.

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

The relevance of JOLTS to future employment is obvious from the graphic below which shows JOLTS Job Openings leading or coincident to private non-farm employment. JOLTS job openings are a good predictor of jobs growth turning points

Job Openings Back To All Time Highs: Yellen's "Favorite Labor Indicator" Says Its Time To Hike  -- When last Friday's disappointing payrolls report hit, which saw just 160K jobs added in April, stocks initially tumbled only to surge as the case of a June rate hike was quickly taken off the table. Not only that, but according to Fed Fund futures as of this moment, the Fed won't hike until some time in early 2017. However, one look at the latest JOLTS data, admittedly Janet Yellen's favorite jobs indicator, paints a very different picture. According to the BLS, in March (there is a one time lag between JOLTS and the payrolls report), the number of job openings soared by 312K, and is now effectively at its all time high level of 5.8 million jobs. If this number is accurate (with the BLS that is a big if after we caught the BLS manipulating JOLTS data back in 2013), it means that the Fed should be hiking essentially... now.  Also confirming that the payrolls data does not capture the underlying euphoria in the jobs market was the quits level, or as Nick Colas calls it the "take this job and shove it" indicator, as it suggests confidence in the job market when people are quitting instead of being laid off/discharged. In April this series also rose by 25K to 3 million, also in line with the highest print since the financial crisis. There was just one fly in the ointment: the total number of hires dropped by 218,000 in March, offset however by a 114K drop in separations. This was the second biggest drop in hiring since 2013, excluding only the surprising 276K drop record in January, which however was offset by a 385K hiring surge, mostly in retail workers, in February.

April 2016 Conference Board Employment Index Improves But Lower Employment Growth Expected: The Conference Board's Employment Trends Index - which forecasts employment for the next 6 months improved but " its growth has slowed in recent months, suggesting that job growth will also slow." Consider that this projected growth is six months from now. Econintersect is forecasting a lower jobs growth rate six months from now. Note that the Econintersect Employment Index is not based on employment data. From the Conference Board: The Conference Board Employment Trends Index™ (ETI) increased in April, after decreasing in March. The index now stands at 128.28, up from 126.42 in March. The change represents a 1.4 percent gain in the ETI compared to a year ago. "Despite the April bounce back in the Employment Trends Index, its growth has slowed in recent months, suggesting that job growth will also slow," said Gad Levanon, Chief Economist, North America, at The Conference Board. "Employers have become more cautious as economic growth remains moderate and profits decline. Looking ahead, we anticipate job growth will remain below 200,000 a month." April's increase in the ETI was driven by positive contributions from all eight components. In order from the largest positive contributor to the smallest, these were: the Percentage of Firms With Positions Not Able to Fill Right Now, Percentage of Respondents Who Say They Find "Jobs Hard to Get," Initial Claims for Unemployment Insurance, Ratio of Involuntarily Part-time to All Part-time Workers, Industrial Production, Real Manufacturing and Trade Sales, Job Openings, and the Number of Employees Hired by the Temporary-Help Industry.

Labor Market Conditions Index May 9, 2016: Highlights:  Employment has been the economy's central strength but has not been in the positive column for the labor market conditions index which remains in contraction for a 4th straight month, at minus 0.9 in April. Still, this is an improvement from March's minus 2.1, a month when payroll growth and the participation rate were stronger but not other data that are tracked in this composite including the 12-month reading for average hourly earnings or the jobs-hard-to-get subcomponent of the consumer confidence report which both showed strength in April. The index, experimental in nature, is a broad composite of 19 separate indicators and, as yet at least, is rarely cited by policy makers.

Who's Telling The Truth On American Jobs - The Fed Or The Government? -- For the fourth month in a row, Labor Market Conditions - according to The Fed - have contracted, the longest streak since the financial crisis. At the same time, despite having fallen from recent highs, the government's Labor Department proclaims non-farm payrolls continue to improve... because the narrative of consecutive monthly job gains must stand. The Government, of course, wants the appearance of economic recovery, job gains, and confidence inspiration - especially into the election. The Fed, however, may not be so keen to promote the idea of a strong economy... because good news is bad news for over-inflated asset prices. The question is - who is telling the truth?

Weekly Initial Unemployment Claims increase to 294,000 --The DOL reported: In the week ending May 7, the advance figure for seasonally adjusted initial claims was 294,000, an increase of 20,000 from the previous week's unrevised level of 274,000. This is the highest level for initial claims since February 28, 2015 when it was 310,000. The 4-week moving average was 268,250, an increase of 10,250 from the previous week's unrevised average of 258,000. There were no special factors impacting this week's initial claims. This marks 62 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.

Initial Jobless Claims Soar Most In 11 Years To 15-Month Highs --The last great hope indicator of the bullish narrative appears to have broken as today's initial jobless claims soars 20k to 294k - the highest since Feb 2015. Seemingly confirming the dismal payroll print, one can only wonder how long before this catches 'down' to the weakness in PMI/ISM survey employment data and the hard macro data. The last 3 weeks have seen initial claims soar by the most since 2005... This is the first time claims have risen YoY since Nov 2012...

U.S. jobless claims hit 14-month high; analysts blame Verizon strike | Reuters: The number of Americans filing for unemployment benefits rose last week to a more than one-year high, but economists blamed striking telecommunications workers for the surge and said the data did not signal a deterioration in the overall labor market. Another report on Thursday showed import prices increased in April for a second straight month, suggesting the disinflationary impulse from a strong dollar and lower oil prices, which has helped to hold inflation well below the Federal Reserve's 2 percent target, was fading. Initial claims for state unemployment benefits increased 20,000 to a seasonally adjusted 294,000 for the week ended May 7, the highest level since late February 2015, the Labor Department said. It was the third consecutive week of increases in first-time applications for jobless benefits. "We have to look past the noise in the latest jobless claims number because it was likely influenced by the Verizon strike. The broader underlying trend in claims remains very constructive," RBC Capital Markets said first-time applications for jobless benefits would have fallen last week excluding the impact of the strike. About 40,000 Verizon workers walked off the job in mid-April.

Yes, the Economy Is Rigged, Contrary to What Some Economists Try to Tell You - Dean Baker --   I see Greg Mankiw used his NYT column to tell folks that politicians are spinning tales when they say the economy is rigged. I would say that economists spin tales when they tell you it is not. (Mankiw and I just ran through this argument on a panel in Boston last week.) Let's quickly run through the main points. First, the overall level of employment is a political decision. We would have many more people employed today if the deficit hawks had not seized control of fiscal policy back in 2011 and turned the dial toward austerity. The beneficiaries of higher employment are disproportionately those at the middle and bottom of the income distribution: people with less education and African Americans and Hispanics. So the politicians pushing austerity decided that millions of people at the middle and bottom would not have jobs.Furthermore, in a weaker labor market, it is harder for those at the middle and bottom to get pay increases. So the shift to austerity also meant that tens of millions of workers would have to work for lower pay. Read all about it in my book with Jared Bernstein (free, and worth it).   The second way in which it is rigged is our trade policy. First there is the size of the trade deficit. This is the result of policy choices. Instead of forcing our trading partners to respect Bill Gates copyrights and Pfizer's patents, we could have insisted they raise the value of their currency to move towards more balanced trade. But Bill Gates and Pfizer have more power in setting trade policy than ordinary workers.

U.S. Workers Regain Faith in Finding Good Job if Laid Off -- After plummeting in 2010, Americans' confidence that they would find a job as good as their current one if they happened to be laid off has been restored. Currently, 63% believe it is very or somewhat likely that they would find a job as good as the one they have, up from 42% six years ago. The current figure is similar to what Gallup measured in early 2007, before the recession. When Gallup last asked this question, in April 2010, the Bureau of Labor Statistics unemployment rate was 9.9%. This April, it is 5.0%. Those positive employment trends are likely one factor in Americans' greater confidence in finding comparable work if they were to lose their job. Whether their confidence is warranted is unclear, though, partly because the job growth in recent years has come disproportionately among lower-paying and part-time jobs. The unemployment rates were similar to the current level -- slightly below 5% -- when Gallup asked the question in 2001, 2006 and 2007. In the 16-year history of the trend, the 2010 measurement is the only one in which the employment situation was dramatically different from the other years. Upper-Income Workers' Assessments of Prospects Have Brightened Considerably Six years ago, workers residing in upper-income households and those residing in middle- and lower-income households evaluated their job opportunities similarly, with 41% of each group saying it was likely that they would find a job similar to their current one. Now, upper-income workers (70%) are significantly more likely than middle- and lower-income workers (58%) to believe they could find a job just as good as their current one if they were laid off. This could indicate that the jobs recovery has not been equal among income groups, particularly for middle-income workers. Workers of differing education levels, ages and genders show similar gains since 2010.

Productivity Sucks? Or Is It Just Fools Measuring The Misunderstood?: Recently there has been a proliferation of articles attributing the decline of GDP to weak productivity growth. Cause and effect, or more crap from pundits? Follow up: The concern of the productivity pundits is that productivity growth has fallen into the toilet......... and believe the cause of poor productivity is the recent weak investment by the private sector. Consider that investment adds to GDP so we can say that if the private sector really pumped significant money into GDP - GDP would rise. As an industrial engineer, for me the formula for productivity is very basic. The problem with an engineer's view of productivity is that although the formula is very simple, the application can very complex. The identification of the inputs vary wildly between locations and businesses. Outputs are relatively easier to identify. Economists want to measure productivity because they have defined productivity growth as THE dynamic of economic growth. Understand that to an economist - GDP is THE measure of value added. Productivity by economists definition is strictly a cost calculation. It does not measure any optimizations for poor business conditions or points of manufacture. Using the economists definition, productivity would improve by investing in a bridge to nowhere. Most readers know my disdain for GDP as it does not measure the economic conditions being faced by the median Joe Citizen. I know of no measure which says Joe Citizen is worse off in 1Q2016 - yet GDP implies average Joe is worse off.   The problem with economic discussion of productivity is that it is essentially GDP - not technology or measurement or anything that has to do with real productivity. Does anyone care?

Just How Good (or Bad) Are All the Jobs Added to the Economy Since the Recession? -   One refrain we hear often from readers of Real Time Economics is that the majority of jobs employers are creating are — in their words — not good, part time, temporary or seasonal minimum-wage positions offering scant benefits, mostly in the service sector. “Nobody could live on just one of these jobs,” J. Thomas Gaffney wrote in a Facebook comment in March. “It’s not the quantity of jobs that matters, it’s the quality, and these jobs are not quality jobs that pay a living wage or provide decent benefits.” Mr. Gaffney’s comments, and others like it, pose a difficult question: How do you measure the quality of all the jobs the U.S. added and lost in a given month? The top line figure from the employment report masks all sorts of variation. Millions of Americans quit or are laid off each month, while millions are hired to new jobs. The monthly number of jobs created is the net total of all that underlying change. Some industries are losing jobs, others are gaining. Even within industries, some firms will be growing and some shrinking every month. Some jobs may only be a few hours a week, or have very low wages; others pay very well. We took a cue from our readers’ comments and looked at job gains in various sectors and how much these positions pay on average. It’s an inexact calculation because people working in the same industry might be paid at wildly different rates. But by looking at the change in roughly 100 industry sub-sectors, this calculation gives a clear picture of whether it’s been high-wage or low-wage industries that have added jobs since the recession started.

Unemployment for young black grads is still worse than it was for young white grads in the aftermath of the recession --The black unemployment rate is typically twice as high as the white unemployment rate, and African Americans are often the last to feel the economic benefits during a recovery. These realities are reflected in the fact that the unemployment rate for young black graduates is still worse today than it ever was for whites in the aftermath of the Great Recession. Young black college graduates (age 24–29) currently have an unemployment rate of 9.4 percent—higher than the peak unemployment rate for young white college graduates during the recovery (9.0 percent). Young blacks with only a high-school degree (age 17–20) face a grimmer picture: an unemployment rate of 28.4 percent, which is also higher than the peak unemployment rate for white high-school graduates during the recovery (25.9 percent). Since these young graduates have the same basic degree and are in the same labor market position as their peers (whether high school or college), one would hope there would be little disparity in the unemployment rates of each group. The fact that having an equivalent amount of education and a virtual blank slate of prior professional work experience still does not generate parity in unemployment across race is evidence that factors such as discrimination, or unequal access to the informal networks that often lead to job opportunities are in play.

The Recession’s Economic Trauma Has Left Enduring Scars - WSJ: The recession ended seven years ago, but persistent joblessness and underemployment marred the economic expansion that followed. A growing body of research suggests the economic trauma has left financial and psychic scars on many Americans, and that those marks are likely to endure for decades. About one in six U.S. workers became unemployed during the recession years of 2007, 2008 and 2009. Today, nearly 14 million people are still searching for a job or stuck in part-time jobs because they can’t find full-time work.  Even for the millions of Americans back at work, the effects of losing a job will linger, the research suggests. They will earn less for years to come. They will be less likely to own a home. Many will struggle with psychological problems. Their children will perform worse in school and may earn less in their own jobs. “The average effects are severe and very long lasting,” said Jennie Brand, a sociologist at University of California, Los Angeles. “There’s no quick recovery.”U.S. economic output remains stubbornly below its potential level, as estimated by the Congressional Budget Office. And many people probably won’t be back on their feet by the time the next recession arrives. J.P. Morgan Chase economists recently predicted a new recession was more likely than not within three years.

As Jobs Vanish, Forgetting What Government Is For: America has been here before. At the dawn of the 20th century, the economy was already well into a fundamental transformation of the labor force, as industry replaced farming and crafts as the primary source of new jobs. ...The nation is well on its way through a second transition, this time to a postindustrial economy with little factory work to be had. Even as industrial production has grown, the economy has shed seven million manufacturing jobs since 1980. ...During much of the 19th and 20th centuries, government at multiple levels played an essential role in shaping the nation’s transition from farms and small towns to cities and factories. It could do so again. What has stopped it is not the lack of practical ideas but the encrusted ideological opposition to government activism of any kind. ...Why American politics turned against this successful model of pragmatic policy-making remains controversial. Perhaps it was the increasing footprint of money in politics, which has given more clout to corporate interests lobbying for smaller government and lower taxes. Maybe desegregation led to increasing distrust in government by white voters. Perhaps it was the combination of a recession and high inflation of the 1970s, which discredited interventionist government policies. In any event, there is much the government could do. ... So what’s holding us back? The loss of a vision, once shared across much of the ideological spectrum, of what government can accomplish, when it is allowed to do its job.

The Minimum Wage Increases = Job Loss Myth  -- As empirical evidence supporting minimum wage increases continues to roll in, can the theoretical orthodoxy continue to hold their ground?  The proposition that raising minimum wages will increase unemployment, especially among lower-skilled workers and young people, is one of the most widely-held beliefs among economists guided by the basic theory of supply and demand.[1] Yet, a new study from the National Employment Law Project (NELP) finds “no correlation” between minimum wage increases and employment levels. That finding is consistent with a 2013 Center for Economic and Policy Research summary report which found that almost all recent empirical economic research on minimum wage increases “points to little or no employment response to modest increases in the minimum wage.”  Concerned about stagnant incomes and growing inequality, 29 states and the District of Columbia have raised their minimum wages above the federal level, pushed in part by a union-led “Fight for Fifteen” (that is, a fifteen-dollar minimum wage). And the Democratic presidential contenders Hillary Clinton and Bernie Sanders are agreed that the federal minimum wage should increase—their only point of difference is how much, how fast.  Republican candidates debating the issue, however, have all reiterated versions of the orthodoxy that minimum-wage hikes would cost jobs. And some mainstream economists are unmoved by the growing body of empirical evidence regarding the non-impact of minimum-wage increases on employment. They argue the current research doesn’t use the correct methodology, or doesn’t properly control for regional and geographic impacts. But these critics also are shifting their ground, saying that raising minimum wages is not the most effective way to fight poverty and inequality, instead arguing for more targeted policies like the Earned Income Tax Credit.

The Collapse of the Middle-Class Job - Our middle-income jobs are disappearing. The evidence shows that living-wage, family-sustaining positions are quickly being replaced by lower-wage and less secure forms of employment. These plentiful low-level jobs have padded the unemployment figures, leaving much of America believing in an overhyped recovery.  New research is beginning to confirm the permanent nature of middle-income job loss. Based on analysis that one reviewer calls "some of the most important work done by economists in the last twenty years," a National Bureau of Economic Research study found that national employment levels have fallen in U.S. industries that are vulnerable to import competition, without offsetting job gains in other industries. Even the Wall Street Journal admits that "many middle-wage occupations, those with average earnings between $32,000 and $53,000, have collapsed."  High-salaried jobs in technology still exist, but they're available to fewer people as machines become smarter. Netflix, for example, serves 57 million customers with less than 2,200 employees, who have a median salary of $180,000. Google is worth $370 billion but employs only about 55,000 workers (50 years ago AT&T was worth less in today's dollars but employed about 750,000 workers). Facebook's messaging application WhatsApp has 55 employees serving 450 million customers.  As jobs are downsized, profits are maximized. Apple makes over $500,000 per employee; Facebook and Google are both over $300,000; Exxon and Phillips 66 are both well over $250,000; Merck and Allergan and Pfizer are all significantly over $100,000. Just 25 years ago GM, Ford, and Chrysler generated a combined $36 billion in revenue while employing over 1,000,000 workers. Today Apple, Facebook, and Google generate over a trillion dollars in revenue with 137,000 workers.

Pew study sees a shrinking middle class in major US cities: — In cities across America, the middle class is hollowing out. A widening wealth gap is moving more households into either higher- or lower-income groups in major metro areas, with fewer remaining in the middle, according to a report released Wednesday by the Pew Research Center. In nearly one-quarter of metro areas, middle-class adults no longer make up a majority, the Pew analysis found. That's up from fewer than 10 percent of metro areas in 2000. That sharp shift reflects a broader erosion that occurred from 2000 through 2014. Over that time, the middle class shrank in nine of every 10 metro areas, Pew found. The squeezing of the middle class has animated this year's presidential campaign, lifting the insurgent candidacies of Donald Trump and Bernie Sanders. Many experts warn that widening income inequality may slow economic growth and make social mobility more difficult. Research has found that compared with children in more economically mixed communities, children raised in predominantly lower-income neighborhoods are less likely to reach the middle class. Pew defines the middle class as households with incomes between two-thirds of the median and twice the median, adjusted for household size and the local cost of living. The median is midway between richest and poorest. It can better capture broad trends than an average, which can be distorted by heavy concentrations at the top or bottom of the income scale. By Pew's definition, a three-person household was middle class in 2014 if its annual income fell between $42,000 and $125,000. Middle class adults now make up less than half the population in such cities as New York, Los Angeles, Boston and Houston.

The middle class is shrinking almost everywhere - The decline of the American middle class is “a pervasive local phenomenon,” according to Pew, which analyzed census and American Community Survey data in 229 metros across the country, encompassing about three-quarters of the U.S. population. In 203 of those metros, the share of adults in middle-income households fell from 2000 to 2014. On the average is over front, there is also this: In total, 172 of these 229 metros saw a growing share of households in the upper-income tier. About as many — 160 — saw a growing share at the bottom. And 108 experienced both: The middle class shrank as the ranks of both the poor and the rich grew. Here is more from Wonkblog on the new Pew study.  The decline in the middle class is typically strongest in areas where manufacturing used to be strong. This used to be a debate, but the funny thing is the nomination of Trump has sealed it for the more pessimistic side.  That is unfair, actually, though I think the pessimistic side is correct nonetheless.

Poor Wages Send A Third Of US Manufacturing Workers To Welfare Lines In Order To Pay For Food, Healthcare, Data Show - U.S. manufacturing jobs used to be a path to the middle class for Americans who couldn’t or didn’t dive into the comfort provided by higher education degrees. But now many skilled, working Americans need some form of public assistance because their wages don’t pay for basic living expenses. Just over 2 million supervised manufacturing workers, or about a third of the total, need food stamps, Medicaid, tax credits for the poor or other forms of publicly subsided assistance while they work on goods that can carry the tag “Made in the U.S.A.,” according to research of official government wage and welfare data released Tuesday by the University of California, Berkeley. The cost of these benefits to the U.S. taxpayer? From 2009 to 2013, federal and state governments subsidized the low manufacturing wages paid by the private sector to the tune of $10.2 million per year. Oregon led the nation on the number of manufacturing workers – 1 in 4 – that needed food stamps during that period of time, while 1 in 5 factory workers in Mississippi and Illinois needed healthcare assistance for both adults (Medicaid) and children (CHIP). Taking into account all major social welfare, including the earned income tax credit and temporary assistance to needy families (TANF), Mississippi topped the list, followed by Georgia, California and Texas. The research aimed to extend an already well-established national debate on wages paid in the service industry, which are often juxtaposed to the factory work that lifted millions of Americans out of poverty for much of the 20th century. The research comes as U.S. workers overall are experiencing one of the lowest paces of wage growth on record. Seven years after the U.S. government declared an end to the longest period of economic contraction since the Great Depression, workers have yet to experience the kind of wage-growth recovery that would be considered normal for the country.

Gap Between CEOs + Workers Much Bigger Than You Realize (bar graph) Ritholtz

Why a Deal-Making Trump Might Raise the Odds of a Federal Minimum Wage Increase -  Donald Trump tweeted Wednesday that he’s “asking” for an increase in the federal minimum wage, possibly positioning himself to do something President Barack Obama hasn’t been able to manage: raise the national pay floor. Mr. Trump’s latest stance differs from his prior positions on the issue and stands in contrast to the view held by most of his former Republican rivals. But if the presumptive nominee is elected president, and actually did move ahead successfully on a wage increase, he would join the ranks of Richard Nixon, George H.W. Bush and George W. Bush as Republican presidents who have signed a federal minimum-wage increase into law — though each of those presidents did so somewhat begrudgingly. In contrast, President Obama—a vocal supporter of raising the pay floor during his second term—appears poised to be the first Democrat to leave office without approving a minimum-wage increase since the law was put in place in 1938. Mr. Trump’s position on the minimum wage has shifted greatly during the campaign. In a November debate, he said he opposed raising the federal minimum, saying wages were “too high.” In December, Mr. Trump tweeted that the middle-class has had “no effective raise in years. BAD” in response to criticism of his previous comment about wages, but he didn’t suggest the minimum wage as a remedy.   His tone, however, changed since his remaining rivals for the GOP nomination dropped out this month. “I don’t know how people make it on $7.25 an hour,” he said Sunday on NBC’s “Meet the Press,” referring to the current federal minimum wage. “Now, with that being said, I would like to see an increase of some magnitude. But I’d rather leave it to the states.” Then on Wednesday, in a Twitter spat with Sen. Elizabeth Warren (D., Mass.), the presumptive Republican nominee shot back against the notion that he wanted to abolish the federal minimum wage. “See media—asking for increase!” he tweeted: Goofy Elizabeth Warren lied when she says I want to abolish the Federal Minimum Wage. See media—asking for increase!

No Wonder We're Poorer: Wages' Share Of GDP Has Fallen for 46 Years - The problem is that limiting financialization will implode the system. The majority of American households feel poorer because they are poorer. Real (i.e. adjusted for inflation) median household income has declined for decades, and income gains are concentrated in the top 5%: Even more devastating, wages' share of GDP has been declining (with brief interruptions during asset bubbles) for 46 years. That means that as gross domestic product (GDP) has expanded, the gains have flowed to corporate and owners' profits and to the state, which is delighted to collect higher taxes at every level of government, from property taxes to income taxes. Here's a look at GDP per capita (per person) and median household income. Typically, if GDP per capita is rising, some of that flows to household incomes. In the 1990s boom, both GDP per capita and household income rose together. Since then, GDP per capita has marched higher while household income has declined. Household income saw a slight rise in the housing bubble, but has since collapsed in the "recovery" since 2009. These are non-trivial trends. What these charts show is the share of the GDP going to wages/salaries is in a long-term decline: gains in GDP are flowing not to wage-earners but to shareholders and owners, and through their higher taxes, to the government. The top 5% of wage earners has garnered virtually all the gains in income.

CWA union says it faced “SWAT team armed with automatic weapons” after uncovering “massive Verizon offshoring operation in Philippines” - Salon.com: The union that is on strike against corporate telecommunications giant Verizon alleges that its representatives were confronted by a heavily armed “SWAT team” in the Philippines, where it says it discovered undeclared offshore operations. Verizon strongly denies the accusations. Chris Shelton, president of Communications Workers of America, or CWA, says his union was contacted by call center workers in the Philippines who work for Verizon. CWA says it sent four representatives to the Philippines this week, where they “discovered that the extent to which Verizon is offshoring work is far beyond what has previously been reported and what the company publicly has acknowledged.” CWA alleges that Verizon is offshoring U.S. customer service calls to centers in the Philippines, where workers are paid as little as $1.78 an hour. The union says that Filipino workers told it they are being forced to work overtime an extra one to two hours each day, along with another full eight-hour sixth day, and are not receiving additional overtime compensation. In a statement, CWA also claimed that, when it discovered the alleged offshored operations, the company sent armed forces to intimidate union representatives in the Philippines.

Slavery conditions in chicken industry show that robots are ready to take this sector too -- A new report by Oxfam revealed shocking data concerning the working conditions in the US chicken industry. They prove that the corporate neo-Feudalism is actually here already. We are talking about slavery conditions inside an increasingly deregulated environment where workers lose rapidly all their rights and benefits. Only a few examples from the report reveal the shocking picture:

• Routinely, poultry workers say, they are denied breaks to use the bathroom. Supervisors mock their needs and ignore their requests; they threaten punishment or firing. Workers wait inordinately long times (an hour or more), then race to accomplish the task within a certain timeframe (e.g., ten minutes) or risk discipline. Workers struggle to cope with this denial of a basic human need. They urinate and defecate while standing on the line; they wear diapers to work; they restrict intake of liquids and fluids to dangerous degrees; they endure pain and discomfort while they worry about their health and job security. And it’s not just their dignity that suffers: they are in danger of serious health problems.

• Supervisors deny requests to use the bathroom because they are under pressure to maintain the speed of the processing line, and to keep up production. Once a poultry plant roars to a start at the beginning of the day, it doesn’t stop until all the chickens are processed. Workers are reduced to pieces of the machine, little more than the body parts that hang, cut, trim, and load—rapidly and relentlessly.

• Supervisors sometimes taunt the line workers for their need to use the restroom at all; they tell them to drink and eat less. Fern, who works at a Tyson plant in Arkansas says, “Our supervisor always makes fun of us. He says we eat too much so we go to the bathroom a lot.” Other workers at Tyson echo the statement; Betty notes, “That’s what they say to us. Don’t drink and eat a lot—if you do, you will end up in the bathroom five times a day.” In a lawsuit against a poultry company in Mississippi, women workers say that their supervisor “charged them money for such things as using the bathroom.

• Although they are reluctant to talk about it, workers from across the country report that they and their coworkers have made the uncomfortable decision to wear adult diapers to work. Not only do the diapers absorb accidents, they provide a degree of protection from the danger of asking permission to leave the line. Many workers are afraid of being mocked, punished, or fired. Betty, who works at a Tyson plant in Arkansas, says that on her own line, two people regularly wear diapers. One woman does so, Betty says, “because she can’t go to the bathroom when she needs to because they don’t let her.” Marta, from a Pilgrim’s plant in Texas, also reports that people in her plant wear diapers to work.

Passing TPP and rewarding slave labor is morally reprehensible -—Americans for Limited Government President Rick Manning today issued the following statement responding to a study by the National Retail Federation finding the 12-nation Trans-Pacific Partnership (TPP) trade pact will benefit U.S. retailers: “I’m sure using southern slave labor to produce cotton was a boon for northern clothing makers and their customers as it lowered costs. In the 19th century, New England textile mills were big buyers of southern cotton. Similarly, the Trans-Pacific Partnership includes Malaysia, which had to be falsely recategorized by the State Department as not a slave state in order to qualify to be a participant in the trade deal, and Vietnam and Brunei, which have horrendous records on human labor trafficking. “So while it’s great that American retailers think that cheap goods built with slave wages are good for their business model, it is morally reprehensible. History will not look kindly upon those who turned a blind eye to these atrocities. “It is little wonder why American workers who can’t find jobs think the Trans-Pacific Partnership is a bad deal for them.  The American people are fed up with the global trade agenda, and continue to reject candidates for president who defend the indefensible. This was reconfirmed in the Fox News West Virginia exit poll that found a full 67 percent of Republicans and 53 percent of Democrats agree that trade overseas is costing Americans their jobs here.”

Exclusive: U.S. plans new wave of immigrant deportation raids | Reuters: U.S. immigration officials are planning a month-long series of raids in May and June to deport hundreds of Central American mothers and children found to have entered the country illegally, according to sources and an internal document seen by Reuters. The operation would likely be the largest deportation sweep targeting immigrant families by the administration of President Barack Obama this year after a similar drive over two days in January that focused on Georgia, Texas, and North Carolina. Those raids, which resulted in the detention of 121 people, mostly women and children, sparked an outcry from immigration advocates and criticism from some Democrats, including the party's presidential election frontrunner Hillary Clinton. Immigration and Customs Enforcement (ICE) has now told field offices nationwide to launch a 30-day "surge" of arrests focused on mothers and children who have already been told to leave the United States, the document seen by Reuters said. The operation would also cover minors who have entered the country without a guardian and since turned 18 years of age, the document said. Two sources confirmed the details of the plan. The exact dates of the latest series of raids were not known and the details of the operation could change.

Jack Lew warns that time is running out for Puerto Rico: US Treasury Secretary Jack Lew warned on Monday that time was running out to address the spiraling crisis in Puerto Rico a week after the island suffered a dramatic default. Mr Lew traveled to San Juan early on Monday morning as policymakers in the US capitol returned from a week-long recess, with less than two months to hammer out details of a rescue package before Puerto Rico faces a deadline on debts backed by its constitution. "It's very hard to do things like this until you are at a moment of necessity or crisis," Mr Lew said outside one of the island's hospitals. "This is that moment." Policymakers in the House of Representatives will unveil a new version of the emergency legislation on Wednesday, which will clarify how the bill will prioritize different creditors in Puerto Rico's labyrinthine web of bond issuers.

Texas Republicans Inch Closer to Secession -- If the nationalists get their way, this November might be the last time Texans vote for a US president. On Wednesday, the Platform Committee of the Texas Republican Party voted to put a Texas independence resolution up for a vote at this week's GOP convention, according to a press release from the pro-secession Texas Nationalist Movement. The resolution calls for allowing voters to decide whether the Lone Star State should become an independent nation. Texas was, in fact, its own country for nine years before joining the United States in 1845, and while the idea of returning to independence has never been taken seriously by most people, it remains popular as a romantic notion and marketing hook. Lone Star beer is the "national beer of Texas." Texas Monthly is the "national magazine of Texas." In a 2009 rally, then-Gov. Rick Perry hinted that the state could secede if "Washington continues to thumb their nose at the American people." He later backed off the idea. (Representatives of the state GOP and Texas Nationalist Movement could not be reached for comment.)The Texas Nationalist Movement, once considered a quixotic fringe group, has added hundreds of members in the years since the election of Barack Obama. According to the Houston Chronicle's Dylan Baddour, at least 10 county GOP chapters are coming to the convention supporting independence resolutions. But this will be the first time in the state's 171-year history that they will actually vote on one.

The Privatization of Childhood Play - Kids used to play outside more. They would hopscotch through the streets, assembling games of stickball and breaking glass soda bottles for fun. Parents would tell their children to be home for dinner and then forget about them until dark. That golden age of unstructured play was real — scholars place it in the second quarter of the 20th century — but the children who lived it are now senior citizens. If you’re currently alive, you probably played less than your parents did. Between 1981 and 1997, for example, six- to eight-year-olds lost 25 percent of their play time. We aren’t romanticizing some fictional American idyll — kids really are playing less today, even if you include video games. And for some kids, even play is now a regimented and supervised activity. We live in an era of the playdate, when aspirational parenting means being your child’s agent and chauffeur. The idea of kids so busy they need adult secretaries to pencil in time with their friends is both silly and real. Take New York mom Tamara Mose: Her son and daughter’s weekly schedule includes piano, Kumon (a chic approach to private tutoring), taekwondo, regular tutoring, dance, and soccer. She’s lucky if she has time for a playdate. According to Mose, the biggest difference between simple play and an official playdate is that playdates are work. Playdates aren’t just scheduled, they’re prepared. They have expenses, and they can succeed or fail. A parent who serves the wrong kind of crunchy cheese snack could be jeopardizing their family’s place in the social hierarchy. Kids play, adults — or, more accurately, moms — make playdates.

Democrat Hedge Fund Investors Underwrite Political Networks to Privatize K-12 Public Education -- Who says Democrats and Wall Street don’t get along? Not too long ago, school board races were quaint affairs. Even in big school districts, candidates usually only had to raise a few thousand dollars to compete. But as the movement to marketize public education gained momentum, advocates broadened their focus from the federal level to state and local governments. There, where campaign costs were substantially lower than in federal elections, the well-funded movement could more effectively leverage its political money. One of the starkest casualties of that strategic shift has been the American school board election. A network of education advocacy groups, heavily backed by hedge fund investors, has turned its political attention to the local level, with aspirations to stock school boards—from Indianapolis and Minneapolis to Denver and Los Angeles—with allies. The same big-money donors and organizational names pop up in news reports and campaign-finance filings, revealing the behind-the-scenes coordination across organizational, geographic, and industry lines. The origins arguably trace back to Democrats for Education Reform, a relatively obscure group founded by New York hedge funders in the mid-2000s. The hedge fund industry and the charter movement are almost inextricably entangled. Executives see charter-school expansion as vital to the future of public education, relying on a model of competition. They see testing as essential to accountability. And they often look at teacher unions with unvarnished distaste. Several hedge fund managers have launched their own charter-school chains. You’d be hard-pressed to find a hedge fund guy who doesn’t sit on a charter-school board.

Bill Gates calls the ed tech bluff -- Bill Gates recently shocked a lot of people when he told a room full of educational technology entrepreneurs at the ASU GSV conference in San Diego that educational technology hasn’t really improved student learning. This was a blockbuster confession from the man behind Microsoft. While Gates said he still thought technology could be a difference-maker in schooling, his words offered a stark reality check for those hyping technology-infused innovation. In truth, Gates’s observation should not have surprised anyone who has been paying attention. After all, technology has long been offered as the miraculous balm that will transform and improve teaching and learning. Enthusiasts have said this about iPads, laptops, the Internet, desktop computers, videotapes, televisions, the radio . . . and even chalkboards, if you go back far enough. With each new advance, schools spend heavily on nifty new gizmos, make grand promises, and get enthusiastic reviews. And then, each time, nothing much changes.  Unfortunately, most technology in schooling has involved haphazard attempts to slather new devices across classrooms, with little vision of how or why these will make a difference.

In October 2015, 69.2 Percent Of 2015 High School Graduates Enrolled In College: In October 2015, 69.2 percent of 2015 high school graduates were enrolled in colleges or universities. Recent high school graduates not enrolled in college were about twice as likely as enrolled graduates to be working or looking for work (72.7 percent compared with 36.0 percent). Information on school enrollment and work activity is collected monthly in the Current Population Survey (CPS), a nationwide survey of about 60,000 households that provides information on employment and unemployment. Each October, a supplement to the CPS gathers more detailed information about school enrollment, such as full- and part-time enrollment status. Additional information about the October supplement is included in the Technical Note.   Of the 3.0 million youth age 16 to 24 who graduated from high school between January and October 2015, about 2.1 million (69.2 percent) were enrolled in college in October. The college enrollment rate of recent high school graduates in October 2015 was little different from the rate in October 2014 (68.4 percent). For 2015 high school graduates, the college enrollment rate was 72.6 percent for young women and 65.8 percent for young men. The college enrollment rate of recent Asian (83.0 percent) graduates was higher than for their White (71.1 percent), Hispanic (68.9 percent), and Black (54.6 percent) counterparts. (See table 1.)

Record Number Of Parents Tell Kids They're On Their Own When It Comes To College Bill -- The current outstanding student loan debt in the United States is roughly $1.3 trillion, and getting bigger by the second. The good news (for those not concerned about economic realities), Obama has just set the precedent that loans will be forgiven, the bad news, parents are now telling their kids to take out more student loans if they intend on going to college. But there is a twist. According to Bloomberg, a new survey by Discover Financial Services found that 48% of parents think their child should pay a portion (if not all) of the cost of attending college, up from 39% four years ago. And just how will potential students pay that portion? Why, student loans of course. 32% of respondents said they would ask the bank for help, while 27% plan to rely on family savings, 4% said they would dip into retirement funds, and 3% even indicated that they may refinance their home to pay for their kids college. Bloomberg goes on to offer up the silly notion that "free money" exists by way of government aid (FAFSA), stating that "about $2.7 billion in federal grant money was left on the table because parents didn't bother to fill out these forms." What Bloomberg fails to mention is that nothing is ever free, and also, as the government subsidizes the bill for those attending college,it only makes tuition more expensive. The student loan bubble is something that we've been covering for years now (this is from 2012), and given the fact that parents aren't able to help as much with the cost of tuition, the amount of debt burdening millennials will only get worse. As for those families planning to dip into savings or retirement funds to help out, if those funds are tied up in financial securities, we would recommend taking a wait and see approach to ensure those funds you've worked so hard for don't dissappear when the market finally corrects.

Harvard Brings Back The 'Blacklist' For Final Club, Fraternity, Sorority Students -- In a stunning attack on freedom of association, Harvard University announced today that members of independent, single-sex, off-campus organizations will be blacklisted from Rhodes and Marshall scholarships and banned from leadership of on-campus organizations or athletic teams.  Harvard President Drew Gilpin Faust stated that next year, members of fraternities, sororities, and “final clubs” will begin to be denied these opportunities in an effort to foster “inclusion” and “address deeply rooted gender attitudes.” According to Dean Rakesh Khurana, who recommended the changes, such organizations have been independent from Harvard since 1984. They operate as off-campus entities and do not receive any recognition or benefit from the university. “Outrageously, Harvard has decided that 2016 is the right time to revive the blacklist,” said Robert Shibley, executive director of the Foundation for Individual Rights in Education (FIRE), which defends freedom of association on campus. “This year’s undesirables are members of off-campus clubs that don’t match Harvard’s political preferences. In the 1950s, perhaps Communists would have been excluded. I had hoped that universities were past the point of asking people, ‘Are you now, or have you ever been, a member of a group we don’t like?’ Sadly, they are not.” “Who’s to say that Harvard’s leaders five years from now won’t decide that Catholics or Republicans should be blacklisted because they might not line up with Harvard’s preferred values?”

Dry Rot in Academia - Thomas Sowell: Jason Riley has now joined the long and distinguished list of people invited -- and then disinvited -- to give a talk on a college campus, in this case Virginia Tech. Mr. Riley is a Senior Fellow at the Manhattan Institute, a columnist for the Wall Street Journal and, perhaps most relevantly, author of a very insightful book titled "Please Stop Helping Us: How Liberals Make It Harder for Blacks to Succeed." In short, Jason Riley's views on race are different from the views that prevail on most college campuses. At one time, 50 years ago or earlier, exposing students to a different viewpoint was considered to be a valuable part of their education. But that was before academia -- and the education system in general -- became virtually a monopoly of the political left. Today one can literally go from kindergarten to becoming a graduate student seeking a Ph.D., without ever hearing a vision of the world that conflicts with the vision of the left. Conservative critics who object on grounds that the views of the left are wrong miss the point. Regardless of whose views become a monopoly, education suffers. As a young Marxist in college during the 1950s heyday of the anti-Communist crusade led by Senator Joseph McCarthy, I had more freedom to express my views in class, without fear of retaliation, than conservative students have on many campuses today. After being invited by conservative students to give talks at various colleges, Jason Riley has then been surprised at how little those conservative students have said during the question and answer periods after these talks. But a Wellesley student explained: "You get to leave when you're done. We have to live with these people until we graduate."

Lenders Get Burned Betting on Ivy Leaguers --For online lenders, the business model of targeting Ivy League student borrowers is starting to backfire. The problem isn’t that graduates of these and other prestigious universities are deadbeats. Rather, these customers, who the lenders covet for their superlow default rates, are proving savvier and more anti-debt than anticipated. Borrowers are prepaying their student loans at a quicker pace—in some cases three times faster—than some companies expected, a potentially bad outcome for the lenders and investors that wanted to collect higher interest payments over time, according to people familiar with the industry. Not only are customers aggressive about refinancing at lower rates, some are paying more than required each month in an attempt to get rid of their debt faster. “It surprised me,” said Gary Lieberman, chairman of Darien Rowayton Bank, a community bank based in Darien, Conn., with a national online lending platform where student-debt borrowers are paying 15% to 17% more than they are obligated. “The nature of these borrowers is that they really want to pay off their debt.” To some extent, online lenders are victims of their own business plans. Lenders including Social Finance Inc., known as SoFi; Darien Rowayton, CommonBond Inc. and Earnest Inc., generally charge lower interest rates than what borrowers are paying on the student loans they initially received from the federal government or large private lenders.

College loan debt tops $1.2 trillion - With college loan debt now topping $1.2 trillion, borrowers, lawmakers and employers are taking a closer look at what can be done to lighten the load for millions struggling to pay students loans. .Robert Garland  has a good job, a home, a wife and a beautiful 18-month-old baby, but there is one catch. The couple has massive college debt, $1,300 a month between them.  But Garland and about 5,000 fellow employees at Fidelity Investments are now getting help paying down their college loans.The company has a new benefit program that gives employees $2,000 a year to pay off student loans. Participants must have at least 6 month with the company and the benefit is capped at a total of $10,000.  PricewaterhouseCoopers has a similar program. Fidelity says the college loan benefit is a draw for prospective employees.Jennifer Hanson, Head of Associate Experience, Fidelity Investments, said, "We have heard a lot from our recruiters, as this is being talked about. Folks are becoming more aware and it is helping us bring in talent."  Garland says the new program has a side benefit. It is inspiring him to pay even more each month against his loans, so he can shift focus more quickly to expanding his home and his family.The benefit is currently taxed as income, but lawmakers are discussing legislation that would change that.

Central States chief warns of insolvency or steeper cuts to pensions - The head of a pension fund serving Teamsters members on Monday warned it may need to enact steeper benefit cuts or go bankrupt in light of a decision by the Treasury Department to reject proposed reductions.Thomas Nyhan, the executive director of the Central States pension fund, told reporters on a conference call that he wasn’t sure that Central States could make the numbers work after Special Master Kenneth Feinberg refused a request to slash benefits by 22% on average for 270,000 Teamsters members. Among the reasons that Feinberg cited in his rejection letter was the 7.5%-per-year investment return projections made by Central States, which he said were too optimistic.  The Treasury Department had jurisdiction to decide on the Central States move because the fund serves multiple employers. Central States estimates it will need $11 billion in funding to prevent insolvency and meet its long-term obligations. Annual benefit payments currently exceed contributions by more than $2 billion. “If there was no legislation at any time, we’re going to end up in insolvency, unless we have another plan,” Nyhan said. “Right now, I can’t prejudge this, but it would be a very, very difficult plan requiring very severe cuts.” Nyhan said Congress had a responsibility to act because lawmakers were the ones who passed legislation in the first place that set the pension fund on its downward path. “They instituted legislation that deregulated the trucking industry and caused a lot of these problems,” Nyhan said. “It wasn’t just the natural order of life.”

Here Come A Lot Of Angry Teamsters: One Of America's Largest Pension Funds Demands A Taxpayer Bailout -- Over the past few months, we have covered the unfolding saga (here and here) of the Central States Pension Fund, which handles retirement benefits for current and former Teamster union truck drivers across various states including Texas, Michigan, Wisconsin, Missouri, New York, and Minnesota, and is one of the largest pension funds in the nation, all the way throughKenneth Feinberg's rejection of the proposal to cut benefits on behalf of the Treasury. When the proposal was rejected, we said that the final resolution will be in the form of an inevitable taxpayer-funded bailout: If the Treasury won't allow any pension cuts, and the government created safety net won't be there to keep the benefits flowing, how will the cash continue to flow to members? With the precedent now set by the Treasury that no cuts will be allowed, the answer will likely come in the form of a massive bailout. As it turns out, that is precisely what fund director Thomas Nyhan believes as well. Nyhan said the rejection means the CSPF likely won't be able to offer another proposed fix without getting funding from Congress, either directly or through the Pension Benefit Guaranty Corp. However with the PBGC also on its way to insolvency, and unable to shoulder the additional burden in world of zero and negative rates, that leaves us with... drum roll please... the US taxpayers, aka Congress, footing the bill. "There are only two solutions. Either the plan receives more money or has to have fewer benefits. I'm hopeful that come probably 2017, we can actually all get to work on something that can provide a solution. If there is no legislation at any time, we're going to end up going to insolvency." Nyhan said.The full-court press is now on, as now everyone involved is calling on congress to step in. Visitors to CSPF's website this morning were greeed with a banner directing to a rescue plan website.

Social Security Administration Seeks Shortcut Through Massive Disability Backlog: -- The Social Security Administration is quietly changing how it handles some appeals from Americans who've sought disability benefits. The changes are part of an effort to chip away at an unprecedented backlog of unresolved claims, one that's left some people waiting more than 500 days for a decision. "With over 1.1 million people waiting for a hearing decision, we are in the midst of a public service crisis," SSA spokesman Mark Hinkle said in an email. "For some people this results in a wait of over 17 months to receive a hearing decision, which we concede is unacceptable service." If someone can't keep working because of a serious illness or injury, that person can apply for monthly benefits under the Social Security Disability Insurance program. Nearly 9 million disabled Americans receive federal disability benefits, which average $1,022 per month. The government takes a hard look at new claims, however, and most are denied at first. Any subsequent appeals go to administrative law judges who have a measure of independence from the SSA. From there, dissatisfied claimants can try an appeals council and ultimately a federal court. It's the later stages of appeals where the SSA has made changes. Nearly 30,000 disability claims per year get sent back down, or "remanded," to the appeals council or to administrative law judges for reconsideration. Now, these remands will instead be heard at the council level by administrative appeals judges who don't have the same independence from the SSA that administrative law judges do. Another 10,000 or so cases being taken away from ALJs include situations where people have returned to work after receiving disability benefits and the agency believes they've been overpaid.

State retiree health care could cost California $6.6 billion a year - California is spending more than $2 billion a year on health care for retired state employees – up more than 80 percent in the last decade, according to Gov. Jerry Brown’s latest budget. However, the state would have to spend over three times as much – $6.6 billion a year – to fully cover current health care costs and whittle down its $80.3 billion unfunded liability for future health care obligations, according to a new report from Pew Charitable Trusts. California isn’t alone in facing a big retiree health care tab. California’s $80.3 billion liability may be the nation’s largest, but it’s just 12.8 percent of the $627 billion total for all states. Until recently, however, it was one of just 18 states that have set aside nothing to cover those future obligations. Brown has acknowledged the big health care liability, and lamented its growth. He’s negotiated contracts with state employee unions that have workers and the state paying into a fund for future retiree health care costs over and above current pay-as-you-go spending and thus slow the increase of the unfunded liability. Brown’s 2016-17 budget includes $88 million to match employee contributions under two contracts and an additional $240 million to prefund future retiree health care costs, H.D. Palmer, a spokesman for the Department of Finance, says.

The Minimum Wage and the Social Determinants of Mental Health -- There’s a new study in Health Economics that looks at the effect of Britain’s minimum wage law on the mental health of low wage workers.* Does increasing incomes improve health? In 1999, the UK government implemented minimum wage legislation, increasing hourly wages to at least £3.60. This policy experiment created intervention and control groups that can be used to assess the effects of increasing wages on health. Longitudinal data were taken from the British Household Panel Survey. We compared the health effects of higher wages on recipients of the minimum wage with otherwise similar persons who were likely unaffected because (1) their wages were between 100 and 110% of the eligibility threshold or (2) their firms did not increase wages to meet the threshold. We assessed the probability of mental ill health using the 12-item General Health Questionnaire. We also assessed changes in smoking, blood pressure, as well as hearing ability (control condition). The intervention group, whose wages rose above the minimum wage, experienced lower probability of mental ill health compared with both control group 1 and control group 2. This improvement represents 0.37 of a standard deviation, comparable with the effect of antidepressants (0.39 of a standard deviation) on depressive symptoms. The intervention group experienced no change in blood pressure, hearing ability, or smoking. Increasing wages significantly improves mental health by reducing financial strain in low-wage workers.  In the The New Republic, I argue that this study is important because it shows us a way to attack the social determinants of mental health. In the wake of all the mass shootings, many US politicians have called for ‘mental health reform’.  I’m all for improving mental health care, but small tweaks to how that system is administered will not change population mental health. The British data suggest, however, that we might be able to reduce the rate of mental illness in a highly-stressed subpopulation by providing them with a living wage.

Black Americans See Gains in Life Expectancy - — It is a bitter but basic fact in health research: Black Americans die at higher rates than whites from most causes, including AIDS, heart disease, cancer and homicide.But a recent trove of federal data offered some good news. The suicide rate for black men declined from 1999 to 2014, making them the only racial group to experience a drop. Infant mortality is down by more than a fifth among blacks since the late 1990s, double the decline for whites. Births to teenage mothers, which tend to have higher infant mortality rates, have dropped by 64 percent among blacks since 1995, faster than for whites.Blacks are still at a major health disadvantage compared with whites. But evidence of black gains has been building and has helped push up the ultimate measure — life expectancy. The gap between blacks and whites was seven years in 1990. By 2014, the most recent year on record, it had shrunk to 3.4 years, the smallest in history, with life expectancy at 75.6 years for blacks and 79 years for whites. Part of the reason has been bad news for whites, namely the opioid crisis. The crisis, which has dominated headlines — some say unfairly, given racial disparities — has hit harder in white communities, bringing down white life expectancy and narrowing the gap.  But there also has been real progress for blacks. The rate of deaths by homicide for blacks decreased by 40 percent from 1995 to 2013, according to Andrew Fenelon, a researcher with the National Center for Health Statistics, compared with a 28 percent drop for whites. The death rate from cancer fell by 29 percent for blacks over that period, compared with 20 percent for whites.

Life Expectancy is Increasing and Health Inequality is Down -- We have heard a great deal about increases in mortality among white, non-hispanic, middle-aged Americans (especially women) but to state the case is also to note that this is one group among many. In an excellent new paper, Currie and Schwandt discuss the good news overall–life expectancy is up and health inequality is down, in some cases dramatically. Here, for example, is life expectancy at birth by gender and year.  Even more impressive is that life expectancy has increased significantly across all poverty groups (as measured by county poverty levels). In the graph below, for example, the blue triangles indicate life expectancy in 1990 (men on the left, women on the right). Note that as the poverty level of the county increases along the horizontal axis life expectancy falls. The green dots are life expectancy in 2010. Once again, as poverty increases, life expectancy falls. What’s remarkable, however, is how much life expectancy increased between 1990 and 2010 in counties of all poverty levels. The news is good and may get better. Between 1990 and 2010 mortality rates for children ages 0-4 fell especially dramatically and especially so in poor counties. Moreover, since mortality at older ages is often baked in by poor health at younger ages there is significant opportunity for these gains to persist over time. The New York Times also reported yesterday on inequality in life expectancy across race. It’s down.

‘Don’t Be a Drama Queen’: Inmate Left To Die From Withdrawal -- Two new federal civil rights lawsuits filed in March shed light on how the privatization of jail medical care may pose a specific threat to inmates with drug dependencies. In Alabama, Whitney Elizabeth Foster sued medical contractor Advanced Correctional Healthcare (ACH) for withholding her prescription methadone, Xanax, and blood pressure medication, causing her to suffer multiple strokes, seizures, and worsening withdrawal, which resulted in irreversible brain damage. In Indiana, the estate of deceased inmate Tammy Perez sued ACH for forcing her to withdraw from a serious heroin addiction without proper assistance. She was so violently ill she couldn’t keep down her prescribed medication for an adrenal gland disorder she had since birth. When jail officials grew tired of cleaning up after Perez’s vomiting and diarrhea, an ACH doctor ordered her moved to an isolated cell, where she died hours before anyone found her. A 2010 report from the National Center on Addiction and Substance Abuse at Columbia University found that, as jail populations in the United States grew over the past few decades, the proportion of inmates who are substance-involved increased dramatically. By 2006, 84.7% of all inmates were substance-involved. The report notes that, despite there being a “substantial body of professional standards […] developed for providing addiction treatment in prisons and jails,” there are “no mechanisms […] in place to ensure the use of existing scientific guidelines and professional standards.”

Obamacare Update: Insurance Premiums Set To Explode Higher In 2017 -- Just recently we warned that thanks to Obamacare, insurers would be unveiling enormous premium increases to the public, ironically just one week before the presidential election. As the Wall Street Journal reports, Oregon and Virginia are the first two states to make insurers' premium proposals for 2017 public, and we are now able to see a glimpse of what will be coming regarding insurance premiums for next year [Spoiler alert: it's ugly].While it is noted that some of the subsidies provided by the federal government will help the lowest income consumers cover the bill, based on what we have learned from Virginia and Oregon, a vast majority of individuals will be googling "sticky wages" soon, as they scramble to figure out how they're going to be able to afford such enormous increases. Starting in Virginia, Anthem Inc and Carefirst BlueCross BlueShield are proposing 15.8% and 25% increases respectively. In Oregon, the increases are stunning to say the least. Providence Health Plan, currently the largest insurer for people buying coverage through the Oregon health exchange, is seeking an average increase of 29.6%. Not to be outdone,Moda Health Plan Inc, another large insurer for the state, is proposing a premium increase of 32.3% - this is after a 25% hike last year. For some context as to how out of control premium increases will be for those enrolled in Oregon, Kaiser Foundation Health Plan of the Northwest is asking for an increase of 14.5%, the second lowest percentage increase in the state. Insurers seeking double digit rate increases are citing higher than expected medical costs (just as we said) incurred by their enrollees as factors in their decisions.

Obamacare Is Reducing Medical Debt -- NYMag: One problem with our private health-care system is that Americans don't like seeing poor people die in the streets. So long as ambulance drivers don't demand proof of employment before bringing the severely injured to the ER, the costs of individuals' health care will be, partially, collectivized. If an impoverished gunshot victim can't pay her medical bill, the hospital will make up the difference by increasing charges on those who can pay. But there are a lot of different ways those costs can be socialized. The GOP's preferred method is to load up poor uninsured people with medical debt, trapping many in spirals of bankruptcy and financial distress. This rarely results in low-income households paying off what they owe, but it does ruin a lot of lives and/or keep America a beacon of freedom. Obamacare pursued a different strategy. By expanding government-funded health insurance to low-income households, the Affordable Care Act socializes the costs of ER visits for the poor up front. What's more, it attempts to reduce the frequency of such visits, by giving the economically disadvantaged access to subsidized preventive health care. A new working paper from the National Bureau of Economic Research finds that this approach, shockingly, reduces the debt burden of poor people. The study estimates that medical debt held by people newly covered by Medicaid since 2014 has fallen by about $600 to $1,000 each year. Comparing states that opted into the Medicaid expansion against those that did not, NBER found that the former saw a reduction in bills sent to collections as well as the amount of debt listed on such bills. These reductions don't just benefit the most vulnerable in our society, the authors contend; they also increase the likelihood that outstanding bills to hospitals, doctors, banks, utility companies, and landlords actually get paid.

Drug Prices Soar Most In The 21st Century - Back in 1998, when Pfizer introduced Viagra it charged so much for the novelty, much needed drug (which millions of men would literally pay anything for) that it sent the entire pharma/drug price index soaring by nearly 15% for about a year. This can be seen, appropriately enough, in the spike on the chart below. But, what is more troubling for Americans these days is while the 1998 Viagra "spike" came and went, in recent years, pharmaceutical preparation, i.e., drug prices have been soaring higher with every passing year, and according to today's PPI report, at the wholesale level, drug prices in April surged by 9.6% over the past year, the biggest increase since 1982 when excluding the Viagra outlier, and certainly the most in the 21st century. This is an issue, because while much of these prices are passed on to consumers at the individual level, this is not reflected in broader core inflation. In fact, when comparing core CPI with drug prices, one sees that while in the early 1980s the two series were both astronomically high, since then - according to the BLS - core inflation has been tame and subdued even as drug prices have been rising, initially slowly and in recent months, exponentially.And while one can debate how much of PPI has or should be reflected in CPI - in this case virtually none of it - despite exploding Obamacare premiums (which also magically are never accounted for in the CPI report even if they certainly boost GDP), we wonder: how long before the BLS at least admits that its shelter/rent inflation data is woefully inaccurate, because as the Census department itself admits, in recent months, the increase in average asking rents is about 4x higher than the core CPI peddled by the BLS.

Pfizer won’t sell lethal injection drugs - A major development in the ongoing farce that is the United States' death penalty system: Pfizer, the last remaining Food and Drug Administration–approved source of lethal injection drugs, has decided to stop selling them for use in executions. States that want to continue to carry out lethal injections—and there will be some—will have to "go underground," in the words of an expert quoted in the New York Times, acquiring the substances through straw purchasers, from overseas, and/or from "compounding pharmacies" that are not federally regulated. From the Times: More than 20 American and European drug companies have already adopted such restrictions, citing either moral or business reasons. Nonetheless, the decision from one of the world’s leading pharmaceutical manufacturers is seen as a milestone ... “Pfizer makes its products to enhance and save the lives of the patients we serve,” the company said in Friday’s statement, and “strongly objects to the use of its products as lethal injections for capital punishment.” Pharmaceutical manufacturers have gradually stopped supplying drugs for executions as evidence has built that lethal injections can be unpredictable and inhumane. (In addition to pressure from activists and activist investors, the Times notes, they must also consider the threat of being sued for liability in the event of executions gone awry.) States' efforts to circumvent manufacturers' decisions have correspondingly become increasingly dark and surreal; last year, federal agents in Phoenix seized $27,000 worth of sodium thiopental that had been illegally imported by the Arizona department of corrections, while in 2014 the state of Louisiana obtained hydromorphone for an execution from a hospital without telling hospital officials what it was going to be used for. (If they had, a hospital official later said, the request would not have been filled.)

Administration tightens ObamaCare sign-up rules - The Obama administration on Friday announced changes to ObamaCare sign-up rules that are intended to cut down on people gaming the system and address a complaint from insurance companies that they say is causing them to lose money. The Centers for Medicare and Medicaid Services (CMS) announced that it is tightening the rules for enrolling in one of ObamaCare’s extra sign-up periods. The extra periods allow people to sign up for insurance outside of the regular enrollment period if they move. The change announced Friday requires that people have coverage at some point in the preceding 60 days, which is intended to prevent people from moving for the sole purpose of becoming eligible to sign up for health insurance. Insurers have complained that current rules are too lax, allowing people to game the system and only sign up for insurance when they need care, driving up costs for insurers and contributing to losses on the ObamaCare marketplaces. “CMS is committed to help strengthen the Health Insurance Marketplace,” spokesman Aaron Albright said in announcing the changes.

The Problem with Obamacare - James Kwak --When it comes to Obamacare, I’m firmly in the “significantly better than nothing” camp. Obamacare has increased coverage—although not as much as one might have hoped. The percentage of people uninsured has fallen from around 17% in 2013, when only a few coverage-related provisions of the ACA were in effect, to around 11% in early 2015, after the major changes kicked in in 2014. That’s six percentage points, or millions of people—but it’s still much less than half of the pre-ACA uninsured.   There has also been a lot of controversy over the impact of Obamacare on health insurance prices. According to the Kaiser Family Foundation, the weighted average pre-subsidy price of a silver plan on the exchanges only increased by 3.6% from 2015 to 2016, which certainly seems good. But one way the ACA keeps premiums reasonable is by pushing people into plans with high levels of cost sharing. The average silver plan has a combined annual deductible (including prescriptions) of more than $3,000; the deductible for an average bronze plan is close to $6,000. In other words, one reason that insurance premiums are affordable is that those premiums don’t buy you what they used to, as insurers shift more and more health care costs onto their customers. This is exactly what we should have expected. Obamacare is an example of “managed competition,” something that Bill Clinton talked about on the campaign trail twenty-four years ago. The basic principle is that competitive markets will generally produce good outcomes—low costs, efficient allocation of resources to meet consumer needs, etc.—but need to be managed around the edges. Moderate Democrats (what we used to call moderate Republicans) have fallen in love with this idea, because they can talk about the wonders of markets while blaming anything they don’t like on “market failures.”

Hillary Clinton Takes a Step to the Left on Health Care - For months during the Democratic presidential nominating contest, Hillary Clinton has resisted calls from Senator Bernie Sanders to back a single-payer health system, arguing that the fight for government-run health care was a wrenching legislative battle that had already been lost.  But as she tries to clinch the nomination, Mrs. Clinton is moving to the left on health care and this week took a significant step in her opponent’s direction, suggesting she would like to give people the option to buy into Medicare. “I’m also in favor of what’s called the public option, so that people can buy into Medicare at a certain age,” Mrs. Clinton said on Monday at a campaign event in Virginia. Mr. Sanders calls his single-payer health care plan “Medicare for all.” What Mrs. Clinton proposed was a sort of Medicare for more. The Medicare program covers Americans once they reach 65. Beneficiaries pay premiums to help cover the cost of their coverage, but the government pays the bulk of the bill. Mrs. Clinton’s suggestion was that perhaps younger Americans, “people 55 or 50 and up,” could voluntarily pay to join the program.

Judge sides with House Republicans against Obamacare -- A federal judge has ruled that the Obama administration is unconstitutionally spending federal money to fund the president's health care law.  The ruling Thursday from U.S. District Judge Rosemary Collyer is a win for House Republicans who brought the politically charged legal challenge.  At stake is $175 billion the government is paying to reimburse health insurers over a decade to reduce co-payments for lower-income people. The House argues that Congress never specifically appropriated that money and has denied an administration request for it, but that the administration is spending the money anyway. Collyer issued an order stopping further reimbursements, but delayed its implementation while the case is appealed. Collyer is a George W. Bush appointee nominated in 2002.

Republicans win Obamacare legal challenge, add to insurer concerns | Reuters: A U.S. judge on Thursday handed a victory to congressional Republicans who challenged President Barack Obama's signature healthcare law, ruling that his administration overstepped its constitutional powers relating to government spending. U.S. District Judge Rosemary Collyer, based in Washington, ruled that the administration cannot spend billions of dollars in federal funds to provide subsidies under the law known as Obamacare to private insurers without the approval of Congress. At issue in the case, brought by the Republican-led House of Representatives, are reimbursements to insurance companies to compensate them for reductions that the law requires them to make to customers' out-of-pocket medical payments. The ruling will not have an immediate effect on the law because the judge put the decision on hold pending an expected appeal by the administration. But it adds to uncertainty over the future of Obama's signature domestic policy achievement ahead of the Nov. 8 presidential and congressional elections, including whether enough health insurers will continue to participate in the program. Insurers have sustained losses from their Obamacare business, saying they have not attracted enough healthy customers to offset the costs of sicker members. Two of the largest players, UnitedHealth Group and Humana Inc, had already said they would not offer plans in many markets next year. "If you're going to lose more money, why participate?"

FDA Seeks to Redefine ‘Healthy’ - WSJ: What’s healthier than a Pop-Tart? Not almonds, according to today’s regulatory rules. That could change as the U.S. Food and Drug Administration kicks off a review of the 1990s official definition of “healthy” at the urging of food companies and lawmakers. The U.S. regulator is planning to ask the public as well as food experts for comment on what should be the modern definition of healthy, setting off a process that could take years to complete. But the decision to redefine the term marks a major step in the FDA’s effort to catch up to changing ideas about health and eating habits. The FDA said in a statement to The Wall Street Journal that in light of evolving nutrition research and other forthcoming food-labeling rules, “we believe now is an opportune time to re-evaluate regulations concerning nutrient content claims, generally, including the term ‘healthy.’” The agency also noted a petition filed by Kind LLC. The maker of fruit-and-nut bars started campaigning for change after being sent a warning letter by the agency last year ordering it to stop using the term “healthy” on its packaging. The FDA rescinded that demand last month, though Kind made other tweaks to its labels based on the FDA’s missive.Food can only be marketed as healthy if it meets five criteria: fat, saturated fat, sodium, cholesterol and beneficial nutrients, such as vitamin C or Calcium. The levels differ by food category, but snacks generally can’t have more than 3 grams of fat. When the term “healthy” was first officially defined in 1994, low fat content was the main focus of health professionals. Sugar wasn’t on the FDA’s, or most nutritionists,’ radar. Kellogg Co. K -0.24 % doesn’t generally market its Frosted Flakes or low-fat Pop-Tarts as “healthy,” but under the current guidelines, it could. While the foods are high in sugar, they meet all the criteria, from low fat to fortified with vitamins. And fat-free pudding cups can be marketed as healthy, but avocados couldn’t because they have too much fat, according to today’s rules.

Denied Breaks, U.S. Poultry Workers Wear Diapers on the Job - Bloomberg -- Workers in plants run by the largest U.S. poultry producers are regularly being denied bathroom breaks and as a result some are reduced to wearing diapers while working on the processing line, Oxfam America said in a report Wednesday. “It’s not just their dignity that suffers: they are in danger of serious health problems,” said Oxfam America, the U.S. arm of the U.K.-based global development group. The group works for a “just world without poverty” and focuses on topics ranging from refugees in Greece to malnutrition. The report cited unnamed workers from Tyson Foods Inc., Pilgrim’s Pride Corp., Perdue Farms Inc. and Sanderson Farms Inc. who said that supervisors mock them, ignore requests and threaten punishment or firing. When they can go, they wait in long lines even though they are given limited time, sometimes 10 minutes, according to the report. Some workers have urinated or defecated themselves while working because they can’t hold on any longer, the report said. Some workers “restrict intake of liquids and fluids to dangerous degrees,” Oxfam said. Conditions for workers in the meat industry have been known as being notoriously poor since the days of Upton Sinclair, the American author who wrote of abuses in his 1906 novel, “The Jungle.” In a 2015 report,  Oxfam said the cost of cheap chicken in the U.S. is workers who face low wages, suffer elevated rates of injury and illness and face a climate of fear in the workplace. The industry was also highlighted in the 2008 documentary Food Inc. The conditions present difficulties, especially for menstruating or pregnant women, according to the latest report. Workers could also face medical problems, including urinary tract infections, and managers have told some workers to eat and drink less to avoid going to the bathroom, according to the report.

As Urban Air Pollution Reaches Unhealthy Levels, Cities Push For Less Driving  -- Most urban lungs around the world are breathing harmful air, according to a new World Health Organization (WHO) report. More than 80 percent of people living in urban areas that monitor air pollution breathe air that exceeds WHO air quality limits, according to the report, which was released Thursday. The report, which evaluated a database encompassing 3,000 cities in 103 countries, also found global urban air pollution levels increased by 8 percent from 2008 to 2013, despite improvements in some regions.  “Urban air pollution continues to rise at an alarming rate, wreaking havoc on human health,” Maria Neira, director of WHO’s department of public health, environmental and social determinants of health, said in a statement. The agency said ambient air pollution — composed of high concentrations of small and fine particulate matter that includes pollutants such as sulfate, nitrates, and black carbon — causes more than 3 million premature deaths worldwide every year.   Most of this harmful air is found in developing countries in Southeast Asia and what WHO calls the Eastern Mediterranean — a region that includes the Middle East as well as some North African countries — followed by low-income cities in the Western Pacific, an area that includes 28 countries and some 1.7 billion people. Air pollution was better off in developed countries’ cities like New York and London. India has 16 of the world’s 30 most polluted cities, but its capital, New Delhi, is no longer the most polluted city in the world, according to the report. That ranking now belongs to Onitsha, a fast-growing port and transit city in southeastern Nigeria, the Guardian reports. In the United States, the most polluted city is Visalia, situated in California’s agricultural San Joaquin Valley.

Scientists Warn That You Could Be Inhaling Chemically-Laden Microplastic Particles -- Microplastics, the scourge of beaches, oceans, waterways and aquatic life worldwide, might also be polluting the air we breathe, according to environmental health experts. The Guardian reported that a research team at King’s College in London is looking into the issue.“There is a possibility, a real possibility, that some of those microparticles will be entrained into the air, and they will be carried around and we will end up breathing them,” said Frank Kelly, a researcher and professor of environmental health at King’s College, at an evidence session at the House of Commons Environmental Audit Committee (EAC) in the UK. According to The Guardian, Kelly said the microplastics could enter the air after sewage sludge is spread on fields and dries out. He also cited a French study that had detected the particles in the air.“This is a horizon-scanning issue but the particles are of a size that they are [breathable], they are increasing in number in our environment and there is a question to be asked,” Kelly added.  Microplastics, or microbeads, are plastic particles with an upper size limit of 5 mm and are found in facial cleansers, toothpastes or disintegrate from larger pieces of plastic or synthetic clothing. These pieces are often too small to be filtered by sewage treatment plants so they get released into bodies of water where they are accidentally consumed by fish, birds or sea mammals.

ABC News Says That Spending 0.03 Percent of GDP on Fixing Lead Pipes Is “Colossal” Cost -- Dean Baker --I guess we can get a pretty good sense of the priorities of the folks at ABC News from the headline of a piece on the costs of replacing the country's lead water pipes. The headline noted the price for Flint and then warned of the"colossal price tag for US-wide remedy." The piece gives two estimates of the cost. One puts the costs at between a few billion dollars and fifty billion dollars. The other puts it at $30 billion. If we take the latter figure and assume that the pipes will be replaced over the next decade, the cost would come to roughly 0.025 percent of GDP. (GDP will average roughly $20 trillion, in 2016 dollars, over the next decade.)  To give some points of comparison, we spend roughly 3.5 percent of GDP on the military. Patent protection for prescription drugs raise their cost by close to 2.0 percent of GDP. And, protected our doctors from international competition raises our annual health care bill by 0.5 percent of GDP.

Report: Flint water bills set to double over five years: Flint residential water bills, already among the highest in the nation, are projected to double during the next five years without action to upgrade the system and address fixed costs, according to a new Michigan Department of Treasury report. “This defined the problem. Now let’s work on the solution,” Gov. Rick Snyder said during a Friday meeting of the Flint Water Interagency Coordinating Committee. The estimates highlight continued concern over Flint water rates despite the city’s expected switch to the Karegnondi Water Authority, which it joined with state approval in hopes of gaining more control over long-term costs. The typical Flint resident is currently charged about $53.84 per month on the water portion of their bill, not counting sewer costs, according to the report prepared by Raftelis Financial Consultants of Missouri. But current residential rates are not projected to cover future costs, assuming the city purchases Lake Huron water from Detroit through fiscal year 2017 before transitioning to the KWA pipeline in 2018. As a result, the typical water portion of a residential bill is estimated to rise to $110.11 per month by fiscal year 2022 “if no action is taken” to address various issues, according to the report.

Delay the Olympics? -- From Amir Attaran at the Harvard Public Health Review: Brazil’s Zika problem is inconveniently not ending. The outbreak that began in the country’s northeast has reached Rio de Janeiro, where it is flourishing. Clinical studies are also mounting that Zika infection is associated not just with pediatric microcephaly and brain damage, but also adult conditions such as Guillain-Barré syndrome and acute disseminated encephalomyelitis, which are debilitating and sometimes fatal. … But for the Games, would anyone recommend sending an extra half a million visitors into Brazil right now? Of course not: mass migration into the heart of an outbreak is a public health no-brainer. And given the choice between accelerating a dangerous new disease or not—for it is impossible that Games will slow Zika down—the answer should be a no-brainer for the Olympic organizers too.  Putting sentimentality aside, clearly the Rio 2016 Games must not proceed.  Attaran’s argument is straightforward. Zika is prevalent in Rio and the strain is more dangerous than we understood. The Olympics will speed the global spread of the virus, reducing the time available to develop a coherent response. And intensifying a devastating disease is not what the Olympics are all about.

Quaker Oats sued over glyphosate found in its 'all natural' oats... the truth is starting to come out about widespread glyphosate contamination of the food supply - NaturalNews.com: Quaker Oats, owned by PepsiCo, has been sued over its "all natural" oats containing high levels of glyphosate weed killer (sold as "Roundup" by Monsanto). The New York Times, forever a defender of  Monsanto and GMOs, is blatantly lying to its readers by claiming the glyphosate found in Quaker Oats is nothing more than "traces." In reality, the glyphosate contamination of Quaker Oats was tested at alarming levels by a St. Louis laboratory using the ELISA technique. Natural News recently reported those numbers in a previous article. They were also released by the Alliance for Natural Health (ANH-USA.org). The tests revealed glyphosate in whole wheat bread, bagels, hot cereals, coffee creamers, instant oatmeal and more. Deadly glyphosate now being sprayed on oats, wheat, barley and other crops as a dessicant Quaker Oats admits that its oats are sprayed with glyphosate by farmers. This fact is a total shock to most consumers who are completely unaware that glyphosate is now routinely sprayed on non-GMO crops. Via the NY Times: In a statement, the Quaker Oats Company said that it did not add glyphosate during any part of the milling process but that it might be applied by farmers to certain grains before harvest... Oats are not a genetically engineered crop. But glyphosate is increasingly being used as a “dessicant” to dry out crops to speed harvesting. The Quaker Oats company, apparently staffed by people who are scientifically illiterate, believes it can "wash off" the glyphosate even though it's already soaked into the oats. As the NY Times continues:

Results of Glyphosate Pee Test Are in ‘And It’s Not Good News’ -- Last month, Members of the European Parliament (MEPs) volunteered to take a urine test to see if glyphosate—the cancer-linked weedkiller—is in their system. Forty-eight MEPs from 13 different European Union countries participated in the test, and now the results are in. According to ELISA test results from the accredited Biocheck Laboratory in Germany: “All participants excreted glyphosate by urine.” The experiment was spearheaded by the Green Party in the European Parliament, which wants a ban on the controversial herbicide in the European Union. The group noted in a press release of their so-called “#MEPee” test: On average, the MEPs had 1.7 micrograms/liter of glyphosate in their urine, 17 times higher than the European drinking water norm (0.1 microgram/litre). This means that everyone we tested was way above the limit for residues of pesticides in drinking water. Of the 48 participants, EU-parliament members from Belgium, France and Germany made up more than 80 percent of the whole investigated participants. The test showed that EU-parliament members from Lithuania, Spain and Croatia had the highest concentrations of glyphosate. The lowest concentrations were in the urines of participants of from Italy, Finland and Ireland.“Nevertheless all investigated EU-parliament members were glyphosate contaminated. This will show glyphosate is also in the food chain of members of the EU-parliament,” the report states. Glyphosate, which the World Health Organization’s International Agency for Research on Cancer (IARC) declared a possible carcinogen last March, is the main ingredient in Monsanto’s widely used weedkiller, Roundup. It is also found in herbicides manufactured by Syngenta and Dow.

‘Mistaken’ Release of Glyphosate Report Raises Questions Over EPA’s Ties to Monsanto -- The House Science, Space and Technology Committee is questioning why the U.S. Environmental Protection Agency (EPA) posted and then suddenly pulled its highly anticipated risk assessment of glyphosate, the main ingredient in weedkillers such as Monsanto’s flagship herbicide Roundup. On April 29, the EPA’s Cancer Assessment Review Committee published a report online about glyphosate concluding that the chemical is not likely carcinogenic to humans. However, even though it was marked “Final” and was signed by 13 members of CARC, the report disappeared from the website three days later.The EPA said that the report was “inadvertently” released. A spokeswoman said:“Glyphosate documents were inadvertently posted to the Agency’s docket. These documents have now been taken down because our assessment is not final. EPA has not completed our cancer review. We will look at the work of other governments as well as work by HHS’s Agricultural Health Study as we move to make a decision on glyphosate. Our assessment will be peer reviewed and completed by end of 2016.”Following the move, committee chairman Lamar Smith (R-Texas) sent a letter on March 4 to EPA administrator Gina McCarthy announcing that his committee is launching an investigation into the matter and is asking that the EPA provide all documents and communications related to the glyphosate study from Jan. 1, 2015 to present. He is giving the EPA until May 18 to provide this information.

Monsanto Faces Rejection in U.S. Over GMO Soybean -- Monsanto, the controversial biotech seed giant, keeps running into trouble on the lucrative GMO soybean market this year. Although 94 percent of U.S. soybean crops come from genetically modified seeds, Monsanto’s latest offering isn’t meeting with the approval of grain traders in the U.S. Called “Roundup Ready 2 Xtend,” the Wall Street Journal reported on May 2 that major grain corporations like Archer Daniels Midland Co. and Cargill Inc. are rejecting the soybean because it lacks important regulatory approval in the European Union and could disrupt international trade.  “The grain companies’ stance is a potential blow to a product that Monsanto has touted as a blockbuster for U.S. farm fields,” wrote Jacob Bunge.Trade groups for the grain companies attacked Monsanto for attempting to sell the seeds without obtaining EU approval first. “Monsanto’s actions with respect to RR2X soybeans are an unacceptable and very troubling development and we urge that it not be repeated,” the groups wrote in a letter quoted by the Journal.According to the Journal:“The letter comes after Bunge [Ltd., a food company], Archer Daniels Midland and Louis Dreyfus Co. recently notified farmers that their U.S. facilities wouldn’t buy soybeans grown from seeds that contain Monsanto’s new crop genes. The companies sent letters and posted signs at grain elevators.”Soybean planting began early this month and farmers could be out of luck if Monsanto is unable to obtain the necessary approvals before the fall harvest.

Nation’s Beekeepers Lost 44 Percent of Bees in 2015-16 -- Beekeepers across the United States lost 44 percent of their honey bee colonies during the year spanning April 2015 to April 2016, according to the latest preliminary results of an annual nationwide survey. Rates of both winter loss and summer loss—and consequently, total annual losses—worsened compared with last year. This marks the second consecutive survey year that summer loss rates rivaled winter loss rates. The survey, which asks both commercial and small-scale beekeepers to track the health and survival rates of their honey bee colonies, is conducted each year by the Bee Informed Partnership in collaboration with the Apiary Inspectors of America, with funding from the U.S. Department of Agriculture (USDA). Survey results for this year and all previous years are publicly available on the Bee Informed website. “We’re now in the second year of high rates of summer loss, which is cause for serious concern,” said Dennis vanEngelsdorp, an assistant professor of entomology at the University of Maryland and project director for the Bee Informed Partnership. “Some winter losses are normal and expected. But the fact that beekeepers are losing bees in the summer, when bees should be at their healthiest, is quite alarming.” Beekeepers who responded to the survey lost a total of 44.1 percent of their colonies over the course of the year. This marks an increase of 3.5 percent over the previous study year (2014-15), when loss rates were found to be 40.6 percent. Winter loss rates increased from 22.3 percent in the previous winter to 28.1 percent this past winter, while summer loss rates increased from 25.3 percent to 28.1 percent.

USDA: Beekeepers Lost 44% of Honey Bee Colonies Last Year --On Tuesday the Bee Informed Partnership, in collaboration with the Apiary Inspectors of America and the U.S. Department of Agriculture (USDA), released its annual report on honey bee losses in the U.S. Beekeepers reported losing 44 percent of their total number of colonies managed over the last year—close to the highest annual loss in the past six years. These losses are considered too high to be sustainable for U.S. agriculture and the beekeeping industry. “These honey bee losses reinforce what sciences continues to tell us; we must take immediate action to restrict pesticides contributing to bee declines,” Tiffany Finck-Haynes, food futures campaigner with Friends of the Earth, said. “The longer we wait, the worse the situation becomes. If we do not suspend neonicotinoid pesticides immediately, we risk losing our beekeepers and harming important ecosystem functions upon which our food supply depends.” A large and growing body of science has attributed alarming bee declines to several key factors, including exposure to the world’s most widely used class of insecticides, neonicotinoids. States, cities, universities, businesses and federal agencies in the U.S. have passed measures to restrict the use of these pesticides due to delay by the U.S. Environmental Protection Agency (EPA). However, these pesticides are still widely used despite mounting evidence that they kill bees outright and make them more vulnerable to pests, pathogens and other stressors.

Biologists Discover Billions Of Missing Bees Living Anonymously In Sacramento —Putting to rest a mystery that has confounded scientists for a decade, a team of biologists from the University of California, Berkeley announced Wednesday that billions of bees believed to have died in recent years were discovered living anonymously in a quiet neighborhood in Sacramento. “Over the years, the scientific community has come up with a number of theories to explain the unusual disappearance of bee populations throughout the world, but it turns out they’ve been in Sacramento the whole time,” said Berkeley Department of Entomology director Lucinda Ronan, who admitted that she and her colleagues had “never thought to look” for the millions of colonies’ worth of flying insects in the sleepy, tree-lined Northern California city and eventually came upon them in an out-of-the-way subdivision entirely by accident. “Our working hypothesis is that they may have been burned out from the incessant task of pollination, or felt too much pressure to produce honey. Regardless, they up and left without any notice, opting for a low-key, simple lifestyle in a nice, peaceful community, completely out of the limelight. It really seems to suit them.” Residents of the unassuming housing development where the bees have evidently lived for the past several years described the immense swarm of insects as “reserved,” “polite,” and dedicated to providing a nice, clean hive for their larvae.

Scientists Uncover Mystery of 80 Suicides in ‘Demonic’ Indian Village -- Rajendra Sisodiya, the village chief, said that his brother and mother were among those who took their own lives. His predecessor on the post of the village head was his cousin Jeevan, who also deliberately ended his life by hanging himself in front of his house. Ashok Verma, a local official, was assigned to head a special committee convened to try to find the root of the problem. “This is a very grave situation and we need to act fast. The villagers lack confidence and motivation and it's very important to counsel them,” he said. However, scientists determined that the deaths could be linked to pesticides that are widely used on cotton crops in the vicinity of the village. The chemicals are likely to cause depression and even schizophrenia, psychiatrist Srikanth Reddy said, noting that China experienced a spike in suicides among farmers using such pesticides a couple of years ago. “Depression isn't something people here are easily able to relate to or identify with. When they are unable to find any reason, they associate it with locally explainable phenomena like demonic presence,” RT quoted Reddy as saying in a Saturday report.

World Bank: The way climate change is really going to hurt us is through water -- As India, the world’s second-most populous country, reels from an intense drought, the World Bank has released a new report finding that perhaps the most severe impact of a changing climate could be the effect on water supplies.The most startling finding? The report suggests that by 2050, an inadequate supply of water could knock down economic growth in some parts of the world a figure as high as 6 percent of GDP, “sending them into sustained negative growth.” Regions facing this risk — which can at least partly be averted by better water management, the document notes — include not only much of Africa but also India, China and the Middle East.“When we look at any of the major impacts of climate change, they one way or another come through water,” said Richard Damania, a lead economist at the bank and the lead author of the report, on a call with reporters Tuesday. “So it will be no exaggeration to claim that climate change is really in fact about hydrological change.”Climate change hits water supplies in multiple ways. Warm temperatures can cause more evaporation of water from landscapes, while changes in precipitation can lead to both more intense individual downpours but also swings into drought conditions. The threat from all this is not just to what people drink but what they eat: The human activity that consumes the most water is agriculture.  And then, there’s sea-level rise: It can push into coastal aquifers, as is happening today in Florida , and thus threaten to make them more saline and less usable for human needs. So it isn’t only surface waters that may be depleted by climate swings, but also groundwater.The World Bank report says that 1.6 billion people on Earth already live in nations that are subject to water scarcity.

Pacific Northwest Snowpack Melting at Record Pace -- Back in October of 2015, the endless summer of warm temperatures and sunny days suddenly vanished, replaced by endless, record setting rainfall and a ridiculously healthy snowpack in the Cascade and Olympic Mountains. Numerous roads around the state were washed away, trees fell in cities and trails, and the entire Pacific Northwest experienced one of the nastiest winters on record. We were told that it was good and that the snowpack in the mountains would last well into summer. We were reassured that we had recovered from the historic drought of 2015 and that last winter was our savior. It seemed that many of the cable media news forecasters thought they were correct and that the snowpack would last a long time. Those of us watching the weather stations around the state’s mountains, knew better. As we monitored the snowpack each week, we were seeing something different. As the sunny skies returned in April of 2016 and record warmth once again blanketed Cascadia, the snow was melting faster than normal. Actually, it was melting faster it had ever melted since it was being recorded. According to a press release by the USDA, the record high temperatures in April of 2016 set records for snowmelt rates around the region: April experienced record high temperatures throughout the entire Pacific Northwest, causing much of the remaining snowpack to melt and runoff. Over 80 percent of all SNOTEL sites with at least 15 years of data set all new melt rate records for April.During two separate high-pressure weather systems in April, Snowpack Telemetry (SNOTEL) experienced minimum daily temperatures exceeding 20 degrees above normal. Due to the rapid snowmelt, runoff was above normal and Washington State’s rivers and streams were able to contain it without flooding.

California Braces for Unending Drought - - With California entering its fifth year of a statewide drought, Gov. Jerry Brown moved on Monday to impose permanent water conservation measures and called on water suppliers to prepare for a future made drier by climate change.Under the governor’s executive order, emergency drought regulations, like bans on hosing down driveways or watering lawns within 48 hours of a rainstorm, will remain indefinitely. Urban water suppliers will be required to report their water use to the state each month and develop plans to get through long-term periods of drought.Despite winter rains that replenished reservoirs and eased dry conditions in parts of Northern California, Mr. Brown suggested that the drought may never entirely end, and that the state needed to adapt to life with less water.“Californians stepped up during this drought and saved more water than ever before,” Mr. Brown said in a statement. “But now we know that drought is becoming a regular occurrence and water conservation must be a part of our everyday life.”Californians have reduced their water use by 23.9 percent, compared with 2013 levels, since the governor ordered a 25 percent statewide cutback last year. With rain brought on by El Niño in recent months, some water agencies have clamored for an end to rationing. One affluent San Francisco Bay Area water agency announced that it would stop publishing the names of its most egregious water wasters, while another district has warned residents that they will soon face fines again for letting lawns go brown. Ninety percent of the state remains in drought, down from 97 percent two months ago, according to the United States Drought Monitor.

Four Years Into Drought, California To Make Some Water Restrictions Permanent: (Reuters) - California on Monday prepared to lift severe mandatory water conservation orders imposed at the height of the state's multi-year drought, after a wet winter led to swelling reservoirs and a deep snowpack in numerous parts of the state. Instead of requiring a 25 percent, state-wide cut in water use, the state would take into account climate and other regional factors. People in rainier regions had complained that the cutbacks were too onerous. California is in the fourth year of a devastating drought that has led farmers to idle land, made rivers too warm for salmon and left some reservoirs half-empty despite winter rains. "The regulations were effective but a somewhat blunt instrument," said Felicia Marcus, chair of the State Water Resources Control Board. On Monday, Democratic Governor Jerry Brown ordered state water regulators to extend some drought protections, such as a prohibition on irrigating lawns and landscape so intensely that water runs down the sidewalk or into the street. He also demanded a new plan for making conservation a way of life over the long term. But Brown's order did not include an extension of the mandatory 25 percent cutback he ordered last year, nor of rules banning restaurants from offering water to customers who do not ask for it.

Colorado’s Rain Barrel Scofflaws Can Now Catch Rainwater Legally  --Until Thursday when Governor John Hickenlooper signed a bill legalizing rain barrels, it was a crime to catch and use rainwater in the state of Colorado. That’s right — the state legalized recreational use of marijuana before a commonplace water conservation tool. Yesterday, Coloradans gathered at the bill-signing event to celebrate this win for water-conscious consumers. While the legislation might sound like common sense to many observers, the legalization of rain capture faced a difficult path through the state legislature. A similar proposal died just last year.  As previously reported by ThinkProgress, Senator Jerry Sonnenberg (R-Sterling, CO), chair of the Senate Agriculture, Natural Resources and Energy Committee was a vocal critic and tough opponent of the rain barrel bill. His concerns were grounded in a strict interpretation of western water law and the system of prior appropriation. He argued that rain barrel use will cut into “senior” water rights, especially for agricultural uses. Supporters of the bill pointed to a study from Colorado State University demonstrating that the use of rain barrels would not decrease the amount of surface runoff going to downstream users, discrediting Senator Sonnenberg’s argument. This year’s version of the bill also included amendments to clarify senior water rights and even garnered support from the Colorado Farm Bureau.

El Nino dries up Asia as its stormy sister La Nina looms: Withering drought and sizzling temperatures from El Nino have caused food and water shortages and ravaged farming across Asia, and experts warn of a double-whammy of possible flooding from its sibling, La Nina. The current El Nino which began last year has been one of the strongest ever, leaving the Mekong River at its lowest level in decades, causing food-related unrest in the Philippines, and smothering vast regions in a months-long heat wave often topping 40 degrees Celsius (104 Fahrenheit). Economic losses in Southeast Asia could top $10 billion, IHS Global Insight told AFP. The regional fever is expected to break by mid-year but fears are growing that an equally forceful La Nina will follow. That could bring heavy rain to an already flood-prone region, exacerbating agricultural damage and leaving crops vulnerable to disease and pests. "The situation could become even worse if a La Nina event—which often follows an El Nino—strikes towards the end of this year," Stephen O'Brien, UN under-secretary-general for humanitarian affairs and relief, said this week. He said El Nino has already left 60 million people worldwide requiring "urgent assistance," particularly in Africa. Wilhemina Pelegrina, a Greenpeace campaigner on agriculture, said La Nina could be "devastating" for Asia, bringing possible "flooding and landslides which can impact on food production."

Armed guards protect last water in drought-parched Indian city: - Authorities in this drought-parched city in central India have deployed round-the-clock armed guards at a river-fed community reservoir to prevent farmers from siphoning the remaining water for irrigation. With rainfall in Tikamgarh district this year 52 percent below average - the second dry year for the area - water is now available to city residents only sporadically, with fears even that may run out during the peak heat months of May and June, authorities say. Forty-seven-year-old Suryakant Tiwari, one city resident, said his family and many others now have drinking and household water supplied only once every five days. "I have not seen such a condition in my lifetime. Almost every water source in the area has dried up. We don't know how we will survive," Tiwari he said. Farmers have been prohibited from drawing water from reservoirs to irrigate their crops. But Tikamgarh Municipal Corporation officials fear farmers from adjoining Uttar Pradesh state - whose farms border the Bari Ghat dam, fed by the Jumuniya River - are poaching water to try to keep their crops alive."If crops continue to be irrigated using the river water, it is not going to last long and there will be severe crisis during the summer season," warned Laxmi Giri, the Tikamgahr municipal corporation president. "Our priority is to supply drinking water to the people." The Jamuniya River is the only source of drinking water for over 100,000 people in Tikamgarh, she said. But "farmers of the neighbouring state try to open the gates of the dam and draw water illegally using pipelines. We're therefore compelled to deploy guards," Giri said.

South Sudan Food Crisis May Affect Up To 5.3 Million People, WFP Says: (Reuters) - Up to 5.3 million people in South Sudan may face a severe food shortages during this year's lean season, the U.N. World Food Programme said on Monday, nearly double the number in the first three months of the year. From January to March, 2.8 million people were classed as being in "crisis" or "emergency" food situations, with about 40,000 thought to be suffering an outright famine. The rising hunger comes despite attempts to end more than two years of war, which started in December 2013 when President Salva Kiir sacked his first vice president Riek Machar, triggering ethnically charged violence. Some fighting continues, but Kiir was able to name a new cabinet in late April, including former rebels and members of the opposition, after Machar returned to Juba and got back his old job. "Internal food security analysis shows that South Sudan will face the most severe lean season in 2016 since its independence, driven by insecurity, poor harvests, and displacement in some areas of the country," said a WFP report published on Monday. "As many as 5.3 million people may face severe food insecurity, with particular areas of concern in the non-conflict affected states of Northern Bahr el Ghazal and Eastern Equatoria."  During the 2015 lean season, which runs from March to September, about 4.6 million people were classed as severely "food insecure", WFP said previously.

Low Water Level in Venezuela’s Biggest Hydroelectric Reservoir Raises Concern: – The water level “remains very critical” at the El Guri reservoir, Venezuela’s main source of hydroelectric power, due to the severe drought caused by El Niño that has already forced the government to ration electricity and drinking water, Electric Energy Minister Luis Motta said. “Today, we’re following the instructions of President Nicolas Maduro. We made an aerial tour of the dam and the situation remains very critical,” he wrote on Twitter. The minister posted a series of photos of the dam, located in southeastern Venezuela, and compared them with others taken a month ago in which the drastic fall in the water level can be seen quite clearly. Motta did not report the current water level at El Guri, but in late April it was reported to be 242.07 meters above sea level, just two meters (yards) above the minimum level required for the dam’s turbines to function. In late April and early May heavy rains in the region raised the water level at the dam responsible for 70 percent of Venezuela’s electric power, leading the minister to emphasize last Thursday that forecasts are “good, despite the fact that it hasn’t rained for three days.”

Venezuela extends two-day workweek for state employees to save energy | Reuters: Venezuela's socialist government has extended a two-day workweek for public sector employees for another two weeks because of a drought that has sapped hydroelectric power generation in the OPEC country. The South American country's 2.8 million employees already have Fridays off during April and May. President Nicolas Maduro in late April gave them Wednesdays and Thursdays off too, and canceled school on Fridays. Maduro's rivals have called the shortened workweek foolhardy, arguing that sending employees home will not solve the power crunch and halting activity will merely worsen Venezuela's deepening recession. But the ruling Socialist Party said on Monday the measures would last until at least May 27. "The Bolivarian government has decided to extend the special policy of non-working days," Aragua state Governor Tareck El Aissami said in a speech on state television from the Miraflores presidential palace in Caracas. "These measures are due to insufficient rains. The rains were very light, and the situation at Guri remains critical," he said. Drought has reduced water levels at Venezuela's main dam and hydroelectric plant in Guri, which covers about two-thirds of the country's energy needs, to near-critical levels. Water shortages and electricity cuts have added to the hardships of Venezuela's 30 million people, already enduring a brutal economic slowdown, shortages of basics from milk to medicines, soaring prices and long lines at shops.

‘El Niño is not a one-off event,’ UN says, calling for action to address phenomenon’s impacts - UN New s– The international community must boost efforts to build the capacity for disaster risk management and readiness to prevent El Niño weather extremes from causing humanitarian crises in affected countries and impeding their development, the President of the United Nations Economic and Social Council (ECOSOC) said today.  “We must remember that El Niño is not a one-off event but recurring global phenomena that we must address for future generations and to achieve the Sustainable Development Goals (SDGs),” said ECOSOC President Oh Joon at the opening of a special meeting on Impacts of the 2015/16 El Niño phenomenon: Reducing risks and capturing opportunities at UN Headquarters in New York.  “All partners, the United Nations, international and regional organizations, civil society, the private sector and the scientific community, need to take coordinated and fortified action to tackle El Niño risks,” he added.  Mr. Oh underscored that since 2015, the world has witnessed the largest El Niño occurrence to date, with many developing countries in Latin America, Africa, Asia and the Pacific suffering under its “devastating and far-reaching impacts”.  “Extreme weather conditions have become more frequent with climate change, bringing droughts, fire, destruction of agricultural production, poor health and diseases, and displacement of people all over the world. These conditions also affect commodity prices and the prospects for sustainable development,” he stressed.  Noting that El Niño is a good example of climate change affecting the livelihood of people, the ECOSOC President said that Marshall Islands, the Federated States of Micronesia and Palau have all declared states of emergency due to drought conditions from El Niño, while Malawi has declared “a state of disaster.”

Learning from El Niño as La Niña Odds Rise (infographic) Although El Niño is weakening, its ramifications continue to be felt around the world. Drought and resulting food insecurity is one of the major implications for southeast Asia, eastern and southern Africa, Central America and the Caribbean. Sixty million are in need of emergency relief today, according to the United Nations. One of the most hard-hit areas has been Ethiopia, where at least ten million people need emergency food assistance, according to the World Food Programme (see figure). In addition to malnutrition and other ill effects of food insecurity, El Niño also has a myriad of other health impacts that will last through at least the end of 2016, including disease outbreaks and disruption of health services. Other climate impacts potentially helped along by this El Niño event include floods in Iran, electricity shortages in Venezuela and devastating fires in Indonesia. But not all impacts of El Niño are negative. Some late-season storms, possibly influenced by El Niño, have been welcome in California, which is experiencing exceptional drought conditions in nearly a third of the state. Some typical El Niño impacts were not seen this year, surprising to some given its strength on par with the other most extreme El Niño events since 1950. While El Niño is one of the most well-understood climate phenomena, scientists still have the need and opportunity to advance our knowledge further, as outlined here by Lisa Goddard, director of the International Research Institute for Climate and Society, at the El Niño 2015 Conference.

20-year review shows 90% of disasters are weather-related; US, China, India, Philippines and Indonesia record the most – A new report issued today by the UN, “The Human Cost of Weather Related Disasters”, shows that over the last twenty years, 90% of major disasters have been caused by 6,457 recorded floods, storms, heatwaves, droughts and other weather-related events. The five countries hit by the highest number of disasters are the United States (472), China (441), India (288), Philippines (274), and Indonesia, (163). The report and analysis compiled by the UN Office for Disaster Risk Reduction (UNISDR) and the Belgian-based Centre for Research on the Epidemiology of Disasters (CRED) demonstrates that since the first Climate Change Conference (COP1) in 1995, 606,000 lives have been lost and 4.1 billion people have been injured, left homeless or in need of emergency assistance as a result of weather-related disasters. The report also highlights data gaps, noting that economic losses from weather-related disasters are much higher than the recorded figure of US$1.891 trillion, which accounts for 71% of all losses attributed to natural hazards over the twenty-year period. Only 35% of records include information about economic losses. UNISDR estimates that the true figure on disaster losses – including earthquakes and tsunamis – is between US$250 billion and US$300 billion annually. Introducing the report, Ms. Margareta Wahlström, head of UNISDR, said: “Weather and climate are major drivers of disaster risk and this report demonstrates that the world is paying a high price in lives lost. Economic losses are a major development challenge for many least developed countries battling climate change and poverty.

Millions of Dead Fish Washing Up on Vietnam’s Shores -- Vietnam has a fish problem and the government isn’t talking about it. Since April, millions of dead fish have been washing up on Vietnam’s shores.  The lifeless fish and clams—along with the odd whale—go on for miles. Researchers hired by Vietnam’s government have concluded that “toxic elements” are behind the “unprecedented” deaths, but that’s where the answers seem to stop, reports Scott Duke Harris for the Los Angeles Times.  While the government is reluctant to a point any fingers—there’s a $10-billion investment on the line—locals, particularly fishermen, blame the environmental catastrophe on Formosa, a steel plant from Taiwan that allegedly pumped untreated steel wastewater into the ecosystem. If that’s true, the environmental consequences could be devastating.  According to Satyendra Kumar Sarna, a metallurgist and veteran of the steel industry since 1965, of Ispat Guru, there are several possible environmental effects of untreated wastewater: toxicity, which affects marine life; reduced levels of dissolved oxygen, which also affects marine life and the temperature of the water; silting; and oil slicks. Unsurprisingly, the folks at Formosa aren’t being transparent about the role they did or didn’t play in this fishy mess. On one hand, the corporation is screaming that there’s (conveniently) no proof that it’s to blame. On the other hand, in a really bad PR move, a PR rep “also suggested that Vietnam may have to accept environmental trade-offs for industrial growth—perhaps a choice between steel or fish,” reports the Los Angeles Times.

All Of A Sudden, Fish Are Dying By The Millions All Over The Planet - It is certainly not unusual for fish and other inhabitants of our oceans to die.  This happens all the time.  But over the past month we have seen a series of extremely alarming mass death incidents all over the planet.  As you will see below, many of these mass death incidents have involved more than 30 tons of fish.  For example, just check out what is going on in Chile right now.  The following comes from a Smithsonian Magazine article entitled “Why Are Chilean Beaches Covered With Dead Animals?“… As Giovanna Fleitas reports for the Agence France-Presse, the South American country’s beaches are covered with piles of dead sea creatures—and scientists are trying to figure out why.Tales of dead animals washing up on shore are relatively common; after all, the ocean has a weird way of depositing its dead on shore. But Chile’s problem is getting slightly out of hand. As Fleitas writes, recent months have not been kind to the Chilean coast, which has played host to washed-up carcasses of over 300 whales, 8,000 tons of sardines, and nearly 12 percent of the country’s annual salmon catch, to name a few. In Vietnam, things are even worse.  At this point, so many dead fish and clams have been washing up along the coast that soldiers have been deployed to bury them… Millions of fish have washed up dead along a 125-kilometre stretch of the Vietnamese coast in one of the communist country’s worst environmental disasters. Soldiers have been deployed to bury tonnes of fish, clams and the occasional whale that began dying in early April along the north-central coast, including some popular tourist beaches. Vietnamese officials facing growing anger over the disaster have not announced the official cause of the deaths, which have affected the livelihoods of tens of thousands of families. Elsewhere in Asia, there have been similar incidents.  For example, CNN is reporting that one lake in southern China is currently dealing with 35 tons of dead fish…

Nearly 4,100 sea turtles sucked into Florida power plant --For the past decade, nearly 4,100 endangered sea turtles — over one every day — have been sucked into the St. Lucie Nuclear Power Plant on Hutchinson Island, near Port St. Lucie, Florida. Nearly one-tenth of the marine animals are injured or killed. That is how long it has taken the federal government to approve building pipe grates on the three pipes, each a quarter mile long that run through the ocean. Now we're being told it will take two more years to build and test the grates. AOL.com is reporting this is only the first step to address the issue. The crosshatched grate being tested will only protect about 27 percent of the turtles, but a smaller mesh will also stop water flow, the Florida Power & Light Company (FPL) said, The grate is the first attempt since the plant opened 40 years ago to address the problem of sea turtles, divers, and other wildlife being sucked into the pipes. The three pipes run a quarter mile from the ocean and empty into a canal that runs along State Road A1A. "St. Lucie power plant is very unique with the number of turtles it captures, just because of its location," biologist Cody Mott said, according to TC Palm. "Not many other facilities have this many turtles or have to deal with these issues." Biologists think the sea turtles think the pipes are part of the reef which they use for protection, reports the Orlando Weekly. Most of the turtles suffer injuries on their trip through the pipes, and it is difficult to estimate how many are actually killed. The Endangered Species Act punishes violators with up to $50,000 in fines and a year in jail per each offense. But in Section 10 of the act, licensed entities, like FPL are exempt from prosecution.

Shoot First, Ask Questions Later --The headline tells the story — North Dakota’s First Wolverine In 150 Years Is Immediately Shot And Killed By Rancher. The first verified wolverine spotted in North Dakota in nearly 150 years was shot and killed by a rancher last month.  The rancher “came out to a calving pasture and the cows had surrounded the wolverine and he felt it was a threat,” state furbearer biologist Stephanie Tucker told the newspaper.  The wolverine, known to wildlife officials as M56, had made headlines in 2009 for traveling some 500 miles from Wyoming into Colorado... The status of the wolverine has been under debate for a number of years. In 2014, federal officials declined to add the wolverine to the list of endangered and threatened species.   However, a federal judge last month ordered the U.S. Fish and Wildlife Service to reevaluate that decision after a lawsuit from environmental groups. Following that endangered species link, we learn that there are an estimated 300 wolverines in the lower 48. According to Google, which quotes the USDA, there are approximately 98.4 million cows in the United States.  It is not clear that Jared knew what kind of animal he was looking at, which is not surprising considering the fact that no wolverine had been spotted in North Dakota in 150 years. In any case, Hatter did nothing "wrong"  In either case, officials say that Hatter appeared to have done nothing wrong. Although North Dakota may not have had a visit from a wolverine in well over a century, the state surprisingly still has a closed hunting season for the animal. More to the point, the state also allows ranchers to kill predators that attack or harass livestock.  Shoot first, ask questions later. Have a nice weekend.

Russia Builds Tunnel To Save Endangered Leopards And Tigers - Russia has just opened its first roadway improvement designed to protect big cats, on its Siberian border with China.  The Narvinskii Pass tunnel runs for about a third of a mile underneath a major migratory route for Amur leopards and tigers. They’re two of the most endangered big cats in the world, and just to give you a sense of the hazard they face from increased highway traffic in the region, check out this dash-cam video (skip to about 30 seconds in).   Until recently, there wasn’t all that much traffic from Vladivostok down to the border, and there was just a gravel road across the Narvinskii Pass. But over the past 15 years, according to Dale Miquelle, a tiger specialist in the region for the Wildlife Conservation Society, a major city has sprung up on the Chinese side of the border, and a busy four-lane highway now crosses through critical leopard and tiger habitat, with the usual highway barriers on the sides. Miquelle credited Sergey Ivanov, chief of staff to Russian President Vladimir Putin, with taking the initiative to protect the leopards.   A few weeks ago, I reported that recent claims of a sharp increase in tiger numbers were just wishful thinking—and that tigers have lost 93 percent of their historic range, with a 40 percent decline since 2010. This week, Panthera, the cat conservation group, piled on with a study demonstrating that leopards have lost 75 percent of their historic range. Make that 95 percent in West Africa and up to 87 percent in Asia, where several leopard subspecies totter on the brink of extinction.

Will Moose Thrive or Die Because of Climate Change? - Lee Kantar lost two moose calves this past weekend. They are just a few among many calves that did not survive their first year in the forests of Maine. Kantar, a moose biologist for the state’s Department of Inland Fisheries and Wildlife, has only been tracking calves for a few years but early death is a trend he and others can see across the animal’s southern range, which stretches through the northern U.S. and Canada. Scientists speculate that young and adult moose alike are plagued by new diseases and parasites. Brain worm and winter ticks, for example, are both worsening as the climate warms. In Maine at least 50 percent of the calves do not live to see their second year. In northeastern Minnesota that number is as high as 90 percent; in the northwestern part of that state the moose population has disappeared. The devastating news might be countered by more positive signs farther north, however. New research, published April 13 in PLoS ONE, shows that rising temperatures and shorter winters in Alaska have helped moose conquer vast new stretches of territory. Food for the foraging animals is growing rapidly, ushering them into previously stark tundra. The migration likely is not just happening in Alaska but in Canada and northern Russia. “It’s an adaptation that at least gives us hope that moose as a species can be maintained,” Kantar says.

One in five of world's plant species at risk of extinction --  One in five of the world’s plant species is threatened with extinction, according to the first global assessment of flora, putting supplies of food and medicines at risk. But the report also found that 2,000 new species of plant are discovered every year, raising hopes of new sources of food that are resilient to disease and climate change. New finds in 2015 included a giant insect-eating plant first spotted on Facebook and a 100-tonne tree hidden in an African forest. The State of the World’s Plants report, by experts at the Royal Botanic Gardens Kew, reveals that there are currently 390,000 species of known plants, with more than 30,000 used by people. However, more than 5,000 species have invaded foreign countries and are causing billions of dollars of damage every year. “Plants are absolutely fundamental to humankind,” said Prof Kathy Willis, director of science at Kew, who led the new report. “Plants provide us with everything - food, fuel, medicines, timber and they are incredibly important for our climate regulation. Without plants we would not be here. We are facing some devastating realities if we do not take stock and re-examine our priorities and efforts.” The report is the first of what will be an annual benchmark analysis to set out what is known - and not known - about plants and highlight critical issues and how they can be tackled. . “Once you know [about a problem], you can do something about it. The biggest problem is not knowing.”

Fifth of plant types at risk as farms, logging expand | Reuters: One in five types of plant worldwide is at risk of extinction from threats such as farming and logging that are wrecking many habitats, a first global overview of plant life said on Tuesday. In total, 391,000 types of plants are known to science, from tiny orchids to giant sequoia trees, according to the "State of the World's Plants" written by 80 experts led by the Royal Botanic Gardens (RBG) at Kew, in London. And despite 21 percent of all the species being threatened with extinction, the report also said new plants were still being discovered, such as a 1.5 meter (5 feet) tall insect-eating plant on a mountaintop in Brazil in 2015. Nonetheless, the experts said many parts of the world were suffering rapid change, such as from the felling of tropical forests to make way for farms and cities. Global warming was among other man-made risks. "There's a huge change going on, mainly agricultural change and land for urbanization," said Kathy Willis, RBG Kew's director of science. The report, meant as a first annual audit of the world's plants, omits plants such as algae and mosses. Willis said a rising world population of more than 7 billion people needed food and places to live and that scientists should be pragmatic and help identify areas most in need of conservation. The study said 31,000 plant species had documented uses such as in medicines, food or building materials. Little-known plants might have unknown benefits, such as resilience to diseases.

Florida Reefs Begin to Dissolve Much Sooner Than Expected - Scientific American -- It wasn’t supposed to happen this fast. Some of the reefs around the Florida Keys are dissolving. They may have crossed a tipping point due to increasing ocean acidification, raising the alarm that climate change impacts in the ocean are continuing to happen at a much quicker pace than scientists previously suspected. Rising carbon dioxide levels in the atmosphere are making seas more acidic. That makes it harder for coral to build up their skeletons. Scientists expected that the rising tide of acidic waters would cross a tipping point and start dissolving reefs by mid-century. But some of Florida’s reefs appear to be getting a head start, according to research published in Global Biogeochemical Cycles on Monday.  Scientists sampled seven sites across the 300-mile stretch of reefs stretching from Miami south to Key West. The findings show that the northern stretches of the reefs and their limestone bases are already dissolving.  “Those reefs are starting to waste away,”  “Each year there will be a little less limestone than the year before.” Many of the other reefs in the study are dissolving in fall and winter when ocean waters tend to be more acidic due to natural processes like seagrass dying off. Only the two southernmost reefs that he sampled are still building up mass year-round.. According to the Florida Keys National Marine Sanctuary, the reefs there provide an estimated $2 billion in income and 70,400 jobs. They are home a variety of fish and provide protection against storm surge to the millions of residents in southeast Florida.

Great Barrier Reef Could Be Dead in 20 Years --Climate change will make the Great Barrier Reef’s bleaching events more severe and frequent in the coming years, a new report by the Climate Council of Australia warns.  According to the scientific study, the reef could become a “dead ecosystem” with mass bleaching likely happening every two years by 2034 unless Australia does its bit to curb global greenhouse emissions. Last week, 170 tourism operators wrote to several politicians, including the prime minister, the federal environment minister and local representatives, pleading urgent climate action to save the reef.Map of the Great Barrier Reef showing results of aerial surveys for 911 reefs.  For a deeper dive:

• News: Sky News, ABC News, Guardian, Star 2
• Commentary: Guardian, John Sauven op-ed

Five islands in Solomons submerged due to sea-level rise:  Aerial and Satellite images show rising sea levels have caused five islands in the Solomons in the South Pacific to completely disappear, the first scientific evidence that confirms the dramatic impact of climate change on low-lying islands.  A newly published study by Australian academics using time series aerial and satellite imagery of 33 reef islands from 1947- 2014 reveals that 11 islands across the northern Solomon Islands have either totally disappeared over recent decades or are currently experiencing severe erosion due to sea level rise. The five islands — Kakatina, Kale, Rapita, Rehana and Zollies — that vanished ranged in size from one to five hectares and supported dense tropical vegetation that was at least 300 years old. The authors of the study said: Climate change induced sea-level rise is anticipated to be one of the greatest challenges for humanity over the coming century. Shoreline recession at two sites has destroyed villages that have existed since at least 1935, leading to community relocations. The report also warned that Taro, the capital of Choiseul Province,is likely to be the first provincial capital in the world to relocate its residents in response to the impact of sea-level rise. Melchior Mataki who chairs the Solomon Islands' National Disaster Council, said:  This ultimately calls for support from development partners and international financial mechanisms such as the Green Climate Fund. This support should include nationally driven scientific studies to inform adaptation planning to address the impacts of climate change in Solomon Islands. Solomon Islands, seen as a hot-spot for sea-level rise due to climate change, has seen its sea-level rise at almost three times the global average, around 7-10 mm per year since 1993.

Expanding tropics pushing high altitude clouds towards poles, NASA study finds  --A new NASA analysis of 30 years of satellite data suggests that a previously observed trend of high altitude clouds in the mid-latitudes shifting toward the poles is caused primarily by the expansion of the tropics. Clouds are among the most important mediators of heat reaching Earth's surface. Where clouds are absent, darker surfaces like the ocean or vegetated land absorb heat, but where clouds occur their white tops reflect incoming sunlight away, which can cause a cooling effect on Earth's surface. Where and how the distribution of cloud patterns change strongly affects Earth's climate. Understanding the underlying causes of cloud migration will allow researchers to better predict how they may affect Earth's climate in the future.George Tselioudis, a climate scientist at NASA, and his colleagues analyzed the International Satellite Cloud Climatology Project data set, which combines cloud data from operational weather satellites, including those run by the National Oceanic and Atmospheric Administration, to provide a 30-year record of detailed cloud observations. They combined the cloud data with a computer re-creation of Earth's air currents for the same period driven by multiple surface observations and satellite data sets.What they discovered was that the poleward shift of the clouds, which occurs in both the Northern and Southern Hemispheres, connected more strongly with the expansion of the tropics, defined by the general circulation Hadley cell, than with the movement of the jets.

Canada’s huge wildfires may release carbon locked in permafrost - More than 80,000 Canadians have been forced to leave their homes this week, in the largest evacuation of its kind in the country’s history. So far, the fire has burned through an area covering at least 850 square kilometres and shows no signs of stopping. Alberta is in a state of emergency and even the infamous tar sand oilfields have had to curb output. “While it is too soon to comprehend the full extent of the damage, we know that it is far-reaching and utterly devastating,” said prime minister Justin Trudeau in a statement to the House of Commons yesterday .The effects may extend far beyond Canada and Alaska, because of the frozen organic matter under the forest permafrost. Wildfires can strip away the protective vegetative blanket and release all that stockpiled carbon into the atmosphere, says Merritt Turetsky, an ecosystem ecologist at the University of Guelph in Ontario. The thawing soil could also trigger microbial activity, releasing more carbon dioxide and methane. In other words, more wildfires can mean more greenhouse gases, accelerating the very climate change that may have helped kick off the fires in the first place — not to mention changing the equation for rest of the globe. “This is carbon that the ecosystem has not seen for thousands of years and now it’s being released into the atmosphere,” says Turetsky. “We need to start thinking about permafrost and we need to start thinking about deep carbon and everything we can do to inhibit the progression of climate change.”

Canada's Fort McMurray wildfire 'to double in size' - BBC News: A huge wildfire which devastated the Canadian oil town of Fort McMurray could double in size over the next 24 hours, officials say. The blaze now covers an area larger than New York City and is being fanned by winds and feeding on dry vegetation. The flames are moving away from the town, most of whose inhabitants have reached safety. But many are still stuck north of Fort McMurray and evacuations by road and air are resuming. More than 80,000 people were evacuated from the city earlier this week. Thousands of people have been airlifted out but a mass convoy evacuating people from oil worker camps in the north was halted on Friday as huge flames flanked the road. The provincial government said on Friday that the fire had grown to 1,000 sq km (386 sq miles). Wildfire prevention manager Chad Morrison said there was a "high potential that the fire could double in size" by the end of Saturday. But he added that it would expand into a more remote forested area north-east of Fort McMurray. Dry conditions and 27C heat were expected during the day, but cooler temperatures would prevail and there was a possibility of rain on Sunday and Monday.

Canada’s Fort McMurray wildfire is so massive, you can see it from space - The massive wildfire that continues to burn in the Fort McMurray area of Alberta, Canada has been captured from space by NASA imaging satellites. Thousands of people in the fire's path have been left homeless and displaced.  The unprecedented scope of the blaze is apparent in these photos released by the U.S. space agency today.  “Fire conditions remain extreme in the province due to low humidity, high temperatures and wind according to the emergency updates being released by the Government of Alberta.”  The latest update on the wildfire from by the Government of Alberta was issued Sunday, May 8, 2016 at 4:15pm local time:  Currently there are more than 500 firefighters battling the blaze in and around Fort McMurray, along with 15 helicopters, 14 air tankers and 88 other pieces of equipment. Yesterday’s plan (on May 07) to evacuate 25,000 residents who fled north of Fort McMurray was a success. As of 10:00am, no evacuees have been reported remaining in camps to the north. 300 people from Fort McKay were evacuated to the Edmonton area by air and ground. This was a precautionary evacuation due to heavy smoke in the area. 1,500 employees at the Syncrude facility were evacuated on May 7 and the facility was shut down. Groups of employees have also been evacuated from the Suncor, Husky, Shell and CNRL facilities. Many of these facilities are still operating. 250 ATCO employees are in Fort McMurray working to restore the power grid and assess the gas infrastructure.  The wildfire is currently 161,000 hectares (397,800+ acres) and is anticipated to grow overnight. Fire conditions remain extreme, with four new starts across Alberta yesterday. A total of 34 wildfires are burning, with five out of control, 23 under control and six turned over to the responsible parties.

Alberta Fires Worse for Canada Economy Than Katrina for U.S. -  Intact Financial Corp. may post insured losses of as much as C$1.1 billion ($850 million) from the wildfires in Alberta, which could dent the Canadian economy harder than Hurricane Katrina hit the U.S. Intact, Canada’s biggest property and casualty insurer, said the damage claims will lead to net losses of C$130 million to C$160 million, or as much as C$1.20 a share, according to a company statement Monday. Jaeme Gloyn, an analyst with National Bank of Canada Financial, estimated the C$1.1 billion figure based on the company’s per-share data. The Toronto-based insurer had net income of C$147 million in the first quarter. “The devastation brought on by the wildfires is unprecedented,” Intact Chief Executive Officer Charles Brindamour said in the statement. “The scope of the damage and destruction that we have observed in recent days is a reminder of the important role we play in getting our customers back on track.”The fires have covered 965 square miles and devastated the town of Fort McMurray, which was evacuated last week. It’s likely to be the costliest natural catastrophe in Canadian history, Fitch Ratings said Monday in a statement. Insured Losses Industrywide insured losses could reach C$9 billion, according to reports from Bank of Montreal and others. With Canada’s 2016 gross domestic product estimated at $1.8 trillion, or about 10 percent of U.S. GDP, the disaster could be bigger on a relative basis than Katrina, based on an analysis by Imperial Capital. Katrina, the storm that hit New Orleans in 2005, cost $60.5 billion, according to data from Munich Reinsurance and the Insurance Information Institute. The flames are scorching a region that’s home to oil and gas producers including Suncor Energy Inc. and Cnooc Ltd.’s Nexen. At least 1,600 homes and structures have been damaged. That’s more than triple the number from the Slave Lake Fire in Alberta in 2011, previously the country’s most costly fire and third-most expensive catastrophe, according to Aon Plc.

Global Warming Cited as Wildfires Increase in Fragile Boreal Forest - The New York Times: The near-destruction of a Canadian city last week by a fire that sent almost 90,000 people fleeing for their lives is grim proof that the threat to these vast stands of spruce and other resinous trees, collectively known as the boreal forest, is real. And scientists say a large-scale loss of the forest could have profound consequences for efforts to limit the damage from climate change.In retrospect, it is clear that Fort McMurray, in northern Alberta, was particularly vulnerable as one of the largest human outposts in the boreal forest. But the destruction of patches of this forest by fire, as well as invasions by insects surviving warmer winters, has occurred throughout the hemisphere.In Russia, about 70 million acres burned in 2012, new statistics suggest, much of that in isolated areas of Siberia. Alaska, home to most of the boreal forest in the United States, had its second-largest fire season on record in 2015, with 768 fires burning more than five million acres.Global warming is suspected as a prime culprit in the rise of these fires. The warming is hitting northern regions especially hard: Temperatures are climbing faster there than for the Earth as a whole, snow cover is melting prematurely, and forests are drying out earlier than in the past. The excess heat may even be causing an increase in lightning, which often sets off the most devastating wildfires.

Alberta to have plan within 2 weeks for returning evacuees  (AP) — Alberta will have a plan within two weeks for getting residents of the wildfire-ravaged oil sands capital Fort McMurray back into their homes, even as fire conditions were forecast to worsen, the province’s municipal affairs minister said Thursday. Danielle Larivee told reporters she realizes how difficult it is for evacuees — thousands of them in the Edmonton area — to be displaced but that their safety is the most important thing. She said authorities still need to make sure there will be no more danger from the fires and that natural gas and water facilities, along with a functioning hospital, are up and running. “I know how stressful it is to leave everything behind and to be away from home for a prolonged time,” said Larivee, who was evacuated from her home during wildfires five years ago. “I know how strong the desire is in the aftermath of an event like this to get home and start putting your life back together.” Larivee said officials are beginning to prepare the more than 88,000 evacuees for re-entry into their communities but the fire risk remains high. She said temperatures were forecast to rise next week, along with high winds, creating a high risk of more fires. “We will be in extreme fire danger,” she said. Chad Morrison, Alberta’s senior wildlife manager, said 930 square miles (2,410 square kilometers) continue to burn and flare ups are still occurring in Fort McMurray and Anzac. Authorities said the wildfire was approximately 8 miles (13 kilometers) from the Saskatchewan boundary. “We’re long from over in this fight as we continue to mop up hot spots in these communities,”

Deep sea microbes may be key to oceans’ climate change feedback: Microbes are hardly the poster-children of climate change, but they have far more impact than polar bears on Earth’s carbon cycle – and therefore on our climate. A new study published Friday in Science Advances finds that seabed bacteria and archaea (which look like bacteria but have very different genetics and biochemistry) are sensitive to climate. Because their habitat covers 65% of the entire globe, they form a huge part of the biosphere and are important in the regulation of carbon in the deep ocean, which affects long-term climate change. The microbes in question are packed together in the top 15 centimeters of the deep ocean seabed, like rush hour commuters in a city metro, up to a million times more abundant than in the sunless ocean water, or buried in deeper layers of seabed sediments. Their city-like crowding is fueled by a sparse sordid snow of excrement and microscopic dead bodies from life in the upper ocean, far above them. The scientists collected 228 samples from various locations in the North Atlantic and Mediterranean, from a range of ocean depths (400 to 5570 meters deep) and a wide variety of ocean bottom temperatures. They measured the microbe populations using two independent DNA profiling techniques:  They discovered that the seabed microbes thrive where water temperatures are cold, but their populations decline significantly as deep ocean waters warm.  That is also linked to the fact that warmer deep-sea ecosystems have a low input of organic carbon supplied from the surface waters. In other words, their population is limited because their food is limited. Moreover, as the microbes warm so does their metabolic rate, requiring more food to survive, so the meagre food supports fewer individual microbes.

Austria's Treasured National Resource, Its Glaciers, Are Melting Fast —Nearly all of Austria's 900 glaciers retreated last year amid record-setting heat, according to Austrian scientists. The rapid melting mirrors a trend across the Alps and underscores scientists' warnings of accelerating, extreme climate impacts caused by human-caused greenhouse gas emissions.  Across the country, the glaciers retreated an average of 72 feet in 2015, more than twice the rate of the previous year, the Austrian Alpine Association said in its annual glacier survey. Three of the country's glaciers retreated by more than 320 feet. The nonprofit association—which promotes mountain culture, research and conservation— has been conducting detailed glacier measurements since 1927, creating a dramatic record of climate change effects in the alpine region. "The summer of 2015 was more than 2 degrees Celsius warmer than the long-term average," said survey team coordinator Andrea Fischer, a glaciologist with the Austrian Academy of Sciences. "Long periods of high pressure and the absence summer snowfall...are the reasons for the glacial meltdown." Austria's largest glacier, the Pasterz, retreated by 177 feet in 2015, the survey found. Its volume has declined by half since it was first accurately measured in 1851. The annual survey measures a representative sample of 92 major glaciers; 96 percent were found to be receding. Globally, 2015 was the hottest year since recordkeeping began in 1880, by a large margin, with the bulk of the temperature rise a result of manmade global warming, according to the World Meteorological Organization and U.S. government science agencies. Last summer was also the warmest on record in Austria, surpassing the previous record set in 2003, when heat waves were blamed for 30,000 deaths in Europe.

Depth Of Field (video, sliders) As a botanist at Denali National Park in Alaska, Roland has watched rising temperatures transform the landscapes he calls home. He's tracked changing tree lines and watched the tundra dwindle. He's grieved as wildlife habitats shrink when ecosystems respond to unexpected shifts.  In 2004, Roland stumbled upon a vast collection of landscape photos taken throughout the park’s history. He made it his mission to communicate the urgent need to address climate change by taking exact matches of more than 200 of the photos. The result is the Denali Repeat Photography Project, a lesson for us all about global warming's impact on our natural environment.  We spoke with Roland about his project for this video. The photo on the right, taken in 2004, shows a major loss of glacial ice from the 1916 photo. Glacial melt contributes to sea level rise, a phenomenon that threatens coastal communities worldwide.  The 1928 photo on the top shows an icefall, but it has largely melted away in 2011.When ice melts, it exposes new ground, altering the native ecosystem for plants and animal life in the area.  From 1958 to 2001, there were major changes in the vegetation growing near the Boreal Mountains. While the more recent photo may look more verdant, it shows that shrub tundra is being overtaken by white spruce forest, signifying the ecosystem is changing from a sub-alpine environment to a boreal one. Such drastic and rapid changes in ecosystems can be harmful to biodiversity.

With Arctic Sea Ice Unusually Thin, Scientists Wary of Another Record Melt -- After this winter's extraordinary Arctic heat wave, summer sea ice extent is likely to drop near—or even below—the record low set in 2012, American and European scientists have reported. This year's melting continues a steady, decades-long decline in Arctic sea ice, which has accelerated in the 21st century in concert with the surge in carbon dioxide emissions. Satellite measurements, taken since 1979, showed sea ice plummeting to its lowest extent in 2002. That began a string of record or near-record lows, and since then the summer ice extent has never again come close to the long-term (1979-2000) average. Arctic sea ice is also getting much thinner. This spring, new data from the European Space Agency's CryoSat 2 satellite shows the ice cover stretching across the Arctic Ocean is, on average, 15 percent thinner than it was last year at the same time. Thinner ice is more easily broken by wind and waves and melts more quickly, intensifying concerns about a potential new record low this year. The measurements are critical for assessing the progress of climate change because Arctic ice pack is a vital climate regulator. The icy white shield reflects the sun's heat back into space, and as the ice cover diminishes, the much darker ocean surface absorbs more heat. Research shows that this shifts the jet stream, leading to more extreme droughts and rainfall events in the northern hemisphere. The declining sea ice is also diminishing populations of polar bears—which depend on the ice as a base to hunt and breed—as well as walruses, ice-dependent seals and sea birds that hunt along cracks in the ice.

Arctic Sea Ice Monitoring Satellites Are Dying: Here's Why You Should Care -- Many climatologists are sounding the alarm that our fleet of satellites that monitor Arctic sea ice is on life support (and that may be generous). This matters to you and is frankly not just about polar bears. Walt Meier is a research scientist at NASA’s Goddard Space Flight Center Cryospheric Sciences Laboratory. He wrote to me,  Satellites carrying passive microwave sensors are essential for monitoring sea ice because only these sensors have the capability to see through clouds and dark of night to capture a continuous and complete record of sea ice every day. This sea ice time series is now nearing 40 years in length, making it one of the longest continuous satellite-derived climate datasets. The loss of these satellites would effectively end the consistent record of Arctic sea ice decline. When I asked Dr. Meier about the current status of the fleet he told me, DMSP-F19 (part of the Defense Meteorological Satellite Program) is definitely dead. DMSP-F17  is still operational except one channel (37 GHz, V polarization) of SSMIS. Unfortunately, that’s an essential channel for the sea ice algorithms. DMSP-F18 is still fully capable, at least for the sea ice channels, which is what we’re planning to switch to. The Japanese AMSR2 sensor is also available. That’s not as optimal for the long-term record because, even though it’s more modern, it’s not as consistent This is a patchwork fix. Long-term issues are clearly evident as F18 is an aging system A DMSP-F20 is built and in storage but funding was not allocated by Congress to launch it. We may need to rethink that decision. Many of us have warned of these looming gaps for weather and climate monitoring.

World's carbon dioxide concentration teetering on the point of no return -- The world is hurtling towards an era when global concentrations of carbon dioxide never again dip below the 400 parts per million (ppm) milestone, as two important measuring stations sit on the point of no return. The news comes as one important atmospheric measuring station at Cape Grim in Australia is poised on the verge of 400ppm for the first time. Sitting in a region with stable CO2 concentrations, once that happens, it will never get a reading below 400ppm.Meanwhile another station in the northern hemisphere may have gone above the 400ppm line for the last time, never to dip below it again. “We’re going into very new territory,” James Butler, director of the global monitoring division at the US National Oceanographic and Atmospheric Administration, told the Guardian. When enough CO2 is pumped into the atmosphere from burning fossil fuels, the seasonal cycles that drive the concentrations up and down throughout the year will eventually stop dipping the concentration below the 400ppm mark. The 400ppm figure is just symbolic, but it’s psychologically powerful, says Butler. The first 400ppm milestone was reached in 2013 when a station on the Hawaiian volcano of Mauna Loa first registered a monthly average of 400ppm. But the northern hemisphere has a large seasonal cycle, where CO2 concentrations decrease in summer but increase in winter. So each year since it has dipped back below 400ppm.Then, combining all the global readings, the global monthly average was found to pass 400ppm in March 2015.

The Near-Term Extinction Movement Is Embracing the End Times - We know the planet is in the midst of a new Great Die-Off, caused by human behavior. Less clear is whether this mass extinction will someday include us, but a growing number of people believe that it will. Who can blame them?  We’ve already dipped into a doomsday seed vault stash in the Arctic thanks to a war catalyzed in part by climate change, and images of refugees from that war rushing past militarized border police who shoot them with rubber bullets and flash bang grenades certainly don’t look like a world on the upswing. And yet the chaos has only just begun: Some degree of catastrophe this century is all but assured no matter what we do now. Our oceans will continue to rise for centuries. And scientists suspect that "feedback loops,” like the fast-melting permafrost in the Arctic and Siberia could send enough methane into the air to lead to catastrophic, runaway climate change. So it’s no wonder that a burgeoning number of people are subscribing to the idea that human extinction in our lifetime is all but certain. Depending on who you ask, they earnestly estimate the climate change-caused apocalypse will unfold between a few weeks to three generations from now. There's not a lot of data on how widely these beliefs are shared, but the believers are beginning to organize; loosely, at least. An “extinction candidate” is running for Senate in California. Meetings and workshops are being held around the country to discuss the End. And an active, private Facebook group, “Near Term Extinction Love,” to which I belong, has hundreds of members. Call them near-term extinctionists, or the stoics of climate change, though they don’t go by any official moniker.  One woman recently posted about feeling deep despair for life lost and fear of the future, and supporters piled on likes and comments assuring her it was OK to feel that way. . More frequently members post “told you so” news articles bearing bad climate news.

Governments should study worst-case global warming scenarios, former UN official says: - A United Nations panel of scientists seeking ways for nations to limit global warming to 1.5 degrees Celsius should not dissuade governments from concentrating on bleaker scenarios of higher temperatures as well, its former chief said on Wednesday. Nations should be considering the potential impact of temperature rises of much as 4 degrees Celsius (7.2 Fahrenheit), said Robert Watson, former head of the U.N. Intergovernmental Panel on Climate Change. The U.N. panel was assigned to find ways to limit global warming to 1.5C (2.7F) after a 195-nation climate change summit in Paris in December. Most of those nations signed the climate change deal in April, pledging to seek a 2C degrees limit and make efforts toward a 1.5C level as well. Some scientists have questioned whether limiting global warming to 1.5C is realistic and if the world's industrialized nations are willing to make such deep cuts in greenhouse gas emissions. Speaking at a Rutgers University conference with the current IPCC chair, Hoesung Lee, Watson said: "Is it feasible technically? Worth analyzing, basically?" "I hope we don't lose sight however of what are the impacts of a 3 to 4 degree world," said Watson, who chaired the IPCC from 1997 to 2002. "The reason is if we don't get the Paris agreement implemented, we may well see 3 and 4 degrees Celsius."

Carbon dioxide emissions from US energy sector fall 12% since 2005 - Carbon dioxide emissions from the US’s energy sector fell in 2015 and now stand at 12% below 2005 levels, a drop mainly driven by the continuing collapse of the coal industry. Americans’ energy consumption resulted in the release of 5.2bn tons of CO₂ last year, according to the US Energy Information Administration (EIA), down from 5.4bn tons in 2014. The 12% cut since 2005 has come during a period in which the US economy has, adjusting for inflation, grown by 15%.  About a third of America’s emissions come from energy consumption, with transportation, industrial activity and agriculture also making significant contributions. A flurry of coal plant retirements and an increase in the production of natural gas and renewable energy have pushed the US further towards the federal government’s goal of slashing emissions by between 26% and 28% by 2025, prompting some analysts to call for stronger measures to accelerate the decline. “I think we have still got some work to do,” said Colleen Regan, head of North American environmental markets at Bloomberg New Energy Finance. “I think Obama has done a lot but the next president will need to do more to bring emissions down in transport and industry. According to the EIA, the 2015 fall in emissions was largely due to “decreased use of coal and the increased use of natural gas for electricity generation”. Last year, coal made up 80% of all retired electricity-generating capacity, with plants shutting down across the midwest and south, particularly in Ohio, Georgia and Kentucky.

Carbon dioxide emissions from electricity generation in 2015 were lowest since 1993 - Today in Energy - U.S.(EIA): Carbon dioxide (CO2) emissions from electricity generation totaled 1,925 million metric tons in 2015, the lowest since 1993 and 21% below their 2005 level. A shift on the electricity generation mix, with generation from natural gas and renewables displacing coal-fired power, drove the reductions in emissions.   Total carbon dioxide emissions from the electric power sector declined even as demand for electricity remained relatively flat over the previous decade. In both 2013 and 2014, total electricity sales and electricity-related CO2 emissions increased. But in 2015, both sales and emissions fell. In 2015, warm winter temperatures reduced the demand for electricity, lessened the need to bring marginal generators online, and lowered natural gas prices. During seven months of 2015, electricity generated from natural gas exceeded coal generation.  Electricity generation and its resulting emissions are primarily determined by the available capacity and relative operating costs of the different technologies. Recent capacity additions have favored natural gas and renewable energy, while retirements have been mostly coal units. In recent years, the drop in natural gas prices, coupled with highly efficient natural gas-fired combined-cycle technology, made natural gas an attractive choice to serve baseload demand previously met by coal-fired generation. Coal-fired generation has decreased because of both the economics driven by cost per kilowatthour compared to that of natural gas and because of the effects of increased regulation on air emissions.

Could A “Brexit” Enhance British Energy Security? | OilPrice.com: The UK is only a few weeks away from a June 23 referendum that will decide whether or not it exits the European Union. British leaders are stepping up their campaign, urging voters to reject a “Brexit,” warning that doing so would lead to huge economic losses. The Chancellor of the Exchequer, George Osborne, said a Brexit would leave Britain “permanently poorer,” resulting in an economy that is 6 percent smaller in 2030. But the economic effects that will stem from breaking up with Europe are not as clear cut as the government of Prime Minister David Cameron tends to argue. Take the electricity sector, for example, where there are some upsides from a Brexit for electricity generators. If the UK withdrew from Europe, the British government would be allowed to put up new tariffs on electricity imported from France and the Netherlands, two countries that have strong linkages with Britain. That would correct for some market imbalances, according to Dr. Vladimir Parail, a senior consultant at the London-based consultancy Oxera, who spoke with Oilprice.com in an interview.“Despite the UK being part of the EU single market, there is currently no truly leveled playing field where UK generators can compete with their EU counterparts. Notably, the UK has a higher CO2 tax than the rest of Europe, as well as higher transmission and balancing charges levied on generators, giving thermal generators in continental Europe a competitive advantage over their UK peers,” Dr. Parail said. British electricity generators pay about 8 to 8.5£/MWh more than their competitors in France and the Netherlands, according to Oxera’s research, equivalent to about 25 percent of traded UK electricity prices.

It’s Official: Japan Now has More Electric Car Charging Spots than Gas Stations* - One of the first countries in the world to embrace modern electric cars, Japan has long been considered something of a shining example on how electric car rapid charging infrastructure should be implemented.n fact, look at the charging station maps for Japan, and you’ll see a sea of CHAdeMO DC quick chargers blanketing every major route from north to south and east to west, thanks in part to pro- electric car incentives and a nationwide — rather than regional — approach to charging station deployment. As of earlier this month, there were more than 2,819 CHAdeMO DC rapid chargers installed across the country, far more than the 1,532 installed in the whole of Europe or 854 found in the U.S. That massive number of accessible, reliable charging stations combined with lower-power level 2 charging provision — both private and public — now means there are more dedicated charging stations in Japan than there are gas stations. Far more in fact: over 40,000 says Nissan, versus the 34,000 gas stations currently trading in Japan.

Corporate Branding of National Parks: The Disturbing Link between Philanthropy and Privatization - For the first time in its 100-year history, the National Park Service is quietly preparing to make fundraising a central activity by aggressively soliciting corporate sponsorships using agency personnel as fundraisers. Joining widespread criticism by watchdog groups and park advocates, Joe Davidson at the Washington Post decries this effort to commercialize the national parks, broaden who can raise money, liberalize the use of sponsorship money, and expand what the government will promise in return.  Private philanthropy has always supported national parks, with occasional flare-ups such as the time the Bush administration attempted to privatize parts of the park service in 2003, and in 2011 when Coca-Cola objected to a plan to prohibit the sale of disposable plastic water bottles in the parks. (The plan was never implemented.) In April 2015, National Park Service Director Jon Jarvis waived agency policies to sign a multimillion-dollar deal with Anheuser-Busch that gave Budweiser unprecedented branding placements during the “quiet phase” of its $350 million Centennial Campaign for America’s National Parks. In February 2016, having raised more than $200 million, the public phase of the campaign commenced with an updated fundraising plan called “Director’s Order #21: Philanthropic Partnerships” (the document is here) that exalts corporate branding. The Centennial Campaign concludes in 2018. Concerns range from corporate donors exerting influence on park policies to licensing park images for commercial purposes. The argument holds that the National Park Service should be devoted to protecting and stewarding national resources and leave fundraising to the private “friends” groups and the National Park Foundation.

Tree removal for Minnesota solar project prompts legislative action - In addition to a countywide moratorium, a controversy over the removal of trees for a Minnesota solar project has prompted an amendment in the state legislature. The amendment, offered by state Rep. Marion O’Neill, would prohibit solar projects if more than 75 percent of the trees in an area larger than three acres would have to be cut down. The bill to which her amendment was attached cleared the Minnesota House on April 27, though the Senate has yet to take it up. The proposed legislation only applies to solar projects, and does not restrict other land-intensive uses, such as real estate development or mining. Rep. O’Neill did not return calls for comment on the distinction.The controversy erupted in Wright County in early April, when Enel Green Power North America (EGP-NA) workers clear-cut some 11 acres of mature hardwood trees – an area roughly the size of 8 football fields – for the 80 acre solar array. The location is part of a planned $250 million, 150-megawatt Aurora Solar Project, scattered over 21 sites in 16 Minnesota counties, that is expected to go online at year’s end. The project received approval from the state Public Utilities Commission (PUC) in May 2015. The tree clearing took place near the town of Buffalo, an exurban community about 40 minutes from downtown Minneapolis, where farm fields and natural areas are interlaced with suburban housing and commercial projects. Locals, no strangers to development, say they received no warning that the roughly 1,000 trees were coming down.

EIA projects 48% increase in world energy consumption by 2040 - The U.S. Energy Information Administration's recently released International Energy Outlook 2016 (IEO2016) projects that world energy consumption will grow by 48% between 2012 and 2040. Most of this growth will come from countries that are not in the Organization for Economic Cooperation and Development (OECD), including countries where demand is driven by strong economic growth, particularly in Asia. Non-OECD Asia, including China and India, accounts for more than half of the world's total increase in energy consumption over the projection period.   Renewables and nuclear power are the world's fastest-growing energy sources over the projection period. Renewable energy increases by an average 2.6% per year through 2040; nuclear power increases by 2.3% per year.  Even though nonfossil fuels are expected to grow faster than fossil fuels (petroleum and other liquid fuels, natural gas, and coal), fossil fuels still account for more than three-quarters of world energy consumption through 2040. Natural gas, which has a lower carbon intensity than coal and petroleum, is the fastest-growing fossil fuel in the outlook, with global natural gas consumption increasing by 1.9% per year. Rising supplies of tight gas, shale gas, and coalbed methane contribute to the increasing consumption of natural gas.   Although liquid fuels—mostly petroleum-based—remain the largest energy source, the liquids share of world marketed energy consumption is projected to fall from 33% in 2012 to 30% in 2040. As oil prices rise in the long term, many energy users adopt more energy-efficient technologies and switch away from liquid fuels when feasible.  Coal is the world's slowest-growing energy source, rising by only 0.6% per year through 2040. Throughout the projection period, the top three coal-consuming countries are China, the United States, and India, which together account for more than 70% of world coal consumption.

Army Corps Denies Permits for Biggest Proposed Coal Export Terminal in North America -- This is big—for our climate, for clean air and water, for our future. It’s also big because the U.S. government is honoring its treaty obligations. After a five-year struggle that engaged hundreds of thousands of people, the U.S. Army Corps of Engineers issued a landmark decision Monday to deny federal permits for the biggest proposed coal export terminal in North America—the SSA Marine’s proposed Gateway Pacific Terminal, a coal export facility at Xwe’chi’eXen (also known as Cherry Point), Washington. In January 2015, the Lummi Nation asked the Army Corps to reject the project because it would violate U.S. treaty obligations to project the tribe’s fisheries and ancestral lands. This is a huge win for the Lummi Nation and its Northwest community allies over the coal companies. The Army Corps made the right choice and did its duty by upholding treaty rights and honoring the U.S. government’s commitment to those treaties. Time and again, Pacific International Terminals has shown disregard for the Lummi Nation and its allies, who have for years voiced concerns about the project’s public health, economic and environmental impacts.

Report: Indiana's coal-power use falls 37 percent since '07 (AP) — Indiana's consumption of coal for electricity generation plunged nearly 40 percent from 2007 through 2015 as its utilities retired older coal-fired plants and increasingly embraced natural gas and renewable energy sources, a new federal report shows. Indiana was among three states that saw big declines in coal consumption for electricity over that 8-year period, according to the U.S. Energy Information Administration. Its report, release last week, found that coal used for power generation fell 37 percent in Indiana between 2007 and 2015, while Ohio's dropped 49 percent and Pennsylvania's fell 44 percent. Jodi Perras, who is the Indiana representative for the Sierra Club's Beyond Coal Campaign, said the report offers the latest evidence that coal-fired power plants are on the way out in the U.S. amid a changing energy market and tightening federal regulations on the pollutants those plants release as they burn the fossil fuel. Perras said the state's utilities are generally operating their coal plants less often and relying more on natural gas power plants that generate electricity at a lower cost than coal. Wind farms are also becoming more common in Indiana, helping with the shift away from coal, she said. "Coal is in decline. This is happening across the country because there are much cheaper and cleaner ways to generate electricity. These market forces are forcing coal out of the market," Perras said. Indiana has long been dependent on coal to light its homes and power its factories. But the percentage of Indiana's electricity generated by coal-fired power plants fell from 92 percent in 2000 to 79.7 percent in 2014, according to a March report by the Energy Information Administration, a branch of the U.S. Department of Energy.

EPA chief says carbon rule not killing coal country (Reuters) - The top U.S. environmental regulator said Friday that federal rules to curb power plant pollution are not the cause of the economic decline of coal country after presidential candidates confronted anger on the campaign trail this week from laid-off West Virginia miners. "We need to understand that the market right now is saying that coal isn't competitive. It is saying it louder and clearer everyday," U.S. Environmental Protection Agency Administrator Gina McCarthy said at a Climate Action summit in Washington. McCarthy spoke at the end of a week that saw the three remaining U.S. presidential candidates campaign in coal mining state West Virginia, where mining job losses and mine closures were a central theme. Democratic front-runner Hillary Clinton faced backlash from residents of southern West Virginia for comments she made in March that her economic renewal plan for the state would put "a lot of coal miners and coal companies out of business." Meanwhile, presumptive Republican nominee Donald Trump donned a miners' helmet at a political rally Thursday, pledging to bring back coal mining jobs. He said Clinton would carry out President Barack Obama's environmental rules. "You can't take it folks. You're gonna have your mines closed, 100 percent," Trump said. McCarthy said the economic decline of the Central Appalachian region started to happen in the 1980s, well before her agency released the Clean Power Plan, a proposal made last year to lower carbon emissions from power plants by 2030 to 32 percent below 2005 levels.

Plans for coal-fired power in Asia are 'disaster for planet' warns World Bank -- Plans to build more coal-fired power plants in Asia would be a “disaster for the planet” and overwhelm the deal forged at Paris to fight climate change, the president of the World Bank said on Thursday. In an unusually stark warning, the World Bank president, Jim Yong Kim, noted that countries in south and south-east Asia were on track to build hundreds more coal-fired power plants in the next 20 years – despite promises made at Paris to cut greenhouse gas emissions and pivot to a clean energy future. In the US, coal use is in sharp decline– and the country’s biggest companies are in bankruptcy. But there is still strong demand for coal in south Asia and east Asia, where tens of millions still have no access to electricity. On their own, China, India, Indonesia and Vietnam account for three-quarters of new coal-fired power plants expected to be built around the world in the next five years. In India alone about 300 million people live without access to electricity. “If Vietnam goes forward with 40GW of coal, if the entire region implements the coal-based plans right now, I think we are finished,” Kim told a two-day gathering of government and corporate leaders in Washington, in a departure from his prepared remarks. “That would spell disaster for us and our planet.”

Protesters descend on Newcastle as flotilla attempts to stop coal exports - ABC News (Australian Broadcasting Corporation): Police say about 1,500 anti-coal protesters descended on the NSW port of Newcastle on Sunday in a bid to blockade the port and prevent exports. The world's largest coal export port, north of Sydney, was targeted by demonstrators calling for action to tackle climate change. About noon, the port was filled with kayaks paddling out to the entrance of the harbour as part of the Break Free event. The aim was for the mass flotilla to stop coal ships entering and leaving the harbour, something protesters claimed to have achieved. Police said 66 people were arrested during the "large civil disobedience" protest. In total, 57 protesters who occupied a rail bridge to block coal train at Sandgate were issued with Field Court Attendance Notices (FCANs) for remaining on enclosed lands. Pictures posted on social media showed groups of protesters lying on train tracks. Protesters face a range of charges, from destroying or damaging property to giving others a ride to take part in the protest, before climbing on vessels without authority.

Record number of Hanford workers sickened by toxic vapors at nuclear site --  An unprecedented number of workers at Hanford have been exposed to dangerous chemical vapors since Thursday, April 28. In one week's time a total of 47 people either sought medical attention after suffering symptoms due to chemical vapor releases or as a precautionary measure. Symptoms reported by workers include a headache, burning nose and throat, nausea, a metallic taste in the mouth, elevated blood pressure, and dizziness. Experts hired by the Department of Energy, which owns Hanford, have found even a short burst of exposure to chemical vapors can cause long term health effects such as brain damage and lung disease. Workers sickened by the sudden release of toxic gasses at Hanford has been a problem for nearly 25 years, but those familiar with the nuclear site cannot remember so many people falling victim in such a short period. “What’s happening at Hanford isn’t right, and I am exploring further legal options to keep our workers safe,” said Washington State Attorney General Bob Ferguson.Ferguson filed a lawsuit in September against the U.S. Department of Energy and its contractor, Washington River Protection Solutions (WRPS) over the lack of protections for workers. Ferguson filed the suit after an eight-month investigation by the KING 5 Investigators, “The Human Toll of Hanford’s Dirty Secrets”. The 2014 series exposed that the federal government and its contractors hid information about the adverse health effects of vapors to workers for decades and to this day aren’t following their own expert’s advice on how best to keep workers safe. Local Union 598, which represents Hanford pipefitters and welders, and the Seattle-based advocacy group Hanford Challenge, also filed a lawsuit to force protection for workers on the same day as the Attorney General.

Nebraska utility head recommends closing nuclear power plant (AP) — The head of a Nebraska utility recommended shutting down the nation's smallest nuclear power plant by the end of the year, saying Thursday that it doesn't make economic sense to keep it open. Tim Burke, the president and CEO of the Omaha Public Power District, told the utility's board that Fort Calhoun Nuclear Station isn't financially sustainable. Shuttering the plant would represent a major shift for the utility, which serves more than 310,000 customers in 13 counties in southeastern Nebraska. Utility officials previously maintained that Fort Calhoun would be a valuable part of its plans because of its ability to generate power without adding to carbon dioxide emissions. The board is expected to vote on the recommendations at its June 16 meeting. The district spends about $650 million a year on generating power, which includes about $250 million on Fort Calhoun. Burke said closing the nuclear plant will help keep the utility's rates low compared to the average power cost in the region. The utility also has to make sure its mix of power plants can comply with environmental rules and restrictions on carbon dioxide emissions. The district typically gets about 34 percent of its power from the Fort Calhoun plant, but utility officials said Thursday that other carbon-free options, such as wind power, now make better financial sense. The economics of the utility business have changed significantly in recent years because of new environmental regulations and cheaper natural gas prices due to hydraulic fracturing. Fort Calhoun's small size and single reactor contributed to the recommendation to close it. "It's just not viable. It's just not economically viable,"

Davis-Besse nuclear reactor restarted, equipped to handle Fukushima-sized disaster | cleveland.com: FirstEnergy's nuclear company has restarted its Davis-Besse nuclear reactor following a biennial shutdown for refueling, inspections and maintenance. The 908-megawatt plant was operating at 60 percent of power this afternoon and expected to reach full power during the week. One megawatt, or 1 million watts, is enough electricity to power 800 to 1,000 homes. During the 44-day shutdown, the company completed construction of a new emergency water and power supply building designed to meet federal and industry emergency standards that have been developed since the disaster at Fukushima, Japan, in March 2011. Constructed next to the reactor containment building, the hardened three story structure has been built on bedrock under the plant and contains more than 130,000 square feet of space. The building houses storage tanks containing 290,000 gallons of water and two large gas-turbine generators to power pumps that would push that water into the reactor if a major disaster knocked out all of the plants redundant emergency systems, which is what happened in Japan following the tsunami. The 290,000 gallons of stored water would be sufficient to cool the plant for up to 24 hours while crews set up emergency pumps and lines to draw water from Lake Erie. There is also sufficient space in the new building to store those additional portable pumps and large generators, said Jennifer Young, FirstEnergy spokeswoman.

Critics: New FirstEnergy ‘bailout’ plan ‘would make Houdini blush’ - FirstEnergy’s latest attempt to recast its Ohio plan to guarantee income for certain power plants remains fatally flawed in the eyes of challengers and other critics. Rather than let federal regulators scrutinize its proposed power purchase agreement, FirstEnergy now wants to withdraw that part of the plan, which was unanimously approved by the Public Utilities Commission of Ohio on March 31. Yet the company still wants ratepayers to pay the charges it previously proposed. According to FirstEnergy, the modified plan is now basically a “hedge” to protect customers when electricity costs eventually rise. Critics disagree. “It’s not clear to me what it means to say it’s a hedge against future price increases,” said William Bowen, an energy policy expert at Cleveland State University. “What’s the difference between a hedge against future price increases and excess profits today?” The average consumer household could wind up paying more than $10 more per month if the plan goes forward, consumer advocates have found. “This continuing saga of the FirstEnergy bailout remains a great risk for Ohioans' electric bills and, nearly two years into the state process, an imposition on government regulation that the public funds,” said Ohio Consumers’ Counsel Bruce Weston. “Enough is enough.‎"

Ohio regulators will consider FirstEnergy's new customer surcharges, expect higher monthly bills | cleveland.com: -- State regulators have opened the door for another round of hearings that could give FirstEnergy a way to have customers indirectly subsidize its old uneconomic power plants. The Public Utilities Commission of Ohio decided Wednesday that it would take another look at the company's previously approved rate case set to begin June 1. The new, revised rate plan does not contain the controversial "power purchase agreements" that would have violated federal rules governing utility competition. Instead, it would have surcharges, meaning the result for customers would be the same: higher bills. But the PUCO's ruling came a full day before its previously set deadline for opponents to file arguments against appeals. That deadline is 5 p.m. today. And Wednesday's PUCO order made it clear that it anticipates additional sworn depositions, additional expert testimony and perhaps formal hearings. All of this would happen despite thousands of pages of arguments and roughly 40 days of formal hearings already logged in the 19-month-old case.

Politically connected utilities have outsized influence in Ohio -- Which brings us to the Public Utilities Commission of Ohio, which is supposed to be sure that electric and gas companies charge Ohioans fair prices. Three of the five PUCO members are Republicans, though, a party that, all else equal, is friendly to big businesses, such as utilities.  Rank-and-file Ohioans, regardless of politics, have to get by. And utility rates are a factor in making ends meet. Yet the Statehouse utilities lobby, along with lobbies representing banks, insurance companies, nursing home proprietors and oil-and-gas frackers, is among the most powerful in Columbus. Utilities and other corporate giants will argue, and they're correct, that they're big employers – "job-creators," and all that. But they're also big political players – and not just out of civic-mindedness. A looming PUCO vacancy means Republican Gov. John Kasich will soon appoint a new PUCO member. True, given the five-member commission's seeming ... deference ... to FirstEnergy Corp. (the Illuminating, Ohio Edison and Toledo Edison companies) and American Electric Power Co. (the Ohio Power Co.), a new PUCO member likely wouldn't re-orient the panel, at least not much. Besides, anybody who might rock the boat wouldn't be picked.  Still, it's beyond ridiculous that none of the PUCO commissioners is a Democrat. Besides the three GOP incumbents (including Chairman Andre Porter, who's leaving the commission May 20, creating the vacancy Kasich will fill), two independents are PUCO members.

Ohio’s proposed regulations seek to reduce methane leaks - Toledo Blade: With Ohio becoming a bigger player in the global fracking surge, environmental activists, oil and gas lobbyists, union representatives, fishing and outdoor enthusiasts, and public health officials across the state were weighing in on the Obama Administration’s final rules for methane releases that were announced Thursday. Much of the debate echoed what has been said about tighter rules climate-altering emissions from coal-fired power plants: Better environmental stewardship, but at what cost? But now, Ohio — one of the nation’s largest energy users and one of the most heavily invested in coal power — is facing a similar controversy with its oil and gas industry. While the oil and gas industry claims it does a good job of controlling releases from its drilling sites nationwide, the U.S. Environmental Protection Agency believes it can do more. Its new rules to tighten down on leaks from oil and gas wells that are hydraulically fracture — i.e. frack — shale calls for a 45 percent reduction in methane releases by 2025, compared with 2012 levels. The American Petroleum Institute, the nation’s largest oil and gas lobby, and the Ohio Oil and Gas Association, which represents Ohio drillers, said the rule threatens to slow the fracking surge. Shawn Bennett, Ohio Oil and Gas Association executive vice president, described the new rules as “nothing more than a continued assault” on an industry that creates jobs and provides cheap energy.

Two groups want to put charter amendments on the November ballot in Youngstown: City voters could see several amendments and changes to Youngstown’s charter on the Nov. 8 election ballot, and not all of them will come from the commission reviewing the charter document. Backers of the anti-fracking Community Bill of Rights, which has failed five times, and those supporting a “Part-Time Workers Bill of Rights” have submitted language for charter amendments to the city council clerk’s office. The groups don’t need to submit the charter amendment proposals with the required minimum number of valid signatures for at least three months, but already have provided the proposed language to Valencia Marrow, city council clerk. The charter amendment to ban fracking has failed twice in 2013, twice in 2014, and in the Nov. 4, 2015, general election. The results for last year’s issue loss was the closest: 2.5 percentage points. This would be the first effort to get a part-time workers bill of rights on the city ballot. The proposal would require employers paying the same starting hourly wage it gives full-time workers to part-timers for jobs that require “equal skill, effort and responsibility, and that are performed under similar working conditions,” and require part-timers with “proportional access” to full-time workers in “the same job classification.”

Despite $62.2M loss, Rex Energy still drills in Carroll County - Canton Repository  - Bolstered by a joint-venture agreement, Rex Energy continues to drill Utica Shale wells in Carroll County. The Pennsylvania-based company released its first-quarter earnings Tuesday ahead of a Wednesday morning conference call with investors. Rex Energy lost $62.2 million or $1.11 per share during the quarter. Revenue from operations was down 44 percent and commodity revenue dropped by a third from the same quarter a year ago. Production from Rex wells was equal to 200 million cubic feet of natural gas a day, up 7 percent from the fourth quarter. Oil, condensate and natural-gas liquids, including ethane, accounted for 38 percent of production. Rex spent $30.6 million during the quarter, nearly all of it on projects in the Utica and Marcellus shales. That spending was offset by $31.8 million in reimbursements through a joint venture with Benefit Street Partners, an affiliate of Providence Equity Partners. In Carroll County, Rex drilled two wells, fracked a well and placed four wells in production during the quarter. The company had five wells drilled and waiting to be fracked at the end of March. The three-well Kiko pad in Washington Township went into production during the first quarter. The wells averaged five-day sales rates equal to 1,300 barrels of oil per day. The production included 2.3 million cubic feet of natural gas per day, 502 barrels of natural-gas liquids per day and 369 barrels of condensate per day, assuming full ethane recovery. The Kiko wells averaged 4,900 in lateral length and were fracked in 33 stages.

New Fracking Study Finds Children at Greater Risk of Respiratory Health Problems -- Unconventional oil and gas (UOG) operations such as fracking might allow for cheaper prices to heat your home, but a growing number of scientists are becoming concerned about its unacceptable health implications.  In the first comprehensive literature review to date on the respiratory health risks associated with UOG, experts from the Center for Environmental Health, the Institute for Health and the Environment, Physicians for Social Responsibility and the Alliance of Nurses for Healthy Environments have found that these operations are particularly harmful to infants and young children. The study, Hazards of UOG Emissions on Children’s and Infants’ Respiratory Health, was published today in the journal Reviews on Environmental Health.  According to the study, at least five chemicals associated with unconventional oil and gas operations and fracking—tropospheric ozone, particulate matter, silica dust, benzene and formaldehyde—are linked to respiratory health issues on infants and children, including asthma, reduced lung and pulmonary function, increased susceptibility to infection, chest discomfort, difficulty breathing, lung inflammation and other adverse outcomes.  The study states: Sources of air pollution include emissions from the extraction and processing of natural gas, as well as the transportation via natural gas infrastructure components including compressor stations and pipelines. Pollutants can be emitted during venting, flaring, production and leaks from faulty casings. In addition, truck transportation of materials to and from well pads and vehicular equipment use during construction and maintenance generate air pollution from particulate matter and diesel exhaust. These processes release numerous contaminants into the air, resulting in elevated concentrations of polycyclic aromatic hydrocarbons (PAHs), methane, ozone, NOx and VOCs [volatile organic compounds] like benzene, formaldehyde, alkenes, alkanes, aromatic compounds, and aldehydes.

This mystery was solved: scientists say chemicals from fracking wastewater can taint fresh water nearby - Washington Post -- The boom in unconventional drilling for natural gas known as fracking hit so fast that scientists have had to scramble to determine whether it’s safe for humans and the environment. Mostly they’re still trying to catch up.  But a recent study by the U.S. Geological Survey appears to have answered one burning question about millions of gallons of water laced with chemicals that bubbles out of the ground after being injected into the wells to fracture rocks to release trapped gas. When the water is stored, do the chemicals somehow leach into nearby surface water such as streams? The short answer is yes, said the study’s lead author, Denise Akob, a USGS microbiologist.“The key take away,” said Akob, who led a team of researchers from Duke University and the University of Missouri in studying a stream near a wastewater storage site in Lochgelly, W.Va., “is really that we’re demonstrating that facilities like this can have an environmental impact.”  Upstream from the site with gray and brown storage tanks, the waters of Wolf Creek tested normal. Downstream, there were detectable levels chemicals that commonly lace fracking waste — barium, bromide, calcium, chloride, sodium, lithium, strontium. The report called the levels low, not enough to have a noticeable impact on marine life. But it did appear to have an effect on something that could be equally important. Communities of microbes that help support marine life were dramatically altered downstream. There was a lower diversity of the life forms downstream, “which could impact nutrient cycling,” a building block of life in the creek, the USGS explained in a statement that announced the study.  Long story short, endocrine disruptors can wreak havoc on the hormones of mammals. In the Chesapeake Bay watershed that includes bays, rivers, streams and creeks in six states and the District of Columbia, scientists have determined that endocrine disruptors have switched the testes of male smallmouth bass to ovaries.

Scientists Just Pinpointed Another Example Of Fracking's Environmental Impact -- A dumping site for fracking fluids long suspected to be leaching into Wolf Creek, a West Virginia waterway with ties to a county’s water supply, has indeed contaminated the creek with multiple chemicals, a new U.S. Geological Survey study has found.The “study demonstrates definitively that the stream is being impacted by [unconventional oil and gas extraction] wastewaters,” Denise Akob, USGS scientist and lead author of the study, told ThinkProgress. Unconventional oil and gas extraction refers to the many processes that involve hydraulic fracturing, also known as fracking.   For this study, scientists in 2014 collected water and sediment samples upstream and downstream from Danny E. Webb Construction Inc.’s disposal site, which is still operational. Samples were then analyzed for a series of chemical markers that are known to be associated with fracking. “We were able to see some elements that are known to be associated with [unconventional oil and gas] wastewaters, including barium, bromide, calcium, chloride, sodium, lithium, and strontium,” Akob said.  They also found that microbial diversity near sampling sites decreased. Though small, microbes play an important role in ecosystems’ food webs, and Akob said changes in microbial community composition is an indication of ecological impact. Yet she noted that of all the chemicals recorded, iron levels were the only ones to exceed aquatic health guidelines for the area. Wolf Creek has for years suffered from iron pollution from legacy mining.  Scientists don’t refer to the company by name in the study or interviews but note the source of the fracking chemicals is clear. However, questions remain. “The two big open questions right now are how are these wastewaters getting to the environment,” and “how far downstream do they go,” Akob said.

Ky. group hears about "hot" waste at W.Va. site - The Courier-Journal  Follow-up tests at a West Virginia company that prepared radioactive fracking waste to be sent to Kentucky revealed material so "hot" that it would need to go to a special landfill for disposal – not the Kentucky municipal dump where earlier shipments were sent, a Kentucky official has revealed.  The disclosure casts some doubt on prior assurances about the radioactive intensity of waste sent to Kentucky, said Louisville attorney Tom FitzGerald, director of the Kentucky Resources Council. The original Kentucky shipments, which are still under state investigation, were said to have been below the radioactivity threshold that would have required disposal in a landfill designed to handle more dangerous waste. The information about testing at the source of the waste from a radiation expert with the Kentucky Cabinet for Health and Family Services was made public during the first meeting of a special work group looking into how to protect Kentuckians from radioactive oil and gas drilling waste. The group of experts was assembled by Energy and Environment Cabinet Secretary Charles Snavely. Curt Pendergrass, the supervisor of the cabinet's radioactive materials branch, led the group through a review of the state's few radioactive waste regulations. But it was his mention of that follow-up testing – involving the situation that prompted Kentucky lawmakers to seek the oil and gas work group's advice – that stood out during a more than three-hour meeting Thursday afternoon. Any such radioactive waste that exceeds a level of 2,000 picocuries per gram must be sent to a landfill designed to handle long-lived and potentially dangerous radioactive waste, Pendergrass explained. "I will tell you this ... that number was exceeded,"

Faced With a Fracking Giant, This Small Town Just Legalized Civil Disobedience —  A tiny community sitting on a 27-square-mile piece of Western Pennsylvania wanted to send a big message to the energy company planning to deposit toxic fracking wastewater under its neighborhoods. And its 700 residents wanted it to be perfectly legal for them to loudly object. Grant Township had seen what happens when people nationwide take to the streets to protest bullying corporations: Arrests. Lots of them. So Grant Township planned ahead. Two weeks ago, it passed a law that protects its residents from arrest if they protest Pennsylvania General Energy Company’s (PGE) creation of an injection well. Residents believe this law is the first in the United States to legalize nonviolent civil disobedience against toxic wastewater injection wells. Township Supervisor Stacy Long said. “We’re doing it to safeguard the residents and protect as many people as possible,” she said. Long said legalizing direct action is a response to the ongoing problem of rural residents seeing their voices excluded from discussions between state governments and big corporations on issues that have local ramifications.

Pennsylvania probes possible link between earthquakes, fracking: Pennsylvania environmental regulators want to determine whether a series of minor earthquakes in the state this week were caused by nearby fracking operations by an oil and gas company. Five tiny temblors, all too weak to be felt by humans, took place in a 22-hour span in Lawrence County, about 50 miles north of Pittsburgh and three-quarters of a mile from a natural gas well owned by Houston-based Hilcorp Energy Co. No damage was reported. Hydraulic fracking, a type of drilling method to extract gas or oil from underground shale, has been tied to earthquakes in neighboring Ohio and other states, but never in Pennsylvania, the nation’s No. 2 natural gas-producing state. The state Department of Environmental Protection is consulting with seismologists and plans to meet with Hilcorp “for them to present geologic data they have collected in the area during and prior to drilling and stimulation,” DEP spokesman Neil Shader said Friday. He didn’t say what action DEP would take if Hilcorp is found to have caused the tremors. “The investigation has to be completed before considering any next steps,” Shader said.

Fracking Hits Milestone as Natural Gas Use Rises in U.S. -- More natural gas in the U.S. is coming from wells that have been hydraulically fractured than ever before, and fracking’s share of the country’s gas supply is continuing to rise, according to new data from the U.S. Energy Information Administration. At the same time, the fracking boom in the U.S. has led to a major boost in natural gas consumption, and for the first time last year, natural gas contributed about the same level of greenhouse gas emissions as coal, the globe’s largest single source of greenhouse gas emissions driving climate change.  Sixty-seven percent of natural gas produced in the U.S. came from fractured wells in 2015, according to the data. That represented a total of 53 billion cubic feet of natural gas per day, up from 50 billion cubic feet in 2014.  In 2000, only 3.6 billion cubic feet of gas came from fractured wells — roughly 7 percent of total U.S. natural gas production that year. About a third of the gas produced in the U.S. is used to generate electricity. TheThe fracking boom led to the U.S. becoming the world’s largest producer of oil and flooded the market with natural gas, driving down prices. That encouraged utilities to build more electric power plants that run on natural gas instead of coal. The shale gas boom is one of the main reasons that more electricity was generated with natural gas than coal for the first time last year, and 2016 is poised to be the first full calendar year that natural gas is expected to eclipse coal as the nation’s chief source of electricity

Demand factors impact natural gas storage injection season -- The U.S. natural gas market is carrying about an 850-Bcf surplus in storage versus last year and the 5-year average. But it looks like the surplus will finally start to contract in earnest over the next few weeks. So the big question is -- will it be fast enough to prevent crippling supply congestion by this fall? With Canadian storage inventories also high and U.S. gas production still averaging slightly higher than last year, it seems record demand will be needed to bring storage into balance. Today we look at the prospects for demand this summer to trump last year’s record demand. This is Part 4 of our natural gas supply/demand and storage update series, “Carry That Weight.” In Part 1 we looked at the 2015-16 winter supply/demand balance, which showed that an exceptionally mild winter resulted in modest demand through what are typically the highest demand months of the year, and that this occurred even as production was reaching new highs. This only exacerbated the surplus in storage, leaving the market nearly 6-Bcf longer than the previous winter.  In Part 2 we then looked at how the enormous storage overhang would impact storage activity in the 2016 injection season: essentially that injections into storage will need to be consistently below what they have been historically in these months if the market is to prevent a storage capacity shortage (and further price discounts) by fall 2016. In Part 3 we began a look at the various fundamental factors at play this summer that could help or hinder that process of grinding down the surplus through the injection season.

The U.S. Natural Gas Export Boom Means Pipelines and LNG -  U.S. piped gas to Mexico has more than tripled since 2010 to about 3 Bcf/day. By 2019, 15 new pipelines will more than double capacity to Mexico to around 15 Bcf/day. This is far more than anticipated imports, but extra pipeline access that would help Mexico meet peak demand.This is important because there’s basically no storage available in Mexico, lacking mature fields, aquifers, and saline domes to store natural gas. Mexico has liquefied gas storage of about 3 days, far lower than the average storage capacity for OECD countries of nearly 85 days. Since 2010, Mexico’s gas consumption is up 22%, but its production is down 11%.Moreover, Mexico is a free trade country, so U.S. gas exports to Mexico are declared in our national interest and thus essentially automatic (a designation problem that the U.S. LNG export business is struggling with). The gas surge in Mexico comes from economic growth, a concerted effort to displace oil with gas, and a manufacturing sector that continues to expand due to lower wages, “integration with and dependence on the U.S. market,” and manufacturers looking to get away from a more problematic China (more distant, unions, rising pay, etc.).With gas now accounting for 60% of Mexico’s electricity, per capita use rates are about 70% lower than the other OECD nations. Given the statistically significant connection between power use and economic development (see my article here), Mexico’s government therefore has a clear obligation to increase personal consumption rates.This will all translate into more imported gas from the U.S.: despite significant energy reforms to bring in outside investors, shale gas in Mexico has potential but won’t really begin until 2020 at best. No matter what, a shift to gas in Mexico will be difficult because the country has historically been an oil-focused producer, with petroleum constituting 80% of hydrocarbon production versus 20% for gas.

France studying possible ban on import of U.S. Shale gas - minister | Reuters: French Energy Minister Segolene Royal said on Tuesday she is investigating legal means to ban the import of shale gas from the United States because France has banned shale gas exploration using hydraulic fracking for environmental reasons. Royal, answering a question in parliament, said contracts signed by French gas utility Engie and power utility EDF with a U.S. producer have led to the import of LNG which contained about 40 percent shale gas. "I have asked the two companies why they weren't vigilant and I have also asked for an examination of a legal means for us to ban the import of shale gas," Royal said in parliament.

Gas sector 'doom and gloom' overdone: IEA -  The "doom and gloom" around global gas demand is overdone, International Energy Agency chief economist Laszlo Varro, said Tuesday at the annual Flame conference. "The opportunities for gas are in the developing world," he told delegates at the event in Amsterdam. "We identified around 800 million mt of coal consumption in China and India that is not possible to replace with wind and solar power [as part of decarbonization].""We also think that as air pollution gets higher on the political agenda [in Asia], there will be an increasing policy push from coal towards gas for industrial use and building heating." Furthermore, the Middle East could re-emerge as a major gas demand driver "if and when oil price recovers" given the resulting positive impact on the macroeconomic environment, Varro said. He also said the worst was over for the European gas industry. "Europe is losing coal and losing domestic gas production and also losing nuclear production and gaining in energy efficiency and renewables ... the good and bad news cancel out so you have a roughly unchanged position." While the gas industry would have to get used to the idea of cheap coal, the elimination of inefficient coal was an opportunity for cheap and secure gas, he said.

Stop the Fracking Lies: Public and Workers Deserve Truth and Solutions About Energy: The future of the coal and fracking industries and jobs in these industries has been in the news a lot these past days. While we must be mindful of the people who currently depend on these industries for their livelihoods, the fact remains that this work is harmful. People are losing their health, the quality of their lives, the safety of their children, the value and sanctity of their homes, the clean water they need to drink and the healthy air they need to breathe. The cost of continued dependence on fossil fuels is far too great to support any longer. While we must support new jobs for fossil fuel workers, these jobs cannot be in the continued use or expansion of fossil fuels and its infrastructure. The research on this issue is clear. The shale gas extraction industry - an industry dependent upon drilling and fracking -- is an industry that devastates the communities where it is happening. The process contributes to greenhouse gas emissions responsible for dangerous storms like the ones we have experienced as recently as this past week. Fracking contaminates drinking water supplies (260 confirmed cases in PA alone), and risks the health of people of all ages (e.g. children of mothers living within 10 miles of gas wells are 30 percent more likely to be born with congenital heart disease and twice as likely to have a neural tube defect.)  For those that think pipelines are getting safer, think again. Research shows that pipelines built since 2010 have incident rates higher than those installed pre-1940s. 

Kalamazoo River Reopens, 23 Months after Spill, But Submerged Oil Remains - About 34 miles of the Kalamazoo River in Southeastern Michigan were opened to the public Thursday, almost two years after the most expensive oil pipeline spill in U.S. history dumped more than 1 million gallons of heavy Canadian crude into an adjoining creek. Crews have been cleaning the waterway since July 26, 2010, when a ruptured pipeline owned by Enbridge Energy Partners, the U.S. branch of Canada's largest transporter of crude oil, was discovered in wetlands in Marshall, Mich. The Canadian crude oil, known as diluted bitumen, contaminated more than two miles of Talmadge Creek and about 36 miles of the Kalamazoo, forcing people to flee their homes because of the overpowering smells. The cost of the cleanup has now reached at least $765 million, making it the most expensive oil pipeline spill since the government began keeping records in 1968. Enbridge is responsible for all of the cost, with most of the cost being paid by its insurance company. With Thursday's opening, all but a short stretch of the river known as the Morrow Lake delta is now available for recreation, according to the U.S. Environmental Protection Agency. That delta area, at the western edge of the contaminated section and near the city of Kalamazoo, remains closed to the public. Although people can once again swim and boat on the Kalamazoo, that doesn't mean the river is oil-free. Cleanup of the remaining oil will continue in the Morrow Lake delta and other low spots along the river bottom. EPA officials in Marshall have told InsideClimate News that removing the rest of the oil could take months or years. Enbridge has estimated that 843,444 gallons of oil were discharged after Pipeline 6B developed a six-and-a-half foot tear. But calculations by the EPA, which is overseeing the cleanup operation, show that more than 1.14 million gallons of oil have been recovered so far.

Atlantic Coast Pipeline Revised, Could Open Late 2018 - WFAE  - Utilities planning the Atlantic Coast Pipeline have altered the route to avoid environmentally sensitive areas. But they say there's no change in the projected cost or 2018 completion date.  Four energy companies are seeking federal approval for the $5.1 billion project, which was announced in 2014. The 600-mile pipeline would carry natural gas from shale oil fields in Ohio, West Virginia and Pennsylvania to power plants in Virginia and eastern North Carolina.   Planners have shifted the pipeline away from sensitive habitats, including national forests in Virginia and West Virginia. And they've made smaller route changes in North Carolina, including Cumberland and Johnston Counties, and in Virginia.  That has added about 36 miles, bringing the total to 600, but officials say that won’t affect the cost. The route will parallel I-95 from the Virginia border to Robeson County, near Lumberton. Duke Energy is among the owners. Spokesman Tom Williams says shale gas, produced by fracking, is a cheaper and cleaner fuel for Duke’s growing number of gas-fired plants. Which are replacing those that burn coal. “In essence, there's been a shale revolution, where there's been lots of very low-cost gas fields that have opened up in the West Virginia, Pennsylvania region. Also across Ohio, other regions, New York. This is a way to access that gas, and bring it to eastern North Carolina,” Williams said. The pipeline, the first of its kind in eastern North Carolina, also will serve Piedmont's industrial customers. Dominion already has signed up customers for 96 percent of the gas.

Big Cypress National Preserve oil exploration wins approval - (AP) — The National Park Service has given the green light for a Texas company to explore for oil and gas in the Big Cypress National Preserve. Park service officials said Friday that a 20-month environmental review showed there would be no significant impact if Burnett Oil Company did a survey 110 square miles in the national preserve. The survey will use sound waves from truck-mounted vibrators to create three-dimensional map of potential oil and gas reserves. The park service says If Burnett Oil finds something that it wants to pursue, the company would have to submit a new plan of operations, and that would require another environmental review. The preserve located in South Florida is home to Florida panthers, black bears and other wildlife.

Oil Company Gets The Go-Ahead To Explore For Oil In Wildlife-Rich Preserve -- Florida’s Big Cypress National Preserve is home to a vast array of plant and animal life, including mangroves, orchids, alligators, and the highly endangered Florida panther.  But that rich biodiversity is one of the key reasons environmentalists were outraged last week when the National Park Service approved Burnett Oil Company’s proposal to explore for oil in the southwest Florida preserve. The Park Service completed an Environmental Assessment of the proposal, and found that the oil exploration outlined in the plan wouldn’t significantly impact the preserve.   Environmental groups, however, aren’t so sure. The oil company plans to use “vibroseis” trucks to test for oil in the preserve — vehicles that weigh 60,000 pounds and which send sound waves down through the earth to help discover where oil reserves are located. It’s similar to the seismic testing technique that scientists and marine activists are protesting in the Atlantic, but in this case, it’s being used on land.   “We’re concerned these trucks could do a lot of damage to the ecosystem,” Amy Mall, senior policy analyst for the Natural Resources Defense Council, told ThinkProgress. The Park Service states in its final assessment of the project that the trucks “would  not create new trails; they would use mostly existing trails” and roads in the preserve. In the case that a truck needs to go off-trail, the NPS says it is emphasizing a plan in which trucks don’t pass over the same area twice, and that “a single pass of a vehicle would not constitute trail creation.”

Shell Oil Spill Dumps Nearly 90,000 Gallons of Crude Into Gulf -- An oil spill from Royal Dutch Shell’s offshore Brutus platform has released 2,100 barrels of crude into the U.S. Gulf of Mexico. The leak—roughly 88,200 gallons—created a visible 2 mile by 13 mile oil slick in the sea about 97 miles south of Port Fourchon, Louisiana, according to the U.S. Bureau of Safety and Environmental Enforcement. Officials said that the accident occurred near Shell’s Glider field, an underwater pipe system that connects four subsea oil wells to the Brutus platform, which floats on top of the water with a depth of 2,900 feet. Shell spokeswoman Kimberly Windon said in a statement that the likely cause of the spill was a release of oil from the subsea infrastructure. The Coast Guard said that the source of the discharge is reportedly secured. A cleanup crew has been dispatched. Shell spokesman Curtis Smith said in a statement that a company helicopter observed the sheen yesterday, and that the wells were under control after it isolated the leak and shut in production. “There are no drilling activities at Brutus, and this is not a well control incident,” the company said. “Shell is determining the exact cause of the release by inspecting the subsea equipment and flowlines in the Glider field. The company has made all appropriate regulatory notifications and mobilized response vessels, including aircraft, in the event the discharge is recoverable. There are no injuries.”

Shell: Skimmers in Gulf to clean up 88,200 gallon oil spill: (AP) — Crews were preparing to clean up an oil spill in the Gulf of Mexico after about 88,200 gallons of oil were released from a Shell flow line about 90 miles off the coast of Louisiana, the company said Friday. Shell said five boats were dispatched to clean up oil they can skim off the surface of the Gulf. Meanwhile, environmental groups said this latest spill was another example of why offshore drilling should be banned. Activists plan to hold a march in Washington, D.C., on Sunday to demand an end to drilling and used this new spill as further evidence. “It’s unacceptable that oil spills have been permitted to become the status quo in the Gulf,” said Michael Brune, the Sierra Club’s executive director, in a statement. “We have allowed the region to be perpetually treated as a sacrifice zone.” Shell did not directly respond to the complaints of environmental groups. In a statement, Kimberly Windon, a Shell spokeswoman, said, “No release is acceptable, and safety remains our priority as we respond to this incident.” Spills happen every year in the Gulf. This new spill is classified as medium in size under U.S. Coast Guard guidelines. Since 2012, there have been 147 spills and about 516,900 gallons of oil spilled in the Gulf, according to figures from the Bureau of Safety and Environmental Enforcement, the agency that oversees drilling.

Citing Earthquakes, EPA Urged to Toughen Regs - (CN) — With data linking pollution to earthquakes and contaminated drinking water, regulators must get strict on disposing oil and gas waste, nonprofits say in a federal complaint. With no federal review of oil and gas waste criteria since 1988, horizontal drilling and hydraulic fracturing technologies, or fracking, have become "mainstream" in the industry, according to the complaint filed last week in Washington.      A statement that the project released with the May 4 lawsuit says the wells "have been linked to numerous earthquakes in Arkansas, Colorado, Kansas, New Mexico, Ohio, Oklahoma, and Texas."  "Updated rules for oil and gas wastes are almost 30 years overdue, and we need them now more than ever," Adam Kron, a senior attorney at the Environmental Integrity Project, said in the statement. "Each well now generates millions of gallons of wastewater and hundreds of tons of solid wastes, and yet EPA's inaction has kept the most basic, inadequate rules in place. The public deserves better than this." The complaint notes that another method of disposal, "road-spreading," can allow toxic runoff to into bodies of water. Pits meanwhile can leak.     "EPA's authority is limited by statutory or regulatory exemptions under the Clean Water Act, Safe Drinking Water Act, the Comprehensive Environmental Response, Compensation and Liability Act, and the Resource Conservation and Recovery Act," the spokeswoman said in an email. "Where EPA's exemptions exist, states may have authority to regulate unconventional oil and gas extraction activities under their own state laws. The EPA continues to work with states and other stakeholders to understand and address potential concerns with hydraulic fracturing to ensure that natural gas and oil production will proceed in a safe and responsible manner."  Alleging violations of the Resource Conservation and Recovery Act, environmentalists accuse the EPA of having created a "state-by-state patchwork, where operators can 'venue shop' for the least stringent requirements and community protections from human health and environmental impacts."

New Fracking Lawsuit Already Nailed By Koch Bros : So, that didn’t take long. Last Wednesday, a group of prominent environmental organizations filed a major new lawsuit accusing the US Environmental Protection Agency of failing to regulate fracking as a hazardous waste for the past 30 years. Just two days later, the Koch-backed Washington Legal Foundation issued a scathing op-ed accusing the EPA of colluding with the groups to establish new regulations through “orchestrated settlements.” The op-ed is an obvious attempt to undermine the legitimacy of any future regulation of fracking by EPA, regardless of how the lawsuit shakes out. Quantifying impacts of fracking on a national level has run into an informational brick wall because of the loophole. The EPA’s most recent effort was a tepid draft report on fracking impacts issued last year, which the oil and gas industry welcomed as vindication. However, on close reading, the report was really a cry for help. The authors noted “a significant data gap for hazard identification” — attributable to the 2005 loophole — making it impossible to reach any broad conclusions about risks and impacts on the nation’s water resources. That brings us to the new fracking lawsuit. If you don’t have time to read the filing, our friends over at Think Progress offer the following rundown of the main issue: A coalition of environmental organizations is suing the Environmental Protection Agency, claiming federal regulators have for three decades failed to update rules for disposing of fracking and drilling wastes that may threaten public health and the environment.

Groundwater Contamination from Fracking Changes over Time: Study -  A new Texas study has found that horizontal oil wells fractured by the injection of high volumes of chemicals, sand, and water contaminate nearby water wells with a variety of heavy metals and toxic chemicals that fluctuate over time. . ''In our most recent study, we found that as more unconventional wells were drilled and stimulated, more drilling-related contaminants were found in the groundwater,'' study author Zacariah L. Hildenbrand told The Tyee.  Dichloromethane, an industry chemical and potential human carcinogen, was found in quantities above safe drinking water levels in water wells on highly fracked landscapes. The U.S. Environmental Protection Agency says the chemical ''poses health risks to anyone who breathes the air when this compound is present.''   In 2012, the Texas researchers sampled 38 water wells in a three-county region already punctured by 298 oil wells and found significant amounts of heavy metals such as iron and arsenic and high levels of dissolved salts in the water wells. Several months later when an additional 85 wells appeared in the study area, more or higher levels of contaminants appeared in 36 monitored water wells, including toluene, arsenic, barium, strontium, and chromium. The pH of the water also changed while dichloromethane, a degreaser used on well pads, appeared in the water as well. During phase three (in 2013), while industry drilled and fracked another 37 wells in the region, the project recorded significant increases in pH (the water became more alkaline), inorganic carbon, toluene, o-xylene (probable human carcinogens), and barium, along with statistically significant decreases in salts, fluoride, beryllium, chromium, iron, zinc, and zirconium.* By 2014, as industry drilling and fracking intensified, the chemical composition of the water changed once again. Concentrations of ethanol, bromide, fluoride, chloride, nitrate, and sulfate all increased from phase three. Samples containing common frack or drilling ingredients such as methanol, isopropyl alcohol, acetaldehyde, cyclohexane, ethyl benzene, and o-xylene also increased. In many cases, the oil wells were located within four kilometres from the sampled water wells.

Insurers shun risk as oil-linked quakes soar in Oklahoma | Reuters: As the number of earthquakes in Oklahoma exploded into the hundreds in the last few years, nearly a dozen insurance companies moved to limit their exposure, often at the expense of homeowners, a Reuters examination has found. Nearly 3,000 pages of documents from the Oklahoma Insurance Commission reviewed by Reuters show that insurers and the reinsurers who cover them grew increasingly concerned about exposure to earthquake risks because of heightened frequency of seismic activity, which scientists link to disposal of saltwater that is a byproduct of oil and gas production. Even as they insured more and more properties against earthquakes in the past two years, six insurers hiked premiums by as much as 260 percent and three increased deductibles. Three companies stopped writing new earthquake insurance altogether, state regulatory filings obtained by Reuters show. Several insurers took more than one of those steps. In addition, the insurers would consider suing oil and gas companies for reimbursement in instances where they would have to pay damages to homeowners, according to several sources, including two insurance company officials. So far Oklahoma's biggest earthquake was a 5.6 magnitude temblor in Prague in 2011 that buckled road pavement and damaged dozens of homes.

Increasing Federal Income From Crude Oil And Natural Gas On Federal Lands: The production of oil and natural gas in the United States has increased rapidly over the past decade. As of 2014, domestic production of crude oil had grown to about half of total consumption, and domestic production of natural gas represented almost 95 percent of total consumption. Domestic oil and gas production occurring on federal lands or in federal waters off the coast of the United States represented about one-fifth of total U.S. production in 2014. All told, the gross income (before payments to states) from onshore oil and gas resources averaged $3.0 billion annually from 2005 to 2014, comprising the following amounts:

• • About $230 million per year in bonus bids,
• • $50 million per year in fees for nonproducing leases, and
• • $2.7 billion per year in royalties from production. Total gross income from offshore oil and gas resources averaged $8.0 billion per year over the 2005 - 2014 period:
• • Lease auctions generated about $1.8 billion,
• • Rental fees generated about $230 million, and
• • Royalties from production yielded about $6.0 billion.

Production from parcels and associated royalty payments can continue for many years, and thus leases issued in any given year represent only a small share of annual royalty income. In 2013, about 6 percent of royalty income from onshore oil and gas came from parcels that were leased in the previous 10 years; in contrast, about half came from parcels that were leased more than 50 years earlier. For offshore resources, about 8 percent of royalty income in 2013 came from parcels that were leased in the previous 10 years, and the majority came from parcels that were leased more than 20 years earlier (see figure below).

Silent sandbox: Once booming frac sand industry continues major downturn  - This should be the time of year when the frac sand mines that dot western Wisconsin are buzzing with activity after a seasonal winter slowdown. Instead, most of the facilities in the once-booming sand mining sector sit dormant, with skeleton crews occasionally stopping by to ensure the lights are still working and groundwater runoff is properly contained. “There’s been a huge, huge slowdown,” said Kent Syverson, chairman of the geology department at UW-Eau Claire and a frequent consultant for the frac sand industry. “Many operations have idled their plants and laid off people. And even the ones that are still operating are not operating at full capacity.” Chippewa County conservationist Dan Masterpole visited most of the county’s supposedly active frac sand mining sites in the past two weeks and saw little evidence of activity. None of the companies had reinstated their mining operations, he said. “The mining companies are definitely not cranking back up this spring as quickly as they normally do,” Masterpole said. “Normally this time of year they’d be in full production.” The dramatic change from the go-go days of just a few years ago — when the industry sprang up in west-central Wisconsin because of the region’s high-quality sand — is the result of sand shipments plummeting in response to lower oil prices. The price of a barrel of U.S. West Texas Intermediate crude oil closed Friday at $44.66, down about 25 percent from a year ago and more than 50 percent from June 2014, when Eau Claire gasoline pump prices peaked at $3.74 a gallon. As oil prices have fallen, so has the demand for the Wisconsin sand that helps fuel the nation’s shale oil industry.  With oil prices so low, Masterpole said, “People are choosing to leave the oil in the ground and the sand in the hills.”

Company seeks Iowa OK to immediately start oil pipeline work - — A Texas-based company has asked Iowa regulators for permission to immediately start work on most of the Bakken oil pipeline route through 18 Iowa counties. Dakota Access LLC, a unit of Energy Transfer Partners of Dallas, said in a filing Thursday that the work must begin this month to complete the project in one construction season. Pipeline opponents promise to fight the request, The Des Moines Register reported. The Iowa Utilities Board has approved pipeline plans but said construction can’t begin until the U.S. Army Corps of Engineers approves federal permits. Dakota Access said it wants to begin work except in areas where preconstruction notifications are required by the Corps. Des Moines climate change activist Ed Fallon said his organization is challenging the legitimacy of Dakota Access’ request. “Throughout this process, Dakota Access has bullied landowners,” Fallon said. “Now, they are trying to bully the Iowa Utilities Board. In doing so, they’re hoping for an end-run around the Army Corps of Engineers — the entity rightfully charged with a full, objective analysis of the wide range of potential impacts of this pipeline.”

Push to start Dakota Access pipeline construction meets firm opposition - (AP) — Opponents of a proposed oil pipeline slated to run through four Midwestern states pressed Iowa regulators Thursday to keep a Texas-based petroleum company from starting construction before all federal permits are approved. Dakota Access planned on beginning construction by now on the 1,150-mile pipeline that’s designed to carry a half-million barrels of oil a day from the Bakken oil fields in northwest North Dakota to a tank storage facility in south-central Illinois. The company told the Iowa Utilities Board in a filing last week it must begin laying pipe by Tuesday to finish before winter and avoid disturbing farmland for a second growing season. It also has notified regulators in North Dakota that construction would start Sunday and on Monday in South Dakota, and a company spokeswoman confirmed Thursday that construction is set to begin next week in Illinois. But the Iowa board’s approval in March required Dakota Access to obtain all other permits before beginning construction in the state. And the U.S. Army Corps of Engineers, which is responsible for ensuring there’s no adverse impact on wildlife and natural resources, hasn’t issued any permits and also has been delayed by complaints it hasn’t been thorough in its review. Dakota Access filed a request last week with the Iowa Utilities Board to begin construction on land for which it has landowner approval and for which no federal permits are required. The board has set a Monday deadline for other parties to comment on the request, but hasn’t set a date to decide about whether it will allow construction to begin soon. Environmental group the Sierra Club said in a filing Thursday that the Iowa Utilities Board should stick with its decision to withhold construction approval until all permits are approved because input from other federal agencies may affect the route. And Ed Fallon, director of Bold Iowa, another organization that opposes the pipeline, told The Associated Press that Dakota Access has been very aggressive with landowners and is now “bullying” the Iowa board to give in.

State inspecting weekend saltwater spill in Mountrail County: (AP) — North Dakota’s Oil and Gas Division is looking into a saltwater spill in Mountrail County over the weekend. EOG Resources Inc. reported Saturday that 259 barrels of saltwater was released and contained, with all but 10 barrels recovered. A barrel holds 42 gallons. Saltwater is a byproduct of oil production. Equipment failure was cited as the cause of the spill at a storage tank site about 7 miles north of Parshall. A state inspector was visiting the site Monday.

Duke Study: Rivers Contaminated With Radium and Lead From Thousands of Fracking Wastewater Spills --Thousands of oil and gas industry wastewater spills in North Dakota have caused “widespread” contamination from radioactive materials, heavy metals and corrosive salts, putting the health of people and wildlife at risk, researchers from Duke University concluded in a newly released peer-reviewed study. Some rivers and streams in North Dakota now carry levels of radioactive and toxic materials higher than federal drinking water standards as a result of wastewater spills, the scientists found after testing near spills. Many cities and towns draw their drinking water from rivers and streams, though federal law generally requires drinking water to be treated before it reaches peoples’ homes and the scientists did not test tap water as part of their research.High levels of lead—the same heavy metal that infamously contaminated water in Flint, Michigan—as well as the radioactive element radium, were discovered near spill sites. One substance, selenium, was found in the state’s waters at levels as high as 35 times the federal thresholds set to protect fish, mussels and other wildlife, including those that people eat.The pollution was found on land as well as in water. The soils in locations where wastewater spilled were laced with significant levels of radium and even higher levels of radium were discovered in the ground downstream from the spills’ origin points, showing that radioactive materials were soaking into the ground and building up as spills flowed over the ground, the researchers said. The sheer number of spills in the past several years is striking. All told, the Duke University researchers mapped out a total of more than 3,900 accidental spills of oil and gas wastewater in North Dakota alone.Contamination remained at the oldest spill site tested, where roughly 300 barrels of wastewater were released in a spill four years before the team of researchers arrived to take samples, demonstrating that any cleanup efforts at the site had been insufficient.

Duke study: Fracking has poisoned North Dakota's soil and water: - A study of 3,900 fracking waste-water spill sites in North Dakota has revealed that soil and water contamination is widespread and persistent, endangering the health of humans, wildlife and the environment. It seems that in our search for oil and gas, we don't do anything half-way. Such is the case with North Dakota. While there is no question that fracking has given a huge boost to the state's economy, the long-term costs may be too much to bear. Researchers at Duke University have been studying the effects of hydraulic fracturing in several states since 2010. In the North Dakota study, they found that some rivers and streams in the state now carry levels of radioactive and toxic materials higher than the federal drinking water standards, reports EcoWatch. The researchers found high levels of ammonium, selenium, lead and other toxic contaminants from spilled "produced water," also known as salt water or brine, a by-product of fracking. The levels of selenium, a radioactive element, were 35 times higher than the federal threshold set to protect fish and other aquatic wildlife. “The magnitude of spills that we see in North Dakota I haven’t seen elsewhere,” said Avner Vengosh, a Duke University professor who has been studying the effects of hydraulic fracturing since 2010 in several oil-producing states. The soil in locations where after four years, there were significantly high levels of radium at the spill site, was bad enough but downstream, the levels of radium in the soil were even higher, showing that radioactive materials were soaking into the ground and building up, the researchers said. The problem of the ongoing contamination is exacerbated by the fact that inorganic substances in the wastewater are resistant to biodegradation, leaving a "long-term legacy of contamination," according to the study.

Study: Bakken oil field leaks 275,000 tons of methane yearly: (AP) — A new study says the oil-producing region of North Dakota and Montana leaks 275,000 tons of methane annually, an amount that’s less than previously reported. Researchers say it’s the first field study of methane emissions from the Bakken shale formation. Methane is a greenhouse gas that contributes to global warming. It’s the primary component of natural gas. The study released Wednesday was based on air samples a National Oceanic and Atmospheric Administration airplane took from over the Bakken region in May 2014. The study says the methane emissions were less than what had been reported by some satellites and slightly lower than U.S. Environmental Protection Agency estimates. Researchers say the amount of methane leaking from the Bakken is similar to the emission rate from the oil-rich Denver-Julesburg Basin in Colorado.

In North Dakota, new pipeline rules split industry, landowners - Neil Benter got the call last August. An oil company's pipeline had started leaking on his farmland outside Ambrose, North Dakota. It turned out the leak had been going on for days or weeks, spilling an estimated 4,260 barrels -- 178,900 gallons -- of salty wastewater. Nine months later, Benter is left to wonder how the leak happened and whether the salt will permanently sterilize part of the land. "That pipeline wasn't even 2 years old," Benter said. "They've got to do a better job of putting these pipelines in." By the end of the summer, Benter and other landowners will know how strictly the state plans to regulate pipeline construction in an effort to prevent similar leaks and spills. The North Dakota Industrial Commission is preparing to finalize a package of rules that could impose construction and safety requirements on the largely unregulated network of gathering pipelines that connect to individual oil wells in the state. The oil industry opposes most of the changes, saying they're too expensive and come at a time when the global crash in oil prices has caused a steep decline in drilling in North Dakota. Environmentalists and landowner groups are pushing for tougher restrictions, saying the state should do more to prevent pipeline accidents like the one on Benter's land.

Top oil county wants state inspectors on the home front -- bismarcktribune.com: – Leaders in North Dakota’s top oil producing county pushed state health officials Wednesday to consider stationing inspectors in Watford City to more closely monitor the oil and gas industry. The issue came up Wednesday during a presentation by the North Dakota Department of Health about radioactive material that is a byproduct of oil production. A landfill in McKenzie County is the first to apply to the state to accept waste with radioactivity levels up to 50 picocuries per gram. McKenzie County leaders questioned how much state oversight there would be if the landfill gets approved for accepting the higher level of radioactivity.  Scott Radig, director of the health department’s Division of Waste Management, said the health department requires dust control in all landfills, but county leaders said the photo told a different story. The health department inspects special waste landfills at least once a month, Radig said. In addition, the department has a spill response team that’s on the road Monday through Friday, with one person stationed south of Lake Sakakawea and one person stationed north.

North Dakota oil output drops 9,850 barrels daily in March (AP) — North Dakota’s Department of Mineral Resources says the state’s oil production decreased by about 9,850 barrels a day in March. The agency says the state produced an average of 1.09 million barrels of oil daily in March. North Dakota’s production record was set in December 2014 at 1.22 million barrels daily. North Dakota also produced a record 1.70 billion cubic feet of natural gas per day in March, up from 1.68 billion cubic feet daily in February. The March tally is the latest figure available because oil production numbers typically lag at least two months. There were 27 drill rigs operating in North Dakota’s oil patch on Thursday — the lowest number since July 2005.

North Dakota oil production falls 9,846 B/D in March: state agency -  Platts - North Dakota's crude oil production fell less than 1% or 9,846 b/d in March from the previous month, the state's department of mineral resources said Thursday, a smaller decline than officials had expected. The state produced 1.109 million b/d in March, compared with 1.119 million b/d in February, the agency said. The state notched peak production of 1.227 million b/d in December 2014. There is a two-month lag in reporting output numbers. "We were anticipating more than double [the actual decline]," Lynn Helms, director of North Dakota's Oil and Gas Division, said in his monthly press conference which was also available via webex.As recently as 10 days ago, state officials believed crude output would drop below 1.1 million b/d, Helms said. But, "we had four operators who came in with amended reports that showed significant production increases," which boosted output above that figure. The director said Ft. Berthold-area production in March was up about 9,500 b/d. Two of the operators that delivered large production increases operated exclusively in the Fort Berthold area, a prolific region of the giant Bakken Shale that underlies the western part of the state. A third operator had some production there. "Those companies fracked a bunch of wells and increased production there," Helms said.

Study: Bakken oil field leaks 275,000 tons of methane yearly (AP) — A new study says the oil-producing region of North Dakota and Montana leaks 275,000 tons of methane annually, an amount that’s less than previously reported. Researchers say it’s the first field study of methane emissions from the Bakken shale formation. Methane is a greenhouse gas that contributes to global warming. It’s the primary component of natural gas. The study released Wednesday was based on air samples a National Oceanic and Atmospheric Administration airplane took from over the Bakken region in May 2014. The study says the methane emissions were less than what had been reported by some satellites and slightly lower than U.S. Environmental Protection Agency estimates. Researchers say the amount of methane leaking from the Bakken is similar to the emission rate from the oil-rich Denver-Julesburg Basin in Colorado.

Update On Bakken Methane Emissions As EPA Gets Ready To Implement New Methane-Emission Rules -- May 12, 2016 - For background to this next Dickinson Press story, see this months-old story over at FuelFix: EPA expands methane rules to all oil and gas wells.  Here's The Dickinson Press story: The Bakken oil and gas field emits 275,000 tons of methane each year, says a new study. The results of the study published Wednesday in the Journal of Geophysical Research: Atmospheres found that the Bakken is leaking a lot of methane, but less than some satellites have reported. According to wiki when asking the question, what gas is flared from oil wells?  Improperly operated flares may emit methane and other volatile organic compounds as well as sulfur dioxide and other sulfur compounds, which are known to exacerbate asthma and other respiratory problems.  Other emissions from improperly operated flares may include, aromatic hydrocarbons (benzene, toluene, xylenes) and benzapyrene, which are known to be carcinogenic.  Natural gas is a naturally occurring hydrocarbon gas mixture consisting primarily of methane, but commonly including varying amounts of other higher alkanes, and sometimes a small percentage of carbon dioxide, nitrogen, hydrogen sulfide, or helium.   Flaring can affect wildlife by attracting birds and insects to the flame. Approximately 7,500 migrating songbirds were attracted to and killed by the flare at the liquefied natural gas terminal in Saint John, New Brunswick, Canada on September 13, 2013.

ExxonMobil restarts Torrance refinery a year after fire (AP) — ExxonMobil has restarted its oil refinery in Torrance more than a year after an explosion crippled the plant and led to higher gas prices in California. As a safety precaution, ExxonMobil shut down a pollution control device for six hours during the re-start process early Tuesday. City News Service says that shutdown will result in up to 600 pounds of excess particulate emissions — but South Coast Air Quality Management District officials do not expect it to expose residents to unhealthy levels. The refinery has sat largely idle since the February 2015 blast injured four contractors, caused heavy damage at the plant and rocked nearby neighbors. The plant’s shutdown led to a shortage of gas that meets California’s stricter pollution regulations and caused higher prices at the pump.

The Case for Building Low-Cost Methanol Capacity - Even in tough times like these, companies need to look ahead, to consider what steps they would take--or investments they would make--if, for example, oil prices were to rise to X dollars per barrel, or the cost of drilling and completing a well were to fall by Y%. For methanol producers, these “what-ifs” might include what if methanol prices (holding steady the past few months at $249/metric ton, or MT) were to rebound to where they stood a year ago ($442/MW in May 2015)? Or what if we could add new capacity at a fraction of the cost of new-build? Today, we consider how building more methanol capacity might make sense in the right circumstances. Decisions to invest—whether it be investments in drilling and completing a well or in building new infrastructure—are based not only on current and projected prices for the related commodity or product but on the (sometimes changing) magnitude of the investment. Recall that even before oil prices started to collapse in mid-2014, the per-Bbl and per-MMBtu cost of producing oil and gas, respectively, had been falling as producers gained drilling-and-completion experience and increased efficiency. As oil prices slid and demand for drilling and completion services fell, the cost of those services plummeted, further changing the dynamics of when it’s profitable to drill and complete wells. Or consider the first wave of U.S. liquefaction and liquefied natural gas (LNG) export terminals, which was led by the projects that could make use of existing LNG import facilities (including docks capable of handling large LNG vessels, and adjoining pipelines that connect the terminal to the regional gas pipeline network) and thereby reduced the projects’ costs.

US imposes rules on fracking emissions The Obama administration is imposing controls on the US shale industry by unveiling rules demanding that oil and gas producers curb leaks of greenhouse gas. The crackdown on methane leaks comes as the 2016 presidential campaign leaves the oil industry facing uncertainty over the future of fracking regulation. President Barack Obama is targeting the production and distribution of oil and gas — the second largest industrial source of greenhouse gases after power plants — as part of his efforts to leave a record of action against climate change. But Mr Obama’s latest steps underlined how his legacy is likely to be determined only after he has left the White House by the courts or future presidents. The effort will first hit new oil and gas facilities via rules that were finalised on Thursday by the Environmental Protection Agency. But the regulator also said it was initiating plans to target existing facilities, which are likely to have a bigger impact on the industry. The oil industry decried the regulations as “unreasonable and overly burdensome”. The American Petroleum Institute, a lobby group, warned they could harm the shale energy revolution unleashed by hydraulic fracturing, which has already lost considerable momentum due to the oil price slump. The rules on new facilities require owners and operators to find and repair leaks of methane — the main component of natural gas — that occur during the drilling, production or transmission of oil and gas. While most global action on climate change has focused on emissions of carbon dioxide, the principal greenhouse gas, the EPA said there was a growing body of evidence that methane was doing more harm than previously thought. The EPA estimated that the cost of implementing its new rule, which requires companies to perform rolling leak checks, would be $530m, a figure it said would be outweighed by climate-related benefits of $690m in 2025.

US proposes to cut methane from oil, gas by nearly half - (AP) - The Obama administration issued a final rule Thursday to sharply cut methane emissions from U.S. oil and gas production, a key part of a push by President Barack Obama to reduce methane emissions by nearly half over the next decade. The rule by the Environmental Protection Agency is the major element of an administration goal to reduce methane emissions from oil and gas drilling by up to 45 percent by 2025, compared to 2012 levels. It will require energy producers to find and repair leaks at new or modified oil and gas wells and capture gas that escapes from wells that use the common drilling technique known as hydraulic fracturing, or fracking. Methane, the key component of natural gas, tends to leak during oil and gas production. Although it makes up just a sliver of greenhouse gas emissions in the United States, it is far more powerful than carbon dioxide at trapping heat in the atmosphere, making it a top target for environmentalists concerned about global warming.  Officials estimate the rule will cost the industry about $530 million in 2025. Those costs would be outweighed by reduced health care costs and other benefits totaling about $690 million, officials estimate. EPA administrator Gina McCarthy said the new rule would "protect public health and reduce pollution linked to cancer and other serious health effects while allowing industry to continue to grow and provide a vital source of energy for Americans across the country." The mandate, which will take effect this summer, will apply only to new and modified sources, such as wells, pumps, pipes and compressors, but it will set a framework for the EPA to impose similar requirements on nearly 1 million existing wells and other equipment nationwide. Those rules are not expected before Obama leaves office.

EPA Finalizes Methane Rule For New Oil And Gas Operations --The Environmental Protection Agency on Thursday issued its final rule for methane emissions from the oil and gas industry. The rule limits methane emissions from new oil and gas infrastructure and requires operators to submit to semi-annual or quarterly monitoring, depending on the type of operation. In addition, the agency took another step toward drafting a rule that would apply to existing oil and gas operations. “They will help keep the nation on track to help the us cut emissions from the oil and gas sector,” EPA administrator Gina McCarthy said on a call with reporters Thursday. The new rule will reduce emissions by 11 million tons per year of CO2 equivalent by 2025, she said. The Obama administration has a goal of reducing methane emissions from the oil and gas sector by 40 to 45 percent from 2012 levels by 2025. Natural gas is 80 percent methane, while oil extraction processes also often release methane trapped underground. In 2012, 30 percent of the country’s methane emissions came from oil and gas operations.  Methane is a potent greenhouse gas, trapping heat 86 times more effectively than CO2 over a 20-year span, so leaking methane can be a huge problem. While natural gas burns more cleanly than coal, leaks in the system can eliminate the climate benefits. Scientists have found that in the United States, methane leaks and venting have nullified any emissions benefit from transitioning the electricity sector from coal- to natural gas-fired power plants. In fact, the EPA recently found that the problem of escaping methane is even worse than initially feared. The United States currently gets a third of its electricity from natural gas, up from 24 percent in 2010.  The final rule increases monitoring frequency — and smaller wells will be included There are, though, two key changes from the initial draft rule the EPA published last year that environmentalists welcomed. Under the new rule, natural gas compressors will be subject to quarterly monitoring — twice as often as under the proposal. In addition, low-production wells will be included in the rule. In its fact sheet, the agency credited the changes to the more than 9,000 public comments it received after the draft rule was published.

Map: The Fracking Boom, State by State - As debate intensifies over oil and gas drilling, most states with frackable reserves are already fracking—or making moves to do so in the near future. That translates to 21 states, from California to Texas, Michigan to West Virginia, currently employing this high-intensity form of energy extraction, and five others may soon follow. Called high-volume hydraulic fracturing, or fracking, the controversial process became commercially viable in the late 1990s. It generally involves injecting millions of gallons of water, along with sand and chemicals, down a well to extract oil-and-gas reserves that were previously hard to access. InsideClimate News News compiled a comprehensive map of the nation's fracking activity. This state-by-state breakdown will be periodically updated.  Fracking is used differently in each state, depending on the available fossil fuels. Texas has thousands of wells that tap into deeply buried shale deposits. By contrast, in Indiana, fracking occurs for a small percentage of wells. Tennessee and Kentucky are outliers. While both states allow high-volume fracking (modern fracking), drillers there tend to use other extraction techniques that can involve injecting nitrogen gas underground. Illinois and North Carolina are the most recent states to allow modern fracking, with their state legislatures passing new rules in 2015 and 2014, respectively, and regulators are now waiting for applications. Nevada allows the process and had active operations as recently as December 2014; New York and Maryland buck the trend. New York was the first  state with sizeable fossil fuel reserves to close its borders to fracking. In December 2014, Gov. Andrew Cuomo banned the practice. His decision cited the public health risks from water and air pollution, and the unknown climate change impacts of extracting natural gas. Maryland lawmakers, also concerned about fracking's impact on the environment and public health, passed a moratorium in May 2015 that bars the process until October 2017.

Two More Energy Companies Go Bankrupt: Linn Energy, Penn Virgina File Chapter 11  --According to data compiled by Haynes and Boone, in just the first four months of 2016 there had already been double the amount of bankrupt energy debt than in all of 2015, with the total secured and unsecured defaults rising to $34 billion, double the $17 billion total for all of 2015. We can now add two more major names succumbing to the Saudi onslaught against marginal shale producers when overnightfirst Linn Energy announced a prepackaged Chapter 11 deal, followed by Penn Virginia defaulting just hours later. In the first case, oil and gas producer Linn Energy LLC filed for chapter 11 bankruptcy afterreaching a deal with lenders to restructure its $8.3 billion debt load and obtain $2.2 billion in fresh financing. In its bankruptcy filing press release, Linn announced that the holders of more than 66% of its credit facility have agreed to the “broad terms” of a debt restructuring but didn’t provide further details. The lenders also agreed to let Linn Energy spend the cash securing their debt, known as cash collateral, and to help fund a new $2.2 billion term loan. LinnCo LLC, a publicly traded affiliate, filed for bankruptcy alongside Linn Energy Wednesday. LinnCo was created to help Linn Energy raise additional equity capital and is taxed as a corporation, rather than as a master limited partnership like Linn Energy.  For those wondering if the bankruptcy would prevent the company from pumping more oil, bad news: Linn Energy said access to the cash will allow it to continue normal operations without lining up new bankruptcy financing. However, the company still requires permission from the U.S. Bankruptcy Court in Victoria, Texas, to begin spending.

Oil At $45 A Barrel Proving No Savior As Bankruptcies Add Up  - -- Three bankruptcies this week shows that $45 a barrel oil isn’t enough to rescue energy companies on the verge of collapse. Since the start of 2015, 130 North American oil and gas producers and service companies have filed for bankruptcy owing almost $44 billion, according to law firm Haynes & Boone. The tally doesn’t include Chaparral Energy Inc., Penn Virginia Corp. and Linn Energy LLC, which filed for bankruptcy this week owing more than $11 billion combined. At least four more oil and gas companies owing more than $8 billion are nearing default, including Breitburn Energy Partners LP and SandRidge Energy Inc. Bankruptcies have accelerated as cash-starved companies find it almost impossible to raise capital. Energy companies have been virtually shut out of the high-yield bond markets, banks are cutting credit lines and asset sales have slowed. While troubled companies may not be saved by $45 oil, some of the better operators will turn profitable at $50, said Subash Chandra, an analyst with Guggenheim Securities in New York. Companies best able to take advantage will be those with with acreage in North Dakota’s Bakken shale, the Permian in Texas or the Scoop and Stack prospects in Oklahoma. "If oil is at $50, fortunes turn dramatically," Chandra said. "But the problem is they turn so much that the service companies come in and raise prices and take a share of it, or if production responds so quickly that oil has a hard time staying at $50." While some of the best operators in the most prolific acreage may boast well break-evens of $35 a barrel, that only includes the cost of drilling,. Expenses like overhead, salaries, taxes and interest expenses easily add another $10 to $15 a barrel, he said. "The short answer is $45 a barrel doesn’t save anybody," Cutter said. "Anyone who was going bankrupt at $30 is still going bankrupt at $45. You need to see oil sustained at $60 to $65 before you see a real turnaround in profitability for the sector."

Wave of Fossil Fuel Project Cancellations Follows Keystone XL Rejection -- Six months after the Obama administration rejected the Keystone XL pipeline, at least 20 other proposed energy projects—mines, pipelines, plants, related rail projects and export terminals—have been canceled, rejected or delayed, according to research compiled and mapped by InsideClimate News. Sustained grassroots resistance and public opposition have played a role in at least some of these decisions; other influential factors include unfavorable economic conditions such as low oil prices, as well as governments' environmental concerns and project siting issues. Proposed in 2008, the Keystone XL was originally slated to transport Canadian oil sands crude to Gulf Coast refineries. Federal regulators rejected the project for its potential climate impact and minimal economic benefits—and activists hailed the decision as a victory for their years of action against the project. Since then, the Federal Energy Regulatory Commission rejected two project applications—for the Oregon-based Jordan Cove LNG project and Pacific Connector Pipeline—and delayed the decisions on two other facilities. For five of the projects, the bids or key permits were rejected by either a federal panel or state or local officials. Companies chose to cancel five other projects, including Arch Coal's abandoning its planned Otter Creek coal mine in Montana and Kinder Morgan's pulling the plug on its Northeast Energy Direct pipeline. The remaining facilities are delayed.

Big Oil Abandons $2.5 Billion in U.S. Arctic Drilling Rights --- After plunking down more than $2.5 billion for drilling rights in U.S. Arctic waters, Royal Dutch Shell, ConocoPhillips and other companies have quietly relinquished claims they once hoped would net the next big oil discovery. The pullout comes as crude oil prices have plummeted to less than half their June 2014 levels, forcing oil companies to slash spending. For Shell and ConocoPhillips, the decision to abandon Arctic acreage was formalized just before a May 1 due date to pay the U.S. government millions of dollars in rent to keep holdings in the Chukchi Sea north of Alaska. The U.S. Arctic is estimated to hold 27 billion barrels of oil and 132 trillion cubic feet of natural gas, but energy companies have struggled to tap resources buried below icy waters at the top of the globe. Shell last year ended a nearly $8 billion, mishap-marred quest for Arctic crude after disappointing results from a test well in the Chukchi Sea. Shell decided the risk is not worth it for now, and other companies have likely come to the same conclusion, said Peter Kiernan, the lead energy analyst at The Economist Intelligence Unit. "Arctic exploration has been put back several years, given the low oil price environment, the significant cost involved in exploration and the environmental risks that it entails," he said.

The Oil Industry Just Backed Out Of A Multi-Billion Dollar Investment --It seems that the rent really is too high, at least for the major oil and gas firms that have now cancelled their exploration leases in the Arctic. ConocoPhillips, ENI, and Iona have relinquished all their leases in the Chukchi and Beaufort seas off the coast of Alaska, according to new documents obtained in a Freedom of Information Act request filed by advocacy group Oceana. “The decisions to give up leases reflect both environmental and economic realities of operating in a remote and unforgiving environment like the Arctic,” Michael LeVine, senior counsel for Oceana, told ThinkProgress. Statoil, which also had leases in the region, had previously relinquished all its leases, and Shell has relinquished all but one block, where it has already done exploratory drilling, he said. A spokesman for ConocoPhillips confirmed that the leases no longer represented a good investment for the company. “Given the current environment, our prospects in the Chukchi Sea are not competitive within our portfolio. This will effectively eliminate any near term plans for Chukchi exploration for the company,” Christina Khul told ThinkProgress in an email. While Khul specified that she was referring to the economic environment, not the political one, both are likely on the minds of shareholders for the world's largest oil and gas companies. Exploration in the Arctic Ocean is an incredibly expensive endeavor. The Arctic is a harsh and unforgiving environment. The drilling season is short, since it's impossible to drill in the freezing temperatures from fall to spring. And the location is remote, which means it costs more to get equipment and people up there. It has been estimated that Shell — the only company that has tried drilling in the Chukchi — spent about $7 billion on its efforts, which have not yet paid dividends.

Big Oil Abandons the Arctic, Obama Under Pressure to Do More to Protect the Region - Sometimes it is hard to find good news on the climate. Take a quick look at a couple of today’s stories: According to Australian researchers, five tiny Pacific islands, which are part of the Solomon islands, have completely disappeared due to rising sea levels, in what is being described as the “first scientific confirmation of the impact of climate change on coastlines in the Pacific.” Another six islands have had large swathes of land washed into the sea too. Elsewhere, one in five of the world’s plant species is said to be threatened with extinction, with climate change one of the factors along with farming and construction. But there is good news too, which gives immense hope to those fighting Big Oil, especially in the Arctic: Big Oil is in full retreat from the region.  Once the Arctic was the seen as the last big untapped frontier for the industry. But rather than being full of black gold, the Arctic has proven to be one of the most expensive black holes for the industry ever. Bloomberg reported this morning that after spending a whopping $2.5 billion for drilling rights in U.S. Arctic waters, oil companies such as Shell and ConocoPhillips have quietly relinquished their rights to some 2.2 million acres. This equates to nearly 80 percent of the leases they bought nearly a decade ago. This is truly significant: Peter Kiernan, the lead energy analyst at The Economist Intelligence Unit told Bloomberg: “Arctic exploration has been put back several years, given the low oil price environment, the significant cost involved in exploration and the environmental risks that it entails.” Oil giant, Shell which has already blown $8 billion on its mis-guided Arctic folly, relinquished 274 leases in the Chukchi and Beaufort Seas, although it is holding onto the lease that it started to drill last year. ConocoPhillips formally relinquished its 61 Chukchi Sea leases. Statoil had already dumped 16 Chukchi Sea leases and its working interest stakes in 50 others in the U.S. Arctic last November.

EIA revises up U.S. crude production in 2017 amid higher prices -  U.S. crude production in 2017 will decline less than previously forecast as higher oil prices encourage higher output, the Energy Information Administration said in a monthly report on Tuesday. The statistical arm of the U.S. Department of Energy said crude production will decline by 830,000 barrels per day in 2016, in line with previous expectations, but that the decline will slow to 410,000 bpd in 2017, rather than the 560,000 bpd previously forecast. "U.S. crude oil production in 2017 is expected to be more than 100,000 barrels per day higher than previously forecast in response to higher oil prices," EIA Administrator Adam Sieminski said in comments released after the data. Until last month, oil had seen one of the strongest rebounds since the financial crisis, with prices rallying nearly 80 percent from multiyear lows under $30 a barrel in the first quarter, supported by falling U.S. production, supply constraints in Libya and the Americas and a weak dollar. The rally has since stalled at around $45 as record output by Russia and major Middle East producers renewed worries about a global glut of some 1.5 million bpd that originally drove prices down from above $100 in mid 2014. The EIA also lifted its U.S. oil demand forecast for the second quarter of 2016 by 0.5 percent to 19.58 million bpd, and revised upwards its demand growth forecast by 0.1 percent for the entire year to 19.54 million bpd. The EIA trimmed its 2017 oil demand forecast by 0.2 percent to 19.66 million bpd.

EIA Revises Crude Oil Price Forecast Up $6/Barrel - The US Energy Information Administration (EIA) has revised its earlier crude oil price forecast, originally issued in April, but now expected to be around $40.52 per barrel, up $6 from its April estimates of only $34.73 per barrel for the average price of crude in 2016."Improving economic data, growing supply disruptions, and falling U.S. crude oil production and rig counts contributed to the price increase," the EIA said in its Short-Term Energy Outlook report released today. The forecast for Brent crude prices in 2017 were also revised upwards, from $40.58 per barrel to $50.65 per barrel. The West Texas Intermediate (WTI) prices were also revised positively, with new expectations for 2016 at $40.32 per barrel. For 2017, the EIA expects to see Brent and WTI at the same price. Average Brent crude prices in April were $42 per barrel, or $3 higher than in March.

EIA revises inventory build forecasts downward - In its Short-Term Energy Outlook for May, the US Energy Information Administration estimates that global petroleum and other liquid fuels inventory builds will average 1 million b/d in 2016 and 200,000 b/d in 2017 compared with the average of 1.4 million b/d in 2016 and 400,000 b/d in 2017 forecast in last month’s STEO. Lower inventory build forecasts mainly reflect revised historical rates of demand growth in 2015, along with the expectation of higher demand growth in 2016 and 2017. EIA expects global oil inventory draws to begin in third-quarter 2017.  EIA increased its estimates of historical and forecast global consumption for 2015-17 compared with April’s STEO. Global consumption of petroleum and other liquid fuels is now estimated to have increased by 1.4 million b/d in 2015, 100,000 b/d higher than previously estimated and reflecting upward revisions to 2015 growth in both China and India. EIA now expects global oil consumption to increase by 1.4 million b/d in 2016 and by 1.5 million b/d in 2017, 300,000 b/d and 200,000 b/d higher, respectively, than forecast in the STEO for April. China’s consumption is forecast to grow by 400,000 b/d in both 2016 and 2017.

Latest IEA US shale scenario paints worsening outlook picture - Oil | Platts News Article & Story: The International Energy Agency issued a downbeat forecast for US light tight oil production levels through 2020 Wednesday, predicting that overall shale output would not flatten out even at $60/b average oil prices over the period. In a presentation at the Platts Global Crude Oil Summit, IEA chief economist Laszlo Varro gave an updated set of scenarios that appeared more negative than the agency's previous World Energy Outlook, published in November 2015. Varro also addressed the effect of climate change policies on investment and said even under a scenario that sees global temperatures rise 2 degrees Celsius, investment in oil production would still be needed. Long-term demand for diesel looks "quite robust" despite recent air quality concerns, he added.The latest forecast expects US light tight oil production to decline by 3 million b/d in the 2015-2020 period if oil prices average $40/b over the period and would still decline slightly at $60/b. Only at $70/b prices would light tight oil production rise slightly, while $100/b prices would result in a 1.5 million b/d increase over the period, according to the forecast. "The US oil industry is fighting very hard and I'm really impressed by how hard they fight, but they cannot overcome the laws of gravity. So investment is declining in the US quite significantly," Varro said.

Whatever Happened to Condensates after Lifting of the Crude Export Ban?  -- Few segments of the energy market have experienced the roller-coaster ride that U.S. condensates have been on over the past five years.   Prior to 2011, U.S. condensates were a forgotten backwater of the hydrocarbon complex, mostly blended off into crude oil.  Then condensates rapidly transitioned from obscurity to an oversupplied, price-discounted growth market, then to a driver of massive infrastructure investment, then to the star of the show as the only member of the U.S. crude oil family that could be exported.  By mid-2014, producers and midstreamers were in love with condensates.  Exports were legal and growing.  New pipeline, splitter, stabilizer and export dock infrastructure was coming online.  U.S. condensate markets were tightening and condensate prices were increasing.  Then in one fell swoop in December 2015, Congress swept away all export restrictions on crude oil, potentially relegating U.S. condensates back to the obscurity from whence they came. All of this turmoil in U.S. condensates has played out within the much broader context of international condensate markets. The natural gas production of many countries yields substantial volumes of condensates.  These volumes are traded in robust markets, with the epicenter of demand in the Asia/Pacific region, supplied mostly by producers in the Middle East, Asia and Africa.  These markets are also in transition, though not with the level of turmoil being experienced by U.S. condensates.  The key to condensates in the global market is the relationship between condensate production growth, export volumes and the major market for these exports – condensate splitters and refineries.  Prior to lifting of the export ban, these markets were gearing up for significant volumes of U.S. condensates.  Now things have changed.

The Real Oil Limits Story - What Other Researchers Missed -- Gail Tverberg -- For a long time, a common assumption has been that the world will eventually “run out” of oil and other non-renewable resources. Instead, we seem to be running into surpluses and low prices. What is going on that was missed by M. King Hubbert, Harold Hotelling, and by the popular understanding of supply and demand? The underlying assumption in these models is that scarcity would appear before the final cutoff of consumption. Hubbert looked at the situation from a geologist’s point of view in the 1950s to 1980s, without an understanding of the extent to which geological availability could change with higher price and improved technology. Harold Hotelling’s work came out of the conservationist movement of 1890 to 1920, which was concerned about running out of non-renewable resources. Those using supply and demand models have equivalent concerns–too little fossil fuel supply relative to demand, especially when environmental considerations are included. Virtually no one realizes that the economy is a self-organized networked system.There are many interconnections within the system. The real situation is that as prices rise, supply tends to rise as well, because new sources of production become available at the higher price. At the same time, demand tends to fall for a variety of reasons:

• Lower affordability
• Lower productivity growth
• Falling relative wages of non-elite workers

The potential mismatch between amount of supply and demand is exacerbated by the oversized role that debt plays in determining the level of commodity prices. Because the oil problem is one of diminishing returns, adding debt becomes less and less profitable over time. There is a potential for a sharp decrease in debt from a combination of defaults and planned debt reductions, leading to very much lower oil prices, and severe problems for oil producers. Financial institutions tend to be badly affected as well. If a person looks at only past history, the situation looks secure, but it really is not. 

Difference between Trump and Clinton as president: One million barrels of oil a day - If Trump becomes next U.S. president, it could mean a boost to U.S. oil production.  U.S. oil production is bound for a significant shake up after the presidential election in November, says a senior editor at energy-information provider Platts. “This election is going to have a major impact on the direction of U.S. and, possibly, global oil supply. Maybe the most significant impact of any election in U.S. history,” said Brian Scheid, senior oil editor at Platts, at the Platts Crude Oil Summit in London on Tuesday. Looking at a worst case/best case scenario worked out between several analysts in Washington, he estimated that with a Republican win, U.S. oil production could jump by as much as 500,000 barrels a day. If the Democrats win, there could be a decline of 500,000 barrels a day, Scheid said. “Essentially a one million barrel per day swing depending on the result of a single election. This is a relatively major difference in supply, equal to nearly the amount of crude the entire state of North Dakota now pumps each day,” he said.

Six States Join TransCanada To Sue Obama Over Rejection Of The Keystone XL Pipeline - Six states have joined with TransCanada to sue the Obama administration over its rejection of the Keystone XL pipeline permit application.   TransCanada filed the suit in a federal court in Houston in January, alleging that the president had overstepped his constitutionally granted powers. The right to regulate trans-border commerce is reserved for Congress, the suit says.   But the president denied the permit based on national security grounds, which is well within his rights, Center for Biological Diversity attorney Bill Snape told ThinkProgress.  “They are basically asking the court to second-guess the president on a national interest decision,” Snape said.  The states seem to be alleging that the Obama administration rejected the Keystone XL pipeline permit application because the president thought his own reputation was on the line.  “In [President Obama’s] view, overriding the States and Congress is necessary to preserve his stature on the world stage and his bargaining position in ongoing or future multinational negotiations,” wrote the attorneys general of Oklahoma, Kansas, Montana, Nebraska, South Dakota, and Texas, who this week filed an amicus brief in support of a suit against the federal government by Keystone’s developer, TransCanada.   Snape says that may well have been part of the president’s intention — and that it’s well within his purview to do so. “This law allows the president to make this decision and he gets to make it based on his interpretation of national interest,” Snape said. This is not the first time Obama or his agencies — particularly the Department of the Interior and the Environmental Protection Agency — have been sued by the states for actions intended to reduce pollution or take action on climate change. The Waters of the United States Rule has been targeted. The Clean Power Plan is at the courts. The Mercury Rule went to the Supreme Court.

Shift in the Wind May Push Gargantuan Fort McMurray Fire Toward Tar Sands Facilities on Saturday  - Robert Schribbler - The Fort McMurray Fire is now so vast that it has both burned through and completely surrounded the city, its airport, and the neighboring community of Anzac 31 miles to the south. Spinning out blazes in a long tail across the green forested land of Canada, the fire now appears to cover about 40 miles of distance and 10 miles of width at its longest and widest points. A secondary fire to the northeast of the main blaze also appears to have lit off. And by the end of Saturday officials now believe the fire could cover an area the size of Rhode Island. Viewing the massive scope and extent of the blaze, one can see why an evacuation convoy of 1,500 vehicles — composed of members of the fire response team and a number of stranded evacuees from the tar sands industrial zone — was unable to flee the region earlier on Friday. BBC News reports indicated that the convoy encountered walls of flames 200 feet high and was forced to turn back to a city that finds itself surrounded with walls of flame on every side. This was the second time in two days that the evacuation convoy attempted to leave the fire zone and the second time that all ways out were found to be blocked by the fires. Thousands of people remain stranded in the fire zone to the north of the blaze and officials say it will take four days to move them once a clear pathway out is found RCMP reported that by late Friday a third attempt from the convoy, now swelling to 2,500 vehicles, finally made its way south away from the fire zone. GFS model forecasts indicate that temperatures will rise into the mid 80s Saturday. Yet another day of record hot readings for a climate change baked Canada. Winds are shifting toward the south. And very dry conditions will continue to worsen the already extreme levels of fire danger. With the fire now burning very close to the Athabasca oil production facility — a section of the tar sands that was evacuated yesterday due to fire encroachment — it appears that these winds will likely drive the fire toward and, possibly, into that industrial section. 

Alberta's 'Vicious' Wildfires Spread to Suncor Oil-Sands Site -- Wildfires raging through Alberta have spread to the main oil-sands facilities north of Fort McMurray, knocking out an estimated 1 million barrels of production from Canada’s energy hub. A cold front scheduled to pass through the area today may bring light rain that would help fire fighters battle the inferno. The blaze, which was forecast to expand to more than 2,500 square kilometers (965 square miles) in the next few days, grew slower than expected overnight and now covers less than 2,000 square kilometers, Travis Fairweather, a forestry spokesman, said Sunday. A cold front may bring a “bit of rain,” but will be proceeded by winds of up to 60 kilometers an hour (37 miles an hour), spreading the fire further. The out-of-control inferno may keep burning for months without significant rainfall. “Heavy winds push the fire,” he said. “Spread rates increase significantly.” The fire that began a week ago was encroaching oil-sands operations run by Suncor Energy Inc. and Syncrude Canada Ltd. and may soon cover an area the size of Luxembourg. While “creeping small flames” appear from satellite images to have reached the “doorstep” of the Suncor bitumen mining operations in the north, the blaze mostly expanded to the southeast and to the west, Fairweather said Sunday. The Suncor facility hasn’t been damaged, the company said in an e-mail Sunday. “It is a dangerous and unpredictable and vicious fire that is feeding off an extremely dry Boreal forest,” The wildfires have led to combined productions cuts of about 1 million barrels of oil a day, or about 40 percent of the region’s output of 2.5 million barrels, based on IHS Energy estimates. The cuts, and the mass exodus of more than 80,000 people from the fires raging in Fort McMurray, represent another blow to an economy already mired in recession from the oil price collapse.

Finally Good News For Canada's Raging Wildfire: Rain, Wind Conditions Push Blaze Away From Oil Sands - Cooler weather on Monday will help in firefighters  battle to get the Alberta wildfire under control. The fire, which has destroyed about 620 square miles and has been nicknamed "The Beast", has been burning since May 1 and now has more than 100 water-dropping helicopters flying over it. After expecting the fire to double in size over the weekend, light rains and cooler temperatures helped prevent that from happening. "This is great firefighting weather, we can really get in here and get a handle on this fire, and really get a death grip on it," said Alberta fire official Chad Morrison on Sunday. The fires have knocked out an estimated 1 million barrels a day, or about half the crude output from the center of Canada's oil sands region, and while the fire approached operations of Suncor Energy, Canada's biggest energy company, there was no damage as firefighters were able to hold the blaze southwest of the area. The good news, as far as the oil facilities and future production are concerned, is that the forecasts show that the winds have shifted, and with gusts of up to 31mph, is moving the fire east, away from the oil sands. Once the fires are under control, oil sands mining projects could be back to normal production levels in about a week, however projects that require steam to extract the oil could take two or more weeks depending on the start-up method and pressure requirements according to Morgan Stanley.Companies such as Suncor, Phillips 66, and Statoil ASA have declared force majeure, a provision that protects companies from liability for contracts that go unfulfilled. According to Bloomberg, Suncor has said that it has begun planning to restart production after moving more than 10,000 employees and their families out of the Fort McMurray area. The restart will happen once it's safe and when third-party pipelines are available. The city's water is undrinkable, its gas has been turned off, and its power grid is significantly damaged, so when that restart occurs depends on a number of factors.

Canada wildfire could be costliest natural disaster in its history - (Reuters) - Canadian officials on Sunday showed some optimism for the first time that they were beginning to get on top of the country's biggest wildfire, as cooler weather and light rain stopped the blaze from growing as much as feared and winds took the flames away from oil sands boomtown Fort McMurray. "It definitely is a positive point for us, for sure," said Alberta fire official Chad Morrison in a news briefing, when asked if the fight to contain the flames had a reached a turning point.  The wildfire scorching through Canada's oil sands region in northeast Alberta had been expected to double in size on Sunday, threatening the neighboring province of Saskatchewan, as it moved into its seventh day. But favorable weather helped hold it back, giving officials hope that they can soon begin assessing the damage to Fort McMurray, close to where the fire started, causing its 88,000 inhabitants to flee. "As more and more fire has burned out around the city and the fuel around the city starts to disappear ... we are starting to move into that second phase of securing the site and assessing the site," said Alberta Premier Rachel Notley, during the same media briefing.The broader wildfire, moving southeast through wooded areas away from the town, would still take a long time to "clean up," Morrison cautioned. Officials had previously warned that the fire could burn for months. Fort McMurray is the center of Canada's oil sands region. About half of the crude output from the sands, or one million barrels per day, had been taken offline as of Friday, according to a Reuters estimate. The inferno looks set to become the costliest natural disaster in Canada's history. One analyst estimated insurance losses could exceed C$9 billion ($7 billion).

Alberta officials say oil sands city saved from fire's worst (AP) — Alberta’s premier has declared Canada’s oil sands city has been largely saved and said a plan will be put together within two weeks so most of the 88,000 evacuees can return to their homes. At least two neighborhoods in Fort McMurray became scenes of utter devastation with incinerated homes leveled by a wildfire that the city’s fire chief called a “beast … a fire like I’ve never seen in my life.” But the wider picture was more optimistic as officials said 85 percent to 90 percent of the city remains intact, including the downtown district.  Alberta Premier Rachel Notley said about 2,400 homes and buildings were destroyed, but firefighters managed to save 25,000 others, including the hospital, municipal buildings and every functioning school. “This city was surrounded by an ocean of fire only a few days ago but Fort McMurray and the surrounding communities have been saved and they will be rebuilt,” Notley said. She said the fire continues to grow outside the city and now is about 790 square miles (2,020 square kilometers) in size. Notley said there will be a meeting Tuesday with the energy industry to discuss the state of their facilities and the impact on operations. The fire has forced as much as a third of Canada’s oil output offline and was expected to impact an economy already hurt by the fall in oil prices.

Suncor looks to restart oil-sands production after wildfires | Fuel Fix: Canada oil-sands producers including Suncor Energy Inc. could resume production within a week after the threat subsides from wildfires that cut as much as 40 percent of the region’s output. A quick restart depends on whether companies managed shutdowns properly and if power and pipeline infrastructure is unscathed, according to analysts at Wood Mackenzie Ltd. and IHS Energy. Suncor and Syncrude Canada Ltd., two of the biggest producers in the area that’s been ravaged by wildfires near Fort McMurray, Alberta, both said they managed safe shutdowns. Only one oil-sands site, Cnooc Ltd.’s Nexen operations, has suffered minor damage. “The best possible case, you’re probably looking at somewhere within a week to get them restarted,” said Harold York, vice president of integrated energy at Wood MacKenzie. Restarts will also depend on availability of workers after large-scale evacuations, which may be hindered given destruction of homes in the area, he said. If companies executed controlled shutdowns, that means bitumen has been cleared from the system so that restarts won’t be hindered, according to Kevin Birn, a director at IHS Energy in Calgary.

Factbox: Fort McMurray fire impact on Canadian oil market - Oil | Platts - Canadian crude prices continued to rise Friday as oil production remained shut in because of a wildfire, although companies were in the process of returning output. The fire, which started Sunday, caused a massive evacuation from the oil sands capital of Fort McMurray, Alberta, and has resulted in roughly 820,000 b/d of oil sands output being cut. The fire could potentially impact some 1 million b/d of bitumen production capacity from the Athabasca region, but work was underway Friday to restart the lost capacity once the fire abates. Light crude benchmark Syncrude Sweet Premium was heard bid at front-month NYMEX light sweet crude oil futures contract (WTI CMA) plus $2.35/b, up from minus 25 cents/b on Tuesday, before the production outages.Heavy crude benchmark Western Canadian Select was unchanged at minus $11.85/b, although that was up from an assessment of minus $13.45/b Tuesday.  Prices could have been higher if not for high crude inventories. In the US Midwest, for instance, where the bulk of Canadian crude exports arrive, stocks at 158.3 million barrels for the week ended April 29 were 45 million barrels above the five-year average, US Energy Information Administration data showed. Midwest refiners imported a record high 2.5 million b/d of Canadian crude in February, according to the EIA.  Canadian Natural Resources, which saw a "minor outage" at its 128,000 b/d Horizon oil sands facility due to pipeline stoppages, has now returned to normal production levels. CNR is the operator of the Horizon and Kirby oil sands mining facilities in the Fort McMurray area.

U.S. Cash Crude-Bakken grades jump to near 3-year high on Alberta wildfire shut-ins - Bakken differentials rose on Monday to the strongest in nearly three years as traders hurried to buy the crude on worries about supply constraints due to a raging wildfire in Canada's Alberta province. The move follows Syncrude Canada cutting estimated production volumes by some 35 percent in May after a wildfire forced the company to close its mines and upgrader operations over the weekend, sources said. U.S. Bakken for June settled at 40 cents a barrel over WTI from 35 cents a barrel below WTI on Friday, according to Shorcan Energy Brokers. That was the strongest since July 2013. Canadian crude prices climbed further on Monday as the wildfire entered a second week, with offline capacity estimated at around 1 million barrels per day. Light, sweet barrels in the U.S. Gulf got a boost, with traders expecting barrels to possibly move inland as a result of the production curbs. * Light Louisiana Sweet (WTC-LLS) for June delivery rose 20.5 cents to a midpoint of $2.13 and traded between $2.05 and $2.15 a barrel premium to U.S. crude futures. * Mars Sour (WTC-MRS (LSE: MRS.L - news) ) rose 3 cents to a midpoint of -$3.22 and traded between $3.20 and $3.25 a barrel discount to U.S. crude futures. * WTI Midland (WTC-WTM) rose 7 cents to a midpoint of -$0.13 and traded at a 10 cent a barrel discount to U.S. crude futures . * West Texas Sour (WTC-WTS) rose 17.5 cents to a midpoint of -$1.1 and traded at a $1.20 a barrel discount to U.S. crude futures. * WTI to East Houston traded at $1.75 a barrel over WTI. * ICE Brent July futures fell $1.74 to settle at $43.63 a barrel. * WTI June crude futures fell $1.22 cents to settle at $43.44 a barrel. * The Brent/WTI spread (WTCLc1-LCOc1) widened by 45 cents to settle at 40 cents.

Oil firms have 10 years to change strategy or face 'short, brutish end' -- International oil companies such as Shell and BP must completely change their business model or face a “nasty, brutish and short” end within 10 years, one of Britain’s most influential energy experts has warned. Paul Stephens, a fellow at Chatham House thinktank, said in a research paper the oil “majors” were no longer fit for purpose – hit by low crude prices, tightening climate change regulations and their own wrongheaded strategies. In the report, Stephens argues the only way forward for the companies lies in diversifying into green energy, drastically reducing their operations or consolidating through mega-mergers. “The prognosis for the IOCs [international oil companies] was already grim before governments became serious about climate change and the oil price collapsed … their old business model is dying,” said Stephens, a visiting professor at University College London. “In this new world, the only realistic option … lies in restructuring and realising (selling) many of their current assets to provide cash for their shareholders.” The death of these key fossil fuel providers would be an astonishing reversal in fortunes for powerful companies that have previously been accused of being climate change deniers and tools – if not makers – of foreign policy.

Argentina shale development moves forward, but still slow -   Platts - Argentina has the potential to become a net exporter of oil and natural gas from its huge shale resources, a task that will require large investments not just by majors but also a lot of junior players, executives said Monday. "If Argentina does things right, it could become a big exporter of oil and gas," Arturo Vilas, general manager of Canada's Miramar Hydrocarbons, said at the Argentina Shale Gas and Oil Summit in Buenos Aires. Argentina has among the world's largest shale oil and gas resources, and big companies like the country's state-run YPF, Chevron and Dow Chemical have started to put them into production, while ExxonMobil, Shell and Total are pursuing production pilots. The country is producing about 50,000 b/d of oil equivalent in shale oil, gas and liquids, according to Neuquen government data. Neuquen is a southwestern province that is home to the giant Vaca Muerta play and most of the country's shale drilling. There could be an increase in investment this year thanks to improved conditions for doing business in the country. The new right-of-center government of President Mauricio Macri, who took office in December, has returned the country to global financial markets by ending a 15-year sovereign debt default, expanding financing opportunities for companies. His administration has also raised most energy prices, lifted capital controls and scrapped trade restrictions.

Analysis: As LPG demand balloons, India to become more reliant on imports - A raft of government initiatives has propelled India's insatiable appetite for LPG to record highs, leading analysts to believe that growth is expected to hover close to double digit levels in the near to medium term as New Delhi intensifies its push towards cleaner fuels. But with LPG domestic demand growing at a much faster rate than output, the country, where refiners find it more profitable to focus on middle distillates rather than boosting LPG output, will be increasingly dependent on imports to meet its incremental consumption growth, analysts added. LPG demand in March hit a record high of 1.835 million mt, up 14.16% year on year, taking the cumulative demand in January-March 2016 to 5.254 million mt, up 11.28% year on year, data from India's Petroleum Planning and Analysis Cell showed. The growth in March meant that LPG consumption has recorded positive growth over 31 months in a row.Top officials of Indian oil companies and independent analysts recently told Platts that even though demand growth is unlikely to hold at those lofty levels, LPG demand will continue to grow around 7%-9% over the coming years.

GSPC in talks with ONGC on selling gas field stake: The Gujarat State Petroleum Corp (GSPC) said on Monday it is in talks with the country's top explorer Oil and Natural Gas Corp on selling a stake in its gas block off the east coast, to revive the challenging deep water field. The block, where the discovery of gas was announced in 2005 by Prime Minister Narendra Modi while leading his home state of Gujarat, was to start commercial production in 2011 but difficulties in drilling 5,000 metres below the seabed pushed back the plan by about five years. GSPC, controlled by the state government, has already invested about $3.6 billion in exploring and building infrastructure around the block but with little success, and now wants ONGC's help on funds and drilling expertise. GSPC says it now hopes to start commercial production from the Krishna Godavari field later this year, with an initial output of 70-80 million cubic feet a day (mcfd). "Commercial production is expected to start after the drilling, hydraulic fracturing and completion of the fifth development well (D5), tentatively by the end of October," GSPC said in a statement emailed to Reuters. GSPC had managed to extract around 23 mcfd since August 2014 from three wells it drilled using conventional drilling methods. To expedite recovery, the company has now migrated to hydraulic fracturing (fracking) - a technique popularised by U.S. shale drilling companies and in which fractures are created in rock formations using pressurised fluids. The fourth well is expected to start production by this weekend using the fracking method, which would cost $60-$70 million for each well and involve global oilfield services firms such as Halliburton and Schlumberger.

What's Next For Big Oil Now Brazilian President Rousseff Is Suspended? -- Brazilian President Dilma Rousseff has been suspended from office following a senate vote to initiate her impeachment trial on corruption allegations that lead back to state-run Petrobras, leaving vice-president Michel Temer to take over in the interim, while foreign oil companies wait anxiously to see what this will mean for the industry.Rousseff has denied any wrongdoing and refers to the impeachment process as a ‘’coup’’. Temer is an academic who has also been accused of corruption. He is expected to take office today. He may remain in office until the end of Rousseff’s term in 2018 if the senate votes this through. For now, however, the senate has voted only to suspend Rousseff for 180 days. Temer is expected to pursue privatization of state assets if he is left in office, and Brazil’s strong labor unions will fight this. An immediate strike has already been threatened by the labor union behind Transpetro—Petrobras’s transportation subsidiary—over Rousseff’s suspension. Other industry-related labor unions are also talking about strikes. For the oil industry, nothing is clear. While the industry is seeking reforms on a number of levels, including changes to rules that require state-run Petrobras to have a 30-percent operating stake in all sub-salt projects and changes to tough local content rules, nothing is likely to be decided until Rousseff’s status is definitive. At the same time, there were already indications that the oil industry was gaining ground with the current government. The day before Rousseff’s suspension announcement, Brazil said it was planning to push through new regulations any day that would allow companies other than state-run Petrobras to operate some sub-salt projects, according to anonymous sources cited by Reuters. These projects are part of the Subsalt Polygon—where the major discoveries have been—and presently only Petrobras can operate them.

Shell Nigeria shuts oil terminal as attacks cut production: (AP) — Shell is temporarily closing the terminal exporting Nigeria’s benchmark Bonny Light crude oil as militant attacks have cut production in Africa’s biggest petroleum producer. Shell refused to confirm labor union reports that the company is also evacuating workers from Bonga oilfield following a threat. A bomb attack last week closed a major Chevron facility. Shell’s Forcados export terminal has been shut since an undersea pipeline attack in February. In a statement Wednesday, Shell declared force majeure on Bonny exports effective 1100 GMT the day before to protect the company from contractual obligations, citing a leak on the Nembe pipeline. Pipeline operator Aieto Exploration blamed sabotage or an attack. Militants want a bigger share of Nigeria’s oil wealth. Nigeria’s production is down to 1.7 million barrels a day from 2.2 million.

Nigeria's NNPC records 3,153 vandalized points on oil pipelines over 12 months - Oil | Platts -- State oil firm Nigerian National Petroleum Corp said it recorded 3,153 punctured points on its oil pipelines in the 12 months to end March, adding that continued crude and oil products losses were draining it financially. "Incessant vandalism and products theft have continued to destroy value and put NNPC at [a] disadvantaged competitive position," the NNPC said. NNPC recorded an operating deficit of Naira 24.23 billion ($123 million) in February and Naira 18.89 in March, it said, on the back of attacks on the Forcados crude export line that resulted in the loss of the entire oil export revenues of its subsidiary, NPDC. NNPC said the crippling of the 48-inch Forcados export line resulted in the shut-in exports of 300,000 b/d of the Forcados crude grade since February.NNPC manages the government's average 57% interest in joint ventures with foreign oil firms including Chevron, Eni, ExxonMobil, Shell and Total. It said that due to dwindling revenue, it used $4.3 billion, or 95.9% of total export earnings between April 2015 and March 2016, to fund joint venture cash calls, thus transferring little into the so-called Federation Account.

Nigeria rules out negotiations with oil pipeline attackers - - Nigerian military high command Wednesday ruled out engaging militants sabotaging oil production facilities in the Niger Delta, saying it would rather deploy "every available resources to deal decisively" with the militants. Recent attacks on Nigeria's oil facilities by Niger Delta militants have caused Nigerian production to fall by 12% to around 1.67 million b/d at the end of April, according to S&P Global Platts OPEC survey data. Foreign oil firms operating in the Niger Delta have also started evacuating some of their workers to reduce the risk to their lives. "The military will employ all available means and measures within its Rule of Engagement to crush any individual or group that engages in the destruction of strategic assets and facilities of the government in the Niger Delta [and] they will stand to regret the consequences of their actions," military spokesman Rabe Abubakar said in a statement."The whole world has seen what they [militants] are causing in terms of economic terrorism against the nation and would be treated as criminals in line with the laws of the land." Violence in Nigeria's vast southern oil patch had subsided after a 2009 government amnesty to militants halted a spate of attacks on oil installations. The administration of President Muhammadu Buhari, which has already cut funds for the amnesty program, said it would end next year. The militants, who call themselves the Niger Delta Avengers, have renewed demands for control of the region's oil. The Nigerian Navy said late Tuesday it had destroyed two illegal oil refineries located in the creeks of the Niger Delta.

Nigeria to deregulate domestic gasoline prices to woo importers: minister - The Nigerian government will deregulate the domestic pump price of imported gasoline in a bid to encourage private marketing companies to import more, minister of state for petroleum Emmanuel Kachikwu said late Wednesday, as the country seeks to end months of crippling fuel shortage. Kachikwu said on state television that the national fuel pricing regulatory body, the Petroleum Products Pricing Regulatory Agency, would announce Thursday a new price band not above Naira 145/liter ($0.74/liter), which fuel marketers would not be permitted to exceed. "In order to increase and stabilize the supply of the product any Nigerian entity is now free to import the product, subject to existing quality specifications and other guidelines issued by regulatory agencies," Kachikwu said. The government previously maintained a regulated price of Naira 86.50/liter for gasoline, but private marketers said this was not enough to cover the cost of imports, which had already been hiked by tight access to foreign exchange as well as high bank charges.

The OPEC Epoch is Over – Where are oil prices headed now? -- The fate of oil companies and nations hangs in the balance of oil prices. Russia could go broke. Some think that’s by US design. Saudi Arabia could experience its Arab Spring if oil prices remain too low too long. And OPEC is dead. That’s the biggest news in this new century for oil. The House of Saud has stated clearly many times now and again this week in an even more emphatic manner that it intends to move the oil market from decades of OPEC price manipulation to a raw supply-and-demand equation. Rigging the price of oil was the raison d’être of the cartel known as the Organization of Petroleum Exporting Countries, and that function has now ended. But people are slow to get their heads around such big news. Saudi Arabians enjoyed a tax-free environment as long as oil paid the bills and cheap subsidized fuel. Huge revenue from oil enabled constant pay-offs to the powerful that stabilized the state. All of that has ended or is at risk of ending as the Saudis seek to rebalance their state budget in the face of huge declines in revenue. . It’s fraught with peril for all. Among oil companies and banks, it’s not just the little leaguers that are hurting. Royal Dutch Shell reported an 83% decline in profits year on year. Most oil companies reported significant drops in profit for the first quarter of 2016, though many saw their stock values soar upon reporting because investors had feared an even worse hit. Their banks have reported the same.  As I speculated in a recent article, the oil market may be entirely rigged by central banks. We know from experience the Federal Reserve will buy anything in any quantity to save its member banks. So, if low oil prices are hurting major banks, why wouldn’t the Fed start buying oil … if nothing else, through proxies? And why would it tell us if it did? We learned months ago that trouble in the tar pits was bad enough that the Dallas Federal Reserve Bank was telling its member banks not to foreclose on bad oil loans because they’d just drown themselves in oil debt if they started writing down their balance sheets to match the fire-sale values they’d be creating by foreclosing.

WTI Crude Tumbles To $43 Handle After Large Cushing Build -- On the heels of downward price momentum from positive headlines out of Alberta with regard the wildfires, Genscape has just reported a forecast 1.4 million barrel build at Cushing - significantly above expectations and recent activity. This has pushed WTI crude further below the pre-Saudi oil minister levels and back to a $43 handle...

Oil Jumps Despite Saudi Plans For "Significant Output Growth"; Kuwait Unveils Plans For Record Production Surge -- A day after oil tumbled to the lowest level in weeks, it has once again started to climb, ignoring the changing dynamic in the oilsands region where the fire has now moved away from critical Canadian oil infrastructure, and is instead focusing on concerns about supply disruptions not just out of Canada but also a series of attacks on Nigeria's oil infrastructure which pushed the country's crude output close to a 22-year, cumulatively knocking out 2.5 million barrels of daily production. However, two stories that oil traders are ignoring in today's action is the latest out of Saudi Arabia where Saudi Aramco, the state oil company, announced it was raising production to capture more customers as it pushes ahead with what could be the world’s biggest stock market listing next year the FT reported earlier. Additionally, Kuwait's head of research at state-owned Kuwait Petroleum said the country aims to produc a record 4 million a barrels a day by 2020, a major increase of nearly 50% compared to its recent 2.8mmbpd output recorded in March. First, back to Saudi Arabia, where in some of the first comments since a major government reshuffle at the weekend, Saudi Aramco chief executive Amin Nasser emphasized the company’s willingness to compete with rivals, putting oil producers from regional adversary Iran to US shale producers on notice. “Whatever the call on Saudi Aramco, we will meet it,” he said during a rare media visit to the headquarters of the state oil company in Dhahran. “There will always be a need for additional production. Production will increase upward in 2016.” As we noted over the weekend when analyzing the recent Saudi oil minister succession, Mohammed bin Salman, deputy crown prince, hinted that the kingdom could easily accelerate output to more than 11m b/d as Iran, Riyadh’s regional rival, tries to attract customers after years of sanctions. Saudi Aramco, which pumps more than one in every eight barrels of crude globally, is at center of a reform program being pushed by Prince Mohammed, who has emerged as the man holding the main levers of power in Saudi Arabia.

Oil Slides After Crude Inventory Surges Most In A Month -- Following Genscape's 1.4mm build estimate at Cushing, and expectations of a 1.1mm build, API reported a 1.46mm build. Chatter across trading desks was that API data had been leaked and that is what drove oil prices higher (after their Genscape-driven dump) which proved 100% incorrect as total crude inventories soared a shocking 3.5mm barrels (against expectations of no change) - the most in 5 weeks. Gaosline built less than expected and Distillates saw a draw but the damage was done and prices of WTI started to give back the days gains. API:

• Crude +3.45mm (Exp unch)
• Cushing +1.46mm (+1.1mm exp)
• Gasoline +271k (+710k exp)
• Distillates -1.36mm

The biggest weekly  build in 5 weeks...

API Reports Another 3.5 Million Barrel Build in Oil Inventories (Video) -- The EIA Report is tomorrow, but under any interpretation of the API numbers the Bulls will still be waiting for their big Drawdown EIA Report. It looks like we just keep replacing US Production with OPEC Production, namely Saudi Arabia, Iraq and Iran excess production.

OilPrice Intelligence Report: Increasing Outages Continue To Stabilize Oil Prices: Oil traders have largely dismissed the massive wildfires in Canada, which caused the outage of more than 1 million barrels of oil production per day. Instead, the markets saw that the wildfires might not spread as much as was previously thought over the weekend, and the fires remained at a distance from some major sources of production. Again, as we said last week, the supply disruptions, for now, have more to do with the evacuation of personnel, and not lasting damage to facilities. The outage is very substantial, but unless it lasts much longer than expected, the oil markets should not be affected by the events too much. Meanwhile, reports from Genscape suggest that oil storage levels continue to climb, a bearish signal for oil. Crude prices shot up in early trading on May 9 but WTI lost more than 2 percent by Monday’s close and Brent dropped by nearly 4 percent. The big news from the weekend came from Riyadh, where long-time oil minister Ali al-Naimi was removed in favor of the former chief of Saudi Aramco, Khalid al-Falih. The 80-year old Naimi was expected to eventually leave power, but the move came somewhat as a surprise. The reshuffling caused some uncertainty in the oil markets, as the loss of Naimi’s steady hand makes interpreting Saudi oil policy a bit more tricky. On the other hand, the move ensures that Saudi Arabia will continue to pursue its current strategy of elevated production and fighting for market share. Coordinated action within or outside of OPEC is unlikely. Ultimately, little changes in terms of supply and demand for oil.

Oil Spikes After DOE Reports Huge Inventory Draw, Production Drop -- Following Genscape and API's 1.4mm barrel build estimates at Cushing, DOE confirmed a 1.52mm build. However, API's 3.45mm build overnight was shockingly opposed by DOE's 3.41mm inventory draw - the 3rd biggest weekly draw of the year (as we suspect Canadian issues are impacting levels). Gasoline also saw an unexpected draw and Distillates drew down. Following last week's big production drop (Alaska), US crude production fell once again - for the 16th week in a row. This combination of a surprise draw and lower production shocked prices of WTI above $45.50. DOE:

• Crude -3.41mm (+2.9mm whisper)
• Cushing +1.52mm (+1.45mm whisper)
• Gasoline -1.23mm (+162k whisper)
• Distillates -1.67mm (-1.146mm whisper)

DOE bucked the trend and reported a huge draw, 3rd biggest weekly draw of the year...

Oil closes at $46.23, a 6-month high, after first US crude draw in six weeks: Oil prices jumped more than 3 percent on Wednesday after the U.S. government reported crude inventories fell unexpectedly for the first time since March, adding to concerns over supply disruptions in Canada and Nigeria. The U.S. Energy Information Administration (EIA) said crude inventories fell 3.4 million barrels last week, compared with analysts' expectations for an increase of 714,000 barrels and the American Petroleum Institute's (API) build of 3.5 million barrels in preliminary data issued on Tuesday. The EIA report "has been quickly viewed as bullish, with the crude draw just about exactly opposite to what API had," said Dominick Chirichella, senior partner at the Energy Management Institute in New York. Motor gasoline stocks also fell 1.2 million barrels, and distillate fuel inventories were down 1.6 million barrels. International Brent crude oil futures were up $1.98, or 4.3 percent, at $47.51 per barrel. U.S. West Texas Intermediate (WTI) crude futures settled 3.5 percent higher, or $1.57, at $46.23, a six-month high.

Global oil markets 'heading towards balance': IEA: Global oil markets are heading towards a long-awaited equilibrium, according to updated supply and demand data from the International Energy Agency (IEA). The IEA said in its latest oil market report on Thursday that a rebalancing of supply and demand was starting to become evident from the existing supply and demand data which showed that global oil supply was starting to look more measured. Demand was resilient and a surplus of oil could start to shrink later this year, it added. "Global oil supplies rose 250,000 barrels a day in April to 96.2 million barrels a day (mb/d) as higher OPEC output more than offset deepening non-OPEC declines," the IEA said in its monthly report. However, it noted that year-on-year, "world output grew by just 50,000 barrels a day in April versus gains of more than 3.5 million barrels a day a year ago" and noted that 2016 non-OPEC supply is forecast to drop by 800,000 barrels a day to 56.8 mb/d.  Despite the higher output from the 12-country OPEC group, the IEA noted that falling non-OPEC supply and rising demand could cause oil stock growth to decline in the latter half of the year helping the supply and demand dynamic – and crucially, oil prices – to return to a more stable footing.

US crude falls after rising to top $47 a barrel: U.S. crude gave up gains after rising to a 2016 intraday high on Thursday, having earlier been supported by data from the International Energy Agency (IEA) showing tightening supply, in addition to a surprise drop in U.S. crude inventories. U.S. West Texas Intermediate (WTI) crude futures were 33 cents lower at $45.90 at 11:32 a.m. ET (1532 GMT) on Thursday, after briefly turning negative and having earlier hit $47.02, the highest level since Nov. 4. International Brent crude futures were trading at $47.08 per barrel, down 52 cents from their last settlement.The IEA on Thursday raised its 2016 global oil demand growth forecast to 1.2 million barrels per day (bpd) from its April forecast of 1.16 million. It also noted that output from Nigeria, Libya and Venezuela is down 450,000 bpd from a year ago. Analysts said that while the IEA data was helping to support prices, the gradual return of Canadian oil sands output and the expectation that prices are nearing levels that could trigger the return of some U.S. production might cap gains. "The only thing that could throw a spanner in the works to prevent oil from rallying further would be the (U.S.) production,"

Oil up 1 percent after swing on mixed data; U.S. crude at Nov highs | Reuters: Oil prices rose 1 percent in volatile trade on Thursday, with U.S. crude hitting six-month highs as investors weighed a forecast for tighter global supplies against signs of another storage build at the hub for U.S. crude futures. Worries of a major outage in Nigerian crude also boosted the market, some traders said. "It was a mixed bag, with both longs and shorts trying to defend positions based on the data that appealed most to them. The bulls prevailed," said Phil Flynn, analyst at the Price Futures Group in Chicago. Brent crude futures LCOc1 settled up 48 cents at $48.08 per barrel. U.S. crude's West Texas Intermediate (WTI) futures CLc1 rose 47 cents to settle at $46.70. It hit a six-month high of $47.02. With that, Brent was on track for a weekly rise of 6 percent and WTI 4 percent, continuing a broad uptrend that has added about $20 to a barrel from lows in January and February. WTI could advance to almost $51 in the near-term "on pure technical merits", said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates. "But from a longer-term perspective, we still see this market setting up for a hard fall next month" from a potential dollar rally or weak Chinese economic data, he added.

Oil demand growth strengthens in Q1 — IEA -- The International Energy Agency is more likely to raise forecasts for oil demand than cut them because of a booming global gasoline market and India’s increasing thirst for crude. Demand growth in the first three months of 2016 was 200,000 barrels a day higher than earlier anticipated at 1.4m b/d, the world’s leading energy forecaster said on Thursday, with India responsible for almost a third of the upward revision. “India saw the largest volume growth globally,” said the IEA in its closely watched monthly oil market report. “With demand at 4.4m b/d in the first quarter, India is the world’s fourth biggest oil consumer behind the US, China and Japan.” Although the IEA left its forecast for global demand growth unchanged at 1.2m b/d for the year, it said the risks to future forecasts was to the upside, citing gasoline demand growth which it said was growing “strongly in nearly every key market”. Preliminary US government data earlier this week showed petrol demand in the world’s largest oil consumer had hit 9.65m b/d last week, the highest since last summer and approaching record levels reached before the financial crisis. Rising demand is one of the factors that could help accelerate the rebalancing of the oil market, which has been weighed down by oversupply for almost two years. After increasing by 1.3m b/d in the first half of 2016, the IEA sees global oil stocks rising by just 200,000 in the remainder of the year as supply and demand come into line. On the demand side, the IEA said it had revised its forecast for the decline in non-Opec production this year to 800,000 b/d from 700,000 b/d previously because of devastating wildfires in Canada and unscheduled shutdowns in Ghana and India. There have also been disruptions to supply in Opec countries such as Libya, Nigeria — Shell this week declared force majeure on Bonny Light output — and Venezuela, where it has been difficult to maintain operations in the face of power cuts.

Global oil demand surprises on the upside: Kemp | Reuters: Global oil consumption is growing much faster than most analysts expected at the start of the year but increases in demand remain very uneven geographically and by fuel. World oil demand increased by 1.4 million barrels per day (bpd) in the first three months of 2016 compared with the same period in 2015, the International Energy Agency said on Thursday ("Oil Market Report", IEA, May 2016). First-quarter consumption grew faster than the agency predicted at the end of last year, when it forecast growth of 1.2 million bpd between January and March ("Oil Market Report", IEA, December 2015). For the time being, the IEA has left its forecast for average consumption growth this year at 1.2 million bpd, noting "headwinds" as a result of sluggish global growth, which implies a slowdown later in 2016. But coupled with large crude supply interruptions from Canada, Nigeria, Libya, Iraq and Venezuela, and a slowdown in U.S. shale, the agency predicts the "the direction of travel of the oil market (is) towards balance". The agency expects the global supply-demand surplus to narrow sharply from 1.3 million bpd in the first six months to just 200,000 bpd in the second half of 2016.The strongest demand growth is coming from India and the United States, where cheaper prices are encouraging motorists to consume record quantities of gasoline. India's consumption of petroleum products topped 4 million bpd for the first time in the 12 months ending in April, according to data from the Ministry of Petroleum and Natural Gas.

OPEC Sees Rival Oil Production Declining as Markets Rebalance - WSJ: Shrinking U.S. output and massive cuts to investment in new projects will reduce the global oil glut over the course of this year, the Organization of the Petroleum Exporting Countries said Friday, potentially pushing world-wide oil production lower than demand in 2017. OPEC forecast that production by countries outside the cartel will help rebalance a global crude market that is seen prices fall by more than half since 2014, even though OPEC has declined to rein in its own production. OPEC said in its monthly report that non-OPEC production will fall by 740,000 barrels a day from 2015 to 56.4 million barrels a day this year—10,000 barrels a day less than OPEC previously predicted. Most of the decline will stem from cuts that U.S. oil producers are making to cut production that is become unprofitable with the oil-price rout. “Outside the U.S., there have been consistent signs of declines in non-OPEC production, which should likely flip the global oil market into a net deficit in 2017,” OPEC said.OPEC forecast U.S. production this year will fall by 431,000 barrels a day from 2015 to 13.56 million barrels a day. The rest of the predicted non-OPEC decline will come from lower investments and production delays in China, Mexico, the U.K., Kazakhstan and Colombia. Overall, oil companies world-wide will cut their exploration and appraisal investments during 2016, 2017 and 2018 to $40 billion annually, half the average annual spending of 2012 through 2014, the group said.The reduction in non-OPEC production is cushioning the effect of OPEC’s rising output. A meeting between countries in April to discuss a production freeze collapsed after Saudi Arabia said it would only limit its production if Iran did too, according to officials from Saudi Arabia and other countries involved in the talks. Iran, which was released in January from international sanctions curbing its oil sales, hasn’t agreed to production limits. Its oil output in April was 3.45 million barrels a day—up 198,000 barrels from a month earlier, OPEC said. That accounted for the cartel’s entire output boost from March. Overall OPEC production last month was up 188,000 barrels a day, to 32.44 million barrels, from a month earlier.

OilPrice Intelligence Report: Oil On Track To Balance Later This Year: Oil prices held steady this week despite a rash of news that emerged. Canada lost more than 1 million barrels per day of oil production, but several oil sands companies are working with the Alberta government to bring at least some production back online as quick as possible. Oil prices took a breather though earlier in the week when it became apparent that the fires were held at a distance from most oil sands facilities. But, by Wednesday, prices ticked up again when the EIA reported a draw in crude oil stocks, combined with more losses in production.Oil stocks fell by 4 million barrels last week, the first drawdown in more than a month. Weekly production figures dropped again, down another 23,000 barrels per day. U.S. oil production now stands at 8.8 million barrels per day (million b/d), down about 900,000 barrels per day from the April 2015 peak. The weekly declines have been extremely consistent, with drop offs only varying in degree. By all accounts, the losses will continue through the rest of the year.  Cnooc’s Nexen Energy warned its shareholders and customers that it may not be able to fulfill contracts because of the outage at its facility. Nexen declared force majeure for its May production, joining at least three other companies. The supply disruptions are significant, amounting to well over 1 million b/d. But to reiterate, this disruption probably won’t last too long.  Although the volume of oil disrupted in Nigeria is smaller than in Canada, the problems facing oil producers in Nigeria are much more serious. The Forcados export terminal remains offline, blocking 250,000 barrels per day of exports. Several pipelines have been attacked by the militant group Niger Delta Avengers. The group attacked a platform operated by Chevron (NYSE: CVX), forcing supply offline. Royal Dutch Shell withdrew staff from some of its projects. Altogether, Nigeria has roughly 500,000 barrels per day offline, taking production down to more than twenty-year lows. Shell also declared force majeure on Tuesday for Bonny Light because of an explosion at a pipeline, shutting down the conduit. The outage could affect 200,000 barrels per day. Separately, ExxonMobil (NYSE: XOM) said that mechanical difficulties at one of its drilling rigs damaged a pipeline that it operates in conjunction with the state-owned Nigerian National Petroleum Corp. (NNPC). The malfunction caused an oil spill and some supplies were interrupted. The problem adds to the long list of woes facing Nigeria, which is reeling from low oil prices and a floundering economy.

Is Glencore Manipulating The Price Of Oil: Swiss Trader Holds Over 30% Of June Brent Supply While oil bulls were delighted by yesterday's DOE news of an inventory drawdown refuting the prior day's API news of a major build, what was ignored was the build in Cushing storage (more on that shortly), which according to Genscape hit a utilization just shy of 80%, or more than 70 million barrels, a record high since Genscape began monitoring the hub in 2009. To be sure, the risk of running out of land storage has been one we have previously discussed on various occasions and hinted that one way this is being circumvented is with substantial amounts of oil being stored on tankers at sea, mostly by commodity trading companies, who take advantage of the market's contango to generate month to month profits as producers choose to keep their product away from the market until prices rise.  As it turns out, not only is this the case, but according to Reuters, one particular energy trader - a name well-known to Zero Hedge readers - Glencore, has built up a massive inventory stake in the Brent market where it now holds an unprecedented 30% position in Brent, which it is holding for offshore storage in its tankers in hopes of pushing the price of Brent, and thus the entire energy complex higher, by limiting supply.  As Reuters details, citing trade sources, Glencore has built up one of the largest positions in part of the Brent crude market which acts as a benchmark for global oil prices since the start of the year. For those unfamiliar, the Brent market is based on four North Sea crude oils - Brent, Forties, Oseberg and Ekofisk, or BFOE. According to Reuters Glencore is quietly cornering the Brent market, by holding more than a third of the 37 BFOE cargoes loading in June and is expected to acquire more. The report details that Glencore has been acquiring June BFOE cargoes through the "chains" - a forward market in which cargoes soon to be assigned loading dates are traded, according to trade sources citing data from pricing agency Platts."It's definitely a bold statement of market view by Glencore," said a trading source with another company operating in the North Sea. "You'd have to be in their heads and in their books to know exactly what's going on."

Genscape: "Inventories At Cushing Are Close To Maximum Operating Capacity" - Cushing, OK, crude inventories reached a record high May 3, 2016 of more than 70mn bbls after refinery outages in the U.S. Midcontinent displaced barrels to both storage tanks and the U.S. Gulf Coast. Without significant new storage capacity, Midcontinent stocks could reach maximum operating capacity this year, according to Genscape. Cushing inventories increased 1.3mn bbls week-on-week following the spring maintenance season, which also caused Patoka, IL, stocks to climb 1.4mn bbls to a record high above 11mn bbls week ending April 29, 2016. Meanwhile, along the Gulf Coast, waterborne loadings to international and domestic destinations recently hit a 2016 high while stocks increased in the Midcontinent. Inventories at Cushing are close to maximum operating capacity, and on May 3, 2016 reached utilization just shy of 80 percent, a record high since Genscape began monitoring the hub in 2009. Genscape has never observed capacity utilization higher than 80 percent based on historical data, though utilization may breach 80 percent depending on the utilization of merchant capacity, or capacity that is leased by an owner to other users. Utilization of operational capacity has remained above 70 percent at Cushing since November 2015. Storage capacity at six of 16 operators at Cushing was utilized above 80 percent as of May 3, 2016. There is little help on the horizon from new storage capacity to prevent Cushing from hitting maximum operating capacity. There are two tanks under construction at Cushing, totaling 540,000 bbls. No tank construction projects are underway at Patoka.

US rig count drops 9 this week to 406, another all-time low | The Seattle Times: (AP) — The number of rigs exploring for oil and natural gas in the U.S. dropped by nine this week to 406, another all-time low amid depressed energy prices. A year ago, 888 rigs were active. Houston oilfield services company Baker Hughes Inc. said Friday 328 rigs sought oil and 86 explored for natural gas. One was listed as miscellaneous. Among major oil- and gas-producing states, Texas declined by seven rigs, Louisiana was down three and North Dakota, Oklahoma and Wyoming each fell by one.New Mexico gained two rigs and California one. Alaska, Arkansas, Colorado, Kansas, Ohio, Pennsylvania, Utah and West Virginia were all unchanged. The U.S. rig count peaked at 4,530 in 1981. The previous low of 488 set in 1999 was eclipsed March 11, and has continued to slide.

US Rig Count Continues To Crash - The total US rig count declined yet again this week, down 9 to 406 - a new record low. The last four times rig counts collapsed anything like this, the US economy was in recession. Oil rigs dropped 10 to a new cycle low at 308, but appear near a turning point if lagged oil prices remain any indication...

U.S. Oil Rig Count Falls by Ten in Latest Week - WSJ: The U.S. oil-rig count fell by 10 to 318 in the latest reporting week, according to oil-field services company Baker Hughes Inc., deepening an extended 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 one in the latest week to 87. The U.S. offshore-rig count was 22 in the latest week, down two from the previous week and down 12 from a year earlier. Crude oil prices fell on Friday as investors took profits following Thursday’s steep gains and the dollar added to its recent rally. Oil hit fresh six-month highs on Thursday in part from a bullish report on supply and demand from the Paris-based International Energy Agency. It focused on recent supply outages and strong demand world-wide, which helped revive oil’s rally in the past week. But many of those supply disruptions are temporary, and the market has effectively accounted for them, making this a logical time for some to cash out. U.S. crude was recently down 1.2% to $46.14 a barrel.

$100 Trillion Shift From 'Just-In-Time' To 'Just-In-Case' - This article provides indicators of a $100 trillion market shift from "Just-in-Time" to "Just-in-Case" in transport/energy investments. Based on the "Extra Energy Tooth" following US peak oil in 1970, this will push all energy prices higher for 10 years:

• Saudi Arabia announced a $2 trillion to their "post-oil era" fund.
• China recently announced a $50 trillion plan to deploy solar and wind energy networks.
• The American Society of Civil Engineers Report Card on Infrastructure grades the US with a D+. They estimate investments of $3.6 trillion are required.
• "Reed Hundt, former chairman of the Federal Communications Commission, compared the switch from fossil fuels to clean energy with the 1990s transition from analog technology to digital technology - ' a feat that took more than a trillion dollars of U.S. investment during a period of eight years. If we invested that much money in clean energy, he argued, we could similarly transform our energy system in the next eight years.'"
• The Physical Internet® will be built to change urban mobility. My guess is this market is about $5 trillion in the US and $25 trillion in the world. See payback in the Physical Internet section.
• In October 2015, 193 nations signed the Sustainable Development Goals.

The current "Just-in-Time" market psychology is focused on improving inventory turns to minimize costs to the oil companies and prices to customers. It pays little attention to the risks of outages.  The "Just-in-Case" market psychology is focused on minimizing risks of supply disruptions.

Oil "Rebalancing" In Jeopardy After Iran Output Soars To Pre-Sanction Levels, Russia "Pours Cold Water" On OPEC Forecast -- Earlier today, the OPEC released its latest monthly forecast which echoed what the IEA said yesterday, as the organization which Roseneft CEO Sechin said has "practically stopped existing", said shrinking U.S. output and massive cuts to investment in new projects will reduce the global oil glut over the course of this year, potentially pushing world-wide oil production lower than demand in 2017. In the report, OPEC was eager to call the early demise of its non-OPEC competitors, and predicted that production outside of the (defunct) cartel countries will fall by 740,000 barrels a day from 2015 to 56.4 million barrels a day this year—10,000 barrels a day less than OPEC previously predicted. Most of the decline will stem from cuts that U.S. oil producers are making to cut production that is become unprofitable with the oil-price rout. OPEC forecast U.S. production this year will fall by 431,000 barrels a day from 2015 to 13.56 million barrels a day. The rest of the predicted non-OPEC decline will come from lower investments and production delays in China, Mexico, the U.K., Kazakhstan and Colombia. Overall, oil companies world-wide will cut their exploration and appraisal investments during 2016, 2017 and 2018 to $40 billion annually, half the average annual spending of 2012 through 2014, the group said. It said that “outside the U.S., there have been consistent signs of declines in non-OPEC production, which should likely flip the global oil market into a net deficit in 2017." In other words, OPEC thinks that OPEC's strategy to cut non-OPEC production is working.  As such, OPEC believes that production by countries outside the cartel will help rebalance a global crude market that is seen prices fall by more than half since 2014, even though OPEC has declined to rein in its own production. Ironically, as non-OPEC production may (or may not) shrink by 740,000 barrels, Iran alone has already added that amount of production and then some.

Saudi Arabia Ousts Longtime Oil Minister - — Saudi Arabia on Saturday announced the ouster of its longtime oil minister as part of a larger ongoing government shakeup.A royal decree announced that Ali al-Naimi has been replaced by former Health Minister and Saudi Aramco board chairman Khaled al-Falih.Al-Naimi has long been a pillar of Saudi oil policy, leading the Ministry of Petroleum and Mineral Resources since 1995. Prior to that role he'd served as the president of oil giant Aramco.Under a new Saudi leadership led by King Salman, the king's son Deputy Crown Prince Mohammed bin Salman has largely been overseeing Saudi economic policy along with a handful of new ministers. The changes announced Saturday come as the government plans wide-ranging reforms aimed at overhauling the Saudi economy amid lower oil prices that have eroded state revenues.Saudi Arabia's dominant market share and historical ability to influence prices by loosening or tightening its taps gave al-Naimi exceptional influence at meetings of the oil cartel OPEC, where the kingdom is by far the largest producer and de facto policy-maker. His brief utterances on the sidelines of OPEC meetings often had the power to swing global oil prices.AdvertisementContinue reading the main story He has presided over a controversial strategy of keeping production levels high despite the drop in prices over the past two years in an effort to drive more expensive producers in the U.S. and elsewhere out of the market. That has led to a glut of supply.At a talk in February in Houston, he stood by that strategy, arguing that cuts by lower-cost producers like Saudi Arabia would simply subsidize higher-cost ones."The producers of these high-cost barrels must find a way to lower their costs, borrow cash or liquidate," he said in Houston. "It sounds harsh, and unfortunately it is, but it is the more efficient way to rebalance markets."

Oil Shocker: Saudi Arabia Fires Powerful Oil Minister al-Naimi In Dramatic Power Reshuffle - For years, Ali al Naimi was the most important person in the world of oil: the former CEO of Saudi Aramco ascended to the post of Saudi oil minister in 1995, and over the past 21 years had the power to send the price of oil soaring or plunging with one word. To be sure, over the past two years it was mostly plunging because as is well-known, Saudi Arabia's policy ever since the 2014 Thanksgiving OPEC meeting in which Saudi Arabia broke off from the rest of the petroleum cartel to pursue its intention of putting US shale and high cost OPEC production out of business. Then things unexpected, and dramatically, changed in April when Bloomberg published a detailed interview on the present and future of Saudi oil policy, which however took place not with al Naimi but with a young man few had heard of: Deputy Crown Prince Mohammed bin Salman, barely 30 years old, who just happens to be the favored son of Saudi Arabia's new King Salman who took control one year ago. For oil watchers Doha was not so much about OPEC oil production, but about a huge power move that had just taken place in Saudi Arabia, as a result of which al Naimi had become irrelevant overnight.  The FT confirmed as much:  "the episode has left Ali al Naimi, the kingdom’s technocratic oil minister for the past 21 years, looking increasingly sidelined. While the Saudi royal family has always had the final say on oil policy, rarely has a member spoken so publicly — or freely — on its direction. Delegates from other countries had been assured Mr Naimi was there to deliver a deal. “Saudi Arabia’s oil policy is now firmly in the hands of Deputy Crown Prince Mohammed bin Salman,” said Sean Evers, managing partner of Gulf Intelligence in Doha." This is all came to a stunning culmination moments ago, when Al Arabiya reported the shocking, if inevitable news, that Saudi Arabia has fired long-serving oil minister Ali al-Naimi, on Saturday. According to the WSJ, Naimi would be replaced with Khalid al-Falih, chairman of state oil company Aramco.

Saudi Arabia government overhaul sees oil minister removed - BBC News: Saudi Arabia's King Salman has removed the country's veteran oil minister as part of a broad government overhaul. Ali al-Naimi has been replaced after more than 20 years in the role by former health minister Khaled al-Falih. Saudi Arabia, the world's largest crude exporter, unveiled major economic reforms in April, aimed at ending the country's dependence on oil. About 70% of its revenues came from oil last year, but it has been hit hard by falling prices. The government shake-up, announced in a royal decree, sees a number of ministries merged and others, such as the ministry of electricity and water, scrapped altogether. A public body for entertainment is being created, and another for culture. King Salman's son Prince Mohammad directs the country's economic policy, and Mr al-Naimi's removal is an indication that he wants tighter control over the commodity,  For 20 years, Ali al-Naimi was regarded as the most powerful figure in the global oil industry. He ran the biggest exporter of crude, Saudi Aramco, and was seen as being able to drive the price of oil on the markets through the producers' group Opec. Over the past few years, he has been involved in a battle to protect Saudi Arabia's share of global oil sales in the face of competition from newer producers in the US. His refusal to cut oil production led to a glut of supply - more than the market needed. This resulted in a sharp fall in the price of oil, and so cheaper petrol at the pumps. It has also meant the Saudi kingdom has earned less money. Ali al-Naimi has characterised this as a fight to secure oil sales in the long term, one he hopes Saudi Arabia will win and US fracking companies will lose. But it is a gamble. The fall in the price of oil has been much more extreme - and longer-lasting - than many analysts expected.

Saudi Arabia Gives First Glimpse Of Oil Strategy Under New Minister -- Following the biggest news of this weekend, the (anticipated) resignation/termination of Saudi Arabia's longstanding oil minister Ali al-Naimi, everyone has been wondering about what comes next and how this development will impact the price of oil. We laid out our preliminary thoughts as follows: Ultimately this is not about the new oil minister: this is about Prince Mohammed taking full control over Saudi oil. So the question everyone now wants answered is "what does this mean for oil?"  While nobody knows the answer, what is clear is that over the past 2 months, Prince Mohammed has had a far more hawkish outlook on oil prices. [I]t was Mohammed who effectively scuttled the Doha oil deal which was "this close" to reaching a conclusion before a last minute collapse as the crown prince intervened, overriding al Naimi's proposal. Furthermore, as the FT reported at the time, "there were other signs that Saudi Arabia’s oil ministry was preparing for a deal. Between January and March the country held its oil output at around 10.2m barrels per day — a level consistent with the proposed freeze." Then a few weeks ago, Prince Mohammed once again poured cold water over any expectations that Saudi Arabia would permit higher oil prices when he said last week said "the country’s production could immediately rise to 11.5m b/d — if there was demand." In other words, on the margin al Naimi's termination and Prince Mohammed's official ascent to the top of the Saudi oil chain of command are likely bearish in the short term, as Saudi Arabia reverts to its 2014 strategy of pushing oil prices low enough to put marginal producers out of business, a process that due to relentless hedging and generous banks, has taken way too long. Still, speculation is just that, and the market will be driven by any official statement out of Saudi Arabia and its new oil minister, Khalid al-Falih. One day after the surprising power shift, made his first official statement saying that Saudi Arabia was "committed to meeting demand for hydrocarbons from its customers and would maintain its petroleum policies." From Reuters: "Saudi Arabia will maintain its stable petroleum policies. We remain committed to maintaining our role in international energy markets and strengthening our position as the world's most reliable supplier of energy," Khalid al-Falih said in an e-mailed statement. "We are committed to meeting existing and additional hydrocarbons demand from our expanding global customer base, backed by our current maximum sustainable capacity."

What OPEC Has To Fear From The New Saudi Oil Minister  -- In a surprise move, Saudi Arabia sacked its long-time oil minister over the weekend, an event that illustrates the near-total control that the new young Saudi prince has obtained over the country’s energy industry. For many years, Ali al-Naimi, the outgoing Saudi oil minister, was the voice of Saudi Arabia’s oil industry and policy. Even seemingly insignificant remarks from al-Naimi could move oil prices up or down. But the 80-year old oil minister has seen his power eclipsed by the 30-year old Deputy Crown Prince Mohammed bin Salman. In April, when al-Naimi was forced to backtrack on the Doha oil freeze deal, reportedly at the behest of the Deputy Crown Prince, it was clear that his time at the helm was coming to an end. Over the weekend, al-Naimi was pushed out in favor of Khalid al-Falih, the head of the state-owned oil company Saudi Aramco. The swap was expected and had been previously announced, but the timing came as a surprise. The move leaves the Deputy Crown Prince with undisputed control over Saudi Arabia’s energy strategy, as well as its broader economy. As for oil policy, however, the ouster of al-Naimi probably does not change much. If anything, it confirms that Saudi Arabia will continue to fight for market share, keeping production elevated in order to bankrupt high-cost producers such as U.S. shale.  And why should Saudi Arabia or OPEC change course? Saudi Arabia decided not to reduce production in the face of oversupply in late 2014 – a strategy, it should be noted, that had the backing of al-Naimi – and while it has taken much longer than expected, forcing prices to crash due to high levels of output is finally beginning to bear fruit. Some sixty-odd U.S. shale companies have declared bankruptcy and U.S. oil production is down almost 800,000 barrels per day from a year ago. More declines are forthcoming. Other non-OPEC oil producers are also reporting declines in output. Production cuts from OPEC would only throw a lifeline to these struggling high-cost producers, a move that would make little sense from the Saudi point of view.

OPEC Is Dead, What’s Next? -- OPEC is dead, Rosneft’s head Igor Sechin has told Reuters. In a fine example of stating the obvious – at least to those who have been keeping an eye on the energy industry – and putting it in context, the chief of Russia’s largest oil company welcomed an era where the oil market will be driven by “finance, technology and regulation.  Russia and OPEC are natural rivals, although there has been a sense of partnership, especially after the advent of shale in the U.S., when both started pumping more and more crude to preserve their market share.  It was Russia that tried earlier this year to negotiate a production freeze with OPEC, and while some smaller OPEC members were ready to sign on the spot, the organization’s leader, Saudi Arabia, blew the proposal off, demanding that Iran also take part in the freeze.  This was an embarrassing moment for Russia, and in his email to Reuters, Sechin made a point of noting that Rosneft was always against this move, with perfectly reasonable skepticism.  Riyadh has boasted repeatedly that it can wait out the price slump. Of course, the success of this strategy would depend on the length of the slump, but Saudi Arabia has deeper pockets than Russia. Saudi Arabia also has a new economic development program that involves a move away from oil.  The Saudis have all but said outright that their national priorities in energy would always trump OPEC priorities. The country has repeatedly used its influence as the largest producer in the organization to dictate the energy policies of smaller producers, which has been harmful for the latter. And these policies, which can be summed up as “pump as much as you can, don’t let the shale boomers get a breather” have not led to a clear victory. 

Saudi Aramco finalizes IPO options and plans global expansion - (Reuters) - Saudi Arabia's state-owned oil giant Aramco is finalizing proposals for its partial privatization and will present them to its Supreme Council soon, its chief executive said about the centerpiece of the kingdom's efforts to overhaul its economy. The company has a huge team working on the options for the initial public offering (IPO) of less than 5 percent of its value, which include a single domestic listing and a dual listing with a foreign market, CEO Amin Nasser said on Tuesday. They will be presented "soon" to Aramco's Supreme Council, headed by Deputy Crown Prince Mohammed bin Salman, who is leading an economic reform drive to address falling oil revenue and sharp fiscal deficits by boosting the private sector, ending government waste and diversifying the economy. Nasser stressed that even after the listing, the Saudi government would retain sole control over Aramco's oil and gas output levels. "Production is sovereign," he said. Riyadh has traditionally kept an expensive "spare cushion" of excess production capacity, allowing it to raise or reduce levels to influence prices according to the government's market strategy. Private oil companies, by contrast, do not hold back output for strategic gain. Nasser also said Aramco was seeking to expand globally via joint ventures in Asia and North America.

Saudi Aramco signals rise in oil output - Saudi Arabia’s state-owned oil company is likely to increase its production to meet rising demand this year, its chief executive said, as the company begins an expansion that includes a partial IPO and new refining capabilities.   “We’re seeing a global increase in demand,” Amin Nasser, the chief executive of Saudi Arabian Oil Co., known as Saudi Aramco, said at a news briefing Tuesday at the company’s headquarters. “We are meeting that call on us.”  Saudi Arabia, the world’s largest exporter of crude oil, is already pumping at near-record levels of about 10.2 million barrels a day. That output was part of an overall Saudi strategy for dealing with oil prices that collapsed more than 70% from June 2014 to January 2016: Pump flat out and compete with other countries for crude buyers.  Mr. Nasser’s comments suggest the kingdom’s oil company isn’t changing course. Saudi Arabia’s output tends to increase in the summer to deal with rising air-conditioner use when temperatures in the kingdom reach scorching levels, but Mr. Nasser said Aramco would pump more to meet demand elsewhere, particularly in the U.S. and India.   Mr. Nasser declined to give an average figure for crude production this year but said the new output would come mostly from expansions of current fields.  Jim Krane, a fellow at Rice University’s Baker Institute where he studies Saudi energy policy, said the kingdom has no choice but to increase production if it wants to protect its share of crude markets and increase its refining capacity. He said the Saudis were also considering the possibility of oil demand falling in the future.

Saudi raising oil output ahead of Aramco IPO - Saudi Arabia is raising production and pressing ahead with a global expansion plan for its state oil company ahead of what could be the world’s largest ever stock market listing. In some of the first comments since a government reshuffle at the weekend, Saudi Aramco chief executive Amin Nasser emphasised the company’s willingness to compete with rivals, putting on notice oil producers from regional adversary Iran to US shale producers. “Whatever the call on Saudi Aramco, we will meet it,” he said during a rare media visit to the headquarters of the state oil company in Dhahran. “There will always be a need for additional production. Production will increase upward in 2016.” The oil industry is watching for any shifts in Saudi policy or crude output levels after the kingdom on Sunday replaced veteran oil minister Ali al-Naimi after more than two decades in office. Mohammed bin Salman, deputy crown prince, has hinted that the kingdom could easily accelerate output to more than 11m b/d as Iran, Riyadh’s regional rival, tries to attract customers after years of sanctions. Saudi Aramco, which pumps more than one in every eight barrels of crude globally, is at the centre of a reform programme being pushed by Prince Mohammed, who has emerged as the man holding the main levers of power in Saudi Arabia. He believes the company could be valued at more than $2tn. The plan — Vision 2030 — aims to end the country’s dependency on oil within 15 years, leveraging the assets of the state oil company to fund wide-ranging investments to diversify its economy.

The 30-Year-Old Saudi Revolutionary - WSJ - It is testing time for the House of Saud. Until last year, the monarchy had been treading water for half a century under the leadership of the increasingly aged and infirm sons of its founder, Abdul Aziz ibn Saud. Then a 29-year-old grandson, Mohammed bin Salman,was named deputy crown prince by his father, King Salman, and put in charge of the economy, national defense and the Saudi oil giant, Aramco. In late January, on the anniversary of his ascension to power, he began opening the curtains on his sweeping vision to transform his country—and his countrymen. That vision includes reducing the country’s dependence on oil; privatizing the economy, including a slice of Aramco; turning Saudi citizens from dependents of the government into self-reliant individuals; expanding work opportunities for women; creating more jobs for young people; imposing taxes for the first time; encouraging a more-moderate form of Islam; and even sanctioning various forms of public entertainment—this, in a country that bans cinema. The prince’s vision is little short of revolutionary. There is no shortage of skeptics within and beyond the royal family, with its more than 7,000 princes, many of whom are devoutly conservative and fear any change that upsets the established order and princely privileges. And not only princes are discomforted. For generations, Saudi citizens have been brought up in the belief that the kingdom’s unique social compact guaranteed them security and prosperity in exchange for loyalty, or at least acquiescence, to the Al Saud royal family. What are Saudis to make of a vision in which they are to take responsibility for themselves and for producing their own prosperity? And, if that part of the compact has been changed, what degree of loyalty will they still extend to the Al Saud? These fundamental questions invite another: What is the future of Saudi Arabia and of the Al Saud?

Panama Papers Data Leak : King of Saudi Arabia sponsored Netanyahu’s campaign - According to the Middle East Observer, Isaac Herzog, member of the Knesset and Chairman of the Israeli Labor party, revealed that Saudi King Salman bin Abdulaziz financed the election campaign of Israeli Prime Minister, Benjamin Netanyahu. “In March 2015, King Salman has deposited eighty million dollars to support Netanyahu’s campaign via a Syrian-Spanish person named Mohamed Eyad Kayali. The money was deposited to a company’s account in British Virgin Islands owned by Teddy Sagi, an Israeli billionaire and businessman, who has allocated the money to fund the campaign Israeli Prime Minister Benjamin Netanyahu”, Herzog cited a leaked Panama Paper.

Saudi King Salman Financed Netanyahu’s Campaign. Panama Papers Leak --- This revelation has broad geopolitical implications. Since the late 1970s, Saudi Arabia has financed Al Qaeda and the recruitment of the Mujahideen. Saudi Arabia is  a state sponsor of “Islamic terrorism”. Saudi Arabia is also a staunch ally of the United States which, according to the Chairman of the Israeli Labour Party  finances the Zionist political agenda of Likud in Israel. Isaac Herzog, member of the Knesset and Chairman of the Israeli Labor party, revealed that Saudi king Salman bin Abdulaziz financed the election campaign of Israeli Prime Minister, Benjamin Netanyahu.“In March 2015, King Salman has deposited eighty million dollars to support Netanyahu’s campaign via a Syrian-Spanish person named Mohamed Eyad Kayali. The money was deposited to a company’s account in British Virgin Islands owned by Teddy Sagi, an Israeli billionaire and businessman, who has allocated the money to fund the campaign Israeli Prime Minister Benjamin Netanyahu”,Herzog cited a leaked Panama Paper. Related Panama Papers can be found in the following links:

• http://panamapapers.sueddeutsche.de/en/
• https://panamapapers.icij.org/the_power_players/
• http://bit.ly/1UJkMS4
• http://www.freezepage.com/1462699031QTMVBVWSWT
• http://www.talniri.co.il/marketnews/article.asp?mp=4&id=76320

Additional Evidence Emerges That US Officials Intentionally Whitewashed Saudi Role In 9/11 -- The reason I believe the “28 pages” are so important is because it unquestionably demonstrates that senior members of the U.S. government care more about the public perception of Saudi Arabia, and protecting its terrorist spawn, than cares about the public interest. Indeed, focus on these pages is already beginning to achieve just that. As the Guardian reported earlier today: A former Republican member of the 9/11 commission, breaking dramatically with the commission’s leaders, said Wednesday he believes there was clear evidence that Saudi government employees were part of a support network for the 9/11 hijackers and that the Obama administration should move quickly to declassify a long-secret congressional report on Saudi ties to the 2001 terrorist attack.The comments by John F Lehman, an investment banker in New York who was Navy secretary in the Reagan administration, signal the first serious public split among the 10 commissioners since they issued a 2004 final report that was largely read as an exoneration of Saudi Arabia, which was home to 15 of the 19 hijackers on 9/11. “There was an awful lot of participation by Saudi individuals in supporting the hijackers, and some of those people worked in the Saudi government,”Lehman said in an interview, suggesting that the commission may have made a mistake by not stating that explicitly in its final report. “Our report should never have been read as an exoneration of Saudi Arabia.” He was critical of a statement released late last month by the former chairman and vice-chairman of the commission, who urged the Obama administration to be cautious about releasing the full congressional report on the Saudis and 9/11 – “the 28 pages”, as they are widely known in Washington – because they contained “raw, unvetted” material that might smear innocent people.

Kuwait courts South Korea in the face of drop in crude market share - Kuwait is making a concerted effort to retain its importance as a reliable crude oil supplier to South Korea, where it has seen its market share dip as Korean refiners, spoilt for choice, have picked up more barrels from Iraq and Iran. A high-profile delegation led by Kuwaiti Prime Minister Sheikh Jaber Al-Mubarak Al-Hamad Al-Sabah and Deputy Prime Minister and Acting Oil Minister Anas Khalid Al Saleh is in Seoul this week where they met with several South Korean leaders, including President Park Geun-Hye and her energy minister, and chief of the country's biggest refiner, among others. Kuwait has seen its market share in South Korea's total crude imports drop to 14% in Q1 2016 from 14.7% in Q1 2015 as Iraq has raised its share to 14.3% from 12.9% and Iran to 8.6% from 4.2% over the same period, data from state-run Korea National Oil Corp. showed. Kuwait supplied 37.41 million barrels in Q1 2016, up 3.3% year on year.This compares with Iraq's 38.05 million barrels, up almost 20% year on year, and Iran's 22.85 million barrels, up nearly 123%. "Middle East oil producers are striving to tighten relations with customers in the Asia-Pacific region, the biggest market for their crude," an official at the Korea Petroleum Association said Tuesday. "They are struggling to maintain their share in the South Korean market in the face of increasing shipments from Iran and Iraq," he said.

De-Dollarization Accelerates As Russia Nears Launch Of Ruble-Priced Oil Trading Platform - It appears Russia is close to taking the next big step towards de-dollarization and killing the petro-dollar as Vladimir Putin's "dream" of ruble-based pricing of its domestically-produced oil is on the verge of realization. SPIMEX (The St. Petersburg International Mercantile Exchange) is actively courting international oil traders to join its emerging futures market, which as Bloomberg reports, is designed "to create a system where Russian oil is priced and traded in a fair and straightforward way." Step-by-step Russia, China and other emerging economies are taking measures to reduce their dependence on the US dollar, and as SputnikNews detailed, F. William Engdahl warns - referring to Russia's crude oil benchmark initiative - this move could deal a dramatic blow to the "petrodollar's" dominance. Russia has taken a significant step which will undermine the current Wall Street oil price monopoly: Russia's own crude oil benchmark futures contract will price oil in rubles and no longer in US dollars, American-German researcher, historian and strategic risk consultant F. William Engdahl remarks. "The move is part of a longer-term strategy of decoupling Russia's economy and especially its very significant export of oil, from the US dollar, today the Achilles Heel of the Russian economy… It is part of a de-dollarization move that Russia, China and a growing number of other countries have quietly begun," the American researcher writes in his recent article for New Eastern Outlook. He explains that the setting of an oil benchmark price is a cornerstone of the method used by omnipotent Wall Street bankers to control world oil prices. "Oil is the world's largest commodity in dollar terms," the historian stresses.

Iran Hits Saudis Where It Hurts, Offers Biggest Discount On Asian Crude Since 2007 -- Iran has extnded its 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 this new discount, Iranian oil will be noticeably cheaper for Asian clients than both Saudi and Iraqi crude.  The motivation behind Iran’s move is easy to see. The country is starving for oil revenues. It has a lot of work to do on its oil production and transport infrastructure to boost production, and it has just begun to recover from years of harsh sanctions.  Asia is a priority destination for its crude, so Iran has been lowering prices in parallel with pumping more oil. In March, for example, its exports to Asia marked a 50 percent increase on the year. Even factoring in the sanctions that were in effect last March, a 50 percent increase is a substantial achievement. Saudi Arabia’s price increase is harder to interpret. Riyadh is currently sending a lot of mixed signals. Its deputy crown prince recently announced a comprehensive economic reform plan that aims to reduce the kingdom’s dependence on oil over the next 14 years. At the same time, Saudi Aramco—the state-run oil behemoth—has said it will continue to increase production despite the market depression. Now the Saudis are raising prices for Asia because they say they expect a pickup in demand.  Saudi Arabia and Iran are playing a game of barrels. Asia is the ultimate prize, not just because of China, but because global economic forecasts peg emerging economies as the main driver of overall growth in the medium term. Oil demand in the developed world is likely to fall over the medium- and long-term as vehicles become more efficient. Iran’s strategy makes sense—lowering prices will allow it to capture more market share. Plus, Iran needs any revenues it can get its hands on.

Inside the Rebellion: Chinese auto workers are becoming increasingly militant, but lack mass, independent organizations. - A large and growing wave of worker strikes and protests is sweeping across China. Last year alone, there were over 2,700 actions — double the total for 2014. And over a thousand have taken place so far this year. Workers face an uphill battle. The Chinese Communist Party — unmoved by worker invocations of the CCP’s avowed values, including a commitment to working-class liberation — is cracking down on the unrest. They’ve arrested activists and closed key autonomous worker centers. But the political turmoil engulfing the party has also created a potential opening for workers. Chinese authorities are walking a tightrope, coupling a harsh response that seeks to limit the scope of protest with strategic concessions to demands for severance, pension payments, and wages. In this turbulent period, explaining ongoing working-class resistance in China — its forms, expressions, potentials, and limits — along with the particular approach of the CCP and the state is an important and challenging endeavor. Sociologist Lu Zhang tackles this project in her new book, Inside China’s Automobile Factories: The Politics of Labor and Worker Resistance, providing a brilliant analysis that springs from an exhaustive study of China’s auto sector.

China Continues to Prop Up Its Ailing Factories, Adding to Global Glut - WSJ: China is doubling down on efforts to keep unprofitable factories afloat despite for years pledging to curb excess capacity, adding to a glut of basic materials flooding the global economy. The country’s overproduction of steel, aluminum, diesel and other industrial goods has driven down prices and crippled competitors, leading to thousands of lost jobs in the U.S. and elsewhere. China’s continuing aid for unneeded factories is triggering a sharp rise in trade disputes and protectionist sentiment, especially in the U.S., where trade has emerged as one of the pivotal issues in the U.S. presidential election. According to a Wall Street Journal analysis of Chinese public companies, Chinese government support includes billions of dollars in cash assistance, subsidized electricity and other benefits to companies. Recipients include steelmakers, coal miners, solar-panel manufacturers, and other producers of other goods including copper and chemicals.One beneficiary, Aluminum Corp. o ACH -4.13 % f China, or Chalco, said in October one of its units would shut down a roughly 500,000-ton-per-year smelter in the far-western Gansu region as it struggled to make profits. Executives prepped for thousands of layoffs. Then Gansu officials slashed the plant’s electricity bill by 30%, employees say, and the factory was saved. Although a portion of capacity was taken offline, most is operational.

China's Bad Debt Problem Is Much Deeper Than Just Real Estate -- Among the bigger financial problems covered in depth on Zero Hedge over the past several years, were China's massive amount of newly created credit adding to an already unsustaimable debt load, its rapidly growing bad debt pile (what we call China's "neutron bomb" which as we first estimated last October is about 20% of total bank debt), and its sub-prime real estate bubble. Lately many others - especially Kyle Bass - have also started looking the same problems and asking a simple question: what is the real repayment ability of Chinese corporates now that this credit monster has been unleashed, and is the NPL problem isolated to just real estate. For those answers, we look at a recent Natixis report.

China's debt: Worse than you think, but maybe not be a problem: China has a debt problem, and it's likely much worse than most statistics demonstrate.  Recent reports point to an ongoing effort by Beijing to tightly control the prevailing storyline about its economy, including recent revelations about the central government pressuring economists to use a more upbeat tone. Even bearish predictions about the Chinese economy have at least pretended that economic data from the country are reliable. And those numbers are now more in doubt than ever. China's total debt-to-GDP ratio is 240 to 270 percent, depending whom you ask, and that's a sizable increase from the roughly 150 percent of a decade ago. And that jump has occurred while China's GDP has grown strongly — meaning the debt is ballooning wildly. "Historically when you have that sort of expansion of credit, … it generally leads to financial turbulence," said Nicolas Veron, a visiting fellow at the Peterson Institute for International Economics. "And China has had a rapidly expanding GDP, too — so it's just dizzying." It's not the absolute debt levels making economists bearish on China, however, it's their rapid increase. Some have posited that China is getting its appetite for debt under control, but that may not be true. Moody's reported at the end of April that it saw overall leverage rising, and the Chinese shadow-banking sector expanding at a fast rate. Shadow banking, the aggregate term for unregulated credit from nonbank entities, has long been a specter over China's impressive growth.

China stocks plunge again as hopes for economic recovery fade | Reuters: China stocks fell sharply again on Monday, reaching eight-month lows, as investors saw hopes for a strong economic recovery fade and worried about fresh regulatory curbs on speculation. Following the market's nearly 3 percent slump on Friday, China's blue-chip CSI300 index fell 2.1 percent, to 3,065.62, while the Shanghai Composite Index lost 2.8 percent, to 2,832.11 points. China April trade data, released on Sunday, doused investor hopes of a sustainable economic recovery, with both exports and imports falling more than expected. Recovery hopes were further dimmed by an article on Monday in the People's Daily, the Communist Party's mouthpiece. It cited an "authoritative source" saying China's economic trend will be "L-shaped", rather than "U-shaped", and definitely not "V-shaped", but the government will not use excessive investment or rapid credit expansion to stimulate growth. Shares fell across the board, but selling concentrated in relatively expensive small caps amid fears of fresh regulatory crackdown on speculation. China's securities regulator said on Friday that the valuation gap between the domestic and overseas market and speculation on "shell" companies - firms used for backdoor listings - merited attention. An index tracking raw material shares tumbled nearly 5 percent as China's commodity prices continued to fall amid a government crackdown on speculative trading.

China’s smaller companies face credit challenge as bond market funding dries up -- Small mainland Chinese companies, struggling to keep stay afloat amid the cooling economy, have suffered a setback as the high-yield corporate bond market on the Shanghai Stock Exchange appears to have swung shut with investors, spooked by fears of rising defaults, have shied away from the debt sales. Not a single high-yield bond offering has transacted on the Shanghai Stock Exchange so far this year, a fundraising and trading platform slated for medium and small-sized unlisted firms. Institutional investors, underwriters and companies said that the rising number of defaults on the country’s 14.3 trillion yuan bond (HK$17.03 trillion) market recently and expectations of a credit crisis have undermined the junk debt market. “The door has been shut for those small firms,” said Shenwan Hongyuan Securities chief bond analyst Chen Kang. “It is unlikely that the fundraising platform could be reopened anytime soon.” In mid-2012, the China Securities Regulatory Commission (CSRC) established the market at the Shanghai bourse, creating an alternative to banking loans for small- and medium-sized firms. Companies are allowed to conduct sales of the high-yield debt through private offerings before the bonds are listed on the Shanghai exchange. It was seen as a ground breaking move on the mainland’s corporate debt market because only large-size industrial or financial juggernauts with higher ratings could sell debt on the interbank bond market and the exchange before the liberalisation.

China eyes $724 billion of transport investment over next three years | Reuters: China will invest around 4.7 trillion yuan ($724 billion) in transport infrastructure projects over the next three years, the country's transport ministry said in an article posted on its website late on Wednesday. The 2016-2018 plan from China's Ministry of Transport and National Development and Reform Commission (NDRC) will see the country push forward 303 key transportation projects including railways, highways, waterways, airports and urban rail, it said. The investment splurge underlines China's reliance on high-levels of public sector spending, credited by economists as being behind recent signs of improvement in the country's economy, but also as creating a risk as debt levels rise. The article, posted on the Ministry of Transport's website, said the investment plan would improve the country's high-speed transport networks and inter-city links to meet the demands of China's wider economic and social development. China's first quarter investment in infrastructure surged almost 20 percent, as the government looks to transport-related sectors to help support wider economic growth. The official Xinhua news agency reported earlier this month that China will invest around $12 billion this year in building aviation infrastructure.

China's non-performing loans hit 11-year high - regulator | Reuters: Troubled lending at China's commercial banks reached 4.6 trillion yuan ($706 billion) at end-March, a jump of 428 billion yuan from December, official data showed, as the pace at which loans are souring has risen amid the country's slowdown. Chinese commercial bank non-performing loans (NPLs) rose to an 11-year-high of 1.4 trillion yuan, or 1.75 percent of total bank lending, the China Banking Regulatory Commission (CBRC) said in a quarterly report published on its website Thursday. At the end of 2015, NPLs accounted for 1.67 percent of all loans. Separate from NPLs, "special mention" loans, or lending potentially at risk of becoming non-performing, rose to 3.2 trillion yuan by end-March, the CBRC said, surpassing 4 percent of total loan volume for commercial banks. For Chinese lenders, the build-up of bad debts, which have increased for 18 consecutive quarters, followed the state-driven credit boom of 2009 and has shown no sign of slowing. This is making policymakers mull unconventional measures to prevent a potential debt crisis. Beijing has given six banks a total quota of 50 billion yuan to issue asset-backed securities with NPLs as underlying assets. Policymakers are also preparing to reintroduce debt-to-equity swaps, a measure that saved banks from mountains of bad loans in the early 2000s by asking them to convert their loans to troubled state-owned enterprises into shareholdings.

In China, Nobody Wants To Be A Bagholder - With the frenzied speculation that drove levels and volumes in Chinese commodities off the charts having dawned on everyone from Cramer to Chinese Securities regulators as 'not real', it appears everyone is scrambling to not be the bagholder for this bubble as authorities crackdown on Chinese asset managers pooling retail investor funds, warning of the rise of "ponzi schemes." While nobody knows for sure how much of the trading surge has been driven by individuals, but the evidence suggests retail punters are playing a big role, and as Bloomberg reports, the average holding period for contracts including rebar and iron ore was less than 3 hours in April! China’s asset managers were warned of “Ponzi scheme” risks from pooling investor funds intended for different products, as an industry association said a joint venture between Citic Trust and Citic-Prudential Fund Management was being punished for violating restrictions on such practices. As Bloomberg details, Citic-CP Asset Management, known for marketing Uber Technologies Inc. shares in China, has been suspended for six months from issuing new products because of the breaches, according to an Asset Management Association of China statement on its website on Thursday. No one answered at a phone number listed on a website for Citic-CP Asset Management on Friday. The risk from pooling money is that cash from new investors can be used to repay existing investors, as occurs in the scams named after Charles Ponzi. The association reiterated that funds investing in securities are banned from running cash pools and pledged to work with the China Securities Regulatory Commission to cleanse the industry of the practice.

One Chinese company has a debt pile almost as big as the whole of Australia - A lot has been written about China's debt problem, but there is one particular report which provides a spectacular example of its size and scope. China's state-owned rail corporation racked up 4.14 trillion yuan ($866 billion) in debt by the end of the first quarter, according to an audit report that was made publicly available on April 29 and reported by business magazine, Caixin. To put that in context, all of the governments and businesses in Australia combined have a net foreign debt bill of just over a trillion dollars. China Railway Corp is not far off. And it's debt is building up as the railway company, which operates China's trains and is responsible for its much lauded 19,000 kilometre high-speed rail network, loses money. In the first quarter, CRC reported a net loss of 8.73 billion yuan, up 35 per cent from a year ago. The losses were driven both by its aggressive expansion program as well as a sharp drop in rail freight, one of Premier Li Keqiang's favoured economic indicators. The Chinese government is well aware of its debt problem. This week, the Communist Party newspaper, the People's Daily, published an interview with "a person of authority", a term often used as a proxy for the views of the senior leadership. The interview, which ran prominently off page one, highlighted leverage as the key financial risk facing China. Boosting growth by increasing leverage was like "growing a tree in the air," the "authoritative figure" reportedly told the newspaper. Economists, including UBS' Wang Tao, interpreted this piece as an assurance from policy makers that leverage would no longer be used to boost growth and structural reforms would not be abandoned in the pursuit of economic targets.

Chinese Exports, Imports Slump, Miss Consensus As Debt-Fueled Growth Burst Is Over - Overnight China reported April exports and imports, both of which dropped after a strong pick up in March, and missed consensus expectations, confirming "weak demand at home and abroad and cooling hopes of a recovery in the world's second-largest economy." Exports fell 1.8% from a year earlier, following a strong 11.5% rebound in March (mostly due to last year's base effect), the General Administration of Customs said on Sunday, supporting the government's concerns that the foreign trade environment will be challenging in 2016. April imports tumbled 10.9% from a year earlier after a 7.6% drop last month and falling for the 18th consecutive month, driven by weaker processing trade, confirmg domestic demand remains weak despite a pickup in infrastructure spending and record credit growth in the first quarter.The next effect meant China posted a trade surplus of $45.56 billion in April, versus forecasts of $40 billion, although with much of that "trade" the result of another record month of capital flight via Hong Kong "import remits", nobody really has any idea what China's true trade number is. In fact, looking at the chart below, Nomura concludes that capital outflows may have accelerated in April despite the USD6.4BN increase in FX reserves (largely due to valuation effect). Import growth from Hong Kong continued to surge, to 203.5% y-o-y in April from 116.5% in March, versus a drop in import growth from other markets, to -11.9% from -8.2% (see chart below). This implies continued capital outflows disguised as imports.

The Turnaround in Private and Public Financial Outflows from China -- NY Fed - China lends to the rest of the world because it saves much more than it needs to fund its high level of physical investment spending. For years, the public sector accounted for this lending through the Chinese central bank’s purchase of foreign assets, but this changed in 2015. The country still had substantial net financial outflows, but unlike in previous years, more private money was pouring out of China than was flowing in. This shift in private sector behavior forced the central bank to sell foreign assets so that the sum of net private and public outflows would equal the saving surplus at prevailing exchange rates. Explanations for this turnaround by private investors include lower returns on domestic investment spending and a less optimistic outlook for China’s currency.   China’s income exceeds its spending, which is equivalent to saying its saving exceeds its physical investment spending, that is, all money spent replacing or adding to the capital stock. As an accounting matter, a country’s income is allocated to either consumption or saving while spending goes to either consumption or investment spending. These two identities mean that a nation’s saving equals its investment spending when income equals spending. Opening up to trade allows a country to have its income exceed its spending when its exports exceed its imports, and this difference exactly equals the difference between saving and investment spending. The insight here is that the gaps between spending and income, between saving and investment spending, and between exports and imports all equal a nation’s lending to (or borrowing from) the rest of the world.

China heading for big economic policy shift, says mystery ‘authoritative’ source in People’s Daily - A People’s Daily article published yesterday showed that China’s leadership is trying to make a grand shift in the nation’s economic policies in a bid to say goodbye to debt ­fuelled growth. In a sign of distaste for the credit-pumped growth in the past couple of months, the Communist Party mouthpiece cited an unidentified “authoritative” figure as saying that boosting growth by increasing leverage was like “growing a tree in the air” and that a high leverage ratio could lead to a financial crisis. Economic growth was set to enter a so-called L-shaped trajectory for a few years and it was unrealistic to expect any rebound in the world’s second largest economy, according to the article. “It’s a policy stance statement that China will stop its practices in the first quarter of bolstering growth by credit injection,” Tao Dong, chief economist for non­Japan Asia at Credit Suisse in Hong Kong, said. “It’s clear-minded to see high leverage as a source of risks, and I applaud such a statement.” The publication of the 11,000-character article comes after the mainland pumped an unprecedented amount of credit into the economy in the first quarter to help growth, triggering price gains in properties and commodities and putting strategic goals such as economic restructuring on the back burner. After a strong rebound in the first quarter, “everyone thought, ‘well, it’s not possible to continue like this’,” Louis Kuijs, chief Asia economist at Oxford Economics in Hong Kong, said. “We are waiting for policy signals [of change], and this is probably one of the signals.” The article, in the form of a question and answer format, repudiated many of the economic policies pursued by the State Council under Premier Li Keqiang, including propping up stock prices to address a slowdown in growth and boost the leverage ratio to keep expansion on track.

Who Wins and Who Loses As China Rebalances - iMFdirect  -- China’s economy leaves nobody indifferent. The world is watching closely as the second largest economy in the world is shifting its growth model from an export-driven one to one centered on household consumption. As China’s economy slows and rebalances, its impact is being felt on an already fragile global economy, and particularly in the rest of the Asia region. Our recent studies show that while China’s rebalancing will adversely affect some Asian economies, it will also open opportunities for several others. Because of its sheer size and integration into the global economy, China’s transition will certainly affect those around it. China is now the top trading partner of most major economies in the region, particularly in East Asia and the Association of Southeast Asian Nations (ASEAN). During 2000–15, exports to China increased dramatically from 3 percent to 9 percent of world exports and from 9 percent to 22 percent of Asian exports. According to IMF staff calculations, a 1 percentage point change in China’s real GDP growth is estimated to affect the real GDP growth of the median Asian economy by 0.15–0.30 of a percentage point. Against this backdrop, some countries have felt the pinch. As China’s economy moves away from investment, its demand for raw materials used intensively in related activities, such as iron ore, copper, and coal, is declining contributing to lower commodity prices. Commodity exporters such as Australia, Indonesia, Malaysia, and New Zealand are likely to be hard hit. Beyond that, those economies that have been closely integrated with China through the global value chains, and which are heavily exposed to China’s investment activity, such as Korea and Taiwan Province of China, will be affected. Suppliers of technology like Japan and Korea, and providers of capital, such as Hong Kong and Singapore, will also feel the pain

South China Sea Watch: China starts drills, showcases isles -- China’s navy has launched annual war drills in the South China Sea with one of its most advanced warships, the missile destroyer Hefei. The exercises include simulations for breaking an enemy blockade and reconnaissance drills with submarine forces. Five other guided-missile destroyers, a frigate and a supply ship of the South Sea Fleet based in Sanya on Hainan Island, home to a major naval and air force base, are taking part. According to the official Xinhua News Agency, the ships will be joined by forces based in the Spratly and Paracel islands, where China has embarked on massive island-building to expand and reinforce the reefs it controls in the disputed region. Also last week, China sent famed singer of patriotic anthems Song Zuying on a tour of its man-made islands in the Spratlys to entertain troops and underscore confidence in asserting its claim in the contested area. Among the songs performed: “Ode to the South Sea Defenders,” whose lyrics speak of “troops of stout men with guns in their hands who battle the wind and fight the waves to guard the nation’s door.” Photos of the performances also offered a rare glimpse of the extensive work China has been carrying out at Fiery Cross Reef, showing lighthouses, harbors and buildings. In the background of some can be seen one of the navy’s massive Type 071 amphibious dock ships, capable of carrying four helicopters and as many as 800 troops.

Hong Kong first-quarter economic growth likely weakest in 4 years | Reuters: Hong Kong's economy probably grew at its weakest annual pace in four years in the first quarter, hurt by China's slowdown, weak retail sales and falling asset prices. Four economists survey by Reuters expect growth in the January-March quarter to have slowed to 1.48 percent from a year earlier - the weakest pace since the second quarter of 2012 - and down from 1.9 percent in the fourth quarter of 2015. One economist with a quarterly estimate forecast the first quarter grew a seasonally adjusted 0.9 percent from the fourth quarter - when it expanded merely 0.2 percent. "Hong Kong's economy is facing myriad headwinds, including an increasingly acute residential property price correction and significant linkages with the slowing Chinese economy," said Andrew Wood, head of Asia country risk at BCI research. "While we do not envisage the economy tipping into full-scale recession in 2016, the risks of such an event are rising." Hong Kong's economy grew 2.4 percent in 2015, about half the pace of 2011, as a slowdown in mainland China and a weaker yuan curbed Chinese spending, while a volatile stock market also hit domestic consumption. A string of retailers from fashion to jewelry firms have posted grim performance figures, with retail sales contracting for the 12th successive month in March,

The Bank Of Japan Begins Selling ¥1.3 Trillion In Stocks Acquired Over The Years -- It often comes as a surprise to those unfamiliar with the Bank of Japan's M.O., that unlike other developed central banks (except the SNB, of course, while even the PBOC recently admitted it now buys stocks directly to prop up the Chinese stock market via the Buttonwood SPV), the BoJ has no qualms about admitting it actively purchases equities, either in the form of single name stocks or, more actively in recent years, ETFs. Or, as the case may now be, selling them.   In a two year period starting in 2002, and then again in the 2009-2010 post-crisis interval, the Bank of Japan, purchased stocks from commercial banks in doubtful financial health to "reduce their exposure to the stock market."  The BOJ ended this policy in April 2010 but held on to the stocks for fear of precipitating a broader sell-off. It then moved on to an even more aggressive monetary policy when prime minister Abe launched the latest Japanese QE in 2012, as part of which the Japanese central bank would purchase not only unprecedented amounts of government bonds but also ETFs and REITs, and potentially other risk assets. However, in a stark reminder, that what central banks buy they eventually have to sell, Japan's Nikkei writes that the Bank of Japan has begun selling equities it bought from commercial banks in the previous decade to ease anxiety over the financial sector.  But before some interpret the move as a risk to Japan's stock "market" as the biggest equity backstopper now becomes a seller, concurrent with the BOJ's liquidations Kuroda will offset these divestments with extra purchases of exchange-traded funds, in effect netting out selling with even more stock buying.

Japan Q1 GDP Seen Showing Flat Growth After Q4 Slump (MNI) - Japan's economy is forecast by economists to have posted flat growth in the January-March quarter, barely avoiding a technical recession, as a slight rebound in consumption appears to have been offset by weak business investment and exports. The median of Q1 GDP forecasts by 10 economists was a 0.1% rise on quarter, or an annualized 0.6%. The forecasts ranged from a 0.2% contraction to a 0.4% expansion (from -0.9% to +1.6% annualized). The Cabinet Office will release preliminary GDP data for the first quarter at 0850 JST on Wednesday, May 18 (2350 GMT on May 17). A rise in Q1 GDP would be the first growth in two quarters following a 0.3% fall on quarter, or an annualized 1.1% drop in the final quarter of 2015, while a contraction in Q1 would mean Japan slipped back into a technical recession for the first time since the April-September period in 2014. Economist forecasts for consumer spending in January-March ranged from a 0.1% drop to a 0.8% rise on quarter, with the median at +0.4%, which would recover less than half the 0.9% slump in October-December. The mild weather which hurt sales of winter cloths and heaters was blamed for the Q4 weakness. Consumption in the first three months of the year was slightly pushed up by the leap-year effect but the underlying trend of consumer spending remains weak, economists said. "Other than the leap-year effect, there were no particular factors to support consumption in January-March and the lackluster state is lingering in April-June," said Sumitomo Mitsui Asset Management chief economist Akiyoshi Takumori.

Japan Banks May Soon Pay Borrowers To Take Out Loans - Things are increasingly upside down in the brave new centrally planned world: thanks to negative deposit rates central banks have put an explicit cost on saving, while in various instances, such as taking out a mortgage in Denmark and the Netherlands, the bank actually pays the borrower, thus rewarding living beyond one's means. Curiously, it was just a month ago when an offer was spotted in Germany offering a negative -1% rate on small consumer loans issued by Santander Bank. According to Bloomberg, Japanese banks may soon pay borrowers to accept loans if they can raise funds at even cheaper rates. Negative interest-rate lending is increasingly becoming a reality since the Bank of Japan started levying charges on idle cash. Lenders can now borrow for three months in the Tokyo interbank market at a record-low 6 basis-point annualized rate, versus 17 basis points since the BOJ move in January. They may eventually be able to be paid to borrow and then profit by paying less to lend, according to Credit Suisse Group AG, JPMorgan Chase & Co. and SMBC Nikko Securities Inc. This is also known as shoving money down people's throats... and then paying them for it.

Kuroda says BOJ could ease policy 'substantially' - Bank of Japan Gov. Haruhiko Kuroda said the central bank "can still ease [its] monetary policy substantially" if necessary, in an interview with German financial newspaper Börsen-Zeitung published Wednesday. Mr. Kuroda said the effects of quantitative and qualitative easing, or QQE, along with a negative interest rate are "already very clear" in financial markets, but "we have to wait a few months to see the effects in the real economy," Börsen-Zeitung reported. Discussing the postponement of achieving the BOJ's 2% inflation target, Mr. Kuroda reiterated the importance of energy prices. Excluding energy items and fresh food, the inflation rate is around 1%, Mr. Kuroda said. He said "we have only gone halfway," but "we are absolutely on the right track." In a quarterly forecast released April 28, the BOJ moved back its forecast date for achieving its 2% target. The new forecast called for 2% to be reached between April 2017 and March 2018, compared with a previous target range of April 2017 to September 2017. Mr. Kuroda also told Börsen-Zeitung that recent strength in the yen isn't the result of BOJ policy. "After we had introduced the negative interest rate, the yen initially depreciated," he said. But then uncertainty about China's economy, weak oil prices and reduced expectations for interest-rate increases from the U.S. Federal Reserve led to the yen's appreciation.

Japan's negative interest rates fuel buying and 'carry' trade in Aussie REITs: China may have been the source of exuberance in the Australian residential property market, but it is Japanese investors that have lifted ASX-listed real estate investment trusts to bold valuations. Negative interest rates under Bank of Japan governor Haruhiko Kuroda are believed to have fuelled long positions and by some accounts, a carry trade-style strategy in Australian real estate investment trusts. This led to strong buying last week, taking the property benchmark, the S&P/ASX 200 A-REIT Index, to an eight-year high on Wednesday. It closed at 1433.5 points on Monday. The local sector, being the A-REITs, has beat the broader S&P/ASX 200 Index by 21 per cent over the past 12 months, including dividends. Interest in Australian-listed property is just another consequence of the low returns fixed-income investors face, forcing asset managers to get creative. Japanese bonds are trading into negative territory more than 10 years out, meaning if an investor holds a Japanese government bond to maturity they will not get all of their money back. The 10-year Japanese government bond has a negative yield of 0.125 per cent and the 30-year bond yields a positive 0.273 per cent.

Extra budget for disaster to total ¥778 billion, be financed by negative rates | The Japan Times: The government plans to compile a ¥778 billion supplementary budget for fiscal 2016 to help deal with the aftermath of deadly earthquakes that rocked Kyushu last month, sources close to the matter said Tuesday. To finance it, the government will avoid additional bond issuance by using reduced interest payments for government debt afforded by the Bank of Japan’s adoption of a negative interest rate in late January. The government initially booked about ¥9.9 trillion for interest payments in the initial fiscal 2016 budget but now expects those costs to drop because the yield on the 10-year government bond has declined to around minus 0.1 percent. After the Cabinet approves the plan, Prime Minister Shinzo Abe will submit the budget to the Diet on Friday. The bill is likely to clear the House of Representatives on May 16 and the House of Councilors the following day. The additional expenditure includes ¥700 billion for a reserve fund controlled by the Cabinet. The reserve fund is expected to be used to rebuild businesses damaged by the quakes and to repair infrastructure. The remaining ¥78 billion will be used for such purposes as helping residents rebuild their livelihoods, building temporary housing and running evacuation facilities, the sources said.

Japan's national debt climbs to a dizzying ¥1,049.37 trillion | The Japan Times: Central government debt stood at ¥1,049.37 trillion — or just over 1 quadrillion — at the end of March, up ¥4.78 trillion from three months earlier, the Finance Ministry said Tuesday. The growing debt reflects a lack of financial resources amid ballooning social security costs in rapidly aging Japan. According to the ministry, the latest total consisted of ¥910.81 trillion in government bonds, ¥54.81 trillion in borrowing, mainly from financial institutions, and ¥83.75 trillion in financing bills or short-term government notes of up to one year. As of March 31, per capita debt, or the amount owed per person, stood at around ¥8.26 million, given a population of about 126.98 million — an estimate as of April 1. The total debt was more than double the country’s nominal gross domestic product in 2015 of ¥499.1 trillion. Japan’s fiscal health is the worst among major developed economies.

Yen falls vs dollar for second day to near two-week low | Reuters: The yen slid to a nearly two-week low against the dollar on Tuesday as risk appetite improved for a second straight session, undermining traditional safe havens such as the Japanese currency. Repeated verbal warnings from Japan over the weekend and on Tuesday saying it was prepared to step in to weaken the currency has also held off investors seeking to buy the yen at the expense of the dollar. The greenback has struggled recently as the Federal Reserve is on track to raise U.S. interest rates gradually. "Risk appetite is naturally tied to the belief that we're in an ultra-low-yield environment and investment managers can't simply sit here," said Jeremy Cook, chief economist at payments company World First in London. "We have to see a move any time we see the slightest bit of positivity, by grabbing yield in emerging markets currencies, for instance."

Malaysian leader’s stepson allegedly bought U.S. property with 1MDB funds - At least $50 million allegedly diverted from a state investment fund in Malaysia was spent on luxury properties in New York and Los Angeles by the stepson of the Malaysian prime minister, according to documents reviewed by The Wall Street Journal and people familiar with the matter. Riza Aziz, a film producer and stepson of Malaysian leader Najib Razak, used money that originated from the 1Malaysia Development Bhd. fund to acquire a 7,700-square-foot, $33.5 million duplex in the Park Laurel condominium tower overlooking New York’s Central Park, the documents and people said. Aziz also used money originating from 1MDB to buy an 11,000-square-foot walled mansion in Beverly Hills with a 120-foot-long pool for more than $17.5 million, the documents and people said. The financing of those acquisitions is under investigation by the Federal Bureau of Investigation, which is conducting a wide-ranging inquiry into alleged misappropriation of billions of dollars from 1MDB, according to people familiar with the probe. 1MDB was set up in 2009 to benefit the Malaysian people, Investigators believe that money used to buy the two properties was part of at least $238 million — more than the Journal previously reported — that was transferred to an offshore company wholly owned by Aziz, Red Granite Capital, by a firm which investigators believe played a central role in the alleged multibillion-dollar fraud. The Journal previously reported that Aziz’s film company received $155 million in loans originating with 1MDB, much of which went to finance the 2013 movie “The Wolf of Wall Street.”

India's Bad Loans Could Be Bigger Than New Zealands $170 Billion Economy – NDTV Profit: India's bad-loans problem looks much worse than lenders have been willing to acknowledge, heaping pressure on banks' profits and further tightening the screws on distressed debt that could be bigger than New Zealand's $170 billion economy. The magnitude of the debt-mess was laid bare late last month when two of India's largest private sector lenders provided unprecedented guidance on non-performing loans, underscoring repeated warnings by Reserve Bank of India's governor Raghuram Rajan on the need to clean up banks' balance sheets. The dangers are clear cut. Increasing provisions to cover rising bad loans are likely to hurt banks' profits and curb credit growth, stoking a vicious circle of lower economic growth triggering more defaults and choking off business investment and production. Indeed, banks' loan growth at 10.7 per cent in the last fiscal year ended March 31, was the slowest in nearly two decades, partly on lower lending to debt-heavy sectors such as iron and steel that account for the lion's share of bad debt. Profits at most lenders have also taken a hit in the past six months as they set aside a higher sum to cover for defaults after a clean-up exercise ordered by the RBI.

The War In Afghanistan Has Turned A Generation Of Children Into Heroin Addicts | Zero Hedge: One of the many catastrophic legacies left behind by the longest war in U.S. history is that Afghanistan produces 90% of the world’s opium. As with most parts of the world, the most vulnerable pay the heaviest price of war, and the country has faced a harrowing escalation in the number of child heroin addicts. “What’s happened in Afghanistan over the last 13 years has been the flourishing of a narco-state that is really without any parallel in history,” Kabul-based journalist Matthieu Aikins told Democracy Now back in 2014. Adding that all levels of Afghan society are involved in the flourishing trade — which became undeniably worse after the U.S.-led invasion — Aikins accused both the Taliban and government-linked officials of profiting from the crisis. He claimed the U.S., in its quest for vengeance against the Taliban and Al Qaeda, not only cooperated with warlords but ignored corruption by criminals whose human rights abuses created the conditions that led to the rise of the Taliban in the first place. As a result, Afghanistan now produces twice as much opium as it did in the year 2000, and the booming trade now accounts for 50% of the country’s GDP. Since the cartels began refining their poppy harvests into addictive and profitable heroin, the street price for “powder,” as it is known, is the cheapest in the world — and it costs less than food in the war-torn country.

Panama Papers report alleges NZ prime place for rich to hide money | Reuters: Wealthy Latin Americans are using secretive, tax-free New Zealand shelf companies and trusts to help channel funds around the world, according to a report on Monday based on leaks of the so-called Panama Papers. Pressure is mounting on Prime Minister John Key to take action after local media analyzed more than 61,000 documents relating to New Zealand that are part of the massive leak of data from Mossack Fonseca, a Panama-based law firm. The papers have shone spotlight on how the world's rich take advantage of offshore tax regimes. Mossack Fonseca actively promoted New Zealand as a good place to do business due to its tax-free status, high levels of confidentiality and legal security, according to a joint report by Radio New Zealand, TVNZ and investigative journalist Nicky Hager. Key said it was "utterly incorrect" that New Zealand was a tax haven, adding he was open to changing rules around foreign trusts if advised by a review or the OECD. "If there's any need for change in this area, the government will consider it and if necessary, take action," Key told reporters. The government was asking the Ministry of Justice to move quickly on rules already under consideration to tighten anti-money laundering requirements for lawyers, real estates and accountants, he added.

Here are all the notable people we've found in the Panama Papers so far -- The International Consortium of Investigative Journalists (ICIJ) published a huge database on Monday detailing how some of the world's wealthiest and most powerful people legally hide their cash — dubbed the "Panama Papers." The database consists of more than 200,000 companies, trusts, foundations, and funds incorporated in 21 countries and countless names of the wealthy people who shelter their cash there. The findings of the so-called Panama Papers investigation were first unveiled at the beginning of April. Over 11 million documents held by the Panama-based law firm Mossack Fonseca had been leaked to the German newspaper Süddeutsche Zeitung. The paper shared the information with the ICIJ, which is made up of 107 media organizations in 78 countries. The global news outlets examined 28,000 pages of documents, also revealing the full scale of the tax breaks won by 340 companies.   Business Insider scanned the database, which includes data both from the Panama Papers and a 2013 report called "Offshore Leaks," for newsworthy or prominent people or organizations in the worlds of finance, politics, technology, and others.   We have taken a spider map for the individual's holdings as an example. Each green dot represents an offshore entity with associations to the individual: This post is being updated as new information is available.

How the Kleptocrats’ $12 Trillion Heist Helps Keep Most of the World Impoverished - For the first time we have a reliable estimate of how much money thieving dictators and others have looted from 150 mostly poor nations and hidden offshore: $12.1 trillion. That huge figure equals a nickel on each dollar of global wealth and yet it excludes the wealthiest regions of the planet: America, Canada, Europe, Japan, Australia, and New Zealand. That so much money is missing from these poorer nations explains why vast numbers of people live in abject poverty even in countries where economic activity per capita is above the world average. In Equatorial Guinea, for example, the national economy’s output per person comes to 60 cents for each dollar Americans enjoy, measured using what economists call purchasing power equivalents, yet living standards remain abysmal. The $12.1 trillion estimate—which amounts to two-thirds of America’s annual GDP being taken out of the economies of much poorer nations—is for flight wealth built up since 1970. Add to that flight wealth from the world’s rich regions, much of it due to tax evasion and criminal activities like drug dealing, and the global figure for hidden offshore wealth totals as much as $36 trillion. In 2014 the net worth of planet Earth was about $240 trillion, which means about 15 percent of global wealth is in hiding, significantly reducing the capital available to spur world economic growth. That $12.1 trillion figure for money looted from poorer countries has been hiding in plain sight. It comes from numbers in the global economic data—derived by comparing statistics from the International Monetary Fund and the World Bank, supplemented by some figures from the United Nations and the U.S. Central Intelligence Agency—that do not match up, but which until now no one had bothered to analyze.

Kenya to close all refugee camps and displace 600,000 people -- Kenya plans to close all of its refugee camps in a move that would displace more than 600,000 people.The country's government said it was shutting down the camps due to “very heavy” economic, security and environmental issues. Those due to close include Dadaab, the largest refugee camp in the world, home to more than 300,000 people on the Kenya-Somalia border. Karanja Kibicho, Kenya’s secretary for the Ministry of Foreign Affairs and International Trade, cited the influence of terror group Al-Shabaab as among the risks of keeping the camps open. Mr Kibicho said in a statement: "Kenya, having taken into consideration its national security interests, has decided that hosting of refugees has come to an end. "The Government of Kenya acknowledges that the decision will have adverse effects on the lives of refugees and therefore the international community must collectively take responsibility on humanitarian needs that will arise out of this action." It is not yet clear when the closures will begin, but the Kenyan government has already disbanded the Department of Refugee Affairs, which worked with humanitarian organisations for the welfare of the refugees. The closures mean Somali asylum seekers would be forced to return to the situation they fled.

U.S.-Funded Somali Intelligence Agency Has Been Using Kids as Spies: For years they were children at war, boys given rifles and training by al-Qaeda-backed militants and sent to the front lines of this country’s bloody conflict. Many had been kidnapped from schools and soccer fields and forced to fight. The United Nations pleaded for them to be removed from the battlefield. The United States denounced the Islamist militants for using children to plant bombs and carry out assassinations. But when the boys were finally disarmed — some defecting and others apprehended — what awaited them was yet another dangerous role in the war. This time, the children say, they were forced to work for the Somali government. The boys were used for years as informants by the country’s National Intelligence and Security Agency (NISA), according to interviews with the children and Somali and U.N. officials. They were marched through neighborhoods where al-Shabab insurgents were hiding and told to point out their former comrades. The faces of intelligence agents were covered, but the boys — some as young as 10 — were rarely concealed, according to the children. Several of them were killed. One tried to hang himself while in custody. The Somali agency’s widespread use of child informants, which has not been previously documented, appears to be a flagrant violation of international law. It raises difficult questions for the U.S. government, which for years has provided substantial funding and training to the Somali agency through the CIA, according to current and former U.S. officials.

Unemployment: Troubles Ahead for Emerging Markets - IMF blog - Forecasts of real GDP growth attract a lot of media attention. But what matters more to the person on the street is how growth translates into jobs. Unfortunately, the mediocre growth outlook of recent years may lead to a disturbing outlook for jobs, particularly among fuel-exporting countries and in the Latin America and Caribbean region. Chart 1 provides a measure of the global unemployment rate based on data for 116 countries, of which 37 countries are classified as “advanced” (a term used in the IMF’s World Economic Outlook to refer to high-income countries) and the remaining 79 are emerging and developing economies (for brevity, we refer to the group as “emerging economies”). The unemployment rate in advanced economies has declined over the past couple of years—with sharp declines in the United States and slower progress in the euro area—and this trend is expected to continue. In contrast, the unemployment rate in emerging economies is expected to increase over the course of this year. Much of this increase is expected to occur in countries where fuel exports are a big share of export earnings. As shown in Chart 2, the unemployment rate in this group is expected to increase to 8.4 percent this year, a full percentage point above the estimate for last year. Looking across regions, Latin America and the Caribbean in particular, face a sharp increase in the unemployment rate (Chart 3). In 2016, unemployment in the region is expected to be nearly 8 percent, over two percentage points higher than it was two years ago. This sharp rise is driven by recessions in large economies in the region, such as Brazil. Elsewhere, many economies are growing modestly, thus limiting the labor market deterioration (see the IMF’s Regional Economic Outlook for the Western Hemisphere).

A Global Marshall Plan for Joblessness? naked capitalism Yves here. As an accompaniment to this article, please read (or re-read) Michal Kalecki’s classic essay on the obstacles to achieving full employment. By Pavlina R. Tcherneva - Global unemployment is expected to surpass 200 million people for the first time on record by the end of 2017, according a recent ILO study, and limitations of official statistics suggest that the problem is much larger . As conventional measures increasingly fail to produce tight labor markets and jobless recoveries become the norm, economists grapple with this new reality by calling it secular stagnation and by adjusting upwards the rates of unemployment deemed ‘natural’ — but the human, social and economic costs of this growing problem are rarely considered in economic modeling.  Because the social and economic costs of unemployment spread and reproduce in complex and pernicious ways, it ought to be treated like an infectious disease. The policy response should aim at inoculation against unemployment, not at countering its effects. Today, when governments tackle the issue they focus on counteracting its impact after mass layoffs have already occurred. Monetary and fiscal measures are fine-tuned to produce investment-led growth, but they are usually too weak and always too late.   But instead of accepting rising levels of unemployment, a preventative policy of inoculation is needed, which avoids accepting unemployment as natural in the first place. Such a policy requires providing decent jobs at decent pay to all who want to work on as-needed basis: A Global Marshall Plan for the unemployed.

Brazilian Speaker, in About-Face, Won't Annul Rousseff's Impeachment— In a stunning twist in the effort to impeach President Dilma Rousseff of Brazil, the new speaker of the lower house of Congress has changed his mind — less than 24 hours after announcing that he would try to annul his chamber’s decision last month to impeach her.Brazilians awoke on Tuesday to the news of the sudden about-face by the speaker, Waldir Maranhão, who on Monday was widely ridiculed and threatened with expulsion from his Progressive Party for trying to upend the impeachment process.Mr. Maranhão said on Monday that he would to try to annul the April 17 impeachment vote, citing concerns about procedural irregularities. But in a decision made around midnight here, and widely circulated in the early morning on Tuesday, Mr. Maranhão told Renan Calheiros, the head of the Senate, that he was revoking his earlier decision.The head-spinning change of course was only the latest development in a political crisis that has mesmerized and bewildered Latin America’s most populous nation.The practical significance of the decision is that it improves the chances Ms. Rousseff will be ousted this week.AdvertisementContinue reading the main story The Senate, which was already threatening to disregard Mr. Maranhão’s pronouncements, is scheduled on Wednesday to start voting on whether to remove Ms. Rousseff from office and place her on trial over claims of budgetary manipulation. Ms. Rousseff is widely expected to lose that vote, clearing the way for her to be replaced by Vice President Michel Temer.The circuslike atmosphere in Brazil’s Congress — which has recently been marked by shouting matches, protests inside the chamber and lawmakers spitting on one another — has provoked ire across the country.

Brazil's Dilma Rousseff to face impeachment trial - BBC News: Brazil's President Dilma Rousseff is to face trial after the Senate voted to impeach and suspend her. Ms Rousseff is accused of illegally manipulating finances to hide a growing public deficit ahead of her re-election in 2014, which she denies. Senators voted to suspend her by 55 votes to 22 after an all-night session that lasted more than 20 hours. Vice-President Michel Temer will now assume the presidency while Ms Rousseff's trial takes place. The trial may last up to 180 days, which would mean Ms Rousseff would be suspended during the Olympic Games in Rio de Janeiro, which start on 5 August. Ms Rousseff made a last-ditch appeal to the Supreme Court to stop proceedings, but the move was rejected. Her suspension brings an end to 13 years of the rule of her Workers' Party.In a speech at the end of the all-night Senate session, attorney general Jose Eduardo Cardozo said that the impeachment request did not have legal basis and that the opposition wanted to remove a democratically-elected president. He said senators were condemning an "innocent woman" and that impeachment was a "historic injustice".

Brazil Senate puts Rousseff on trial, ending 13 years of leftist rule | Reuters: Brazil's Senate voted on Thursday to put leftist President Dilma Rousseff on trial in a historic decision brought on by a deep recession and a corruption scandal that will now confront her successor, Vice President Michel Temer. With Rousseff to be suspended during the Senate trial for allegedly breaking budget rules, the centrist Temer will take the helm of a country that again finds itself mired in political and economic volatility after a recent decade of prosperity. The 55-22 vote ends more than 13 years of rule by the left-wing Workers Party, which rose from Brazil's labor movement and helped pull millions of people out of poverty before seeing many of its leaders tainted by corruption investigations. Fireworks rang out in cities across Brazil after the vote at the end of a 20-hour session in the Senate. Police had briefly clashed with pro-Rousseff demonstrators in Brasilia on Wednesday, exchanging volleys of tear gas and rocks. Rousseff, a 68-year-old economist and former Marxist guerrilla who was Brazil’s first female president, is unlikely to be acquitted in a trial that could last as long as six months. A two-thirds majority is needed in the Senate to convict her but the scale of her defeat on Thursday showed that the opposition already has the support it needs.

Venezuelan Opposition Leader Assassinated Days After 1.8 Million Sign Petition To Oust Maduro -- The situation in hyperinflating socialist paradise Venezuela just moved one step closer to chaotic totalitarianism. With President Maduro clinging to power (thanks to his military 'assistance') amid growing social unrest (1.8 million signatures gathered seeking a referendum to remove him), FoxNews Latino reports German Mavare, leader of the opposition UNT party, died Friday after being shot in the head, assassinated in the western state of Lara, according to his organisation. Maduro has appeared on State TV tying Mavare to "armed groups" and suggested that more right-wing politicians are potential targets. The Venezuelan people are growing increasingly angry at the nightmare of economic squallor Nicolas Maduro appears to have laid at their door (thanks in large part to an overly-generous socialist agenda runnining out of other people's petrodollars)... In less than a week, more than 1.8 million people in Venezuela signed petitions seeking a referendum to remove President Nicolas Maduro from office. That's nine times the required 200,000 signatures.  The opposition said in a statement they delivered the petitions in 80 sealed boxes early Monday morning without notifying the media to avoid potential clashes with Maduro’s supporters. Ousting Maduro will not be an easy task despite his approval rating plummeting amid triple-digit inflation, widespread food shortages and near-daily power blackouts. Recent polls suggest two-thirds of Venezuelans want him out. If the National Electoral Council verifies the signatures in the coming days, it would trigger a second petition drive during which 20 percent of the electorate, almost 4 million people, would have to sign before a referendum could be scheduled on removing Maduro before his term ends in 2019. If a vote were held, the president would be removed only if the number of anti-Maduro votes exceeded the 7.6 million votes he received in the 2013 election. In December's parliamentary elections, opposition candidates mustered only 7.7 million even though they won control of the legislature by a landslide.

Scenes From The Venezuela Apocalypse: "Countless Wounded" After 5,000 Loot Supermarket Looking For Food -- Over the last several years we have documented with clockwork regularity Venezuela's collapse into failed state status, which was cemented several weeks ago when news hit that "Venezuela had officially run out of money to print new money."  Last night we showed what Caracas, looks like this week: As we wrote then these are simply hungry Venezuelans protesting that their children are dying from lack of food and medicine and that they do not have enough water or electricity. As AgainstCronyCapitalism added, this is a country with more oil than Saudi Arabia, and the government has stolen all the money and now they bottleneck peaceful protesters and threaten them with bombs (or haul them to prison and torture them). As pure desperation has set in, crime has becomes inevitable. A man accused of mugging people in the streets of Caracas was surrounded by a mob of onlookers, beaten and set on fire, who published a pixeled-out but still graphic video of the man burning as mob justice is now the supreme arbiter of who lives and who dies: "Roberto Fuentes Bernal, 42, was reportedly caught trying to mug passersby in the Venezuelan capital, and before police arrived at the scene, the crowd took the law into their own hands." The video can be seen here. Now, in the latest shocking development, Venezuela saw a new wave of looting this week that resulted in at least two deaths, countless wounded, and millions of dollars in losses and damages.According to Panampost, on Wednesday morning, a crowd sacked the Maracay Wholesale Market in the central region of Venezuela.  According to the testimonies of merchants, the endless food lines that Venezuelans have been enduring to do groceries could not be organized that day.As time went by, desperate Venezuelans grew anxious over not being able to buy food. Then they started jumping over the gates and stormed the supermarket."They took milk, pasta, flour, oil, and milk powder. There were 5,000 people" one witness told Venezuela outlet El Estímulo. People from across the entire state came to the supermarket because there were rumors that some products not found anywhere else would be sold there.

The Sinaloa Cartel Has More Planes Than Mexico’s Biggest Airline -- Jorge Gustavo Arevalo-Kessler’s career flying planes for the Sinaloa Cartel’s private airline ended with an arrest in Mexico City and an admission of guilt before a US federal judge. German by birth, Arevalo-Kessler became a Mexican citizen and rose to the rank of captain in the Mexican air force, where he worked as an instructor and trained hundreds of pilots. His post-military career was quite different. He received an offer to fly for Emirates Airlines and could have retired with a pension. Instead, he went to work for Joaquin “El Chapo” Guzman and flew bundles of cash and cocaine to and from Venezuela, Panama, and Mexico. Arevalo-Kessler received 11 years in federal prison on charges of conspiring to engage in money laundering.  was an important pilot in the Sinaloa Cartel’s air operations, which by sheer number of planes rival those of major airlines. Its fleet size is likely larger than Mexico’s largest commercial airliner Aeromexico. The cartel’s fleet is even comparable to some major international airlines, although most of the cartel’s aircraft are smaller, befitting their role of traveling to and from remote, crude landing strips. That’s according to a new investigation by the Mexican newspaper El Universal, which obtained data on planes seized by the Mexican security forces between 2006 and 2015. The numbers are surprising even for the Sinaloa Cartel, the world’s wealthiest drug-trafficking organization.'

Russia Offers Free Land to Foreign Pioneers -- The Russian state parliament will pass a bill on April 12, 2016, which will offer free one hectare (about 2.5 acres) of land in that country’s Far Eastern Federal District to both Russians and non-Russian nationals wishing to settle the region. Originally, the scheme was limited to Russian nationals only, but the new version of the bill has extended this right to carefully-screened non-Russians as well. According to a report in the RT news service, the plots of land will be handed over to Russians and foreigners who want to build homes or start businesses in agriculture or tourism in the region. The Russian lower house Committee for Real Estate and Construction recommended that the State Duma approve the bill in the second reading in a session next week. The parliament already approved the draft in the first reading on December 18, 2015. According to the 2010 Census, the Far Eastern Federal District has a population of 6,293,129. The population has been in decline ever since the collapse of the Soviet Union, dropping by 14 percent in the last fifteen years. The Russian government—aware that unless the European element of the population is rapidly increased, the region will quickly become majority Chinese—has been actively working on repopulation plans since 2010.

Russia Hints At Nuclear War After US Deploys Ballistic Missile Shield | In a dramatic development for the global nuclear balance of power, yesterday we reported that starting today, the United States would launch its European missile defense system dubbed Aegis Ashore at a remote airbase in the town of Deveselu, Romania, almost a decade after Washington proposed protecting NATO from Iranian rockets and despite repeated Russian warnings that the West is threatening the peace in central Europe. As Robert Bell, a NATO-based envoy of U.S. Defense Secretary Ash Carter explained "we now have the capability to protect NATO in Europe. The Iranians are increasing their capabilities and we have to be ahead of that. The system is not aimed against Russia," he told reporters, adding that the system will soon be handed over to NATO command. We also noted that the Kremlin, which for years has warned that it would have no choice than to escalate proportionally, was "incensed at such of show of force by its Cold War rival in formerly communist-ruled eastern Europe where it once held sway." Moscow said that the U.S.-led alliance is trying to encircle it close to the strategically important Black Sea, home to a Russian naval fleet and where NATO is also considering increasing patrols. Russia has good reason to be worried: the US move is a clear defection from the carefully established Game Theory equilibrium in the aftermath of the nuclear arms race, one which potentially removes a Russian first strike threat, thereby pressuring Russia. We added that "the precarious nuclear balance of power in Europe has suddenly shifted, and quite dramatically: despite U.S. assurances, the Kremlin says the missile shield's real aim is to neutralize Moscow's nuclear arsenal long enough for the United States to make a first strike on Russia in the event of war."

Recep Tayyip Erdogan Rejects EU Demands to Reform Terror Law -- Recep Tayyip Erdogan, Turkey’s president, has rejected Brussels’ demands for an overhaul of an anti-terror law, suggesting he is prepared to abandon a deal EU leaders credit with curbing the flow of migrants. Brussels has requested that Ankara make the change before the EU delivers visa-free travel for 80m Turks, one of the biggest concessions of the migration deal. But Mr Erdogan insisted on Friday the legislation was necessary at a time when his country is being targeted by Islamist and Kurdish militants and said he was not prepared to change it.

How Recep Erdogan Became the Most Powerful Man in Europe --Erdogan is a patient Islamist. He used his power to tighten his grip and consolidate power behind one party — and one man. He even commissioned a new golden throne to sit on. The putative caliph set about taking Turkey in an all too predictable direction — consolidating power around himself by taking it away from the military and judiciary and stifling domestic dissent whenever he could. The extent to which Erdogan has been able to take Turkey backwards is a modern tragedy. He gambled that the EU, for all of its pious words, could be bought off later. In a single night in January 2014, he removed and replaced some 350 police officers. His party gave itself new powers permitting domestic espionage on banks and companies on matters relating to ‘foreign intelligence’.  In March he seized control of Zaman, until then Turkey’s highest–circulation newspaper. And he has taken action against thousands of citizens for the offence of insulting the president. Last month, a Turkish man was arrested for insulting Erdogan by asking police for directions to the zoo.  When a late-night comedy show in Germany pointed to the absurdity of a German law forbidding insults against foreign leaders by attacking Erdogan, Turkey demanded that Berlin acted. Erdogan was calling Angela Merkel to heel. And successfully: she approved prosecution of the offending comedian.  In private, Erdogan must be amazed at just how much he can wrangle. The worse his behaviour, the greater his clout in Europe. He can send German police to arrest German comedians whose jokes he dislikes. He can instruct the EU to delay its ‘progress reports’ on Turkey to a time that better suits his electoral purposes. A few weeks ago, a leaked transcript of a conversation showed Jean-Claude Juncker, president of the European Commission, pleading Erdogan to consider that ‘we have treated you like a prince in Brussels’.

US Says Iran Open for Business, but Europe's Banks Disagree - The Obama administration's calls for restoring global business ties with Iran are falling flat in Europe, where risk-averse banks told U.S. Secretary of State John Kerry on Thursday that they don't believe they can do business in the Islamic Republic without triggering U.S. sanctions.Nearly a year after the U.S. and world powers struck a deal to ease financial penalties against Iran in exchange for curbs on its nuclear program, the Tehran government complains that U.S. policy is denying that promised relief. Kerry and other top officials have been fanning out across the globe to correct what Kerry called "misinterpretations or mere rumors" about what kind of transactions are still prohibited.The nuclear deal removed broad U.S. sanctions on Iran's economy, clearing the way for foreign companies to conduct business. Some specific entities, including companies associated with Iran's Revolutionary Guard, remain off-limits under sanctions intended to punish Iran for other behavior such as its ballistic missiles program and sponsorship of groups the U.S. considers terrorist organizations."We want to make it clear that legitimate business, which is clear under the definition of the agreement, is available to banks," Kerry said after an unusual meeting in London with top financiers. "As long as they do their normal due diligence and know who they're dealing with, they're not going to be held to some undefined and inappropriate standard here."Europe's banking powerhouses were unconvinced."We will not accept any new clients who reside in Iran, or which are an entity owned or controlled by a person there," said Standard Chartered. "Nor will we undertake any new transactions involving Iran or any party in Iran."

TTIP leaks highlight the dangers of regulatory cooperation | Corporate Europe Observatory: TTIP (Transatlantic Trade and Investment Partnership) has sparked a public outcry in Europe. The recent leak of many parts of TTIP by Greenpeace, allowing us for the first time to read the negotiating position of the US, confirms the most serious concerns.On top of private parallel courts which would create an avenue for multinationals to receive vast amount of taxpayers’ money in 'compensation' for democratic decisions, TTIP poses another threat to public interest legislation: regulatory cooperation (or convergence, as often referred to in the USA). Regulatory cooperation aims to align standards across the Atlantic by changing law-making in the European Union and the United States of America. Both EU and US positions on regulatory cooperation show there is reason for concerni. Corporate Europe Observatory's analysis has led us to two worrisome conclusions: First, transatlantic standards will to a large extent be set behind closed doors by a limited group of actors: big business, the US regulatory authorities, and the European Commission. And second, unelected officials are ready to further sacrifice our democratic rules and reduce our social and environmental protections, such as healthy working conditions and product safety, on the altar of trade.

Michael Hudson: Warning to Europe – How the TTIP Threatens Public Health Care and Pensions -- I assume that the reason you have invited me from America is that my country has been doing just about everything wrong in its health care. Its experience may provide an object lesson for what Europe should avoid (and indeed, has avoided up to this point). For starters, privatization is much more expensive than European-style Single Payer public health care. Monopoly prices also are higher. And of course, fraud is a problem.America’s Obamacare and health insurance laws have been written by political lobbyists for special interests. So has the TTIP: Transatlantische Handelsabwollen. Since George W. Bush, the U.S. Government has been prohibited from bargaining for low bulk prices from the pharmaceutical companies. Most Americans think that Health Management Organizations (HMOs) are rife with corruption and billing fraud. The insurance sector has made a killing by spending a great deal of money on bureaucratic techniques to reject patients who seem likely to require expensive health care. Doctors need to hire specialists working full time just to fill out the paperwork. Error is constant, and any visit to the doctor, even for a simple annual checkup, requires many hours by most patients on the phone with their insurance company to correct over-billing. The dream of U.S. “free market” lobbyists to shift the costs of health care onto its users instead of as a public program. According to current plans backed both by the Republicans and by much of the Democratic Party leadership, these user costs ideally would be paid by pre-saving in special “health savings” accounts, to be managed by Wall Street banks as a kind of mutual fund (with all the financial risks this entails – the same kind of risks that are troubling most U.S. pension funds today). The reason why the U.S. discussion of health care for the elderly is so relevant for Europeans is that the Transatlantic Trade and Investment Partnership (TTIP) that President Barack Obama pushed on German Chancellor Angela Merkel two weeks ago. It poses a far-reaching threat to European policies.

Protest Movement Threatens TTIP Transatlantic Trade Deal - SPIEGEL ONLINE: An unprecedented protest movement of a scope not seen since the Iraq war in Germany has pushed negotiations over the TTIP trans-Atlantic free trade agreement to the brink of collapse. The demonstrations are characterized by a level of professionalism not previously seen.As the battle over TTIP was lost, Angela Merkel feigned resolution yet one more time. "We consider a swift conclusion to this ambitious deal to be very important," her spokesperson said on her behalf on Monday. And this is the government's unanimous opinion. But the German population has a very different one. More than two-thirds of Germans reject the planned trans-Atlantic free trade agreement. And even in circles within Merkel's cabinet, the belief that TTIP will ever become a reality in its currently planned form is disappearing. That's because on Monday morning, Greenpeace published classified documents from the closed-door negotiations. Even if the papers only convey the current state of negotiations and do not document the end results, they still confirm the worst suspicions of critics of TTIP. The 248 pages show that bargaining is taking place behind the scenes, even in areas which the EU and the German government have constantly maintained were sacrosanct. These include standards on the environment and consumer protection; the precautionary principle, a stricter EU policy that sets high hurdles for potentially dangerous products; the legislative self-determination of the countries involved, etc. Even the pledge made on the European side that there would be no arbitration courts has turned out to be wishful thinking. So far, the Americans have insisted on the old style of arbitration court. The result is that Merkel's grandly staged meeting with US President Barack Obama in Hanover eight days earlier had been nothing more than a show -- one aimed at hiding the fact that the two sides are anything but united in their positions.

Poland Refuses To Accept Any Refugees "As They Pose A Threat To Security", Will Not Comply With European "Blackmail" - Seemingly unfazed by the recent European Commission proposal to punish countries which refuse to comply with "fair" refugee allocation quotas with fines as high as €250,000 per asylum seeker, the head of Poland’s ruling Law and Justice party and former PM Jaroslaw Kaczynski said that no refugees will be accepted in Poland "as they pose a threat to security" adding that Poland will oppose any law forcing EU members to pay €250,000 per refused refugee. "After recent events connected with acts of terror [Poland] will not accept refugees because there is no mechanism that would ensure security," Law and Justice (PiS) chair Kaczynski said on Saturday, as quoted by Radio Poland. Needless to say, Poland is also vocally opposed to the abovementioned proposal, announced last week, which would force EU member states to pay €250,000 per refused refugee. The common complaint voiced not only by Poland, but all Eastern European nations who would suffer the most from Europe's aggressive refugee reallocation proposal is that the goal of the EC is to redistribute the weight of the refugee crisis from countries such as Greece by introducing automatic asylum quotas for each EU member state.

Poles Are Taking to the Streets in Massive Numbers to Protest the Country's Shift to the Right: -- In the past few months, alarm bells have been raised in Poland as critics of the country's new ruling party, Law and Justice, or PiS, speak out against what they believe are dangerous infringements on democracy and a wave of conspiratorial panic in the country. The accusations of cronyism, authoritarianism and an overall surge to the right don't just come from far-left activists however.Just last week, three former Polish presidents published an open letter featured in one of Poland's largest newspapers denouncing the new government for what they believe is a "usurpation of power" over existing laws and institutions. Amongst them were Lech Walesa, a Nobel Peace laureate who became modern Poland's first freely elected president."The new government is pursuing policies which both disrespect law and justice, which is ironic given that the party is named Law and Justice," said Piotr Maciej Kaczynski, a former research fellow at the Centre for European Policy Studies, a Brussels-based think tank.  The de facto leader of PiS is Jaroslaw Kaczynski, the brother of former Polish President Lech Kaczynski who tragically died in a plane crash in 2010. Jaroslaw's reign has thus far been characterized by rapid, dramatic changes and the perpetuation of conspiratorial thinking.

Thousands take to streets in Greece ahead of reform vote -- Thousands of protesters took to the streets of Athens on Sunday as Greece’s parliament prepared to vote on a controversial tax and pensions overhaul which has sparked mass opposition. Police said almost 15,000 people turned out to march in Athens and the second city of Thessaloniki against the measures demanded by the EU and IMF that the government is seeking to adopt ahead of a crunch meeting of eurozone creditors in Brussels on Monday. The reforms to be voted on later Sunday would reduce Greece’s highest pension payouts, merge several pension funds, increase contributions and raise taxes for those on medium and high incomes. The austerity measures are part of a package demanded by the European Union and International Monetary Fund in exchange for a 86 billion euro ($95 billion) bailout agreed in July, the third for the debt-laden country since 2010. Central Athens was largely closed to traffic with a significant police presence in the city although numbers were significantly down on February protests when 40,000 people marched in Athens alone. "People are tired and disappointed by the leftist government in power... the rallies have not had the scale we had expected," said Maria K, a private sector employee in her fifties who claims to be owed 30,000 euros ($34,000) in back pay from her employer. She also blamed the Orthodox Easter holidays for reducing the numbers at the protests.

Greece Passes Austerity Measures As Creditors Remain Deadlocked Over Bailout Terms - WSJ: —Greece’s parliament voted to overhaul pensions and increase taxes on Sunday amid strikes and street protests, in a move the government hopes will impress the country’s creditors and unlock bailout funds. But Greece’s most influential creditors, Germany and the International Monetary Fund, remain deadlocked over the terms of Greece’s bailout plan, which the IMF thinks is badly flawed but Germany says can’t be changed. The Eurogroup, as the committee of eurozone finance ministers is known, will meet in Brussels on Monday to discuss Greece’s fiscal strategy and the sustainability of its debts. A resolution of the deep differences isn’t expected. The legislation that Greek lawmakers passed late on Sunday covers the bulk of a package of austerity measures worth around €5.4 billion ($6.16 billion), or 3% of gross domestic product, that creditors have requested. The legislation includes a simplification of Greece’s fragmented and costly pension system, which the country’s creditors and the ruling left-wing Syriza party agree is long overdue. But cuts to entitlements and increases in workers’ contributions have provoked opposition from Greek labor unions and other professional groups. Thousands of protesters demonstrated against the measures outside parliament on Sunday.

Greek Debt Talks Enter Familiar Summer Tumult - — The Greek debt talks are entering an all-too-familiar stage, as the country’s creditors on Monday sought to overcome a standoff over whether to give new aid to Athens.Eurozone finance ministers discussed the bailout terms and for the first time formally debated ways to possibly ease Greece’s giant debt burden. But the talks here on Monday were inconclusive.The ministers said they would meet again on May 24 in hopes of signing off on a long-delayed review of whether Athens is complying with the terms of the 86-billion-euro bailout agreed to last summer — its third financial lifeline since the crisis began seven years ago.Jeroen Dijsselbloem, the head of the Eurogroup of eurozone finance ministers, told a news conference Monday evening that there could be an agreement leading to more aid for Greece at that May 24 meeting.AdvertisementContinue reading the main story The Greek government said on Monday that it hoped an agreement would make it possible to dispense €5.7 billion, or about $6.5 billion, from the bailout funds.Once again, though, there are wide gulfs between European officials, Greece and the International Monetary Fund over a continuing austerity program and the prospects of debt relief for Athens.

Greece will be 'failed state' without debt relief: Greece is in danger of becoming a “failed state” the country’s finance minister warned today following three days of strike action by labour unions angered over European demands for more austerity cuts. Euclid Tsakalotos issued the warning ahead of another meeting of Greece’s international creditors in Brussels this afternoon aimed at breaking the impasse over the disbursement of Greece’s £60bn third bailout package. Greek Finance Minister Euclid Tsakalotos arrives at the Eurozone finance meeting in Brussels on Monday  “Nobody should believe that another Greek crisis, leading perhaps to another failed state in the region, could be beneficial to anyone,” Mr Tsakalotos said in a letter to creditors urging them to take steps to ease Greece’s crippling debt burden. Pressure is growing on the government of Alexis Tsipras, the leader of the Left-wing Syriza party which stormed to power in 2015 promising to end European-imposed austerity measures but was ultimately forced into a humiliating climb-down. Nobody should believe that another Greek crisis, leading perhaps to another failed state in the region, could be beneficial to anyone Euclid Tsakalotos, Greek finance minister In his latest attempt to demonstrate commitment to reform, Mr Tsipras used his wafer-thin parliamentary majority to force through another swingeing round of tax rises and pension cuts on Sunday night. Greece’s labour unions reacted furiously to the changes, calling three days of strikes over the weekend with up to 40,000 demonstrators on the streets warning that Greece’s working population could not bear any more pain.

Germany Blinks on Giving Debt Relief to Greece….or Did It? -- Germany and Greece’s other creditors, facing the threat of the IMF sitting out the so-called “third bailout” of Greece, which needs to be in place by early July to stave off default, made what is being touted by Greece and some media outlets as a big concession, as in being willing to entertain debt reduction. In fact, reading between the lines, it is the IMF, and not Germany and the creditors, that have given ground. The IMF was insisting on actual debt reduction for Greece, as in principal haircuts. The Financial Times reports that the IMF has offered what amounts to an extend and pretend program: On debt relief, ministers examined some basic options outlined by the IMF and the European Stability Mechanism, the eurozone’s bailout fund. Governments have firmly and repeatedly rejected any formal writedown of their holdings of Greek debt, leaving them to look at other options, such as longer grace periods and extended payment timescales.  An ESM paper, seen by the FT, outlines a range of options including 5-year maturity extensions, capping annual loan repayments at 1 per cent of gross domestic product until 2050 and capping interest rates at 2 per cent. One more radical move mentioned is to buy out the IMF with cheaper and more long-term ESM loans.  This is a change in the IMF position that had gone curiously uncommented on by the press. Even before updating its forecasts for Greece to show it will not earn a primary surplus this year, the IMF had taken the position that Greece needed debt reduction, not mere debt “relief”. And indeed, in an environment of zero going to negative interest rates in Europe, extending maturities, which already extend to 30 years with interest rate deferrals in the early years, is not going to provide much help in net present value terms.

Greece captured in death spiral -- The economic and social situation in Greece day by day is getting worse, after SYRIZA’s capitulation on the 13^th of July 2015. Greeks have seen their hopes for resistance to fade away, as Alexis Tsipras, the leader of the radical left changed camp and now acts as a loyal partner of the international mafia of Finance. Either from impotence or from deception Alexis Tsipras has managed to spread frustration and defeatism among the majority of Greek people. Greeks are under a huge shock feeling betrayed, by the man who trusted most. This psychological state allows the lenders to impose economic measures, which under other circumstances, would have caused the uprising of Greeks. In order to seize this opportunity the Greek government legislated 5.4 billion euros worth of budget savings on Sunday the 8^th of May. 153 lawmakers out of the 300 of the Greek parliament backed the legislation. Gradually from June 2016 there will be a rise on taxes in all products and services. The government is going to a) raise VAT from 23% to 24%, b) raise special tax on fuel, beer, cigarettes, coffee etc. c) raise the vehicle taxes d) introduce a 10% tax on subscription television and a 5% tax on Internet. Moreover the government is going to lower the income tax – free threshold to 8,863 euros from 9,100 euros, while freelancers are going to pay more than 50% of their income to taxes and social security.All these taxes are imposed to a devastating economy, which has lost around 30% of its GDP, measures which are going create more poverty and unemplyoment. The so – called bailout programme, which doomed Greece economy in deep recession, now is going to bring the economic development! What an Orwell Greek tragedy this is! War is peace! Freedom is slavery! Ignorance is strength!

Lynn Parramore: Austerity Without Debt Relief Courts New Unrest in Greece A breakdown in negotiations may be the best outcome of Monday’s Eurozone finance ministers’ meeting on debt relief for Greece, warns INET grantee and University of Texas economist James K. Galbraith. That’s because, he believes, Greece’s debtors continue to demand unsustainable austerity measures as the price for bailout funds — measures the Greek government will, sooner or later, be forced to halt. “A breakdown of the [Brussels] discussion would be the best outcome,” Galbraith says. “That would move some of the creditors a little bit more towards reality, perhaps. There’s no point in making more concessions to them. They just keep on asking for more. There’s no way to satisfy these people. They’re engaged in a land grab. They have a strategy to achieve that, but the time of reckoning will come sooner or later.” The Brussels meeting follows a day of dramatic protests by thousands of citizens in Athens and Thessaloniki on Sunday, as Greece’s parliament passed a controversial new round of pension and tax reforms demanded by creditors.   Monday’s meeting is the first in six years to focus on the issue of debt relief measures, which may be necessary to avoid a Greek default in July, when the country’s next major repayment to the International Monetary Fund (IMF) and the European Central Bank comes due. Jeroen Dijsselbloem, the head of the Eurogroup of finance ministers, has expressed hope that a deal can be reached later this month. And Greek Prime Minister Alexis Tsipras has said that the Brussels meeting is critical to achieving debt relief and breaking a vicious economic cycle. But the creditors are divided on the issue, with the IMF favoring debt relief, while Germany leads opposition. Galbraith expects the IMF to capitulate. “The IMF is making noises,” he says, “but they are not going to have the cojones to stand up to the Germans.”

Unequal Growth But Evidence of Improvement in Europe -- Eurostat released estimates of first quarter GDP for the Eurozone a little over a week ago (here), showing modest growth of 0.5% for the more inclusive measure of European countries. This is the 12th quarter in a row that the Eurozone has exhibited positive growth after suffering nearly two years of negative growth 2011-2013. The truth is, however, that the Eurozone has only barely recovered to its pre-recession levels. Furthermore, this growth has been driven by core economies, with countries on the periphery still years away from a full recovery. As usual, disaggregated data is not yet available for all countries from Eurostat. As we see from the most recent set of available data, a number of countries have recovered beyond their 2008 peaks: Notably, the large economies of the UK, France (and Germany, though we don’t have the data) are pulling measures of Eurozone health (EU15, EU28, EA12) up above their pre-recession highs. While this is notable, the smaller periphery economies are still lagging well behind. Focusing specifically on these economies (Portugal, Ireland, Italy, Greece, and Spain), we still see an inadequate recovery: Greece can only be termed a tragedy at this point; with the exception of Ireland, the rest of the periphery economies are still lagging behind their 2008 peaks. Spain and Portugal have both made substantial recoveries over the past year, and are approaching their pre-recession levels. Much of this recovery has come through a rise in net exports, shown in the following two graphs: But has not translated into increases in consumption, as each economy is still substantially below their pre-recession levels:Additionally, there has been much discussion about the UK leaving the Eurozone. Leaving aside the merits of such a decision for the UK, we wanted to demonstrate their importance to the interpretation of the recovery of the Eurozone. When we remove the UK from the Eurozone and recalculate aggregated recovery statistics, there is a stark difference

German Factory Orders Recover In March: Germany's factory orders recovered at a stronger than expected pace in March, figures from Destatis revealed Monday. New orders in manufacturing climbed 1.9 percent on a monthly basis in March, reversing a 0.8 percent fall in February. Economists had forecast a 0.7 percent rise after prior month's initially estimated decline of 1.2 percent. Domestic orders decreased 1.2 percent, while foreign orders grew 4.3 percent on the previous month. New orders from the euro area moved up 1.1 percent and new orders from other countries increased 6.2 percent. The manufacturers of intermediate goods fell 1.2 percent, while orders for capital goods showed an increase of 4 percent. For consumer goods, an increase in new orders of 1.6 percent was registered.

Italy must choose between the euro and its own economic survival -- Italy is running out of economic time. Seven years into an ageing global expansion, the country is still stuck in debt-deflation and still grappling with a banking crisis that it cannot combat within the paralyzing constraints of monetary union.  "We have lost nine percentage points of GDP since the peak of the crisis, and a quarter of our industrial production," says Ignazio Visco, the rueful governor of the Banca d'Italia. Each year Rome hopefully pencils in a fall in the ratio of public debt to GDP, and each year the ratio rises. The reason is always the same. Deflationary conditions prevent nominal GDP rising fast enough to outgrow the debt. The putative savings from drastic fiscal austerity - cuts in public investment - were overwhelmed by the crushing arithmetic of the 'denominator effect'. Debt was 121pc in 2011, 123pc in 2012, 129pc in 2013. It came close to levelling out last year at 132.7pc, helped by the tailwinds of a cheap euro, cheap oil, and Mario Draghi's fairy dust of quantitative easing. This triple stimulus is already fading before the country escapes the stagnation trap. The International Monetary Fund expects growth of just 1pc this year. The global window is closing in any case. US wage growth will probably force the Federal Reserve to raise interest rates and wild speculation will certainly force China to rein in its latest credit boom. Italy will enter the next downturn - perhaps early next year - with every macro-economic indicator in worse shape than in 2008, and half the country already near political revolt.

UBS could pass on negative rates to wealthy clients - CEO | Reuters: Switzerland's biggest bank UBS could pass on negative interest rates to wealthy private customers or add new service fees to ensure profitability and capital returns in the current environment, its chief executive said on Tuesday. UBS already passes on negative interest rates to corporate clients, but CEO Sergio Ermotti's admission is a sign of the pressure Swiss banks are under due to the Swiss National Bank's negative interest rate policy. "If the conditions remain as they are or grow worse, we will have to consider extending these measures to very wealthy clients and increasing interest rates on loans," Ermotti said at the group's annual general meeting on Tuesday. "Or we will have to demand payment for services that were previously free – with the possibility that additional fee adjustments in the future will also be necessary." Low or negative interest rates meant banks had to weigh taking on client assets against the costs these incurred for the institution and the "unreasonably large amount" of capital with which they needed to back up liquid assets. Interest rates in UBS's native Switzerland have been held at fresh record lows for more than a year. Since lifting a minimum exchange rate cap against the euro in January 2015, the SNB has charged 0.75 percent for deposits held with the central bank.

Negative interest rates spark record gold rush as demand for safe deposit boxes jumps: Investors snapped up gold at a record pace in the first three months of 2016 as global growth fears intensified and central banks slashed interest rates deeper into negative territory. Concerns that Britain could leave the EU also triggered a spike in demand across Europe where " investors were plagued by lingering Brexit fears," according to the World Gold Council.  Gold demand climbed by 21pc to 1,290 tonnes in the first three months of 2016 compared with a year earlier, its gold demand trends report said. This represents the biggest first quarter  increase since records began in 2000.The council said the rise was "fuelled by investor concerns regarding economic fragility and an uncertain financial landscape." The first three months of the year saw massive inflows into exchange traded funds (ETFs), which give investors an easy way to invest in gold without having to purchase bullion.

Stay or go, Brexit vote bound to unravel EU --  In five weeks, the European Union will crack, no matter which way the Brexit referendum goes. If Britain votes to leave the EU, the EU will lose its second most powerful member, and all the economic, political and military might that goes with it – imagine the United States shorn of California. If Britain votes to remain, an à la carte EU will emerge, with countries choosing what treaties and powers they want, as Britain is doing now. Brexit or not, the concept of the EU as “all for one and one for all” is dying. Polls already show that more than half of the French and Italians want their own in-out referendums. The domino effect has started and it’s impossible to say where or how it will end. The institution devoted to common interests and peace since the Treaty of Rome in 1957 is set to unravel quickly or slowly after the June 23 vote. The “ever-closer union,” the notion that lies at the heart of the EU treaties, seems gone forever. For this, British Prime Minister David Cameron can take much, maybe most, of the blame. Lest we forget, the referendum on Britain’s EU membership was not demanded by the British public. Polls showed that the EU question ranked low on the tally of voters’ concerns. Mr. Cameron promised a referendum for no other reason than to placate the Euroskeptic arm of his fractious Conservative party. Imagine that: His effort to fix a parochial, internal problem is putting at risk the integrity of the entire EU. Mr. Cameron is a gambler and, so far, his gambles have mostly succeeded. He gambled in February that the EU would cut Britain a new membership deal. While his entire shopping list was not fulfilled, he got enough to declare victory. But the stakes are much higher in the Brexit vote and the polls are tight. The latest ICM poll puts Leave at 46 per cent and Remain at 44 per cent. The YouGov poll puts Leave at 40 per cent and Remain at 42 per cent.

David Cameron: Brexit could lead to Europe descending into war: Brexit will increase the risk of Europe descending into war, David Cameron will warn as he says that Britain will pay a high cost if "we turn our back" on the EU. The Prime Minister will invoke Sir Winston Churchill and say that the foundation of the European Union has helped bring together countries that have been "at each others throats for decades". He will highlight the battles of Trafalgar, Blenheim, Waterloo and the two World Wars as evidence that Britain cannot pretend to be "immune from the consequences" of events in Europe.Just three hours after the Prime Minister finishes speaking Boris Johnson, the eurosceptic Conservative MP, is expected to attack Mr Cameron’s EU deal. In his first speech since stepping down as Mayor of London Mr Johnson, a keen historian who has written a biography of Sir Winston, is likely to challenge Mr Cameron's claims. He has also vowed to produce some "pretty nasty surprises" before embarking on a red bus tour across the UK to make the case for a Brexit.

Barclays banker accused of rigging Libor rate 'hit assistant with baseball bat': A Barclays employee has claimed his boss hit him with a baseball bat in the office. An assistant to the Barclays banker who was the first in the UK to admit rigging Libor rates has made a series of sensational claims about his boss in court on Thursday (11 May). These include being hit on the head and knuckles with a baseball bat, being made to stand on a chair and recite the world's capitals and being ridiculed for having a disability.Jonathan Mathew, 35, made the claims about senior Barclay's trader, Peter Johnson, 61, at Southwark Crown Court where Mathew is one of five employees facing charges relating to the manipulation of the Libor rates. Mathew, who is dyslexic and partially deaf, told the court that when Johnson overheard him admitting he didn't know the capital of the Philippines in a phone call, he publicly humiliated his assistant in a scene reminiscent of the movie "The Wolf of Wall Street."