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

Saturday, May 21, 2016

week ending May 21

U.S could raise interest rates two-three times this year, Fed officials say | Reuters -- A U.S. Federal Reserve policymaker said on Tuesday that he will push for an interest rate hike in June or July and two others still see up to three rate increases this year, leaving the door open to a change in monetary policy relatively soon. The U.S. central bank has held rates steady at a target range of 0.25 to 0.50 percent since moving from near zero in December. In its April policy statement it indicated it wants to have more confidence in the economy's overall health before raising rates again. Data on consumer prices, housing starts and industrial production released earlier on Tuesday showed the U.S. economy re-accelerating into the second quarter. Dallas Fed President Robert Kaplan told reporters in Texas that he will advocate for an interest-rate hike at the Fed's upcoming policy meetings. "Whether that's June or July, I can't say right now," Kaplan said. Kaplan added that after that first 2016 rate hike he would prefer to pause to assess conditions, and while he would "hope" to continue to normalize rates thereafter, the pace of rate hikes will depend on economic data. Despite the Fed standing pat in the first three meetings of the year, Atlanta Fed President Dennis Lockhart said at an event in Washington that he still assumes there will be two to three rate hikes between now and December, and that markets are more pessimistic on the U.S. economic outlook than he is."I think it certainly could be a meeting at which action could be taken," Lockhart said in reference to the Fed's next policy meeting on June 14-15, one of its remaining five meetings for this year. San Francisco Fed President John Williams, in a joint appearance with Lockhart in Washington, echoed the optimistic view of the economy. Two to three interest rate hikes this year "seems reasonable," he said, and there will be a lot more economic data to parse between now and mid-June.

Fed Not As Convinced About June As Markets, by Tim Duy: Market participants place less than 10 percent chance of a rate hike in June. In contrast, San Francisco Federal Reserve President John Williams continues hold out hope for a third. Via ReutersTwo to three rate increases this year "definitely still makes sense," he said... Williams, a centrist whose views are generally in line with those of Fed Chair Janet Yellen, said he has not yet conferred with his staff economists over whether the next rate increase would be best made in June, July or September...With most gauges of the labor market suggesting the United States is at or nearly at full employment, he said, and inflation set to rise to the Fed's 2 percent target in two years, "things are definitely looking good."  Delaying rate hikes for months, he said, "would force our hands a little bit to move much more quickly in 2017." Williams follows on the heels of Kansas City Federal Reserve President Esther George and Boston Federal Reserve President Eric Rosengren. The former clearly wants a rate hike, the latter, like Williams, not convinced that June is off the table. Williams adds the possibility that market participants are in for a rude awakening come June:"Hopefully, if the markets understand our strategy, understand the data the way we do, then they won’t be too surprised by what we do," Williams said. "I definitely don’t think we need to go into a meeting with the markets convinced that we are going to raise rates in order for us to raise rates." I think the Fed increasingly believes the data is lining up in their favor. Friday's retail sales report likely went a long-way toward dispelling any lingering concerns they might have over the strength of the consumer. The tenor of that data has picked up markedly in the last few months:

Fed Watch: Fed Officials Come Looking For A Fight -- Incoming data continues to support the narrative that the US economy is not, I repeat, not, slipping into recession. Instead, the US economy is most likely continuing to chug along around 2 percent year over year. Not exciting, but not a disaster by any means. Indeed, for Fed officials thinking the rate of potential growth is hovering around 1.75 percent, it is enough to keep upward pressure on labor markets, pushing to economy further toward full employment. And if you think you want to hit the inflation target from below, then you need to hit the employment target from above. Which means a non-trivial contingent of the Fed does not want to leave June off the table. That is a message that came thorough loud and clear today. Industrial production surprised on the upside, gaining 0.7 percent. Still down on a year over year basis, but it is worth repeating that the weakness is narrowly concentrated:  Housing starts for April were also above expectations. The upward grind since 2011: Notably, the housing market is transitioning from multifamily to single family construction: See Calculated Risk for more. Inflation rose on the back of higher gas prices. Headline CPI gained 0.4 percent, although core rose a more modest 0.2 percent. Core CPI inflation is hovering just above 2 percent: Fed hawks will be nervous that rising gas prices will quickly filter through to core inflation; doves will remind them that the Fed's target is PCE inflation, which remains well below 2 percent. Fedspeak was decidedly hawkish today, with both Atlanta Federal Reserve President Dennis Lockhart and San Fransisco Federal Reserve President John Williams insisting that market participants are wrong to assume the Fed will pass on the June meeting. Separately, Dallas Federal Reserve President Robert Kaplan argued for a rate hike in June or July.

Fed Is Seriously Considering Raising Interest Rates in June, Meeting Minutes Say - — The Federal Reserve sent a sharp, simple message to financial markets on Wednesday: Pay attention. The Fed is thinking seriously about raising its benchmark interest rate at its next meeting, in June.The unusually frank bulletin was delivered in the official account of the Fed’s April meeting, which said explicitly that most officials thought “it likely would be appropriate” to raise rates in June if the economy shows clear signs of a rebound from a weak winter.That message was sharply at odds with the expectations of investors, who had largely written off a June increase before Wednesday, betting instead that the Fed would leave rates unchanged until later in the year. Measures calculated from asset prices suggested that investors saw less than a 5 percent chance of a June increase at the beginning of the week; by the end of Wednesday, that had spiked above 30 percent.It remains far from certain, however, that the Fed will move at its meeting on June 14 and 15. The economy has yet to demonstrate the strength the Fed says it wants to see, and some officials said in April there might not be time to gain the necessary confidence before the June meeting.Still the account made clear that Fed officials want markets to take the possibility more seriously. “The markets are certainly more pessimistic than I am,” Dennis Lockhart, the president of the Federal Reserve Bank of Atlanta and a bellwether for the Federal Open Market Committee, said.

Fed signals interest rate hike firmly on the table for June | Reuters: WASHINGTON Federal Reserve officials felt the U.S. economy could be ready for another interest rate increase in June, according to the minutes from the central bank's April policy meeting released on Wednesday. Most participants in the policy-setting committee's April 26-27 meeting said they wanted to see signs that economic growth was picking up in the second quarter and that employment and inflation were firming, the minutes showed. "Then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June," according to the minutes. The suggestion that a rate increase in June is firmly on the table suggests the Fed is closer to tightening monetary policy again than Wall Street had expected. The Fed lifted rates in December for the first time in nearly a decade. Prices for futures contracts on the Fed's benchmark overnight lending rate implied that investors saw a 34 percent chance of a rate increase next month, up from 19 percent shortly before the release of the minutes, according to CME Group.

Fed’s Dudley points to interest rate hike in June or July - — It would be appropriate for the Federal Reserve to raise interest rates again at either the June or July meeting as long as the economy rebounds from a weak first quarter as expected, a key Federal Reserve official said Thursday. “If I am convinced that my own forecast is sort of on track — then I think a tightening in the summer, the June, July timeframe is a reasonable expectation,” William Dudley, the president of the New York Fed, said at a press briefing. Dudley is a critical voice at the Fed. The New York Fed president — uniquely among regional presidents — always get a vote on the Federal Open Market Committee and serves as the FOMC’s vice chairman. There was a “pretty strong sense” among Fed officials that market expectations of a summer rate hike were “way too low” earlier in May, Dudley said. Recent speeches and a signal from the Fed’s April minutes that a June rate hike was on the table has caused expectations of a rate hike to jump.

Fed Watch: Minutes Say June Is On The Table - There is quite a bit of material in the minutes of the April 2016 FOMC meeting to work with. The central message of the minutes was that financial market participants were too complacent in their expectations that the Fed would stand pat in June. The Fed clearly made no such decision in April. Instead, meeting participants hotly debated the likelihood that a rate hike would be appropriate in June: Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation making progress toward the Committee's 2 percent objective, then it likely would be appropriate for the Committee to increase the target range for the federal funds rate in June. Most participants, but not necessarily most voting members, thought a June hike would be appropriate if the economy firms as anticipated. Still, it was not clear to participants that the economy would evolve as expected: Participants expressed a range of views about the likelihood that incoming information would make it appropriate to adjust the stance of policy at the time of the next meeting. Several participants were concerned that the incoming information might not provide sufficiently clear signals to determine by mid-June whether an increase in the target range for the federal funds rate would be warranted.This has been essentially my position - that the Fed would not have sufficient data on Q2 at the time of the June meeting to justify a rate hike. Other were more optimistic: Some participants expressed more confidence that incoming data would prove broadly consistent with economic conditions that would make an increase in the target range in June appropriate. Note that "several" is greater than "some." Those same "some" were also likely those that expressed this concern: Some participants were concerned that market participants may not have properly assessed the likelihood of an increase in the target range at the June meeting, and they emphasized the importance of communicating clearly over the intermeeting period how the Committee intends to respond to economic and financial developments. This should have come as no surprise. Policymakers have repeatedly said as much in recent weeks. Too many participants in April felt June was a real possibility if the data cooperated - and it largely has cooperated - to so easily dismiss the possibility of a June hike. My initial reaction to the minutes was to call the June meeting a toss-up.

FOMC Minutes: "Most participants judged" that June rate hike "appropriate" based on data -- The FOMC believes that market participants are underestimating the likelihood of a rate hike in June. From the Fed: Minutes of the Federal Open Market Committee, April 26-27, 2016 . Excerpts:   Participants agreed that incoming indicators regarding labor market developments continued to be encouraging. They generally concurred that data releases during the intermeeting period on components of private domestic demand had been disappointing, but most participants judged that the slowdown in growth of domestic spending would be temporary, citing possible measurement problems and other transitory factors. Financial market conditions continued to improve, providing support to aggregate demand and suggesting that market participants saw some reduction in downside risks to the outlook: Equity prices rose further, credit spreads declined somewhat, and the dollar depreciated over the intermeeting period. Taking these developments into account, participants generally judged that the medium-term outlook for economic activity and the labor market had not changed appreciably since the previous meeting. Furthermore, most participants continued to expect that, with labor markets continuing to strengthen, the dollar no longer appreciating, and energy prices apparently having bottomed out, inflation would move up to the Committee's 2 percent objective in the medium run. Still, with 12-month PCE inflation continuing to run below the Committee's 2 percent objective, a number of participants judged that it would be appropriate to proceed cautiously in removing policy accommodation. . Accordingly, these participants believed that it would be important to evaluate whether incoming information was consistent with their expectation that economic growth would pick up and thus support continued improvement in the labor market. In addition, a number of participants judged that the risks to the outlook for inflation remained tilted to the downside in light of low readings on measures of inflation compensation and the fall over the past year in some survey measures of longer-term inflation expectations. Also, many participants noted that downside risks emanating from developments abroad, while reduced, still warranted close monitoring. For these reasons, participants generally saw maintaining the target range for the federal funds rate at 1/4 to 1/2 percent at this meeting and continuing to assess developments carefully as consistent with setting policy in a data-dependent manner and as leaving open the possibility of an increase in the federal funds rate at the June FOMC meeting.

FOMC Minutes: Most officials saw June hike 'likely' if economy warranted...

  • Range of views on whether data would support June hike
  • Here is the April 27, 2016 FOMC statement
  • Most judged it would likely be appropriate to hike in June if data remains consistent with Q2 GDP pickup, firmer labor market conditions and progress on inflation
  • Some concerned that markets may not have accurately assessed the chance of a June hike
  • Policymakers expressed a range of opinions on whether there would be enough incoming data before June 15 meeting to warrant a hike
  • Some judged outlook as now roughly balanced, many others continued to see downside risks
  • Few saw it as appropriate to hike in April, two worried that US behind the curve on inflation
  • May expressed confidence that US growth would pick up in coming quarters but some saw risk that a more persistent slowdown underway
  • Generally saw risks from global and financial developments as having diminished but still warranted close monitoring
  • Risks to the projection for inflation were still judged as weighted to the downside, reflecting the possibility that longer-term inflation expectations may have edged down
  • Some participants noted that global financial markets could be sensitive to the upcoming British referendum on membership in the European Union or to unanticipated developments associated with China's management of its exchange rate.
  • Full text of the FOMC Minutes.

The Fed Minutes are Noise -- I wasn’t surprised to hear in the FOMC minutes that members of the committee thought:For these reasons, participants generally saw maintaining the target range for the federal funds rate at 1/4 to 1/2 percent at this meeting and continuing to assess developments carefully as consistent with setting policy in a data-dependent manner and as leaving open the possibility of an increase in the federal funds rate at the June FOMC meeting. I was surprised to see some of the markets take it seriously.  Here’s why:

  • 1) The FOMC loves to talk hawk and them be doves.  They don’t think the costs to waiting are significant, particularly given how low measured inflation and and implied future inflation are.  Five-year inflation, five years forward implied from TIPS spreads is not high at present as you can see here:
  • 2) The FOMC is well known for giving with the right hand and taking with the left.  They would like if possible to have the best of both worlds — gentle movement of what they view as key variables, while usually not dramatically changing the forward estimates of those
  • 3) The FOMC’s natural habitat is wishful thinking.  Their GDP forecasts are usually high, and they suspect their policy tools will move the economy the way they want and quickly, and it’s just not true.
  • 4) LIBOR rates have done a better job of the FOMC at estimating future policy, and they have barely budged since the FOMC minutes came out.
  • 5) The FOMC always has more doves than hawks, and that is the way the politicians who appoint and approve the board members like it.  They will live with inflation.  That was yesterday’s problem.  Today’s problem is stagnant median incomes — and looser monetary policy will help there, right?Well, no, but I’m sure they clapped when Peter Pan asked them to save Tinkerbell.  There is no link between inflation and faster real growth over the long haul.  There may be measurement errors in the short run.

Hawkish Fed Chatter And Another Slide In Base Money Supply -- A second interest rate hike may be near, advised New York Fed President Bill Dudley on Thursday. “If I’m convinced that my own forecast is on track, then I think a tightening in the summer, the June-July time frame, is a reasonable expectation.” The release of Fed minutes from the last policy meeting fall in line with that thinking. So, too, does the April update on real (inflation-adjusted) base money supply (M0), which contracted in year-over-year terms in April, marking the third decline in the past four months. The St. Louis Adjusted Monetary Base (deflated by the consumer price index) fell 5.4% last month vs. the year earlier level, a slightly bigger dip after the annual decline through March. The current year-over-year slide marks the third time that the Federal Reserve has embraced a tightening cycle since the last recession ended. In the previous two rounds of squeezing policy, based on M0 annual changes, the central bank relented and resumed a bias for stimulus. Is this time different? Dudley’s latest comments certainly leave room for expecting that monetary policy will continue to tighten. As Reuters reports, “June is definitely a live meeting depending on how the data evolves,” Dudley said, adding that he was “quite pleased” to see the market has priced in higher chances of a June rate hike this week. The effective Fed funds rate (EFF) is stable, holding at a level that’s prevailed for much of 2016 to date. But that doesn’t mean much. EFF offered no hint of a rate hike last December, ahead of the Fed’s announcement on the 16th of that month to increase its policy rate for the first time in nearly a decade to a 0.25%-to-0.50% range, which still stands. The EFF eventually surged to reflect the shift, but on Dec. 16th… after the fact (EFF data is released with a lag).

Fed Hike Threat Has Wall Street Braced for the Worst | The Fiscal Times - It’s been nearly a year since the S&P 500 hit its all-time high. The Dow Jones Industrial Average has been flirting with the 18,000 level since before Christmas 2014. And for the past three months, the Dow has been stuck in a 500-point trading range. But large-cap stocks have traced out an epic head-and-shoulders reversal pattern, with a "neckline" right at 17,500. Headwinds are accumulating fast: uneven U.S. economic growth, evidence of caution by U.S. consumers, falling global trade volumes, energy sector defaults, an increasingly contentious U.S. presidential contest, credit woes in China, falling corporate profitability and, most importantly, indications that the Federal Reserve — spurred on by steady job growth and rebounding inflation — is set to hike interest rates as many as three times this year. As we enter a period of historical seasonal weakness for stocks, investors would do well to brace for a turbulent summer. Because Wall Street insiders, as I'll explain below, already are. Wednesday’s release of surprisingly hawkish Federal Reserve meeting minutes from the April policy meeting rattled investors. Those minutes were a sharp turnaround from what was considered a "dovish" statement from the Fed last month. In the minutes, policymakers noted that a June rate hike would be appropriate should second quarter economic data show a reacceleration of growth. Futures traders increased the odds of a June interest rate hike from 4 percent to 35 percent according to TD Securities as the Fed acknowledged that stable job gains and rebounding inflation will force the issue on policy tightening — no matter the temper tantrum from stimulus-obsessed traders — despite concerns about consumer spending, the "Brexit" referendum and the situation in China.

I Continue to Fail to Understand Why the Federal Reserve’s Read of Optimal Monetary Policy Is so Different from Mine… Brad DeLong - Does you think this looks like an economy where inflation is on an upward trend and interest rates are too low for macroeconomic balance? Mohamed El-Erian says, accurately, that the Federal Reserve is much more likely than not to increase interest rates in June or July: Mohamed El-Erian: Federal Reserve Is Torn: ""Moves in financial conditions as a whole are making [the Fed]....more confident about going forward [with interest-rate hikes,] and they were worried that the markets were underestimating the possibility of a rate hike this year and they wanted to do something about it.... In the end, what's clear is a hike will definitely happen this year.... If the Fed unambiguously signals that it will move, you will see a stronger dollar and that... will have consequences on other markets... Olivier Blanchard (2016), [Blanchard, Cerutti, and Summers (2015)2, Kiley (2015), IMF (2013), and Ball and Mazumder (2011) all tell us this about the Phillips Curve:

  • The best estimates of the Phillips Curve as it stood in the 1970s is that, back in the day, an unemployment rate 1%-point less than the NAIRU maintained for 1.5 years would raise the inflation rate by 1%-point, and that a 1%-point increase in inflation would raise future expected inflation by 0.8%-points.

  • The best estimates of the Phillips as it stands today is that, here and now, an unemployment rate 1%-point less than the NAIRU maintained for 5 years would raise the inflation rate by 1%-point, and that a 1%-point increase in inflation would raise future expected inflation by 0.15%-points.

The United States as a Banker to the World - David Beckworth - A few weeks ago I attended a conference on international monetary stability at Stanford's Hoover Institute. It was an interesting conference that John Taylor nicely summarizes here. I was fortunate enough to present one of the papers at the conference and got great feedback on it. The paper, coauthored with Chris Crowe, looks at two roles played by the United States in the international monetary system. First, the U.S. financial system effectively acts as a banker to world and second, the Fed has inordinate influence on global monetary conditions. We document these two roles and consider how they interact.  In this post I want to discuss the first role since it relates to an important ongoing problem previously covered here, the safe asset shortage. In  my next post I will cover the second role and see how it interacts with the first role.  As I have noted before, there is an ongoing safe asset shortage problem. The U.S. financial system is an important part of this story since it is a key supplier of safe assets to world.  Lately, however, it has not been supplying enough safe assets to satiate demand for them. In fact, just yesterday we learned the following: The US government paid off more debt than it issued last month in a stunning turn-around for America’s public finances, causing an acute shortage of bonds and a further downward slide in borrowing costs.  Net issuance of notes and bonds by the US Treasury plunged below zero in April as tax revenues surged, a feat last achieved for fleeting moments at the end of the global economic boom in 2008. Normally, this would be a welcomed development but right now it may actually weaken the global economy. For since the crisis in 2008, there has been an increased demand for safe stores of value--especially U.S. treasuries--that has pushed short-term interest rates to the zero lower bound (ZLB) in many parts of the world. That development, in turn, has prevented markets from clearing. That is, the ZLB put a price floor under short-term interest rates or, alternatively, a price ceiling on the price of safe assets.

WSJ Survey: Recession Odds Remain Elevated Despite Calmer Financial Markets -    In February, when the Dow Jones Industrial Average had fallen nearly 15%, concerns grew that the U.S. economy was slipping into recession. Those fears have since subsided in financial markets, but most economists continue to see an elevated risk of the U.S. falling into a new recession within the next 12 months.The grew at a 0.5% annual pace in the first quarter of the year, according to the most recent Commerce Department reading. The most recent monthly jobs report showed the pace of job growth slowing as well. This rough start to the year prompted economists to lower their estimates for economic and job growth this year. The average forecast now calls for 1.9% growth this year, down from 2.1% in last month’s survey. Over the next 12 months, the economy will add about 180,000 jobs, they estimate, down from 185,000 last month and 190,000 in March. Even after making these downgrades, 63%% of economists think the risks to the economy are to the downside. In other words, if their forecasts are wrong, economists think it’s because they’re probably too optimistic. Since recession risks first rose late last year, the biggest risk has consistently been the chance that China’s economy would falter or that the dollar would be too strong, and that a slowdown in international trade would weigh the U.S. down. While a global slowdown is still identified as the biggest risk, the forecasters see elevated risks coming from the U.S. political process as well. About 42% of respondents say uncertainty from the election is already harming the U.S. economy, at least somewhat, because business investment can be challenging when the potential range of political outcomes is so wide.

Key Measures Show Inflation close to 2% in April -- The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning: According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.3% (3.4% annualized rate) in April. The 16% trimmed-mean Consumer Price Index rose 0.2% (2.5% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.  Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.4% (5.0% annualized rate) in April. The CPI less food and energy rose 0.2% (2.4% annualized rate) on a seasonally adjusted basis.   Note: The Cleveland Fed has the median CPI details for April here. Motor fuel was up 152% annualized in April! This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.5%, the trimmed-mean CPI rose 2.0%, and the CPI less food and energy also rose 2.1%. Core PCE is for March and increased 1.6% year-over-year. On a monthly basis, median CPI was at 3.4% annualized, trimmed-mean CPI was at 2.5% annualized, and core CPI was at 2.4% annualized. On a year-over-year basis, three of these measures are at or above 2%. Using these measures, inflation has been moving up, and most are close to the Fed's target (Core PCE is still below).

Chicago Fed "Index shows economic growth picked up in April" --The Chicago Fed released the national activity index (a composite index of other indicators): Economic Growth Picked Up in April Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +0.10 in April from –0.55 in March. All four of the broad categories of indicators that make up the index increased from March, but three of the four categories made nonpositive contributions to the index in April.  The index’s three-month moving average, CFNAI-MA3, decreased to –0.22 in April from –0.18 in March. April’s CFNAI-MA3 suggests that growth in national economic activity was somewhat below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year. This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Chicago Fed: 3-Month US Macro Trend Remains Sluggish In April -- Economic growth in the US eased in April to a four-month low, according to this morning’s update of the three-month average of the Chicago Fed National Activity Index (CFNAI-MA3). The reading for last month dipped to -0.22, the lowest since last December’s -0.28 reading.  A negative value indicates below-trend growth, based on the historical record, but only figures below -0.70 mark the start of a recession, according to the Chicago Fed. By that standard, the US macro trend was sluggish, but the weak output—the weakest, in fact, for the year so far—is still well above the tipping point that aligns with economic contraction. Today’s report follows a similar review via yesterday’s update of The Capital Spectator’s US business-cycle profile, which also reveals slower growth these days but without triggering a new recession signal. Note that the monthly data for the Chicago Fed index popped sharply higher, rising to +0.10 for April—a dramatic rebound after the -0.55 data for March. Although the monthly figures are noisy and often misleading, the jump in April supports the narrative that economic growth in the second quarter is on track to rebound after a near-flat performance in Q1 GDP. The case for raising growth expectations in Q2 also finds support in the current GDP nowcast via the Atlanta Fed. The bank’s May 17 estimate for economic output in Q2 is +2.5%, a moderate pace that represents a substantial improvement over Q1’s tepid +0.5%. The New York Fed’s nowcast for Q2 also projects a rebound (as of May 13), but the expected growth for the April-through-June period is a softer +1.3%.

April 2016 CFNAI Super Index Moving Averages Declined. - The economy's growth declined based on the Chicago Fed National Activity Index (CFNAI) 3 month moving (3MA) average - and remains well below the historical trend rate of growth (but still above levels associated with recessions). The three month moving average of the Chicago Fed National Activity Index (CFNAI) which provides a summary quantitative value for all the economic data being released - declined from -0.18 (originally reported as -0.18 last month) to -0.22. Three of the four elements of this index are in contraction. This index IS NOT accurate in real time (see caveats below) - and it did miss the start of the 2007recession.

  • The headlines talk about the single month index which is not used for economic forecasting. Economic predictions are based on the 3 month moving average. The single month index historically is very noisy and the 3 month moving average would be the way to view this index in any event.
  • This index is a rear view mirror of the economy.

As the 3 month index is the trend line, the trend is currently showing a marginally decelerating rate of growth. As stated: this index only begins to show what is happening in the economy after many months of revision following the index's first release.

GDPNow and Then - Atlanta Fed's macroblog -- Real-time forecasts from the Atlanta Fed’s real gross domestic product (GDP) nowcasting model—GDPNow—have been regularly updated since August 2011 (the model was introduced online in July 2014). So we now have a nearly five-year history to allow us to evaluate the accuracy of the model’s forecasts. The chart below shows forecasts from GDPNow (red dots) alongside actual first estimates of real GDP growth (gray bars) from the U.S. Bureau of Economic Analysis (BEA). For comparison, the blue dots in the chart are the consensus (average) forecasts from the Wall Street Journal Economic Forecasting Survey (WSJ Survey). The initial estimate of real GDP growth for a particular quarter is usually published at the end of the subsequent month. The WSJ Survey consensus forecasts plotted above were released about two weeks before these estimates. To maintain comparable timing with the WSJ Survey, the GDPNow forecasts shown in the chart are those constructed on or before the 12th day of the same month.  Occasionally, there has been relatively large disagreement between GDPNow and the WSJ consensus. For example, GDPNow predicted that GDP growth would be below 0.5 percent for five out of 19 quarters between 2011 and 2016, and the lowest WSJ Survey consensus forecast for any of those quarters was 1.3 percent. Nonetheless, the average accuracy of the GDPNow and WSJ Survey consensus forecasts has been similar: the average absolute forecast error (average error without regard to sign) for GDPNow was 0.56 versus 0.60 for the WSJ Survey consensus.

Just Released: Presenting U.S. Economy in a Snapshot at Our Economic Press Briefing -- Monitoring the economic and financial landscape is a difficult task.  Since last June, New York Fed research economists have been helping on this front, by producing U.S. Economy in a Snapshot, a series of charts and commentary capturing important economic and financial developments. At today’s Economic Press Briefing, we took reporters covering the Federal Reserve through the story of how and why the Snapshot is produced, and how it can be helpful in understanding the U.S. economy.  Our presentation drew from the May Snapshot and focused on several issues of current interest. For example, there was a marked slowdown in the growth of consumer spending in 2016:Q1 despite relatively low gasoline prices, solid growth in real disposable income, and a labor market that has shown steady improvement. In addition, there are tentative signs that the manufacturing sector may be stabilizing in the aftermath of a strong dollar and weakness overseas that depressed demand for U.S. exports. Related to the previous point, the manufacturing sector has also been impacted by low oil prices that have led to a significant pullback in oil and gas drilling activity and resulted in a decline of business investment in nonresidential structures. On the inflation front, the decline in goods prices since 2013 stemming from lower import prices has acted to restrain core inflation.

Strong U.S. data bolsters second-quarter growth prospects | Reuters: U.S. consumer prices recorded their biggest increase in more than three years in April as gasoline and rents rose, pointing to a steady inflation build-up that could give the Federal Reserve ammunition to raise interest rates later this year. Other data on Tuesday showed housing starts and industrial production rebounded strongly last month, suggesting the economy was regaining steam early in the second quarter after almost stalling early in the year. "The combination of higher prices, housing gains and industrial production support the narrative of a second-quarter rebound in GDP, and will stir talks of the necessity of at least one Fed hike later this year," The Labor Department said its Consumer Price Index increased 0.4 percent last month, the largest gain since February 2013, after rising 0.1 percent in March. That took the year-on-year increase in the CPI to 1.1 percent from 0.9 percent in March. Americans also paid more for medical care, food, recreation, tobacco, motor vehicle insurance, airline fares and grooming. Economists polled by Reuters had forecast the CPI gaining 0.3 percent last month and advancing 1.1 percent from a year ago. The so-called core CPI, which strips out food and energy costs, rose 0.2 percent after climbing 0.1 percent in March. In the 12 months through April, the core CPI increased 2.1 percent after increasing 2.2 percent in March. The Fed has a 2 percent inflation target and tracks an inflation measure which is currently at 1.6 percent. The rise in prices in April is likely to be welcomed by Fed officials who have persistently expressed concerns about inflation running below its target.

A Growth Rate Weighed Down by Inaction - Back when “Gunsmoke” was on TV and Lyndon Johnson was president, the United States economy managed to storm ahead by nearly 5 percent a year for nearly a decade. What we would give to recover some of that power!During Ronald Reagan’s presidency two decades later, the rise in the economic cycle, coming out of what was then the worst downturn in the post-World War II era, averaged a bit over 4 percent a year. By the time George W. Bush lived in the White House, the rebound from recession delivered an average growth rate of under 3 percent.You want to know how much bounce it has now? In the seven years since the United States emerged from the Great Recession under President Obama, annual growth has averaged just about 2 percent.The bad news? Unless business and government do something to improve the economy’s underlying capability, the United States will be lucky to achieve even that paltry growth rate over any sustained period of time.“The growth we have experienced has gained from a massive cyclical tailwind,” Lawrence H. Summers, the former Treasury secretary who also served as President Obama’s chief economic adviser, told me.But that cyclical tailwind — bolstered by putting idle resources back to work, which brought the unemployment rate down to 5 percent from 10 percent — is spent. The jobless rate will not fall from 5 percent — close to what economists consider full employment without excessive inflation — to zero. What remains is an economy at the mercy of two powerful dynamics. The first is a gradual shrinking of the work force as a share of the population, as it is squeezed by successive waves of retiring baby boomers and no longer gaining from the one-time surge of women into the paid work force in the 20th century. The second is a persistent decline in productivity growth over the last dozen years.

Regulations are a really big drag on US growth - When the Department of Commerce reported recently that the U.S. economy grew at an annual rate of only 0.5% during the first quarter of 2016, the White House attributed the meager growth in output to weakness in business investment and exports. Yet there is another important institutional influence often overlooked — or conveniently ignored — that negatively affects the country’s overall economic performance: the increasing impact of government regulations.  In a 22-industry study released in April by the Mercatus Center at George Mason University, a group of researchers found that federal regulations created an economic drag on the U.S. economy amounting to an average annual reduction in GDP growth of 0.8%. What is unique about this study is that that it evaluates the cumulative costs of regulation over a long time period and examines the effect of federal regulations by considering a counterfactual experiment: What would have happened if federal regulations had been “frozen” at the levels that prevailed in 1980?  The study’s authors posit that the cumulative buildup of federal regulations over time leads to duplicative, obsolete, conflicting and even contradictory rules, and that the multiplicity of such regulatory constraints complicates and distorts executive decision-making concerning a firm’s planning for research and development, business expansion, investments in new equipment, and updating manufacturing processes. Thus, because of the importance of innovation and productivity growth to the U.S. economy, these distortions have negative consequences for long-term economic growth in the U.S. The Mercatus research team calculated that the 0.8% annual drag on real GDP growth since 1980 due to the cumulative effects of regulation can be extrapolated into a 25% reduction in the size of the U.S. economy in 2012, or an economy that was $4 trillion smaller (nearly $13,000 per American) than it would have been in the absence of regulatory growth.

A Flatter Treasury Curve… And Slower Growth? -- The spread between long and short Treasury yields has been narrowing lately, a change that some analysts see as a warning sign for US economic growth. The current numbers overall suggest that that the macro trend is sliding into the business-cycle ditch, but there’s still plenty of concern about painfully slow growth. How slow can it go before tipping into a formal recession? No one really knows, but the flatter yield curve these days is attracting attention in the wake of wobbly equity prices and mixed economic news. “The yield curve itself signals that things are not good looking into the future and talking about recession risk,” Steve Major, head of fixed-income research at HSBC Holdings, tells Bloomberg. “The market is now ready for a long, long time with very low rates and it’s been painful because people have been expecting the Fed to do what it said it was going to do. The Fed really wants to hike rates but can’t.” Divining the future path for the economy is loaded uncertainty, as always, but the big squeeze on the yield curve lately is still noticeable and somewhat worrisome, based on daily data via Treasury.gov. Note, for instance, how yesterday’s curve (black line) compares with its shape from a year ago (blue line). Maturities for five years and above have dropped while shorter term yields—2 years and below—have increased. The net result: the spread between short and long rates has been squeezed.

Confused Thinking About Real Interest Rates Leads to Mistaken Belief that Lower Interest Rates Boost Investment -- Cameron Murray - The mysterious real interest rate – the one typically denoted as r in economic theory – does not have a real life counterpart. This is a problem for economic theory. And it is a major problem for policy makers relying on monetary policy to boost economic activity.  While we think of the nominal interest rate minus inflation as getting close to the theoretical concept of real interest rates, changing this value in practice through central bank operations does not actually change the real return on capital and stimulate investment through that channel. Why? Because the price of capital is determined by the interest rate! We have known this for a long time. Joan Robinson wrote about the circularity of reasoning when we measure the quantity of capital by its price. She was ignored. As I expect to be. For those who want to understand a little deeper, the here are some more details. First we take the standard economic view. In this view there is a thing called capital, K, that has a fixed cost (because it is a machine or building etc.), and each unit of K has an income earning potential, net of depreciation, each period, which I call I. To buy each K people borrow money at the rate r, meaning that as long as the ratio I/K > r it is profitable to invest in more capital, K.

The Mystery Of Saudi Treasury Holdings Solved: US Reveals Saudi Holdings For The First Time -- In the aftermath of Saudi Arabia's explicit threat to sell off US Treasurys (of which according to the NYT it had some $750 billion) should the US pursue legislation that could hold it liable for the September 11 bombings, Wall Street's analysts quickly tried to calculate whether Saudi Arabia had anywhere remotely close to that amount of US paper available for liquidation. As a reminder, despite starting to release data on foreign ownership of Treasuries in 1974, the Treasury’s policy has been to not disclose Saudi holdings, and it has instead grouped them with those of 14 other mostly OPEC nations, including Kuwait, Nigeria and the United Arab Emirates.  The group held $281 billion as of February, down from a record of $298.4 billion in July. For more than a hundred other countries, from China to the Vatican, the Treasury provides a detailed monthly breakdown of how much U.S. debt each owns. A few days after the NYT's disturbing article on Saudi Treasury liquidation, in hopes of bringing some clarity to this all too important topic, we penned an article titled "Does Saudi Arabia Have $750 Billion In Assets To Sell?" we cited Stone McCarthy which analyzed oil exporter reserve holdings and observed that "at the end of January, Asian oil exporters held $563.6 billion of U.S. securities, with Treasuries and U.S. equities accounting for 92.2% of the total. Treasury holdings totaled $268.2 billion."

Bye, Bye Asian Oil --“Asian Oil Exporters” always was a geographically accurate yet still somewhat misleading subcategory of the Treasury International Capital (TIC) data release.Technically, the Gulf is in Asia, and Asian oil exporters were a set of countries that could be differentiated from African oil exporters. But the title wasn’t terribly helpful either. Not for a set of countries—the GCC countries (Saudi Arabia, the United Arab Emirates, Qatar, Bahrain, Oman, and Kuwait), Iraq, and Iran—in what more commonly is called the Middle East. And, thanks to a wise decision by the U.S. Treasury to release the disaggregated data, it will soon be only of historic interest. The Treasury didn’t just release the current Treasury security holdings (or to be more precise, their holdings of Treasury securities in U.S. custodial accounts) for individual Gulf and Caribbean countries, it also released the historical time series. That is the way to immediately establish the credibility of a data series. So, shock of all shocks, we now know Iran doesn’t own any Treasuries. At least not any in U.S. custodial accounts. The real story in the data, though, is the lack of any real story. The Gulf countries do not keep that many Treasuries in U.S. custodial accounts, so there wasn’t much for the disaggregated data to reveal. That has long been apparent from the aggregated data. The $250 billion or so of Treasuries held by “Asian oil exporters” was small relative to combined reserves of these countries (excluding Iran, for obvious reasons) of around $1 trillion. And after say 2010, the changes in the Gulf’s combined Treasury holdings haven’t even really moved with their reported reserves.

In Unexpected Twist, Saudi Arabia Was Buying US Treasuries Over Past Year -- As reported earlier after decades of keeping Saudi Arabian holdings of treasury paper non-public and bundled with those of other "oil exporting nations", today at 4pm for the first time the US Treasury confirmed that its "leaked" look at Saudi holdings, exposed as a result of a Bloomberg FOIA, was accurate when it reported that the Saudis owned $116.8 billion in US paper as of March 31, which made the country the 13th largest holder of US Treasurys.What is far more surprising, as this data was already revealed earlier, is that in the past three months Saudi holdings barely declined, and according to the Treasury, dipped only from $124BN in January to $117BN in March, which represents far smaller selling than what many sellside analysts had expected as a result of Saudi reserve liquidation. In fact, at $116.8 billion, Saudi holdings are above the November total of $114.7BN which was the highest going back all the way to March. In other words, instead of selling US Treasuriess, Saudi Arabia appears to have been buying over the past year!

AEP: Bond shortage deepens as US Treasury stops issuing debt: The US government paid off more debt than it issued last month in a stunning turn-around for America’s public finances, causing an acute shortage of bonds and a further downward slide in borrowing costs. Net issuance of notes and bonds by the US Treasury plunged below zero in April as tax revenues surged, a feat last achieved for fleeting moments at the end of the global economic boom in 2008. The dramatic improvement comes as US federal spending settles at 20.5pc of GDP, down from 24.5pc after the Lehman crisis, and roughly comparable to where it was at the end of the Reagan era in the 1980s. America’s $19 trillion of existing debt is no longer enough to satisfy voracious demand from investors, forcing them to accept ever lower returns.  The lack of the new bonds has pushed down yields on 10-year US Treasuries to 1.74pc, close to the historic lows reached during the eurozone debt crisis four years ago. The return on US municipal bonds has dropped to an all-time low of 2.45pc despite the default crisis in Puerto Rico. The slide in yields raises eyebrows since US core inflation has crept up to 2.3pc. The Atlanta Fed’s measure of ‘sticky price’ inflation is running at 2.5pc. US wages have been rising at an annual rate of 4pc over the last three months. Interest rates in the US are now deeply negative in real terms by any measure, and are falling further each month. This has its roots outside the US:  global deflationary forces are playing havoc with yields in all the major economies. The Institute of International Finance estimates that almost $10 trillion of debt is currently trading at negative rates, with a crush of buyers bidding recently for a Spanish 50-year bond issue at 3.5pc.  Ireland and Belgium have both placed 100-year bonds in recent weeks.

U.S. debt dump deepens in 2016 -- Central banks are dumping America’s debt at a record pace. China, Russia and Brazil sold off U.S. Treasury bonds as they tried to soften the blow of the global economic slowdown. They each sold off at least $1 billion in U.S. Treasury bonds in March. In all, central banks sold a net $17 billion. Sales had hit a record $57 billion in January. So far this year, the global bank debt dump has reached $123 billion. It’s the fastest pace for a U.S. debt selloff by global central banks since at least 1978, according to Treasury Department data published Monday afternoon. Treasuries are considered one of the safest assets in the world, but some experts say a sense of panic about the global economy drove the selloff. “It’s more of global fear than anything,” says. “There’s still this fear of ‘everything is going to fall apart.'” Judging by the selloff, policymakers across the globe were hitting the panic button often and early in the year as oil prices fell, concerns about China’s economy rose and stock markets were very volatile. In response, countries may be selling Treasuries to prop up their currencies, some of which lost lots of value against the dollar last year. By selling U.S. debt, central banks can get hard cash to buy up their local currency and prevent it from losing too much value. Also, as investors have pulled money out of developing countries, central bankers seek to replenish those lost funds by selling their foreign reserves. The leader in the selloff: China. “We’ve seen Chinese central bank foreign reserves fall dramatically,” . “Their currency is under pressure.” Between December and February, China’s central bank sold off an alarming $236 billion to help support its currency, which China is slowly letting become more controlled by markets and less by the government. In March, China sold $3.5 billion in U.S. Treasury bonds, Treasury data shows.

Total US Debt Is Back To Its Great Depression Peak -- Long before McKinsey released its 2015 report which showed that, contrary to repeated, erroneous analysis and propaganda media reports, not only has the world not deleveraged at all but has added some $60 trillion in debt since the crisis (a number which mostly thanks to China is about $5 trillion higher over the past year) we warned that the primary reason why the world is unable to grow is because of an unprecedented mountain of debt that keeps growing. In fact, since the growth - and monetization - of debt by central banks is the critical precondition to keeping asset prices artificially inflated, it was also the case that global debt would keep rising indefinitely, at least until such time as the world finally hits its credit limit, a critical topic discussed extensively by Citigroup's Matt King in October of 2015. Which leads to the question: based on historical analysis just where is the debt capacity for the world's biggest creditor, the United States, and what happens when said capacity is hit. The following chart from Citi shows the last century of US non-financial leverage in context. As of this moment, consolidated US non-fin debt/GDP is about 275%, or roughly where it was US when the great depression stuck. For those curious about the "tipping point" threshold levels, keep an eye on 300% - that's when the system collapsed last time leading to a devastated economy. The second question: what happened next to unleash the greatest deleveraging in the history of the US? Why World War II of course.

Donald Trump’s Printing Press Sends the Media to the Fainting Couch -- Donald Trump generated some breathless commentary last week (perhaps, for once, unjustified) for suggesting, in response in part to those who have pointed out that some of the policies he has pseudo-proposed would enlarge the deficit, that the US government can always pay its bills: “This is the United States government. First of all, you never have to default because you print the money, I hate to tell you, OK?” (He had also suggested that the government might buy back government debt at a discount if interest rates rise. Dean Baker argues this would be pointless, not disastrous.) Among the responses to these comments were claims that this “money printing” business would, ipso facto, be (hyper)inflationary.  L. Randall Wray spoke to Bloomberg’s Joe Weisenthal about the issue. Wray emphasized that the government always spends by “printing money,” or more accurately, by crediting bank accounts through computer keystrokes. With respect to whether Trump’s purported policies would or would not be inflationary then, the central question for Wray is not whether Trump would or would not have the government “printing money,” but whether the economy would be at full employment. At that point, a government deficit of sufficient size could be inflationary (in other words: “So, yes, deficits do matter, but not for solvency“). Watch the interview here at Bloomberg:

The Unprincipled and Mythical Mankiw Principles of Economics - By William K. Black -- In this first installment I discuss the unacknowledged contradiction that lies at the core of the two meta-myths in the preface to N. Gregory Mankiw’s textbooks.  Mankiw is among the leading providers of introductory economics textbooks.  In his preface to these volumes he preaches his first meta-myth in his first substantive sentence about economics. Economics combines the virtues of politics and science. It is, truly, a social science. Its subject matter is society–how people choose to lead their lives and how they interact with one another. But it approaches its subject with the dispassion of a science. As it is preached by Mankiw, theoclassical economics is a dogma that repeatedly violates the most basic tenets of science.  It is unlikely that many scientists approach their work with “dispassion” – passion is one of the keys to success in many humans – but theoclassical economists routinely fail to bring dispassion to their dogmas.  Indeed, the first step in their adoption of the scientific method would be to renounce Mankiw’s first meta-myth. Mankiw’s preaches his second meta-myth in the next paragraph of his preface. Economics is a subject in which a little knowledge goes a long way. (The same cannot be said, for instance, of the study of physics or the Japanese language.) Economists have a unique way of viewing the world, much of which can be taught in one or two semesters. My goal in this book is to transmit this way of thinking to the widest possible audience and to convince readers that it illuminates much about the world around them. Mankiw does not see the fundamental contradiction between his two meta-myths.  It turns out in his second meta-myth that learning economics is not really like learning a real science or even a language.  A “little knowledge” supposedly “goes a long way” in economics, unlike physics or learning Japanese.

Hillary Clinton Says She’d Expect Bill Clinton to Help Fix the Economy - Hillary Clinton again said she would put her husband “to work” on the nation’s economy as she campaigned for a second day in Kentucky, a state Bill Clinton won twice and where he remains popular. “I want to help bring back the kind of economy that worked for everybody in the 1990s,” she said on Monday. “I’ve already told my husband that if I’m so fortunate enough to be president and he will be the first gentlemen, I’ll expect him to go to work … to get incomes rising.” As was the case on Sunday, she gave no specifics as to what she meant. But the crowd jammed into the Lone Oak Little Castle diner loved the comments, and she spent about 45 minutes working the room ahead of Tuesday’s Democratic primary. Mrs. Clinton and her husband have both repeatedly suggested he would play a role in working on the economy, but on Sunday, Mrs. Clinton raised some eyebrows when she said she would put him “in charge” of a revitalization. A campaign spokesman said Mrs. Clinton did not mean to suggest any particular role for her husband but that she would use his talents to help her. He added that it would be premature to talk about any sort specific role for the former president.

After Distancing Herself From Bill Clinton’s Economic Policies, Hillary Wants Him as Mr. Economic Fix It --  Yves Smith - After having institutionalized the neoliberal economic policies that have enriched the 1% and particularly the 0.1% at the expense of everyone else, Hillary Clinton wants to give the long-suffereing citizenry an even bigger dose. As she said in Fort Mitchell, Kentucky: My husband, who I’m going to put in charge of revitalising the economy, because you know he knows how to do it,” Clinton said in Fort Mitchell, Kentucky, on Sunday. “And especially in places like coal country and inner cities and other parts of our country that have really been left out. This plan is revealing, and in not a good way.  There Goes Hillary as “Most Qualified Candidate Evah”.. Since when does a supposedly super competent elected official use their spouse in a policy design and implementation capacity outside of existing bureaucratic role and capacities? In banana republics and the Clinton presidency. And remember how well that co-presidency thingie worked out? Hillary’s big special project, health care reform, was such a bomb that it was over 20 years before the idea could be revived. And after that debacle, she retreated from taking on high-profile tasks and moved in the direction of a more traditional First Lady role.

Introducing The USS Zumwalt - The US Navy's New $4.4 Billion Ship --Dear readers, the U.S Navy would like to introduce to you its most technologically sophisticated destroyer to date: The USS Zumwalt. The USS Zumwalt (designed by Raytheon) is powered by electricity produced by turbines, has guns that can hit targets over 70 miles away, and has a sharp-angled geometric design that apparently makes the 610 foot long ship 50 times more difficult to detect on radar. It also has a state-of-the-art weapon launcher designed to fire missiles for sea, land, and air attacks. All of this for a taxpayer cost of a mere $4.4 billion. During the testing phase for the ship, a lobsterman told the Associated Press that the vessel appeared to be a 50 to 60 foot fishing boat on his radar. The ship is set to be formally commissioned in October in Baltimore, and will have a home port of San Diego. See, the defense budget needs to be as large as it is in order to build behemoth warships such as this. The good news is that it will only show up as small fishing boat when sent to the Fiery Cross Reef in order to agitate China.

For Obama, an Unexpected Legacy of Two Full Terms at War - — President Obama came into office seven years ago pledging to end the wars of his predecessor, George W. Bush. On May 6, with eight months left before he vacates the White House, Mr. Obama passed a somber, little-noticed milestone: He has now been at war longer than Mr. Bush, or any other American president.If the United States remains in combat in Afghanistan, Iraq and Syria until the end of Mr. Obama’s term — a near-certainty given the president’s recent announcement that he will send 250 additional Special Operations forces to Syria — he will leave behind an improbable legacy as the only president in American history to serve two complete terms with the nation at war.Mr. Obama, who won the Nobel Peace Prize in 2009 and spent his years in the White House trying to fulfill the promises he made as an antiwar candidate, would have a longer tour of duty as a wartime president than Franklin D. Roosevelt, Lyndon B. Johnson, Richard M. Nixon or his hero Abraham Lincoln.

The Great Leap Backward: America’s Illegal Wars on the World: Can we face it in this election season? America is a weapons factory, the White House a war room, and the president the manager of the neoliberal conspiracy to recolonize the planet. It exports war and mass poverty. On the economic front, usurious neoliberalism; on the military front, illegal wars. These are the trenches of America’s battle for world domination in the 21st century.If not stopped, it will be a short century.Since 1945, America’s Manifest Destiny, posing as the Free World’s Crusade against the Red Menace, has claimed 20 to 30 million lives worldwide and bombed one-third of the earth’s people. In the 19th century, America exterminated another kind of “red menace,” writing and shredding treaties, stealing lands, massacring, and herding Native populations into concentration camps (“Indian reservations”), in the name of civilizing the “savages.” By 1890, with the massacre of Lakota at Wounded Knee, the frontier land grab—internal imperialism– was over. There was a world to conquer, and America trained its exceptionally covetous eye on Cuba and the Philippines.American external imperialism was born.

The Monkeywrench Wars -- John Michael Greer - Industrial design classes at MIT used to hand out copies of "Superiority" as required reading; unfortunately that useful habit has not been copied by the Pentagon, and as a result, the US armed forces are bristling with brilliantly innovative wonder weapons that don’t do what they’re supposed to do. The much-ballyhooed Predator drone is one good example among many. For those who don’t follow military technology, it’s a remote-controlled plane designed to fly at rooftop level, equipped with a TV camera and missiles. The operator, sitting in an air-conditioned office building in Nevada, can control it anywhere on Earth via satellite uplink, seek out suspected terrorists, and vaporize them. Does it work? Well, it’s vaporized quite a few people; the Obama administration is even more drone-happy than its feckless predecessor, and has been sending swarms of drones around various corners of the Middle East to fire missiles at a great many suspected terrorists. You’ll notice that this has done little to stabilize the puppet governments we’ve got in the Middle East these days, and even less to decrease the rate at which American soldiers are getting shot and blown up in Afghanistan. There’s a reason for that. The targets for drone attacks have to be selected by ordinary intelligence methods—terrorists don’t go around with little homing beacons on them, you know—and ordinary intelligence methods have a relatively low signal-to-noise ratio. As a result, a lot of wedding parties and ordinary households get vaporized on the suspicion that there might be a terrorist hiding in there somewhere. Since tribal custom in large parts of the Middle East makes blood vengeance on the murderers of one’s family members an imperative duty, and there are all these American soldiers conveniently stationed in Afghanistan—well, you can do the math for yourself.

Senate Passes Bill Exposing Saudi Arabia to 9/11 Legal Claims - — A bill that would let the families of those killed in the Sept. 11 attacks sue Saudi Arabia for any role in the terrorist plot passed the Senate unanimously on Tuesday, bringing Congress closer to a showdown with the White House, which has threatened to veto the legislation. The Senate’s passage of the bill, which will now be taken up in the House, is another sign of escalating tensions in a relationship between the United States and Saudi Arabia that once received little scrutiny from lawmakers. Administration officials have lobbied against the bill, a view that the White House spokesman Josh Earnest reiterated after the vote. And the Saudi government has warned that if the legislation passes, it might begin selling off up to $750 billion in Treasury securities and other assets in the United States before they face a danger of being frozen by American courts. Adel al-Jubeir, the Saudi foreign minister, delivered the warning to lawmakers and the administration while in Washington in March. Many economists are skeptical that the Saudis would deliver on such a warning, saying that a sell-off would be hard to execute and would do more harm to the kingdom’s economy than to America’s. Questions about the role Saudi officials might have played in the Sept. 11 plot have lingered for more than a decade, and families of the victims have used various lawsuits to try to hold members of the Saudi royal family and charities liable for what they allege is financial support of terrorism. But these moves have been mostly blocked, in part because of a 1976 law that gives foreign nations some immunity from lawsuits in American courts.

Congress Is Using Zika To Weaken Truck Safety: -- Truck driver Dana Logan tried on Wednesday to recount a crash that decapitated two fathers and two children, hoping to convince Congress to stop weakening rules that require truckers to get rest. She couldn’t do it. A dozen years after the fatigued driver of another truck fell asleep and drove into an SUV stuck in traffic behind her rig on a Texas highway, Logan was still too devastated to finish talking about it.  What the Logans and other safety advocates are worried about are measures that would allow truck drivers to work more than 80 hours a week, tacked onto to separate appropriations bills in the House and the Senate. The Senate on Thursday passed a measure that allows 73 hours of driving and an additional 8.5 hours on related work each week as part of a massive spending measure that will fund transportation, housing and military construction projects, as well as the Veterans Administration. Funding for Zika prevention was also added to that bill, making it very likely to pass.  In the House, measures were added to the transportation and housing appropriations bill under consideration in the committee that set similar rest rules, reverting to regulations originally set in the Bush administration that were repeatedly challenged and thrown out in lawsuits. Both bills would prevent the Obama administration from enforcing a regulation that briefly went into effect in 2013 that effectively capped truck drivers’ working hours at 70 a week, and ensured they could have two nights off in a row. That rule was blocked by a rider in a 2014 spending bill, which had to pass to avert a government shutdown. The newly inserted policy provisions represent a trend over the last three years of the trucking industry using must-pass spending bills to win regulatory concessions that are opposed by most safety advocates and likely could not pass as normal stand-alone bills. In this case, not only do the bills fund major parts of the government, they provide cash to fight Zika.

"We're Running a F--cking Casino:"  Politician Writes Tell-All Memoir An anonymous congressman has dropped a bombshell election-year book that confirms why Americans hate their national government and have rallied to anti-establishment presidential candidates like Donald Trump.The veteran politician lays bare a rotten and corrupt Congress enslaved by lobbyists and interested only in re-election in an anonymous, 65-page manifesto called “The Confessions of Congressman X.”“Like most of my colleagues, I promise my constituents a lot of stuff I can never deliver,” he admits. “But what the hell? It makes them happy hearing it . . . My main job is to keep my job.”The House member — a Democrat who is either still in Congress or served sometime over the past two decades — says more time is spent fundraising than reading bills and calls Washington a “sinkhole of leeches.” The title of one chapter sums up his view of congressional leaders: “Harry Reid’s a Pompous Ass,” he says of the Senate Democratic leader. The book, published by the small Mill City Press, is based on years of transcribed private discussions, which the congressman last November gave editor Robert Atkinson.

Free Trade vs. the Republican Party  - Pat Buchanan - In his coquettish refusal to accept the Donald, Paul Ryan says he cannot betray the conservative “principles” of the party of Abraham Lincoln, high among which is a devotion to free trade. But when did free trade become dogma in the Party of Lincoln? As early as 1832, young Abe declared, “My politics are short and sweet, like the old woman’s dance. I am in favor of a national bank … and a high protective tariff. These are my sentiments and political principles.” Campaigning in 1844, Lincoln declared, “Give us a protective tariff and we will have the greatest nation on earth.” Abe’s openness to a protective tariff in 1860 enabled him to carry Pennsylvania and the nation. As I wrote in 1998: “The Great Emancipator was the Great Protectionist.” During his presidency, Congress passed and Abe signed 10 tariff bills. Lincoln inaugurated the Republican Party tradition of economic nationalism. Vermont’s Justin Morrill, who shepherded GOP tariff bills through Congress from 1860 to 1898, declared, “I am for ruling America, for the benefit, first, of Americans, and for the ‘rest of mankind’ afterwards.” In 1890, Republicans enacted the McKinley Tariff that bore the name of that chairman of ways and means and future president. “Open competition between high-paid American labor and poorly paid European labor,” warned Cong. William McKinley, “will either drive out of existence American industry or lower American wages.” Too few Republicans of McKinley’s mindset sat in Congress when NAFTA and MFN for China were being enacted.

Big Report, Little Finding: The ITC evaluates the economic impact of the TPP - Jared Bernstein - The International Trade Commission (ITC) just released its 792-page monster of a report on the “likely impact” of the Trans-Pacific Partnership (TPP) on the US economy. The findings are largely positive on net but tiny, which confirms two of my priors. First, I see no rational way your support or opposition to the TPP can be informed by these findings, and second, trade agreements, as opposed to trade, have little to do with US growth and jobs. That is not, btw, meant to be a critique of the report. The fact that it shows tiny results, which I’ll get to in a moment, comports (as I said above) with my expectations of the economic impact of a trade agreement with a bunch of countries, 6 with whom we already have trade deals.But as I’ve stressed before, it is beyond our capacity to plausibly model the impact of a complex, 6,000 page, 12-country trade deal 15 years out! Remember, we’re severely challenged trying to accurately predict GDP or jobs out one quarter or one month. And while the ITC report fails to provide confidence intervals around its estimates, they’d likely cross zero (i.e., be statistically indistinguishable from no change at all).  A bit of background. When the executive or legislative branch needs advice or technical expertise on matters of trade, they turn to the ITC. In the case of the TPP, the ITC was required to submit a report by today. Specifically, the ITC estimates that, by 2032, the TPP would:

  • Increase read GDP by $42.7 billion, or 0.15 percent;
  • Increase employment the equivalent of 128,000 full-time jobs, or 0.07 percent;
  • Increase exports by $27.2 billion (1 percent) and imports by $48.9 billion (1.1 percent);
  • Have the biggest sectoral impact on agriculture and food, increasing employment in that industry by 0.5 percent;
  • Decrease employment in the manufacturing, natural resources, and energy sector by 0.2 percent

Dean Baker's Statement on the TPP and Latest USITC Report - The Center for Economic and Policy Research: CEPR's Dean Baker issued the following statement on the latest USITC Report and the TPP: “The United States International Trade Commission (USITC) report on the Trans-Pacific Partnership (TPP) was far closer in its assessment of the impact of the TPP on the U.S. economy to the earlier report from the United States Department of Agriculture (USDA) than the recent report produced by the Peterson Institute for International Economics. “Some of the highlights of the report are:

  • • The ITC projected an increase in exports of $26.2 billion in 2032 (in 2032 dollars). By contrast, the Peterson Institute’s projection of the gains in exports was more than an order of magnitude larger, projecting an increase in exports of $357 billion in 2030 (in 2015 dollars).
  • • The report projected a slightly larger increase in imports of $48.9 billion (in 2032 dollars).
  • • The report projected that agricultural exports would rise by $7.2 billion, while imports would increase by $2.7 billion, for an increase in net exports of $4.5 billion, a bit over 1.0 percent of the sector’s output.
  • • The report projected manufacturing exports would increase by $15.2 billion, while imports would increase by $39.2 billion, for a net increase in the deficit in manufactured goods of $24.0 billion. It indicated this would result in a drop in manufacturing employment of 0.2 percent.
  • • The projected growth in imports of services would be $7.0 billion, slightly exceeding the projected growth of exports of $4.8 billion, which means that the agreement would lead to a modest reduction in the surplus on services.
  • • The overall projected gains to national income by 2032 are$57.3 billion or 0.23 percent. Since this gain is realized over the next 16 years, it implies an increase to the annual growth rate of just over 0.01 percentage point. In other words, the USITC projects that as a result of the TPP, the country will be as wealthy on January 1, 2032 as it would otherwise be on February 15 of 2032.

Stop Calling Deals That Help CEOs Pillage with Impunity “Free Trade” --  William K. Black -- This is the second column in my series on the “Mankiw’s myths and Mankiw morality.”  In the first column I showed that N. Gregory Mankiw’s own unprincipled principles of economics predicted that the financial system would be rigged by and for the financial CEOs.  In his New York Times column Mankiw purported to be writing to dispel myths, but actually did the opposite, asserting that the financial system could not be rigged.  I explained in the first column how Mankiw famously decreed that it would be “irrational” (rather than ethical) for a CEO not to “loot” a firm that he controlled.   Under Mankiw morality, financial CEOs would have the incentive and the ability to rig the system and would do so repeatedly. My second column responds to some of Mankiw’s myths about the “trade deals.”  I again apply Mankiw morality and theory to refute Mankiw’s myths about “trade deals” being good for America.  Mankiw morality predicts that CEOs, whenever they can personally get away with it, will rig the system to create a “sure thing” allowing the CEO to become wealthy through fraud and other abuses.  The CEOs see regulators and prosecutors as the paramount risks to their ability to get away with rigging the system.  They look for every opportunity to discredit and render ineffective regulation, to make it difficult to prosecute elite white-collar criminals, and to ensure that agency heads and attorney generals will be appointed who are unwilling to effectively regulate and prosecute corporate elites. The “free trade deals” are pretexts for emasculating regulation and prosecution of corporate elites.  They have virtually nothing to do with “trade” much less the oxymoronic abuse of the term “free trade.”  Consider first why the deals are always crafted in an indefensible manner.  The CEOs get to participate in making the deals.  Consumers, workers, and investors are excluded under official secret laws.  All of economic theory, particularly under Mankiw morality (it would be “irrational” for CEOs not to defraud), predicts that the CEOs would use their unique ability to rig the deals in their favor.  They deliberately crafted the deal making system to give them the means and opportunity to rig the deals – they already had the motive.

Bogus Defenses of Tax-Dodging Corporate Inversions -- The crucial motive in transferring corporations’ “nationality” and official headquarters to low-tax nations is that inversions shield the “foreign” profits of U.S. corporations from federal taxation and ease access to these assets. This protects total U.S. corporate profits held outside the United States—a stunning $2.1 trillion—from any U.S. corporate taxes until they are “repatriated” back to the United States.  Major corporations benefit hugely from the infinite deferral of taxes purportedly generated by their foreign subsidiaries. “If you are a multinational corporation, the federal government turns your tax bill into an interest-free loan,” wrote David Cay Johnston, Pulitzer-Prize winning writer and author of two books on corporate tax avoidance. Thanks to this deferral, he explained, “Apple and General Electric owe at least $36 billion in taxes on profits being held tax-free offshore, Microsoft nearly $27 billion, and Pfizer $24 billion.” Nonetheless, top CEOs and their political allies constantly reiterate the claim that the U.S. tax system “traps” U.S. corporate profits overseas and thereby block domestic investment of these funds. But these “offshore” corporate funds are anything but trapped outside the United States. “The [typical multinational] firm … chooses to keep the earnings offshore simply because it does not want to pay the U.S. income taxes it owes,” explains Thomas Hungerford of the Economic Policy Institute. “This is a very strange definition of ‘trapped’.” In fact, these offshore profits can be, and are, routed back into the United States through the use of tax havens. (Tax havens, where corporations and super-rich individuals place an estimated $7.6 trillion, were thrust into the international spotlight with the recent release of the Panama Papers. See William K. Black, “Business Press Spins Elite Tax Fraud as ‘Good News’,” p. 5.) “‘Overseas’ profits are neither overseas nor trapped,” explained Kitty Rogers and John Craig. “It is true that for accounting purposes, multinational corporations keep these dollars off of their U.S. books. But in the real world, the money is often deposited in U.S. banks, circulating in the U.S.”

Which US Companies Stockpile the Most Profit “Overseas?” But where the Heck is the Money? | Wolf Street: There is a misconception about the uncanny ability of very profitable US companies, like Microsoft and Apple, to park their profits overseas in order to dodge US taxes: the money from these profits that are parked “overseas” isn’t actually overseas. It is registered in accounts overseas, for example in Ireland, but is then invested in whatever assets the company chooses to invest it in, including in US Treasuries, US corporate bonds, US stocks, and other US-based investments. This was revealed to the public during the Senate subcommittee investigation and hearings in March 2013 that exposed where Apple’s profits that were officially parked “overseas” actually end up. “Tim Cook emerged smelling like a rose, the triumphant CEO of America’s most iconic welfare queen,” I wrote at the time. And so the practice continues in all its glory. These funds cannot even be “repatriated” because they’re already here — or wherever the company wanted to invest them. According to a recent report by the Government Accountability Office (GOA), this and other practices give large corporations a big advantage over small businesses and individuals.   The report points out the vast difference between the much bemoaned statutory corporate income tax rate of 35%, one of the highest in the world, and the Effective Tax Rate, which is zero for some of the most profitable companies. But how much of their profits are registered overseas? The interactive chart below shows the 50 US companies with the most profits stockpiled “overseas” to avoid taxes in the US, while the actual money is wherever, including in US-based assets (hover over the blue bars to get the amounts):

Only About One-Quarter of Corporate Stock is owned by Taxable Shareholders -- Only about one-quarter of U.S. corporate stock is held in taxable accounts, far less than most researchers and policymakers thought. The share has declined sharply from more than four-fifths in 1965.  In a report published today in the journal Tax Notes, my Tax Policy Center colleague Lydia Austin and I found the other three-quarters of shares now are held in tax-exempt accounts such as IRAs or defined benefit/contribution plans, or by foreigners, nonprofits or others.    Two trends in particular are worth noting: The first is the sharp increase of U.S. stock held in retirement accounts, which we estimate at about 37 percent. Income accrued within retirement accounts is tax free. The second is the increase in portfolio investment by foreigners, which now represents about 26 percent of U.S. corporate stock. The foreign share would be greater if we included foreign direct investments, which are controlling interests in U.S. corporations. Foreigners generally pay no U.S. tax on capital gains from their sale of U.S. corporate stock, and the U.S. withholding taxes they pay on dividends are often reduced greatly by treaty.  This decline in stock ownership by taxable investors has been hard to spot since it is not obvious in data published by the Federal Reserve and others. As a result, most analysts have calculated that at least half of U.S. corporate shares are in taxable accounts, twice the level we calculated.  I plan to testify on the implications of our calculations to business tax reform at a hearing of the U.S. Senate Finance Committee tomorrow.

Hillary's Latest Scandal: She And Bill Siphoned $100 Mil From Persian Gulf Leaders - A new investigation reveals that Bill and Hillary Clinton took in at least $100 million from Middle East leaders. Can such a financially and ethically compromised candidate truly function as our nation’s leader? The investigation by the Daily Caller News Foundation has uncovered a disturbing pattern of the Clintons’ raising money for the Clinton Foundation from regimes that have checkered records on human rights and that aren’t always operating in the best interests of the U.S. By the way, the $100 million we mentioned above doesn’t appear to include another $30 million given to the Clintons by two Mideast-based foundations and four billionaire Saudis. All told, it’s a lot of money. “These regimes are buying access,” Patrick Poole, a national security analyst who regularly writes for PJ Media, told the DCNF. “You’ve got the Saudis. You’ve got the Kuwaitis, Oman, Qatar and the UAE (United Arab Emirates). There are massive conflicts of interest. It’s beyond comprehension.”

Three of Hillary’s Mega Donors Are in Panama Papers; Another Tied to $6.8 Billion Tax Avoidance Scheme -  Pam Martens -  Last month the Washington Post compared the state of U.S. political campaigns to that of the Gilded Age, noting that 41 percent of the money raised by SuperPacs by the end of February came from just “50 mega-donors and their relatives.” New evidence suggests that that tax avoidance may be at the center of what some of these mega-donors are expecting in return for that largess to Presidential and Congressional candidates.Take the case of Priorities USA, the SuperPac supporting Hillary Clinton’s campaign. It has already raised $67 million and just four hedge fund billionaires have ponied up 40 percent of that amount. Hedge fund billionaire George Soros has donated $343,400 to the Hillary Victory Fund, a controversial joint fundraising effort between Hillary, the Democratic National Committee and state committees, as well as donating a whopping $7 million to her SuperPac, Priorities USA. The Panama Papers show George Soros tied to Soros Holdings Limited, whose agent is Mossack Fonseca, and lists the British Virgin Islands for its registration. Another company tied to Soros is Soros Finance Inc., which shows registration in Panama and also lists Mossack Fonseca as its agent.  Employees of hedge fund Paloma Partners have donated $4 million to Hillary’s SuperPac, Priorities USA. At least $2.5 million of that came in two checks written in 2015 by S. Donald Sussman, the founder of the hedge fund. Sussman also gave $343,400 to the Hillary Victory Fund. Sussman and Paloma Partners turn up in the ICIJ offshore database from a document leak in 2013.  Billionaire hedge fund owner, David E. Shaw, wrote a check for $750,000 to Hillary’s SuperPac, Priorities USA, on March 31, 2015 and another in the identical amount on February 12, 2016 according to Federal Election Commission records. Three entities tied to Shaw turn up in the earlier leaked offshore accounts in the ICIJ database: an account in the name of David E. Shaw, a Shaw Family Trust I, and Mid Ocean Company.

Panama Papers reveal George Soros' deep money ties to secretive weapons, intel investment firm - Billionaire George Soros, who has spent millions of dollars financing Democrats and left-wing causes, used a controversial Panamanian law firm to establish a web of offshore investment partnerships that operate around the world and out of the scrutiny of U.S. regulators, according to leaked documents. The so-called Panama Papers, a trove of 11.5 million financial documents tracing the Mossack Fonseca law firm’s efforts to help politicians, celebrities and criminals shield their money from taxes, contain links to Soros, who funds the journalism group that is disseminating the information. So far, the International Consortium of Investigative Journalists (ICIJ) has been silent on its benefactor’s ties to the law firm. Three offshore investment vehicles controlled by Soros are catalogued in the Panama Papers. Soros Finance, Inc. was incorporated in Panama; Soros Holdings Limited was set up in the British Virgin Islands and a limited partnership called Soros Capital was created in Bermuda. The laws of Panama, Bermuda, the British Virgin Islands and a score of “tax havens” allow foreign firms to hide ownership of cash, real estate and other assets from securities regulators and tax collectors in the countries where they are physically headquartered.  Incorporating a business offshore is not illegal, but President Obama has called for the tax loophole to be sealed shut, saying everyone should “pay their fair share.”

Lawmakers Try New Tactic to Ease Rules for Private-Equity Funds - WSJ: House lawmakers are preparing legislation to ease regulatory requirements on private-equity funds, the latest effort to roll back federal oversight of the industry. But after years of failed attempts to exempt most managers of private-equity funds from having to register with the Securities and Exchange Commission, the House is considering a new approach: easing a series of technical regulatory requirements on such funds. Legislation drafted by Reps. Robert Hurt (R., Va.) and Juan Vargas (D., Calif.) aims to exempt fund managers from certain rules that private-equity funds and their industry groups say are unduly burdensome, crimping the funds’ investments in companies that create jobs. “There is bipartisan agreement on the need to make common-sense updates”   Managers of private-equity funds pool their money alongside institutional investors such as pension funds and university endowments to buy equity stakes in companies or pieces of them.  The bill, which has yet to be formally introduced, is part of a trio of draft bills that lawmakers plan to discuss at a hearing of a House Financial Services subcommittee on Tuesday. In addition to the private-equity legislation, lawmakers also plan to discuss a bill to impose restrictions on firms that advise shareholders in corporate elections and another bill to boost standards for economic analysis at the SEC.

The Vultures’ Vultures: How A New Hedge-Fund Strategy Is Corrupting Washington -- A Harvard-trained political economist, Robert Shapiro is the head of a consulting firm called Sonecon. That business card doesn't do it for you? He's got a few more in his wallet:

    • Senior fellow at the Georgetown University School of Business.
    • Adviser to the International Monetary Fund.
    • Director of the Globalization Initiative at NDN, a progressive think tank.

Shapiro, a Democrat, has advised presidents and presidential candidates, and has held powerful government posts. It stands to reason, then, that when he has thoughts on public policy, he can find an outlet ready to publish them. Recently, he's had ideas on how the government can address the debt crisis in Puerto Rico and how it can end the conservatorship of Fannie Mae and Freddie Mac by moving them into the private market. Before that, he had a take on how to deal with Argentina's debt crisis. For all three, he produced academic-looking papers, complete with footnotes and charts. All three situations have one thing in common: If they were resolved the way Shapiro suggested, a variety of bets placed by a select group of the most politically powerful hedge funds would pay off in a huge way. In the case of Argentina, they mostly have. Fights over how to resolve the other two issues are still raging in Washington. For this article, we called Shapiro to ask on whose behalf he has been waging these intellectual battles. His answer was surprising in its honesty: He's working with DCI Group, a political dark arts master known to be advocating on behalf of a group of powerful hedge funds that are changing how Washington works. Shapiro, it turns out, is but one foot soldier in the hedge fund infantry. A review of public documents, tax filings and interviews with people involved finds that in each of the three campaigns, hedge funds have enlisted the same set of lobbyists, political operatives, dark money groups and think-tank experts spanning the political spectrum.

Hedge Funds Want a Pony, Um, Permanent Capital, as More Investors Exit - Yves Smith - An new article in the Financial Times illustrates the degree to which hedge fund managers, accustomed to calling the shots, seem constitutionally unable to adapt to the idea that their business has become a buyers’, not a sellers’, market. The latest fantasy, even as funds are facing high levels of redemptions when super-low and negative rates ought to make them on of the places to be, is that they should get even better terms. Their pet ask is “permanent capital” as in really long lockups. Yes, and I would like to have a pony. When times are tough, vendors give concessions rather than increase their demands. There’s no indication that the fund managers who want to tie up investor money are prepared to give a big break commensurate with the loss of liquidity, like considerably lower fees.  The Financial Times story does point out that many funds now have monthly redemptions, which looks like a symptom that the fundraising environment has become more difficult than hedgies want to admit. In the early 2000s, only fledging funds offered monthly liquidity; quarterly was the norm, and some funds could limit redemptions to once a year. Monthly redemptions can be highly disruptive, since investors will be tempted to use the hedge fund as a source of liquidity independent of fund performance. Having investors sell (and put funds back) on short notice not only makes it hard to run an investment strategy (which assets do you sell?) but it can lead to cascading sales. If one investor sells enough, it may put another investor at over 10% of fund assets, which is prohibited by the investment policies of many institutional investors. So that investor will have to sell to get back down to 10%, which has the potential to trigger more partial exits.

Hedge Fund Comeuppance: Firms Hunker Down, Start to Cut Fees as Investors Wise Up and Withdraw Money -- Yves Smith - Some Masters of the Universe are having their wings clipped. Hedge fund have continued to charge rich fees even as their results not only became more correlated with stocks but have undershot them. In other words, they’ve repeatedly failed to deliver on their raison e-etre: superior results, or failing that, useful diversification. Investors, who’ve historically been dazzled by the promise of hedge fund alchemy, are finally realizing that what they have bought is dross and have finally decided enough is enough. In late 2014, CalPERS stunned the investor community by saying it was exiting hedge funds. Last month, the New York City pension system said it was terminating its $1.7 billion program. The Illinois State Board of Investments decided to cut its hedge fund commitments by $1 billion in 2016, while AIG said it will trim its $11 billion allocation by 50%. The New York Post reported that the $3.2 trillion industry could see as much as $500 billion in withdrawals this year. These gloomy forecasts come on the heels of the marquee annual hedge fund conference, the SkyBridge Alternatives at the Bellagio in Vegas. But even a bad year does not look all that bad from Hedgistan. From Institutional Investor: But despite the A-list delegates and luxe environs — some 2,000 conference guests enjoyed lavish pool parties, VIP dinners, private concerts with the Killers and the Wailers, a pop-up salon and free spin classes — the mood this year was almost somber. And it’s easy to see why: After years of mediocre aggregate performance, followed by a terrible first quarter, hedge fund managers are enduring withering criticism from investors. And some of these investors are voting with their feet.  The Wall Street Journal reported that, horrors, the participants were pinching pennies:

How Bad Biology is Killing the Economy - An avowed admirer of Richard Dawkins’ gene-centric view of evolution, of Enron CEO Jeffrey Skilling mimicked natural selection by ranking his employees on a one-to-five scale representing the best (one) to the worst (five). Anyone with a ranking of five got axed, but not without first having been humiliated on a website featuring his or her portrait. Under this so-called ‘Rank & Yank’ policy, people proved perfectly willing to slit one another’s throats, resulting in a corporate atmosphere marked by appalling dishonesty within and ruthless exploitation outside the company.The deeper problem, however, was Skilling’s view of human nature.  Like many before him, Skilling had fallen hook, line and sinker for the selfish-gene metaphor, thinking that if our genes are selfish, then we must be selfish, too. He can be forgiven, however, because even if this is not what Dawkins meant, it is hard to separate the world of genes from the world of human psychology if our terminology deliberately conflates them. Keeping these worlds apart is the greatest challenge for anyone interested in what evolution means for society. Since evolution advances by elimination, it is indeed a ruthless process. Yet its products don’t need to be ruthless at all. Many animals survive by being social and sticking together, which implies that they can’t follow the right-of-the-strongest principle to the letter: the strong need the weak. This applies equally to our own species, at least if we give humans a chance to express their cooperative side. Like Skilling, too many economists and politicians ignore and suppress this side. They model human society on the perpetual struggle that they believe exists in nature, which is actually no more than a projection. Like magicians, they first throw their ideological prejudices into the hat of nature, then pull them out by their very ears to show how much nature agrees with them. It’s a trick for which we have fallen for too long. Obviously, competition is part of the picture, but humans can’t live by competition alone.

Nasdaq just went nuclear on the SEC -- Nasdaq just went nuclear. In a letter to the US Securities and Exchange Commission, Nasdaq's law firm, Gibson Dunn, said that the SEC could be sued if it approves IEX's application to become an exchange.  IEX, the upstart trading venue made famous by Michael Lewis' book "Flash Boys," filed with the SEC in September to become a stock exchange, kicking off a heated debate of the merits of its application. The debate has at times gotten ugly, with IEX and the New York Stock Exchange in particular trading barbs.  For its part, the SEC has delayed its decision on the application until mid-June.  At issue is the IEX speed bump, which the venue says levels the playing field between high-speed traders and the rest of the field.  But IEX's rivals have questioned whether the speed bump is consistent with Regulation National Market System, the rule which governs stock exchanges. It requires that a public exchange's response to an incoming order be "immediate." The SEC has hinted that the 350-microsecond delay built in to the IEX system could be permissible, as it is under one millisecond. Nasdaq disagrees.  Here is the Gibson Dunn letter:  And here is the closing paragraph: For all of these reasons, Nasdaq urges the Commission not to depart from its existing interpretation of Regulation NMS by authorizing artificially delayed response times for protected quotations, and further submits that the Commission lacks the authority to approve IEX's application and to treat its intentionally delayed quotations as protected.IEX responded to the Nasdaq letter in an emailed statement. John Ramsay, chief market policy officer at IEX, said: The incumbent exchanges have lost the debate on the merits and Nasdaq's latest salvo is more saber rattling in an effort to stave off competition at all costs.

How Is This Not Criminal: Goldman Underwrites $2 Billion Tesla Stock Offering Hours After Upgrading Stock To A Buy -- Call it criminal deja vu, all over again. Back in February 2014, just hours after Morgan Stanley shocked the market with an upgrade of Tesla which had a price target over 100% higher than the existing price, Morgan Stanley revealed it also happened to be the underwriter on a $1.6 billion convertible bond offering for Tesla.  Fast forward two years later when, as we reported earlier today, overnight none other than Goldman upgraded Tesla to a Buy with a $250 price target with an absolutely idiotic "rationale", claiming that while there is a 65% chance the stock is worth under $125, because Elon Musk is something between a Steve Jobs, Henry Ford and a Maytag Repairman (no really see below).... the stock is worth closer to $250. That wasn't the crime: at most it is sheer stupidity and anyone who is dumb enough to believe this garbage should lose all their money. What however one can easily make a strong case was a crime, if only in direct breach of an internal Chinese wall, is that moments ago the very same Goldman Sachs (and Morgan Stanley) announced they are lead underwriters on a $2 billion stock offering for Tesla, one in which none other than Elon Musk was also selling over half a billion dollars in TSLA stock.Tesla today announced an underwritten registered public offering of about $2 billion of common stock. Tesla is offering about $1.4 billion of shares with the remaining shares to be sold by Elon Musk to cover tax obligations associated with his concurrent exercise of more than 5.5 million stock options. On a net basis, Mr. Musk will increase his overall Tesla shareholdings through these transactions.

Another Market Prop Falters—-Q1 Buyback Announcements Down 38% From Prior Year - Corporate America has its eye on a new target as executives look to tighten their belts amid a slump in profits — and this time shareholders won’t like it. After snapping up trillions of dollars of their own stock in a five-year shopping binge that dwarfed every other buyer, U.S. companies from Apple Inc. to IBM Corp. just put on the brakes. Announced repurchases dropped 38 percent to $244 billion in the last four months, the biggest decline since 2009, data compiled by Birinyi Associates and Bloomberg show. Coming amid the worst profit slump since the financial crisis, the slowdown may signal companies are preserving cash as economic and political uncertainty whips up from Europe to China and in the U.S. At stake is the primary source of buoyancy for the second-longest bull market in history, at a time when individuals and money managers are bailing out and valuations sit near 14-year highs. “If the only meaningful source of demand in the market is companies buying their own shares back, then what happens if that goes away?” said Brad McMillan, chief investment officer of Commonwealth Financial Network in Waltham, Massachusetts, which oversees $100 billion. “We should be concerned.” Repurchases aren’t the only thing companies are cutting. As profits fell for a fourth straight quarter, the number of firms slashing dividends rose to a seven-year high. Executives are scaling back after handing out sums of cash that exceeded their earnings,  an act that has drawn criticism from politicians. Presidential candidate Hillary Clinton said in July that companies’ focus on share prices is hurting the economy because it lowers investment. In the first quarter, capital spending dropped 5.9 percent, the most since 2009.

The DAO Might Be Groundbreaking, But Is It Legal? | American Banker: If an automated, leaderless "company" called the DAO – which has raised the equivalent of $154 million in the largest crowdfunding effort to date – lives up to the hype, it could transform the way firms are financed and governed. There's just one problem: It's unclear whether what this thing is doing is legal. The DAO, which stands for Decentralized Autonomous Organization, has no managers, no legal documents and no central server. Over the last two weeks it has raised the $154 million (and counting) from more than 11,000 people by swapping its own "DAO tokens" in exchange for the cryptocurrency known as ether. Code running on a distributed network of computers will be entrusted to invest the proceeds in projects approved by the DAO's (human) members. They're not called shareholders, but the DAO tokens they receive for their ether will entitle them to vote on proposals and receive rewards. "It's taking the principle of the blockchain to the extreme," said Stephan Tual, chief operating officer of Slock.it, a German startup that helped write the DAO's code. "No one benefits from it except the people that support it. Even we, the ones who invented it, get nothing."In theory, distributed autonomous organizations (of which the DAO is one of the first examples) are a hardcoded solution to the age-old principal-agent problem. Simply put, backers shouldn't have to worry about a third party mismanaging their funds when that third party is a computer program that no one party controls.

Litigation Financing Attracts New Set of Investors - WSJ: Starting over after a high-profile divorce and personal bankruptcy, Raymond Boucher. the attorney best known as the architect of a $660 million settlement for California clergy-abuse victims turned to IMF Bentham, one of the major players in the burgeoning and controversial business of litigation funding. With several million dollars from Bentham, Mr. Boucher said he has been able to run his nine-person firm and take on new cases without worrying about money. He will pay back the funds only if and when the lawsuits underlying the financing are successful. Commercial litigation funding took hold in the U.S. less than a decade ago, touted as a way for little-guy plaintiffs to fund lawsuits against deep-pocketed defendants. But these days, funders, including publicly traded Bentham and Burford Capital LLC and private funds like Chicago-based Gerchen Keller Capital LLC, cast their mission differently: to give corporations and law firms a way to shed risk from their balance sheets. Rather than betting on one-off lawsuits, today’s funders are scaling up and backing large portfolios of cases to deploy money faster and create more consistent returns for their own investors. Well-heeled investors are seeing the appeal in returns that are largely untethered to the wider markets. Pension funds, university endowments, family offices and others have collectively pumped more than a billion dollars into the sector in recent years. In a major example of the industry’s changing focus, Burford said earlier this year in public filings that it provided $100 million to an unnamed global law firm, supported by a portfolio of existing cases. The size of the deal shocked the staid legal industry, which questioned whether the move flouts a ban in the U.S. on outside investors in law firms. Burford says the money isn’t equity in a law firm, but rather an alternative type of financing that is only paid back if the litigation results in a payday. Even so, the deal could be the first sign of cracks in the long-held prohibition against outsiders taking a stake in the legal profession.

Business Loan Delinquencies Spike to Lehman Moment Level  -- Wolf Richter -  After appearing to wipe rate hikes off the table earlier this year, the Fed put them back on the table, perhaps as soon as June, according to the Fed minutes. A coterie of Fed heads was paraded in front of the media today and yesterday to make sure everyone got that point, pending further flip-flopping.  Drowned out by this hullabaloo, the Board of Governors of the Federal Reserve released its delinquency and charge-off data for all commercial banks in the first quarter – very sobering data. Consumer loans and credit card loans have been hanging in there so far. Credit card delinquencies rose in the second half of 2015, but in Q1 2016, they ticked down a little. And mortgage delinquencies are low and falling. When home prices are soaring, no one defaults for long; you can sell the home and pay off your mortgage. Mortgage delinquencies rise after home prices have been falling for a while. They’re a lagging indicator. But on the business side, delinquencies are spiking! Delinquencies of commercial and industrial loans at all banks, after hitting a low point in Q4 2014 of $11.7 billion, have begun to balloon (they’re delinquent when they’re 30 days or more past due). Initially, this was due to the oil & gas fiasco, but increasingly it’s due to trouble in many other sectors, including retail. Between Q4 2014 and Q1 2016, delinquencies spiked 137% to $27.8 billion. They’re halfway toward to the all-time peak during the Financial Crisis in Q3 2009 of $53.7 billion. And they’re higher than they’d been in Q3 2008, just as Lehman Brothers had its moment. Note how, in this chart by the Board of Governors of the Fed, delinquencies of C&I loans start rising before recessions (shaded areas). I added the red marks to point out where we stand in relationship to the Lehman moment:

Did the Supervisory Guidance on Leveraged Lending Work? - NY Fed - Financial regulatory agencies issued guidance intended to curtail leveraged lending—loans to firms perceived to be risky—in March of 2013. In issuing the guidance, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation highlighted several facts that were reminiscent of the mortgage market in the years preceding the financial crisis: rapid growth in the volume of leveraged lending, increased participation by unregulated investors, and deteriorating underwriting standards. Our post shows that banks, in particular the largest institutions, cut leveraged lending while nonbanks increased such lending after the guidance. During the same period of time, nonbanks increased their borrowing from banks, possibly to finance their growing leveraged lending activity.

Beneficial Ownership Rule Riddled with Loopholes, Experts Say | American Banker: A long-awaited final rule published this week that requires banks to keep better track of the owners of companies with accounts at their institutions is too little, too late in combatting money laundering and terrorism financing, according to financial crime specialists. It is "shockingly soft," said Ross Delston, a Washington-based attorney and anti-money-laundering expert. "We should be calling it the pillow-top regulation." The rule will require banks to collect information on certain key individuals associated with a company. Financial institutions will have to ask for the names of a company's owners with a stake higher than 25%, and for individuals with "with significant managerial control" over the operations of the firm. In certain cases – where no one owns more than 25% of a firm's assets – this could mean that the only person registered would be an executive, board member or some vaguely defined individual with similar functions. Security advocates are worried this could allow bad actors to hide behind a shell company or a disconnected executive.

Bernanke Defends Dodd-Frank, Counters Calls for Breakups | American Banker: — Former Federal Reserve Chairman Ben Bernanke defended post-crisis reforms and pushed back against calls to forcefully break up the biggest U.S. banks, but conceded that regulators should be willing to make necessary changes to avoid another financial crisis. In a blog post Friday morning, Bernanke said firm conclusions about the largest banks' being "too big to fail" are difficult to draw, much less the conclusion that the Dodd-Frank Act and the Basel accords have failed to mitigate the risks. Instead, the reforms have put into place a process by which risk will be reduced in the financial system over time. "While substantial and even fundamental changes may ultimately be necessary, we don't yet know exactly what they will be," Bernanke said. "Instead, the legacy of the Dodd-Frank Act, the Basel agreements, and other reforms is a sensible process which, with sustained effort, will help us solve the problem. A key element of the strategy is that it gives banks strong incentives to shrink or otherwise restructure themselves to reduce the risk they pose to the financial system." Bernanke went on to say that the forced breakup of the largest banks "doesn't seem like a smart way" to avoid another crisis, for a couple of reasons. First, any breakup based on asset size alone would be highly disruptive to the financial system and would relinquish any economic benefits that larger banks confer to the economy. Second, a fixation on asset size draws attention away from the real culprits in systemwide disruptions: loss of confidence, runs on funding, fire sales and disruption of credit.

Democrats Defect to Yellen's Side on Key Fed Policy | American Banker: — Key Democrats abruptly reversed course Tuesday concerning a monetary policy tool, saying they now support the Federal Reserve's ability to pay interest on banks' excess reserves. Just three months ago, Fed Chair Janet Yellen took fire from both Democrats and Republicans during a House hearing in which lawmakers characterized the interest payments as another bank bailout. But after meeting with Yellen in private, top Democrats said they now agree with the Fed that the payments are necessary. "While I initially raised concerns with this approach, after exploring this matter further and speaking at length with Chair Yellen, it has become abundantly clear that the net benefits to the public that result from this policy are substantial," Rep. Maxine Waters, the top Democrat on the House Financial Services Committee, said in an emailed statement. The issue, which was the subject of a hearing Tuesday in front of the House monetary policy and trade subcommittee, has gained prominence after Congress targeted the Fed's dividend payments to banks as a source of funding last year. With that funding already seized to pay for a transportation bill, observers warned that the Fed's interest payments would be next on the list. That appeared to be the case at a hearing in February, in which both Waters and House Financial Services Committee Chairman Jeb Hensarling criticized the payments as a bank subsidy.

The U.S. Government Is Quietly Paying Billions to Wall Street Banks - Pam Martens -- Wall Street On Parade has learned, by piecing together the SEC filings of Freddie Mac and Fannie Mae and previous Federal Reserve studies, that these two companies that have been in U.S. government conservatorship since the 2008 financial crisis, continue to pay out billions of dollars to the biggest Wall Street banks on their derivatives contracts. This raises multiple red flags, not the least of which is how much does the U.S. public really understand about the 2008 financial crisis and what appears to be a continuing taxpayer bailout. It is well known at this point that AIG had to be bailed out because it owed over $90 billion on its derivative and security loan contracts to Wall Street and foreign banks. Now, it’s looking like Fannie Mae and Freddie Mac were also Wall Street’s derivatives patsies – or “dumb tourists” as author Michael Lewis might say. According to Freddie Mac’s first quarter 10K filed with the Securities and Exchange Commission, this is how much it has paid to its derivatives counterparties in just the past four years: $2.1 billion in 2015; $2.6 billion in 2014; $3.46 billion in 2013; and $3.8 billion in 2012. Fannie Mae’s payouts have been smaller than Freddie Mac’s. We could not find comparable data for Freddie Mac for the crisis years but its 10K for the first quarter of 2011 shows total derivative losses (declines in the value of its derivatives portfolio plus payouts to counterparties) as follows: $8 billion in 2010; $1.9 billion in 2009; and a stunning $14.95 billion in 2008. Both the Federal Reserve Bank of New York and the Federal Reserve Bank of St. Louis have conceded in separate studies that placing Freddie and Fannie under U.S. government conservatorship was critical to stemming the bleeding of the big Wall Street banks because of their derivatives counterparty status. The New York Fed’s staff report of March 2015 noted the following: “Fannie Mae and Freddie Mac held large positions in interest rate derivatives for hedging. A disorderly failure of these firms would have caused serious disruptions for their derivative counterparties.” A 2010 report from the Federal Reserve Bank of St. Louis backs up the New York Fed’s more recent assessment...

Fighting the Next Global Financial Crisis - Robert J. Shiller -  What do people mean when they criticize generals for “fighting the last war”? It’s not that generals ever think they will face the same weapon systems and the same battlefields.  The error, to the extent that the generals make it, must operate at a more subtle level. Generals are sometimes slow to get around to developing plans and ordnance for those new weapon systems and battlefields. And just as important, they sometimes assume that the public psychology, and the narratives that influence the morale that is so important in achieving victory, is the same as in the last war.   That is also true for regulators whose job is to prevent financial crises. For the same reasons, they may be slow to change in response to new situations. They tend to be slow to adapt to changing public psychology. The need for regulation depends on public perceptions of the last crisis, and, as George Akerlof and I argued in Animal Spirits, these perceptions depend heavily on changing popular narratives.  The latest progress reports from the Financial Stability Board (FSB) in Basel outline definite improvements in stability-enhancing financial regulations in 24 of the world’s largest economies. Their “Dashboard” tabulates progress in 14 different regulatory areas. For example, the FSB gives high marks for all 24 countries in implementing the Basel III risk-based capital requirements.   But the situation is not altogether reassuring. These risk-based capital requirements may not be high enough, as Anat Admati and Martin Hellwig argued in their influential book The Bankers New Clothes. And there has been much less progress in a dozen other regulatory areas that the FSB tabulates.

'Ending Contagion' Is the New 'Ending Too-Big-to-Fail' | American Banker: — As the Federal Reserve Bank of Minneapolis continues its yearlong inquiry into how to end "too big to fail" in the banking system, academics and economists are starting to home in on a different but related question: How do we keep financial contagion from creating financial crises? Speaking before the second symposium here on Monday, John Cochrane, senior fellow at the Hoover Institution at Stanford University, presented a proposal to restructure the banking system by taxing leverage and having banks move toward a 100% equity model — effectively replacing deposits and other short-term bank debt with equity, which is not as subject to runs. Without debt, Cochrane said, banks cannot fail, since the definition of failure is a bank that is unable to meet its debt obligations. If a bank cannot fail, its customers will have no incentive to withdraw their interests in the bank. He said his proposal would arrest the contagion of bank runs that led to bank failures in the 1930s and seized the short-term-credit markets in the financial crisis. "Our financial crisis was a systemic run," Cochrane said. "Runs at specific individual institutions caused by identifiable problems [are] not really the danger. A specific contagion mechanism by which troubles at one institution spread to another because they cause people to worry about their own bank's assets — it's that systemic-run element that means banks can't easily sell cash, issue equity or otherwise handle problems." Cochrane said that by insisting on a heavily equity-based banking system and taxing the extent to which banks — and nonbanks as well — rely on leverage is a way of minimizing the moral hazard of "too big to fail" while also avoiding the subjective and impossible task of assigning capital requirements at a level that makes institutions safe.

Not all bankers learned from the financial crisis, ex-Bank of America executive says  -- You’d think the horrors of the last financial crisis would be deeply etched into the brains of every banker in the U.S. But according to former Bank of America executive Rick Parsons, some bankers could very well have missed out on lessons of the crisis. States such as Georgia, Washington and Florida are full of wounded bankers, said Parsons, who left the industry in 2011, lives in Charlotte and now writes and speaks on the banking industry. But other states, including North Carolina, didn’t suffer as many bank failures, leaving them less wary about past mistakes. i “I think one of the reasons this industry repeats the same mistakes over and over again is because the people who learn the lessons most brutally are the ones who then leave the industry,” Parsons, 60, told me in a recent interview. His second book, “Investing in Banks: Strategies and Statistics for Bankers, Directors, and Investors,” a guide for investing in banks, was published last month. Parsons’ comments come at a time when some regulators and elected officials continue to voice concerns about the potential for the nation’s largest banks to trigger another economic crisis if they were to fail. Such worries stoke calls by critics of large banks who want to see them busted up. Parsons, a former risk executive for Bank of America, is among those who argue that federal regulators will need mega-banks to help lift the U.S. out of its next financial crisis. Big banks, such as JPMorgan Chase & Co. and Bank of America, played a crucial role in the last meltdown by acquiring other troubled lenders, preventing their collapse and further economic mayhem, he notes.

Senior female executive at Bank of America sues over 'bro's club' | Reuters: A senior female fixed-income banker at Bank of America Corp (BAC.N) has filed a lawsuit accusing the bank of underpaying her and other women, and retaliating when she complained about illegal or unethical practices by her colleagues. In a complaint filed on Monday night, managing director Megan Messina said she was a victim of "egregious pay disparity" relative to male peers, and was paid less than half the salary of the man who shares her title as co-head of global structured credit products. She also accused the bank of condoning bias by her boss that made her feel unwelcome in his "subordinate 'bro's club' of all-male sycophants." She said the bank violated federal Dodd-Frank whistleblower protections by suspending her last month for complaints about alleged improper activity that harmed clients. Bank of America spokesman Bill Halldin said: "We take all allegations of inappropriate behavior seriously and investigate them thoroughly." He said Messina remains an employee of the Charlotte, North Carolina-based bank. Messina, a 42-year-old single mother of three, is seeking at least $6 million for being underpaid, plus punitive damages and compensation for mental anguish and humiliation. Her lawsuit filed in federal court in Manhattan joins many others that accuse Wall Street of bias against female bankers, including being paid less and tolerating demeaning conduct.

Banks Successfully Lobbied on Beneficial Ownership Rule: Top Fincen Official | American Banker: — The banking industry has influenced several key features in the final beneficial ownership rule, a top official at the Treasury Department's Financial Crimes Enforcement Network said this week, while defending the rule's effectiveness. "Some may say that the final [beneficial ownership] rule and this new legislative proposal do not go far enough," Jamal El-Hindi, Fincen's deputy director, said at an Institute of International Bankers anti-money-laundering seminar in New York, according to prepared remarks. "Others may say that we are going too far in our push for transparency." "[W]e simply cannot let the perfect be the enemy of the good. Particularly in this space where we know that nothing will ever be perfect," El-Hindi added. The rule, which the White House announced earlier this month, will require banks to identify one or several individuals with a large stake or control of a company, before bringing them in as clients. But experts have said it is riddled with loopholes. El-Hindi cited several changes the IIB successfully lobbied, noting that the organization's comments "were used to significantly shape the final rule." The measures included a grandfathering clause for all companies that had already opened accounts with banks; a protraction of the grace period for implementing the rule from one to two years; and loosening requirements on which company affiliates banks had to identify as the so-called "beneficial owners."

Industry Advocates Rail Against CFPB's Arbitration Plan | American Banker: The Consumer Financial Protection Bureau's proposal to limit the use of arbitration clauses came under attack Wednesday for potentially raising costs and liability for financial firms. The CFPB's plan, released earlier this month, would ban the use of arbitration clauses that prevent consumers from bringing class-action lawsuits. But industry advocates and outside observers sharply questioned the proposal during a House Financial Services subcommittee hearing on Wednesday, arguing it would help plaintiff's lawyers more than consumers. "We're running the system just to transfer money from defendants to class action lawyers," said Jason Johnston, a professor at the University of Virginia School of Law. Andrew Pincus, a partner at Mayer Brown and a former assistant to the solicitor general in the Justice Department, said the cost to companies of defending class action lawsuits would raise the price of lending. "If reserves have to be taken because of massive class actions that's obviously capital that would not be available to support lending," Pincus said. "The problem here is arbitration is being ended and what the bureau didn't study is [whether] there is a way to make arbitration more user-friendly than it is." Pincus suggested that if an institution harms many consumers, the CFPB could use its own power to redress the problem.

Data Grab in CFPB's Arbitration Plan Spooks Industry | American Banker: The Consumer Financial Protection Bureau's proposal to restrict the use of arbitration clauses would allow it to seize enormous amounts of data from financial firms that could lead to more enforcement actions, according to industry lawyers. In the CFPB's proposal, released earlier this month, companies would have to submit claims, awards and other information on disputes in arbitration to the agency. The bureau plans to collect records on the process from financial firms and from arbitration providers. But opening the private arbitration process to enhanced regulatory scrutiny is sparking concern among banks, credit card companies, debt collection firms and payday lenders, among others. "Companies are still free to arbitrate, but the whole point of it is taken away because everything will become subject to the CFPB," said Elizabeth Bohn, co-chair of the consumer finance industry group at the law firm Carlton Fields. "It defeats the purpose of the arbitration process being a private proceeding if everything is subject to CFPB oversight." When the proposal was issued, CFPB Director Richard Cordray said collecting data on arbitration will help the agency determine if more enforcement is necessary. Collecting data "would also enable further review of the substantive allegations raised in these arbitration processes to see if they warrant action by the bureau," Cordray said at a field hearing on the issue. But Craig Nazzaro, of counsel at the law firm Baker Donelson, said financial institutions face a big risk because the data collected on arbitration could be used against them. Just as the bureau uses customer complaint data in its supervisory and enforcement efforts, so too will the CFPB employ arbitration data.

House Republicans Rig Hearing to Block Consumers from Going to Court – Pam Martens - The ink was barely dry on a proposal by the Consumer Financial Protection Bureau (CFPB) to restore the rights of banking customers to take their grievances into a court of law instead of a system of forced arbitration, when House Republicans threw together a hearing yesterday to scaremonger over make-believe evils of the proposal. The hearing was convened by the Republican-controlled Financial Institutions and Consumer Credit Subcommittee of the House Financial Services Committee and not-so-subtly titled “Examining the CFPB’s Proposed Rulemaking on Arbitration: Is it in the Public Interest and for the Protection of Consumers?” The American Law Litigation Daily called the hearing “seriously lopsided.” ValueWalk called it “skewed.” We’re calling it brazenly rigged. In decades of watching Senate and House hearings, we have never seen a more unlevel playing field. Out of the four witnesses called to testify, three were hand-picked to parrot the position of the banks with one lonely witness on hand to counter their repeated misstatements of fact. Watching that one lone witness, Paul Bland, Executive Director of the nonprofit organization, Public Justice, attempt to provide balance to the proceeding was akin to watching bullies on the playground hurling dumb epithets at the straight-A kid in their class.Most of the Republicans didn’t even bother to call on Bland or ask his opinion.  At one point, Republican Congressman Blaine Luetkemeyer of Missouri, a former banker himself, posed a slanted question to all four witnesses, then snapped at Bland, “You’re outvoted, it’s three to one.” When you rig a witness panel, naturally you can easily achieve three opinions against one.

Lending Club, Already Troubled, Receives Justice Dept. Subpoena - Still reeling from revelations that forced the resignation of its founder and chief executive, Lending Club said on Monday that it had received a subpoena from the Justice Department. The company, which serves as an online matchmaker between small-business borrowers and individual and institutional lenders, disclosed the grand jury subpoena in a regulatory filing, saying it intended to cooperate with the federal investigation. A week ago, Lending Club, which is based in San Francisco, revealed that its founder and chief, Renaud Laplanche, had resigned after an internal investigation discovered fabrications in about $3 million of loan applications. The internal inquiry turned up other problems, including the sale of $22 million of loans to the investment bank Jefferies that Lending Club employees knew did not meet certain of Jeffries’s specifications. The internal review also revealed that Mr. Laplanche had invested in a fund that was buying the company’s loans without informing the Lending Club board, which includes prominent members like Lawrence H. Summers, the former Treasury secretary and former Harvard University president.  The disclosure of a criminal subpoena, which the company received last Monday — the day it announced Mr. Laplanche’s departure — is another big blow to Lending Club. Once considered the pioneer in its field, Lending Club is now fighting to defend the soundness of its business model.

The CFPB's Overly Simplistic Approach to Loan Underwriting -- The May issue of The Atlantic contains an insightful story titled "The Secret Shame of Middle-Class Americans," by Neal Gabler. Gabler puts a face to one of the biggest economic issues facing this country: the erosion of household savings in America and the resulting traumatic impact on the middle class. He cites a Federal Reserve survey — released about a year ago — finding that nearly 50% of Americans have trouble finding $400 to pay for an emergency and confesses that he finds himself in this same predicament. By candidly discussing the financial challenges he faces despite being a successful writer, Gabler highlights the fact that bad credit is pervasive. Numerous studies support this. Last year, the Corporation for Enterprise Development reported that a majority of Americans, 56%, had nonprime credit scores, or scores below 700. The Consumer Financial Protection Bureau, meanwhile, recently found that about 11% of the U.S. adult population was "credit invisible," or lacking credit scores. For most people this isn't due to a lack of education or irresponsible behavior; it's a result of the economic reality that millions of Americans face today. Fluctuations in income and increasing costs of living, especially in health care and education, are causing more and more Americans to live on the edge. That is why it is so important that the CFPB's upcoming rules on short-term lending not create damaging unintended consequences for the millions of Americans who rely on nonbank credit solutions to help manage financial emergencies.

Banks Stepping into Payday Lenders' Shoes? I'm Not Buying It -- A recent story in American Banker reported that at least three banks are planning to launch new small-dollar loans products after the Consumer Financial Protection Bureau's payday lending rule becomes effective. The article states banks are drawn to a possible CFPB exemption from underwriting requirements for loans meeting certain characteristics. Here's why I'm dubious about this development.The re-entry of banks into the small-dollar, short-term credit market would be a win for consumers' choice. Additional competition spurs innovation, which improves products and services and drives down costs. Payday lenders represented by the Community Financial Services Association of America have always welcomed more competition, as we have noted in these pages previously.I am, however, quite skeptical of the notion that the CFPB rule will change banks' resistance to these products. Up to now, major banks have been uninterested in serving this market, and the products they have tried to offer have not been successful. If banks could be serving this market profitably, why aren't they already doing it? A recent study commissioned by the American Bankers Association found that only 1% of banks surveyed currently offer loans of $500 or less. Banks largely find loans of a few hundred dollars unprofitable and unsustainable due to the high cost and risk of offering these products. In fact, in 2009, the FDIC's Small-Dollar Loan Pilot Program allowed banks to offer payday loan-type products with a 36% interest rate cap. But those products proved unprofitable in the short term. Even if more banks would offer small-dollar loans under the CFPB's rule, the recent American Banker article states that banks would only net $70 on a $500 loan, only about twice the cost of an average overdraft fee. This is simply not enough revenue to offset the increased costs associated with offering small-dollar products.

CFPB Trains Sights on Auto Title Lending | American Banker: The Consumer Financial Protection Bureau has found that one in five borrowers who take out short-term auto title loans have their vehicle seized because they cannot repay the loan. In a study to be released early Wednesday, the CFPB found that few borrowers are able to repay an auto title loan within the term of 30 days. Rather, 80% of borrowers have to renew or take out another loan because they cannot pay the lump sum plus interest and fees when it is due, the agency said. "Our study delivers clear evidence of the dangers auto title loans pose for consumers," CFPB Director Richard Cordray said in a press release. "Instead of repaying their loan with a single payment when it is due, most borrowers wind up mired in debt for most of the year. The collateral damage can be especially severe for borrowers who have their car or truck seized, costing them ready access to their job or the doctor's office." The 24-page report on auto title loans comes just weeks before the CFPB is expected to issue the first national regulations of the $38.5 billion payday lending industry. Auto title loans are less widely used than payday loans but are made for larger amounts, and the two products are similar in structure, cost and business model. The borrower provides the lender with the title to the vehicle, which generally must be owned. The vehicle's value is usually the primary consideration for the amount that can be borrowed. Moreover, a lender can repossess or sell the vehicle to satisfy the amount owed if loan payments are not made on time.

Auto Title Lending: Exploding Toasters --Adam Levitin -The CFPB has a new report out on auto title lending, and the findings are jaw-dropping. If ever there was a consumer financial product that looks like an exploding toaster, it is an auto title loan.  Default rates on auto title loans are one in three, with one in five resulting in a repossession. Is there any consumer product that is tolerated when one out of three products blows up? Even one in five?   There's a lot of good data in the report (which assiduously avoids any interpretation, but just presents the facts), but beyond the default rates, here's what really jumps out at me: over 80% of the loans roll over and around half result in sequences of 10 or more loans.  That means that rather than viewing auto title loans as short term products with an extension option, they are really used more like longer-term products with a prepayment option. But more importantly, it tells us something about how to interpret default rates.   Defenders of the auto title lending industry, such as Todd Zywicki, have argued (and also here) that the default rates are low. As I have previously pointed out, Zywicki's calculations are based on treating each loan in a multi-rollover sequence as a separate loan, thereby massively inflating the denominator in the default rate, and others have unfortunately relied on Zywicki's calculations. The CFPB study is the first study I've seen that calculates the real default rate and ignores the artificiality of treating rollovers as separate loans.  Based on these default rates, let me suggest a new metric for thinking about abusive or unfair or unconscionable lending.   Historically society has tried to use the cost of the loan as the measure of whether a debt burden is unmanageable--that's usury laws. But how about looking not at the costs, but at the results, or at the anticipated results:  if a loan product's default rate is over a certain threshold, isn't that prima facie evidence that there is something wrong with the product? 

CFPB Set to Release Payday Lending Proposal on June 2 | American Banker: The Consumer Financial Protection Bureau is expected to unveil its formal proposal to restrict payday lending on June 2, the first national regulations of short-term, small-dollar loans. The bureau said Wednesday that it plans to hold a public hearing in Kansas City, Mo., to discuss small-dollar lending. The hearing will be held at the Kansas City Convention Center and will feature remarks from CFPB Director Richard Cordray, as well as testimony from consumer groups, industry representatives and the public. The CFPB typically uses such hearings to unveil key regulations and it's widely expected the agency will roll out the official payday lending plan at this event. The industry has been anticipating a proposal on the $38.5 billion payday lending industry that could potentially cover a larger swath of financial institutions and fintech companies. If the CFPB sticks to an outline of its proposal released a year ago, it would significantly restrict payday lending activities and specifically target ways in which borrowers fall into cycles of debt and reborrowing. The CFPB has said it is intends to give lenders two options for payday loans: either verify the borrower's ability to repay a loan, or comply with restrictions on how often a short-term loan can be rolled over or reissued within a certain time frame. Lenders also could opt for alternatives that allow for less underwriting and documentation.

Waters Introduces Bill to Rewrite Credit Reporting System | American Banker: — Rep. Maxine Waters, the top Democrat on the House Financial Services Committee, introduced legislation Thursday to reform consumer credit reporting. The California Democrat's bill would give the Consumer Financial Protection Bureau the power to oversee the development of credit scoring models, including alternative credit scoring models that could help borrowers with thin credit profiles. It would also give borrowers more ability to fix problems with their credit scores. The credit reporting process is often opaque to the consumers that it tracks, making error resolution difficult. The system is also often ill-equipped to account for extenuating circumstances that can lead to a black mark. Under the bill, the CFPB would be required to consult with the Federal Housing Finance Agency on reviewing and updating the credit scoring methods used by Fannie Mae and Freddie Mac, which could expand their credit box. The Comprehensive Consumer Credit Reporting Reform Act of 2016 would also reduce the time that negative information stays on a credit report from seven years to four. For bankruptcies it would be reduced from 10 years to seven. Victims of predatory student loans, medical debts and unfair mortgage lending practices also would get a reprieve under the bill.

New York Lenders Subpoenaed Over Seller-Financed Mortgage Alternatives  -- Financial regulators in New York are scrutinizing a revival in seller-financed deals for marketing inexpensive homes to lower-income people who cannot get a mortgage. The New York State Department of Financial Services on Friday subpoenaed four investment firms that either are involved with seller-financed deals or provide financing for such deals, said a person with direct knowledge of the matter but spoke on the condition of anonymity because the investigation is preliminary. The firms receiving subpoenas from New York regulators are Battery Point Financial, New York Mortgage Trust, Apollo Residential Mortgage and an affiliated entity of Apollo Global Management, the person said. All four are in Manhattan. The nation’s top consumer regulator, the Consumer Financial Protection Bureau, recently began an informal inquiry into seller-financing arrangements, which are commonly referred to as contracts for deeds. The bureau has assigned two enforcement lawyers to research the seller-financing market and determine whether the terms of some deals violate federal truth-in-lending laws. Contracts for deeds and other forms of seller financing have been in resurgence after the financial crisis, which created a large supply of cheap foreclosed homes for investors to buy and left many potential homeowners unable to qualify for a mortgage. The high-interest, long-term contracts have proliferated because banks have retreated from lending to low-income families. Private investment firms have stepped in to fill the void.

Former Wells Fargo Employee Claims Bank Defrauded Government Of $1.4B In Foreclosure Funding -- There has been no shortage of lawsuits filed against Wells Fargo in recent years, from accusations the bank pushed mortgages on borrowers who couldn’t repay them to claims the company pressed employees to engage in fraudulent conduct with regard to customer accounts. Now, a recently unsealed whistleblower lawsuit melds together those issues, claiming the bank encouraged employees to withhold information from customers that could potentially lead to foreclosure proceedings.   The former employee claims in the suit, originally filed in 2015, that he was terminated in 2014 after he learned the bank had repeatedly collected on mortgages that it didn’t have proper documentation for.  According to the lawsuit [PDF] — unsealed last week when the Department of Justice declined [PDF] to intervene in the case — the employee claims Wells Fargo defrauded the government by collecting $1.4 billion in federal foreclosure-prevention funding for loans the bank knew lacked proper documentation during the housing crisis. The employee, who had worked for the company for 10 years, testified that he discovered Wells Fargo’s allegedly illegal action in December 2013 while assisting a customer. The couple, the lawsuit states, were afraid their home was going to be foreclosed on, as they were overdue on their second mortgage and the bank was demanding a balloon payment. When the employee looked in the company’s computer system for the couple’s contract he realized it was missing or nonexistent. He told the couple of his findings. “[The employee] promptly reported the issue with the customers to his supervisor and others within Wells Fargo,” the suit states. “The next day, [he] received multiple emails from Wells Fargo headquarters that the loan documents were missing and that the company did not have the customers’ contract. Despite this, Wells Fargo directed [he] to deceive the customers and treat the loan like a balloon payment was due.” The man says he was not comfortable with the directive, believing it to be unethical and illegal. He says he was “berated” by a supervisor for telling customers the truth about their loan documents.

The Great Foreclosure Fraud - Dave Dayen - (book excerpt) There is a rot at the heart of our democracy, rooted in a nagging mystery that has yet to be unraveled. It gnaws at people, occupies their thoughts, leaves them searching for answers in the chill of the night. Americans want to know why no high-ranking Wall Street executive has gone to jail for the conduct that precipitated the financial crisis. The oddest thing about the predominance of the question is that everyone already assumes they know the answer. They believe that too many politicians, regulators, and law enforcement officials, bought off with campaign contributions or the promise of a future job, simply allowed banker miscreants to annihilate the law in pursuit of profit. But they must not like the explanation very much, because they keep asking why, as if they want to be proven wrong, to be given a different story. Maybe they don’t like the implications of a government that lets Wall Street walk. It does too much violence to the conception of the country they have in their mind, with its ideals of justice and fairness. It explains the disempowerment people feel in the face of a rigged economic and political system, with differing standards of treatment depending on wealth and power. It engenders a loss of faith in core institutions, turning our democracy into a sideshow, where the real action happens offstage. It inspires people to don tricornered hats and protest crony capitalism, or pitch camp at the base of Wall Street and refuse to move. It generates a profound anxiety, for if bankers can bring the economy to the point of ruin and get away with it, what’s to stop them from doing it again? It makes our economy seem too fragile, our laws too impotent.

Hall of Shame: HUD Finally Forces Private Equity Buyers of Distressed Mortgages to Give Real Modifications After Years of Complaints Now That HUD Chief is on Clinton VP List --  Yves Smith - Although I often come down on the New York Times for its politically skewed reporting, here the Grey Lady makes clear that the Department of Housing and Urban Development is, after years of pressure, finally changing its rules on sales of distressed mortgages for what looks to be the hope for career advancement of HUD Secretary Julian Castro. However, this story does appear in Dealbook, so the intended message could be “Private equity looting is being inconvenienced out of the Democratic Party’s need for better optics.” Since 2010, HUD has had a program for the sale of distressed mortgages. And by that, we mean really distressed: “extremely delinquent,” as in no payment for 48 months. 105,000 loans have been sold, with private equity firms Loan Star and Bayview (a Blackstone fund) the biggest buyers.  There are cases of borrowers in high-end homes being left in place despite years of delinquency. Readers told us of entire neighborhoods of tony homes in Las Vegas where hardly anyone was paying. The theory seemed to be that no one would buy those houses at that time, and those houses would be costly to secure and maintain until the market recovered. The apparent logic was better to leave them in place to keep the home in adequate shape.  Now one has to wonder why these loans have not been foreclosed upon or modifications attempted. Remember, HUD now controls these loans (the agency guaranteed loans provided by banks). But instead of modifying them on its own, HUD instead entered into a private investor enrichment program of loan sales. The neoliberal logic was that private equity firms would be more “nimble” than banks, with “nimble” meaning they could somehow find a better approach. But as the Times wrote in 2015, in the case of Loan Star, “nimble” turned out to mean they’d start foreclosing even faster.

Bipartisan Senate coalition unveils bill to boost affordable housing --As part of an effort to address what it calls America’s growing housing crisis, a bipartisan group in the Senate unveiled a bill this week that aims to boost affordable housing development by expanding the Low Income Housing Tax Credit. The bill, called the “Affordable Housing Credit Improvement Act,” would increase the Low Income Housing Tax Credit by 50% over its current level. The bill sponsored by Senate Finance Committee member Maria Cantwell, D-WA and Senate Finance Committee Chairman Orrin Hatch, R-UT, as well as Sen. Ron Wyden, D-OR, and Sen. Charles Schumer, D-NY. According to Cantwell’s office, under the proposal, the expanded Low Income Housing Tax Credit would help create or preserve approximately 1,300,000 affordable homes over a 10-year period, which would be an increase of 400,000 more units than is possible under the current program.  Cantwell’s office also said that that beyond expanding the Low Income Housing Tax Credit, the legislation would also create a new income-averaging option to help developments maintain financial feasibility while providing a “deeper level of affordability.” The bill also establishes a permanent 4% credit rate floor for acquisition and bond-financed projects, which Cantwell’s office said will provide more “predictability and flexibility” in financing these projects.

MBA: "Mortgage Applications Decrease in Latest MBA Weekly Survey" -- From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey Mortgage applications decreased 1.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 13, 2016....The Refinance Index increased 1 percent from the previous week. The seasonally adjusted Purchase Index decreased 6 percent from one week earlier to the lowest level since February 2016. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 12 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) remained unchanged at 3.82 percent, with points unchanged at 0.34 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate was unchanged from last week. 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 12% higher than a year ago.

Mortgage Rates Surprisingly Steady Despite Market Volatility - Mortgage rates held surprisingly steady today, even though underlying bond markets were in noticeably weaker territory. As bonds weaken, rates normally move higher, but there's been a bit of a disconnect recently. In light of our discussion last week, perhaps it isn't so surprising. We had anticipated that mortgage rates would start out with an advantage this week because they didn't move much lower at the end of last week even though bond markets were stronger. In other words, bond markets are suggesting rates should be right about where they were on Thursday afternoon, and that's exactly where they are. Naturally, this means that we no longer have the same sort of implicit advantage we enjoyed on Friday afternoon heading into the weekend. As such, it's definitely safer to lean back toward locking. The most prevalently-quoted conventional 30yr fixed rate remains 3.625% on top tier scenarios, with a smattering of lenders still down at 3.5%.

Existing Home Sales increased in April to 5.45 million SAAR - From the NAR: Existing-Home Sales Rise in April for Second Straight Month Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.7 percent to a seasonally adjusted annual rate of 5.45 million in April from an upwardly revised 5.36 million in March. After last month's gain, sales are now up 6.0 percent from April 2015. ...  Total housing inventory at the end of April increased 9.2 percent to 2.14 million existing homes available for sale, but is still 3.6 percent lower than a year ago (2.22 million). Unsold inventory is at a 4.7-month supply at the current sales pace, up from 4.4 months in March.   This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993. Sales in April (5.45 million SAAR) were 1.7% higher than last month, and were 6.0% above the April 2015 rate. The second graph shows nationwide inventory for existing homes. According to the NAR, inventory increased to 2.14 million in April from 1.96 million in March. Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer. The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

April 2016 Existing Home Sales Were Relatively Good.: The headlines for existing home sales say "April's sales increase signals slowly building momentum for the housing market this spring". Our analysis of the unadjusted data shows that home sales improved relative to last month, but the rolling averages degraded. Sales price rate of growth improved. Econintersect Analysis:

  • Unadjusted sales rate of growth accelerated 0.9 % month-over-month, up 4.9 % year-over-year - sales growth rate trend decelerated using the 3 month moving average.
  • Unadjusted price rate of growth accelerated 1.0 % month-over-month, up 4.2 % year-over-year - price growth rate trend declined using the 3 month moving average.
  • The homes for sale inventory grew this month, but remains historically low for Aprils, and is down 3.6 % from inventory levels one year ago).

NAR reported:

  • Sales up 1.7 % month-over-month, up 6.0 % year-over-year.
  • Prices up 6.3 % year-over-year
  • The market expected annualized sales volumes of 5.350 to 5.460 million (consensus 5.400 million) vs the 5.45 million reported.

Existing Home Sales Tumble In South, West Regions; Condo Sales Soar -- Single-family existing home sales rose just 0.6% MoM in April with The South and The West regions seeing notable declines in sales (down 2.7% and down 1.7% respectively). What saved the headline priont was a 10.3% surge in Condo sales - among the best monthly spikes since the crisis helped by a spike in sales in The Midwest - where prices are most affordable. Single-family home sales inched forward 0.6 percent to a seasonally adjusted annual rate of 4.81 million in April from 4.78 million in March, and are now 6.2 percent higher than the 4.53 million pace a year ago. The median existing single-family home price was $233,700 in April, up 6.2 percent from April 2015. Existing condominium and co-op sales jumped 10.3 percent to a seasonally adjusted annual rate of 640,000 units in April from 580,000 in March, and are now 4.9 percent above April 2015 (610,000 units). The median existing condo price was $223,300 in April, which is 6.8 percent above a year ago. Lawrence Yun, NAR chief economist, says April's sales increase signals slowly building momentum for the housing market this spring. "Primarily driven by a convincing jump in the Midwest, where home prices are most affordable, sales activity overall was at a healthy pace last month as very low mortgage rates and modest seasonal inventory gains encouraged more households to search for and close on a home," he said. "Except for in the West — where supply shortages and stark price growth are hampering buyers the most — sales are meaningfully higher than a year ago in much of the country."

A Few Comments on April Existing Home Sales -- I'd consider any existing home sales rate in the 5 to 5.5 million range solid based on the normal historical turnover of the existing stock. I've seen reports calling the February sales rate "dismal" and the March sales rate "a strong rebound". Nah. This is just normal volatility. Sales through April are up 5.5% from the same period in 2015.  A solid increase.As always, it is important to remember that new home sales are more important for jobs and the economy than existing home sales. Since existing sales are existing stock, the only direct contribution to GDP is the broker's commission. There is usually some additional spending with an existing home purchase - new furniture, etc - but overall the economic impact is small compared to a new home sale.  For existing homes, inventory is still key.  I expected some increase in inventory last year, but that didn't happened.  Inventory is still very low and falling year-over-year (down 3.6% year-over-year in April). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases.Two of the key reasons inventory is low: 1) A large number of single family home and condos were convert to rental units. Last year, housing economist Tom Lawler estimated there were 17.5 million renter occupied single family homes in the U.S., up from 10.7 million in 2000. Many of these houses were purchased by investors, and rents have increased substantially, the investors are not selling (even though prices have increased too). Most of these rental conversions were at the lower end, and that is limiting the supply for first time buyers. 2) Baby boomers are aging in place (people tend to downsize when they are 75 or 80, in another 10 to 20 years for the boomers). Instead we are seeing a surge in home improvement spending, and this is also limiting supply. Of course low inventory keeps potential move-up buyers from selling too.  If someone looks around for another home, and inventory is lean, they may decide to just stay and upgrade.

Housing Starts increased to 1.172 Million Annual Rate in April -- From the Census Bureau: Permits, Starts and Completions Privately-owned housing starts in April were at a seasonally adjusted annual rate of 1,172,000. This is 6.6 percent above the revised March estimate of 1,099,000, but is 1.7 percent below the April 2015 rate of 1,192,000. Single-family housing starts in April were at a rate of 778,000; this is 3.3 percent above the revised March figure of 753,000. The April rate for units in buildings with five units or more was 373,000.  Privately-owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 1,116,000. This is 3.6 percent above the revised March rate of 1,077,000, but is 5.3 percent below the April 2015 estimate of  Single-family authorizations in April were at a rate of 736,000; this is 1.5 percent above the revised March figure of 725,000. Authorizations of units in buildings with five units or more were at a rate of 348,000 in April.  The first graph shows single and multi-family housing starts for the last several years. Multi-family starts (red, 2+ units) increased in April compared to March. Multi-family starts are down 12% year-over-year. Single-family starts (blue) increased in April, and are up 4% year-over-year. The second graph shows total and single unit starts since 1968. The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low), Total housing starts in April were above expectations, and combined starts for February and March were revised up.

April 2016 Residential Building Situation Is Soft.: Be careful in analyzing this data set with a microscope as the potential error ranges and backward revisions are significant. Also the nature of this industry variations from month to month so the rolling averages are the best way to view this series - and the data remains in the range we have seen over the last 3 years (although permits is at the low end of the range). The slowing of building permits continues to be to softness in multiple family dwellings.

  • The unadjusted rate of annual growth for building permits in the last 12 months has been around 10% - it is a -13.1 % this month.
  • Construction completions are lower than permits this month for the 16th month in a row (when permits exceed completions - this sector is growing)..
  • Unadjusted 3 month rolling averages for permits (comparing the current averages to the averages one year ago) is 3.3 % (permits) and 14.2 % (construction completions):
  • Building permits growth decelerated 13.1 % month-over-month, and is down 6.1 % year-over-year.
  • Single family building permits grew 3.5 % year-over-year.
  • Construction completions decelerated 34.1 % month-over-month, down 5.8 % year-over-year.

US Census Headlines:

  • building permits up 3.6 % month-over-month, down 5.3 % year-over-year
  • Construction completions down 11.0 % month-over-month, down 7.4 % year-over-year.

Comments on April Housing Starts --The housing starts report this morning was above consensus, and there were upward revisions to the prior three months.  However starts were down 1.7% from April 2015, but April was strong last year (see the first graph).  The key take away from the report is that multi-family is slowing, and single family growth is ongoing year-over-year. This graph shows the month to month comparison between 2015 (blue) and 2016 (red). The comparison for April was more difficult than in February and March. Year-to-date starts are up 10.2% compared to the same period in 2015, but that will slow further with the more difficult comparisons for the remainder of the year. Multi-family starts are down 2.3% year-to-date, and single-family starts are up 16.8% year-to-date. Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment). These graphs use a 12 month rolling total for NSA starts and completions.The rolling 12 month total for starts (blue line) increased steadily over the last few years, and completions (red line) have lagged behind - but completions have been catching up (more deliveries), and will continue to follow starts up (completions lag starts by about 12 months).Multi-family completions are increasing sharply year-over-year.I think most of the growth in multi-family starts is probably behind us - in fact multi-family starts probably peaked in June 2015 (at 510 thousand SAAR) - although I expect solid multi-family starts for a few more years (based on demographics)

Why hasn’t increased household formation led to increased housing construction?  --Tim Taylor has an interesting article about “What was different about housing this time?”  Specifically, why has housing in both building terms and as a share of GDP risen so slowly since 2009.To cut to the chase, he writes that while prices have been increasing:There are two possible categories of reasons for the very low level of residential building since 2009. On the supply side, it may not seem profitable to build, given what was already built back before 2008 and the lower prices. On the demand side, … the demand for housing is tied up with the rate of “household formation”–that is, the number of people who are starting new households…..  The level of household formation was low for years after 2009 …….. Together, the declines in household formation and homeownership contributed to the decline in residential expenditures as a share of GDP.  As an initial matter, I again note that it is important not to overlook the surge in all-cash purchases of large houses by foreigners – who are hedging their bets and/or shielding financial assets – since 2009. But what caught my eye was Taylor’s graph showing household formation:  It certainly *was* low after 2009 – until 2015, when it rose sharply, to an annualized rate of 1.750 million. And now look at housing starts for the last 10 years: Household formation and housing starts tracked reasonably closely from 2009 through 2014, but the relationship completely broke down in 2015, with about 600,000 more households formed than new houses being built. It strikes me that this may be an important part of the spike in median asking rents since the beginning of 2015: To say that it is puzzling that home builders have not addressed this surge in demand for starter housing is an understatement. It is probably one of the two biggest imbalances in the entire economy (along with stagnant wages vs. record profits). This isn’t just an academic concern: increasing rents may have been vacuuming up nearly all of consumer gas savings for 1/3 of the populatioin. and their impact on inflation may be leading the Fed to an important policy mistake which could bring on the next recession.

NAHB: Builder Confidence unchanged at 58 in May - The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 58 in May, unchanged from 58 in April. Any number above 50 indicates that more builders view sales conditions as good than poor. From the NAHB: Builder Confidence Holds Stable in May: Builder confidence in the market for newly-built single-family homes remained unchanged in May at a level of 58 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). “Builder confidence has held steady at 58 for four straight months, which indicates that the single-family housing sector remains in positive territory,” “However, builders are facing an increasing number of regulations and lot supply constraints.”The HMI components measuring sales expectations in the next six months increased three points to 65, while the component charting current sales conditions and the index gauging buyer traffic both held steady at 63 and 44, respectively. “The fact that future sales expectations rose slightly this month shows that builders are confident that the market will continue to strengthen,” said NAHB Chief Economist Robert Dietz. “Job creation, low mortgage interest rates and pent-up demand will also spur growth in the single-family housing sector moving forward.” ...Looking at the three-month moving averages for regional HMI scores, the South and Midwest both registered one-point gains to 59 and 58, respectively. The West remained unchanged at 67 and the Northeast fell three points to 41.

AIA: "Architecture Billings Index Shows Continued Modest Growth"  -- Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.   From the AIA: Architecture Billings Index Shows Continued Modest Growth After beginning the year with a decline, the Architecture Billings Index has posted three consecutive months of increasing demand for design activity at architecture firms. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the April ABI score was 50.6, down from the mark of 51.9 in the previous month. This score still reflects an increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 56.9, down from a reading of 58.1 the previous month.  “Architects continue to report a wide range of business conditions, with unusually high variation in design activity across the major building categories,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “The strong growth in design contracts – the strongest score for this indicator since last summer -- certainly suggests that firms will be reporting growth in billings over the next several months.”
• Regional averages: South (52.2), Northeast (51.5), West (50.8), Midwest (50.8)
• Sector index breakdown: multi-family residential (53.7), commercial / industrial (52.0), mixed practice (50.0), institutional (49.0)
This graph shows the Architecture Billings Index since 1996. The index was at 50.6 in April, down from 51.9 in March. Anything above 50 indicates expansion in demand for architects' services.  This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.  According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction.  This index was positive in 9 of the last 12 months, suggesting a further increase in CRE investment in 2016.

Retail Sales Rev Their Engines With 1.3% Increase -- Robert Oak - April 2016 retail sales really popped up as auto sales roared.  Retail sales increased 1.3% for the month and auto dealers sales surged by 3.5%.  Without autos & parts sales, retail sales still had a great showing with a monthly 0.8% gain.  Gasoline station sales have also shot up as prices rose, a 2.2% increase for the month.  Retail sales have now increased 3.0% from a year ago and all of auto dealer sales for the year were gained in April, 3.5%.   Retail sales are reported by dollars, not by volume with price changes removed.  Retail trade sales are retail sales minus food and beverage services and trade sales increased by 1.4% for the month.  Contrary to the press, retail sales are not consumer spending, although are highly correlated. Total April retail sales were $453.4 billion.  Below are the retail sales categories monthly percentage changes.   General Merchandise includes Walmart, super centers, Costco and so on.  Department stores by themselves saw a 0.3% increase from last month.  Grocery stores by themselves also surged with a 1.1% monthly sales increase.  Building materials and garden supply places had a terrible month with a -1.0% monthly decline.  Restaurants and bars increased 0.3% and are up 5.2% for the year.  Miscellaneous brick and mortar store retailers saw a 1.5% increase with a 4.7% annual sales gain.  Online shopping continues to increase with a whopping 2.1% monthly gain and an annual one of 10.2%.  These figures are seasonally adjusted.

Bounce for Bloomberg Consumer Comfort Index -- The Bloomberg Consumer Comfort Index pulled off its 2016 low, rising to 42.6 last week vs. 41.7 previously. The 2016 high hit in late January was 44.6.  A separate measure of expectations about the economy showed just 24% believing things are getting better, with 35% saying it's getting worse. The -11 net reading is the same as last month, and the gauge has been net negative all year.

Consumer Price Index May 17, 2016: A nearly 10 percent monthly jump in gasoline costs drove the consumer price index 0.4 percent higher in April but outside of this, pressure is not building. The core rate did rise a respectable 0.2 percent but the year-on-year rate, which is a closely followed gauge for overall inflation, went 1 tenth in reverse for a second straight month to only plus 2.1 percent and barely above the Fed's 2 percent policy line. Apparel prices, which continue to decline despite the lower dollar and higher costs of imports, have been a major factor all year behind the lack of pressure. Service prices continue to show the most heat, led by medical care at plus 0.3 percent in the month and plus 3.0 percent on the year, but housing prices have been flat, up 0.2 percent in the month and 2.1 percent on the year. Food prices are up only 0.9 percent on the year while energy prices, despite two months of strong gains, are still down a year-on-year 8.9 percent. The key right now for the inflation picture is wages, where gains have been limited and are not pressuring selling prices. The headline aside, this report will not revive whatever chances there are for a June FOMC rate hike.

Inflation rises in April at fastest rate in 3 years - The prices Americans pay for goods and services saw the fastest increase in April in more than three years, led by the higher cost of gas and rent. The consumer price index shot up a seasonally adjusted 0.4% last month, the biggest gain since February 2013. More than half of the rise in consumer inflation stemmed from a recent bump in the cost of gasoline. Rent was another major contributor, accounting for about one-fourth of the increase.Although price pressures are on the rise, overall inflation is still relatively tame. The CPI has risen just 1.1% in the past 12 months, up from 0.9% in March, the government said Tuesday. The Federal Reserve wants inflation — as measured by a related series known as the PCE price index — to rise to a 2% level that it considers healthier for the economy. The central bank is reluctant to raise interest rates despite steady growth and a tighter labor market because of low inflation. Many economists predict inflation will move closer to the Fed’s target by year end. Higher gas prices will push up the cost of a variety of goods, they say, while a weakening dollar will make imports more expensive. Much of the recent increase in the CPI so far this year has been spurred by higher oil prices. An 8.1% spike in gas pushed the energy index sharply in April, the Bureau of Labor Statistics said. Food prices also rose 0.2% last month, though the cost of groceries has fallen in the past year. Stripping out food and energy, so-called core consumer prices rose 0.2% in April. The cost of rent increased 0.3%, as did medical care. Drug prices rose even faster and car insurance became more costly.

April 2016 CPI: Inflation Little Changed: According to the BLS, the Consumer Price Index (CPI-U) year-over-year inflation rate was 1.1 % - an increase from last month's 0.9 %. The year-over-year core inflation (excludes energy and food) rate declined 0.1% to 2.1 %, and remains slightly above the target set by the Federal Reserve.As a generalization - inflation accelerates as the economy heats up, while inflation rate falling could be an indicator that the economy is cooling. However, inflation does not correlate well to the economy - and cannot be used as a economic indicator. The major influence on the CPI was energy prices. The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent in April on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.1 percent before seasonal adjustment. The seasonally adjusted all items increase was broad-based, with the indexes for food, energy, and all items less food and energy all rising in April. The food index rose 0.2 percent after declining in March, with the food at home index increasing slightly. The index for energy increased 3.4 percent, with the gasoline index rising 8.1 percent, and the indexes for fuel oil and natural gas also advancing. The index for all items less food and energy increased 0.2 percent in April. The shelter index rose 0.3 percent, as did the index for medical care, and the indexes for motor vehicle insurance, airline fares, recreation, and education increased as well. Several other component indexes increased slightly, including those for alcoholic beverages, tobacco, and personal care. In contrast, the indexes for household furnishings and operations, apparel, new vehicles, used cars and trucks, and communication all declined. The all items index rose 1.1 percent for the 12 months ending April, a larger increase than the 0.9- percent increase for the 12 months ending March. The index for all items less food and energy rose 2.1 percent over the last 12 months, compared to a 2.2-percent rise for the 12 months ending March. The food index has risen 0.9 percent over the last 12 months, and the energy index has declined 8.9 percent.

CPI Shoots Up 0.4% As Gasoline, Medical, Food and Shelter Prices Rise - Robert Oak - The Consumer Price Index ballooned up by 0.4% for April as energy prices jumped up 3.4%. Gasoline alone really shot up, 8.1% for the month. Inflation with food and energy price changes removed increased 0.2% with shelter and medical costs once again increasing. From a year ago overall CPI has increased 1.1%. Without energy and food considered, prices have increased 2.1% for the year. CPI measures inflation, or price increases. Yearly overall inflation is shown in the below graph. Core inflation, or CPI with all food and energy items removed from the index, has increased 2.1% for the last year. For the past decade the annualized inflation rate has been 1.9%. Core CPI's monthly percentage change is graphed below. This month core inflation increased 0.2%. Within core inflation, shelter increased 0.3%, with monthly rental costs increasing the same as home ownership, 0.3%. Hotels and lodging away from home increased 0.4%. Water, sewer and trash services increased 0.5% for the month in price. Transportation really flew up with a 0.7% increase and within leasing vehicles also increased 0.7%. The energy index is down -8.9% from a year ago. The BLS separates out all energy costs and puts them together into one index. For the year, gasoline has declined --13.8%, while Fuel oil has dropped -27.5%. Graphed below is the overall CPI energy index. Graphed below is the CPI gasoline index as prices are now rising again. Core inflation's components include shelter, transportation, medical care and anything that is not food or energy. The shelter index is comprised of rent, the equivalent cost of owning a home, hotels and motels. Shelter increased 0.3% and is up 3.2% for the year. Rent of a primary residence just keeps increasing and this month by 0.3% and is up 3.7% for the year. Graphed below is the rent price index. Food prices increased 0.2% for the month. Food and beverages have now increased just 0.9% from a year ago. Groceries, (called food at home by the BLS), increased 0.1% for the month, and are down -0.3% for the year. The meats, poultry, fish, and eggs index declined by -0.1% as the eggs index by itself plunged -6.3%. Eating out, or food away from home increased 0.2% for the month and is up 2.7% for the year. Graphed below are grocery price increases, otherwise known as the food at home index.

Consumer Prices Jump Most In Over 3 Years Amid Rising Gasoline, Rent Inflation - Headline CPI rose 0.4% MoM (above +0.3% exp) for the biggest jump since Feb 2013but sadly at the same time, price-adjusted hourly wages slid 0.1% in April.Following a small drop in March, from 8 year highs, Core (ex food and energy) Consumer Prices rose 2.1% YoY (as expected) abesent the effect of Gasoline's huge 8.1% MoM surge. Of course this is probably transitory but we note that rent inflation remains at 3.7% YoY - its highest since 2008 and definitively not transitory. And as the breakdown shows, energy and gasoline price soared in April - so are higher oil prices good or bad again? The index for all items less food and energy increased 0.2 percent in April after increasing 0.1 percent in March. The shelter index rose 0.3 percent in April following a 0.2 percent rise the prior month. The indexes for rent and for owners' equivalent rent both increased 0.3 percent, while the index for lodging away from home declined for the second straight month, falling 0.4 percent. The medical care index rose 0.3 percent in April, with the index for prescription drugs rising 0.7 percent and the hospital services index advancing 0.3 percent, but the physicians' services index declining 0.1 percent. The motor vehicle insurance index rose 1.2 percent in April, and the index for airline fares advanced 1.1 percent after declining in March. The recreation index rose 0.3 percent in April, as did the index for education, and the indexes for alcoholic beverages, tobacco, and personal care all posted slight increases. Gas prices according to CPI data, are up over 20% in the last 2 months - the biggest spike since June 2009...

April 2016 Import Sea Container Count Continued Collapse Raises Recession Concerns: The continued contraction in import counts for April raises economic questions. Even exports were fairly weak. This data set is based on the Ports of LA and Long Beach which account for much (approximately 40%) of the container movement into and out of the United States - and these two ports report their data significantly earlier than other USA ports. Most of the manufactured goods move between countries in sea containers (except larger rolling items such as automobiles). This pulse point is an early indicator of the health of the economy. Consider that imports final sales are added to GDP usually several months after import - while the import cost itself is subtracted from GDP in the month of import. Export final sales occur around the date of export. Container counts do not include bulk commodities such as oil or autos which are not shipped in containers. For this month: Containers come in many sizes so a uniform method involves expressing the volume of containers in TEU, the volume of a standard 20 foot long sea container. Thus a standard 40 foot container would be 2 TEU. There is a good correlation between container counts and trade data (the US Census trade data is shown on the graph below). Using container counts gives a two month advance window on trade data.

LA area Port Traffic Declined in April -- Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic. The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container). To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average. On a rolling 12 month basis, inbound traffic was down 0.7% compared to the rolling 12 months ending in March. Outbound traffic was down 0.8% compared to 12 months ending in March. The downturn in exports over the last year was probably due to the slowdown in China and the stronger dollar. The 2nd graph is the monthly data (with a strong seasonal pattern for imports). Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March (depending on the timing of the Chinese New Year). In general exports are moving sideways and imports are gradually increasing.

Recession Watch: Freight Volume Drops to Worst Level since 2010 -  Wolf Richter - Freight shipments by truck and rail in the US fell 4.9% in April from the beaten-down levels of April 2015, according to the Cass Transportation Index, released on Friday. It was the worst April since 2010, which followed the worst March since 2010. In fact, shipment volume over the four months this year was the worst since 2010. This is no longer statistical “noise” that can easily be brushed off. The Cass Freight Index is based on “more than $26 billion” in annual freight transactions by “hundreds of large shippers,” regardless of mode of transportation, including by truck and rail. It does not cover bulk commodities, such as oil and coal and thus is not impacted by the collapsing oil and coal shipments. The index is focused on consumer packaged goods, food, automotive, chemical, OEM, heavy equipment, and retail. In a similar vein, the Association of American Railroads reported last week that loads of containers and trailers fell 7.5% in April year-over-year. “Intermodal” is a direct competitor to trucking. Combined, they’re a measure of the goods-based economy. The Cass Freight Index is not seasonally adjusted. Hence the strong seasonal patterns in the chart. Note the beaten-down first four months of 2016 (red line):

Moody's cuts rail industry outlook to 'negative'  -- Moody's Investors Service has downgraded its outlook for the North American rail industry to "negative" from "stable," as railroads face deep and long-lasting declines in freight volumes, the firm announced yesterday. The weak industry conditions will likely continue through at least the third quarter, according to a Moody's press release. "Volumes of coal, the second-largest freight group in the North American railroad industry, plunged by an unprecedented 37 percent in April amid persistently low natural gas prices and high stockpiles at utilities after a warm winter," said Vice President and Senior Analyst Rene Lipsch. Revenue growth is anticipated to fall below zero, the firm's minimum for a stable outlook, she added. Moody's projects total freight volume to decline 3.5 percent to 4.5 percent this year, driven in particular by an expected 20 percent to 25 percent decline in coal shipments.

Rail Week Ending 14 May 2016: Rail Again Moves Deeper Into Contraction: Week 19 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. We do not believe the data is affected this week by the labor issues in the ports one year ago.A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 498,379 carloads and intermodal units, down 9.2 percent compared with the same week last year. Total carloads for the week ending May 14 were 238,353 carloads, down 11.4 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 260,026 containers and trailers, down 7.2 percent compared to 2015. Four of the 10 carload commodity groups posted an increase compared with the same week in 2015. They included miscellaneous carloads, up 11.8 percent to 9,646 carloads; metallic ores and metals, up 5.5 percent to 23,881 carloads; and nonmetallic minerals, up 4.8 percent to 35,702 carloads. Commodity groups that posted decreases compared with the same week in 2015 included coal, down 30.8 percent to 64,800 carloads; petroleum and petroleum products, down 19 percent to 11,727 carloads; and grain, down 8.5 percent to 18,373 carloads. For the first 19 weeks of 2016, U.S. railroads reported cumulative volume of 4,559,020 carloads, down 14.2 percent from the same point last year; and 4,888,034 intermodal units, down 1.4 percent from last year. Total combined U.S. traffic for the first 19 weeks of 2016 was 9,447,054 carloads and intermodal units, a decrease of 8 percent compared to last year.

Fed: Industrial Production increased 0.7% in April -- From the Fed: Industrial production and Capacity Utilization - Industrial production increased 0.7 percent in April after decreasing in the previous two months. Manufacturing output rose 0.3 percent after declining the same amount in March. The index for utilities jumped 5.8 percent in April, as the demand for electricity and natural gas returned to a more normal level after being suppressed by warmer-than-usual weather in March. Mining production fell 2.3 percent in April, and it has decreased more than 1 1/2 percent per month, on average, over the past eight months. At 104.1 percent of its 2012 average, total industrial production in April was 1.1 percent below its year-earlier level. Capacity utilization for the industrial sector increased 0.5 percentage point in April to 75.4 percent, a rate that is 4.6 percentage points below its long-run (1972–2015) average. This graph shows Capacity Utilization. This series is up 8.7 percentage points from the record low set in June 2009 (the series starts in 1967). Capacity utilization at 75.4% is 4.6% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007. The second graph shows industrial production since 1967. Industrial production increased 0.6% in April to 104.1. This is 19.1% above the recession low, and 1.5% below the pre-recession peak. This was above expectations of a 0.2% increase.

Housing Construction & Industrial Output Rebound In April -- US housing starts and industrial activity posted solid increases in April, rising by stronger-than-expected rates last month. But the upbeat news is clouded by negative trends for the year-over-year data. In the housing sector, the change in tone on the downside is conspicuous—for the first time in 13 months, new residential construction and newly issued building permits fell relative to their respective year-earlier levels. Meanwhile, industrial output rebounded sharply in April, rising by a better-than-projected 0.7%. But the improvement wasn’t enough to reverse the red ink in the annual comparison. As a result, US industrial activity contracted last month in year-over-year terms–as it’s been doing since last September.  The monthly figures suggest that better days are coming. But short-term data is noisy and generally unreliable for monitoring business-cycle risk. As such, overcoming the dark clouds that hang over the year-over-year numbers will require strong and consistent monthly gains for the near term. For the moment, however, gravity prevails, as the following charts show. As noted, housing construction and new permits are now falling—at the same time—vs. year-earlier levels. Could it be noise? Perhaps, but the jig may be up if the red ink doesn’t fade in next month’s report.  Industrial output is still sinking in annual terms, although the manufacturing component is holding on to small gains in the year-over-year column. Note, too, that the annual slide in headline industrial activity revived in relative terms to the smallest decrease—down 1.1%–in six months. If you’re so inclined, that comparatively soft decrease offers a hint for thinking that repair and recovery are now in progress on this front.

April 2016 Industrial Production Remains In Contraction Year-over-Year But Monthly Data Improves.: The headlines say seasonally adjusted Industrial Production (IP) improved. The year-over-year data remains in contraction - so improvement is always relative.

  • Headline seasonally adjusted Industrial Production (IP) increased 0.7 % month-over-month and down 1.1 % year-over-year.
  • Econintersect's analysis using the unadjusted data is that IP growth accelerated 1.6 % month-over-month, and is down 0.7 % year-over-year.
  • The unadjusted year-over-year rate of growth accelerated 0.3 % from last month using a three month rolling average, and is down 1.6 % year-over-year.

    IP headline index has three parts - manufacturing, mining and utilities - manufacturing was up 0.3 % this month (up 0.4 % year-over-year), mining down 2.3 % (down 13.4 % year-over-year), and utilities were up 5.8 % (up 0.4 % year-over-year). Note that utilities are 10.6 % of the industrial production index, whilst mining is 15.5 %. Unadjusted Industrial Production year-over-year growth for the past 2 years has been between 2% and 4% - it is currently in contraction.

    Industrial Production Stuck In Longest Non-Recessionary Slump In The Past Century -- A significant downward revision for March (from -0.6 to -0.9% MoM) enabled April to beat handsomely (+0.7% vs +0.3% exp.) pleasing headline-tracking algos. While this is the biggest monthly jump in Industrial Production since Nov 2014 - all thanks to the biggest spike in Utilities since 2007; the year-over-year tumble continues with IP -1.07% YoY for the 8th month in a row. Industrial production has never fallen for this long - in 96 years - without the US economy being in recession. The monthly pickup was thanks to Utilities: The increase of 5.8 percent in the output of utilities was its largest since February 2007, when it leapt 6.2 percent. In April, electric utilities and natural gas utilities expanded 5.4 percent and 9.3 percent, respectively.  But year-over-year, this is the 8th monthly plunge in a row...

    China Furious After US Launches Trade War "Nuke" With 522% Duty --  China is back to doing what it did in late 2015 (and what it has always done) when as we reported, a surge in Chinese exports led to the first salvos in the trade war between China - the world's biggest exporter of various steel products and is responsible for half the entire world's steel output - and countries who are importing dumped Chinese products at the expense of their own steel and mining industries.  Nowhere has this trade tension been more obvious than in the UK, where in recent months angry, protesting steel workers have been demanding rising protectionist steps against a country they, rightfully, see as unleashing a global commodity deflation driven by out of control, and unprofitable by highly subsidized, production by Chinese steel mills. The US was not left unscathed: we reported in December that "The Trade Wars Begin: U.S. Imposes 256% Tariff On Chinese Steel Imports" and since then things have progressively turned worse, finally culminating overnight with an outburst of anger from Chinese officials who, after attempting to flood not just the US but also the entire world with their commodity in general and steel in particular, exports... Chinese exports hit a record 112 million tonnes last year, with rivals claiming that Chinese steelmakers have been undercutting them in their home markets. According to Reuters, in the four months to April, China's steel exports have risen nearly 7.6% to 36.9 million tonnes. In some regard, China has reason to be angry: the US unleashed what is nothing short of a nuclear bomb in its rapidly escalating trade war with China, and recently imposed duties of 522% on cold-rolled steel used in automobiles and other manufacturing,  In doing so it has rendered Chinese exports to the US unsustainable and will force even more excess Chinese production to remain landlocked within China's borders, making the domestic glut, and price collapse, that much worse.

    What do "experts" say about trade? -- Imagine an article on the "carried interest" tax loophole, entitled as follows: "Carried Interest tax treatment should not be changed, experts agree" And suppose that all of the experts were hedge fund billionaires.  CNBC has a new article discussing "expert" opinion on Chinese steel exports. Here's the headline: China has conducted a 'war' - not trade - with steel, experts say. The article cites two experts:  China's low-cost metal producers have been widely cited as the main culprit for the glut. In particular, the world's second largest economy has been accused of "dumping" cheap steel on to global markets, due to a slowdown in domestic demand, in a bid to gain market share. Lourenço Gonçalves, chairman, president and chief executive of mining and natural resources company Cliffs Natural Resources, told CNBC on Thursday that China had been acting unfairly. . . ."Just based on the numbers, China is by far the largest problem," Gonçalves said, accusing China of not abiding by the rules of international trade. "You can't call yourself competitive if your competitiveness is based on cheating the international rules of trade. And here's the other expert:  James Bouchard, founder, chairman and chief executive of steel services group Esmark, agreed that there was "no doubt about it" that China was dumping steel and said that the impact had been "devastating" for businesses. We now live in a world where actual experts are ignored, and the press merely repeats the claims of special interest groups on one side of the issue. Trump would be proud.

    Caterpillar Retail Sales Fall For Record 41 Consecutive Months -- For Caterpillar, the great recession was bad, for about 19 months. In May 2010, after declining sharply for just under two years, CAT posted it first positive global retail sales comps and never looked back... until December 2012 when comp sales once again turned negative and have been negative ever since. For the past 41 months!  The breakdown showed that contrary to popular opinion, there has been no pick up in demand for heavy industrial machinery anywhere around the globe.

    • Caterpillar global 3-mo. retail machine sales down 12% vs March 13% fall, Feb. down 21%
    • North America machine sales down 11% after falling 8% in March
    • Asia/Pacific sales April down 10% after falling 14% in March
    • Latam sales April down 37% after falling 34%
    • EAME (Europe, Africa, Middle East) sales April down 6% after falling 8%
    • Power systems sales: April down 34% after falling 41%

    NY Fed: May "General business conditions turned negative, falling nineteen points to -9.0"  --From the NY Fed: Empire State Manufacturing Survey Business activity contracted for New York manufacturing firms, according to the May 2016 survey. Following a brief foray into positive territory in March and April, the general business conditions index fell back below zero, declining nineteen points to -9.0. ...Employment levels remained fairly steady, with the index for number of employees showing little change at 2.1, while the average workweek index declined ten points to -8.3—evidence that the average workweek was shorter this month. ...Indexes for the six-month outlook generally suggested that firms were somewhat less optimistic about future conditions than they were in April.  This was well below the consensus forecast of 7.0, and suggests manufacturing contracted in the NY region in May.

    May 2016 Empire State Manufacturing Index Now Contracting.: The Empire State Manufacturing Survey dropped like a rock into contraction.

    • Expectations were for a reading between 2.50 to 11.20 (consensus +7.00) versus the -9.0 reported. Any value above zero shows expansion for the New York area manufacturers.
    • New orders subindex of the Empire State Manufacturing Survey is now in expansion, whilst the unfilled orders sub-index improved by remains in contraction.
    • This noisy index has moved from +3.1 (May 2015), -2.1 (June), 3.9 (July), -14.9 (August), -14.7 (September), -11.4 (October), -10.7 (November), -4.6 (December), -19.4 (January 2016), -16.6 (February), +0.6 (March), 9.6 (April) - and now -9.0.

    . This noisy index has moved from +3.1 (May 2015), -2.1 (June), 3.9 (July), -14.9 (August), -14.7 (September), -11.4 (October), -10.7 (November), -4.6 (December), -19.4 (January 2016), -16.6 (February), +0.6 (March), 9.6 (April) - and now -9.0. As this index is very noisy, it is hard to understand what these massive moves up or down mean - however this regional manufacturing survey is normally one of the more pessimistic. Econintersect reminds you that this is a survey (a quantification of opinion). Please see caveats at the end of this post. However, sometimes it is better not to look to deeply into the details of a noisy survey as just the overview is all you need to know.

    Empire Fed Manufacturing Outlook Crashes Back To Reality --The March/April dead cat bounce in Empire Fed Survey is back deep into contraction territory. Having surged to +9.6, May saw respondents entirely lose faith and crash back to -9, massively missing expectations of a +6.5 print (the biggest drop since Oct 2014). Under the surface everything plunged (except the number of employees which inched higher) as New Orders, Workweek, and Prices received all contracted drastically. Even hope tumbled withfuture CapEx expectations collapsing by the most since June 2013.  Business activity contracted for New York manufacturing firms, according to the May 2016 survey.  Following a brief foray into positive territory in March and April, the general business conditions index fell back below zero, declining nineteen points to -9.0. Nineteen percent of respondents reported that conditions had improved over the month, while 28 percent reported that conditions had worsened. The new orders index also turned negative, its seventeen point drop to -5.5 signaling a decrease in orders. The shipments index, down twelve points to -1.9, showed that shipments were flat, and the unfilled orders index fell to -6.3. The delivery time index, at -6.3, pointed to shorter delivery times, and the inventories index, at -7.3, suggested that inventory levels were lower.  The new orders and shipments indexes also fell below zero, pointing to a decline in both orders and shipments. Survey results indicated that inventory levels were lower and delivery times shorter. The prices paid index edged down to 16.7—a sign that moderate input price increases were continuing—and the prices received index fell below zero, suggesting a small drop in selling prices. Employment levels appeared to be little changed, while the average workweek index pointed to a decline in hours worked. The six-month outlook was somewhat less optimistic than in April, and the capital spending index plummeted to 3.1, its lowest reading in more than two years...

    May 2016 Philly Fed Manufacturing Survey Remains In Contraction - Little Changed: The Philly Fed Business Outlook Survey remains in contraction. Key elements marginally declined. The only other manufacturing survey released so far for this month is in contraction. This is a very noisy index which readers should be reminded is sentiment based. The Philly Fed historically is one of the more negative of all the Fed manufacturing surveys but has been more positive then the others recently. The index declined from -1.6 to -1.8. Positive numbers indicate market expansion, negative numbers indicate contraction. The market expected (from Bloomberg) 0.0 to 6.5 (consensus +3.0). Firms responding to the Manufacturing Business Outlook Survey continued to report tenuous growth this month. The indicator for general activity was essentially unchanged in May and remained slightly negative. Other broad indicators also reflected general weakness in business conditions. The indicator for employment improved but remained negative. Manufacturers' forecasts of future activity tempered slightly from last month, overall, but continue to suggest confidence in future growth.  The diffusion index for current activity was essentially unchanged at -1.8 this month. The index has registered a negative reading in eight of the last nine months (see Chart). The current new orders index decreased for the second consecutive month, from 0.0 to -1.9 this month. Conversely, the current shipments index rose 10 points; however, the percentage of firms reporting a decline in shipments narrowly exceeded the percentage reporting an increase. As with the other broad indicators this month, the unfilled orders and delivery time indexes both remained in negative territory. The indicator for inventories rose notably to its highest reading in nine months but still registered a negative reading.

    Philly Fed Flounders To 3-Month Lows As New Orders Tumble --March's epic - and utterly embarrassing - spike is now nothing but an aberration as for the eight month of the last nine, Philly Fed's business outlook remains firmly in negative territory. With hope-strewn expectations of a +3.0 print, Philly Fed dropped from -1.6 to -1.8 with New Orders tumbling back into contraction. While the headline data dropped, "hope" was also dashed as 6-month expectations for inventories (not good for GDP) and employees (not good for Fed meme) tumbled.  The breakdown

    Ten Winning and Losing Industries from the Pacific Trade Deal - The proposed Pacific trade agreement that has generated so much controversy in the 2016 campaign season would likely benefit the U.S. economy overall, but would distinctly help some businesses and types of workers more than others. A nonpartisan U.S. commission released a 788-page report that estimates the extra economic gains or losses that dozens of industries would incur after 15 years under the Trans-Pacific Partnership, or TPP, assuming it wins passage in Congress and is ratified by other nations. Here are some findings from the report of the U.S. International Trade Commission, with the figures representing the net economic effect of that TPP on that industry in 15 years:

    As US politicians romanticize doomed manufacturing jobs, the new working class is suffering - Today, politicians of both parties promise to bring back manufacturing jobs. But as much as it pains me to say it, these efforts are misplaced. Instead, we desperately need to direct our attention towards improving the jobs of the new working class—the legions of fast food, retail, health care, and janitorial jobs who now form the backbone of our economy. These are jobs that can’t be outsourced to China, Vietnam, or India. While America’s public intellectuals wax eloquently, and even idolize, the innovation and ideation done by tech workers, the reality that most Americans actually work in a bargain-basement economy remains on the margins of contemporary political discourse.  Four in ten private sector workers do not have any right to a paid sick day. Close to one in five workers has an erratic schedule, subject to change on a weekly basis. Many occupations that will add the most new jobs to our economy in the next decade will require little to no education beyond high school—where wages hover below $12 an hour for the most part, and the work is done disproportionately by women, Latinos, and African Americans. These are jobs such as fast food prep, retail sales, home health and personal care, secretarial positions and janitorial and cleaning services. This is the economy of today and tomorrow—and yet the presidential campaigns of both parties remain remarkably aloof to this reality. The degradation of living standards for the new working class didn’t just happen overnight. Today, the United States has one of the highest percentages of working people earning low-wages—one out of four employed Americans—of 26 advanced countries surveyed by the Organization for Economic Co-operation and Development (OECD). The degradation of living standards for the new working class didn’t just happen overnight, however. Rather, it is the result of a tightly orchestrated plan by the nation’s political and corporate elites to undermine what they see as government meddling and overreach in the market.

    Americans Don’t Miss Manufacturing — They Miss Unions - Manufacturing no longer plays its former role in the economy, and not only because there are far fewer factory jobs than in the past. The jobs being created today often pay less than those of the past — sometimes far less. A new report this week from the Labor Center at the University of California, Berkeley, found that a third of production workers — non-managers working on factory floors and in related occupations — earn so little that their families receive some form of public assistance such as food stamps or the Earned Income Tax Credit. Many of those workers are temps, who account for a growing share of factory employment. The median wage for a manufacturing production worker, according to separate data from the Bureau of Labor Statistics, was $16.14 an hour in 2015, below the $17.40 an hour for all workers. On average, manufacturing jobs still pay better than most jobs available to people without a college degree. The median manufacturing worker without a bachelor’s degree earned $15 an hour in 2015, a dollar more than similarly educated workers in other industries.1 But those averages obscure a great deal of variation beneath the surface. Average manufacturing wages are inflated by high-earning veterans; newly created jobs tend to pay less. And there are substantial regional variations. The average manufacturing production worker in Michigan earns $20.80 an hour, vs.$18.86 in South Carolina, according to data from the Bureau of Labor Statistics. Why do factory workers make more in Michigan? In a word: unions.  Private-sector unions have been shrinking across the country for decades, but they are stronger in the Midwest than in most other parts of the country. In Michigan, 23 percent of manufacturing production workers were union members in 2015; in South Carolina, less than 2 percent were.

    Weekly Initial Unemployment Claims decrease to 278,000 -- The DOL reported: In the week ending May 14, the advance figure for seasonally adjusted initial claims was 278,000, a decrease of 16,000 from the previous week's unrevised level of 294,000. The 4-week moving average was 275,750, an increase of 7,500 from the previous week's unrevised average of 268,250.  There were no special factors impacting this week's initial claims. This marks 63 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.

    Why Is the Labor Force Participation Rate Increasing? - FRB St. Louis -- The unemployment rate in the United States has been declining since the Great Recession ended in mid-2009.1 This decline has been partly due to discouraged workers leaving the labor force, as illustrated by the decrease in the labor force participation rate in the figure below.2  However, the labor force participation rate has started to increase after trending downward since the end of the recession. It rose from 62.4 percent in September to 63 percent in March before settling at 62.8 percent in April. During this period, the unemployment rate continued decreasing, reaching 5 percent in April.  A closer look at the labor force participation rate is important to understand what is behind this trend. To do that, we decomposed labor force participation by gender, age and education levels for the period beginning in September.  Several patterns emerged from these figures. First, we observed that the increase in female participation led to the increase in the labor force participation rate before November. However, the male participation rate has been increasing at a faster pace since then.  Second, the labor force participation rate has risen across all age categories:

    • 54.5 percent to 55.2 percent for ages 16-24
    • 80.6 percent to 81.2 percent for ages 25-54
    • 39.7 percent to 40.1 percent for ages 55 and above

    The most interesting patterns arose when we looked at labor force participation by levels of education. We observed that the lowest education group increased its participation rate the most, from 44.8 percent to 46.1 percent. The highest education group, however, saw an overall slight decrease in its participation rate. For other education groups, there was not a clear trend.  Based on the above decompositions, we concluded that the recent increase in the labor force participation that we observed has been mainly driven by males and the lowest education workers.

    Foreign-Born Workers Account for Rising Share of U.S. Labor Force -- The share of foreign-born workers in the U.S. labor force inched up again last year, highlighting one of the hot-button issues in the unfolding presidential campaign. The labor force last year had about 26.3 million foreign-born persons last year, according to new Labor Department figures. That amounts to nearly 17% of the total U.S. labor force, the highest level in records dating back two decades.  The share of foreign-born workers was about 11% in 1996, approached 16% in 2007 and then fell during the recession. Steady economic growth appears to be drawing people to the U.S. at a faster pace again while the native-born labor force grows slowly. Likely Republican candidate Donald Trump has tapped into economic and racial anxiety with calls to build a wall on the border with Mexico, deport all illegal immigrants and ban Muslims from entering the U.S. Democratic presidential front-runner Hillary Clinton last month said she would create a national Office of Immigrant Affairs to coordinate government programs and help integrate immigrants, refugees and their children into communities.The Labor Department report doesn’t distinguish between workers in the U.S. legally or illegally, and doesn’t track country of origin.

    State unemployment rates by race and ethnicity at the start of 2016 show a plodding recovery, with some states continuing to lag behind - EPI - In March 2016, the national unemployment rate was 5.0 percent, unchanged since the end of the fourth quarter in December 2015. From December 2015 to March 2016, 30 states and the District of Columbia saw their unemployment rates decline, while 14 states saw unemployment rise. While about half the states in the nation have returned to their respective pre-recession unemployment rates, conditions vary greatly across states and across racial and ethnic groups. In March, state unemployment rates ranged from a high of 6.6 percent in Alaska to a low of 2.5 percent in South Dakota. Nationally, African Americans had the highest unemployment rate in March, at 9.0 percent, followed by Latinos (5.6 percent), whites (4.3 percent), and Asians (4.0 percent).Read more:

    State unemployment by race and ethnicity, 2015Q4
    State unemployment by race and ethnicity, 2015Q3
    State unemployment by race and ethnicity, 2015Q2
    State unemployment by race and ethnicity, 2015Q1

    Following is an overview of racial unemployment rates and racial unemployment rate gaps by state for the first quarter of 2016. We provide this analysis on a quarterly basis in order to generate a sample size large enough to create reliable estimates of unemployment rates by race at the state level. We only report estimates for states where the sample size of these subgroups is large enough to create an accurate estimate.

    BLS: Unemployment Rates stable in 41 states in April -- From the BLS: Regional and State Employment and Unemployment Summary - Unemployment rates were significantly lower in April in 5 states, higher in 4 states, and stable in 41 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today. .. South Dakota and New Hampshire had the lowest jobless rates in April, 2.5 percent and 2.6 percent, respectively. The unemployment rate in Arkansas (3.9 percent) set a new series low. (All region, division, and state series begin in 1976.) Alaska and Illinois had the highest rates, 6.6 percent each. This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession. The size of the blue bar indicates the amount of improvement. The yellow squares are the lowest unemployment rate per state since 1976. The states are ranked by the highest current unemployment rate. Alaska and Illinois, at 6.6%, had the highest state unemployment rates. The second graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 11 states with an unemployment rate at or above 11% (red). Currently no state has an unemployment rate at or above 7% (light blue); Only seven states and D.C are at or above 6% (dark blue).

    April’s state jobs report shows slowing improvement across the country --The Bureau of Labor Statistics released the Regional and State Employment and Unemployment report for April today, which mirrors a disappointing jobs report at the national level for April. The decline of unemployment rates across most of the country has been decelerating, with fewer states seeing their unemployment rates drop—much like how the national unemployment rate has stalled at 5.0 percent. In April 2016, the U.S. economy added just 160,000 jobs, the smallest gain since September 2015. California and Florida made up over three-fifths of those jobs gained in April. From January 2016 to April 2016, 27 states and the District of Columbia experienced declines in their unemployment rates, while 18 states had their unemployment rates rise. The states with the largest declines in their unemployment rates were Tennessee (-1.1 percentage points), Oregon (-0.6 percentage points), and Mississippi (-0.7 percentage points). States with the largest increases in their unemployment rates were Wyoming (+0.8 percentage points), Pennsylvania (+0.7 percentage points), and Indiana (+0.6 percentage points). Five states experienced no change. From January 2016 to April 2016, 42 states and the District of Columbia added jobs. The largest gains occurred in Utah (+1.1 percent), followed by Massachusetts, Missouri, Washington (all +1.0 percent), and Georgia (+0.9 percent). Of the seven states that lost jobs, the hardest hit states continue to be energy dependent states like Wyoming (-1.5 percent), North Dakota (-1.3 percent), and Alaska (-0.7 percent).

    Long-Suffering Michigan is Finally Enjoying Below-Average Unemployment -  The Great Lakes State, for the first time in more than a decade and a half, is enjoying consistently lower unemployment than the U.S. as a whole. Michigan’s seasonally adjusted unemployment rate last month was 4.8%, the Labor Department said Friday, remaining at its lowest level in 15 years and below the national average of 5%. It was the third consecutive month that Michigan had lower joblessness than the U.S. as a whole, a streak not seen since 2000. Manufacturing-heavy Michigan suffered through years of economic pain and high unemployment after the end of the 1990s economic boom even before the 2007-2009 recession. In June 2009, the state’s jobless rate peaked at 14.9%, the highest in the nation and a full 5.4 percentage points higher than the U.S. average of 9.5%. Since then, Michigan has steadily closed the gap, aided by the automotive industry’s rebound. For one month last year, July 2015, its unemployment rate was a tick below the U.S. level, but for the next six months unemployment in the state was equal or slightly higher than the national average. This year, though, Michigan’s jobless rate has moved lower while the U.S. average has remained largely stable. It’s not all good news. Michigan’s labor force shrank for years and remains smaller than it was a decade ago. A similar pattern has played out across the Rust Belt, where unemployment rates have been falling in part because job seekers have moved away, retired or otherwise left the workforce. Still, nonfarm payrolls in Michigan last month were up 2.5% from a year earlier, the strongest annual job gain in four years, taking total payroll employment in the state to its highest seasonally adjusted level since June 2006. Across the nation last month, 33 states plus the District of Columbia saw their jobless rates decline from April 2015, while 14 states saw a rise in unemployment and jobless rates in three states were unchanged. Alaska and Illinois had the highest unemployment rates in the nation, 6.6% in April. The lowest jobless rate was in South Dakota, 2.5%, followed by New Hampshire with 2.6%.

    Most Americans Don’t Know About Ride-Sharing and the ‘Gig Economy’ - If you think ride-sharing and the gig economy are taking over the world, you might be living in a bubble. New research from the Pew Research Center shows that ride-hailing and home-sharing and grocery delivery and shared office spaces remain unfamiliar phenomena to the majority of people in the U.S. despite substantial inroads among young urbanites. For its new research, Pew polled 4,787 American adults on their usage and awareness of services that are variously called the sharing economy, the on-demand economy or the gig economy. For most Americans, this technology has not permeated their lives yet.The only service that most Americans have used is purchasing second-hand goods online, such as the online auction site eBay. In second place, a large number of Americans — 41% — have also used programs offering same-day or expedited delivery, a service offered by the retailer Amazon. But typically when people talk about the sharing economy or gig economy, they’re talking about platforms that allow people to rent out rooms in their homes, or use their cars to give people rides or deliver groceries. And for now, these are much less common. Only 15% of adults have used ride-hailing services, like those offered by Uber and Lyft. Only 6% have ever had their groceries delivered, and only 4% have hired someone online to perform errands and tasks. What’s more, the terminology around these companies remains unfamiliar to most Americans. Three-quarters are not familiar with the term “sharing economy” and 89% are unfamiliar with the term “gig economy.”

    Are People in Middle-Wage Jobs Getting Bigger Raises? - Atlanta Fed's macroblog -- As observed in this Bloomberg article and elsewhere, the Atlanta Fed's Wage Growth Tracker (WGT) reached its highest postrecession level in April. This related piece from Yahoo Finance suggests that the uptick in the WGT represents good news for middle-wage workers. That might be so.  Technically, though, the WGT is the median change in the wages of all continuously employed workers, not the change in wages among middle-income earners. However, we can create versions of the WGT by occupation group that roughly correspond to low-, middle-, and high-wage jobs, which allows us to assess whether middle-wage workers really are experiencing better wage growth. Chart 1 shows median wage growth experienced by each group over time. (Note that the chart shows a 12-month moving average instead of a three-month average, as depicted in the overall WGT on our website.) Wage growth for all three categories has risen during the past few years. However, the timing of the trough and the speed of recovery vary somewhat. For example, wage growth among low-wage earners stayed low for longer and then recovered relatively more quickly. Wage growth of those in high-wage jobs fell by less but also has recovered by relatively less. In fact, while the median wage growth of low-wage jobs is back to its 2003–07 average, wage growth for those in high-wage jobs sits at about 75 percent of its prerecession average. Are middle-wage earners experiencing good wage growth? In a relative sense, yes. The 12-month WGT for high-wage earners was 3.1 percent in April compared with 3.2 percent and 3.0 percent for middle- and low-wage workers, respectively. So the typical wage growth of those in middle-wage jobs is trending slightly higher than for high-wage earners, a deviation from the historical picture.

    The New Overtime Rules – The Numbers - WSJ -- New overtime regulations are a big deal for affected workers, but aren’t likely to influence the overall economy much. Salaried workers newly eligible for overtime could see their paychecks increase. Some businesses warn those same employees might be switched to hourly jobs and lose eligibility for other perks, such as bonuses and vacation time. From the broader economy’s perspective, the rule just doesn’t appear to shake things up.  The Labor Department said doubling the pay threshold under which salaried workers must be eligible for overtime–to $47,476 a year–will make 4.2 million employees newly eligible for overtime pay. That sounds like a lot, but represents less than 3% of all workers in the U.S. By comparison, increasing the minimum wage to $15 an hour nationally would affect about a third of the workforce. The government says $1.2 billion will be paid annually, on average, over the next 10 years to workers newly eligible for overtime. That’s another big number that looks small in comparison to the $7.8 trillion in wages and salaries American earned last year. The overtime rule would result in a 0.02% annual increase in overall pay. That doesn’t move the needle much on average hourly earnings, which have been growing better than 2% annually in recent years. After the rule takes effect in December, the threshold under which salaried workers much be paid overtime will be adjusted every three years. That’s a major change. Regulators last lifted the level in 2004 and previous increases occurred in the 1970s. The new threshold will be based on the 40th percentile of average earnings for full-time salaried employees in the lowest-cost region of the country, which is currently the South. When the overtime threshold is next adjusted, in 2020, the Labor Department projects the level will rise to $51,000, a 7.4% increase. That’s in line with the 2.2% national increase in earnings for 40th percentile salaried workers in the first quarter of 2016, from a year earlier. That increase far outpaced consumer-price inflation, a gain of 0.4% in March from a year earlier according to the Labor Department.  Typically, employees working overtime are paid one-and-a-half times their normal hourly rate. But that rate only applies to the additional hours, not the entire paycheck. Overtime, by its nature, is marginal, and that limits its effect on the broader economy.

    Surprise: Beyoncé’s Ivy Park Collection is Being Made in Sweatshops --Beyoncé’s new Ivy Park collection is made in sweatshop conditions by laborers, who earn as little as $6.17 a day, according to sources, including The Telegraph. The mega-star and so-called feminist’s collection hit shelves last month and allegedly aims to “support and inspire women." Well, as of this weekend, it is already being plagued with controversy as the garments are reportedly being manufactured in Sri Lankan factories by grossly underpaid seamstresses working in conditions being likened to “sweatshop slavery.” On Sunday, a 22-year-old seamstress, one of the women tasked with making the Ivy Park collection for MAS Holdings, a Sri Lanka-based garment and accessories export giant, told UK's The Sun, that she earned 18,500 rupees (a mere $125 a month), about half the Sri Lankan average wage. She told the publication that she has worked over nine hour daily shifts, five days a week, plus overtime.  The workers, mostly young women from poor rural villages, can only afford to live in boarding houses, which are often provided (at a cost) by the factory owners, and work more than 60 hours a week to make ends meet. The worker who spoke out about the conditions associated with the manufacturing of the Ivy Park line is a farmer’s daughter from a remote village 200 miles away from the Katunayake-based factory. She shares a 10-foot by 10-foot room with her 19-year-old sister. “All we do is work, sleep, work, sleep,’’ she told The Sun anonymously for fear of being fired or worse.

    You Are Poor Because You Are Inferior --  Susan Of Texas - You will not be surprised to hear once again that Megan McArdle doesn't have a problem with income inequality. “Equality,” wrote Balzac, “may be a right, but no power on earth can convert it into a fact.”  How incredibly useful. I know that when I am thinking about income inequality my first thought is of Balzac, who supported the rights of royalty. However, the quote is very useful when you intend to conflate individual differences with the systematic and deliberate impoverishing of the lower and middle classes in the US today.  Just ask any schoolchild who has watched some classmates breeze four grades ahead in the math curriculum as others struggle to complete their daily assignments. Life is rife with inequality: Some people are good looking and others plain, some clever and others slow, some soar to popularity while others long to be noticed.  Funny thing--going by personal abilities, McArdle should be at the very bottom of the economic heap. She can't do math, her ethics are a horror show, her ability to reason is nearly nil, and her education, despite its mind-boggling expense, is utterly insufficient for her needs. Yet she is an enormous success (as these things go) because of her birth to wealthy, connected parents.  Life is not fair, conservatives tell us, to excuse away a system that deliberately exploiters the powerless for the enrichment of the powerful. Yeah. We know life isn't fair. We can do something about that or we can snigger and smirk and make lots of lovely money telling everyone else to suck it up and admit they are failures because they are inferior.

    Megan McArdle Really, Really, *Really* Doesn't Care About Income Inequality -  Susan Of Texas - Noah Smith, formerly of Noahopinion and now of Bloomberg, seems to be independent minded at a first glance but oh, the company he now keeps! He now works for Bloomberg and he was assigned a debate on inequality with Megan McArdle. One assumes that the new guy was given the crap assignment, but maybe he drew the short straw. Either way, the result isn't pretty. Inequality has emerged as a contentious issue since the financial crisis, and it figures prominently in the presidential campaigns of both political parties. Bloomberg View columnists Megan McArdle and Noah Smith try to make sense of it and figure out what, if anything, should be done. Megan: What sort of inequality should we care about? Wealth inequality, income inequality, inequality of opportunity, inequality of mobility -- these tend to get lumped together. No amount of fair opportunity will produce similar outcomes for two different people. This tends to get ignored, because it's inconvenient for both sides. Or because it's irrelevant to the question of a system set up by the rich to benefit the rich at the expense of the poor.  So what kinds of inequality should we talk about? And what kinds should make us shrug and say, "Yeah, well, life's rough sometimes"? McArdle probably has no idea how callous she appears throughout this exchange, mostly because she is far too callous to care.

    Why “Make America Denmark Again” will not happen: The rise of inequality in rich countries is way over-explained. Because income inequality (evaluated at the level of households or individuals) is such a complex variable, the outcome of a vast number of technological, political,  demographic and behavioral factors and its neat decomposition into these various factors is impossible, we shall always have a plethora of potential explanations. This way a point nicety raised in a recent post by Chico Ferreira from the World Bank. But not all explanations are equally powerful or make sense. A couple of days ago at a conference at Northwestern University, I listened to the explanation proposed by Gerald Davis from University of Michigan. Davis argued ... that the rise of US inequality coincides with the decline of large companies that used to employ hundreds of thousands or even millions of workers and by their substitution by much smaller companies. ... His argument is that large hierarchical structures have to engage in some evening out of salaries (internal redistribution) in order to keep cooperation, needed for the success of the enterprise, going. I think that the deconcentration of which Davis writes is only a proximate cause of the rise in inequality. The “deep cause” was technological change, combined in an inextricable way (as I argue in my “Global inequality”) with globalization. What happened, I think , was that advances in technology such as stock management (just-in-time), ability of speedy “bespoke” production, and crucially advances in telecommunications made “broken up” (devolved) production more efficient. The concentration of workers in one place that, at the origin of the Industrial Revolution, was made indispensable by the importance of the energy sources available at discrete physical points, could now be reversed. We could go back to a type of production that predates the Industrial Revolution, a kind of a modernized “putting out” system.

    The Privilege of Buying 36 Rolls of Toilet Paper at Once --“One of the great ironies in modern America,” writes Mehrsa Baradaran in her 2015 book How the Other Half Banks, “is that the less money you have, the more you pay to use it.” Baradaran, an associate professor at the University of Georgia’s law school, was referring to the outrageously high fees that low-income workers must pay to “fringe” banks just to access and manage the money they’ve earned. Her point—that when people don’t have much, a single dollar in some ways doesn’t go as far as it otherwise would—extends to several other parts of Americans’ financial lives, including how they shop. In  a recent working paper, the University of Michigan’s A. Yesim Orhun and Mike Palazzolo, point to how two of American shoppers’ (and marketers’) favorite money-saving strategies, the limited-time offer and buying in bulk, come with savings that are more accessible to some consumers than others. Choosing to buy things when they’re on sale or packaged in huge quantities is something lots of shoppers may take for granted as a matter of preference, but for many, these purchases—and the savings that come with them—are out of reach.

    A Plan to Flood San Francisco With News on Homelessness - The New York Times: As the editor in chief of The San Francisco Chronicle, Audrey Cooper has overseen countless stories on homelessness. But the issue became personal three years ago when she was pushing her 6-month-old child in a stroller through the city’s business district. A homeless couple in a tent on the sidewalk were having sex, tent flaps open, as their pit bull stood guard.Ms. Cooper expressed her outrage loudly and in colorful language.“I probably shouldn’t have started yelling at them,” she said in an interview in her fishbowl office in the heart of the Chronicle’s newsroom. “They let their dog loose.”San Francisco residents have over decades become inured to encounters with the city’s homeless population, the clumps of humanity sleeping on sidewalks under coats and makeshift blankets, or drug addicts shooting up in full view of pedestrians. There are also the tension-filled but common scenes of mentally ill men and women stumbling down streets, arguing with imaginary enemies or harassing passers-by.One particularly vocal group of residents, San Francisco’s journalists, say they feel a sense of urgency in addressing the problem. They are banding together in an exasperated, but as yet vaguely defined, attempt to spur the city into action.Next month, media organizations in the Bay Area are planning to put aside their rivalries and competitive instincts for a day of coordinated coverage on the homeless crisis in the city. The Chronicle, which is leading the effort, is dispensing with traditional news article formats and will put forward possible solutions to the seemingly intractable plight of around 6,000 people without shelter.

    CBO: Nearly 1 in 6 Young Men in U.S. Jobless or Incarcerated - Nearly one in six young men (between the ages of 18-34) in the U.S. were either jobless or incarcerated in 2014, according to a new government report. It details a striking amount of male alienation that has been on the rise since the 1980s. According to the Congressional Budget Office (CBO), out of the 38 million young men in the U.S. in 2014, 16 percent were jobless (5 million or 13 percent) or incarcerated (1 million or 3 percent). The share of young men without a job or in prison has increased substantially since 1980, when just 11 percent of young men fit into either category.   CBO highlights that the level of joblessness and incarceration varies based on young men’s educational attainment. The less they have, the more likely they are to be jobless or incarcerated. The rates also varied among racial and ethnic groups. In 2014 young black men were about twice as likely to be jobless or incarcerated than white or Hispanic young men were. The disparity was largely due, however, to higher rates of incarceration among young black men. Economic, policy, and skill-set changes contributed to the the large increase in joblessness and incarceration from 1980 to 2014, CBO said. On the economic side in particular, CBO pointed to the recent recession, technological advances, more women entering the workforce and such debate-inspiring issues as outsourcing and low-skilled immigration. “Among them were longer-run trends in the economy, such as increases in the employment of women and the movement of some jobs to other countries,” the CBO report reads.

    Puerto Rico Sets Default Record With HTA Bond Action - Gov. Alejandro García Padilla froze the transfer of revenues from the Puerto Rico Highways and Transportation Authority to its bonds, making the commonwealth the biggest technical defaulter in U.S. municipal history. The governor’s order Wednesday, which uses the recently signed Puerto Rico moratorium law as its basis, affects all of the authority’s debt. As of August 2015 the PRHTA had $6.1 billion in bond debt outstanding, of which $2.4 billion wasn't insured. At this point Puerto Rico is in technical default on at least $12.25 billion, which eclipses the $7.9 billion Detroit default. Legislation to help Puerto Rico deal with its fiscal and economic crisis remained stalled in U.S. Congress, as lawmakers debate bankruptcy powers and a financial control board for the territory. The governor's order won't stop payments on the authority's bonds until at least next year, according to a release from the governor's office. This is because there is enough money in the bonds' trust accounts to make payments until then. García Padilla's order suspends transfers from highway tolls to bonds and imposes a stay on legal claims. It remains to be seen if bondholders observe this stay. Bond insurer Ambac sued the authority on May 10 for several breaches of contract and fiduciary duty. In his announcement of the emergency at the authority and the suspension of revenue transfers, the governor said the money would be used for the authority's operations, construction projects, and bills with suppliers.

    Haslam allows Tennessee to sue feds over refugees: Despite having concerns, Gov. Bill Haslam will allow Tennessee to become the first state in the nation to sue the federal government over refugee resettlement on the grounds of the 10th Amendment. On Friday, Haslam announced his decision to allow the measure, which directs Attorney General Herbert Slatery to sue the federal government for noncompliance of the Refugee Act of 1980, to take effect without his signature. The federal act was designed to create a permanent procedure for the admission of refugees into the United States. Explaining his decision, Haslam noted the provisions in the bill that allow the General Assembly to hire outside counsel if Slatery refuses to pursue the case. "I trust the attorney general to determine whether the state has a claim in this case or in any other, and I have constitutional concerns about one branch of government telling another what to do," Haslam said. Slatery's office has not indicated whether he would follow the legislature’s directive. A spokesman said this week that the attorney general will find the "best option to continue to protect the interests of Tennessee.” Haslam also questioned whether it was the "proper course" for the state to attempt to dismantle the refugee act. "Rather, I believe the best way to protect Tennesseans from terrorism is to take the steps outlined in my administration’s Public Safety Action Plan, which enhances our ability to analyze information for links to terrorist activity, creates a Cyber Security Advisory Council, restructures our office of Homeland Security, establishes school safety teams and provides training for active shooter incidents and explosive device attacks," he concluded.

    5 Highlights from the Census Bureau’s City Growth Report – WSJ - Cities and suburbs in Texas are booming. Since 2010, the suburbs of Austin and Houston led all others in growth, with other metros in Texas–including San Antonio and Dallas–among those with the fastest population gains, according to demographer William Frey of the Brookings Institution.   Detroit shrunk to 677,116 people in 2015, down 0.5% from a year earlier. That makes it the nation’s 21st largest city, pushing it out of the top 20 U.S. cities for the first time since the 1850s.   Nashville has been growing steadily for years, making it the nation’s 25th largest city in 2015 with 654,610 residents. Just five years ago it trailed Memphis in size by about 50,000 people. But with Memphis shrinking down to 655,770 last year, it’s likely that Music City will surpass it soon.  Washington, D.C. notched some East Coast bragging rights when it surpassed Boston in size last year to become the nation’s 22nd largest city with 672,228 people.  Since 2010, New York City has gained 375,000 people. That’s how many people live in Bakersfield, Calif. — itself the No. 52 city in population. New York has been the nation’s largest city since the first census in 1790 and seems unlikely to lose its lead any time soon. At 8.55 million people, it’s growing as quickly — at a little less than 1% a year — as No. 2 Los Angeles, currently at 3.97 million.

    Murders Are Up in Many US Cities Again This Year --Major cities across the U.S. have experienced a surge in homicides in recent months, continuing a grim rise that began last year. Murders are up in roughly 30 cities nationwide so far in 2016, according to data released by theMajor Cities Chiefs Association on Friday. Nearly half of the cities surveyed showed increases in homicides in the first quarter of this year compared with 2015, when the murder rate in many U.S. cities rose after decades of decline. The data paints a varied picture: some cities have experienced a slight rise in murders, others have seen declines, while nearly a dozen metropolitan areas–including Chicago, Las Vegas, Los Angeles, Memphis, Nashville, and San Antonio–have had sizable increases. The report comes two days after FBI Director James Comey linked the recent increase in crime to the so-called “Ferguson effect,” a theory that law enforcement has been less aggressive because of concerns about being recorded and potentially charged with a crime. There is no evidence showing that such thinking is to blame for the recent uptick in murders. Still, criminologists have yet to determine whether the homicide spikes are short-term increases after decades of falling crime levels or if if this is the beginning of a new, larger trend.The report, which included 63 of the association’s 68 member departments, found that there were 1,365 homicides from January through March this year compared with 1, 251 in 2015. Numbers for rape, robbery, aggravated assault, and non-fatal shootings—which saw a significant jump from 3,855 in 2015 to 4,673 this year—were all up as well.

    California Cops Are Fighting Weed Legalization Because It Means Less Money for Them - This year, Californians will vote on a ballot measure that could legalize weed recreationally in the state. Many of the groups donating money to fight the legalization effort represent police and corrections officers. Why do you think that might be? The Intercept dug up a disclosure filing showing donations from several state law enforcement and corrections associations to a lobbying group called the Coalition for Responsible Drug Policies, which raised $60,000 in the first three months of this year with the aim of beating legalization. Keeping cannabis illegal is good business for the cops, and these groups are probably not solely concerned with the placid horrors of weed addiction. For instance: The Department of Justice gives grants to police departments for fighting drugs, including marijuana; cops can use asset forfeiture to seize cash and gear from dealers and keep it for themselves; more people in jail for pot possession or dealing means greater demand and more job opportunities for prison guards. If pot is legalized, all of those revenue streams suddenly dry up. The Intercept notes that John Lovell, the lobbyist who founded the Coalition for Responsible Drug Policies, has previously worked to funnel federal money into weed enforcement and to stymie asset forfeiture reform, which would have made seizing your stuff less profitable for the police. Making money isn’t just a pleasant side effect of prohibition for these guys; it’s the whole ballgame.

    Government Surveillance Program In The Bay Area Exposed « CBS San Francisco: (CBS SF) — Hidden microphones that are part of a clandestine government surveillance program that has been operating around the Bay Area has been exposed. Imagine standing at a bus stop, talking to your friend and having your conversation recorded without you knowing. It happens all the time, and the FBI doesn’t even need a warrant to do it. Federal agents are planting microphones to secretly record conversations. Jeff Harp, a KPIX 5 security analyst and former FBI special agent said, “They put microphones under rocks, they put microphones in trees, they plant microphones in equipment. I mean, there’s microphones that are planted in places that people don’t think about, because that’s the intent!” FBI agents hid microphones inside light fixtures and at a bus stop outside the Oakland Courthouse without a warrant to record conversations, between March 2010 and January 2011.  “An agent can’t just go out and grab a recording device and plant it somewhere without authorization from a supervisor or special agent in charge.”

    TSA: Some fliers should get to airport three hours before flight - -- The Transportation Security Administration is warning some travelers that they should show up three hours before their scheduled flights. This weekend people who were flying out of O'Hare and Midway say lines were out of control, hundreds of people deep. And that isn't just the story in Chicago, but in lots of airports all across the country. Now it's not only making the travelers mad, but the airlines too. “We don't think that efficiency and effectiveness in screening needs to be mutually exclusive,” says Jean Medina, senior vice president of Airlines for America. “We think that you can be both efficient and effective as you screen people, and that's really what we'd like to see.” In June, the TSA will hire 768 new officers to expedite screening. For now, the agency is encouraging frequent fliers to sign up for pre-check. After paying a fee and completing a background check, you can go through a faster security line.

    Viral Video Shows Nightmare TSA Line Stretching "For Miles" - After questioning whether a self-imposed process to make airline check-ins more rigorous, knowingly increasing wait times, was a Federally-funded scheme to force travelers to enroll in pre-check programs, thus manipulating people into cooperating with authoritarian strategies; it seemed rather appropriate that the following video, which went viral, shows what is simply a stunningly long TSA line wait at Midway Airport. As WaPo reports, when Sean Hoffman arrived at Midway Airport last week for his flight home to Oregon, he said he was taken aback by the comically long line to get through security."I got to the end, (and) I was like, holy (expletive), people would probably like to see this," Hoffman recalled in an interview. And so he did...

    The TSA will ruin your summer vacation and no one can agree on a fix | The Verge: Security lines at airports around the US are growing longer and longer. And that’s infuriating airlines, airports, passengers, and our elected officials alike. The long lines at the TSA-staffed security checkpoints are delaying fights and causing people to miss their planes. But ironically, passengers and airlines — the two groups most affected — are the ones who can do the least about it. "Logistically, we don't have the opportunity to hold flights for hours," Ross Feinstein, a spokesperson for American Airlines, said in an interview with The Verge. Passengers "get to the gate too late and they can't get rebooked for days or a week. That's our concern, the impact it's having on our customers." Naturally, frustrated customers take their anger out on airline employees or, increasingly, airline Twitter accounts. "We see it every day on social media. They're very upset, and our employees are very concerned." But the airlines can't fix the problem. Security lines are handled by the TSA and individual airports. The Port Authority of New York and New Jersey, which is in charge of JFK, LaGuardia, and Newark airports — three of the busiest in the country — recently sent a letter to the TSA urging it to fix the problems and threatening to use private security contractors to handle security screening. Hiring private security isn't some crazy idea. Though most airport security checkpoints are manned by TSA agents, there are a handful of airports enrolled in the Screening Partnership Program (SPP), a TSA effort that allows private security contractors to screen passengers under federal supervision. It's a program championed by Congressman John Mica (R-FL), a longtime TSA foe. There are nearly two dozen airports enrolled in SPP, including SFO in San Francisco, and Mica says it's the way of the future.

    Where Motherhood Carries the Highest Cost in Europe and the U.S. - Europe is often depicted as a paradise for working mothers: a land where paid maternity leave policies flow like wine and governments subsidize quality childcare. But a new report suggests those kinds of family-friendly polices aren’t enough to ensure workplace gender equality. In fact, several countries, the United Kingdom and Austria among them, fare worse than the U.S. on an index of a dozen metrics, including the “cost of motherhood,” or how much less a mother makes than her childless counterpart relative to men; the share of women in the workforce; and the proportion of managers who are women. Overall, the U.S. comes in roughly around the middle of 18 countries evaluated by Glassdoor Economic Research, the research arm of jobs website Glassdoor, that looks at data from the Organization for Economic Cooperation and Development and other groups. Take the “cost of motherhood,” for example, which Glassdoor calculated by dividing the difference between full-time female and male median wages by median male wages. In Ireland and Germany, having a child shaved off a substantial chunk of women’s earnings. Irish women without children between ages 25 and 44 and working full time earned 17.5% more than men. But for women with at least one child, that premium reversed to a 14% gap from their male colleagues’ earnings. The pay gap is similarly high in Germany, where mothers earn 25% less than men, compared with a 2% difference for women without children. American women rank fifth, with a 16 percentage-point difference between women without children and those with at least one. Sociologist Michelle Budig has called this phenomenon “the motherhood penalty,” in contrast with the “fatherhood bonus,” in which men who become parents see a rise in pay relative to their childless peers.

    Chicago may cut summer school programs despite a surge in violence - The Chicago public school system may dramatically cut back summer school programs for their most vulnerable students this year, despite a surge in shootings that has put the city on track for its most violent year in more than a decade.  A school system spokeswoman said Illinois’ budget standoff had put summer school programs for more than 17,000 students in jeopardy. The programs largely serve students who are struggling to graduate or move on to the next grade, and they include students from the third grade through high school. Since the beginning of the year, both murders and shooting incidents have spiked in Chicago. There have been more than 1,000 shooting incidents so far this year, a 67% increase compared with last year, and roughly twice as many shooting incidents in the two years before that. Murders are up 56% compared with the same time period last year.   Among the wounded and dead are children and teenagers, including a 13-year-old violence prevention activist and a former South Side prom king whose turnaround story was featured in a CNN documentary.  The potential cuts, first reported by the Chicago Sun-Times, raise questions about whether having academically struggling students outside this summer, rather than in classrooms, might put them at greater risk of violence.

    Real Reform for Detroit’s Kids | City Journal - -- Even as it tries to revive itself after emerging from bankruptcy, Detroit faces a new crisis: it had to shut down many of its schools this week because of a sickout by teachers. The Detroit Federation of Teachers engineered the stoppage to pressure the Michigan legislature to agree to a $715 million aid package—without which, Detroit schools could run out of money by June. Michigan governor Rick Snyder wants to tie the aid to reforms that would bring new leadership to the troubled system, but some legislators are skeptical—with good reason. Snyder’s plan represents the fifth major reform agenda in the last 30 years for the Detroit Public Schools, which have been plagued by lousy leadership, a reform-resistant union, and a shortage of resources. Instead of a new plan for an old system, it’s time for Snyder and Michigan’s legislators to try something new.  Detroit’s public schools began their decline in the 1970s, as middle class residents fled the city. Even as the educational challenges increased, however, the system’s bureaucracy grew and grew. The board of education gained a reputation for financial mismanagement, fostering the impression that Detroit’s schools were being operated as a jobs program for adults, rather than to educate kids. By the late 1980s, the system ran a $180 million deficit, with a high school dropout rate of 50 percent and daily absenteeism averaging almost 20 percent of all students. The state brought in new management to stabilize the school system’s budget.  Education reforms followed. Some principals gained the freedom to select their own curriculum and staff. A bitter teachers’ strike undermined these reform efforts, shuttering schools for 26 days in September of 1992. As one school board member told the press: “[The strike] hit the reform effort upside the head like a two-by-four.”

    Rowan-Salisbury school system to let students carry pepper spray - Greensboro News & Record — A North Carolina school system has adopted a policy allowing high school students to carry pepper spray this fall, a policy one board member said may be useful for students who encounter transgender classmates in the bathroom. The Salisbury Post reports (http://bit.ly/1TzmUGY ) the policy was adopted by the Rowan-Salisbury Board of Education during a work session on Monday. Board member Chuck Hughes said using the sprays was purely defensive, and he referenced the North Carolina law that limits LGBT rights, saying such sprays could help female students if they go to the bathroom and don't know who's coming in after them. The defensive spray clause won't affect students until it's published in the upcoming student handbook.

    Oklahoma Prepares To Impeach Obama Over Transgender Bathrooms - While over the past several months the US has had its share of bizarre stories over the latest liberal craze, namely providing transgender bathrooms at public schools or losing access to funds which promptly enraged conservatives across the nation, the most recent development may also be the most surprising one yet: it appears that as the public debate over the treatment of transgender has hit a fever pitch, Oklahoma republicans have had enough and are now looking to impeach Barach Obama.   As Reuters reports, Oklahoma's Republican-dominated legislature has filed a measure calling for President Barack Obama's impeachment over his administration's recommendations on accommodating transgender students, saying he overstepped his constitutional authority. So all the other times Obama overstepped his "constitutional authority", that one could ignore, but this time he really crossed the line? Lawmakers in the socially conservative state are also expected to take up a measure as early as Friday that would allow students to claim a religious right to have separate but equal bathrooms and changing facilities to segregate them from transgender students.

    Success Academy winning against the odds - Sarah Gustafson of AEI -- The New York City charter school network Success Academy has been much maligned since Bill de Blasio took office as Mayor of the Big Apple in 2014. Taking the side of teachers’ unions against charter schools, de Blasio has sought to slow the growth of charter operators throughout the city and has used multiple public feuds with Success founder and CEO Eva Moskowitz to make clear his position.  Despite de Blasio’s many critiques, Success has been wildly successful. In 2015, Success had 68% of students test proficient in English, compared to 30% citywide. In math, the scores were even better: 93% of Success students tested proficient, while only 35% did citywide. Of the 10 highest-scoring schools in math, 5 were Success schools, and of the top 20, 9 were from Success. The network now operates 34 schools serving 11,000 students in four boroughs, but because of Success’ 20,000 student waitlist, Moskowitz aims to expand to 100 schools in ten years. Last week, Politico released a 2014 internally-conducted Success risk assessment that details challenges faced at the time and likely future challenges. Chief among the risks, according to the surveyed executives, is teacher recruitment and training: “…[T]he risk most often cited by senior managers was the network’s ability to recruit and retain its existing staff, including school principals and top executives.” Success’ risk assessment adds another layer of human capital stress: the departure of executives after a short tenure in the organization. Politico reports: “In the sixteen months since the risk assessment was drafted, at least five high-level Success executives have left the network, out of 20 total ‘leaders’ listed on the network’s website.” One Success Academy executive mentioned that the departure of leadership “leads to loss of tribal knowledge, creating a high stress environment.”

    Los Angeles schools reach $88 million settlement for sex abuse: report | Reuters: The Los Angeles Unified School District has agreed to pay $88 million to settle two sexual abuse cases involving now-imprisoned former elementary school teachers of the second largest public school system in the United States, according to local media. The settlement, finalized during the weekend, will mean the families of 30 children abused at two different elementary schools by teachers Paul Chapel III and Robert Pimental will receive about $3 million apiece, the Los Angeles Times reported on Monday. The settlement comes less than two years after the Los Angeles school system agreed to pay nearly $140 million - the largest ever for the district - to families of students sexually abuse by Mark Berndt, an elementary school teacher who took bondage-style photos of some pupils. "We're glad that we're able to resolve both of these cases so we can avoid potentially painful litigation and put these cases behind us," Gregory McNair, an attorney for the district, said to the Los Angeles Times. "We're turning a corner here because we've resolved the last two very large cases that were involving the district." A dozen children who are receiving money from the latest settlement were abused by Paul Chapel III, a former teacher at Telfair Avenue Elementary in Pacoima. Chapel, whose case arose after a parent's complaint in 2011, is serving a 25-year sentence after pleading no-contest to molestation charges in 2012, the newspaper said. The abuse reportedly occurred over a decade.

    Charles Koch's Disturbing High School Economics Project Teaches 'Sacrificing Lives for Profits' -- From 2005 to 2014, the Charles Koch Foundation doled out nearly $108 million to colleges and universities. The school that has accepted the second highest total from the Charles Koch Foundation from 2005 to 2014 is Florida State University, whose economics department entered into a 2008 agreement that gave the foundation a say in its curriculum and hiring decisions, as Dave Levinthal of the Center for Public Integrity reported. One part of the 2008 agreement, which proposed a $6.6 million budget to be funded by the Charles Koch Foundation and unnamed “Donor Partners,” established a “Program for Excellence in Economic Education” within the Gus A. Stavros Center for the Advancement of Free Enterprise and Economic Education, part of the economics department. Annual reports confirm these funding arrangements. Under “Readings Reflective of Common Sense”, one selection sticks out. “Sacrificing Lives for Profits,” written by Common Sense Economics coauthor Dwight Lee, actually argues that we’d all be better off if companies cut corners, even risking customers’ lives, in the name of profit:  "The charge that sways juries and offends public sensitivities … is that greedy corporations sacrifice human lives to increase their profits. Is this charge true? Of course it is. But this isn’t a criticism of corporations; rather it is a reflection of the proper functioning of a market economy. Corporations routinely sacrifice the lives of some of their customers to increase profits, and we are all better off because they do. That’s right, we are lucky to live in an economy that allows corporations to increase profits by intentionally selling products less safe than could be produced. The desirability of sacrificing lives for profits may not be as comforting as milk, cookies and a bedtime story, but it follows directly from a reality we cannot wish away." Lee gives the example of expensive safety features in cars. With cheaper, less safe cars, he argues, consumers would be free to spend more money on (overpriced) education and (overpriced) health care, ignoring compelling economic arguments for free education and single-payer health care, both of which might have a chance if it weren’t for the extremely low tax policies he no doubt supports. The longer life expectancy that comes with more education and health care, he thinks, far outweighs the occasional traffic death due to dangerous automobiles, yet he apparently overlooks the fact that the healthiest, most highly educated individual could die in an instant from poorly manufactured brakes or shoddy paneling.

    Jamie Dimon and Mike Bloomberg, Two New York Billionaires, Think They Know What Poor Kids Need - Pam Martens -- Yesterday we read two articles: one made our blood boil, the other broke our hearts. Let’s start with the first. Bloomberg News seems to be on a roll with Jamie Dimon, Chairman and CEO of JPMorgan Chase. Yesterday, former New York City Mayor Mike Bloomberg, whose net worth is placed at $43.5 billion according to Forbes, teamed up with one of his largest customers, fellow billionaire Jamie Dimon, to jointly write an opinion piece for the media site which carries the name and majority ownership of Mike Bloomberg.  Mike Bloomberg and Jamie Dimon selected a curious topic – high school vocational education — subtly suggesting that the largest wealth and income inequality in America since the early 1900s might somehow be rectified if high schools trained students for blue collar jobs. The new writing duo mapped it out thusly:“We will not solve the critical challenges of poverty, underemployment, wage stagnation and bulging prisons unless we get serious about investing in effective programs that prepare kids who are not immediately college-bound for middle-class jobs.” We can understand why two billionaires making their living from Wall Street – currently structured as the greatest wealth transfer scheme in history – would want to distract the public from the facts being presented by Presidential candidate, Senator Bernie Sanders, to millions of Americans who are catching on for the first time. Free public college goes right to the heart of Wall Street’s and JPMorgan Chase’s empire of home equity loans and credit cards that millions of Americans are currently forced into in order to pay for their children’s college education, burying many in debt for a lifetime. Which leads us to the heartbreaking and Pulitzer-worthy article by Neal Gabler at The Atlantic. Gabler, a man with two grown daughters, makes the ultimate sacrifice for changing the dialogue in America by publicly disclosing his own financial struggles, despite a graduate degree and an impressive resume. Gabler brilliantly walks us through the studies showing what he has acutely come to understand: “Many of us, it turns out, are living in a more or less continual state of financial peril. So if you really want to know why there is such deep economic discontent in America today, even when many indicators say the country is heading in the right direction, ask a member of that 47 percent. Ask me.”

    Why Many College Students Never Learn How to Write Sentences -- Recently I coached a bright high school senior on how to get his college admission essay into shape. After his mother handed me a check, she said, “He gets good grades, so I was surprised to see his essay was not that good. I know they’ll teach him to write in college—I just hope he gets into a good one.” I didn’t say the ugly truth: that her bright boy might not graduate as a solid writer, no matter how good the college.  The problem is that colleges admit many students who don’t know what a sentence is, and then fumble the job of repair. High school graduates arrive incompetent to write, benefit little from their pitifully weak freshman instruction, and cannot improve their copy afterwards, because colleges impose no writing standards after the freshman year. In my experience, depending on the college, up to half the students in Writing I classrooms are baffled because they never learned sentence construction in grade school or high school. They aren’t just defective in their knowledge of grammar—they know nothing about grammar.  Most cannot find the subject and verb in a sentence longer than eight words. Why? Because many American public schools use a “reader-writer workshop” method of writing instruction that completely skips grammar. In these workshops, students and teachers sit in a circle, play the roles of reader and writer, and give encouraging feedback to essays written on the most inconsequential of personal topics.

    If College Students Are Hungry, Should Uncle Sam Feed Them? - Since the federal government feeds students in K-12 schools via the National School Lunch Program, it should similarly feed college students who are “food insecure,” argues a new policy brief published last month by the Wisconsin HOPE Lab. According to authors Sara Goldrick-Rab, et al, the country loses productivity because students who are hungry underperform and therefore don’t graduate on time, if at all. “Insufficient attention to the nutritional needs of undergraduates,” they write, “could contribute to the inadequate production of college-educated labor.” It is funny to hear talk about “underproduction” regarding college graduates when large numbers of them work in low-skill jobs. It’s obvious that we have oversold higher education, and that the need for college-educated workers is mainly due to credential inflation. But let’s put that aside and focus on the paper’s claim that large numbers of college students go hungry. The authors acknowledge there is “limited information about the extent to which undergraduates struggle to find enough food to eat.” What information they have comes primarily from a survey administered to more than 4,000 students at ten community colleges in seven states. The results: “Half of all respondents were at least marginally food insecure over the past 30 days…. More than one in four respondents ate less than they felt they should, and 22 percent said that they had gone hungry due to lack of money.” From that survey, the study concludes, “The most prevalent challenge facing community college students appears to be their ability to eat balanced meals, which research suggests may affect their cognitive functioning.”

    Burlington College Closing Due To "Crushing Debt" Incurred Under Presidency Of Bernie Sanders' Wife --In what may or may not be a harbinger of things to come should Bernie Sanders become president, earlier today Burlington College, a small Vermont private school once led by the wife of Democratic presidential candidate Bernie Sanders, said Monday it will close later this month, citing "the crushing weight" of debt incurred during the president of Jane Sanders who was president of the college until 2011.According to WaPo, the college which enrolled 224 students as of fall 2014, said it faced financial troubles connected to its 2010 purchase of 32 acres of lakefront property from the Archdiocese of Burlington, according to the Burlington Free Press. The college said it had sold property to reduce its debt to a manageable level, but it was placed on probation in 2014 by its accrediting agency and it faced cash flow problems due to the imminent loss of a line of credit. The reason for the small liberal school's terminal financial trouble is that to fund the property purchase from the Catholic diocese, Sanders took out $10 million in loans.  As HeatStreetreported last month, the college almost immediately fell short on its financial obligations as fundraising pledges and commitments Ms. Sanders cited in the loan agreements never materialized. Less than a year after leading Burlington College into massive debt, Ms. Sanders resigned, taking with her a $200,000 severance package. By 2014, because of its shaky finances and running deficits, Burlington College found itself placed on probation for two years by the regional accreditation agency.

    Why Clif Bar wants the government to forgive farmers’ student loans  -- Executives at Clif Bar, the organic energy bar company, are urging Congress to pass the Young Farmer Success Act, a bill introduced last year that would allow farmers to have their student loan debt wiped away after 10 years of payments. Clif Bar is one of the biggest companies signing on to a letter drafted by the American Sustainable Business Council, of which the company is a member, asking Congress to enact the bill.  Right now, borrowers who work in government and certain types of nonprofit fields for 10 years and make their payments during that time can have their student loans discharged as part of the Public Service Loan Forgiveness Program. The bill, introduced by Rep. Christopher Gibson (R-NY) would add farmers to the list of occupations that qualify for PSLF. “Farming is a tough business,” said Matthew Dillon, the director of agricultural policy and programs at Clif Bar. “It’s a lot of risk and if we can help early on in lowering the entry fee in farming by creating some debt forgiveness, all the better.”  Student loan debt is getting in the way of young people embarking on a career path in farming and continuing in the field, advocates say. The National Young Farmers Coalition, an advocacy group pushing to add farmers to PSLF, found in a 2014 survey that more than half of their members either delayed moving forward with their farming career or quit the occupation all together because of concerns about student loans. The nation’s farming industry and its food supply could be in danger if these 20 and 30-somethings decide to leave the sector for good, advocates say. The average age of U.S. farmers was 58 in 2012 and just 6% of the nation’s 2.1 million farmers were under 35, according to data from the U.S. Department of Agriculture.

    U.S. states' unfunded pension costs near $1 trillion in 2013: Pew (Reuters) - U.S. states owed $968 billion in unfunded pension benefits for retirees in 2013, the highest level in a decade, according to a report released Tuesday by Pew Charitable Trusts. The states also reported $587 billion in unfunded retiree health care liabilities and $518 billion in outstanding debt in 2013, according to Pew. "Although states have decades to pay off these sums - or, in the case of retiree health care, make changes that reduce their liabilities - these claims on future revenue can limit states’ budget flexibility when the costs come due," the report said. "Less money may be available to fund other priorities, such as health care for low-income Americans or education, or to cover unexpected needs," the report said. The long-term liabilities can also affect credit ratings and borrowing costs for an individual state. Unfunded pension obligations increased from 2.5 percent of personal income in 2003 to 6.9 percent in 2013, the report said. The increase was due to underfunding, lower-than-expected investment returns, and, in some cases, expanded but unfinanced benefits, Pew said. Alaska had by far the most in total unfunded liabilities as measured by personal income. The state reported $8.9 billion in unfunded pension costs and $9.9 billion in unfunded retiree health care costs. The oil-producing state is currently grappling with a multibillion-dollar budget deficit caused by sustained low crude prices, which led to a series of credit downgrades this year.

    CalPERS Invests in Toll Road Even Though Those Deals Consistently Lose Money -- Yves Smith - CalPERS appears to be going from the frying pan into the fire. Having managed finally to exit hedge fund investments, years later than for their own good, but still well ahead of their peers, they’ve gone for another type of high-risk investment. One of the giant fund’s recent deals was an investment in a private toll road. CalPERS appears not to have gotten the memo that the privatization of roads and bridges predictably turn out to be turkeys.   As we’ll see below, CalPERS can argue that its investment is different from the typical toll-road money pit, in that it’s buying into a restructuring, not an original financing. But there’s every reason to think that CalPERS, as a newbie, does not know what it does not know. And as with private equity, it is up against players with vastly more sophistication that it has.  Here’s the outline of the CalPERS investment by Jon Ortiz the Sacramento Bee, which focused on the critique made by the state engineers’ union: The retirement fund recently purchased 10 percent of Indiana Toll Road Concession Co. The firm runs a 157-mile stretch of highway that runs across northern Indiana from Illinois to Ohio. California’s state engineers’ union says it’s a horrible investment that sinks government employees’ money into a project that, ironically, is hostile to government employees. The toll-road company is the first of what fund managers anticipate will be more investments in infrastructure and transportation projects as the $291 billion system broadens its reach into those sectors.

    Arrest of ousted board chair threatened and retirement of executive director announced at board meeting of ailing pension system -- A meeting of the Kentucky Retirement System (KRS) Board of Trustees kicked off Thursday with an a claim by the KRS executive director that the system’s former board chair would be arrested if he participated in the meeting after Gov. Matt Bevin issued an executive order removing him from that position last month. Board members and attendees of the meeting at KRS headquarters were informed by KRS Executive Director Bill Thielen that members of the governor’s office and the personnel cabinet were in the room, along with Kentucky State Police officers who Thielen claimed had been asked to arrest former KRS Board Chair Tommy Elliott if he participated in the meeting. Elliott remained in the room during the meeting but not at the table with the board members. Because the board needs someone to preside over the meeting, board member Joseph Hardesty was nominated and served as chair for the meeting. There was discussion about the board electing a new chair at the Thursday meeting, with Vince Lang being nominated, but those motions were delayed to avoid any more controversy at this point. KRS is currently without an official board chair after Bevin’s replacement for Elliott, dermatologist Dr. William Smith, turned down the post Tuesday, the same day Attorney General Andy Beshear’s office issued an opinion stating Bevin does not have the authority to remove Elliott and that Dr. Smith did not have the qualifications to serve in the position.

    How Pa. hires money managers for pension funds: It adds up: Pennsylvania paid more than $600 million in fees to hundreds of private firms managing money for its state and school pension systems in 2015.  Plus more in submanager fees, and profits that hedge funds and real estate managers pocket at liquidation of their investments, which the pension systems don't count. The fees that the state pension systems reported total more than the investment profits the funds collected last year, a tough one for investors. Maybe it's not surprising, then, that professional money managers so often split these fees with the guides who promise to help them land government investment contracts. "Placement agents" help private money management firms get hired by pension funds and others. Funds also hire advisers to help decide which firms to hire. This field attracts sports celebrities. Retired Phillies pitcher Larry Christenson and Steelers receiver Lynn Swann have each founded placement agent firms that helped money managers sign public pension clients. Former Eagles tight end John Spagnola advises public pension funds and others on which managers to hire.

    New Jersey Now Has $1.1B Budget Hole As Debt, Pension Crisis...: New Jersey faces a $1.1 billion budget hole over two fiscal years just as the state's debt and pension crisis has become dire, officials said this week. If the state doesn't find the money by the new fiscal year, the budget gap could lead to cutbacks in the state's pension fund and a scaling back of services and programs as New Jersey finds ways to roll back its growing debt. Don't expect an increase in taxes, though. Gov. Chris Christie, who is suffering from the worst popularity ratings among any New Jersey governor in 26 years, has ruled that out. In memo reported by Politickernj.com, the Office of Legislative Services forecasted that the state will collect $1.1 billion less in taxes than the Christie administration had predicted, and his $34 billion budget proposal will have a $487 million shortfall. The Christie administration will now have to scramble to find $487 million before the 2015-16 fiscal year ends June 30, and nj.com reported that there's little left in the treasury this late in the fiscal year. The OLS is scheduled to testify before the Assembly Budget Committee on Wednesday about the proposed 2016-17 $34.8 billion budget, which is supposed to take effect by July 1. The news comes as a Pew Charitable Trusts “Fiscal 50” report put New Jersey among the nation’s most indebted states across several categories.

    Treasury's Teamsters Bailout Ploy -- Congress passed legislation in 2014 to help insolvent multi-employer pension plans save themselves. But now the Obama Administration and Teamsters are enabling a giant taxpayer bailout that Congress sought to prevent. This month Treasury Department Special Master Kenneth Feinberg blocked the Central States Pension Fund’s plan to use a 2014 law that allows declining multi-employer pension plans to cut benefits within limits. Mr. Feinberg cited technical shortcomings in the Central States plan, but the rejection defies Congressional intent and will put pensioners at greater risk. Central States, which covers about 400,000 Teamsters workers and retirees, is paying $3.46 in benefits for every dollar the fund takes in due to employer withdrawals and aging demographics. Under optimistic actuarial assumptions, the plan will go broke in the next decade and take down the Pension Benefit Guaranty Corporation with it. The PBGC’s multi-employer program is already running a $52 billion deficit. The PBGC insures about 1,400 multi-employer pension plans for 10 million workers. Hundreds of thousands of retirees who draw pensions from the PBGC would then receive less than 10 cents on the dollar. The maximum PBGC annual guarantee for retirees who have worked 30 years is $12,870, so most pensioners would get less than $1,000 a year. The 2014 law gave endangered pension plans broad discretion to pare benefits so long as retirees wouldn’t get less than 110% of their PBGC guarantee. Retirees over the age of 80 and disabled pensioners must be held harmless. The law also protects employers like UPS that paid their withdrawal liability and agreed to offset future benefit reductions for their workers. The average pension reduction would be about 22.6% under the Central States rehab plan. However, nearly half of plan participants, including 12% who are covered by the UPS “make-whole” agreement, wouldn’t be affected.

    Fix for VA health snarls veterans and doctors in new bureaucracy - Veterans are still waiting to see a doctor. Two years ago, vets were waiting a long time for care at Veterans Affairs clinics. At one facility in Phoenix, for example, veterans waited on average 115 days for an appointment. Adding insult to injury, some VA schedulers were told to falsify data to make it looks like the waits weren’t that bad. The whole scandal ended up forcing the resignation of the VA secretary at the time, Eric Shinseki. Congress and the VA came up with a fix: Veterans Choice, a $10 billion program. Veterans received a card that was supposed to allow them to see a non-VA doctor if they were either more than 40 miles away from a VA facility or they were going to have to wait longer than 30 days for a VA provider to see them. The problem was, Congress gave them only 90 days to set up the system. Facing that deadline, the VA turned to two private companies to administer the program — helping veterans get an appointment with a doctor and then working with the VA to pay that doctor. It sounds like a simple idea but it’s not working. Wait times have gotten worse. There are 70,000 more vets waiting at least a month for an appointment than there were at this time last year. The VA claims there has been a massive increase in demand for care, but the problem has more to do with the way Veterans Choice was set up. It is confusing and complicated. Vets don’t understand it, doctors don’t understand it and even VA administrators admit they can’t always figure it out.

    Are Economists Idiots or Just Delusional? - The University of Chicago’s Booth School of Business’s IGM Forum Mark Thoma) reports; you decide. If reducing the value of the policies held by those who are continuously employed, either by taxing them or forcing those people to move to a less comprehensive plan than their risk-aversion preferences, is going to “reduce costly distortions in U.S. health care,” the only possible conclusion is that total health care spending is going to get costlier on average. Yes, you might argue this will reduce “distortion.” But you would have to be an idiot—or, apparently, Alan Auerbach (Strongly) or Austan Goolsbee—to believe that is a good thing. Note the eminently-sane, just as certain, Carolyn Hoxby’s comment: The Cad[illac] tax is meant to counter other distortions so this is a q[uestion] of whether 4th best fixes 3rd best. An economist who says he knows is wrong. which acknowledges that this is a distortion of a distortion and, as a first-order approximation, less ideal than the status quo. Contrast this with the silence in the face of blithering certitude from Auerbach and Goolsbee, who are happy to reduce “distortion” without noting the concomitant reduction in overall utility.

    Americans support single-payer, “Medicare-for-all” health care system -- Presented with three separate scenarios for the future of the Affordable Care Act (ACA), 58% of U.S. adults favor the idea of replacing the law with a federally funded healthcare system that provides insurance for all Americans. At the same time, Americans are split on the idea of maintaining the ACA as it is, with 48% in favor and 49% opposed. The slight majority, 51%, favor repealing the act.   Gallup included these three questions in its interviewing on May 6-8 to provide insight into how Americans might react to the three remaining presidential candidates' proposals for dealing with the ACA. Bernie Sanders calls for replacing the ACA with a single-payer, federally administered system that he calls "Medicare for All." Donald Trump has said he would repeal the ACA, and Hillary Clinton generally says she would keep the ACA in place. Americans were asked in the survey to react to each of these proposals separately, and there was no mention of the candidates in the question wording. The results show that many Americans are OK with several ways of handling the ACA rather than favoring only one possibility. In particular, 35% of all Americans say they would favor keeping the ACA in place and separately say they favor the idea of replacing it with a federally funded universal health insurance system. Among Democrats and Democratic leaners, 59% favor both of these approaches. In short, many Americans would apparently go along with Clinton's idea of keeping the ACA in place as it is now, or with Sanders' bolder proposal to replace it with a Medicare-for-All system.

    Insurer Sues US Government For $223 Million In Obamacare Related Back Payments - The Affordable Care Act set up what is called a risk-corridor program to entice insurers to participate. Essentially the program limits the risk of loss an insurer can take due to its participation in the healthcare exchange by being reimbursed for part of the loss. The program works the other way as well, meaning that if an insurer profits above a certain threshold, those profits get paid into the program. In 2014, insurers paid $362 million into the program, however they requested a whopping $2.87 billion in payments to help cover losses. Due to this, the federal Department of Health and Human Services promptly backed out of the agreement it had made with insurers, and decided to announce that insurers would only receive 12.6% of the money they claimed under the risk-corridor program in 2014. Perhaps the bill came due for that $4.4 billion destroyer the Navy decided it needed and the money went to pay for that instead. It turns out that at least one insurer isn't going accept that the the government isn't going to fulfill its end of the bargain. Highmark, the insurance arm of Pittsburgh based nonprofit Highmark Health, is suing the US government for $223 million in back payments owed to it under the risk-corridor program. "All we're asking is for the federal government to do what they promised" said Highmark Health CEO David Holmberg. Highmark Health had a loss of around $85 million last year, on revenue of about $17.7 billion. The losses are largely due in part to its ACA-plan business, and one can see why the company would expect the government to live up to its promises. This is a textbook example of how Obamacare will not only drive up insurance premiums, drive out small businesses, and leave patients scrambling for medical attention, but it will also continue to drive health insurance companies out of business. That change we could all believe in? That's the pennies on the dollar that the government is paying out on its own promises,

    Political choices made to goose Obamacare are now wrecking it - AEI: There are many structural flaws plaguing the way that the Affordable Care Act tilts the rules in favor of costlier and less efficient markets. There are plenty of gratuitous steps taken by regulators, who interpreted the prescriptive law in ways that made it even costlier. But perhaps no regulatory tradeoff was more damaging than the political tension between boosting enrollment and making the market for ACA health plans more self-sustaining and price-competitive. At every turn, regulators favored enrollment gains over sound management. That has come at a big cost in how the plans are now priced. The policy mistakes have compounded Obamacare’s woes. Fixing them will require more than regulatory tweaking. It will compel the Obama team to adopt a new political ethic when it comes to the tension between access, affordability and the obligations they’re willing to place on consumers. The Obama team can tilt the rules to let people flow in and out of the Obamacare exchanges at will. But this gaming will drive up costs for everyone. Regulators created a litany of special exemptions to try and coax more people to enroll in Obamacare. There were so many “Special Enrollment Periods” that for practical purposes, most people could enroll at any time. It’s now clear that many people waited until they got sick before purchasing coverage. Worse still, it set the wrong expectations–that consumers could migrate in and out of Obamacare at their discretion, and health insurance wasn’t something that they needed to hold onto. These loopholes undermined the inducements needed to coax people to buy and maintain coverage. The result is an insurance pool that’s costlier than was projected. Premiums are rising as one consequence.

    Theranos Has Junked Two Years of Blood Test Results -- Troubled biotech firm Theranos Inc. has reportedly told regulators that two years of results from its blood-testing machines have been voided, meaning that tens of thousands of patients could have been given incorrect results. The company and its founder Elizabeth Holmes were once the darlings of investors, earning a valuation of $9 billion in 2014 on the back of claims that new technology in their Edison brand machines would revolutionize medical testing. But federal regulators have found major problems at Theranos’ California laboratory, and are considering banning Holmes from being involved in lab tests for two years.  The Wall Street Journal, which first raised questions over the accuracy of testing by the company last year, reports that Theranos has told health care regulator the Centers for Medicare and Medicaid Services that all Edison test results from 2014 and 2015 have been thrown out. The company is issuing corrected results of tests conducted up to two years ago to doctors and patients, who may have already based clinical decisions on the initial tests, the Journal said, citing a person familiar with the matter and several doctors around the U.S. The company, which handles almost 900,000 tests a year, announced in late March that it had undertaken a comprehensive review and “voided results associated with any findings that were not consistent with the quality standards the lab holds itself to today, under our lab’s new leadership.”

    Notes on drug shortages --Look for more developed pieces from me on drug shortages, forthcoming. Here are some notes that will inform them.

    • The number of drug shortages tripled between 2005 and 2010 (Wilson 2012, from which more below).
    • More recently, the incidence of new shortages has fallen, but the total number of drugs in shortage has continued to grow.
    • The most severely affected drugs were generic injectables, including those for cancer, infectious diseases, or used during surgeries.
    • Generic injectables are most prone to shortages because of a low number of capable manufacturers leading to low capacity.
    • Drug shortages are most problematic for patients in cases for which there are no good substitutes.
    • Shortages of generic injectables are less common in Europe, perhaps because generic drug prices are higher there than in the US.
    • Drug shortages can harm patients by forcing them to switch to less effective/higher risk therapies or delay care.
    • Manufacturers are required to notify the FDA of anticipated manufacturing disruptions. Working with industry, the FDA helped prevent 80 percent of anticipated shortages in 2013 (FDA’s drug shortage strategic plan, from which more below).

    How Big Pharma Uses Charity Programs to Cover for Drug Price Hikes -- In August 2015, Turing Pharmaceuticals and its then-chief executive, Martin Shkreli, purchased a drug called Daraprim and immediately raised its price more than 5,000 percent. Within days, Turing contacted Patient Services Inc., or PSI, a charity that helps people meet the insurance copayments on costly drugs. Turing wanted PSI to create a fund for patients with toxoplasmosis, a parasitic infection that is most often treated with Daraprim. Having just made Daraprim much more costly, Turing was now offering to make it more affordable. But this is not a feel-good story. It’s a story about why expensive drugs keep getting more expensive, and how U.S. taxpayers support a billion-dollar system in which charitable giving is, in effect, a very profitable form of investing for drug companies—one that may also be tax-deductible. PSI, which runs similar programs for more than 20 diseases, jumped at Turing’s offer and suggested the company kick things off with a donation of $22 million, including $1.6 million for the charity’s costs. That got Turing’s attention.  Turing ultimately agreed to contribute $1 million for the patient fund, plus $80,000 for PSI’s costs. PSI is a patient-assistance charitable organization, commonly known as a copay charity. It’s one of seven large charities (among many smaller ones) offering assistance to some of the 40 million Americans covered through the government-funded Medicare drug program. . After Turing raised Daraprim’s price, some toxoplasmosis patients on Medicare had initial out-of-pocket costs of as much as $3,000. That’s just a fraction of the total cost. Turing’s new price for an initial six-week course of Daraprim is $60,000 to $90,000. Who pays the difference? For Medicare patients, U.S. taxpayers shoulder the burden. Medicare doesn’t release complete data on what it pays pharmaceutical companies each year, but this much is clear: A million-dollar contribution from a pharmaceutical company to a copay charity can keep hundreds of patients from abandoning a newly pricey drug, enabling the donor to collect many millions from Medicare.

    America’s Most Common Drug Ingredient Could Be Making You Less Empathetic --Every week, a quarter of Americans take a painkiller that could be dampening our collective feelings of empathy. In a paper published online this week, scientists claim that acetaminophen, Tylenol’s main ingredient, makes people more likely to think that other people’s pain isn’t a big deal.  Researchers from the National Institutes of Health and Ohio State University published their findings in Social Cognitive and Affective Neuroscience after studying the effects of the drug on between 80 and about 120 college students across three different experiments.  One group of students drank a liquid with 1,000 mg of acetaminophen, while another took a placebo. An hour later, everyone read short stories about situations such as feeling emotional pain from the death of a parent, or physical pain from a knife that had cut through to the bone. The students who drank the acetaminophen assigned lower ratings for perceived pain and distress than the students who didn’t. In the second experiment, participants socialized with other people and then, while alone, watched a game supposedly involving three of the people they had just met. The game showed two people excluding the third from an activity, and asked students to rate how hurt the excluded member was. Again, students who took the painkiller assigned lower pain ratings. Given how common acetaminophen is (it’s present in more than 600 products) it’s worth looking into what the researchers have called its “broader social side effects” and whether other painkillers could have similar results.

    Zika Virus May Spread To Europe In Coming Months, WHO Warns: The Zika virus, an infectious disease linked to severe birth defects in babies, may spread into Europe as the weather gets warmer, although the risk is low, health officials said on Wednesday. In its first assessment of the threat Zika poses to the region, the World Health Organization's European office said the overall risk was small to moderate. It is highest in areas where Aedes mosquitoes thrive, in particular on the island of Madeira and the north-eastern coast of the Black Sea. "There is a risk of spread of Zika virus disease in the European Region and ... this risk varies from country to country, said Zsuzsanna Jakab, the WHO's regional director for Europe. "We call particularly on countries at higher risk to strengthen their national capacities and prioritize the activities that will prevent a large Zika outbreak." The WHO's European region covers 53 countries and a population of nearly 900 million. It stretches from the Arctic Ocean in the north to the Mediterranean Sea in the south and from the Atlantic in the west to the Pacific in the east. A large and spreading outbreak of Zika that began in Brazil has caused global alarm. The virus has been linked to thousands of cases of a birth defect known as microcephaly in babies of women who become infected with Zika while pregnant. The WHO has said there is strong scientific consensus that Zika can also cause Guillain-Barre, a rare neurological syndrome that causes temporary paralysis in adults. The WHO's Geneva headquarters in February declared the Zika outbreak a public health emergency of international concern (PHEIC), warning it was spreading "explosively" in the Americas.

    Antibiotics will stop working at a 'terrible human cost', major report warns -- Urgent action is needed to control the use of antibiotics before they cease to work, leaving a number of major conditions untreatable and causing “terrible human and economic cost”, a major study has warned.Resistance to antibiotics is growing at such an alarming rate that they risk losing effectiveness entirely meaning medical procedures such as caesarean sections, joint replacements and chemotherapy could soon become too dangerous to perform. Unless urgent action is taken, drug resistant infections will kill 10 million people a year by 2050, more than cancer kills currently, the report’s authors warn.  Drug resistant infections are thought to be growing due to over-use of medicine such as antibiotics and anti-fungus treatments to treat minor conditions such as the common cold. With over-use, resistance to the drugs builds up meaning some conditions become incurable and so-called ‘superbugs’ such as MRSA develop.Research has also suggested that antibiotic use in pig farming is common as poor living conditions mean such treatment is necessary to prevent infections spreading between livestock and that this passes down to humans through pork consumption, increasing resistance levels further. In the UK, 45 per cent of all antibiotics are given to livestock. It calls for urgent action to halt the growing use of antibiotics: “to avoid the terrible human and economic costs of resistance that the world would otherwise face.” Among his recommendations, Lord O’Neill calls for a public awareness campaign on the harms of antibiotic use, for restrictions to be placed on the use of some critical antibiotics and a tax on the drugs to be introduced for livestock use.

    The Plan to Avert Our Post-Antibiotic Apocalypse -- Under instructions from U.K. Prime Minister David Cameron, economist Jim O’Neill has spent the last two years looking into the problem of drug-resistant infections—bacteria and other microbes that have become impervious to antibiotics. In that time, he estimates that a million people have died from such infections. By 2050, he thinks that ten million will die every year.  A former chairman of Goldman Sachs with no scientific training, he was an unorthodox choice to lead an international commission on drug-resistant infections. He was also an inspired one. The problem of drug-resistant microbes isn’t just about biology and chemistry; it’s an economic problem at heart, a catastrophic and long-bubbling mismatch between supply and demand. It’s the result of the many incentives for misusing our drugs, and the dearth of incentives for developing new ones.  The scope of that problem is clear in O’Neill’s final report, which launches today on the back of eight earlier interim publications. It is as thorough a review of the problem of drug-resistant infections as currently exists. “They’ve been extremely open-minded, and have sought opinion extensively across the world,” The report’s language is sober but its numbers are apocalyptic. If antibiotics continue to lose their sting, resistant infections will sap $100 trillion from the world economy between now and 2050, equivalent to $10,000 for every person alive today. Ten million people will die every year, roughly one every three seconds, and more than currently die from cancer.  And yet, resistance is not futile. O’Neill’s report includes ten steps to avert the crisis. Notably, only two address the problem of supply—the lack of new antibiotics.   Indeed, seven of his recommendations focus on reducing the wanton and wasteful use of our existing arsenal. It’s inevitable that microbes will evolve resistance, but we can delay that process by using drugs more sparingly.

    World Bank launches $500 million insurance fund to fight pandemics | Reuters: The World Bank on Saturday said it was launching a $500 million, fast-disbursing insurance fund to combat deadly pandemics in poor countries, creating the world's first insurance market for pandemic risk. Japan has committed the first $50 million towards the facility, which will combine funding from reinsurance markets with the proceeds of a new type of World Bank-issued high-yield pandemic “catastrophe” bond, the bank said. In the event of a pandemic outbreak, the facility will release funds quickly to affected poor countries and qualified international first-responder agencies. The genesis of the new facility was the slow international response to the Ebola outbreak in 2014, when it took months to muster meaningful funds for affected countries as death tolls mounted. "The recent Ebola crisis in West Africa was a tragedy that we were simply not prepared for. It was a wake-up call to the world,” World Bank President Jim Yong Kim told a media conference call. “We can’t change the speed of a hurricane or the magnitude of an earthquake, but we can change the trajectory of an outbreak. With enough money sent to the right place at the right time, we can save lives and protect economies,” Kim added. The so-called Pandemic Emergency Financing Facility will initially provide up to $500 million that can be disbursed quickly to fight a pandemic, with funds released once parametric triggers are met, based on the size, severity and spread of an outbreak. The facility was developed in conjunction with the World Health Organization and reinsurers Swiss Re and Munich Re, which are acting as insurance providers. It will include catastrophe, or cat bonds, in which purchasers would lose principal if fund flows are triggered by a pandemic outbreak, the World Bank said.

    The ‘Sell By’ Dates On Our Groceries Are Causing Tons Of Food Waste  -- The food labeling system in the United States is a complete mess. Foods can be labeled “healthy” regardless of how much sugar they contain. Foods can be labeled “Non-GMO” even when they don’t have genes, making the existence of a genetically-modified version impossible. But beyond encouraging misinformation in our food system and potentially leading consumers to make ill-informed nutritional decisions, labels can also be terrible for the environment and food security.  Take, for instance, the existence of omnipresent expiration labels. Most consumers assume that these labels are guidelines for the date after which it’s unwise, or potentially unsafe, to eat that particular food product. But expiration labels basically mean nothing. There are no federal standards for expiration dates, except for baby formula, and best-by or sell-by date have no basis in science — instead, they’re a manufacturer’s best guess for when the food is likely to be freshest, or at peak quality. Some food products could easily last a year or a year and a half past their “sell by” date. A lot of American consumers don’t know that, however, which leads to confusion over expiration labels and, in turn, causes Americans to throw out a lot of perfectly good food. A recent study from the Harvard Food Law and Policy Clinic, the Johns Hopkins Center for a Livable Future, and the National Consumers League, which surveyed over 1,000 American consumers, found that a third of consumers believe that expiration labels are federally regulated. The study also found that more than than a third of consumers consistently throw away food that is close to or past its labeled expiration date, and 84 percent do it at least occasionally.

    Should Parents Be Worried About Nanoparticles in Baby Formula? -- There’s a lot of stuff you’d expect to find in baby formula: proteins, carbs, vitamins, essential minerals. But parents probably wouldn’t anticipate finding extremely small, needle-like particles. Yet this is exactly what a team of scientists here at Arizona State University (ASU) recently discovered. The research, commissioned and published by Friends of the Earth—an environmental advocacy group—analyzed six commonly available off-the-shelf baby formulas (liquid and powder) and found nanometer-scale needle-like particles in three of them. The particles were made of hydroxyapatite—a poorly soluble calcium-rich mineral. Manufacturers use it to regulate acidity in some foods, and it’s also available as a dietary supplement. Looking at these particles at super-high magnification, it’s hard not to feel a little anxious about feeding them to a baby. They appear sharp and dangerous—not the sort of thing that has any place around infants. And they are “nanoparticles”—a family of ultra-small particles that have been raising safety concerns within the scientific community and elsewhere for some years. For all these reasons, questions like “should infants be ingesting them?” make a lot of sense. However, as is so often the case, the answers are not quite so straightforward.

    Scientists Talk Privately About Creating a Synthetic Human Genome - The New York Times: Scientists are now contemplating the fabrication of a human genome, meaning they would use chemicals to manufacture all the DNA contained in human chromosomes.The prospect is spurring both intrigue and concern in the life sciences community because it might be possible, such as through cloning, to use a synthetic genome to create human beings without biological parents.While the project is still in the idea phase, and also involves efforts to improve DNA synthesis in general, it was discussed at a closed-door meeting on Tuesday at Harvard Medical School in Boston. The nearly 150 attendees were told not to contact the news media or to post on Twitter during the meeting.Organizers said the project could have a big scientific payoff and would be a follow-up to the original Human Genome Project, which was aimed at reading the sequence of the three billion chemical letters in the DNA blueprint of human life. The new project, by contrast, would involve not reading, but rather writing the human genome — synthesizing all three billion units from chemicals.But such an attempt would raise numerous ethical issues. Could scientists create humans with certain kinds of traits, perhaps people born and bred to be soldiers? Or might it be possible to make copies of specific people?

    Austin, Indiana: the HIV capital of small-town America - Darren was 13 when he started taking pills, which he claims were given to him by an adult relative. “He used to feed them to me,” Darren said. On fishing trips, they’d get high together. Jessica and Darren have never known a life of family dinners, board games and summer vacations. “This right here is normal to us,” Darren told me. He sat in a burgundy recliner, scratching at his arms and pulling the leg rest up and down. Their house was in better shape than many others I’d seen, but nothing in it was theirs. Their bedrooms were bare. The kind of multigenerational drug use he was describing was not uncommon in their town, Austin, in southern Indiana. It’s a tiny place, covering just two and a half square miles of the sliver of land that comprises Scott County. An incredible proportion of its 4,100 population – up to an estimated 500 people – are shooting up. It was here, starting in December 2014, that the single largest HIV outbreak in US history took place. Austin went from having no more than three cases per year to 180 in 2015, a prevalence rate close to that seen in sub-Saharan Africa.  Exactly how this appalling human crisis happened here, in this particular town, has not been fully explained. I’d arrived in Scott County a week previously to find Austin not exactly desolate. Main Street had a few open businesses, including two pharmacies and a used-goods store, owned by a local police sergeant.  In the streets either side of it, though, modest ranch houses were interspersed among shacks and mobile homes. Some lawns were well-tended, but many more were not. On some streets, every other house had a warning sign: ‘No Trespassing’, ‘Private Property’, ‘Keep Out’. Sheets served as window curtains. . Others had porches filled with junk – washing machines, furniture, toys, stacks of old magazines. There were no sidewalks. Teenage and twenty-something girls walked the streets selling sex. I watched a young girl in a puffy silver coat get into a car with a grey-haired man.  Driving around for days, knocking on doors looking for drug users who would speak with me was intimidating. I’ve never felt more scared than I did in Austin.

    Nebraska Farmers Sue Monsanto Alleging Roundup Gave Them Cancer -- Four Nebraskan agricultural workers have filed a lawsuit against Monsanto Co. alleging that the agribusiness giant’s cancer-linked product, Roundup, gave them non-Hodgkin lymphoma after many years of exposure. The plaintiffs have also accused Monsanto of purposely misleading consumers about the safety of its blockbuster product, which contains glyphosate as its controversial main ingredient. The plaintiffs allege that Monsanto mislabeled the product in defiance of the “body of recognized scientific evidence linking the disease to exposure to Roundup.” Glyphosate, the most widely used herbicide in the world was infamously classified as “probably carcinogenic to humans” by the World Health Organization’s (WHO) International Agency for Research on Cancer (IARC) in March 2015. “Case-control studies of occupational exposure in the USA, Canada, and Sweden reported increased risks for non-Hodgkin lymphoma that persisted after adjustment for other pesticides,” the IARC said about the herbicide, adding that there is also “convincing evidence” that it can cause cancer in laboratory animals. “Roundup is used by Nebraskans raising everything from grain to grass and tulips to trees. Nothing on the label alerts users to health risks,” their attorney David Domina told Courthouse News. He said that Nebraskans deserve the benefit of the WHO’s research and protection against unknown exposure.

    New Evidence About the Dangers of Monsanto's Roundup - John Sanders worked in the orange and grapefruit groves in Redlands, California, for more than 30 years. First as a ranch hand, then as a farm worker, he was responsible for keeping the weeds around the citrus trees in check. Roundup, the Monsanto weed killer, was his weapon of choice, and he sprayed it on the plants from a hand-held atomizer year-round. Frank Tanner, who owned a landscaping business, is also a Californian and former Roundup user. Tanner relied on the herbicide starting in 1974, and between 2000 and 2006 sprayed between 50 and 70 gallons of it a year, sometimes from a backpack, other times from a 200-gallon drum that he rolled on a cart next to him. The two men have other things in common, too: After being regularly exposed to Roundup, both developed non-Hodgkin lymphoma, a blood cancer that starts in the lymph cells. And, as of April, both are plaintiffs in a suit filed against Monsanto that marks a turning point in the pitched battle over the most widely used agricultural chemical in history. Until recently, the fight over Roundup has mostly focused on its active ingredient, glyphosate. But mounting evidence, including one study published in February, shows it’s not only glyphosate that’s dangerous, but also chemicals listed as “inert ingredients” in some formulations of Roundup and other glyphosate-based weed killers. Though they have been in herbicides — and our environment — for decades, these chemicals have evaded scientific scrutiny and regulation in large part because the companies that make and use them have concealed their identity as trade secrets. Now, as environmental scientists have begun to puzzle out the mysterious chemicals sold along with glyphosate, evidence that these so-called inert ingredients are harmful has begun to hit U.S. courts. In addition to Sanders and Tanner, at least four people who developed non-Hodgkin lymphoma after using Roundup have sued Monsanto in recent months, citing the dangers of both glyphosate and the co-formulants sold with it.

    UN Says Glyphosate ‘Unlikely’ to Cause Cancer, Industry Ties to Report Called Into Question --Does glyphosate cause cancer or not? A new joint report from experts at the United Nation’s Food and Agriculture Organization (FAO) and the World Health Organization’s (WHO) Meeting on Pesticide Residues (JMPR) has concluded that the controversial chemical is “unlikely to pose a carcinogenic risk to humans from exposure through the diet.” The new review appears to contradict the WHO’s International Agency for Research on Cancer (IARC), which concluded in March 2015 that glyphosate “probably” causes cancer in humans. So is there a mixup between the two bodies? In a Q&A issued alongside the new report, the WHO acknowledged that the conclusions arrived at by the IARC and the FAO/JMPR were “different, yet complementary.” The IARC assessed glyphosate as a “hazard” while the joint group looked at “risk.” The WHO said that while the “IARC reviews published studies to identify potential cancer hazards, it does not estimate the level of risk to the population associated with exposure to the hazard.” On the other hand, the JMPR “conducts an evaluation or a re-evaluation of the safety of that chemical as it is used in agriculture and occurs in food.” Wired further explained the differences between the two assessments: The IARC studies whether chemicals can cause cancer under any possible situation—realistic or not—while the joint meeting’s report looks at whether glyphosate can cause cancer in real-life conditions, like if you eat cereal every morning made from corn treated with glyphosate. One of these reports is, by design, much more relevant to your life than the other. The IARC is also, by design, not supposed to make recommendations to the public. It assesses “hazard,” which in scientific jargon, means something very different than “risk.”

    EU Delays Approval of Glyphosate, Again -- A decision on whether or not to re-approve the controversial toxic substance glyphosate for use in Europe was postponed Thursday for the second time, following disagreement among representatives of EU governments. A revised proposal by the European Commission to re-approve glyphosate for use in Europe for nine more years, with almost no restrictions, failed to secure the required majority among EU governments. The decision was due to be taken by representatives of EU governments in the Standing Committee on Plants, Animals, Food and Feed. The proposal by the European Commission to approve glyphosate for 9 more years, with no restrictions on its use, would have to have been approved by a qualified majority of member states. It is not yet clear when the next meeting of the committee will take place, but the commission can now either present a new proposal or propose a technical extension for a shorter timeframe (e.g. 2 years).  Bart Staes, Green environment and food safety spokesperson, had this to say about the decision: “This latest postponement is a sign that the significant opposition to re-approving glyphosate is being taken seriously by key EU governments. It is clear that the EU Commission and the agro-chemical industry were hell-bent on bulldozing through the approval of glyphosate for unrestricted use for a long timeframe but thankfully this push has been headed off for now. We hope this postponement will convince more EU governments to join in opposing the approval of this controversial substance and, at the very least, to proactively propose comprehensive restrictions on its use.“

    Poison Sector Concentration: Monsanto May Get Bought -- In my January piece on agrochemical sector concentration I mentioned that Monsanto’s last chance for a merger may be with BASF. Now the business press is percolating with talk of either BASF or Bayer buying Monsanto outright. Both companies have herbicide portfolios not dependent on glyphosate. Bayer also has extensive seed company holdings, while BASF has little in that way.  All the talk reinforces the perception that Monsanto’s Roundup business is seen as having a highly questionable future and that the only thing which might really interest anyone is the company’s potential to develop GM traits other than those based on glyphosate, along with the germplasm holdings among the seed companies Monsanto owns. The specter of “monopoly” always touted in these connections by the corporate media and government is a misdirection ploy. The sector already has monopolies on pesticides and GM seeds, and the handful of companies in an oligopoly sector almost never compete on price, product quality, or anything else which might benefit customers or the public. Rather, they compete for market share through advertising and government lobbying. So a BASF/Monsanto or Dow/DuPont merger is unlikely to make any difference for industrial farmers. Anyone who actually cared about the evils of monopoly would target the sector as the monolithic whole it is, not fret over cosmetic mergers within the sector. We can expect that any reconfigured entity will try to make the Monsanto name go away in the same way that Monsanto’s former contractor Blackwater changed its name to “Xe”. Whatever cosmetic changes are made including in the name, we must still keep calling it Monsanto.

    Genetically modified salmon approved for consumption in Canada - Health Canada has approved genetically modified salmon as safe for consumption, allowing for the first time genetically altered animals on Canadian grocery store shelves. The federal agency’s decision Thursday follows a decades-long fight by AquaBounty Technologies, a company with roots in Canada, to sell its product in North America. The decision was met with fierce opposition by environmental groups who question the safety of the product and who say the approval opens the door to other genetically engineered animals. Health Canada said Thursday its scientists conducted “a thorough analysis” of AquAdvantage, AquaBounty’s brand of genetically modified salmon. By introducing a growth hormone gene from Chinook salmon, the company is able to grow Atlantic salmon to market size in half the amount of time – from about 40 months down to 20. “In every other way, the AquAdvantage salmon is identical to other farmed salmon,” the agency said in a statement. “Following this assessment, it was determined that the changes made to the salmon did not pose a greater risk to human health than salmon currently available on the Canadian market.” The fish will not need to be labelled as genetically modified. In Canada, such labels are required only in cases where the food poses a health risk, or if nutritional qualities have been significantly changed. The United States Food and Drug Administration made a similar decision to allow the sale of AquAdvantage last year.

    National Research Council GMO Study Compromised by Industry Ties -- One day before the National Research Council (NRC) is scheduled to release a multi-year research report about genetically engineered (GMO) crops and food, Food & Water Watch has released an issue brief detailing the far-reaching conflicts of interest at the NRC and its parent organization, the National Academy of Sciences. Under the Influence: The National Research Council and GMOs charts the millions of dollars in donations the NRC receives from biotech companies like Monsanto, documents the one-sided panels of scientists the NRC enlists to carry out its GMO studies and describes the revolving door of NRC staff directors who shuffle in and out of agriculture and biotech industry groups. The new issue brief also shows how NRC routinely arrives at watered-down scientific conclusions on agricultural issues based on industry science. While companies like Monsanto and its academic partners are heavily involved in the NRC’s work on GMOs, critics have long been marginalized. Many groups have called on the NRC many times to reduce industry influence, noting how conflicts of interest clearly diminish its independence and scientific integrity.  More than half of the invited authors of the new NRC study are involved in GMO development or promotion or have ties to the biotechnology industry—some have consulted for or have received research funding from, biotech companies. NRC has not publicly disclosed these conflicts.

    Big Ag Fights to the Bitter End to Keep Pesticide From Being Banned - After years of debate, the U.S. Environmental Protection Agency (EPA) is finally poised to revoke all uses of the pesticide chlorpyrifos, which first came online as a pest control technology in 1965. That action, which could come this year, follows years of accumulating evidence that the organophosphate pesticide poses significant risks to people’s health and the environment. But Big Ag isn’t giving up on chlorpyrifos yet. Marketed by Dow Agrosciences under the names Lorsban and Dursban, chlorpyrifos was once widely used to battle insects in homes, gardens and lawns as well as in agriculture. In June 2000, however, the company agreed to stop selling it for household uses because of the health risks it posed to children. But its agreement with the EPA did not extend to conventional agriculture, where chlorpyrifos is still widely used today. Research has linked the pesticide to nervous system damage, behavioral problems and lower IQ in young children whose mothers were exposed during pregnancy. In adults, low-level exposure to chlorpyrifos can cause nausea, headaches and dizziness and farmworkers or others who experienced severe exposures have suffered vomiting, muscle cramps, diarrhea, blurred vision, loss of consciousness and even paralysis. In its latest round of pesticide residue tests on fruits and veggies, the U.S. Department of Agriculture detected residues of chlorpyrifos on some samples of fruits and veggies children often eat, including peaches and nectarines. The EPA’s final ruling to revoke all uses of chlorpyrifos in agriculture, which has been years in the making, still has Big Ag in a twist, which was on display last month at a hearing of the House Agriculture Committee’s subcommittee on Biotechnology, Horticulture and Research.

    Farms Are A Major Global Source Of Air Pollution  -- At the beginning of the 20th century, two German chemists — Fritz Haber and Carl Bosch — figured out a way to produce ammonia cheaply, and on an industrial scale.  Without their process, it’s estimated that about 40 percent of the human population would not be alive today. But the use of widely-available fertilizer has also come with some considerable downsides. Fertilizer runoff making its way into streams, rivers, lakes, and oceans has contributed to algal blooms and oxygen-free “dead zones” across the United States, from the Gulf of Mexico to the Great Lakes. In Iowa, the Des Moines Water Works utility filed a federal lawsuit against three farm counties, claiming that the filtration technology required to strip the drinking water of nitrates from excess fertilizer runoff costs the utility between $4,000 and $7,000 a day.  And it’s not just the water that is being polluted by fertilizer use. A new study published in Geophysical Research Letters found that fertilizer use — as well as animal agriculture — is a significant contributor to air pollution worldwide. Susanne Bauer, an atmospheric scientist at Columbia University’s Center for Climate Systems Research and the NASA Goddard Institute for Space Studies, told ThinkProgress that she was interested in looking at agricultural air pollution because, unlike car pollution or pollution from combustion engines, it’s a sector that has not been looked at closely, especially on a global scale. Yet with a growing global population, agricultural air pollution — in the form of ammonia from fertilizer and livestock waste — is expected to increase, as farmers race to keep up with the growing demand for food. “In this study, we wanted to shine a light on a sector that is not talked about a lot,” she said. “Nobody wants to criticize food production, but we need to think about how we produce food.”

    A Chemical Reaction Revolutionized Farming 100 Years Ago. Now It Needs to Go --OF ALL THE elements that make up Earth’s atmosphere, nitrogen is by far the most abundant. It is also one of the most inert. Nothing happens when you breathe it in, swallow it, or let it suffuse your skin. Nitrogen gas likes to stay nitrogen gas. But in the early 20th century, two German chemists, Fritz Haber and Carl Bosch, figured out how to pluck fertilizer from thin air by making ammonia (NH3) out of nitrogen gas (N2). You need energy, lots of it. The Haber-Bosch process relied and still relies on high temperature, high pressure, and hydrogen atoms ripped from fossil fuels. Ammonia from this process fertilizes crops, which in turn nourish you. On average, half the nitrogen in your cells might come from Haber-Bosch. “The Haber-Bosch process is one of the most important for humanity,” says Mercouri Kanatzidis, a chemist at Northwestern University. But what seemed ingenious a hundred years ago is running into problems in 2016. The Haber-Bosch process burns natural gas (3 percent of the world’s production) and releases loads of carbon (3 percent of the world’s carbon emissions). If relying on fossil fuels to give the world electricity and heat is unsustainable, so is relying on fossil fuels to grow its food. So interest in a Haber-Bosch alternative is heating up. Last month, the Department of Energy issued a funding opportunity announcement for a sustainable way to make ammonia. The challenge isn’t just making ammonia without fossil fuels—scientists can already do that—but to do it at a scale and price that can compete with an industrial process perfected over a hundred years. And that ultimately might take more than just a technological breakthrough.

    How to Reclaim Nitrogen Back as a Life-giving Nutrient -- Coastal dead zones, global warming, excess algae blooms, acid rain, ocean acidification, smog, impaired drinking water quality, an expanding ozone hole and biodiversity loss. Seemingly diverse problems, but a common thread connects them: human disruption of how a single chemical element, nitrogen, interacts with the environment. Nitrogen is absolutely crucial to life — an indispensable ingredient of DNA, proteins and essentially all living tissue — yet it also can choke the life out of aquatic ecosystems, destroy trees and sicken people when it shows up in excess at the wrong place, at the wrong time, in the wrong form. And over the past century, people have released so much of this type of nitrogen — known as reactive nitrogen — that scientists say we’ve passed the limit of what the planet can safely handle. The result of releasing so much nitrogen to the environment — through excessive and inefficient fertilizer use, agriculture-related nitrogen emissions and nutrient-laden wastewater, along with fossil fuel and biomass burning — is this slew of adverse environmental impacts. These impacts are occurring worldwide and are exacerbated by warming temperatures. Though the nitrogen problem gets far less press, we’ve now upset the naturally occurring balance of nitrogen even more than that of carbon. While many things contribute to the problem — including energy use, urban runoff and sewage — agriculture is the largest source of environmentally damaging nitrogen. According to scientists studying this problem, approximately 80 percent of the nitrogen currently used in agriculture (primarily synthetic and other fertilizers, like manure) is lost to the environment at some point in the food supply chain. These losses occur on farms and in food production, sales, distribution, preparation and consumption.

    World Farmers Need to Do More to Stop Catastrophic Climate Change -- The world’s farmers and food producers must do more—perhaps five times as much—to reduce the greenhouse gas (GHG) emissions that threaten catastrophic global climate change, according to new research. Right now, scientists calculate that the options available to meet the recent Paris agreement to limit global warming to a maximum of 2 C above historic levels would deliver at most 40 percent and at the lowest estimate 21 percent, of the mitigation necessary. That means that cattlemen, rice farmers, shepherds, growers and livestock managers of all kinds must somehow achieve reductions in methane and oxides of nitrogen equivalent to a billion tons of carbon dioxide each year by 2030. Carbon dioxide is the principal greenhouse gas, but although the others are released in much lower quantities and linger in the atmosphere for a much shorter span, they are also many times more potent in terms of the greenhouse effect. This new look at the challenge ahead for the world’s food producers, published in Global Change Biology journal, is the outcome of a co-operation between scientists from 22 institutes or laboratories of global distinction.  These include the Consortium of International Agricultural Research Centres, the International Centre for Tropical Agriculture, the UN’s Food and Agriculture Organization, the International Rice Research Institute and many other agencies and universities.

    For The American Farmer "It's Death By A 1,000 Knives”- US Farmland Values Plunge Most In 30 Years -- Not so long ago, US farmland - whose prices were until recently rising exponentially - was considered by many to be the next asset bubble. Then, exactly one year ago, the fairytale officially ended, and as reported in February, US farmland saw its first price drop since 1986. It was also about a year ago when looking ahead, very few bankers expected price appreciation and more than a quarter of survey respondents expect cropland values to continue declining. They were right. According to several regional Fed reports released last Thursday, real farmland values in parts of the Midwest fell at their fastest clip in almost 30 years during the first quarter.  This is how the Chicago Fed described the increasingly dire situation: Agricultural land values in the Seventh Federal Reserve District fell 4 percent from a year ago in the first quarter of 2016—their largest year-over-year decline since the third quarter of 2009. Cash rental rates for District farmland experienced a significant drop of 10 percent for 2016 compared with 2015—even larger than the decrease of last year relative to 2014. Demand to purchase agricultural land was markedly lower in the three- to six-month period ending with March 2016 compared with the same period ending with March 2015. Moreover, the amount of farmland for sale, the number of farms sold, and the amount of acreage sold were all down during the winter and early spring of 2016 compared with a year ago. Nearly two-thirds of the responding bankers expected farmland values to decrease during the second quarter of 2016, with the rest expecting farmland values to remain stable.

    The American West Is Losing A Football Field Worth Of Land Every Two And A Half Minutes --A new study released Tuesday by the Center for American Progress (CAP) and Conservation Science Partners (CSP) found that every 2.5 minutes, the American West loses a football field worth of natural area to human development. This project, called the Disappearing West, is the first comprehensive analysis of how much land in the West is disappearing to development, how quickly this transformation is taking place, and the driving factors behind this loss. .   The data further disproves statements made by the Bundys, Ken Ivory, and other land seizure proponents that land in the West is already “locked up”. According to the analysis, as of 2011, development in the West covered around 165,000 square miles of land — an area about the size of six million superstore parking lots.  Advocates for seizing and selling off public lands often argue that private landowners will be better stewards of the land. Yet the data from the analysis shows that development on private lands accounted for nearly three-fourths of all natural areas in the West that disappeared between 2001 and 2011, while public lands like national parks and wilderness areas had some of the lowest rates of development.

    Something disturbing is happening to honey bee colonies and scientists can't explain why - Honey bees are nearly as essential to our food system as crops themselves. Depending on how the research is conducted, pollinators are needed to produce approximately one-third of the food we eat (more, according to some estimates). Bees also contribute about $17 billion to the US agricultural industry each year. And it'd be extremely hard and expensive to get your hands on coffee without them, making them a key part of the global economy. So it's unfortunate to note that, according to newly released survey data, honey bees are in serious trouble.Bees have struggled in general for years, facing problems that wreak havoc on populations like colony collapse disorder.But a new report from the Bee Informed Partnership (BIP), a group of leading researchers funded by the United States Department of Agriculture (USDA) and the National Institute of Food and Agriculture, is particularly disturbing.Below is what the researchers have found since they first started tracking bee colony losses in 2007.The total losses of colonies (yellow) are trending upward year-over-year:"When we started the survey, we focused on winter losses as winter is generally seen as the most stressful time of the year for bees," Nathalie Steinhauer, the survey coordinator and a Ph.D. candidate in entomology at the University of Maryland, tells Tech Insider in an email. "High levels of summer losses came as a surprise for us," Steinhauer writes.These trends are a big deal for several reasons.  For one, summer losses are now as bad as winter losses, but summer is when bees are supposed to thrive, flying from flower to flower with abundant food and beautiful weather. But the data also show that, despite recent efforts to cut back on the use of certain pesticides — and a White House-inspired push to cut winter colony losses to 15% over the next ten years — overall losses seem to be just as bad as they've been, if not worse (the 2015-2016 data set is not yet complete).

    Invasive insects are ravaging U.S. forests, and it’s costing us billions -- Last week, a group of researchers published saddening news about “sudden oak death,” spread by an invasive water mold, that has killed over a million trees in coastal California. The pathogen, they found, simply cannot be stopped — though it can still be contained, and the harm mitigated. But it is too extensively established now in California to eradicate.  Unfortunately, it’s a familiar story. The U.S. is subject to the introduction of 2.5 new invasive insects into its forests ever year, according to a comprehensive new analysis of this problem, in the journal Ecological Applications. And that number is just for insects — it doesn’t count diseases, like sudden oak death.  The study finds that the rate of these invasions is increasing, because it is fundamentally related to global trade, which keeps on growing — and that already, their “likely” toll is in the billions of dollars every year.  Indeed, the study calls these invasive pests the “most serious and urgent near-term ecological threat” to U.S. forests — which we rely on not only for cultural and recreational reasons but also to store carbon, filter water, host diverse biological life and much more. It also notes that species invasions are the only known threat “that has proved capable of nearly eliminating entire tree species, or in some cases entire genera, within a matter of decades.”  The case study of this is the American chestnut, which was felled in enormous quantities by the chestnut blight during the 1900s. “The American chestnut tree reigned over 200 million acres of eastern woodlands from Maine to Florida, and from the Piedmont west to the Ohio Valley, until succumbing to a lethal fungus infestation” notes the American Chestnut Foundation.   “The government responds to crises, like a forest fire, for sure,” Lovett says. “This is more of a slow-motion crisis. It’s probably the biggest threat to forest health in the country, but it unfolds very slowly, so it doesn’t get the attention that it deserves.”

    Over A Third Of North America’s Bird Species Need ‘Urgent Conservation Action’ -- Thanks to a multitude of threats, over a third of the bird species in North America are “of major conservation concern,” according to a comprehensive study released Wednesday. The report, released by the governments of Canada, the United States, and Mexico, is the first to look at the threats facing all 1,154 migratory bird species native to North America. Taking into account population sizes and trends, extent of habitats, and severity of threats, the report found that 37 percent of migratory birds in North America qualify for the conservation watch list, “indicating species of highest conservation concern based on high vulnerability scores across multiple factors.” Some are doing worse than others: More than half of seabirds and species that make their homes in tropical forests are on the watch list, the report found. These species face threats like deforestation, which is stripping birds and other animals of their habitats, and overfishing, which is eliminating food sources for seabirds. Meanwhile, bird species that depend on coastal, arid, and grassland habitat are “declining steeply,” while generalists — those birds who can adapt easily to a range of different environments — are doing well.  “This report is telling us what many of us have feared for years: Migratory birds face challenges that dwarf any that they have faced in the era of human dominance of planet,” Dan Ashe, director of the United States Fish and Wildlife Service, said at a launch event in Ottawa Wednesday. Climate change is disrupting migration, he said, while habitat is being fragmented and destroyed. “This 2016 State of North America’s Birds report documents alarming trends,” he said.

    Climate Change Is Shrinking Earth’s Far-Flying Birds - Every year, flocks of red knots criss-cross the globe. In the summer, these shorebirds breed in the Arctic circle, making the most of the exposed vegetation and constant daylight. Then, anticipating the returning ice and continuous night, they fly to the opposite end of the world. Different populations have their own itineraries, but all are epically long: Alaska to Venezuela; Canada to Patagonia; Siberia to Australia.    These migratory marathons mean that the red knot’s fate in one continent can be decided by conditions half a world away. And that makes it a global indicator, a sentinel for a changing world. It is the proverbial canary in the coalmine, except the mine is the planet.  And the canary is shrinking.  For the last 33 years, European scientists have been measuring a population of red knots that stop at Poland’s Gdansk Bay on their migrations between northern Russia and western Africa. When Jan van Gils from the Royal Netherlands Institute for Sea Research analyzed these measurements, he noticed that the knots have been gradually getting smaller. They’re not alone. Israeli sparrows, Danish hawks, Alaskan polar bears, North Sea fish, and many other animal populations are getting smaller as the world warms. Some scientists suggest that the trend is adaptive: compact bodies are useful in hotter conditions because smaller individuals have a larger surface area for their size, and so lose heat more quickly. Others say it’s maladaptive: the shrunken species are simply undernourished.  Red knot chicks mainly feed on the insects that emerge from defrosting Arctic soil. If the snow melts too early, the hatchlings miss out on Peak Insect and can’t eat enough to pack on weight. They end up small and stunted.

    Chile’s ‘Worst Ever’ Red Tide Kills 20 Million Fish, Prompts Investigation of Salmon Farms  - The unprecedented red tide in Chile’s coastal waters—which has killed more than 20 million fish—has triggered protests and a public health crisis in the South American country. The virulent algal bloom, which turns waters red and seafood poisonous, is “the worst case” of red tide in the country’s history and has devastated its fishing industry. Reuters reported in March that the deadly bloom has decimated 15 percent of Chile’s salmon production putting the total economic blow from lost production at around $800 million. The government has declared an emergency zone in the south of Chile as it deals with the red tide. The Guardian reported that the algal bloom has been rapidly spreading along the coast of Patagonia for hundreds of miles, poisoning dozens of people and spurring angry protests from fishermen. Questions are being raised on whether human activity may have worsened the red tide, as National Geographic explained: From February to March this year, one of these blooms killed 25 million salmon in 45 farming centers in Chile. What happened next would prove to be controversial.  About thirty percent of the dead fish were taken to landfills. But the rest were thrown into the sea, about 80 miles (130 kilometers) from Chiloé island. That operation was authorized by the Chilean Navy and the fisheries managers. A few weeks later, a wave of more dead sealife washed up on Chiloé. While the government has blamed El Niño, many on the island suspect the dumping of the dead salmon might have had something to do with it. It’s one more example of the lax regulations of the country’s aquaculture industry, they say, which has exploded since the 1970s, making Chile the world’s second largest exporter of salmon. Environmentalists have complained for years that Chile’s aquaculture industry has polluted the water through feces and unfinished food, which may build up on the seafloor. Following accusations from local fishermen and communities, Chilean authorities and a scientific workforce are currently investigating the country’s salmon industry, the world’s second largest, for potentially exacerbating the algal bloom by dumping rotten or contaminated fish into the sea.

    Navy Allowed to Kill or Injure Nearly 12 Million Whales, Dolphins, Other Marine Mammals in Pacific - What if you were told the US Navy is legally permitted to harass, injure or kill nearly 12 million whales, dolphins, porpoises, sea lions and seals across the North Pacific Ocean over a five-year period? It is true, and over one-quarter of every tax dollar you pay is helping to fund it. A multistate, international citizen watchdog group called the West Coast Action Alliance (WCAA), tabulated numbers that came straight from the Navy's Northwest Training and Testing EIS (environmental impact statement) and the National Oceanic and Atmospheric Administration's (NOAA) Letters of Authorization for incidental "takes" of marine mammals issued by NOAA's National Marine Fisheries Service. A "take" is a form of harm to an animal that ranges from harassment, to injury, and sometimes to death. Many wildlife conservationists see even "takes" that only cause behavior changes as injurious, because chronic harassment of animals that are feeding or breeding can end up harming, or even contributing to their deaths if they are driven out of habitats critical to their survival. Karen Sullivan, a spokesperson for the WCAA, is a former endangered species biologist and assistant regional director at the US Fish and Wildlife Service; she is now retired. "The numbers are staggering," she told Truthout, speaking about the number of marine mammals the Navy is permitted to take. "When you realize the same individual animals can be harassed over and over again as they migrate to different areas, there is no mitigation that can make up for these losses except limiting the use of sonar and explosives where these animals are trying to live."

    Yellowstone Park bison euthanized after bonehead tourists thought they were saving it. The story making the rounds last week about the tourists trying to “rescue” a bison calf in Yellowstone National Park came to an unfortunate conclusion Monday when the park service announced they euthanized the calf. A week ago, a pair of presumably well-meaning, but utterly misguided, tourists saw the calf in the middle of the road and worried the animal was cold and dying. That led them to believe it was a good idea to pile the animal in the back of their SUV and seek help at a ranger station. That was, obviously, not the right move. But general human ridiculousness (and ignorance) is something the park service appears to be dealing with more and more these days. From the National Park Service: Last week in Yellowstone National Park, visitors were cited for placing a newborn bison calf in their vehicle and transporting it to a park facility because of their misplaced concern for the animal's welfare. In terms of human safety, this was a dangerous activity because adult animals are very protective of their young and will act aggressively to defend them. In addition, interference by people can cause mothers to reject their offspring. In this case, park rangers tried repeatedly to reunite the newborn bison calf with the herd. These efforts failed. The bison calf was later euthanized because it was abandoned and causing a dangerous situation by continually approaching people and cars along the roadway. “In Yellowstone, it’s not a zoo,” a park spokeswoman told the Washington Post. “We don’t manage for individuals; we manage for ecosystems.” The tourists were issued a $110 fine and may face further charges.

    WHO: Global air pollution is worsening, and poor countries are being hit the hardest -- Air pollution is growing worse in urban areas across much of the globe, hitting the poorest city dwellers hardest and contributing to a wide range of potentially life-shortening health problems, from heart disease to severe asthma, according to the World Health Organization. New data released by the organization on Thursday detailed how 4 of every 5 residents of cities with reliable measurements face levels of particulate air pollution that exceed what the WHO recommends. While the problem is playing out in cities around the world, poorer countries are suffering most.The WHO said 98 percent of urban areas in “low- and middle-income countries” with populations of more than 100,000 fall shy of the group’s air quality standards.“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, environment, and social determinants of health, said in a statement.[Air pollution in India is so bad that it kills half a million people every year]The figures released Thursday were part of an updated WHO global database of air pollution for cities and smaller human settlements across the world. The database now covers 3,000 cities, towns and villages in 103 countries, listing average annual levels of particulate matter in the air. This includes tiny particles less than 2.5 micrometers in size, known as PM2.5, which are thought to be the most deadly because they can find their way deep into a person’s lungs.The alarming result: 80 percent of people in cities and towns whose air quality is actually monitored are breathing air containing these particulates at concentrations higher than the WHO’s recommended level. Air pollution in urban areas as a whole was 8 percent worse in 2013 than it was in 2008.  

    Earth just recorded its warmest April on record, and it wasn't even close: April was the warmest such month on record for the globe, and yet again, we saw a near-record large margin compared to average, according to NASA data released Saturday. The record all but assures that 2016 will set another milestone for the warmest calendar year in NASA's database, regardless of whether the rest of this year sees comparatively cooler global temperatures. During each of the past seven months, global average surface temperatures have exceeded the 20th century average by more than 1 degree Celsius, or 1.8 degrees Fahrenheit. Until October, that 1-degree threshold had not been crossed since NASA's global temperature records began in 1880.According to NASA, April had a temperature anomaly of 1.11 degrees Celsius, or 1.99 degrees Fahrenheit, above the 20th century average, which means the month tied with January for the third-most unusually mild month ever recorded. The top two spots on that list are occupied by February and March, respectively. The second-warmest April on record was in 2010, when the temperature anomaly was a comparatively paltry 0.87 degrees Celsius, or 1.6 degrees Fahrenheit. The unusual April warmth was most pronounced across the Arctic, from Siberia to Greenland and Alaska. Southeast Asia experienced deadly heat waves occurring in Thailand and India, among other nations. Other climate monitoring tools have shown that Arctic sea ice is precariously sparse and thin for this time of year, potentially setting the stage for another record melt season by the end of the summer.

    Earth Sees Record Warming for 12 Straight Months -- According to the National Oceanic and Atmospheric Administration (NOAA), April 2016 was the 12th consecutive month to break previous heat records, breaking the 1901-2000 long-term average by a record amount.  There is now a 99 percent likelihood that 2016 will become the hottest year on record. NOAA also said the global average carbon dioxide concentration reached 399 parts per million in 2015. “We’re dialing up Earth’s thermostat in a way that will lock more heat into the ocean and atmosphere for thousands of years,” Jim Butler, director of NOAA’s Global Monitoring Division, said in a statement. For a deeper dive: AP, Washington Post, Bloomberg, USA Today, Climate Central, Mashable

    A Song of Fire And No Ice: 2016 On Pace For Hottest Year Ever -- How big a jump was April 2016 compared to the historical record? In an email, Stefan Rahmstorf, Head of Earth System Analysis at the Potsdam Institute for Climate Impact Research, notes that “The margin by which April beats the previous record April is three times larger (0.24 °C) than the margin of any previous record April (biggest was 0.08 °C).”Also, this has easily been the hottest January-April on record, which isn’t a surprise given that last month’s record was hot on the heels of the hottest March on record by far, which followed the hottest February on record by far, and hottest January on record by far.Dr. Gavin Schmidt, the head of NASA’s Goddard Institute of Space Studies, points out on twitter that there is a pattern between how hot Jan-April is and how hot the full year is. He notes that if this pattern holds, then there is a greater than 99% chance that 2016 will be the hottest year on record.Scorching temperatures have extended over many months in the Arctic, and that means we have the perfect conditions for both wildfires and melting ice. Last year, which set the record for hottest year ever, also set the record for the worst U.S. wildfire year with more than 11 million acres burned. Siberia, Mongolia and China also saw massive blazes. This year, Alberta Canada has been so hot and so dry so early in the year that it has already fallen victim to a devastating firestorm: “It’s not just Alberta: Fires fuelled by warming climate are increasing,” as a CBC headline read last week. Arizona University climatologist Jonathan Overpeck expained, “The Alberta wildfires are an excellent example of what we’re seeing more and more of: warming means snow melts earlier, soils and vegetation dries out earlier, and the fire season starts earlier. It’s a train wreck.” Tragically, the warming-driven wildfires themselves cause more carbon dioxide to be released into the atmosphere, an amplifying feedback that speeds up the very climate change that causes more wildfires.

    NASA: Last Month Was Warmest April Ever Recorded, Marking Seven Months of New Highs -- Last month was 1.11 C above the 1951-1980 average, making it the warmest April on record, according to new data from the National Aeronautics and Space Administration (NASA). It was also the seventh consecutive month to have broken global temperature records. Scientists are now nearly certain that 2016 will become the hottest year on record. Meanwhile, CO2 levels in the southern hemisphere exceeded the symbolic 400 parts per million for the first time, as confirmed by measuring stations in Tasmania and Cape Grim, which climate scientists say “highlights the problem of rising emissions.” For a deeper dive: Mashable, ThinkProgress, Guardian, CNN, IB Times, Huffington Post, Sydney Morning Herald

    Super Hot! India Records Its Highest Temperature Ever - A city in India has recorded the highest temperature in the country's history — 51 degrees Celsius, or 123.8 degrees Fahrenheit.  The city in western Rajasthan state broke the record Thursday; India's previous hottest day on record was 50.6 degrees Celsius in Alwar in 1956, according to The Times of India.  The scorching heat in Phalodi comes amid a heat wave across much of the country, as residents eagerly await the arrival of the monsoon season. As The Associated Press reports:"The monsoon normally hits southern India in the first week of June and covers the rest of the nation within a month. It is especially eagerly awaited this year because several parts of the country are reeling under a drought brought on by two years of weak rains. "Clare Nullis, a spokeswoman for the World Meteorological Organization, told reporters in Geneva on Friday during a briefing on record global temperatures that meteorologists expect this year's Indian monsoon will bring more rain than normal, which would be good news for the drought-stricken regions."

    India's Plan to Divert Ganges & Brahmaputra Rivers Alarms Bangladesh - New Delhi is starting massive series of new projects to divert water from major rivers in the north and the east of the country to India's drought-stricken western and southern regions. This news has sounded alarm bells in the Bangladeshi capital of Dhaka, according to the UK's Guardian newspaper. The $400 billion project involves rerouting water from major rivers including the Ganga and Brahmaputra and creating canals to link the Ken and Batwa rivers in central India and Damanganga-Pinjal in the west. Its target is to help drought-hit India farmers who are killing themselves at a rate on one every 30 minutes for at least two decades. The Indo-Gangetic Plain, also known as Indus-Ganga and the North Indian River Plain, is a 255 million hectare (630 million acre) fertile plain encompassing most of northern and eastern India, the eastern parts of Pakistan, and virtually all of Bangladesh, according to a Wikipedia entry. India and Pakistan have a formal internationally-brokered and monitored treaty called Indus Waters Treaty (IWT) signed in 1960 between Indian Prime minister Jawaharlal Nehru and Pakistan President Ayub Khan in Karachi. The IWT allocated water from three eastern rivers of Ravi, Beas and Sutlej for exclusive use by India before they enter Pakistan, while the water from three western rivers of Jhelum, Chenab and Indus was allocated for exclusive use of Pakistan. The treaty essentially partitioned the rivers rather than sharing of their waters. The treaty also permits India to build run-of-the-river hydroelectric projects on the western rivers but it can not divert any water from them for its own use. At least 100 million Bangladeshis living downstream in Jamuna (Brahmaputra) and Padma (Ganga) river basins will be hit hard if India carries out the project as planned. Alarmed by this development, Bangladesh’s minister of water, Nazrul Islam, has pleaded with the Indian government to take Bangladesh’s water needs into consideration, noting that 54 of 56 Indian rivers flowed through his country.

    Leaking Las Vegas: Lake Mead Plunges To Lowest Level Ever As "The Problem Is Not Going Away" -- The hopes of an El Nino-driven refill from last summer's plunging levels of the nation's largest reservoir have been dashed as AP reports Lake Mead water levels drop to new record lows (since it was filled in the 1930s) leaving Las Vegas facing existential threats unless something is done. Las Vegas and its 2 million residents and 40 million tourists a year get almost all their drinking water from the Lake and at levels below 1075ft, the Interior Department will be forced to declare a "shortage," which will lead to significant cutbacks for Arizona and Nevada. As one water research scientist warned, "this problem is not going away and it is likely to get worse, perhaps far worse, as climate change unfolds."  As USA Today reports, the nation’s largest reservoir has broken a record, declining to the lowest level since it was filled in the 1930s. Lake Mead reached the new all-time low on Wednesday night, slipping below a previous record set in June 2015. The downward march of the reservoir near Las Vegas reflects enormous strains on the over-allocated Colorado River. Its flows have decreased during 16 years of drought, and climate change is adding to the stresses on the river. As the levels of Lake Mead continue to fall, the odds are increasing for the federal government to declare a shortage in 2018, a step that would trigger cutbacks in the amounts flowing from the reservoir to Arizona and Nevada. With that threshold looming, political pressures are building for California, Arizona and Nevada to reach an agreement to share in the cutbacks in order to avert an even more severe shortage.

    As California’s Largest Lake Evaporates, A County Struggles For Help — The lake is drying up, uncounted dead fish line the shore, and the desert town is losing people. It could be the plot of a post-apocalyptic movie set in the future, but this is actually happening here and it has been going on for years. It wasn’t always like this, of course. There was a time when this town was booming. There was a time when the Salton Sea, California’s largest lake, was the “French Riviera” of the state, and the pride and joy of Imperial County. But that was decades ago, during the Sea’s heydays of the 1950s and 1960s. Back when this area had luxury resorts, piers, yachts, and thousands of visitors, including stars like Frank Sinatra — who owned a house in nearby Palm Springs and would come down to see Guy Lombardo sail his speedboat.  “You couldn’t put a towel on the beach,” . “When it was the heydays we had five bars here,” “The fishing was the best of the world,” Located some 150 miles south of Los Angeles, the Salton Sea has been receding since the largest agricultural-to-urban water transfer in the nation went into effect in 2004. Experts reached for this story said the Salton Sea’s demise will have dire ramifications for fish, hundreds of migratory bird species, and the air of at least 1.5 million people in Southern California and Northern Mexico, unless mitigation projects happen soon. With less water going in, the Sea is evaporating fast and losing a half-foot of elevation each year. That rate will accelerate starting in 2018 as mitigation waters now flowing into the Sea will end. Moreover, experts said a warmer climate makes evaporation a larger foe.

    May 2016 El Niño/La Niña update: Switcheroo! - Climate.gov (NOAA) - There’s a 75% chance that La Niña will be in place by the fall, meaning sea surface temperatures in the central Pacific at the equator will be more than 0.5°C below average. It’s possible the transition from El Niño to La Niña will be quick, with forecasters slightly favoring La Niña developing this summer. What’s behind this reasonably confident forecast? Sea surface temperatures in the Nino3.4 region, our primary index for ENSO (El Niño/Southern Oscillation), have been cooling steadily since they peaked at 2.4°C (4.3°F) above average back in November. Recently, cooling has accelerated, and April was 1.2°C above average using ERSSTv4, our most historically consistent sea surface temperature dataset from NOAA NCEI. However, this is still well above the El Niño threshold of 0.5°C above average, and the atmosphere is still responding to those warmer surface temperatures. Both the Equatorial Southern Oscillation Index and the traditional Southern Oscillation Index were still negative in April, meaning the surface pressure in the western Pacific is still higher than average, while the surface pressure in the eastern Pacific is lower than average—evidence of a weakened Walker Circulation. (For a refresher on why we have so many different indexes for tracking ENSO, see Tony’s previous post.) Despite these lingering signs of El Niño, the trend toward neutral conditions (Nino3.4 SST within 0.5°C of average) is very likely to continue. Most computer models are predicting El Niño conditions will come to an end in the early summer, and that sea surface temperatures will continue to drop, potentially passing the La Niña threshold (0.5°C below average) sometime in the summer.  Some areas of near- or below-average sea surface temperatures have already appeared in the eastern Pacific.

    Climate change could cause more concentrated storms -- Rising temperatures are causing heavy rain storms to become concentrated over smaller areas, a scenario that could potentially cause extreme flooding in urban locations, according to new research. A new study examining large, intense storms across Australia found that as temperatures increased, the same amount of rain from these storms was falling over smaller areas. The study’s authors found this to be consistent across all of the country’s climate zones, from temperate grasslands to tropical forests. These span nearly all of Earth’s climate zones and can be seen as a proxy for what is happening worldwide, according to the new research. “Regardless of the total amount of rainfall, it is concentrated over smaller areas,” The study’s authors attribute the change in storm area to a shift in the mix of cold and warm storms that has occurred as temperatures have increased. In general, cold storm events are more widespread over a geographic area, such as winter rainstorms that span a whole city. In contrast, warm storm events are more localized, such as summer rainstorms that might only pass through a few neighborhoods. As temperatures rise, there are more warm storm events concentrated in space and fewer cold storm events that are more widespread, Sharma said. The study’s authors expect an increase in warm, concentrated storm events as temperatures continue to rise due to climate change. This could cause an increase in extreme flooding, especially in urban areas where current storm drainage infrastructure might not be able to cope with the heavy deluge of rain from these concentrated storms, Sharma said.

    Ocean Oxygen – another climate shoe dropping: Ocean anoxia – widespread oxygen-starved dead zones in oceans - did the killing of ocean life in several mass extinctions of Earth’s past. Anoxia went hand-in-hand with CO2 emissions, rising global temperatures, and (often) ocean acidification, a situation which today’s climate change is recreating with uncanny likeness.  Even in normal, healthy oceans, dissolved oxygen levels in middle-depth waters (between about 500 to 1,500 meters) are low enough to discourage most higher animals. This makes those depths an important refuge for krill and other prey species to hang out during the day, safe from visual predators. In the dark of night, these creatures venture nearer the surface to graze on plankton, an impressive commute given their small size. There are places around the world where these oxygen minimum zones are much shallower than elsewhere, and there are also coasts where polluted river water delivers excess nutrients into the sea, causing coastal dead zones, for example in the Gulf of Mexico. But these pale in comparison to times in Earth’s past when ocean anoxia became so intense and widespread that it contributed to the permanent annihilation of many marine species. But if we look at the conditions that led to past “Ocean Anoxic Events” (OAEs), and compare them to our altered climate in the coming decades, the parallels are sobering. There is a complex interplay between a warming climate, its effects on land, delivery of nutrients to the ocean, life’s response to the changes, and chemical results. It works mainly by affecting 2 complementary parts of the ocean carbon cycle: the biological carbon pump, and the remineralization depth. 

    A CO2 Milestone in Earth's History  Earth’s atmosphere is crossing a major threshold, as high levels of carbon dioxide (CO2)—the leading driver of recent climate change—are beginning to extend even to the globe's most remote region. Scientists flying near Antarctica this winter captured the moment with airborne CO2 sensors during a field project to better understand the Southern Ocean's role in global climate. The field project, led by the National Center for Atmospheric Research (NCAR) and known as ORCAS, found that there is still air present in the Southern Hemisphere that has less than 400 ppm of CO2—but just barely. In the north, the atmosphere had first crossed that threshold in 2013, as shown by observations taken at Mauna Loa, Hawaii, by the National Oceanic and Atmospheric Administration and Scripps Institution of Oceanography. Most fossil fuels are burned in the Northern Hemisphere, and these emissions take about a year to spread across the equator. As CO2 increases globally, the concentrations in the Southern Hemisphere lag slightly those further north. "Throughout humanity, we have lived in an era with CO2 levels below 400 ppm," said Ralph Keeling, director of the CO2 Program at the Scripps Institution of Oceanography and a principal investigator on ORCAS. "With these data, we see that era drawing to a close, as the curtain of higher CO2 spreads into the Southern hemisphere from the north. There is no sharp climate threshold at 400 ppm, but this milestone is symbolically and psychologically important."

    Fractures seen in rapidly melting Arctic sea ice, and it's only May -- Even accounting for the accelerating pace of Arctic climate change, sea ice loss in the Far North is running well ahead of schedule. This may signal a near record or record low sea ice extent to come in September. Fractures in the ice cover are evident north of Greenland, which Mark Serreze, the director of the National Snow and Ice Data Center in Boulder, Colorado, told Mashable are "quite unusual" for this time of year. In general, the Arctic has warmed at about twice the rate of the rest of the world, due largely to feedbacks between melting sea ice and the ability of newly-open ocean waters to absorb more heat, and then melt more ice. During this winter, and now continuing into spring, prevailing weather patterns have brought temperature anomalies as high — and occasionally higher than — 30 degrees Fahrenheit above average at times in the Arctic, with repeated waves of extreme warmth flooding into the Arctic Ocean from all directions.  The fracturing of sea ice is especially pronounced in the Beaufort Sea, north of Alaska, where satellite images show the ice rapidly breaking up during the past two weeks. "....This is important because what it's doing is isolating the multiyear ice floes and having them surrounded by open water that can enhance melt of those thicker floes. So that is something to watch this summer, whether or not those floes survive will be important to the September minima," Stroeve said. Computer models show such patterns continuing for the next 10 days, as shown in the animation below. (The orange colors indicate milder than average temperatures):

    ‘Fundamentally unstable’: Scientists confirm their fears about East Antarctica’s biggest glacier -- Scientists ringing alarm bells about the melting of Antarctica have focused most of their attention, so far, on the smaller West Antarctic ice sheet, which is grounded deep below sea level and highly exposed to the influence of warming seas. But new research published in the journal Nature Wednesday reaffirms that there’s a possibly even bigger — if slower moving — threat in the much larger ice mass of East Antarctica.The Totten Glacier holds back more ice than any other in East Antarctica, which is itself the biggest ice mass in the world by far. Totten, which lies due south of Western Australia, currently reaches the ocean in the form of a floating shelf of ice that’s 90 miles by 22 miles in area. But the entire region, or what scientists call a “catchment,” that could someday flow into the sea in this area is over 200,000 square miles in size — bigger than California. Moreover, in some areas that ice is close to 2.5 miles thick, with over a mile of that vertical extent reaching below the surface of the ocean. It’s the very definition of vast. Warmer waters in this area could, therefore, ultimately be even more damaging than what’s happening in West Antarctica — and the total amount of ice that could someday be lost would raise sea levels by as much as 13 feet.“This is not the first part of East Antarctica that’s likely to show a multi-meter response to climate change,” said Alan Aitken, the new study’s lead author and a researcher with the University of Western Australia in Perth. “But it might be the biggest in the end, because it’s continually unstable as you go towards the interior of the continent.”The research — which found that Totten Glacier, and the ice system of which it is part, has retreated many times in the past and contains several key zones of instability — was conducted in collaboration with a team of international scientists from the United States, Australia, New Zealand and the United Kingdom. A press statement about the study from the U.S. group, based at the University of Texas at Austin, described the study as showing that “vast regions of the Totten Glacier in East Antarctica are fundamentally unstable.”

    Scientists Confirm Fears About East Antarctica’s Biggest Glacier -- The Totten Glacier in East Antarctica could cross the point of no return within the next century if global warming continues at the current pace.Because the glacier acts as a stopper for a large catchment area in the massive East Antarctic ice sheet, its disintegration could result in raising the global sea level by 2.9 meters according to a recent study. “Totten Glacier is only one outlet for the ice of the East Antarctic Ice Sheet, but it could have a huge impact. The East Antarctic Ice Sheet is by far the largest mass of ice on Earth, so any small changes have a big influence globally,” co-author Martin Siegert from the Imperial College London told the Independent. For a deeper dive: Independent, Washington Post, Phys.org, Time, IB Times

    Nasa maps show New Orleans is dropping up to two inches a YEAR - Daily Mail Online: Using Nasa airborne radar, Scientists have generated maps that reveal New Orleans and its surrounding areas are sinking at 'highly variable rates'.The highest rates were found upriver along the Mississippi near industrial areas and in Michoud - both experienced annual drops of up to two inches.Although the study names multiple contributing, researchers found the major culprits behind the drop in elevation were groundwater pumping and dewatering. Scientists at NASA's Jet Propulsion Laboratory, UCLA and the Center for GeoInformatics at Louisiana State University, Baton Rouge, collaborated on the study, which covered the period from June 2009 to July 2012. Other notable sinking was found in New Orleans' Upper and Lower Ninth Ward in Metairie, where the measured ground movement could be related to water levels in the Mississippi. And an annual 1.6 inch drop was observed at Bonnet Carré Spillway east of Norco, which is the area's last line of protection against springtime river floods blowing over the levees. Experts call this drop in evaluation 'subsidence', as it is when the Earth sinks as a response to geological or man-induced causes. In the case of New Orleans, it is mostly caused by groundwater pumping and dewatering – surface water pumping to lower the water table, which eliminates standing water and soggy ground. Other contributing factors include withdrawal of water, oil and gas, compaction of shallow sediments, faulting, sinking of Earth's crust from the weight of deposited sediments and ongoing vertical movement of land covered by glaciers during the last ice age.

    Trade Deals and the Environmental Crisis --With the release of leaked documents from the TTIP (Trans-Atlantic Trade and Investment Partnership) ‘trade’ deal Greenpeace framed its conclusions more diplomatically than I will: the actions of the U.S. political leadership undertaken at the behest of American corporate ‘leaders’ and their masters in the capitalist class make it among the most profoundly destructive forces in human history. At a time when environmental milestones pointing to irreversible global warming are being reached on a daily basis, the U.S. political leadership’s response is to pronounce publicly that it favors environmental resolution while using ‘trade’ negotiations to assure that effective resolution never takes place. Those representing the U.S. in these negotiations are mainly business lobbyists who have been given the frame of state power to promote policies that benefit the businesses they represent. The thrust of the agreements is to enhance corporate power through legal mechanisms including patents, intellectual property rights and ISDS (Investor-State Dispute Settlement) provisions that create supranational judiciaries run by corporate lawyers for the benefit of corporations. Shifting the power to regulate greenhouse gas emissions to the corporations producing them precludes effective regulation in the public interest. The position that environmental harms must be proven before regulations are implemented leaves a dead planet as the admissible evidence. U.S. President Barack Obama is both the most articulate American politician urging action on climate change and the central Liberal proponent of the trade agreements. The apparent paradox isn’t difficult to understand— the trade agreements will be legally binding on signatory states while Mr. Obama’s statement of the problem won’t be. As evidence of global warming mounts the Republican tactic of denial is looking more and more delusional. By articulating the problem Mr. Obama poses Democrats as the solution while handing the power to curtail greenhouse gas emissions to business lobbyists and corporate lawyers.

    TTIP vs Europeans: A wake-up call for the Commission – EurActiv.com: The massive opposition to TTIP in Europe should convince the EU to listen to its citizens, as the issue has the potential, in conjunction with other factors like Brexit, to bring the whole idea of the Union into question, writes Nomi Byström. Nomi Byström is a postdoctoral researcher in computer sciences at Aalto University, Finland. In all corners of Europe, opposition to TTIP has swept like wildfire since the deal was announced in 2013. Huge demonstrations in Paris, Berlin, Madrid, Amsterdam, London, Helsinki, Vienna, Warsaw, Ljubljana and Prague show no sign of ending. In its first year alone, 3,263,920 people signed a petition against TTIP by a London-based charity. Not only do Dutch voters seek a referendum on TTIP, opinion polls make sobering reading on where most Europeans stand. Only a few days ago, it was revealed that some 70% of Germans see TTIP as bringing “mostly disadvantages”. There is something deeply disturbing already in the way the draft text has been sought to be kept hidden both from democratically elected representatives of their countries and, of course, from ordinary Europeans. This cannot be acceptable. All the more so because, if the treaty does come into force, it will have a profound impact on all member countries’ residents. While private companies stand to benefit the most, it is the people of the EU who will bear the brunt of the deal, as well as democracy and the environment.To give only a few examples, TTIP could prevent compliance with the Paris Climate Agreement – something that the EU itself worked hard for – and hold a member state hostage to remain with fossil energy sources, despite its aspiration to move to renewables. Moreover, especially to smaller countries, the TTIP mechanism for Investor-State Dispute Settlement (ISDS), even in the guise of the Investment Court System, can become nothing short of an economic and environmental disaster. Not to mention the fact that TTIP may turn out to reduce rather than increase jobs in Europe.

    Why Are We So Bad At Solving Problems? -- I am not very optimistic about the fate of mankind as it is, and that has a lot to do with what I cite here, that while our problems tend to evolve in exponential ways, our attempts at solving them move in linear fashion. That is true as much for the problems we ourselves create as it is for those that – seem to – ‘simply happen’. I think it would be very beneficial for us if we were to admit to our limits when it comes to solving large scale issues, because that might change the behavior we exhibit when creating these issues. In that sense, the distinction made by Dennis Meadows below between ‘universal problems’ and ‘global problems’ may be very useful. The former concerns issues we all face, but can -try to – solve at a more local level, the latter deals with those issues that need planet-wide responses – and hardly ever get solved if at all. The human capacity for denial and deceit plays a formidable role in this. I know that this is not a generally accepted paradigm, but that I put down to the same denial and deceit. We like to see ourselves as mighty smart demi-gods capable of solving any problem. But that is precisely, I think, the no. 1 factor in preventing us from solving them. And I don’t see that changing: we’re simple not smart enough to acknowledge our own limitations. Therefore, as Meadows says: “we are going to evolve through crisis, not through proactive change.” And here it is in its context: ‘Limits to Growth’ Author Dennis Meadows ‘Humanity Is Still on the Way to Destroying Itself’

    Naomi Klein: Radical Solutions Only Proper Response to 'Unyielding Science-Based Deadline' -- In a public lecture delivered last week and published online Tuesday, award-winning Canadian author and social justice activist Naomi Klein argues the dire situation of climate change, coupled with failing political and economic systems, is creating a world where nobody will be left unaffected. "It is not about things getting hotter and wetter but things getting meaner and uglier, unless we change the corrosive values that are pitting people against each other," Klein said last Wednesday. In its review of the lecture, RT.com noted how Klein took "inspiration from Said’s famous observation that vast swathes of humanity have been classed as 'the other' – or less than human – she warned the climate crisis is entrenching inequality across the globe."In her construction, the many neglected populations — either left behind or exploited by global capitalism's rapacious appetite for growth and profit—reside in what she refers to as 'sacrifice zones' in which pollution, extreme weather events, endemic poverty, and political disempowerment have all become commonplace. But it won't just be the poor and disenfranchised who pay the price. "Wealthy people think that they are going to be OK, that they will be taken care of. But we all will be affected," Klein said.

    Civil disobedience is the only way left to fight climate change - Right now, thousands of people are taking direct action as part of a global wave of protests against the biggest fossil fuel infrastructure projects across the world. We kicked off earlier this month by shutting down the UK’s largest opencast coal mine in south Wales. Last Sunday, around 1,000 people closed the world’s largest coal-exporting port in Newcastle, Australia and other bold actions are happening at power stations, oil refineries, pipelines and mines everywhere from the Philippines, Brazil and the US, to Nigeria, Germany and India. This is just the start of the promised escalation after the Paris agreement, and the largest ever act of civil disobedience in the history of the environmental movement. World governments may have agreed to keep warming to 1.5C, but it’s up to us to keep fossil fuels in the ground.  With so many governments still dependent on a fossil fuel economy, they can’t be relied upon to make the radical change required in the time we need to make it. In the 21 years it took them to agree a (non-binding, inadequate) climate agreement, emissions soared. It’s now up to us to now hold them to account, turn words into action and challenge the power and legitimacy of the fossil fuel industry with mass disobedience. It is unjust that corporations and governments can commit crimes against the planet and society without retribution, while those fighting to prevent such crimes are punished, murdered and incarcerated. But the number of people willing to challenge this is growing. And if we really want climate justice, ;protest in the pursuit of this must be normalised; we must support rather than denounce those willing to put themselves on the line, since we all benefit from their actions. Not everyone is in a position to take civil disobedience, but we can all get behind it.

    Energy Department Suspends Funding for Texas Carbon Capture Project, Igniting Debate -- The Obama administration has suspended funding for a large, troubled carbon capture and storage project, a decision being challenged by politicians from both parties and environmental advocates alike. While the Texas Clean Energy Project is not officially dead, continued refusal by the Department of Energy to extend any more money would effectively kill it, according to its builder. That would make it the fifth CCS project the DOE has backed away from. The agency took a tough stand in February when it denied a request by the project's developer, Summit Texas Clean Energy, for an $11 million advance from its pot of promised federal money. In its budget request for the fiscal year 2017, which begins October 1, the DOE asked Congress to strip the $240 million pledged to the project from the agency's Clean Coal Initiative and use it for other research and development efforts instead. A final vote on the budget will come late this year. In a world that continues to burn fossil fuels, CCS is seen as critical to avoid the most calamitous consequences of global warming. The Clean Coal Initiative had already been under audit by the DOE's inspector general's office, which grew alarmed by how the agency had allowed the Texas project to drag on. The IG, an independent auditing office, issued a special report on it in April.

    Sierra Club Statement on the U.S. International Trade Commission’s TPP Study --  Today the U.S. International Trade Commission (ITC) released a study on the potential impacts of the Trans-Pacific Partnership (TPP), as required by law. The report projects that the controversial trade deal would result in a decline in U.S. manufacturing due in part to an increase in manufactured imports in some sectors from Vietnam and Malaysia, where production spurs far more climate pollution than in the U.S. It also notes the controversy surrounding the TPP’s conservation provisions, which are too weak to actually curb environmental abuses in TPP countries. The report further acknowledges broad concern that the TPP would empower polluters to sue the U.S. government in private tribunals over climate and environmental protections. In response, Ilana Solomon, director of the Sierra Club’s Responsible Trade Program, released the following statement: “Today’s U.S. International Trade Commission report offers further evidence that the Trans-Pacific Partnership would be a disaster for working families, communities, and our climate. ITC reports have a record of projecting economic benefits of trade agreements that have failed to materialize, so it is noteworthy that even the overly-positive ITC acknowledges that the TPP would have real costs and estimates economic benefits that are slim. “One of the costs of the TPP indicated by today’s report is that, by shifting U.S. manufacturing to countries with carbon-intensive production, the deal not only would cost U.S. manufacturing jobs, but also would spur increased climate-disrupting emissions. “Today’s report is right to note the broad controversy over TPP rules that would empower major polluters to sue the U.S. government in private tribunals over climate and environmental protections. The report gives members of Congress further reason to reject the polluter-friendly TPP so that we can build a new model of trade that protects communities and the climate.”

    Public Lands, National Parks Under Threat of Privatization: Get Ready for the Grand Canyon Theme Park and Convention Center!     Since the public lands of the United States belong to all of us, what say we see what the various greedy gombeens of our political and economic elites have been up to on our land?  Oh, let's start here, where the Bozeman Daily Chronicle has alerted us to the fact that there are members of the House of Representatives who are anxious to give us the General Goods Glacier National Park. Or something. Over the past several years, anti-conservation voices in Congress, led by Rep. Rob Bishop of Utah, have sought to gut the Antiquities Act and prevent presidents from protecting our public lands and heritage. This is almost unbelievable considering that Americans of all stripes support protecting these places. In addition, our public lands support a $650 billion outdoor recreation industry that includes fishing on our nation's rivers, streams, lakes and oceans. In addition to attacks on the Antiquities Act, public lands critics in Congress are also pushing to privatize, sell off and transfer to states our shared national lands. This is an antithesis to our democracy. Proponents of transferring our shared public lands to the states often argue that these lands will still be protected. However, the reality is different as states often do not have the administrative capacity or budget to manage these lands at the same level of protection offered by the federal government. Keep an eye on Bishop. He just tried a neat trick with the help of Paul Ryan, the zombie-eyed granny-starver from the state of Wisconsin and first runner-up in our most recent vice-presidential pageant. The Congress managed to reach a "bipartisan deal"—grab your wallets, immediately—regarding the economic crisis in Puerto Rico. Bishop was behind a proposal to turn federal lands on the island of Vieques over to Puerto Rico, which is exactly what he wants to do in Utah with, say, Zion National Park. The Democrats working on the bill spotted this, however, and stripped that provision from the relief package Bishop was pitching. If you're wondering what Bishop's true feelings are, here's a little video for your edification.

    China’s latest idea for cleaning up air pollution could be horrible for climate change -- China's biggest cities are choking on smog and air pollution emitted by nearby coal plants, and residents are fed up. One way to fix this is to switch over to cleaner energy sources (solar, wind, nuclear, or even natural gas), which has the added benefit of cutting carbon-dioxide output from the world's largest emitter. But not always! In fact, one of China's big proposals for cleaning up air pollution could, paradoxically, make climate change even worse.  Reuters reports that China has just approved three new plants in its western provinces that would turn coal into synthetic natural gas. The idea is that this gas would then be shipped to population centers in the east, where it would burn much more cleanly in power plants and detoxify the air in cities like Beijing. Except there's a huge catch: The coal-to-gas (CTG) plants themselves are highly energy-intensive and can create far more CO2 overall than coal alone. It's basically swapping less smog for more climate change. China currently has three CTG plants operating, four under construction, three newly approved, and plans for another 17 in preparation. If even a fraction are built — a big "if" — that could have a sizeable impact on global warming.

    James Lovelock's One Last Chance to Save Humanity From Climate Change: Burying Large Amounts of Charcoal in the Ground -- For those that don't know who James Lovelock is here's the one sentence bio: Originator of the Gaia hypothesis, chemist, did work on atmospheric chlorofluorocarbons which eventually led them from being banned, advocate of nuclear power. Which is to say, that when James Lovelock says humanity only has one chance left not to get annihilated by the effects of climate change in the 21st century, it's worth shutting up and listening to what the man says.After saying that there's "not a hope in hell" that we'll be able to work out some global system to deal with climate change similar the global CFC ban in time to save ourselves from climate change, Lovleock called most of the "green" efforts to deal with climate change verge on being gigantic scams, Carbon trading, with its huge government subsidies, is just what finance and industry wanted. It's not going to do a damn thing about climate change, but it'll make a lot of money for a lot of people and postpone the moment of reckoning. I am not against renewable energy, but to spoil the decent countryside in the UK with wind farms is driving me mad. Lovelock went on to say that plans to sequester carbon were a waste of time, crazy and dangerous. They would take too much time and too much energy. On nuclear energy he said that is was a way to solve energy problems, but it "is not a global cure for climate change. It is too late for emissions reductions measures." Except this one thing...Bury Massive Amounts of Charcoal to Sequester Carbon

    Meet Brazil’s new cabinet: the science minister is a creationist, agriculture minister deforested the Amazon: The new Brazilian president’s first pick for science minister was a creationist. He chose a soybean tycoon who has deforested large tracts of the Amazon rain forest to be his agriculture minister. And he is the first leader in decades to have no women in his Cabinet. The new government of President Michel Temer — the 75-year-old lawyer who took the helm of Brazil on Thursday after his predecessor, Dilma Rousseff, was suspended by the Senate to face an impeachment trial — could cause a significant shift to the political right in Latin America’s largest country. “Temer’s government is starting out well,” Silas Malafaia, a television evangelist and author of best-selling books like “How to Defeat Satan’s Strategies,” wrote on Twitter. Then there is the issue of race. After a long stretch in which Brazil pressed ahead with affirmative action policies, Temer’s critics point out the lack of Afro-Brazilians in his Cabinet, especially when nearly 51 per cent of Brazilians define themselves as black or mixed race, according to the 2010 census. “It’s embarrassing that most of Temer’s Cabinet choices are old, white men,” said Sérgio Praça, a political scientist at Fundação Getulio Vargas, an elite Brazilian university. He drew a contrast with Justin Trudeau, the Canadian prime minister, who formed a Cabinet in which half of the 30 ministers are women.

    An Ill Wind: Open Season on Bald Eagles - WSJ -- The U.S. Fish and Wildlife Service, the agency charged with protecting bald and golden eagles, is once again trying to make it easier for the wind industry to kill those birds. Two weeks ago the agency opened public comment on “proposed improvements” to its eagle conservation program. It wants to extend the length of permits for accidental eagle kills from the current five years to 30 years. The changes would allow wind-energy producers to kill or injure as many as 4,200 bald eagles every year. That’s a lot. The agency estimates there are now about 72,434 bald eagles in the continental U.S. Let’s hope Judge Lucy H. Koh is keeping an eye out. Last August, Ms. Koh, a federal judge in California, shot down the Fish and Wildlife Service’s previous “improvements.” In a lawsuit brought by the American Bird Conservancy, Judge Koh ruled that the agency had violated the National Environmental Policy Act by declaring that it could issue 30-year permits without first doing an environmental assessment. Now the agency has drafted an environmental review and is still pushing for the 30-year permits. Yet as Judge Koh noted in her ruling, one of the agency’s own eagle program managers warned that 30-year permits are “inherently less protective” and “real, significant, and cumulative biological impacts will result.”  A 2013 study in the Wildlife Society Bulletin estimated that wind turbines killed about 888,000 bats and 573,000 birds (including 83,000 raptors) in 2012 alone. But wind capacity has since increased by about 24%, and it could triple by 2030 under the White House’s Clean Power Plan. “We don’t really know how many birds are being killed now by wind turbines because the wind industry doesn’t have to report the data,” says Michael Hutchins of the American Bird Conservancy. “It’s considered a trade secret.”

    Fire in The Hole!  - The Bridgeton Landfill, about 20 miles northwest of St. Louis, is in many ways a typical pile of trash. Like all modern sanitary landfills, Bridgeton is a layer cake of garbage and dirt sitting on a base of clay, sand and plastic lining, all of it covered with a frosting of clay, plastic liner, soil and grass. But for the last six years, there’s been something wrong at the core of Bridgeton — a wrongness that has led to lawsuits, angry neighborhood activists and national media attention. It’s confusing and scientifically strange — and all those problems are exacerbated by the nearby presence of a big old pile of nuclear waste.Down beneath the layers of trash bags, banana peels, Chinese takeout cartons, diapers and dirt, the Bridgeton Landfill has become very hot. Normally you’d expect the process of decomposition to heat the interior of a landfill to around 140 degrees Fahrenheit. Parts of the Bridgeton landfill, in contrast, have reached temperatures as high as 260. That 120 degrees is the difference between a healthy landfill, decomposing merrily along, and one in which the systems of safe waste management are falling apart. And then there’s the bit about the radioactive waste. Bridgeton is not the only landfill with a hot spot, but it is the only one with a hot spot that’s around 1,200 feet away from about 8,700 tons of radioactive barium sulfate — a byproduct of uranium processing. It came from a factory in St. Louis that produced uranium for the first self-sustained nuclear chain reaction. That material, mixed with dirt, is part of the layers that make up the nearby West Lake Landfill. The Environmental Protection Agency, which manages West Lake as a Superfund site, believes that if the radioactive waste becomes hot, it could release cancer-causing radon gas into surrounding neighborhoods. Suffice it to say there are many reasons people want Bridgeton Landfill to cool down. Unfortunately that’s not going to be easy. Bridgeton may be a typical pile of trash, but this is no typical trash fire. The heat exists 40 to 140 feet below the surface, in places where Republic Services believes no oxygen is present. It exists in places that are wet, soaked with leachate. Those are not conditions where fire should exist, by most common-sense standards.

    Watchdog group files lawsuit over cleanup at federal nuclear lab: (AP) — A watchdog group is suing the federal government and managers of one of the nation’s premier nuclear weapons laboratories over missed deadlines for cleaning up hazardous waste left behind by decades of research. Nuclear Watch New Mexico filed its lawsuit in federal court, naming the U.S. Department of Energy and Los Alamos National Security LLC as defendants. The lawsuit points to a dozen violations. It says the defendants are liable for hundreds of thousands of dollars in civil penalties for failing to comply with a 2005 cleanup agreement with state officials. The Department of Energy did not immediately respond Tuesday to a request for comment. The agency typically doesn’t address pending litigation. The state recently proposed changes to the cleanup plan. The public has through the end of May to comment.

    Showdown over federal coal leasing reform at Casper hearing (AP) — Emotions ran high in a showdown Tuesday between environmentalists and the mining industry over coal-leasing reform and whether the federal government should increase how much it charges corporations to mine federal reserves. On one side, landowner advocates and environmentalists told a U.S. Bureau of Land Management public hearing that change is overdue — up to and including halting coal mining to limit climate change. Others in this coal-friendly city rejected any change to the leases amid a three-year federal leasing moratorium Interior Secretary Sally Jewell announced in January that has added uncertainty amid coal bankruptcies, layoffs and mine closures. No justification exists for higher federal royalties, Cloud Peak Energy Vice President Richard Reavey said at a pro-coal rally held by the Wyoming Mining Association before the hearing. “Here we are at another one of the secretary’s Soviet-style show trials, where the verdict has already has been decided and the sentence already issued. The verdict is that coal will be found to have been guilty of delivering reliable, affordable electricity. Guilty of providing well-paying jobs in flyover states that don’t support the Obama regime. Guilty of trying to make the American economy stronger,” Reavey said. “And the sentence? The sentence is keep it in the ground,” he said. Miners and others at the rally held signs that read “No New Electricity Tax!” and “Coal supports my family.”  The Bureau of Land Management’s hearing was the first of six planned at the outset of the moratorium. Any changes that result — likely hinging on who is elected president this fall — will have a big effect on whether the U.S. coal industry continues to coalesce around the huge surface mines of northeast Wyoming’s Powder River Basin.

    Appellate court backs North Royalton's fight against mandatory pooling in driller's plan to frack for new well - cleveland.com --  A state appellate court on Tuesday sided with North Royalton in a three-year fight to thwart an oil and gas driller who wants to frack for a new gas well in the city.  The 10th District Ohio Court of Appeals agreed with a lower court and the Ohio Oil and Gas commission that the city's safety concerns were not properly considered before the chief of the Division of Oil and Gas Resources Management ordered the city's property be pooled with other land owners, clearing the way for the driller to proceed.  The case arose after Richard Simmers, the chief of the state's Division of Oil and Gas Resources Management, part of the Department of Natural Resources, approved a mandatory pooling order and drilling permit for Cutter Oil, a company with more than a dozen wells in North Royalton. The decision would allow Cutter to drill its first horizontal well in North Royalton.   State regulations require at least 20 acres around the drill site. If a driller cannot get land owners to go along voluntarily, the driller can ask the state to order a mandatory pooling arrangement.  In December 2013, Simmons ordered the mandatory pooling agreement. About 2 acres of city property was included in acreage. North Royalton, objecting to the mandatory pooling request, had sought to raise safety concerns with a state advisory council that collects information for the resources management division chief. The well would be Cutter's first to involve horizontal drilling and fracking.  The city wanted to present information about three incidents:

    • In 2008 a 700-foot long, one-half inch thick metal rod was ejected under pressure from a Cutter well near an elementary school and oil was sprayed from the well. 
    • In 2011 a production line at another well leaked oil into the city's storm sewer leading to Chippewa Creek. 
    • In 2012 a natural gas release at another well forced some residents to be evacuated.

    The advisory council focused solely on whether the land owners, including the city, were adequately compensated under the agreement, effectively negating the safety concerns. 

    'Is the water safe?' Some residents worry about fracking - Cleveland 19 News (WOIO) - Fracking for oil and gas in Ohio is on the rise.More fracking is bringing fears of water contamination for some residents who live nearby. Hydraulic fracking injects large amounts of water mixed with sand and chemicals underground to force open shale rock, releasing oil or gas.  It's what comes up next that worries some residents in Portage County. Fracking wastewater, also known as brine, contains toxic chemicals-- from barium to copper and arsenic. Cleveland 19 News is asking-- where does the waste go and is our drinking water safe? Fracking is big business in Portage County. Farms and small towns dot the landscape of Portage County. It's about 500 square miles, home to over 161,000 people. It's also one of the top 10 counties for fracking wastewater dumping in Ohio. Cleveland 19 News crunched the numbers and found oil and gas companies pumped nearly 28 million gallons into injection wells in Portage County last year. The U.S. EPA says underground injection wells are the safest method of wastewater disposal. The Ohio Department of Natural Resources regulates the industry. Officials say no cases of ground water contamination have been caused by injected fluids in Ohio. But that doesn't have residents like Fran Teresi convinced. Garrettsville resident weighs in on the issue.

    Two sides of Wayne forest drilling issue are night & day - Supporters and opponents of leasing oil and gas drilling rights on the Marietta Unit of the Wayne National Forest both are making their voices heard during the ongoing comment period for a draft Environmental Assessment (EA) on the issue. Their positions couldn’t be more different, though even drilling supporters aren’t completely happy with the draft EA, which found no “significant impact” from leasing forest land to drilling companies. The comment period, during which parties can submit their opinions on the proposed drilling-lease program for 18,000 acres in the Wayne’s Marietta Unit, extends till May 29, unless the federal Bureau of Land Management grants opponents’ request to extend the comment period. Four groups who oppose drilling on the national forest held a press conference at the U.S. Forest Service’s Wayne National Forest Headquarters southeast of Nelsonville Wednesday morning, restating their opposition and requesting an extension of the comment period. Though the event occurred after The NEWS’ print deadline for Thursday’s issue, organizers issued an embargoed news release Tuesday afternoon with anticipated comments from group members. Meanwhile, two landowner groups who strongly support leasing Wayne National Forest land and mineral rights for oil and gas drilling issued news releases last week. The releases included the text of letters they hope leasing supporters will sign and submit to the BLM, which is overseeing the EA and its approval process. The preliminary “finding of no significant impact” does not become official until after the draft EA issued by the federal Bureau of Land Management becomes final. After the comment period is over, pertinent federal officials will have to review public input before finalizing the EA and the related finding of no significant impact.

    Spills require careful cleanups of contaminated soil - When tanker trucks crash and oil rigs rupture, a cleanup system kicks in to protect the environment from petroleum, chemicals and drilling fluids. Those contaminants can’t stay on the roadside or in a field, tainting the soil and potentially reaching waterways, so specialized crews dig them up and cart them away. An example is a recent brine spill in Morrow County. A train slammed into a truck hauling wastewater from an oil and gas well near Mount Gilead, shearing the truck in half and spilling diesel fuel and 3,200 gallons of drilling wastewater across the rail bed and into a nearby farm. A team from Environmental Management Specialists Inc., which has offices across Ohio and in Indianapolis, was called in.  The Morrow County waste came from a conventional oil and gas well, not from a well that had been developed through hydraulic fracturing. The “fracking” process involves injecting toxic chemicals and sand into a well at high pressure to crack rock formations and release oil and gas. Lee said no hazardous materials were at the Morrow County crash site. Nick Adams, business-development manager at Environmental Management Specialists, said workers used an excavator to dig up contaminated soil and dump it into trucks. Soil affected by only brine water could end up in a landfill; soil contaminated with diesel fuel probably would go to a soil-recycling facility, Adams said. Had the spill involved hazardous waste, that would have had to go to a special landfill or incinerator. The EPA lists 20 facilities in Ohio that accept hazardous waste; none is in Franklin County. In the case of the Morrow County spill, though, a hazardous-waste facility was unnecessary. “ There weren’t a whole lot of safety concerns” from that spill, Adams said. Franklin County has a soil-recycling facility: Ohio Soil Recycling on Columbus’ South Side.  Ohio Soil then sprays the soil with concentrated microbes, which eat away at contaminants, essentially speeding up what nature eventually would do on its own. The process can take months. At Ohio Soil, which is built on an old Franklin County landfill and Superfund site, the soil stays there: It is used to level out the old spaces.

    Oil and gas company founded by Aubrey McClendon to close: (AP) — American Energy Partners, the Oklahoma City-based oil and natural gas company founded by the late energy tycoon Aubrey McClendon, is shutting down. The company’s leadership team released a statement Wednesday saying it had decided to wind down operations but the five independent companies it had launched wouldn’t be affected. McClendon co-founded Chesapeake Energy and served as its CEO before stepping down in 2013 and founding American Energy Partners. He died in a fiery car crash in March, a day after being indicted on a bid-rigging charge. Police at the time declined to say whether they thought McClendon meant to crash. The statement says the decision to close was made in consultation with McClendon’s family.

    Fracking in Lake Erie watershed too risky: Sen. Sean Wiley --- Earlier this month, I shared with Erie Times-News readers our need for a moratorium on unconventional natural gas drilling in the Lake Erie watershed. I made that determination after a local Senate Policy Committee hearing at which testimony was presented that outlined potential irreparable impact to our watershed area, a risk that is simply too great to take.  Pennsylvania plays an important role in the natural gas drilling industry and had seen a boom in job creation, community revitalization and economic impact tied directly to this industry, all facts that cannot be discounted. That being said, the Lake Erie watershed is unique and has to be treated as such in this realm. Unconventional drilling -- or "'fracking" -- is much more invasive than conventional gas and oil drilling and requires millions of gallons of water each time a well is fracked. There exists a potential for well leakage directly into our aquifers and the disposal of fracking wastewater into our water system. Seismic activity directly related to drilling has been reported, along with soil contamination, noise pollution, odor complaints and health concerns. There are also proven air-quality issues, and recently released health impact studies indicate a direct correlation between increased incidents of medical diagnosis and individuals with exposure to fracking sites. None of these potential implications can be ignored. This community relies on sources of drinking water from shallow dug wells, deeper drilled wells and surface water sources throughout the watershed.  Our residents and millions of visitors each year enjoy both Lake Erie and the bay for water activities.  There are not currently any active unconventional wells in this targeted area, and the drilling industry has seen a downturn in recent years. As this commodity is market-driven, there is likely to be a resurgence in the future. To be prepared for the potential that the watershed becomes part of that revival, it is imperative to work to enact the moratorium now. To be clear, this moratorium would apply only to unconventional well drilling in the Lake Erie watershed and would not affect existing conventional gas and oil wells.

    Appalachian Basin becoming US natural gas stronghold - In 2010, the Marcellus Shale in Pennsylvania and West Virginia was dubbed the Beast in the East by analysts because of its impressive natural gas treasure. In 2013, Ohio’s neighboring Utica Shale was described as Son of the Beast in the East by analysts because of its growing natural gas potential. The growth of drilling in the Marcellus-Utica shales and the resulting natural gas boom are changing the American energy picture, even though shale drilling is slowing down across the United States due to low commodity prices. Since 2012, Ohio, Pennsylvania and West Virginia have accounted for 85 percent of U.S. shale gas growth, according to the U.S. Energy Information Administration. Shale gas today represents two thirds of U.S. natural gas production, the agency reported recently. The three-state region, also known as the Appalachian Basin, has switched from being among the biggest users of natural gas to its biggest producer. Natural gas from the Utica and Marcellus shales is heading to Virginia, the Carolinas, New England, the Gulf Coast, St. Louis, Chicago, Detroit and Ontario. Pipelines are being reversed to get it to market. Soon it will be heading to American and Canadian ports to be turned into liquified natural gas (LNG) and shipped in tankers to Europe and Asia Drilling began in the Marcellus Shale in 2003 in Pennsylvania. It followed in West Virginia. There has been little Marcellus drilling in Ohio. The rock in Ohio is too thin. But in 2010 drilling began in the deeper Utica in Ohio. That is just beginning in West Virginia and Pennsylvania. Such deeper drilling is more costly with a greater risk and problems. Ohio is about seven years behind Pennsylvania and West Virginia in drilling development, experts say. To date, 14,022 shale wells have been drilled in the Utica-Marcellus in an arc that runs from southern Western Virginia to the north into Ohio and Pennsylvania and then east into northern Pennsylvania.

    Many natural gas-fired power plants under construction are near major shale plays -  (EIA) Natural gas-fired power generation increased 19% in 2015, because of low natural gas prices, increased gas-fired generation capacity, and coal power plant retirements. EIA's May 2016 Short-Term Energy Outlook forecasts that this year, natural gas-fired generation will exceed coal generation in the United States on an annual basis.  Growth in natural gas-fired generation capacity is expected to continue over the next several years, as 18.7 gigawatts (GW) of new capacity comes online between 2016 and 2018. Many of the new natural gas-fired capacity additions in development are near major shale gas plays. The Mid-Atlantic states and Texas have the most natural gas-fired capacity additions under construction with planned online dates within the next three years (2016–18). Many of the natural gas capacity additions are concentrated around the Marcellus and Utica shale regions, largely located in Pennsylvania, West Virginia, and Ohio. These states have been leading the growth in U.S. natural gas production over the past several years, driven by increasing production in the Marcellus and Utica shales. Natural gas infrastructure has been added in these regions to transport natural gas to population centers along the Atlantic Coast. Among the states near the Marcellus and Utica shales, Virginia accounts for the largest cumulative additions of gas-fired capacity over the 2016–18 period, with 2.3 GW of gas-fired capacity under construction, followed by Ohio with 1.9 GW, Pennsylvania with 1.8 GW, and Massachusetts with 0.7 GW, according to EIA's Electric Power Monthly. Expanding pipeline networks in the Northeast are increasing takeaway capacity from the Marcellus and Utica shales, which will support the growth in natural gas-fired generating capacity. In 2015, 6.0 billion cubic feet per day (Bcf/d) of new pipeline takeaway capacity in the Northeast was commissioned to transport natural gas to the east, south, and west of the Marcellus and Utica shales. In 2016, 2.2 Bcf/d of new pipeline capacity currently under construction is scheduled to come online in the Northeast, according to EIA data on natural gas pipeline infrastructure.

    Stubborn natural gas supply imperils best U.S. rally in 14 years - Natural gas futures have soared since March on speculation that supplies are finally falling after a decade of gains. Production numbers tell a different story. Prices have gained about 30 percent from a 17-year low in March, the biggest advance for the period since 2002, as investors including Greenlight Capital’s David Einhorn bet the market would put a dent in supply. While money managers turned bullish on the fuel last month for the first time since 2014, government forecasts show output climbing for the next seven quarters. Explorers including Cabot Oil & Gas Corp. and EQT Corp. outpaced their own production outlooks. Drillers are beating estimates as the price collapse forced them to become leaner, producing more fuel with the fewest rigs since at least the 1980s. Gas output from the Marcellus shale in the U.S. East is pushing stockpiles toward an all-time high. A rebound in crude oil prices threatens to boost supplies of gas extracted as a byproduct. “The Marcellus is still going like gangbusters,” said Stephen Schork, president of energy consulting company Schork Group Inc. in Villanova, Pennsylvania. “We’re probably going to see some oil production rising as prices improve, which means associated gas production will also come back.” Next-month gas futures have climbed from an intraday low on March 4. Futures for 2017 have risen even more, surging 36 percent to trade above $3 per million British thermal units.

    Renewables, LNG capacity growth to mute US gas price strength: economist - - The US electric generation fleet's natural gas demand is likely to grow to 15.9 Tcf by 2030, but surging renewables and global LNG liquefaction capacity may mute any gas price impact, a Texas economist said Thursday. In the most recent year for which complete data is available, power generation consumed 9.7 Tcf of natural gas, according to the US Energy Information Administration. Gurcan Gulen, senior economist at the University of Texas Bureau of Economic Geology's Center for Energy Economics, made a presentation entitled "Going through another cycle: implications for the power sector and Texas economy" at a Gulf Coast Power Association luncheon in Houston. In that presentation, Gulen noted that four non-governmental organizations and large companies such as Microsoft and Google parent company Alphabet announced on May 12 the formation of a Renewable Energy Buyers Alliance to deploy 60 GW of new corporate renewable energy capacity by 2025."If we think the natural gas prices are going to be low, so we build a lot of natural gas generation, and we have a lot of renewables on the market, so it doesn't need natural gas generation, what's going to happen to natural gas prices?" Gulen said. "They're going to tank further." Gas market participants are asking whether US LNG exporters "can play a balancing role" to keep US gas prices at a sustainable level, Gulen said, adding: "I don't think so."

    Utilities seek to expand gas reserve - As U.S. electric utilities become increasingly dependent on natural gas-fired power, they’re looking for ways to mitigate the risk of future gas-price volatility. One hedging option that’s gained some attention lately is direct utility investment in natural gas production assets, the idea being that by acquiring gas-in-the-ground—especially now, when gas prices seem low and many financially strapped gas producers are eager to make deals—utilities can lock in the price of at least part of the future gas needs. Today, we consider the latest efforts by electric utilities to expand their gas hedging strategies—and hold the line on future gas prices—by including direct investments in gas production assets. [...] Thanks to tougher environmental rules, low natural gas prices and other factors, electric utilities aren’t just building more gas-fired generating capacity, they’re running their gas-fired units a lot more than they used to. Utilities also are retiring many of their older, smaller coal-fired units—the ones that, while not very efficient, could be relied on in the heat of summer and cold of winter. All that has left utilities more dependent than ever on gas-fired generation and, with that, more exposed than ever to the risk of natural gas price spikes. Many utilities have regularly engaged in short-term hedging, mostly with the aim of reducing gas-price volatility. More recently, though, electric utilities have been considering—and actually making—investments in gas reserves/production assets or making long-term commitments to buy gas, figuring that 1) natural gas prices are at or near their lowest prices in years; 2) many oil and gas producers, squeezed by low prices for their commodities, are looking for deals, and 3) gas-reserve investments by utilities might be eligible for regulator-approved rates of return (typically about 10%/year), just like the rates of return utilities are permitted to earn on their investments in power plants and transmission lines.

    Goldman Sachs emerges as growing natural gas player - FT -- Goldman Sachs has quietly overtaken Chevron and ExxonMobil to become one of the biggest natural gas merchants in North America, expanding in physical commodities trading even as other banks pull back. The Wall Street institution last year bought and sold 1.2tn cubic feet of physical gas in the US — equal to a quarter of the country’s residential consumption and more than twice its volumes in 2013, a recent regulatory filing revealed. Goldman is now the seventh-largest gas marketer in North America, according to Natural Gas Intelligence. The gas utility serving households in Buffalo, New York last year purchased 11 per cent of its supply from Goldman, a securities filing showed. Power plants that produce electricity for copper mines in northern Mexico also buy gas from the bank, according to government reports and industry executives. Goldman’s commodities division, known as J Aron, is listed as a shipper on huge pipelines including the Texas Eastern, which last month ruptured into a fireball that critically injured a man. Goldman has grown the business even as banks await fresh rules on handling physical commodities such as oil, gas and aluminium. The Federal Reserve has said lethal gas explosions illustrate the risks banks face. Dealing in physical commodities is exempt from the Volcker rule ban on banks’ proprietary trading passed after the financial crisis. In a letter to the Fed in 2014, Goldman said the physical market, not financially settled derivatives, was the main way gas was traded at certain locations. While the bank has sold off infrastructure such as power plants and metals warehouses, its rise as a gas middleman highlights a commitment to commodities. Prominent Goldman leaders including Lloyd Blankfein, chief executive, are J Aron alumni. “The fact that J Aron’s business is growing in the face of low volatility in physical natural gas markets is noteworthy. Many players have downsized,”

    Indiana University research: Fracking support grows when fees stay local - IU Bloomington -- As voters in several states consider controlling oil and gas development in their communities, new Indiana University research offers valuable insight for developers as well as local and state officials. The IU researchers determined that oil and gas development using fracking is greeted with more local support when the fees paid by developers go to municipal governments rather than into county or state general funds.“There are two reasons for this,” said researcher Naveed Paydar of IU’s School of Public and Environmental Affairs. “The public prefers to give more responsibility to local units of government because they are confident they’re the people who can best handle any problems resulting from development. And the public also has greater trust that the revenues will be spent by their municipal government in ways that benefit the local economy.” The conclusions are based on an in-depth public opinion survey of residents in Pennsylvania counties where there is oil and gas development. The research, the first to assess the association between public revenues and local support, is described in "Fee disbursements and the local acceptance of unconventional gas development: Insights From Pennsylvania," published by the journal Energy Research & Social Science.

    Will New Chemical Law Hide the Fracking Industry's Toxic Secrets? -- The makeup of hydraulic fracturing fluid—the slurry of chemicals, sand and water injected deep underground to free petroleum deposits trapped by bedrock—is a closely guarded secret of the oil and gas industry. Fracking has contaminated drinking water and is linked to health problems in people living near drilling sites, and also to triggering earthquakes. But federal law doesn't require drillers to disclose what's in their fracking fluid. Although some states have disclosure laws—California's is the most comprehensive—most still allow some form of "trade secret" protection and don’t require the generation, submission or publication of health and safety data. What exactly is in that toxic stew of fracking chemicals? What chemicals are used at which drill sites? What potential health risks do nearby communities face?  The answers are hard to come by because of deficiencies in our federal toxics law, the Toxic Substances Control Act of 1976. Even basic information such as how the chemical is used can be claimed as confidential. Last month the Partnership for Policy Integrity released an exposé that captures the scope of the problem. Through a Freedom of Information Act request, the organization obtained Environmental Protection Agency data on 105 different chemicals reportedly used in fracking and drilling. The report found:

    • Health studies were only available for just two of the chemicals.
    • EPA expressed concerns about 88 chemicals related to health effects such as skin and eye irritation, respiratory effects, neurotoxicity, kidney toxicity and development toxicity. However, EPA requested health studies for only five of the chemicals.
    • Industry claimed trade secret protection on things like chemical name, product names, chemical uses, production volumes and likely exposures for 75 of the chemicals.  

    Congress has the opportunity to finally remove the shroud of secrecy surrounding fracking chemicals. Key members are currently working to reconcile two bills passed by the House and the Senate last year that would update the law.

    Climate activists protest oil shipments at Port of Albany: (AP) — Climate activists from around the Northeast gathered Saturday at a key crude oil shipment hub on the Hudson River in upstate New York to denounce fossil fuels and promote an accelerated transition to renewable energy sources. The action targeting crude-by-rail trains and oil barges at the Port of Albany is part of Break Free 2016, a two-week series of actions targeting key fossil fuel projects around the globe to protect local communities and fight climate change. About 40 activists from numerous groups attempted to line up across the river in kayaks Friday to practice blocking oil barges, but police and several U.S. Coast Guard boats herded them into a cluster that paddled past a riverfront park where a banner saying “Water not oil” was hung. Police blocked access to a railroad bridge over the river where activists had planned to unfurl banners. Another group on Saturday sat on tracks used by crude oil trains headed to the port. Police did not report any arrests as of midday Saturday. Albany was chosen as the focal point for activists in the Northeast from Pennsylvania to Maine because it’s a hub for crude-by-rail shipments from North Dakota’s Bakken Shale region to East Coast refineries. For three years, residents of a low-income housing project beside the oil train route have been fighting expanded crude oil shipments at the port by Global Partners, a fuel transport firm based in Waltham, Massachusetts. “We have to stop these explosive bomb trains from rolling through our communities across the continent,” Marla Marcum, a member of the Climate Disobedience Center in Arlington, Massachusetts, said on Friday. “We have to keep fossil fuels in the ground and bring the focus to renewables.”

    Tens of Thousands Take Part in Global Actions Targeting World’s Most Dangerous Fossil Fuel Projects  -  Twelve days of unprecedented worldwide action against fossil fuels concluded Sunday showing that the climate movement will not rest until all coal, oil and gas is kept in the ground. The combined global efforts of activists on six continents now pose a serious threat to the future of the fossil fuel industry, already weakened by financial and political uncertainty. Tens of thousands of activists took to the streets, occupied mines, blocked rail lines, linked arms, paddled in kayaks and held community meetings in 13 countries, pushing the boundaries of conventional protest to find new ways to demand coal, oil and gas stay in the ground. Participants risked arrest—many for the first time—to say that it’s time to Break Free from the current energy paradigm that is locking the planet into a future of catastrophic climate change. Driving this unprecedented wave of demonstrations is the sudden and dramatic acceleration in the warming of the planet, with every single month of 2016 shattering heat records, combined with the growing gap between world governments’ stated climate ambitions, and their demonstrated actions in approving new fossil fuel projects. On the last day of mobilization, a key monitoring site on Tasmania recorded atmospheric carbon-dioxide exceeding 400 parts per million for the first time ever. These actions took place under the banner of Break Free, which refers to the need to shift away from our current dependency on fossil fuels to a global energy system powered by 100 percent renewable energy. In 2015, 90 percent of new energy capacity came from renewables, signaling that a rapid transition to 100 percent renewable energy is more feasible than ever.

    Dozens Arrested After ‘Bomb Train’ Protests - Thousands of people around the country protested over the weekend to stop fossil fuels and demand a just transition to an economy that uses 100 percent renewable energy. More than 50 people were arrested in the Pacific Northwest and five others were arrested in upstate New York, where protestors stopped trains carrying crude oil.  Meanwhile, demonstrations in Washington, D.C., Albany, and Los Angeles drew thousands more to the Break Free movement, which brought a coalition of environmental groups together over 12 days of global action and civil disobedience.  On Saturday, five people were arrested in New York after two women suspended themselves from a train trestle where trains cross, carrying crude oil from the Alberta tar sands. Since the ropes were looped over the track, if the the so-called “bomb train” had crossed the bridge, it would have severed the climbers’ ropes. The train was stopped for over two hours, local news sources reported. Beyond the threat posed by burning the carbon contained in the oil these trains carry, activists are also concerned about what happens when oil trains derail and threaten communities. A train derailed and crashed in the Canadian town of Lac Megantic, destroying the town center and killing 47 people, effectively becoming a “bomb train.”  Across the United States, more than 732 thousand barrels of oil are transported by rail every day.  “The global climate system, on which every human depends, is no longer stable because our governments have utterly failed us,” Marissa Shea, one of the activists, said in a statement. “So now, for our survival, we will act on climate ourselves.”

    Albany joins New York communities opposing Bakken oil pipeline  (AP) — Albany has joined 25 other communities officially opposing the Pilgrim Pipeline, which would carry crude oil from Albany to New Jersey refineries and return it as fuel products. The Common Council passed a resolution Monday night denouncing the proposed 178-mile pipeline as an environmental risk and public health danger. The measure isn’t legally binding. The line would be fed North Dakota crude oil carried by trains. Connecticut-based Pilgrim Holdings LLC says it’s a safer alternative to Hudson River barge transport south. But environmentalists say it would likely mean more oil trains crossing the state to Albany. The state Department of Environmental Conservation and Thruway Authority are gearing up for an environmental impact review of the project.

    Constitution pipeline appeals regulator's water permit rejection | Reuters: Constitution Pipeline Company LLC on Monday launched a last-ditch legal challenge to gain approval in New York for its 124-mile (200-km) natural gas pipeline project stretching from the U.S. shale heartland to the northeastern United States as local opposition grows. Constitution said in a statement it has filed a lawsuit in the U.S. Court of Appeals fighting last month's ruling by the New York State Department of Environmental Conservation that denied the project a water permit in the state. The water permit is the final regulatory hurdle for the flagship project, which would bring fracked Pennsylvania gas to New York and New England and has cost its owners $300 million over the past four years. "We are ultimately seeking to have the court overturn this veiled attempt by the state to usurp the federal government's authority and essentially 'veto' a FERC-certificated energy infrastructure project," the pipeline owners said in the statement, referring to the Federal Energy Regulatory Commission (FERC). Constitution Pipeline is owned by subsidiaries of Williams Partners LP , Cabot Oil & Gas Corp, Piedmont Natural Gas Company Inc and WGL Holdings Inc . At stake is the future of the $875 million project, but the outcome of the case could also be a litmus test for other projects destined for New York, where fracking was banned in 2014. It will also be a test for other northeastern states where opposition to the controversial drilling practice is some of the fiercest in the nation.

    Constitution Pipeline sues to overturn DEC’s water-permit denial - PennEnergy: Constitution Pipeline LLC has sued in two federal courts to overturn the New York State Department of Environmental Conservation’s (DEC) denial of a water-quality certificate required for the proposed natural gas pipeline’s construction (OGJ Online, Apr. 25, 2016).  Constitution filed an appeal on May 16 with the US Appeals Court for the Second Circuit. It contends, among other things, that the refusal is arbitrary and capricious and constitutes an impermissible challenge to the US Federal Energy Regulatory Commission’s Certificate of Public Convenience and Necessity, which was issued to the company in December 2014. The company also filed an action with US District Court for Northern New York seeking a declaration that the State of New York’s authority to exercise permitting jurisdiction over certain other environmental matters is preempted by federal law. Constitution is owned by subsidiaries of Williams Partners LP, Cabot Oil & Gas Corp., Piedmont Natural Gas Co., and WGL Holdings Inc. “Upon its review of the evidence, we believe the court will agree that this permit denial was arbitrary and unjustified and improperly relies on the same failed arguments that the DEC made during the FERC certificate proceeding regarding the pipeline route and stream crossings,” they said in a joint statement. [Native Advertisement] DEC’s allegation that it did not receive the necessary information is inaccurate as demonstrated by extensive and comprehensive technical materials submitted by Constitution for the record, the statement said. “We believe this allegation was intended to distract stakeholders from the application of a fair technical and regulatory review of the merits of Constitution’s application for a water quality certification,” it said.

    Justices won't touch $236M verdict in Exxon Mobil pollution: (AP) — The U.S. Supreme Court said Monday it will not hear Exxon Mobil’s appeal of a $236 million judgment for its use of a gasoline additive that contaminated groundwater in New Hampshire. The court’s order leaves in place a jury verdict involving contamination by the chemical MTBE. Exxon Mobil wanted the judgment thrown out because New Hampshire was not required to prove that individual water supplies were contaminated. The Irving, Texas-based company also said it is not responsible for contamination caused by gasoline spills at junk yards and independent gas stations. MTBE, or methyl tertiary butyl ether, is a petroleum-based gasoline additive that has been used since the 1970s to reduce smog-causing emissions. It was found in the 1990s to contaminate drinking water supplies when gasoline is spilled or leaks into surface or groundwater. New Hampshire sued Exxon Mobil and other oil companies in 2003 for damages to remediate MTBE contamination, saying they knew they were supplying a product that is more difficult to clean up than other contaminants. Other companies settled with the state, though some said that when used as intended, MTBE is safe and effective, and the problem was with leaking gasoline storage tanks.

    USGS study shows fracking contamination in Wolf Creek watershed - A new study led by the U.S. Geological Survey indicates waste from oil and gas disposal was found in surface waters and sediments near a controversial underground injection well in Lochgelly, just outside Oak Hill. “Deep well injection is widely used by industry for the disposal of wastewaters produced during unconventional oil and gas extraction," said Dr. Denise Akob, lead author and geomicrobiologist with the U.S. Geological Survey's National Research Program. "Our results demonstrate that activities at disposal facilities can potentially impact the quality of adjacent surface waters.” This is one of the first published studies to demonstrate injection disposal sites impact surface water quality. The study, "Wastewater disposal from unconventional oil and gas development degrades stream quality at a West Virginia injection facility," was published in Environmental Science and Technology, an American Chemical Society journal. The scientists collected water and sediment samples upstream and downstream from the disposal site. All samples were taken within the Wolf Creek watershed near two controversial injection disposal wells operated by Danny Webb Construction. These samples were analyzed for a series of chemical markers that are known to be associated with unconventional oil and gas wastewater. A second Lochgelly-site study called "Endocrine disrupting activities of surface water associated with a West Virginia oil and gas industry wastewater disposal site" was published in April. This study conducted biological assessment tests to determine if contamination of the surface waters causes endocrine disruption. Endocrine disruptors are chemicals that interfere with normal functioning of organisms’ hormones. “We found endocrine disrupting activity in surface water at levels that previous studies have shown are high enough to block some hormone receptors and potentially lead to adverse health effects in aquatic organisms,”

    Potential Of Hydraulic Fracturing Fluids Escaping To Aquifers Subject Of New Paper In Groundwater: A recently published scientific paper offers a numerical study of the potential for fluids related to hydraulic fracturing to escape into usable aquifers via nearby abandoned wells. The article was published in National Ground Water Association’s flagship technical journal, Groundwater®. Titled “Influence of Hydraulic Fracturing on Overlying Aquifers in the Presence of Leaky Abandoned Wells,” it states fluids related to hydraulic fracturing escaping to aquifers could lead to upward leakage of contaminants. Flows into abandoned wells, however, do not conclusively demonstrate contaminants from a fractured shale reservoir can migrate into the overlying aquifer because hydraulic characteristics of the well may limit migration. Moreover, production of the horizontal well after hydraulic fracturing can play a significant role in reducing or inhibiting potential upward leakage. The paper is authored by Joshua W. Brownlow, Ph.D., of the Department of Geosciences at Baylor University in Waco, Texas. “This research indicates certain historical oil and gas activities may affect hydraulic fracturing, and these historical data need to be studied more closely,” Brownlow said. “Hopefully, this study will help water managers and industry use our resources more effectively.”

    Wildlife group sues US over Enbridge pipeline in Michigan — An environmental group is accusing the federal government of misjudging an emergency response plan for a major oil pipeline that runs through Michigan. The National Wildlife Federation filed a lawsuit Monday against a pipeline safety agency, saying the government in 2013 failed to account for impacts on wildlife, plants, and Great Lakes shore if Line 5 ruptures. The pipeline is operated by Enbridge, a Canadian company. It runs from Wisconsin to Ontario, Canada, including the Straits of Mackinac, which connect Lake Michigan and Lake Huron in Michigan. Emails seeking comment from Enbridge and the government weren’t immediately returned. Wildlife Federation spokesman Jordan Lubetkin says the group believes the aging pipeline carries too much risk for the Great Lakes.

    Supreme Court rejects Florida Power & Light's attempt to make customers pay for fracking - Naked Politics: In a rebuke to Florida Power & Light, the Florida Supreme Court on Thursday ruled that state regulators exceeded their authority when they allowed the company to charge customers for its speculative investment into an Oklahoma-based fracking company. In June of last year, the Public Service Commission rejected its staff recommendation and unanimously approved guidelines that gave FPL the right to charge its customers up to $750 million a year for speculative natural gas fracking activities without oversight from regulators for the next five years. In a 6-1 opinion, written by Justice Ricky Polston, the court concluded that the PSC did not have statutory authority to authorize the charge and called its decision "overreach." "Treating these activities as a hedge requires FPL’s end-user consumers to guarantee the capital investment and operations of a speculative oil and gas venture without the Florida Legislature’s authority," Polston wrote. Justice Charles Canady dissented with an opinion, arguing that the PSC did have the authority to allow the costs of the investment to be recovered under the FPL fuel clause. Here's the ruling: Download SCOFLA Woodford case

    Florida Proposes Tripling Amount Of Benzene That Can Be Polluted Into State Waters -  For the first time in over 25 years, the Florida Department of Environmental Protection (DEP) is proposing to revise its restrictions on what toxic chemicals can be discharged into surface water — but environmentalists worry that the proposed standards, which would triple the amount of a toxic chemical called benzene allowed to be discharged into surface waters like rivers and lakes, are meant more to entice fracking companies than keep Floridians safe. According to the Tallahassee Democrat, the Florida DEP is currently either updating, or creating for the first time, standards for 82 various toxic substances — many of which are known carcinogens. Of those 82 chemicals, the vast majority would, under the DEP’s revised standards, have lower standards than those recommended by the EPA. And of the 43 chemicals that are already regulated, the Tallahassee Democrat reports that “a couple dozen” will have limits higher than what is currently allowed. Under the Clean Water Act, states are supposed to revise and update the standards and limits for toxic chemicals, though Florida has not done this since 1990. “The DEP should be pushing for even more stringent criteria than what we have now rather than trying to weaken them,” Dr. Ron Saff, a Tallahassee allergist and immunologist, said during the workshop. “Your job is to protect Floridians, not to poison us.” One major point of contention for environmentalists is the fact that the revised standards would allow much higher levels of benzene than currently allowed. Benzene is a chemical used in fracking, and a well-known carcinogen. Under the revised standards, allowable amounts of benzene would increase three-fold. The DEP's proposal to raise allowable levels of benzene -- often found in fracking waste water -- has led some environmentalists to accuse the DEP of revising the standards to help make Florida a more attractive location for fracking companies.

    Louisiana governor to oil industry: pay for coastal restoration: (AP) — Gov. John Bel Edwards is pushing to get the oil and natural gas industry to pay for restoring Louisiana’s fragile coast by encouraging them to settle lawsuits alleging they caused extensive damage to coastal lands. The governor met with industry leaders on May 13 and asked them to settle the numerous lawsuits, filed by local governments, and help pay for coastal restoration, according to letters obtained by The Associated Press on Friday. Industry leaders have rejected his request. But, the governor, in a letter sent to industry organizations on Thursday, said he wanted to meet with them again to discuss settlements. Three coastal parishes are seeking compensation for alleged state permit violations, coastal damage and pollution. Earlier this year the governor and Attorney General Jeff Landry intervened in those suits.

    The East Texas Basin Continues To Surpass Expectations | OilPrice.com: The East Texas Basin, a rather large Jurassic-Aged basin containing a number of hydrocarbon-bearing formations stretched across the northern part of East Texas and West Louisiana, has been making fortunes for mineral-rights owners, drillers, landmen and entrepreneurs since oil was first struck by Columbus Marion (Dad) Joiner (and his rather creatively-financed syndicate) on September 5, 1930 in Rusk County, Texas. More recently (the last decade or so) our attention has been focused on the incredibly gas-rich Haynesville Shale formation – a deeper, larger and older Jurassic-period formation that stretches across even more of the ArkLaTex region. The Haynesville has been very productive for horizontal hydraulic fracturing operations, and is very near the packaging and transport hubs on the gulf coast. Last month at OGIS I saw a great presentation from Memorial which is a pure play operator focused on the over-pressured Cotton Valley formation in Northern Louisiana. Among other interesting tidbits they presented,

    • • Since 2012, 95 of ~20,800 horizontal gas wells in the U.S. have peak monthly production over 21 MMcfe/d
    • • 36 of those were drilled by Memorial
    • • Memorial has drilled 68 wells in the top 2 percent of the ~20,800 horizontal wells (51 wells in the top 1 percent)

    Well that really popped out at me – they’re bringing on some real boomers there. Normally we see a lot of emphasis on the gigantic Marcellus wells, but there’s a reason that the Louisiana portion of the East Texas Basin is still alive.  Then last week, as I was researching something else, I happened to glance at the “active rigs by basin” metric and saw that there are as many rigs operating in the East Texas Basin as are operating in the Niobrara (14 that day in each). Then I zoomed in on activity in the area and noticed there were even more rigs operating just outside the basin proper to the east and west.

    1,000 DUCs In Eagle Ford -- May 16, 2016 - Emergent Group is reporting: There are currently about 1,000 drilled uncompleted wells in the Eagle Ford.  Throughout 2015, operators completed additional wells reducing the uncompleted inventory.  Anadarko, EOG Resources, and Chesapeake are the operators with the most DUCs in the Eagle Ford. The three top operators hold 38% of the DUC inventory. Link here. The NDIC says that there are about 1,000 DUCs in the Bakken.  Emergent Group had an update on the Bakken DUCs in April, 2016.

    Most Texas quakes likely caused by oil, gas activities: study | Reuters: Oil and gas activities may have caused nearly nine in 10 of the earthquakes Texas has experienced in the past 40 years, and the quakes have become more frequent as oilfield activity has picked up in the past decade, according to a forthcoming study. Of the 162 Texas earthquakes of magnitude 3 or greater between 1975 and 2015, a quarter were "almost certainly" induced by oil and gas activities, while 33 percent were "probably induced and 28 percent were "possibly induced," researchers led by University of Texas-Austin geoscientist Cliff Frohlich wrote. A sharp uptick in oil-linked earthquakes has caused popular uproar and regulatory scrutiny in northern neighbor Oklahoma. While the phenomenon is not nearly as widespread in Texas, the paper, set to be published in Seismological Research Letters on Wednesday, shows the United States' hottest shale plays are not immune to increased seismic risk. Reuters was provided with a copy of the report prior to publication. The researchers also criticized the Texas Railroad Commission, the agency responsible for regulating petroleum production in the state, for being "slow to acknowledge that induced earthquakes occur in Texas." Since shale oil and gas fields like the Haynesville and the Permian boomed in 2008 due to the widespread use of horizontal drilling and hydraulic fracturing technologies, the rate of earthquakes exceeding magnitude 3.0 has increased from 2 per year to 12 per year in Texas, the top U.S. oil state.

    Oil and Gas Quakes Have Long Been Shaking Texas -  A new study suggests the oil and gas industry has triggered earthquakes across Texas since 1925. The research, which publishes Wednesday, attempts to set the record straight on what has become a hot-button issue across the state.

    With citizens expressing concern about the state's growing number of quakes lately, scientists have published studies indicating that recent quakes are likely tied to the disposal of oil and gas wastewater, but state energy regulators say there's still not enough information to explain what's going on.  Last year, state regulators at the Texas Railroad Commission—the agency that oversees oil and gas exploration—cleared two energy companies of responsibility for causing more than two dozen earthquakes in North Texas with their waste disposal.  Researchers from the University of Texas at Austin and the Southern Methodist University in their latest study, to be published in the journal Seismological Research Letters, classified those North Texas events—and dozens more—as being "almost certainly induced" by the energy companies.  "There are many areas in Texas that have man-made earthquakes...and it's not a new phenomenon," said Cliff Frohlich, the study's lead author and the associate director of the Institute for Geophysics at the University of Texas. Frohlich and his five colleagues devised a five-question survey on earthquake timing, location, research on the events and other details. With that data, they assessed the likely origins of the 162 quakes magnitude 3.0 or greater to shake Texas since 1975. They found 42 of them, or 26 percent, were most likely man-made, or "almost certainly induced" by the oil and gas industry. An additional 53 of them, or 33 percent, were classified in the second-likely category of "probably induced."

    The Fracking Process Is Now The Leading Cause Of Earthquakes In Texas - In the last 40 years, oil and gas activity has caused some 60 percent of Texas earthquakes higher than magnitude 3 in the Richter scale, a new study led by researchers from the University of Texas at Austin found. “Oil field practices have been causing earthquakes in Texas probably for about 90 years,” Cliff Frohlich, lead author and associate director of the Institute for Geophysics at the University of Texas at Austin, told ThinkProgress. But “it looks like that as oil field practices changed in the last century, the causes of man-made earthquakes changed.” The study, published Tuesday in Seismological Research Letters, reports that fracking waste injection wells are now the leading cause of earthquakes in Texas. Hydraulic fracturing, or fracking, involves thrusting chemicals and water against shale rock to break it up and release oil or gas. The process produces large amounts of waste fluid, or brine, that is either recycled or disposed of in injection wells. Scientists believe brine from injection wells may be able to flow into nearby faults and soften the friction holding the faults in place, making it easier for a fault to slip, release the stress that was already there, and cause an earthquake. “The stress might have been released by a natural earthquake at some point in the future,” Frohlich said, “but [that] might have been in 10 years, or a thousand years, or a million years.” Of the 162 Texas earthquakes with magnitudes of 3 or greater between 1975 and 2015, the study categorized 42, or 26 percent, as “almost certainly” human-caused, and 53, or 33 percent, as “probably” human-caused. Only 13 percent of earthquakes were natural. The study was based on a review of journals and the historical catalog of Texas earthquakes from 1847 to 2015.  The study also points out that past extraction activities caused earthquakes, too. For instance, pumping too much oil out of the ground too quickly caused earthquakes as early as 1925. But “the recent boom is related to unconventional oil and gas development — fracking,” said Frohlich, who noted there are tens of thousands of injection wells in the state and most don’t cause earthquakes.

    Fracking: Oklahoma’s New F-Word - Fracking in Oklahoma, as well as elsewhere, has been on the decline, thanks to the oil price slump. Quakes, however, are continuing at alarming rates. A CBC report on the situation notes anecdotal evidence that capping wells could possibly reduce seismic activity, but anecdotal evidence is insufficient. There is a growing body of evidence that fracking, as well as traditional oil extraction to a lesser extent, can be directly linked to an increase in seismic activity. The studies that have accumulated this evidence became necessary as some of America’s biggest oil-producing regions started experiencing more than their fair – and historical – share of earthquakes. Oklahoma has been dubbed by media the new earthquake capital of the country. Prior to 2009, the state had fairly negligible seismic activity. Then the shale boom started gathering pace, and today, the state is being shaken by an average of two quakes a day. Before 2009, insurers in Oklahoma had no reason to make earthquake coverage part of their standard offering. Since that year, it has become a very sought-after insurance product. But supply is tightening, according to a Reuters research. Oklahoma insurers seem to be getting increasingly aware of the fact that upping the premiums for earthquake coverage (by 200% in some cases) is not sufficient to avoid substantial losses at this rate of seismic activity. They are removing this coverage from their service offering and rejecting claims for quake-caused damage, attributing it instead to houses settling or just being plain too old.This is the state where the country’s strategic crude oil reserves are kept, at Cushing. The industry is a vital contributor to state revenues, but this may have to change. How, exactly, is a difficult question to answer but people who have had their homes damaged in some of the stronger quakes that have hit Oklahoma since 2009 believe the money and the jobs that the industry provides are not worth the constant risk of having your home fall over your head.

    Iowa declines to act quickly on Dakota Access construction (AP) — Iowa utilities regulators have declined to act quickly on a request to allow a Texas company to begin construction on an oil pipeline across Iowa. Dakota Access had asked the Iowa Utilities Board to start Tuesday on the 1,150-mile pipeline that will carry a half-million barrels of oil a day from northwest North Dakota across South Dakota, Iowa and into south-central Illinois. Construction begins this week in the other states and the Dallas-based company says it must start in Iowa now or risk running into winter and another farm planting season. The board decided Tuesday to take time to consider comments from opponents, which indicate they want no construction in Iowa until all required federal permits are approved. The U.S. Army Corps of Engineers hasn’t issued permits for river crossings.

    Looks Like Iowa Will Keystone The Dakota Access Pipeline -- Iowa utilities regulators have declined to act quickly on a request to allow a Texas company to begin construction on an oil pipeline across Iowa. Reporting almost everywhere, but here is the FuelFix link: Iowa utilities regulators have declined to act quickly on a request to allow a Texas company to begin construction on an oil pipeline across Iowa.   Dakota Access had asked the Iowa Utilities Board to start Tuesday on the 1,150-mile pipeline that will carry a half-million barrels of oil a day from northwest North Dakota across South Dakota, Iowa and into south-central Illinois.  Construction begins this week in the other states and the Dallas-based company says it must start in Iowa now or risk running into winter and another farm planting season.  This essentially gives organizers a full year to gain momentum to keystone the pipeline.  Iowa farmland is worth an incredible amount/acre. Community organizers only have to alarm farmers that the value of their land could plummet if affected by an oil pipeline break. A half-million bopd? That represents about 50% of current North Dakota production and would be the final nail in the CBR coffin. It doesn't take a rocket scientist to figure out who is watching this development closely. Other than affecting a few thousand jobs and one company, it will have no material affect on the Bakken or CO2 emissions.

    Construction underway in 3 states on $3.8B Dakota Access oil pipeline (AP) — Construction is underway in three of four states on a $3.8 billion pipeline that will carry oil from western North Dakota to Illinois. Work on the Dakota Access Pipeline has begun in North Dakota, South Dakota and Illinois, spokeswoman Lisa Dillinger told the American News. The 1,150-mile pipeline also will cross Iowa, but regulators there declined this week to act quickly on a request to allow Texas-based Energy Transfer Partners to begin construction in that state. The pipeline will carry nearly half a million barrels of crude from western North Dakota’s Bakken oil fields each day to a tank storage facility in southern Illinois. It’s been approved by regulators in all four states. The U.S. Army Corps of Engineers still must issue permits for the pipeline to cross the Missouri and Mississippi Rivers. Dakota Access LLC, a unit of Energy Transfer Partners, secured easements from landowners along the route to pass through their property. Landowner Perry Schmidt in northeastern South Dakota’s Spink County said crews in his area have been busy locating utility lines, preparing roadways for construction and planting stakes in construction areas to ensure farmers “aren’t wasting money planting seed.” Dakota Access LLC said last week that it had to start laying pipe this week in order to finish before winter and avoid disturbing farmland for a second growing season. “I’m glad it’s getting started so they can get done on time,” Schmidt said.

    Train hauling fracking sand derails in northern Colorado (AP) — Firefighters say nine train cars that derailed near an elementary school in northern Colorado were carrying sand used in fracking but no hazardous materials. The Great Western cars, part of a 100-car train, came off the tracks and tipped Sunday morning in Timnath, east of Fort Collins. No one was hurt. Poudre (kash-luh-POO’-dur) Fire Authority spokeswoman Madeline Noblett says it was lucky none of the surrounding homes was damaged. The Coloradoan reports that trains that carry crude often move through the area and it took some time before authorities to confirm that they were no materials that posed a chemical or explosive threat.

    Column: Let private-sector experts set fracking policy -- On May 2, the Colorado Supreme Court ruled that bans and moratoriums on hydraulic fracturing by local governments are invalid and conflicting with Colorado statutes.  While this prevents a fractured approach to oil and gas regulation, fracking policies in most states are influenced by media-elevated fears with little regard to economic impacts. Better regulation would rely on policy development by private-sector professional and educational associations to balance proven risks of fracking with the tangible benefits of oil and gas development.  Attitudes of citizens in many communities are formed by fear and frustration. Much of this has been heightened by the media and environmental activist groups.  The Colorado Oil and Gas Conservation Commission is a state agency that sets rules for energy development, including the use of fracking. In recent years, the COGCC has made increased efforts to include the concerns of communities during rulemaking. In Colorado, the goal has been to develop energy resources while protecting communities with tight regulations on fracking. New York, Maryland and North Carolina simply dismissed economic benefits and banned fracking altogether.   This approach to regulation diminishes the fact that over 40 percent of oil and gas production in the U.S. relies on fracking. Because of new resources made accessible by fracking, North American natural gas will likely compose 70 percent of the world market by 2035. Approximately 3-4 million jobs in our nation are projected as a result of this growth.   Given the economic stimulus and job creation potential of our natural gas resources, it is critical to analyze the true risks of fracking and adopt a regulatory approach that mitigates risk while reaping the benefits of the resource. Government regulatory agencies are not cognizant of market mechanisms that affect industries and consumers. Moreover, government bureaucracies lack entrepreneurial vision, which fosters susceptibility to political special interests.

    Big Oil Group Plots to Exclude Public from Public Lands Bidding at IOGCC Meeting - Steve Horn - At the Interstate Oil and Gas Compact Commission (IOGCC)'s 2016 meeting in Denver, Colorado this week, a representative from a prominent oil and gas lobbying group advocated that auctions of federal lands should happen online “eBay”-style — a clear attempt to shut the public out of the bidding process for fossil fuel leases on public lands.    Speaking on public lands issues in front of IOGCC's public lands committee, Kathleen Sgamma — Western Energy Alliance's (WEA) vice president of governmental affairs — compared environmental groups' Keep It In The Ground campaign actions at U.S. Bureau of Land Management (BLM) bids to a “circus.” Sgamma said WEA was in contact with bothBLM and Congressional members to push the auctions out of the public sphere and onto the internet.  DeSmog, which attended the IOGCC meeting, recorded the presentation and has published it online.  Sgamma opened her statement on the Keep It In The Ground “circus” by pointing to the fact that BLM has already compared the activism, in testimony delivered to Congress (beginning at 54:30) on March 23, 2016, with the right-wing militia that occupied the Malheur National Wildlife Refuge's public lands plot in Oregon.   Sgamma also revealed that WEA has a counter campaign that it will launch soon to oppose Keep It In The Ground.   Here is a partial transcript of Sgamma's statement (beginning at about 19:55 in the audio)So Western Energy Alliance is planning some counter-efforts with Keep It In The Ground which we'll be announcing probably later this month. We've also been working with BLM and Congress to say 'Let's just get rid of this circus, let's just have online auctions. eBay is out there, it can be done.' So BLM has also expressed concern for its employees as well. In fact, BLM Director [Neil] Kornze, in a hearing a couple months ago, was asked about all of these protests and even equated these protests with the militia who shut down and occupied the Malheur Wildlife Reserve in Oregon.  

    Temporary oilfield workers are major factor in increased water use in North Dakota Bakken region - Increased water use in the rapidly growing oil industry in North Dakota's Bakken oil shale region, or play, is surprisingly due not only to oil well development but also to people, according to a recent study by the U.S. Department of Energy's (DOE) Argonne National Laboratory. Increased oil development in that region in recent years has attracted thousands of oilfield employees. From 2010 to 2012, nearly 24,000 temporary oilfield workers joined the approximately 27,000 permanent residents in Williams Country, the seat of the region's commercial oil industry. "It is estimated that the average household in the North Dakota Bakken region uses about 80 to 160 gallons of water a day," said Corrie Clark, an environmental systems engineer in Argonne's Environmental Science Division and co-author of a new study published in Environmental Science & Technology. "If each new temporary worker used 80 gallons a day, their total would be more than half the water used for hydraulic fracturing alone. If they used 160 gallons a day, it would exceed the total amount of water used for hydraulic fracturing. Either way, water use by new temporary workers accounts for a big share of the region's increased water use." The Bakken is a shale oil deposit underlying parts of North Dakota and Montana in the United States, and Saskatchewan and Manitoba in Canada. Annual water use for hydraulic fracturing there has more than quintupled from 770 million gallons in 2008 to 4.27 billion gallons in 2012. During the same period, the number of new oil wells per year more than quadrupled from 401 to 1,801; however, the increase in the number of wells is not the sole reason for increased water use when it comes to oil development.

    105K gallons of saltwater-oil mixture spills in North Dakota  (AP) — A tank overflow has caused a spill of about 16,800 gallons of oil and more than 100,000 gallons of a mixture of saltwater and oil in North Dakota. The North Dakota Department of Health says the spill happened Wednesday at a site operated by Texas-based Denbury Onshore LLC, near the town of Marmarth in the southwest corner of the state. The company didn’t immediately respond to a telephone message seeking comment. Initial estimates show about 105,000 gallons of what’s known as produced water, a mixture of saltwater and oil that can contain drilling chemicals, was released. An undetermined amount of the release left the well pad and has affected pastureland. Personnel with the state Health Department and Oil and Gas Division are at the site and monitoring the investigation.

    Crews excavating North Dakota land after large spill: (AP) — Crews in North Dakota excavated pastureland after more than 120,000 gallons of oil and drilling wastewater overflowed from a tank, the state Health Department said Friday. The spill happened Wednesday morning near Marmarth in southwestern North Dakota at a site operated by Plano, Texas-based Denbury Onshore LLC, according to Bill Suess, an environmental scientist who heads spill investigations for the state Health Department. The company notified state regulators of the spill immediately, he said. About 17,000 gallons of oil and 105,000 gallons of what’s called produced water — a mixture of saltwater and oil that can contain drilling chemicals — spilled from a tank after a shut-off sensor failed, Suess said. Denbury spokesman John Mayer said crews may have the spill cleaned up by the end of Friday, though monitoring would continue. State Health Department and Oil and Gas Division employees are monitoring the cleanup. The company told investigators that a power outage caused the sensor to fail, though Suess said the cause of the outage has not been determined. An area about the size of a football field beyond the well site was affected, but no waterways or drinking water sources were threatened, Suess said. “It is a relatively significant volume but from an overall risk standpoint it’s not that high,” he said, noting that the company had a berm around the oil well site but it wasn’t adequate to contain the spill. Neither investigators nor the company could confirm how much oil and drilling wastewater left the site.

    EIA: US Shale Output to Dip for Eighth Consecutive Month  (Reuters) - U.S. shale oil output is expected to fall in June for the eighth consecutive month, according to a U.S. government forecast on Monday, as the squeeze from a two-year rout in crude prices worsens. Total output is expected to fall by nearly 113,000 bpd to 4.85 million bpd, according to the U.S. Energy Information Administration's (EIA) drilling productivity report released on Monday. Bakken production from North Dakota is forecast to fall 27,000 bpd, while production from the Eagle Ford formation is expected to drop 58,000 bpd. Production from the Permian Basin in West Texas is expected to drop 10,000 bpd, according to the data, representing its second consecutive monthly decline. Oil prices are down nearly 60 percent from their mid-2014 highs, which has caused producers to slash capital spending and lay off thousands of workers. Brent crude prices have rallied this year and were hovering just under $50 a barrel on Monday. Analysts warn that production could pick up later this year as producers lock in hedges at better prices to safeguard future output. Total natural gas production is forecast to decline for a sixth consecutive month in June to 46.0 billion cubic feet per day (bcfd), the lowest level since July 2015, the EIA said. That would be down almost 0.5 bcfd from May, making it the biggest monthly decline since March 2013, it noted. The biggest regional decline was expected to be in Eagle Ford, down 0.2 bcfd from May to 6.3 bcfd in June, the lowest level of output in the basin since April 2014, the EIA said. In the Marcellus formation, the biggest U.S. shale gas field, June output was expected to ease by about 0.1 bcfd from May to 17.3 bcfd in June. That would be the fourth monthly decline in a row.

    Rystad estimates 3,900 drilled but uncompleted US horizontal oil wells - Oil & Gas Journal - US shale operators have accumulated an estimated 3,900 drilled but uncompleted (DUC) horizontal oil wells with more than 90% in major liquids plays, said Rystad Energy’s latest analysis.  Rystad estimates the Permian basin has 1,200 wells awaiting completion services, Eagle Ford 1,000, the Bakken formation 850, the Niobrara 620, and another 270 DUCs are spread across other plays.  DUC numbers have grown during the current oil price slump. The DUC inventory includes wells with varying production expectations. Given differences among companies, the pace of DUC conversions will vary by operator, analysts have said.  Rystad Energy, an independent oil and gas consultant, maintains a shale well database called NASWellCube, which includes the DUC inventory.

    Oil Driller Hedges Soar To Five Year Highs -- One recurring theme observed throughout the oil rally since the February 13 year lows, has been increasingly more aggressive hedging action by producers, who are willing to give up upside gains in order to protect from yet another swoon lower in prices. And, as Goldman cautions in its latest note on ongoing imbalances in the oil market, "the rally in long-dated prices has taken prices to levels ($50/bbl in 2017) where hedging activity is ramping up which suggests it will soon stall." This can be seen in the following chart of overall hedging activity by oil explorers which as of this moment is the highest since mid-2011. Overnight Bloomberg confirmed this trend when it reported that producers and merchants increased their short position in WTI by 3.8% for the week ended May 10 to the highest since September 2011. It adds that "oil producers are taking advantage of the rebound in crude markets to lock in protection against another slump. They increased their bets on falling prices to the highest level in 4 1/2 years as U.S. inventories of stored oil remained near an 87-year high, while a natural disaster in Canada and militant attacks in Africa curtailed output. Negative sentiment among the group expanded for a third consecutive week, the longest streak since February." Energy companies from EOG Resources Corp. to Chesapeake Energy Corp. used financial instruments such as futures, swaps and collars to guard against another fall in prices. West Texas Intermediate oil, the benchmark U.S. crude, has gained more than 75 percent since hitting a 12-year low in mid-February. As Again Capital's John Kilduff chimes in producers "have been getting more and more active in hedging ever since the first initial jump," adding that they "appear to be drawn to this market as everyone tries to stay alive through the downturn."

    Drilling Productivity Report - U.S. Energy Information Administration (EIA): The Drilling Productivity Report uses recent data on the total number of drilling rigs in operation along with estimates of drilling productivity and estimated changes in production from existing oil and natural gas wells to provide estimated changes in oil and natural gas production for seven key regions. EIA's approach does not distinguish between oil-directed rigs and gas-directed rigs because once a well is completed it may produce both oil and gas; more than half of the wells produce both. While shale resources and production are found in many U.S. regions, at this time EIA is focusing on the seven most prolific areas, which are located in the Lower 48 states. These seven regions accounted for 92% of domestic oil production growth and all domestic natural gas production growth during 2011-14. |  full report pdf

    Dallas Fed’s Kaplan Sees ‘gradual Recovery’ Ahead For U.S. Oil Patch -- Dallas Federal Reserve Bank President Robert Kaplan said that while he expects more bankruptcies for oil and gas producers this year, he sees energy prices firming, along with prospects for jobs and investment. “I wouldn’t be surprised to see firming prices in the period ahead,” Kaplan told reporters after an open forum with bankers and oil men in the heart of the oil-producing Permian Basin in West Texas. “That doesn’t mean that 2016 is going to be an easy year … there are still going to be companies that are going to have to be restructured.” The biggest U.S. energy price crash in decades has forced more than 60 North American oil and gas producers to seek protection from creditors since early 2015, including two this week. Hundreds of drilling rigs have been idled in the Permian Basin since the price of crude dropped from its peak in mid-2014, pushing the basin’s rig count down to just 130 in April. But data from Baker Hughes and Drilling Info show several rigs have been added in the last two weeks alone. And though debt-laden companies will still need to fold or find buyers, demand and supply in the global oil market will have about evened out by next year, Kaplan said. “I think you’ll see a slow but gradual recovery,” Kaplan said.

    Fracking Slashes US CO2 To Lowest Level Since 1993 -- A new report by the Energy Information Administration (EIA) found hydraulic fracturing, or fracking, has pushed carbon dioxide (CO2) emissions from electricity generation to the lowest levels since 1993. Fracking created immense amounts of natural gas, lowering the price and causing the amount of electricity generated from natural gas to pass the amount of electricity generated from coal for seven of the months in 2015, according to the new EIA report. The report specifies that natural gas power plants produce about 40 percent of the CO2 emitted from a coal plant creating the same amount of electricity. This caused U.S. CO2 from the electricity sector to fall by 21 percent since their high in 2005. “[T]he 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,” read the report. “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.” The EIA report estimates that roughly 68 percent of the falling CO2 emissions are due to the switch from coal to natural gas, and does not mention wind or solar power. Fracking, not government green policies, has caused CO2 emissions to drop sharply in 47 states and Washington, D.C., according to both Scientific American and other studies by the EIA.Solar power is responsible for a mere 1 percent of declining American CO2 emissions, while natural gas is responsible for nearly 20 percent, according to a study published last November by the Manhattan Institute. For every ton of carbon dioxide cut by solar power, fracking has cut 13 tons.

    SandRidge Energy Files for Bankruptcy Protection - WSJ: SandRidge Energy Inc. became the latest victim of the prolonged downturn in energy sector, filing for bankruptcy protection Monday after reaching a deal with its creditors to swap $3.7 billion in debt for control of the oil and gas company. The Oklahoma City company filed for chapter 11 protection in U.S. Bankruptcy Court in Houston after reaching a deal with the majority of its lenders and bondholders on the terms of a “prearranged” debt restructuring pact.   SandRidge Chief Executive James Bennett said the proposed debt swap, which requires court approval, will allow the reorganized company to concentrate on oil and gas exploration and development in our active Oklahoma and Colorado project areas.  The company will stay open during the chapter 11 case and expects to exit bankruptcy “with minimal disruption to our business,” Mr. Bennett said. SandRidge says it has enough cash to fund its ongoing operations without a bankruptcy loan. Among its initial bankruptcy request is the authority to pay operating expenses associated with production activities, royalties and wages to its workers. The company also intends to pay all suppliers and vendors in full during the bankruptcy.

    SandRidge Energy files for bankruptcy with $4.1B in debt: (AP) — SandRidge Energy filed for bankruptcy protection Monday, saying it hopes to convert $3.7 billion of long-term debt into equity while allowing the company to keep its operations going. The Oklahoma City-based company filed the Chapter 11 paperwork in the U.S. Bankruptcy Court for the Southern District of Texas. The petroleum and natural gas exploration company said it had the support of creditors who hold more than two-thirds of its $4.1 billion in total debt. The company said it asked the court for permission to continue day-to-day operations while. It said it wants to continue paying wages, royalties and interest without interruption, and that suppliers and vendors would be paid under their normal terms. “We are pleased that our creditors recognize the long-term value SandRidge and its employees can create with an improved balance sheet,” SandRidge President and CEO James Bennett said in a written statement. “The new capital structure will allow the Company to concentrate on oil and gas exploration and development in our active Oklahoma and Colorado project areas.” Under the bankruptcy plan, the company would restructure $3.7 billion of long-term debt into equity, including $300 million of debt that would later convert to equity in the reorganized company. The company would still owe about $425 million in reserve-based lending facility debt.

    Two More US Energy Companies Go Bankrupt: Breitburn, Sandridge File Chapter 11 --Just days after the latest two shale casualties filed for bankruptcy protection when both Linn Energy and Penn Virginia announced prepackaged Chapter 11, moments ago Sandridge announced it too was entering bankruptcy court when it filed a voluntarily petition under Chapter 11 in U.S. Bankruptcy Court for Southern District of Texas to consummate a pre-arranged reorganization. This follows just hours after Breitburn Energy Partners announced it had filed Chapter 11 as it hopes to negotiate a restructuring of its balance sheet in court, continuing talks with creditors that began a month ago, CEO Hal Washburn said in a release. Combined the two filings would push the total YTD defaulted bond tally higher by another $7.4 billion, as a result of $4 billion in Sandridge debt and $3.4 billion for Breitburn. According to a Reuters tally, some 28 publicly traded North American oil and gas producers have sought bankruptcy protection since early 2015 As the WSJ writes, Breitburn's decision to file for bankruptcy was made when it became "abundantly clear that those negotiations could not be concluded and an appropriate restructuring consummated on an out-of-court basis" in time to avert a cascade of defaults that would have squeezed Breitburn’s liquidity, James Jackson, chief financial officer of a Breitburn subsidiary, wrote in a court filing. About $3 billion of Breitburn’s debts are bank and bond debt, topped by $1.25 billion in loans from lenders led by Wells Fargo Bank, NA. Breitburn is carrying $650 million of senior secured second-lien bonds and $1.1 billion in unsecured bonds. Breitburn said it has been in talks with bondholders about a balance-sheet restructuring. The company has lined up $75 million in bankruptcy financing, and is in talks with senior lenders about bankruptcy emergence financing.

    Another Big U.S. Driller Goes Bankrupt -  Halcon Resources Corp announced yesterday that it is filing for Chapter 11 bankruptcy protection as part of a restructuring agreement with creditors—a move that could wipe out $1.8 billion, or 65 percent, of its debt and $222 million of preferred stock equity. The agreement would also reduce Halcon’s ongoing annual interest burden by more than $200 million. The shareholders affected by the restructuring include those holding 3rd Lien Notes due 2022, Senior Notes due 2020, Senior Notes due 2021, Senior Notes due 2022, Convertible Notes due 2020, and Perpetual Convertible Preferred Stock. The affected stakeholder would then receive shares of common stock, warrants, and/or cash. Halcon hopes that the restructuring agreement will be finalized soon, which will be executed as part of an “accelerated prepackaged Chapter 11 bankruptcy filing”. Halcon is expected to operate as usual during the restructuring process, and pay all suppliers and vendors in full for goods and services provided. The news of the bankruptcy comes after four other oil-related companies filed for protection in the past two weeks, including Midstates Petroleum Company, Ultra Petroleum, Linn Energy and Penn Virginia. These cases followed a string of roughly 70 other bankruptcies in this sector since the beginning of 2015. According to data from Haynes and Boone, total secured and unsecured defaults rising to $34 billion, double the $17 billion total for all of 2015.

    Halcon Reaches Pact with Creditors on Prepackaged Bankruptcy Plan - Rigzone  - Halcón Resources Corp, which produces oil in Texas and North Dakota, said on Wednesday it plans to file for a prepackaged bankruptcy that would wipe out $1.8 billion in debt and help it survive the drop in crude prices. Shares of the Houston-based company fell 55 percent to 44 cents in after-hours trading. The bankruptcy marks a setback to Halcón Chief Executive Floyd Wilson's long-running goal to build and then sell the company to the highest bidder, a plan that mimicked Wilson's 2011 sale of Petrohawk to BHP Billiton for more than $12 billion at a 65 percent premium to its shares. Yet almost from the beginning, Halcón was saddled by high costs and high debt, despite having some quality acreage. Indeed, the value of Halcón's holdings in North Dakota's Bakken shale formation have long eclipsed the market value of the company. Halcón's restructuring plan will eliminate about $222 million of preferred equity, and reduce the company's annual interest payments by more than $200 million. Debtholders will hold most of Halcón's shares after it emerges from bankruptcy protection, the company said in a statement, with existing common shareholders getting 4 percent of the new equity and existing preferred shareholders receiving $11.1 million. In a prepackaged bankruptcy, companies and their creditors agree on a reorganization plan prior to the bankruptcy filing.

    America's Never-Ending Oil Consumption - The United States accounts for less than 5 percent of the world’s population, but it consumes about 20 percent of the global energy supply. The average American citizen uses nearly two times as much fossil fuel as a person living in Great Britain. Americans love cars and big homes and hate public transportation. Constant warnings about climate change and the catastrophic consequences of American energy habits apparently aren’t enough to stop the temptation to consume. Although cars are becoming more efficient, Americans are driving more frequently and across longer distances.  On the campaign trail, even as Democratic presidential candidates talk about clean energy, they don’t often discuss the need to use less. Bernie Sanders says climate change is a moral issue and Hillary Clinton promises to deploy half a billion solar panels by the end of her first term in office. But politicians seem wary of telling Americans they need to cut back.  The cost of delivering that message is high. It’s difficult for politicians to summon the political will to do so when voters are most concerned with economic growth and prosperity. Public-opinion data reveals that Americans want their fuel reliable, safe, and, above all, cheap. Even when people want to fix local problems that come with health risks, like high emissions, they have little willingness to pay more or use less to prevent global warming, according to a Harvard/MIT survey.  Few political dividends seem to come from taking on conservation, it seems. Just ask Jimmy Carter.

    Alberta's oil sands after the wildfires -- It will take at least a few weeks, but it seems likely that production in the Alberta oil sands will return to near normal levels, setting the stage for continued incremental growth over the next few years as expansion projects committed to when oil prices were much higher come online. Although fires are still burning, the devastation in and around Fort McMurray, AB--the unofficial capital of the oil sands region—that forced tens of thousands of people from their homes, prompting oil sands staffing shortages, production scale-backs and a handful of temporary production shutdowns has moved beyond most oil sands operations. But the wildfires’ chain of effects didn’t end there; at one point, crude oil output declines were estimated at upwards of 1 MMb/d (about one-third of Alberta’s normal production of 3.1 MMb/d) caused world oil prices to inch up, some refineries in the U.S. Midwest that depend on Alberta-sourced oil have been forced to scramble for replacement crude, and natural gas prices fell to near zero for a brief period. Today, we begin a two-part look at post-wildfire prospects for the region, and—looking ahead--at the possible need for more pipeline takeaway capacity.

    Canada wildfire: Oil workers urged to leave Fort McMurray camps - BBC News: Around 12,000 people have been urged to leave Canada's oil sands camps near the fire-hit town of Fort McMurray as a resurgent wildfire heads towards them. A regional official told the BBC that 8,000 people were given precautionary evacuation orders late on Monday, in addition to some 4,000 who had already been advised to leave. More than 80,000 people fled the fire that hit Fort McMurray two weeks ago. Air pollution in the Alberta city is still at dangerously high levels.A reading on Monday found the level to be 38 - far exceeding the provincial index's most dangerous level of 10. The vast fire had moved away from Fort McMurray but in recent days it has started to threaten the area again. A number of oil workers had begun in recent days to return to the oil facilities north and south of Fort McMurray to restart production. But on Monday, they were warned that the wildfire was travelling at 30-40 metres per minute north of Fort McMurray.  Over the course of the day, the Regional Municipality of Wood Buffalo extended its precautionary evacuation orders to all camps north of Fort McMurray and south of Fort McKay.  These include the large Suncor and Syncrude sites.

    Alberta wildfire destroys oil sands work camp as 8,000 staff are evacuated - The wildfire raging through northern Alberta has swelled in size and surged north of Fort McMurray, consuming an evacuated oil sands camp on Tuesday and threatening several other facilities in the region. “It continues to burn out of control,” said Rachel Notley, the Alberta premier, one day after the shifting fire forced the evacuation of 8,000 non-essential staff from more than a dozen camps and sites in the oil sands region.  Tinder-dry conditions and temperatures in the mid-20s Celsius helped fuel the wildfire’s growth to 355,000 hectares on Tuesday – a significant jump from 285,000 hectares one day earlier. “Mother nature continues to be our foe in this regard and not our friend,” Notley said. Winds pushed the fire into an area dotted with oil sands work camps, completely destroying a 665-bed camp belonging to Horizon North Logistics just hours after the area was ordered evacuated. The company said every staff member was safe and accounted for.  Two nearby camps for oil sands workers – the 3,700-room Noralta Lodge and 360-room Birch Creek – were being carefully monitored as the flames approached. “We expect fire growth in the area of many of these camps today,” Notley said. Winds were expected to shift the fire east towards the Syncrude and Suncor Energy oil sands facilities. Officials described both facilities as resilient to the risk of fire, pointing to the wide firebreaks surrounding both sites and their private crews of highly trained firefighters. Suncor said on Tuesday that it had begun shuttering its base plant operations as a precautionary measure.Hot spots continued to flare in the city of Fort McMurray – the oil sands hub ordered evacuated two weeks ago as flames flickered in the trees on its outskirts. More than 88,000 people hurriedly fled, with many of them now scattered across Alberta and the rest of the country.

    Fort McMurray fire sweeps east through northern oilsands sites - Edmonton - CBC News: The Fort McMurray wildfire has destroyed one of the oilsands camps north of the city and is roaring eastward toward others in its path. The fire destroyed all 665 units at Blacksand Executive Lodge, which provided temporary housing for workers in nearby oil facilities, on Tuesday morning. By Tuesday afternoon, flames were at the edges of the Noralta Lodge camp, just a few kilometres east of Blacksand. CBC News also obtained photos of flames at the edges of an AFD Petroleum facility, about five kilometres northwest of Noralta. Officials said the fire was expected to move east on Tuesday and would likely jump Highway 63 south of Noralta Lodge.   Businesses in the area have been alerted. "We have an evacuation plan and we're ready to use it," said Dave Harman, a director for the Northlands Sawmill.An official told him the flames were one kilometre west of the facility, which is located about halfway between the northern edge of Fort McMurray and the Noralta Lodge site. The mass of flames some have come to call "the beast" is not a single fire, but rather several fires surrounding and within the town of Fort McMurray. NASA's Suomi NPP satellite collected images of what its office called "the myriad of fires in the Fort McMurray complex" on May 16.

    Fort McMurray Fire — Zero Percent Contained, 1.2 Million Acres in Size, and Crossing Border into Saskatchewan - The Fort McMurray Fire just keeps growing. A global warming fueled beast whose explosive expansion even the best efforts of more than 2,000 firefighters have been helpless to check. By mid-afternoon Thursday, reports were coming in that the Fort McMurray Fire had again grown larger. Jumping to 1.2 million acres in size, or about 2,000 square miles, the blaze leapt the border into Saskachewan even as it ran through forested lands surrounding crippled tar sand facilities. It’s a fire now approaching twice the size of Rhode Island. A single inferno that, by itself, has now consumed more land than every fire that burned throughout the whole of Alberta during 2015. (Continued explosive growth of the Fort McMurray Fire shown graphically in the animation about. Image source: Natural Resources Canada.) The fire has now encroached upon five towns and cities including Fort McMurray, Anzac, Lenarthur, Kinosis, and Cheeham. Tar Sands facilities encompassed by the blaze include Nexen’s Kinosis facility, CNOOC’s Long Lake, and Suncor’s Base Plant. Numerous other tar sands facilities now lie near the fire’s potential lines of further expansion. You can see the insane rate of growth for this fire in the animation above provided by the Natural Resources board of Canada. As the fire again expanded this week, reports coming out of Fort McMurray showed periods of horrendous air quality. Measures hit as high as 51 on Wednesday — which is five times a level that is considered ‘unsafe.’ Fires also ignited in a condo complex Thursday after a mysterious explosion claimed another Fort McMurray home on Tuesday.  Despite what is a massive firefighting effort, the enormous blaze remains zero percent contained. Firefighters have seen some success, however, in keeping fires from burning buildings in and around Fort McMurray through the constant application of water and through the building of enormous defensive fire breaks. With many trees near Fort McMurray and tar sands facilities already consumed by fire and with winds expected to shift toward the North and West, the blazes are expected to mostly move away from structures by Thursday evening.

    Alberta reviews re-entry plan as flames spread north (AP) — Canadian officials said Tuesday they are taking a second look at their plan to allow people to return home to Fort McMurray after a raging wildfire spread north toward oil sands plants. Alberta Premier Rachel Notley told a news conference in Edmonton Tuesday that the fire overnight destroyed a 665-room work camp north of the city and two other camps are threatened. About 8,000 workers at oil camps north of Fort McMurray were ordered to evacuate late Monday. Notley hopes to announce within the week when evacuees from Fort McMurray can return. About 80,000 Fort McMurray residents were forced to evacuate nearly two weeks ago. “Safety will be and must be our first and principle priority,” Notley said. She said conditions in Fort McMurray remain hazardous, with poor air quality from all the smoke a major concern. Two explosions on Monday night in Fort McMurray damaged 10 homes, Notley said. Notley said the explosions are examples of what can happen when a city the size of Fort McMurray is being brought back online. Officials said the explosions are being investigated.

    As Alberta wildfire rages, thousands who fled must wait weeks to go home -- The wildfire in northern Alberta continues to rage out of control, growing to more than 423,000 hectares as officials said it would be at least another two weeks before the tens of thousands of evacuated Fort McMurray residents would be allowed to return to the city. Relief – in the form of cooler weather and slight precipitation – may be on the way for fire crews, Rachel Notley, the Alberta premier, said on Wednesday. “So of course we’re all crossing our fingers that that happens.” While the fire had expanded by 68,000 hectares in the past day, making it more than six times the size of Toronto, much of the fire’s growth has been confined to remote forested areas. Earlier this week, shifting winds forced the evacuation of 8,000 non-essential staff from more than a dozen camps and sites north of Fort McMurray. Hours later, the fire consumed an oil sands camp belonging to Horizon North Logistics, and authorities warned the fire was fast approaching the Syncrude and Suncor Energy facilities in the area. On Wednesday the government said firefighters had been able to hold off the fire from the oil sands facilities. “We were very successful in some of the areas there to the north, so the fire hasn’t encroached as far as we had first feared,” said Chad Morrison, Alberta’s manager of wildfire prevention. “It was very unfortunate that we lost one lodge and that’s obviously due to the extreme fire behaviour.”

    Pipeline News: Kinder Morgan Trans Mountain Expansion project advances -- Canada’s National Energy Board (NEB) has concluded that the Trans Mountain Expansion Project is in the public interest and recommended the Federal Governor in Council approve the proposed expansion. The NEB’s recommendation will allow the Project to proceed with 157 conditions if the Governor in Council approves the project. The Federal Government will make the final decision on the Project in December 2016.  “Trans Mountain is pleased with the NEB’s recommendation,” said Ian Anderson, president of Kinder Morgan Canada. “The decision is the culmination of a lengthy and thorough regulatory review process and considers the many thousands of hours of environmental and technical studies, scientific evidence and community engagement that has been part of this comprehensive assessment. After an initial review of the report, Trans Mountain believes the 157 Project-specific conditions, many in response to input from Intervenors, are rigorous and appear to be achievable.” Trans Mountain continues to analyze the NEB’s conditions for implications to community commitments, costs and Project timeline, but is still expecting the in-service date to be December 2019.“This report is a reflection of our evidence along with the valuable input from Intervenors and our conversations with communities, Aboriginals and individuals,” added Anderson. “Now, more than ever our Project makes sense for Canada. We have demonstrated the demand for much-needed access to global markets and how building this pipeline will bring both dollars and many thousands of jobs for communities in British Columbia and Alberta at a time when our economy needs it most.”

    Ban looms on crude tankers off northern BC - Canadian Prime Minister Justin Trudeau appears ready to fulfill a campaign promise to ban crude oil tankers off northern British Columbia in a move that would throw the proposed Northern Gateway Pipeline into question. The $6.5 billion, 1,177-km twin pipeline proposed by Enbridge Corp. would carry blended bitumen from Alberta to a terminal at Kitimat, BC, and return diluent to Alberta. Trudeau, whose Liberal party won a pivotal election Oct. 19, has asked new Transport Minister Marc Garneau to make the crude-oil tanker ban a priority, according to press reports. As a potential link between the Canadian oil sands and global trade, the Northern Gateway proposal gained importance when US President Barack Obama on Nov. 6 rejected TransCanada Corp.’s application for the border crossing of the Keystone XL project, which would have increased pipeline capacity between Alberta and the US Gulf Coast (OGJ Online, Nov. 6, 2015). TransCanada also has proposed a project called Energy East, which would link the oil sands with eastern Canadian provinces and the Atlantic.

    Fracking investors losing patience with planning delays, says industry boss - The backers of fracking in the UK do not have “limitless patience” for planning delays, according to a leading industry boss. Francis Egan, chief executive of Cuadrilla, warned that despite the government’s promise to fast track fracking, the planning process remains a slow lane. The comments come just ahead of a planning decision in Yorkshire on Third Energy’s application for shale gas exploration. Ministers said last August that they would intervene on planning applications if local authorities failed to meet the existing deadline of 16 weeks to approve or reject fracking applications. David Cameron said in 2014 the government was “going all out for shale”. At a conference on Thursday, Egan told energy minister Andrea Leadsom: “Speaking for Cuadrilla, we are quite a long way away from 16 weeks, we’re approaching two years. I think Third Energy is approaching one year. So the words are good, the intent is good but the delivery is not. Investors have patience but it’s not limitless.” Leadsom said: “We need to tackle the issue of extensive planning delays head-on if we are to reap the benefits that shale gas offers to our energy security, jobs and wider economy. The new measures we’ve introduced will help to make this happen. We are addressing a problem that causes unnecessary delays and benefits no one.” The industry is increasingly frustrated by delays. Cuadrilla has spent over £100m to date and fracked only a single well, which caused minor earthquakes in 2011, and was later closed.

    Oil Markets Balancing Much Faster Than Thought -  Oil markets are only a few months away from a much closer balance as demand holds steady and supply drops off. Several reports from the three major energy entities more or less say the same thing – the supply overhang that the world has experienced over the past two years should narrow and start to close in the second half of 2016. The International Energy Agency estimates that the world is dealing with a supply surplus of 1.3 million barrels per day (mb/d) right now, which should last through the end of the second quarter. By the third and fourth quarters, however, the surplus shrinks to just 0.2 mb/d. The IEA reiterated its forecast that demand will hold at 1.2 mb/d, and expressed a growing sense of confidence that oil markets are only a few months away from moving into balance. For its part, OPEC largely agreed in its May Oil Market Report. But OPEC also chose to focus on the slightly longer-term, citing the massive cut in capital expenditures taken over the past two years. The industry has slashed $290 billion from 2015 and 2016 spending levels so far, with more cuts expected. The spending reductions contributed to the shockingly low level of new oil discoveries last year – the industry discovered less than 3 billion barrels of new oil reserves in 2015, the lowest level in six decades. With few new discoveries, and a rising number of projects deferred, there is a very low level of new projects in the pipeline, so to speak. In other words, oil supply and demand curves are converging towards a balance, and could even cross over at some point a few years down the line as supply fails to keep up with demand.  The U.S. EIA was slightly less bullish in its latest Short Term Energy Outlook, noting that oil supplies will exceed demand by 0.2 mb/d on average through 2017. And the EIA still expects oil prices to rise to only $50 per barrel next year. Still, the trend is largely the same between most of the energy forecasters.

    Here Are The Oil Market Disruptions That Are Sending Oil Soaring  -- The reason why oil has resumed its ascendant ways today is due to yet another focus, this time from the sellside, on the various disruptions in the oil market, following notes from Goldman, Bank of America, and Morgan Stanley according to which the millions in barrels of oil taken offline as a result of the Canada wildfire and persistent Nigerian supply problems will push the market into equilibrium much faster than originally expected. To be sure, this is nothing new: the mainstream media has been pointing this out for weeks with Reuters highlighting the supply loss in a handy table just last Friday. Reuters calculates offline oil supply at 3.75MM pic.twitter.com/w0bJOkArKR  Still, now that the sellside is pushing for an even flatter oil strip - recall that Goldman's full note said that while the market may get into balance faster than expected, a surge in low-cost production by OPEC members will result in lower prices in 2017 - the market has no choice but to follow. So for those who missed it, here is the visual representation of the current oil supply disruptions courtesy of Goldman. Large supply disruptions have pushed production sharply lower since mid-March. Key planned and unplanned outages since mid-February (kb/d)  This is what Goldman said: The recent roll-over in production is the result of somewhat offsetting cross currents. (1) Production has rolled over faster than we had expected in China, India and non-OPEC Africa more than offset upside surprises in the US and the North Sea. (2) Transient but recurring disruptions have more than offset larger than expected Iran and Iraq production. And while some of the disruptions will stop such as maintenance, fires and strikes, some are likely systemic, for example in Nigeria, and we now expect production there will remain curtailed for the remainder of the year. Net, this leaves us expecting a sharp decline in 2Q output.

    Forget the Saudis, Nigeria's the Big Oil Worry -  Drag your attention away from the Middle East for a moment. While policymakers have been focused on Saudi Arabia's oil market machinations, what really matters right now is happening 3,000 miles away in the Niger River delta.The country that was, until recently, Africa's biggest crude producer is slipping back into chaos. A wave of attacks and accidents have hit infrastructure, taking Nigeria's output down to 20-year lows. NIGERIA'S OUTPUT WOES Oil prices are responding, rising to their highest in more than six months. Part of this is explained by the International Energy Agency lifting demand estimates this week. But taking both things together, it's easy to doubt whether current oil surpluses are sustainable.With no solution in sight to the problems that beset the delta's creeks and mangrove swamps, production from onshore and shallow-water oil fields looks vulnerable. If the latest group of freedom fighters seeks to outdo its predecessors, then deepwater facilities may be at risk too.The Niger Delta Avengers have certainly been busy, forcing Shell's Forcados terminal to shut in about 250,000 barrels of daily exports; and breaching an offshore Chevron facility in the 160,000 barrels per day Escravos system. In April, ENI had to declare force majeure -- letting it stop shipments without breaching contracts -- on exports of its Brass River grade after a pipeline fire.

    'Avengers' threaten new insurgency in Nigeria's oil-producing Delta | Reuters: They call themselves the Niger Delta Avengers. Little is known about the new radical group that has claimed a series of pipeline bombings in Nigeria's oil-producing region this year and evaded gunboats and soldiers trawling swamps and villages. Their attacks have driven Nigerian oil output to near a 22-year low and, if the violence escalates into another insurgency in the restive area, it could cripple production in a country facing a growing economic crisis. President Muhammadu Buhari has said he will crush the militants, but a wide-scale conflict could stretch security forces already battling a northern rebellion by hardline Sunni Muslim group Boko Haram. Militancy has been rife over the past decade in the Delta, a southern region which is one of the country's poorest areas despite generating 70 percent of state income. Violence has increased sharply this year - most of it claimed by the "Avengers" - after Buhari scaled back an amnesty deal with rebel groups, which had ended a 2004-2009 insurgency. Under the deal, more state cash was channeled to the region for job training and militant groups were handed contracts to protect the pipelines they once bombed. But Buhari cut the budget allocated to the plan by about 70 percent and canceled the contracts, citing corruption and mismanagement of funds. The "Avengers" have carried out a string of attacks since February that reduced Nigerian oil output by at least 300,000 barrels a day of output, and shut down two refineries and a major export terminal. On Thursday the group emailed journalists a statement saying they were fighting for an independent Delta and would step up their attacks unless oil firms left the region within two weeks.

    Nigerian oil output, naira fall amid attacks, strike threats (AP) — Militant attacks on oil installations and the threat of a nationwide strike drove Nigeria’s petroleum production and its naira currency to new lows Tuesday. The naira fell to 350 to the dollar on the parallel market, against an official rate of 199, amid reports and denials that President Muhammadu Buhari’s government plans an imminent devaluation, bowing to demands of the International Monetary Fund in exchange for soft loans. Nigeria’s oil output dropped to 1.4 million barrels a day, Oil Minister Ibe Kachikwu said Monday, endangering a budget based on production of 2.2 million barrels. The slump means Angola is now Africa’s biggest oil producer, with a steady production of nearly 1.8 million barrels daily, according to the Organization of Petroleum Exporting Countries. Nigeria’s National Labour Congress and the Trade Union Congress, which say they represent 6.5 million workers, and some civic organizations called for a strike Wednesday to protest a 70 percent increase in gasoline prices, prompted by the removal of a government subsidy on gas and shortages of foreign currency. Nigeria is dependent on imports with oil accounting for 70 percent of government revenue. The crisis is dividing labor leaders on religious and ethnic lines. Those from the mainly Muslim north, like Buhari, are against the strike while Christians who dominate the oil-producing south are urging citizens to “Occupy Nigeria!” Unions representing oil and electricity workers, as well as pilots, rejected the strike call even before the National Industrial Court issued a restraining order Tuesday pending a hearing on the justice minister’s request for the court to rule whether the strike is legal.

    Nigerian Oil Output Falls 800,000 Barrels As Militants Step Up Attacks -- Attacks on energy infrastructure continue to bombard the oil majors operating in the Niger Delta. The latest victim was Italian oil giant Eni, who told UPI in an email that some of its equity oil production was knocked offline because of an attack on an oil pipeline.  The Niger Delta Avengers have fiercely stepped up assaults on the likes of Chevron, Shell and Eni in recent weeks. Oil prices have increased over the same time period as the disruptions – combined with the major outages in Canada – have erased the global glut for crude oil. Nigeria’s oil production has plunged by an eye-watering 40 percent, falling to just 1.4 million barrels per day, the lowest level in decades. "Because of the incessant attacks and disruption of production in the Niger Delta, as I talk to you now, we are now producing about 1.4 million barrels per day," Nigeria’s oil minister Emmanuel Ibe Kachikwu said, according to Reuters. "We were at 2.2 million bpd but we have lost 800,000 barrels.” The Nigerian government is hoping to engage with people in the area and stop the attacks, but there is little sign of progress for now.  During midday trading on Wednesday, both WTI and Brent are up around 1 percent to $48.80 and $49.67, respectively.

    Nigeria beefs up security after oil installation attacks - President Muhammadu Buhari has ordered security to be stepped up in Nigeria's oil-producing south, after a spate of attacks blamed on local militants that he said threatened the economy. Buhari on Friday met senior executives of the Anglo-Dutch oil group Shell, whose Nigerian subsidiary has been targeted in recent months by a group calling itself the Niger Delta Avengers. The group wants a fairer share of oil revenue for local people and wants a government amnesty programme that brought similar unrest to an end in 2009 to be continued. A statement from Buhari's office said Nigeria's naval chief had been ordered "to reorganise and strengthen the military joint task force (JTF) in the Niger Delta to deal effectively with the resurgence of militancy and the sabotage of oil installations". JTF operations "were also being enhanced with increased support and cooperation from the United States and Europe in the areas of training, intelligence, equipment and logistics", it added. "We have to be very serious with the situation in the Niger Delta because it threatens the national economy," Buhari told Shell's upstream head Andrew Brown. "I assure you that everything possible will be done to protect personnel and oil assets in the region." Nigeria has recently lost its status as Africa's leading oil producer to Angola because of the cut in output from sabotage, attacks and leaks. The government, which relies on oil exports for 70% of revenue but has seen income slashed because of a global slump in the cost of crude, has budgeted for 2.2 million barrels per day this year. But Vice President Yemi Osinbajo has said output is now at just 1.4 million bpd.

    Brazil’s Petrobras Raises $6.75 Billion From Bond Issue; Pays High Price - WSJ: —Brazilian state-run oil company Petróleo Brasileiro SA, or Petrobras, raised a total $6.75 billion from an overseas bond issue, but it was obligated to pay a high yield to investors, due to its elevated debt. The company issued its bonds via two tranches. The first, worth $5 billion, is due in May 2021 and will pay an annual yield of 8.625%. The second tranche, totaling $1.75 billion, will pay a yield of 9% and will mature in May 2026. In June 2015, by comparison, Petrobras raised $2.5 billion, via a 100-year bond issue, with an annual yield of 8.45%. In previous years, Petrobras has tapped U.S. and European debt markets for tens of billions of dollars, paying yield-starved investors interest rates that often fell below 5%. Petrobras, the world’s most indebted major oil company, has $13.2 billion in debt coming due this year and another $28.5 billion in maturities in the following two years. After years of political interference in everything from fuel pricing to investment decisions, the company has been forced to write off billions of dollars in assets and has seen its cash flows squeezed by lower oil prices. Petrobras said it plans to use the proceeds of the operation, to repurchase a total of $6 billion in outstanding bonds, up from a previously announced $3.58 billion. The company was planning to raise up to $5 billion with the issue, but increased the amount due to the strong demand. The issue attracted demand from investors of around $20 billion, according to a banker, who was involved in the transaction.

    Oil-For-Drugs Swap: India's Answer To Venezuela's Unpaid Bills - Venezuela can’t pay its millions of dollars in debt to Indian pharmaceutical companies, say Indian officials, so officials are considering a proposal that would see the Latin American country swap oil for its drug debts. After an unlucky gamble on India’s part that Venezuela’s emerging economy would be a good place to hawk Indian pharmaceuticals, the debt is now mounting and poor crisis management coupled with the long-running oil price slump has left Venezuela too cash strapped to pay up. Already, according to Indian media, India’s Dr Reddy’s pharmaceutical company has written off US$65 million in debt in the first quarter of this year, while Glenmark Pharmaceuticals Inc is looking to collect some US$45 million in unpaid debt from Venezuela. "The situation in Venezuela is very precarious ... the government knows it needs to do something about the medicine shortage, that's why it is willing to discuss such a deal," Reuters quoted an Indian official as saying. Indian officials cited by local media have suggested that the oil-for-drugs proposal has come from the Trade Ministry, which envisions using the State Bank of India as a mediator in the swap. “The finance ministry has assured us that the government is fully committed to it, but it will take time," India’s Economic Times quoted P.V. Appaji, Director General of the Pharmaceutical Export Promotion Council of India, a body under the country's commerce ministry, as saying. It’s not an unprecedented idea. India has swapped rice and wheat for Iranian oil when Iran was under sanctions.

    Goldman Cuts 2017 Oil Price Forecast Due To Slower Market Rebalancing - In yet another paradoxical move that will leave many scratching their heads, just days after throwing in the towel on its bullish dollar call (now that it expects far less rate hikes over the next year), Goldman moments ago announced that it is also cutting back on its longer-term oil price forecasts (which paradoxically are linked to a stronger dollar) for the coming year, as a result of a rebalancing that is taking far longer to take place than previously anticipated. This is how Goldman explains its bearish pivot on crude: The inflection phase of the oil market continues to deliver its share of surprises, with low prices driving disruptions in Nigeria, higher output in Iran and better demand. With each of these shifts significant in magnitude, the oil market has gone from nearing storage saturation to being in deficit much earlier than we expected and we are pulling forward our price forecast, with 2Q/2H16 WTI now $45/bbl and $50/bbl. However, we expect that the return of some of these outages as well as higher Iran and Iraq production will more than offset lingering issues in Nigeria and our higher demand forecast. As a result, we now forecast a more gradual decline in inventories in 2H than previously and a return into surplus in 1Q17, with low-cost production continuing to grow in the New Oil Order. This leads us to lower our 2017 forecast with prices in 1Q17 at $45/bbl and only reaching $60/bbl by 4Q17. ... while the physical barrel rebalancing has started, the structural imbalance in the capital markets remains large, with $45 bn of equity and bond issuance taking place in the US this year. As a result, we believe that the industry still has further to adjust and our updated forecast maintains the same 2016-2017 price level that we previously believed was required to finally correct both the barrel and capital imbalances, and eventually take prices to $60/bbl.

    This Is Goldman's Primer On The Most Critical Crude Oil Prices - While we are not sure if the market has finally had time to actually read Goldman's oil note from Sunday night (posted here at the same time) and understand that far from bullish Goldman actually warned that the market rebalancing is taking far longer and as a result is lowering its 2017 price targets, there was one additional curious highlight in the report: Goldman's breakdown of critical prices bands for oil which actually is a useful guide for how the broader market (if devoid of momentum-chasing algo traders) would respond with oil trading in any given price interval .

    • Below $30/bbl is the price range when inventories near storage capacity. This risk has passed in our view absent a sharp reversal in global growth.
    • Below $40/bbl, producers respond by aggressively slashing spending and future production. This threshold was made explicit by the US credit agencies when they downgraded 15% of US E&Ps to high yield earlier this year. We no longer need to be in this range unless the systemic disruptions reverse (Nigeria, Libya) or low-cost producers surprise to the upside once again in 2016 or 2017.
    • Between $40/bbl and $50/bbl is the muddle through. It’s the range (1) that most non-OPEC producers budgeted for 2016, and (2) where US producers on aggregate are not ramping up activity: some are focusing on drawing down their well backlog while the aggregate rig count continues to decline. This is where prices will remain through 2Q.
    • Above $50/bbl is where activity will start to ramp up although operational frictions and levered balance sheets will slow this activity initially. This threshold has been explicitly stated during US earnings releases and is also consistent with the notable increase in hedging with calendar 2017 prices near $50/bbl. The ongoing open access to capital creates the risk that activity can ramp up meaningfully more near $50/bbl than we expect, with a US E&P raising equity this past week to ramp up its drilling activity. We also see risks that brownfield capex spending increases near this threshold, as producers seek to maximize returns and cash flow.
    • Near $60/bbl is when new projects will be sanctioned and shale activity will accelerate, which we do not require until late in 2017 in our view.

    OilPrice Intelligence Report: Goldman Sachs Turns Bullish on Oil - Oil prices rose this week due to the ongoing outages from Canada and Nigeria, events which Goldman Sachs says has tipped the markets from oil glut into deficit. The investment bank is typically one of the more bearish voices on oil, so its uncharacteristically bullish call on May 16 caught the markets by surprise. Canada still has more than 1 mb/d of supply offline because of the fires, although some companies are trying to restart operations. More importantly, attacks in the Niger Delta have not let up, which have forced ever more output from Nigeria offline. "The oil market has gone from nearing storage saturation to being in deficit much earlier than we expected," Goldman Sachs said on Monday. WTI and Brent traded up near $48 per barrel. Bearish signs still abound. There are some caveats to keep in mind. Genscape reported oil storage levels rising at Cushing, Oklahoma for the week. ExxonMobil said that it would restore some oil supply in Nigeria. Venezuela secured some help from China and a political breakthrough in Libya could mean the return of some supply from the war-torn North African nation (more on that below).  Suncor Energyand Syncrude Canada were forced to undertake fresh evacuations from oil sands facilities in Alberta because of encroaching wildfires, pulling out around 8,000 people. The fires have yet to be brought under control, and they could delay the restart of more than 1 million barrels per day of production, more than a third of Canada’s entire output. Suncor had said last week that it planned on restarting operations, but the spread of the wildfire has prevented that up until now. The company has shut in at least 300,000 barrels per day of supply.

    Oil hits six-month highs on supply outages, Goldman forecast | Reuters: Oil prices hit six-month highs on Monday on worries about global supply outages and as long-time bear Goldman Sachs sounded more positive on the market, although a stockpile build at the U.S. storage hub for crude futures limited gains. Expectations of resumption in oil exports from a Libyan port, a ramp up in Nigerian crude production by Exxon Mobil Corp and an improved oil-for-loans deal reached by Venezuela with China furthered the tempered the bullish theme in oil. Brent crude futures settled up $1.14, or 2.4 percent, at $48.97 per barrel. It rallied to $49.47 earlier, its highest since early November, in a test towards $50. U.S. crude's West Texas Intermediate (WTI) futures rose by $1.51, or 3.3 percent, to end at $47.72 after touching a six-month high at $47.85. WTI saw a flurry of late buying, with more than 13,600 lots changing hands in the final minute, according to Reuters data, in an attempt to test $48. Crude futures have rallied for most of the past two weeks from a combination of Nigerian, Venezuelan and other outages, declining U.S. production and virtually frozen inflows of Canadian crude after wildfires in Alberta's oil sands region. The disruptions triggered a U-turn in the outlook for the oil market from Goldman Sachs, which had long warned of global storage hitting capacity and of another oil price crash to as low as $20 per barrel. "The oil market has gone from nearing storage saturation to being in deficit much earlier than we expected," said Goldman, which added that supply likely shifted into a deficit in May.

    Crude Slides After Oil Inventories Drawdown Less Than Expected - Following last week's chaotic Genscape build (and warning), API build, but DOE draw, and subsequent face-ripping rally, tonight's API data signaled a lower than expected draw and sparked further chaos in prices as they jerked higher ("it's a draw") only to slide on missed expectations. Having reached 7-month highs during the day session, the 1.1mm barrel drawdown missed expectations of a 3.5mm draw dramatically and sparked selling pressure. However, a smaller than expected build at Cushing stalled the weakness along with notably large drawdowns in Gasoline and Distillates. API:

    • Crude -1.1m (-3.5mm exp, last week -3.4mm)
    • Cushing +508k (+1.1m exp)
    • Gasoline -1.9mm (-1m exp)
    • Distillates -2m (-1m exp)

    Oil futures mark highest settlement in 7 months -  Oil futures rose Tuesday for a second straight session, with prices settling at their highest level since early October as traders bet that the recent output disruptions will drawdown the globe’s supply surplus. The market also looked ahead to data on U.S. crude inventories, which is expected to show a weekly decline. June West Texas Intermediate crude CLM6, +0.46% rose by 59 cents, or 1.2%, to settle at $48.31 a barrel on the New York Mercantile Exchange — the highest settlement for futures prices since Oct. 9. July Brent LCON6, +0.18% ended at $49.28 a barrel on London’s ICE Futures exchange, up 31 cents, or 0.6%.“Supply outages continue to be the key short-term driver for the crude complex, with Canadian and Nigerian production still facing difficulty,” said Robbie Fraser, commodity analyst at Schneider Electric. “The combination of those outages alongside stronger than expected demand growth, particularly from China, has at least temporarily removed excess supply from the market,” he said.The biggest support for oil prices has been supply disruption caused by continued productions outages in Nigeria and Canada. Analysts believe that continued sabotage to Nigeria’s oil infrastructure means that the West African nation is now producing about 1 million barrels a day, down 1.2 million barrels a day from its 2015 average.

    Crude Dumps, Pumps, & Slumps As Unexpected Inventory Build Offsets Production Cut --Following API's smaller than expected draw overnight, DOE data showed an unexpedted 1.31m barrel build (3.5m draw expectations). This was offset by considerably bigger than expected draws in Gasoline and Distillates and Cushing oinventories rose less than expected. Crude production also fell once again, to its lowest since Sept 2014. The initial kneejerk was a mini-flash-crash in crude prices.. but that was rapidly bid back to unch...DOE

    • Crude +1.31m (-3.5mm exp, last week -3.4mm)
    • Cushing +460k (+1.1m exp)
    • Gasoline -2.5mm (-1m exp)
    • Distillates -3.17m (-1m exp)

    Some other statistics:

    • Total production: 8.8mm
    • Crude imports: 7.8mm
    • Total crude supply: 16.1mm

    Production dropped for the 17th week in a row to its lowest since Sept 2014... Total stocks rose 1.3MM to 541MM, up 59 million Y/Y. Some other interesting obserations: despite the Canadian wildfires, it appears that the DOE goalseeked total imports at 7.8mm barrels, virtually unchanged from last week, suggesting there has been no disruption. Also notable is that refinery throughput rose by 190,000 b/d to a new record high of 16.371, up 1% from a year ago this time.

    Oil Holds Gains After Unexpected Storage Build - WSJ:  —Oil prices rose Wednesday as traders looked past a surprise increase in crude stockpiles to focus on robust demand for refined products like gasoline. Prices are on track to settle at a new 2016 high. Oil futures have surged in recent sessions as outages in Africa and Canada and production declines in the U.S. fueled expectations of a tighter supply. U.S. crude for June delivery recently rose 44 cents, or 0.9%, to $48.75 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 29 cents, or 0.6%, to $49.57 a barrel on ICE Futures Europe. U.S. crude-oil inventories rose by 1.3 million barrels to 541.3 million barrels in the week ended May 13, the Energy Information Administration said Wednesday. Analysts polled by The Wall Street Journal had expected a decline of 2.4 million barrels. Stockpiles of refined products including gasoline and distillates like diesel fuel fell by more than crude-oil inventories rose. Demand for refined products rose to more than 20 million barrels a day, the EIA estimated, the highest weekly level since January. “We did have a hefty drawdown in gasoline and distillates,” . “It’s going to support higher prices in the short term.…I think $50 is around the corner.” Gasoline futures recently rose 1.2% to $1.6530 a gallon. Diesel futures rose 2% to $1.4968 a gallon. Imports from Canada to the Midwest fell, reflecting lower Canadian oil-sands production following wildfires. But imports to the Gulf Coast rose by a larger amount, which “highlights the overall robust global supply picture,” . A stronger dollar ahead of the release of the latest minutes from the U.S. Federal Reserve also weighed on oil prices Wednesday. The Wall Street Journal Dollar Index, which tracks the dollar against a basket of other currencies, recently rose 0.3%.

    Oil steadies; Canadian, Nigerian supply issues offset strong dollar | Reuters: Oil prices settled largely unchanged on Thursday as worries about Canadian and Nigerian supply outages offset the impact of a stronger dollar, which has rallied on growing expectations the Federal Reserve will raise interest rates next month. The prospect of a U.S. rate increase in June prompted investors earlier on Thursday to cash out of long positions in Brent and U.S. crude's West Texas Intermediate (WTI) futures. Those positions made money after oil rallied on Monday and Tuesday on worries about supply outages. But Brent and WTI closed sharply off the session lows due to crude export problems facing Canada's Suncor Energy (SU.TO) and reports of trouble at Nigeria's Qua Iboe crude oil terminal. Suncor extended a force majeure that will prevent any more shipping of oil this month from its Syncrude facility. The decision came amid a raging wildfire in Canada's oil sands region that has shut output capacity by more than 1 million barrels per day. In Nigeria, ExxonMobil (XOM.N) said operations at its Qua Iboe crude oil terminal were disrupted by "criminal" activity, although the plant was still producing. The terminal, Nigeria's largest and typically exporting more than 300,000 barrels per day, declared a force majeure last week after damage to a pipeline.

    Oil Supply Disruptions Quickly Fading As Canada, Libya, And Nigeria Return To Production - Earlier this week, Goldman unleashed the latest oil rally when it admitted that while the oil market will take far longer to rebalance due to rising low-cost oil production, it said that material supply disruptions are providing a boost to near-term prices. Goldman provided the following visualization of unplanned ongoing outages ...  where it highlighted the recent stoppages in Canada, Nigeria and Libya as the most prominent. In a surprising twist, it appears that virtually all three of the main disruptions choke points are being resolved far quicker than expected. First on Canada and its ongoing wildfire, the WSJ reported that the threat from forest fires in northern Alberta receded further on Thursday with the blazes moving away from oil-sands production facilities and a nearby evacuated town as cooler, wetter weather aided firefighting efforts, provincial officials said. The out-of-control wildfire spread to more than 1.25 million acres, up from just over one million acres on Wednesday, but the front line moved away from critical infrastructure to a remote area on the border of neighboring Saskatchewan province, the officials said. "The threat definitely has diminished around the communities and the oil-sands facilities," Mr. Morrison said at a news conference in Edmonton. “We held the fire yesterday in all critical areas.” This means that oilsands production is gradually coming back online and full capacity will likely be fully restored in the coming days: Just as important is that the long-running export crisis in Libya also appears to be on the verge of a solution. According to Bloomberg, oil exports are set to resume Thursday from the port of Hariga in eastern Libya, easing a bottleneck and allowing for crude production to increase after competing administrations of the state-run National Oil Corp. reached an agreement in the divided country. Finally, and perhaps most importantly, is Nigeria, whose offline high quality bonny light crude has been seen as a major catalyst for the recent spike in prices due to the actions of such groups as the Niger Delta Avengers, and where Bloomberg notes that an oil tanker was said to have finally loaded up Nigeria’s Qua Iboe crude today, when a shipment was made on the SCF Khibiny, a 1 million bbl carrying Suezmax. It adds that the ship signals today that its status is "under way" having previously been anchored. The reason: "people who had blocked bridge access to Qua Iboe terminal no longer there" according to Bloomberg.

    US oil ends at $47.75, up about 4 percent for week: Oil prices were steady to softer on Friday as a stronger dollar spurred investors to cash in on a second week of gains, with the focus remaining on the rebalancing of the market as the global glut faced unplanned supply outages. The dollar was on course for a third straight weekly gain on Friday on hints the United States is getting closer to raising interest rates. A stronger dollar makes it more expensive for investors to hold greenback-denominated commodities like oil futures. Global benchmark Brent crude prices traded 11 cents lower at $48.70 a barrel, off a six-month high of $49.85 reached two days ago.  U.S. West Texas Intermediate crude futures settled at $47.75 a barrel, down 41 cents, also falling from a seven-month high of $48.09. That said, it gained about 4 percent for the week. Also on Friday, oilfield services firm Baker Hughes reported the number of oil rigs drilling in U.S. fields remained unchanged from the previous week at a total of 318. Oil was still headed for their second straight week of gains, boosted by growing supply disruptions in oil producing countries like Nigeria, Canada and Libya.  "The overall market sentiment remains biased to the upside as a growing contingency of market participants are of the view that the market is already in a rebalancing pattern and the current round of unscheduled production cuts are starting to accelerate the process,"

    Oil futures settle lower, but gain more than 3% for the week - Oil futures on Friday finished the week with a more than 3% gain, with recent production outages feeding expectations for a decline in the global glut of crude supplies. Prices for the session, however, settled lower, pressured by news that exports from an eastern port in Libya have resumed and data showing that the weekly U.S. oil-rigs count was unchanged, after eight straight weeks of declines. The June contract for West Texas Intermediate crude fell 41 cents, or 0.9%, to settle at $47.75 a barrel on the New York Mercantile Exchange. The contract, which expired at the settlement, gained 3.3% for the week. The July contract which is now the most-active and front-month contract, finished the day at $48.41, down 26 cents, or 0.5%. July Brent crude, the global oil benchmark, shed 9 cents, or 0.2%, to $48.72 a barrel on London’s ICE Futures exchange, for a weekly gain of about 2%. News reports said that exports from the eastern port of Marsa al-Hariga in Libya have resumed. The Libyan outage began more than two weeks ago with a dispute between two groups fighting for control of the country.  Prices had seen gains early Friday but “lost momentum after it was reported that oil exports resumed from [Libya’s] blocked eastern port,” said Phil Flynn, senior market analyst at Price Futures Group. Adding further pressure to prices, data from Baker Hughes Friday showed that the number of active U.S. rigs drilling for crude was unchanged at 318 after falling over the last eight weeks in a row. The total U.S. rig count fell by 2 to 404. The figures are a rough proxy for activity in the industry.

    Something Stunning Is Taking Place Off The Coast Of Singapore -- Back in November, when the world-record crude inventory glut was still in its early innings, we showed what we then thought was a disturbing image of dozens of oil tankers on anchor near the US oil hub of Galveston, TX, unwilling to unload their cargo at what the owners of the oil thought was too low prices. Little did we know that just a few months later this seemingly unprecedented sight of clustered VLCCs would be a daily occurrence as oil producers, concerned by Cushing hitting its operating capacity, would take advantage of oil curve contango to store their oil offshore.  However, while the "parking lot" off Galveston has since normalized, something shocking has emerged and continued to grow half way around the world, just off the coat of Singapore. This. The red dots show stationary oil tankers, which have made the Straits of Malacca, one of the world's most important shipping lanes which carries about a quarter of all seaborne oil primarily from the Persian Gulf headed to China, into a "bumper to bumper" parking lots of ships and tens of millions in combustible cargo. it is also the topic of the latest Reuters expose on the historic physical oil glut which continues to build behind the scenes, and which so far has proven totally immune to the sharp increase in oil prices over the past three months. Indeed, as Reuters reports, prices for oil futures have jumped by almost a quarter since April, lifted by severe supply disruptions caused by triggers such as Canadian wildfires, acts of sabotage in Nigeria, and civil war in Libya. And yet flying into Singapore, the oil trading hub for the world's biggest consumer region, Asia, reveals another picture: that a global glut that pulled down prices by over 70 percent between 2014 and early 2016 is nowhere near over, and that financial traders betting on higher crude oil futures may be in for a surprise from the physical market. "I've been coming to Singapore once a year for the last 15 years, and flying in I have never seen the waters so full of idle tankers," said a senior European oil trader a day after arriving in the city-state.

    US rig count drops 2 this week to 404, another all-time low (AP) — The number of rigs exploring for oil and natural gas in the U.S. dropped by two this week to 404, another all-time low amid low energy prices. A year ago, 885 rigs were active. Houston oilfield services company Baker Hughes Inc. said Friday 318 rigs sought oil and 85 explored for natural gas. One was listed as miscellaneous. Among major oil- and gas-producing states, Texas declined by eight rigs while Kansas and North Dakota were down one each.  Louisiana gained seven rigs and Colorado and Oklahoma were up one apiece. Alaska, Arkansas, California, New Mexico, Ohio, Pennsylvania, Utah, West Virginia and Wyoming were 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.

    The oil rig count did not fall for the first time in 9 weeks - The US oil rig count was unchanged this week, breaking an eight-week streak of declines. The gas rig count fell two to 85, and the oil rig tally totaled 318, taking the combined count down two to 404. That's a level not seen since the series began in 1947. The oil rig count fell last week by four, while the gas rig count increased by one. Meanwhile, US oil production keeps falling, and is now at the lowest level since September 2014 according to Bloomberg. Crude production fell to 8.79 million barrels per barrel last week, according to data from the Energy Information Administration. After the rig-count data release, West Texas Intermediate futures were down 0.2% to $48.46 per barrel in New York. Oil prices headed for a second straight weekly gain amid supply disruptions in Nigeria and wildfires near Canadian oil sands. Here's the most recent chart of oil rigs:

    Oil Price Slips After Rig Count Decline Stalls - For 20 of the last 21 weeks, US oil rig count has declined as it tracked the lagged oil price lower. That changed today as oil rigs were unchanged week-over-week perfectly syncing with the lagged lows in oil. Total rigs dropped 2 (thanks to gas rigs) to a new record low but even that pace has slowed dramatically. Oil prices are fading modestly on the news... And oil prices are giving up earlier gains...

    Moody's downgrades Saudi Arabia on lower oil prices: (AP) — Saudi Arabia's credit rating has been downgraded by Moody's because of the long and deep slump in oil prices. Moody's Investors Service said Saturday that it also downgraded Gulf oil producers Bahrain and Oman. It left ratings unchanged for other Gulf states including Kuwait and Qatar. Saudi Arabia is the world's largest oil exporter. Moody's cut the country's long-term issuer rating one notch to A1 from Aa3 after a review that began in March. Crude prices fell from more than $100 in mid-2014 to under $30 a barrel in February, although they have recovered into the mid-$40s. Benchmark international crude settled Friday at $47.83 a barrel. "A combination of lower growth, higher debt levels and smaller domestic and external buffers leave the Kingdom less well positioned to weather future shocks," Moody's said in a note. Moody's lowered Oman to Baa1 from A3 and Bahrain to Ba2 from Ba1. The ratings agency did not downgrade Kuwait, Qatar, the United Arab Emirates or Abu Dhabi, but it assigned a negative outlook to each. Oil prices slumped because of production that grew faster than demand. Surging production from shale operators in the United States contributed to the glut. So did the Organization of Petroleum Exporting Countries, which decided in November 2014, several months after prices began falling, to continue pumping rather than give up market share.

    Saudi Arabia Credit Downgrade: Moody’s Cuts Rating, Assigns Stable Outlook Amid Slump In Oil Prices -- Moody's Investors Service downgraded Saudi Arabia's credit rating Saturday, to A1 from Aa3, citing lower oil prices that led to a “material deterioration in Saudi Arabia's credit profile.” Lower growth, higher levels of debt and reduced buffers both internally and externally — its foreign exchange reserves fell from $731 billion in August 2014 to $576 billion by March — had also weakened the oil-rich kingdom's ability to weather future economic shocks, the agency said. As defined by Moody's, an Aa3 rating signifies high quality and very low credit risk, while the slightly lower A1 rating signifies an upper-medium quality grade and low credit risk. Oil prices have fallen to less than $50 a barrel for crude, from a peak of more than $100 a barrel in 2014. The collapse has taken a heavy toll on Saudi Arabia, which counts on its oil and gas sector for 50 percent of its gross domestic product and about 85 percent of its export earnings.

    Saudi Aramco IPO: The Numbers Don't Add Up And For Bloomberg: Business As Usual -- From various sources this is my 30-second, elevator speech regarding Saudi Arabia and its trillion-dollar mistake:

    • the country is said to have had about $850 billion in cash and marketable equities when this all started;
    • the country is said to have lost maybe $250 billion since October, 2014, due to the "trillion-dollar-mistake"; maybe more, maybe less; maybe a lot more;
    • currently the country is losing about $5 billion / month;
    • the NY Times recently reported that if the "9/11 report" was released, Saudi Arabia was ready to sell $750 billion in US Treasuries; and,
    • one would think about 2/3rds (maybe more of a country's assets) would be in cash, marketable equities, or in this case, 0.67 * 850 = $550 billion.
    In a short Bloomberg story posted today, the writers note that the US Treasury Department ... has released a breakdown of Saudi Arabia's holding of US debt (i.e., Treasuries), after keeping the figures scret for more than four decades. And ... drum roll ... drum roll... The stockpile of the world's biggest oil exporter stood at $116.8 billion ... ... let's just call it less than $150 billion, giving Prince Salman a bit of slack. Now 5% of a trillion company ($50 billion) looks a lot more reasonable. I always wondered why such a low amount ("less than 5%" has been the usual boiler-plate number) was being offered in the IPO. Well, now we know. If one's stockpile is only $150 billion, then $50 billion actually looks pretty impressive.

    Saudi Arabia Considers Paying Contractors With IOUs - Saudi Arabia is considering using IOUs to pay outstanding bills with contractors and conserve cash, according to people briefed on the discussions. As payment from the state, contractors would receive bond-like instruments which they could hold until maturity or sell on to banks, the people said, asking not to be identified because the information is private. Companies have received some payments in cash and the rest could come in the "I-owe-you" notes, the people said, adding that no decisions have been made on the measures. Saudi Arabia has slowed payments to contractors and suppliers, tapped foreign reserves and borrowed from local and international banks in response to the decline in crude oil, which accounts for the bulk of its revenue. The country will probably post a budget deficit of about 13.5 percent of economic output this year, according to International Monetary Fund estimates, pushing the government to borrow an estimated 120 billion riyals ($32 billion). The Saudi government owes approximately $40 billion to the country’s contractors, estimated Jaap Meijer, managing director of research at Dubai-based Arqaam. Companies such as the Saudi Binladin Group are cutting thousands of jobs amid a slowdown in the construction industry, according to media reports. “This would make sense and would help contractors get back on track,” Meijer said of the possible move. “Banks, however, would be more interested if it were a floating rate.”

    Saudi Arabia’s IOUs - Izabella Kaminska - Something of significant note just occurred in the global oil hierarchy. According to a Bloomberg report filed on Wednesday afternoon (UK time), Saudi Arabia may be considering paying some outstanding bills to contractors using government-issued bonds. Contractors, they added, would be able to hold bond-like instruments until maturity. This is quite something, not least because paying your contractors with short-term bonds is not entirely dissimilar to paying them with IOUs. The report also noted that the last time Saudi Arabia had paid contractors with bonds was in the 1990s. Details are still forthcoming and there’s been no official confirmation from Saudi Arabia’s finance ministry thus far. As a consequence, we’ve trawled through the FT archive to figure out what the implications were last time Saudi Arabia pulled the manoeuvre almost exactly two decades ago. Here’s the FT story from April 4, 1996 (click to enlarge): A few points to highlight (bearing in mind it’s now 20 years later and things have probably changed a lot):

    • The 1996 IOUs came on the back of more than five years worth of massive borrowings and followed delays on payments to other parts of the private sector.
    • The debts were borrowings from Saudi Arabia’s own state pensions fund and social security system.
    • The farmers who received the non-interest notes had not been paid for five years.
    • Banks were willing to buy (liquidise) the IOUs at an average discount of 1 per cent over the equivalent treasury bill rate.
    • The practice of delaying payments for two or more years was an unwritten part of government policy since the 1986 oil price fall.
    • The IOU payments followed a major drawdown on Saudi Arabia’s reserves (in part the result of Operation Desert Storm).
    • The cash drain was exacerbated by a reluctance to cut welfare spending and agricultural subsidies.

    Saudi Arabia’s Bold Vision for Economic Diversification – Mohamed A. El-Erian - Saudi Arabia has captured the world’s attention with the announcement of an ambitious agenda, called Vision 2030, aimed at overhauling the structure of its economy. The plan would reduce historical high dependence on oil by transforming how the Kingdom generates income, as well as how it spends and manages its vast resources. It is supported by detailed action plans, the initial implementation of which has already involved headline-grabbing institutional changes in a country long known for caution and gradualism.  While the immediate catalyst for economic restructuring is the impact of the sharp fall in international oil prices, the rationale for these reforms has been evident for much longer. With oil sales generating the bulk of government revenues, and with the public sector being the predominant employer, Saudi officials have long worried that the Kingdom’s lack of economic diversity could place at risk its long-term financial security.  The more than halving of oil prices in the last 18 months has been accompanied by a major change in how the oil market functions. With growth in non-traditional sources of energy – particularly the “shale revolution,” which drove a near-doubling in US production, to almost ten million barrels per day, in just four years – the Saudi-led OPEC oil cartel has less influence on market prices. That’s why Vision 2030 is so important. Seeking to regain better control over its economic and financial destiny, the Kingdom has designed an ambitious economic restructuring plan, spearheaded by its energetic new deputy crown prince, Mohammed bin Salman Al Saud. In simplified terms, Vision 2030 focuses on three major areas, together with efforts to protect the most vulnerable segments of the population.

    What Does The Next OPEC Meeting Have In Store? | OilPrice.com: The next OPEC meeting on the 2nd of June will act as little more than a forum for continued altercations between Saudi Arabia and Iran The 2 June 2016 OPEC meeting will be held amid a backdrop of oil prices near $50 per barrel, a sharp drop in Nigerian production due to sabotage, turmoil in Venezuela, Saudi Arabia operating with a new oil minister, and Iran aggressively pumping close to pre-sanction levels. OPEC interactions have become a direct altercation between Saudi Arabia and Iran, with the remaining members reduced to mere observers. The new Saudi oil minister, Khalid al-Falih, will be attending his first OPEC meeting, but experts doubt he will have the same clout and skills as the outgoing Saudi oil minister, Ali bin Ibrahim Al-Naimi.  “OPEC’s unity is now in the spotlight more than ever,” said an OPEC official. “Would we ever see a minister that carries the same weight as Naimi? I don’t think so, especially as it is clear now that decisions are in the hands of the deputy crown prince,” reports The Wall Street Journal. The Prince outlined his strategy in “Vision 2030”, and a major step in that direction is the listing of the state-owned oil company Aramco. In order to gain additional traction for the proposed listing, the Saudis will continue their aggressive stance in OPEC, and keep all the oil producers on the hook, a glimpse of which was given by the new Saudi Aramco Chief executive Amin Nasser.

    Iran's Oil Sector Returns to Form -- For nearly five decades, the Anglo-Persian Oil Co., later renamed Anglo-Iranian Oil Co., the forebear of what would eventually become British Petroleum, enjoyed near total control over Iran's oil sector. When Iran nationalized the sector in 1951, the United States and United Kingdom responded by overthrowing its architect, Prime Minister Mohammad Mossadegh, just two years later. Those events heavily influenced the 1979 Iranian Revolution, a foundational element of which was resource nationalism. And now it appears that BP is returning to its roots. During the week of May 2, the head of Iran's national oil company announced that BP will soon open an office in Tehran. Meanwhile, the country is opening up its energy sector and considering admitting foreign oil companies to set up joint ventures and operate oil fields there for the first time since 1979. But Iran faces new challenges. To revive his country's economy after years of sanctions, President Hassan Rouhani is now driving an initiative to reinvigorate the oil sector. To do so, Rouhani will have to break what has become a steady cycle of backlash — aimed at foreign and domestic actors alike — over the distribution of oil revenue in Iran.Iran's socialist and isolationist left has all but disappeared from the political scene, leaving in its place reformists who support re-engagement abroad. In fact, a broad consensus has been reached in Iran in favor of reviving economic ties with the outside world. At the same time, of course, the country's various political factions will try to turn the opportunity, each to its own advantage. Nonetheless, the ongoing disputes between Iran's hard-line conservatives, pragmatic conservatives, traditional conservatives and reformists depend more on the distribution of wealth in the country and less on the ideological rifts that characterized the debate 30 years ago.

    IMF official: Iran can’t count on big jump in oil revenue (AP) — A senior International Monetary Fund official says Iran must deal with a shift to lower crude prices and cannot count on a big jump in oil revenue as it looks to boost production and better integrate with the global economy. First Deputy Managing Director David Lipton made the remarks Tuesday during a visit to Iran’s Central Bank. According to a transcript of his speech, Lipton said high global oil output and weak demand limit Iran’s prospects for a large increase in oil revenue. He says sustainable growth and job creation will increasingly depend on sectors other than oil in the future. He also stressed the importance of fighting money laundering and terrorism financing in plugging Iran’s banks into the global financial system, and said the IMF stands ready to help.

    Iran Threatens to Sue US in the Hague for ‘Hostile Moves’ -- Iranian lawmakers are moving closer to approving a lawsuit against the United States to seek compensation for damage inflicted by Washington’s “hostile moves over the past 63 years”. On Wednesday, 181 of the 290 Iranian lawmakers voted in favor of a bill that would pave the way for the government to take legal action against the U.S. in an international court for actins dating back to the 1953 coup in Iran. The move comes just a few weeks after the U.S. Supreme Court ruled that nearly $2 billion of Iran’s frozen assets be given to American families of the victims of a 1983 bombing in Beirut and other attacks. It also comes after the release of documents declassified in April 2013 detailed the alleged CIA-orchestrated ouster of Prime Minister Mohammed Mossadegh 60 years ago. Analysts say the U.S. Supreme Court’s decision is set to affect Washington’s nascent ties with Iran at a time when the U.S. seeks to keep a balance between its strong alliance with Saudi Arabia, Iran’s regional rival, and the government in Tehran, which aims to recover economically after years of UN-backed sanctions due to its controversial nuclear program.

    Algeria Signs Oil, Gas Deal as OPEC Member Seeks to Boost Sales  |  Rigzone- Algeria will supply oil and other energy products to Jordan for the first time under a memorandum of understanding signed on Monday, as the OPEC member seeks to diversify sales after years of stagnating crude production. Algeria’s state-run Sonatrach Group will start shipping liquefied natural gas and liquefied petroleum gas to Jordan in September, followed by crude oil, Algerian Energy Minister Salah Khebri said in an interview in Amman. Sonatrach and National Electric Power Co. of Jordan should reach a final agreement in the next few weeks, he said, without specifying shipment volumes. Sonatrach will also explore for oil and gas in Jordan. “This is the first time that we are going to get fuel and gas from Algeria,” Hasan Hiari, head of the natural gas department at Jordan’s Ministry of Energy & Mineral Resources, said in a separate interview in Amman. "We are keen on diversifying our energy sources." Algeria, Africa’s biggest natural gas producer, has invited international companies to help develop its oil and gas fields as Sonatrach has struggled to raise production after a corruption probe at the company and a deadly al-Qaeda terrorist attack in 2013 at the In Amenas gas field. The nation operated 55 oil rigs in April, an increase in each month since November, according to Baker Hughes Inc. Algeria pumped 1.1 million barrels a day of crude in April, its production little changed since 2013.

    Fledging Libyan unity government not yet in a position to co-ordinate effective military response to Islamic State -- Key Points

    • Despite progress in securing government ministries in Tripoli, sustained international engagement will be required to unite Libya's factions behind the GNA.
    • A continuation of the divisions in governance that have affected Libya since mid-2014 is more likely, marked by enduring mistrust between and within the major factions.
    • A narrow focus on military aid for the GNA will erode its legitimacy in Libya, and hinder further its ability to address the insecurity and instability that allow groups such as the Islamic State to thrive.

    Libya's Central Bank Has $184 Million In Gold In Its Vault... It Just Doesn't Know The Combination -  Imagine a world in which the chief of a central bank didn't have access to cash.   Now stop imagining and take a look at the situation in Libya, where the central bank chief sits in Eastern Libya, while the headquarters is further West in Tripoli, and despite Tripoli sending $23.5 million each month to Eastern Libya, it's only a fraction of what central bank governor Ali El Hibri says is needed to pay the bills ($257 million to be exact). The situation becomes even more strange when the fact that Eastern Libya actually does have a significant amount of gold and silver that it could use to sell and convert to cash, but it's in a vault that requires a five-number access code that nobody seems to have. Nobody that is, except for El Hibri's counterparts in Tripoli that is, and they won't give the code out. Such is life now in Libya since Muammar Gaddafi was captured and killed in 2011. Eastern and Western Libya is divided into two rival governments, and even the central bankers aren't working together to solve issues.It's alleged that the vault has roughly $184 million worth of gold and silver within its walls, and El Hibri isn't going to wait for his colleagues in Tripoli to have a change of heart before he can get to it. While El Hibri waits for a shipment of fresh currency from a foreign printing house to come in, totaling close to $3 billion, the central bank chief has tasked a pair of safe crackers, consisting of one engineer and one locksmith, to break into the vault and retrieve the coins. Although the coins apparently have Gaddafi's face on them, El Hibri has already worked a solution to that little issue by already agreeing to liquidate the treasure through gold and silver merchants provided they melt Gaddafi's likeness off.

    Iraqi security forces use live fire to break up protests in Green Zone — Security forces used live ammunition and tear gas to push back protesters who broke into the fortified Green Zone on Friday, in a sharp escalation of unrest that has gripped the Iraqi capital.Iraq’s military imposed a curfew across Baghdad after the protesters breached the secured area, which is home to the parliament and other government buildings. After protesters broke through — reaching the office of Prime Minister Haider al-Abadi — security forces could be seen advancing across the bridges that lead out of the Green Zone and firing tear gas as gunshots rang out, though it was unclear if they were aiming live ammunition directly at the crowd.Hospital officials said at least 617 people were injured, largely from inhaling tear gas. They did not report any deaths or injuries from gunfire.The turmoil is destabilizing the capital amidst the country’s fight with Islamic State militants, with fears the group could try and capitalize on the unrest to launch attacks on Baghdad, where it has carried out a wave of attacks in recent days.The violence also further undermines the authority of Abadi, who is already politically weak and therefore struggling to enact the reforms demanded by protesters. An economic crisis due to a crash in oil prices also is adding to the pressure.

    Iran-Saudi tensions simmer in Lebanon - BBC News: When thousands of mourners gathered in the southern suburbs of Beirut last week to bury top Hezbollah commander Mustafa Badreddine, who was killed in Syria, they repeatedly chanted "Death to al Saud". The Shia militant group backed by Iran and fighting alongside Bashar al-Assad's forces in Syria, said Badreddine's death "was the result of artillery bombardment carried out by takfiri groups in the area." Takfiri is a specific term to describe Muslims who believe society has reverted to a state of non-belief but in today's Middle East it has also become short hand for Sunni jihadist groups. The chants against the Saudi royal family appeared to strike a discordant note, coming from Hezbollah, a group that came into being in the 1980s to fight Israel's occupation of south Lebanon and remains officially dedicated to the goal of "liberating Palestine" - though it is now deeply embroiled in the war in Syria. But the mourners in Beirut were echoing a similar chant in front of the Saudi embassy in Tehran in January when angry protestors stormed the building after Riyadh carried out a death sentence against a Saudi Shia cleric, Nimr al-Nimr.  On the streets of Beirut, where Hezbollah members and supporters more commonly raise their fists to the slogan of "Death to Israel", the threats against the Saudi royal family were a stark reminder of the rapidly changing landscape in the region and the escalating proxy wars between Tehran and Saudi Arabia, from Syria to Yemen. In Lebanon, the rivalry has been simmering more quietly for years, in ways that are just as significant and came to a head in recent months. To counter Hezbollah's power and Iran's influence in Lebanon, Saudi Arabia has long backed a variety of politicians and institutions in Lebanon, the most prominent being the Hariris: former Prime Minister Saad Hariri and his father, Rafik, also a former prime minister who built his fortune in Saudi Arabia and was killed in a massive truck bomb in 2005.

    Israel and Saudi Arabia: Strange Bedfellows in the New Middle East - FPIF: On the surface, it would seem that Saudi Arabia and Israel would be the worst of enemies — and indeed, they’ve never had diplomatic relations. After all, the Saudis have championed the cause of the Palestinians, who are oppressed by the Israelis. Israelis say they’re besieged by Muslim extremists, and many of these extremists are motivated by the intolerant, Wahhabi ideology born and bred in Saudi Arabia. But beneath the surface, these two old adversaries actually have a lot in common. In fact, in the contemporary Middle East, they’ve become the strangest of bedfellows. Rumors about the budding relationship have been circulating for the past few years. In 2015, former Saudi and Israeli officials confirmed that they’d held a series of high-level meetings to discuss shared concerns, such as the growing influence of Iran in Iraq, Syria, Yemen, and Lebanon, as well as Iran’s nuclear enrichment program. Shimon Shapira, an Israeli representative who participated in secret meetings with the Saudis, put it this way: “We discovered we have the same problems and same challenges and some of the same answers.” On May 5, former Saudi intelligence chief Prince Turki bin Faisal and retired Israeli Major General Yaakov Amidror spoke together at a Washington event hosted by The Washington Institute for Near East Policy — the policy wing of the pro-Israel lobby AIPAC. The event, broadcast live online, showed that Saudi Arabia and Israel have finally come out of the closet –– together.

    Syrian Refugees Forced Into Child Labor  - video - Five million Syrians are on the run from their civil war, and the UN estimates more than one million are children. While undercover, CBS News' Holly Williams discovered refugee children pressed into labor for 50 cents an hour.

    MSF to pull out of World Humanitarian Summit | Médecins Sans Frontières (MSF) International -- Last year, 75 hospitals managed or supported by Médecins Sans Frontières (MSF) were bombed. This was in violation of the most fundamental rules of war which gives protected status to medical facilities and its patients, regardless if the patients are civilians or wounded combatants. Beyond the hospitals, civilians are being wounded and killed by indiscriminate warfare in Syria, Yemen, South Sudan, Afghanistan and elsewhere.  At the same time, the treatment of refugees and migrants in Europe and beyond has shown a shocking lack of humanity. A humanitarian summit, at which states, UN agencies and non-governmental organisations come together to discuss these urgent issues, has never been more needed. So the World Humanitarian Summit (WHS) this month could have been a perfect opportunity. MSF has been significantly engaged in the WHS process over the past 18 months, including preparing briefing notes on various themes – a sign of our willingness to be involved. The WHS has done an admirable job in opening up the humanitarian sector to a much wider group of actors, and leading an inclusive process. However, with regret, we have come to the decision to pull out of the summit. We no longer have any hope that the WHS will address the weaknesses in humanitarian action and emergency response, particularly in conflict areas or epidemic situations. Instead, the WHS’s focus would seem to be an incorporation of humanitarian assistance into a broader development and resilience agenda. Further, the summit neglects to reinforce the obligations of states to uphold and implement the humanitarian and refugee laws which they have signed up to.

    100 Years On: Sykes-Picot Agreement Still Haunts the Middle East - - 100 years ago, the terms of a secret deal dividing the Middle East between the UK and France were put forward. A century on, the Sykes-Picot agreement is still the subject of lively debate, with many citing it as a major factor behind today’s instability in the region. On May 9, 1916, the terms of the Sykes-Picot agreement were outlined in a letter between the British and French, with the actual deal signed one week later, on May 15, 1916. The agreement, negotiated by British diplomat, Sir Mark Sykes and Frenchman Francois Georges-Picot, aimed to divvy up large swathes of the Middle East that were at the time under the control of the Ottoman Empire, as the West believed Ottoman control of the area would not last beyond the end of World War One. The deal, which ultimately triggered a series of other similar agreements relating to control of the Middle East, loosely led to the creation of a border between modern-day Syria and Iraq, with many others arguing that it laid the platform for the creation of a Jewish state in Palestine. Under the deal the French were to control an area extending from Southeastern Turkey, Syria, Lebanon and parts of northern Iraq, while the British would take control of the area consisting of the majority of modern-day central and southern Iraq, as well as Jordan. A third area, loosely based around today’s Israel, was to become an Arab kingdom under a joint French-British mandate.

    Analysis: Drought triggers unusual thirst for gasoil in Asia - Hit hard by an El Nino-induced drought, some Asian countries are witnessing an unusual spike in gasoil demand for power generation with water shortage severely curtailing hydro power generation, especially when the crop season is drawing near. Analysts said that while India, Pakistan and Vietnam are witnessing a spike in demand, Malaysia is also facing dry weather in many areas but has not yet boosted gasoil imports. The market, though, is keeping a close eye on any additional demand from Malaysia. "Across Asia, we have seen a significant switch to diesel in the power sector due to the drought. We have also seen air conditioning demand soar, supporting gasoil demand further," said Amrita Sen, Chief Oil Analyst at Energy Aspects.In India, state-run oil firms have been issuing rare gasoil import tenders to tide over the crisis. Some Vietnamese importers have also sharply raised their gasoil imports. And Pakistan State Oil, or PSO, recently stepped into the international market, in an unusual move, to import gasoil. "The El Nino conditions have meant that India has had two successive years of below-normal rainfall. If weak rainfall persists for a third year, agri-based diesel demand may continue to accelerate," Macquarie said in a recent research report on India's oil sector. The agriculture sector contributes to about 13% of India's overall diesel demand. It is heavily dependent on rainfall, and diesel pumps supplant irrigation supply. A fall in hydro-electricity generation has also meant more diesel is needed to run gen-sets in times of electricity shortage at homes and commercial establishments.

    Nigeria production hiccups expected to raise Vietnam, Malaysia crude premiums - Production hiccups in West Africa coupled with an expected fall in Vietnam's July exports come as a boon for regional crude suppliers, as these could trigger a recovery in price differentials for Southeast Asian grades this month, market participants said Tuesday. Market sentiment improved significantly in Southeast Asia in recent trading days as many Asian end-users, including Indian refiners, were widely expected to shift their focus from Nigerian supplies to Malaysian and Vietnamese sweet crudes in the near term. Four regional sweet crude traders surveyed by Platts said they expect Malaysian Kimanis crude for loading in July to trade at premiums between $2.5/b and $3.0/b to Platts Dated Brent crude assessments this month. In comparison, most of the June-loading Kimanis crude cargoes changed hands at premiums of $1.9-$2.3/b in the previous trading cycle.Platts reported Friday, citing various sources, that exports of Nigerian sweet crude Qua Iboe were halted last week, and force majeure was declared on the grade. The announcement on Qua Iboe follows outages that have hit other grades in Nigeria. Operator Shell declared force majeure last week on similar grade Bonny Light. The month-long force majeure declared on distillate-rich Forcados crude has also reduced exports by 250,000 b/d. "A lot of these WAF grades regularly move East, but surely now Asian buyers would have to look elsewhere ... there are plenty of [light and medium sweet] Malaysian crudes to fill the gap,"

    Japan Energy Spending Cuts Add Urgency to Securing Future Supply -- Energy companies in Japan, a country almost entirely reliant on fossil fuel imports, are slashing investments by more than one-third following the collapse in commodity prices, increasing pressure on Prime Minister Shinzo Abe’s government to supplement exploration budgets. Spending will plunge 37 percent to about 1.2 trillion yen ($11 billion) in the year to March, the country’s Ministry of Economy, Trade and Industry forecast in a report Tuesday. The drop, just one slice of cuts globally, adds urgency to the government’s plans to sustain investment by the country’s explorers and accelerate efforts to get 40 percent of its oil and gas from domestic firms. The world’s biggest consumer of liquefied natural gas and fourth-largest crude buyer relies on imports for 94 percent of its primary energy supply, according to the country’s Federation of Electric Power Companies. Japan may allocate 3 trillion yen over the next five years to help develop large-scale oil and gas developments with state-run Japan Oil, Gas and Metals National Corp. investing in projects, the Nikkei newspaper reported last month. “The government must provide seed money through institutions like Jogmec” and Japan Bank for International Cooperation, said Nobuo Tanaka, former executive director of the International Energy Agency. “The government should do it as part of investment for the future to ensure energy security and reduce volatility.”

    Falling Chinese Demand Could Intensify The Oil War - The Chinese slowdown did more than drag down its own economy, it singlehandedly created financial tremors throughout the global financial markets. With consistent growth rates well over 6 percent, China's economic health is an integral part of global expansion. But just last year, investors saw the disintegration of billions of dollars’ worth of wealth on the Asian giant's stock market. The globalized economy experienced economic withdrawals with lagging Chinese demand, a substance to which both foreign and local industries have become addicted. It goes without saying that industrial and manufacturing demand in the Chinese economy acts as a relevant indicator of the world's financial condition, similar to the status of the United States. For that reason, investors have no choice but to realize the implications that can come from changes in demand for Chinese goods, services, and capital. A country's stock market is often a leading indicator of its economic performance. In China, two dramatic corrections occurred in the middle of 2015 which translated to the weakness that would infect the global economy. From its peak last year, the Shanghai CSI 300 Industrial Index has lost over 50 percent of its value in a downtrend that has depressed sentiment surrounding the industrial and manufacturing sectors in China. The downtrend has softened but continues to devalue large-cap industrial shares approaching values seen in mid-to-late 2014. As far as projections go, the stock market appears to be an indicator of a contraction in demand. Investors looking to pump capital back into these Chinese firms need to consider the bubble-like symptoms that caused four freefalls in the past year. The China Caixin Manufacturing PMI is one of the most watched industrial economic indicators for domestic and global demand trends. The index tracks the monthly growth of the manufacturing sector, one of the largest components of China's GDP. . Just after the major correction in August 2015, the September reading was recorded at its lowest point, 47.0. From there, the contractions have been slowly shrinking to just below 50 in March 2016.

    China’s Oil Industry Is Faltering, Production Falls 5%  - Low oil prices and spending cuts are cutting into China’s oil production, a little known source of output declines that are helping to balance the market. New data shows that China’s oil production oil production fell 5.6 percent in April compared to the same month a year earlier, falling to just 4.04 million barrels per day. Between January and April, production also fell by 2.7 percent. The declines came because China’s large state-owned oil companies are struggling with low oil prices, and just like its international competitors, they have had to make painful spending cuts. Lower levels of spending are starting to translate into a drop off in production as the necessary maintenance to keep field output elevated is reduced. Much of China’s oil production comes from large oilfields that are mature and facing declining output. More investment helps to slow decline, but significant capex cuts are allowing production to slip. Investment in China’s oil sector fell from $54.4 billion in 2014 to just $39.4 billion last year, and likely will fall to $33.5 billion in 2016. More evidence that China’s oil industry is faltering comes from import data – Clipper Data says that Chinese crude oil imports may have hit a record high in April. OPEC, in its latest Oil Market Report, slashed its forecast for China’s oil production this year, lowering it by 90,000 barrels per day to an average of 4.23 mb/d for 2016. The downward revision came because China’s state-owned oil companies have gotten off to a poor start in the first quarter of this year – output was down 100,000 barrels per day in the first quarter compared to the same period in 2015.

    China's April crude oil throughput up 2.4% on year at 10.93 mil b/d - - China's refinery throughput in April rose 2.4% year on year to 44.75 million mt, or an average 10.93 million b/d, preliminary data released Saturday by the National Bureau of Statistics showed. The total was down 3% from 44.91 million mt in March, when throughput posted the first year-on-year decline since March 2015. However on a daily basis, April throughput was up 2.9% from 10.62 million b/d in March. A Platts survey in April of 28 of China's largest state-owned refineries operated by Sinopec, PetroChina and China National Offshore Oil Corporation put average utilization at 77% of nameplate capacity, unchanged from March and edging down from 78% in April 2015. In contrast, the country's independent refineries have steadily ramped up crude throughput on good refining margins since being granted access to imported crudes in July 2015.  Feedstock consumption at independent refineries in eastern Shandong province -- 97% of it crude -- hit a record high 6.76 million mt in April, up 75% year on year and up 5% from March, according to data from Beijing-based energy information provider JYD. Confronted with fierce competition from independent refineries, China's state-owned refiners generally kept their run rates steady.

    China Industrial Production, Retail Sales Rise Less Than Expected:  China's industrial production and retail sales grew less-than-expected in April, damping hopes of stabilization in the economy. Industrial production rose 6 percent year-on-year, which was less than the 6.5 percent growth economists had forecast. In March, production increased 6.8 percent. The National Bureau of Statistics attributed the slower growth in production to weak external demand, poor performance in the mining industry, rising commodity prices and seasonal factors. The agency also reported that the fixed asset investment annual growth slowed to 10.5 percent in the January to April period from 10.7 percent in the January to March period. The easing in the figure was mainly due to sluggish investment in manufacture and infrastructure sectors. Given its large size, the continued slowing in private investment growth warrants high attention, the NBS said. Private investment rose just 5.2 percent in the first four months of the year versus 5.7 percent in the March quarter. A separate report from NBS showed that retail sales rose 10.1 percent year-on-year in April, which was also less than the 10.6 percent gain economists' had expected.

    China April economic activity data disappoints, hiking recovery doubts | Reuters: China's investment, factory output and retail sales all grew more slowly than expected in April, adding to doubts about whether the world's second-largest economy is stabilizing. Growth in factory output cooled to 6 percent in April, the National Bureau of Statistics (NBS) said on Saturday, disappointing analysts who expected it to rise 6.5 percent on an annual basis after an increase of 6.8 percent the prior month. China's fixed-asset investment growth eased to 10.5 percent year-on-year in the January-April period, missing market expectations of 10.9 percent, and down from the first quarter's 10.7 percent. Fixed investment by private firms continued to slow, indicating private businesses remain skeptical of economic prospects. Investment by private firms rose 5.2 percent year-on-year in January-April, down from 5.7 percent growth in the first quarter. "It appears that all the engines suddenly lost momentum, and growth outlook has turned soft as well," "At the end of the day, we have acknowledge that China is still struggling."

    China's economic indicators point to more weakness - China's industrial-production and investment data came in below expectations in April, despite Beijing's aggressive easy-money policies in the first quarter, pointing to continued weakness in the world's second-largest economy. Industrial output rose 6.0% year-over-year in April, compared with 6.8% growth in March, the National Bureau of Statistics said Saturday. This was below a median forecast of 6.6% growth by 15 economists surveyed by The Wall Street Journal. Fixed-asset investment in urban areas grew by a weaker-than-expected 10.5% year-over-year in the January-to-April period, compared with an annual increase of 10.7% for the first three months of 2016. Retail sales--a traditional bright spot--grew by a less-than-expected 10.1% in April compared with a year earlier, slowing from March's 10.5% year-over-year rise, the statistics bureau said. "We're seeing that growth engines are losing momentum, and the growth outlook has turned soft as well,"  "It's clear the government wants to manage down or re-anchor market expectation." Property results improved last month, although the sharp rise in a relatively few top-tier markets, such as the southern city of Shenzhen--where housing prices have risen more than 60% year-over-year so far in 2016--and Shanghai, while smaller markets languish, has raised concern that some markets are overheating.

    Indicator flashes warning on China economy, copper: There's an indicator flashing a big warning signal about the Chinese economy right now and if it's correct, it could send prices for copper and iron ore reeling. "Money supply is showing us a strong correlation between money supply and commodity prices," said Atul Lele, chief investment officer at Deltec International, which has $5 billion in assets under management. His analysis shows that about six months after the supply of funds in China, as measured by M2, rises or falls on a year-over-year basis, metals see a similar rise or decline in prices.

    China's desire for headline growth may hide longer-term risks: Moody's - China's desire to hold up headline growth figures may increase longer-term risks for the world's second-largest economy, ratings agency Moody's Investor Services said on Thursday. Even though the ratings agency has kept its growth forecast for China unchanged at 6.3 percent for this year, it said headline growth continues to be supported by increasing amounts of debt which could lead to more problems down the road. "Delivering target headline growth rates as the primary objective could come at a cost to the quality of growth due to further misallocation of resources, and limit the government's ability to address imbalances in the economy through implementation of reforms," authors Madhavi Bokil and Dima Cvetkova wrote. China has set an economic growth target of 6.5 percent to 7 percent this year, after growth cooled to a 25-year low of 6.9 percent in 2015. But some economists reckon real growth rates are already much lower than official data suggest. Policymakers have said they will be able to ward off systemic financial risks, but concerns at top government levels about the dangers of excessive leverage appear to be growing. China may suffer from a financial crisis and economic recession if the government relies too much on debt-fueled stimulus, the official People's Daily quoted an "authoritative person" as saying last week.

    China central bank investigates bad loan data at banks: sources | Reuters: China's central bank is investigating the accuracy of non-performing loans (NPLs) data at banks as concerns about risks in the country's financial system grow, people with direct knowledge of the matter told Reuters on Monday. Specifically, the central bank's financial stability bureau is investigating whether any NPLs have been miscategorised as normal loans or special mention loans, referring to debt at risk of default, according to two sources who saw a central bank notice on the issue. The probe comes as slowing economic growth raises regulatory concerns that banks are increasingly covering up their NPLs to dress up their balance sheets, said one of the sources. The build-up of bad debts, which have increased for 18 consecutive quarters, follows the state-driven credit boom of 2009 and has so far shown no signs of slowing. The People's Bank of China (PBOC) is looking into whether banks' assets are categorized correctly according to their quality and if there is government interference in financing for public projects, another source said. The central bank is also checking to see if troubled assets have been secretly moved off-balance sheet and if loan repayment schedules are reasonable, the source added.

    China's 1 Trillion Yuan Muni Issues Show Yet to Kick Debt Habit -- Global banks are redoing the math on the apparent slowdown in Chinese borrowing in April to include 1 trillion yuan ($153 billion) of regional government notes. The conclusion: the debt binge is far from over. Including record municipal bond sales, total social financing jumped 17 percent from a year earlier, the most since 2014, to 1.76 trillion yuan, UBS Group AG estimates. Growth in adjusted total credit quickened to 17.7 percent from 17.1 percent in March, according to Deutsche Bank AG. The official reading, which excludes borrowing by local governments, came out on Friday and showed a 29 percent slide to 751 billion yuan. The People’s Bank of China was so alarmed by the impression it was less supportive of growth that it highlighted financing by provinces and cities over the weekend. BlackRock Inc.’s Laurence D. Fink, who oversees the world’s largest money manager, is among investors who would rather China grows slower and cuts total debt that was 247 percent of gross domestic product last year, up from 164 percent in 2008. "The central bank has no intention of tightening any time soon because the recovery is still uneven," "Local government bonds are safer than shadow-banking credit, but they do not alleviate the debt burden for local governments; it just lowers the debt servicing cost and extends the maturity of the debt."

    Money market funds in China become less systemically risky | Brookings Institution: Last year, China's stock market took a tumble, which sent shock waves through the global securities markets. Now, money market funds are booming in China and could present the next systemic risk. While Chinese regulators have taken steps to reduce that risk, the question is whether they have gone far enough. Assets of Chinese money market funds have doubled in the last year - from approximately $350 billion at the end of 2014 to over $700 billion at the end of 2015. These funds are primarily sold online to individual investors by Internet giants like Alibaba and Baidu. Money market funds have become so popular in China because they offer higher interest rates than retail bank deposits. But these funds achieve higher rates by investing in a much riskier array of debt securities than U.S. money market funds - and the average Chinese investor may not be aware of the level of risk involved. If there were significant defaults in the debt securities held by Chinese money market funds, investors would likely run for the exits, just as they did last summer in the Chinese stock market. To prevent these potential problems, the Chinese Securities Regulatory Commission has adopted rules, which became effective in February of this year. These rules are designed to decrease the riskiness and increase the liquidity of Chinese money market funds, although the rules are still looser than the regulations for U.S. money market funds. Since Chinese money market funds are not backed by the government, they can approach bank-like levels of risk only by holding high-quality debt securities with very short maturities. Such maturities reduce the fund's exposure to defaults and other adverse events that can happen between the purchase date and the payment date.

    China criticizes US steel anti-dumping measures - (AP) — China has criticized U.S. anti-dumping penalties imposed on Chinese steel amid mounting complaints Beijing is exporting at improperly low prices to clear a backlog at home.The Commerce Ministry complained Wednesday that the duties of 522 percent announced on cold-rolled steel used in automobiles and other manufacturing were excessive and called on Washington to rescind them. Beijing faces mounting criticism from the United States and Europe over a flood of low-cost steel that Western governments complain hurts their producers and threatens thousands of jobs. The Chinese government is trying to shrink bloated industries including steel, coal, cement, aluminum and solar panel manufacturing in which supplies exceed demand. That has led to price-cutting wars that are driving producers into bankruptcy. Chinese government plans call for stepping up exports and shifting some operations abroad. The Cabinet approved measures in April to support steel exports with tax rebates and bank loans. The latest U.S. duties include 266 percent for anti-dumping and 256 percent to offset what investigators concluded were improper subsidies. The Commerce Ministry complained regulators engaged in "unfair practices" and improperly hampered the ability of Chinese companies to defend themselves but gave no details.

    Is China a House of Cards? - Pepe Escobar - Xi has forcefully dismissed the notion that a House of Cards power struggle has been raging at the rarified heights of the Chinese Communist Party (CCP). Yet at the same time he’s adamant; “conspirators”, “careerists”, “cabals” and “cliques” are attempting to undermine the CCP from within.Thus, with ironic/poetic justice, a 42-part series on corruption in China – titled In the Name of the People and financed by the Middle Kingdom’s top law enforcement agency – is bound to go live before the end of 2016, featuring a CCP stalwart as the bad guy (that’s a first). Call him the Chinese Frank Underwood.This means that what Xi is saying – and acting — live will be mirrored on hundreds of millions of Chinese screens, pitting conflicting factions within the 88 million-member CCP. Xi’s war on corruption has produced a rash of severely disgruntled CCP officials – to put it mildly.Xi not only is the Commander-in-Chief in the fight against corruption; he’s now Commander-in-Chief of China’s joint battle command center as well. He monitors a [Central Military Commission] Chairman Responsibility System as well as the central guard corps, which monitors the security of all other CCP heavyweights. Add to these Xi’s status as CCP’s general secretary, chairman of the Central Military Commission, president of the national security commission and head of the top group for reform of the Chinese system, and a Harvard academic who refers to him as “the chairman of everything” does not seem to be that far off the mark.

    Hard Landing Coming Soon? Chinese Officials Set Off Red Alert on Debt, Urge Serious Measure to Contain It --  Yves Smith - Ambrose Evans-Pritchard has a must-read article on what may be the beginning of the end of the China-as-economic-wunderkind story. The reason for the hesitancy is that the lengthy article that appeared in early May on the front page of the house organ of the Politboro may either be an official declaration or an effort by a powerful minority to press for a meaningful, sustained effort to stop the growth in debt levels. Particularly since the global financial crisis, China has relied heavily on increases in private-sector debt to keep growth levels up. Mind you, borrowing to invest is not necessarily a bad idea if it goes into projects that are sufficiently productive. But as readers know well, China has had investment at an unprecedented proportion of GDP for years, and most of it has gone into assets created for speculation (housing that sits vacant and is seen by investors as an alternative to the stock market) or unproductive increases in industrial capacity. Consider this extract from a March article in the South China Morning Post: At the peak of its cement production in 2014, China turned out more cement in just two years than the United States had produced in the previous century. As the first chart shows, the trend finally topped out last year but it still indicates almost 30 times as much cement production in China as in the US, a much larger economy. Is this huge volume of cement really needed? Is this sustainable?

    Off-shore Debts: South Korean Shipbuilders’ Overseas Subsidiaries Wallowing in Debts - It has been found that the 34 overseas affiliated companies of Daewoo Shipbuilding & Marine Engineering, Hyundai Heavy Industries and Samsung Heavy Industries had 5.3584 trillion won (US$4.65 billion) in total liabilities, up 28.7% compared to five years ago, as of the end of last year. The debts of those of Daewoo Shipbuilding & Marine Engineering increased by 43.2% to 2.1842 trillion won (US$1.89 billion) during the period while the amount of those of Samsung Heavy Industries soared from 431.2 billion won (US$374.9 million) to 1.2633 trillion won (US$1.09 billion). The amount was 1.9109 trillion won (US$1.66 billion) for Hyundai Heavy Industries’ although they reduced theirs by 13.4% over the five years. The overseas affiliated companies recorded an average debt ratio of 548.9% at the end of 2015 whereas it had been 266.1% at the end of 2010 and 200% is generally regarded as an appropriate level in the industry. Besides, 16 out of the 34 companies posted a debt ratio of more than 200% or were those with impaired capital. Hyundai Heavy Industries Vietnam recorded a debt ratio of no less than 6,250% while Daewoo Shipbuilding & Marine Engineering Rumania’s liabilities skyrocketed to 1.45 trillion won (US$1.26 billion) and Samsung Heavy Industries Nigeria had 680 billion won (US$591.3 million in total liabilities along with a debt ratio of 3234.3%. Five and two companies each affiliated with Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries, including Daewoo Shipbuilding & Marine Engineering Canada and Samsung Heavy Industries Germany, were with impaired capital as of the end of 2015.

    Sucked into deflation again - Japan's $2 cup noodle binge is sign of the times | Reuters: Japanese consumers can't get enough of cup noodles, with spending on them surging by more than a quarter over the past year. That sounds like good news, but for a country still struggling to escape deflation it's a worrying signal. Weak consumer spending is fuelling speculation that Prime Minister Shinzo Abe will again delay a planned sales tax hike, and Japan is expected to have dodged a recession at the start of this year by the smallest of margins - helped by an extra 'leap year' day in the January-March quarter. Consumption, one of the few economic engines that fired when Abe launched his "Abenomics" stimulus plan more than three years ago, is faltering. And rising sales of cheap cup noodles is a worrying sign that consumers have little confidence that deflation is being banished. "Consumers remain on guard against rising costs of food and living, refraining from spending on other items, and they're rebuilding savings spent during the last-minute buying spree," said Hiromichi Shirakawa, chief economist at Credit Suisse. Cup noodles, costing as little as 180 yen ($1.65), are a favorite for penny pinchers. Average monthly spending on cup noodles surged 26.1 percent in January-March from a year earlier, government data show - the fourth straight quarter of double-digit growth. Spending on noodles is growing at the fastest pace since Abe took office in late 2012. At the same time, data shows households are spending less on non-durable goods such as utilities, education, recreation, transport and communications.

    BOJ to expand stimulus by July, yen too strong for economy - Reuters poll -- The Bank of Japan will ease monetary policy even further by July as a strong yen and still-sluggish economy threaten its ability to meet its ambitious inflation target, a Reuters poll showed. Asked what steps it would take next, 80 percent of analysts surveyed May 11-17 picked a combination of cutting negative interest rates further and boosting its purchases of government bonds, exchange-traded funds and corporate bonds. Japan's economy expanded at the fastest pace in a year in the first quarter, but analysts say the rebound was not strong enough to dispel concerns over the murky outlook. The yen has strengthened about 10 percent against the U.S. dollar since the BOJ surprised markets in January by cutting its interest rate below zero, an unwanted outcome that could hurt the country's predominant export industries. The Japanese currency firmed to just under 109 yen to the dollar on Wednesday, an exchange rate that a majority of economists said was too strong for the economy. Against that backdrop, expectations the BOJ will open its stimulus taps again remained high after it held policy steady in April.

    BOJ's Kuroda vows to ease more if yen moves hurt price target | Reuters: Bank of Japan Governor Haruhiko Kuroda said on Thursday the central bank would not hesitate easing monetary policy further if market moves, including a spike in the yen, threatened prospects for achieving its 2 percent inflation target. Kuroda shrugged off the view that Japan was triggering a currency devaluation war with its ultra-loose monetary policy, saying that its aggressive easing steps were aimed purely at achieving its price goal. "Like other major advanced nations, the BOJ is conducting monetary policy for the domestic purpose of achieving our inflation target," a view recognized by the global community, Kuroda told reporters in Sendai, northeastern Japan, ahead of a two-day G7 finance leaders' gathering that kicks off on Friday. Finance leaders of the Group of Seven advanced economies are expected to debate looming risks to the global economy, including a British referendum on whether to exit the European Union that could potentially jolt markets. Kuroda said he would closely watch the outcome of the June 23 referendum and its market effect, pointing out that a so-called "Brexit" has been identified as a big risk by G20 nations and the International Monetary Fund.

    BOJ owns more than 5 percent of a dozen Japan REITs: FSA -- The Bank of Japan now owns more than five percent of 12 listed real estate investment trusts (REITs), filings to the Financial Services Agency (FSA) showed on Thursday, as its asset purchase program shows no signs of ending any time soon. The BOJ buys 90 billion yen ($818.3 million) of REITs annually as a part of its stimulus program. In spite of more than three years of aggressive easing, however, the central bank has not reached its inflation target of two percent and economic growth has hardly accelerated. As its REITs portfolio kept expanding, the BOJ scrapped its long-held rule to limit ownership of each REIT to within five percent in December, a move opposed by three of its nine board members. In the following month, the BOJ took additional easing steps by introducing negative interest rates. After three years of massive asset purchases by the BOJ, Japanese markets have become increasingly dominated by the central bank. The BOJ is also thought to own more than five percent of many listed Japanese shares through its buying of exchange traded funds (ETFs) though its holdings are not made public because the central bank is not buying shares directly.

    Japan PM says majority of G7 leaders agree on need for fiscal steps - Japanese Prime Minister Shinzo Abe said on Monday a majority of Group of Seven leaders agree on the need to deploy fiscal stimulus measures to boost global demand. Japan will host a G7 finance ministers and central bankers summit on May 20-21, and there are doubts about how much progress policymakers can make in shifting the global economy out of its current spell of slow growth and low inflation. Earlier this month, Abe traveled to Europe to meet G7 heads in preparation for the meeting in Japan. "The G7 doesn't decide things by a majority (vote). The leaders would come up with a communique after a frank exchange of opinions," Abe told lawmakers in the nation's parliament. The summit comes at a critical time for Japan because its economy is struggling to grow and inflationary pressure is losing momentum. First-quarter economic growth data on Wednesday should also add to the backdrop with quarterly gross domestic product GDP forecast to have expanded by just 0.1 percent, according to a Reuters poll. Lingering worries about Europe's sovereign debt burdens, slowing growth in Britain and uncertainty about the pace of interest rate hikes in the United States are also likely to be hot topics during the summit.

    Is India holding the line against another TPP? -- May 2016, US President Barack Obama published an op-ed in the Washington Post in an attempt to bolster support for the highly controversial Trans-Pacific Partnership (TPP). Obama’s main argument was that the US should be writing the trade rules of the 21st century, rather than ‘countries like China’. Obama was alluding to the latest round of negotiations for the Regional Comprehensive Economic Partnership (RCEP), recently held in Perth. This agreement includes China, Australia, New Zealand, Japan, South Korea, India and the 10 countries that make up ASEAN. Obama seems to be concerned that RCEP won’t mirror the TPP’s stance on issues like intellectual property protection. Health and environmental groups, on the other hand, are worried that RCEP could indeed be a TPP 2.0. They are particularly concerned that it may make life-saving medicines more costly and threaten the right of states to regulate in the public interest. Of the RCEP negotiating countries, it is India, rather than China, that has been the most outspoken in opposing US-style trade rules. In the lead up to the Perth talks, rumours were swirling that the Indian negotiators had been handed an ultimatum by their RCEP partners: play ball or leave the group. The Indian Minister of Commerce denied that any such ultimatum had been made, but the tensions between India and some of the other major players have been evident for some time. Much of the discussion in the media has suggested that the conflict is primarily over traditional trade issues like cutting tariffs. But recently leaked draft RCEP chapters also indicate a lack of consensus on intellectual property and investment, with India and in some cases ASEAN clearly at odds with South Korea and Japan, who are pushing for protections similar to those in the TPP. India’s opposition to expanding intellectual property protections under RCEP is not surprising. India is a major supplier of generic medicines and has been dubbed the ‘pharmacy of the developing world’. Indian manufacturers produce nearly 80 per cent of the world’s supply of HIV/AIDS medicines. Stronger intellectual property protection is bad news for the poor and for Indian drug companies.

    Indian State Banks Post $2 Billion in Losses as Bad Loans Surge - Delinquent loans at Indian state banks are rising unabated. Seven Indian state-owned lenders have reported combined losses of 136 billion rupees ($2 billion) in the three months ended March 31. The latest was Punjab National Bank, which lost 53.7 billion rupees compared with a profit of 3 billion rupees a year earlier. Analysts in a Bloomberg survey had forecast an 857-million rupee loss. State Bank of India, the nation’s largest lender, will report earnings on May 27. About half of India’s government-controlled banks, which account for more than 70 percent of the loans in the banking system, have reported delinquent-debt ratio of almost double the 5.1 percent of loans that were deemed non-performing among Indian lenders as of Sept. 30. Central bank Governor Raghuram Rajan, who has continually warned about hidden bad debt, started a national audit on Oct. 1, in a bid to improve disclosures of soured credit and force banks to set aside more cash to cover potential write-offs. “The numbers show the extent of the NPA rot in the state-run banks,” said Chokkalingam G., managing director at Equinomics Research & Advisory Pvt. in Mumbai. “We are not recommending our clients to buy any state-run banks. We simply don’t know what the book is, so how do you value the bank?" Bad-debt ratio at Punjab National widened to 12.9 percent from 8.47 percent in the preceding quarter, while Bank of Baroda, India’s second-largest state-run bank, reported gross bad loan ratio of 9.99 percent. UCO Bank last week said it’s bad debt had surged to 15.43 percent.

    Mutiny Among The "Magic People" - India Central Banker Admits "The Ammo Is Almost Gone" -- The self-described "magic people" who "give to the markets" are facing a mutiny this morning as Raghuram Rajan, the head of the Indian central bank, admits central banks and governments of rich countries are running out of ammunition for stimulating their economies... but they can never admit as much. Crushing the dreams of "extreme monetary policy"-setters, Rajan goes on to discuss the sanity of 'helicopter money' warning that people will not be 'stimulated' to spend but will question: "What kind of world are we in when the central bank prints money and throws it out of the window?"  Mr. Rajan - an outspoke critic of low interest rates in rich countries that can drive hot-money flows to poorer parts of the world - criticised efforts to use fiscal and monetary policy and infrastructure programmes to boost growth rates in advanced economies. As The FT reports, Although Mr Rajan said there were limits on stimulus, he said central banks “cannot claim to be out of ammunition because immediately that would create the wrong kind of expectations, so there’s always something up their sleeves”. Mr Rajan said he was a supporter of stimulus policies to “balance things out” over short periods when households or companies were proving excessively cautious with their spending. But eight years after the financial crisis, we “have to ask ourselves is that the real problem?”. “I have this image of stimulus as a bridge,” he said. “As the economy goes down, there is an expectation it will come up. Stimulus is a bridge which smoothes over the growth rate of the economy and prevents damaging expectations from building up.” If stimulus went on for a long time, if it did not work, he said, the adjustment would be sharp, indicating there was little room for further stimulus. Mr Rajan warned governments not to rely too much on fiscal stimulus through cutting taxes or increasing public spending. “If your debt to GDP is over 100 per cent, [and you] do more fiscal stimulus, you’d better have a pretty high rate of return in mind, otherwise your younger and middle-aged generations are thinking ‘This thing is not going to return enough, but I’m going to have to pay for it’.”

    Trump's Backtrack on Muslim Ban; India's Map Law; Pakistan Commission on Corruption -- Riaz Haq - Donald Trump has said his Muslim ban "hasn't been called for yet" and it was "only a suggestion". Is the presumptive Republican nominee for president backing away from his call "for a total and complete shutdown of Muslims entering the United States"? If so, why? Has the Republican party helped him understand how the GOP's dog-whistle campaigns work? Will Trump's racism and Islamophobia become less overt now in the general election campaign? Has London Mayoral Election affected GOP's campaign? Why is the Indian government pushing a highly punitive legislation for those found guilty of "incorrect maps of India" not showing all of Kashmir as part of India? Will the law also apply to the Hindu Nationalists pushing maps of Akhand Bharat, including Pakistan, Bangladesh, Nepal and Sri Lanka, which are patently incorrect? How will digital mapmakers try to not run afoul of this law if it passes the Indian parliament?  Why is the Chief Justice of Pakistan resisting "the constitution of a toothless commission" to probe offshore companies owned by Pakistani politicians and others including Prime Minister Nawaz Sharif's family? Why did Chief Justice Jamali say that such a commission "will serve no useful purpose , except giving a bad name to it"? Viewpoint From Overseas host Misbah Azam discusses these questions with panelists Ali Hasan Cemendtaur and Riaz Haq (www.riazhaq.com). https://youtu.be/eEQg1CX5KGs

    Rodrigo Duterte’s Talk of Killing Criminals Raises Fears in Philippines -  The police warned 14-year-old Bobby Alia that there would be consequences after he was accused of stealing a cellphone in November 2003, the boy’s mother said. A few days later he was dead, stabbed in the back with a butcher knife.He was the third of Clarita Alia’s sons to die in Davao, the southern Philippines’ largest city, in killings that remain unsolved. A fourth was killed in 2007. All had been accused of crimes, all were stabbed and all, Ms. Alia said, had received similar warnings from the police.For years, rights groups have called for an investigation into whether Davao’s mayor, Rodrigo Duterte — the tough-talking politician who next month will become president of the Philippines — was complicit in the killings of hundreds of people in Davao since the 1980s by what they describe as government-sanctioned death squads. The victims, the investigations found, included people suspected of committing crimes or using drugs, street children and, in some cases, people who had been mistaken for someone else. While Mr. Duterte has denied any direct knowledge of death squads, he has long called for addressing the Philippines’ severe crime problem by killing suspected criminals. In 2009, he said they were “a legitimate target of assassination.”

    Reality check: protests grow as gap widens between reality and the ‘Africa rising’ storyline -- SELF-CONGRATULATORY  rhetoric keeps springing from the lips of World Economic Forum elites – at the expense of reality. Software executive Brett Parker claims that “Africa will probably remain natural resources-driven for the next two decades at least.” African Leadership University’s Fred Swaniker says, “the Africa Rising narrative presents the most compelling argument for the continent’s prosperity.” Their statements come at a time when commodity prices have crashed to record lows. This has left societies like Nigeria in profound crisis. And in spite of petroleum falling below US$30 per barrel earlier this year and hovering at $40 today, Standard Chartered Bank economist Razia Khan argues that Uganda should keep pumping scarce investment funds into oil exploration. Production in the country will cost an estimated $70 per barrel. The 2016 World Economic Forum (WEF) on Africa, hosted in Kigali, claimed the “fourth industrial revolution“ – the use of “cyberphysical systems” like artificial intelligence, robotics, nanotechnology and biotech – as Africa’s future. This is because the continent is “the world’s fastest-growing digital consumer market”. Yet fewer than a third of sub-Saharan Africans have electricity in their homes. The summit merely reinforced extractive-industry and high-tech myths.

    Kenya's $13 billion East Africa railway - CNN.com: It's been billed as the most ambitious project in Kenya since it gained independence in 1963. Now, the first section of the east African nation's $13.8 billion railway is nearly finished. Originally planned to link Mombasa and Nairobi, the decision was made to extend the line to the market town of Naivasha in 2015, and 75% of civil works have reportedly been completed. This first Mombasa-Nairobi stretch will be completed by June 2017, consulting firm CPCS told CNN. It is hoped that the track will shorten the journey between the two cities from 12 hours to four hours. Passenger trains will travel at 120km/h, and freight trains will be able to carry 25 million tonnes per year, according to the International Railway Journal. Eventually, the East Africa Railway Masterplan will link Mombasa with other major east African cities such as Kampala, in Uganda, and Juba, in South Sudan.  The East Africa Railway Masterplan is being managed by the East Africa Community; an intergovernmental organization of six partner states; Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda, which aims to create a politically united and secure East Africa.  Management consulting firm CPCS advised the East Africa Community on the financial, legal and economic impact of the project.  The railway is being built by the state-owned China Road and Bridge Corporation (CRBC), 90% of the ongoing development of the Mombasa-Nairobi section is being financed by The Export-Import Bank of China.

    Brazil government says jobs, confidence priorities | Reuters: Brazil's interim president, Michel Temer, said in a televised interview Sunday that he hopes to reduce unemployment and bring economic and political calm to Latin America's biggest country. Temer, a centrist who took over as interim president last week after Brazil's senate voted to suspend Dilma Rousseff and try her for irregularities in the government budget, said his government would cut public spending where possible and that a reform of Brazil's pension system was essential. Repeating a pledge made last week, Temer said the cost-cutting would not affect popular social programs that marked the 13-year rule of Rousseff's Workers Party. Brazil's newly formed government is scrambling to identify economic reforms to revive an economy in its worst recession since the Great Depression. In addition to a gaping budget deficit, it must control near double-digit inflation and rising unemployment. Temer, who was the leftist Rousseff's vice president, will remain interim president for the duration of her trial, which could last as long as six months and is expected to lead to her ouster. He said he would not seek the presidency if he serves out the rest of the term, which goes through 2018. Asked what he would like his legacy to be if he remains in office, Temer said: "reduce unemployment and see a calmed country."

    Brazil's new gov't sees primary deficit around 160 bln reais | Reuters: Brazil's new interim government estimates that its primary budget deficit could hit 160 billion reais ($45 billion) this year, including eventual losses from state electricity holding Eletrobras, a source with knowledge of the situation told Reuters on Wednesday. Planning Minister Romero Juca will meet this afternoon with members of the Congressional budget committee and with Senate President Renan Calheiros to discuss the subject, the source said.

    Dilma Rousseff Suspension Prompts Accusations Of Parliament Coup; Venezuela, El Salvador And Ecuador Pull Ambassadors: A third Latin American country has pulled its ambassadors from Brazil after the Congress moved to suspend democratically elected President Dilma Rousseff last week. Calling the investigation into Rousseff's alleged budget mismanagement a coup, Ecuador has followed Venezuela and El Salvador and Ecuador in freezing diplomatic relations, condemning the impeachment process and backing Rousseff,  Telesur reported Wednesday. They join five other Latin American nations that have expressed concerns about the suspension but stopped short of removing their ambassadors: Bolivia, Chile, Cuba, Nicaragua and Uruguay.  Michel Temer, Brazil's vice president, is serving as acting president while Rousseff is investigated by lawmakers, prompting accusations from leftist governments that he is working with the U.S. to oust her, Telesur reported. So far only Argentina’s new, conservative government of President Mauricio Macri has publicly backed Brazil's new right-wing government. Argentina said in a statement it “respects the institutional process” in Brazil and trusts that the result will “consolidate the strength of Brazilian democracy.”

    Venezuela crisis: Maduro threatens seizure of closed factories - BBC News: Venezuelan President Nicolas Maduro has threatened the seizure of factories that have stopped production, and the jailing of their owners. In a speech to supporters in the capital Caracas, he said the country had to recover the means of production, to counter its deep economic crisis. On Friday, he introduced a new, nationwide state of emergency. Opposition protesters have been rallying in Caracas to push for a recall vote to eject him from power. Mr Maduro said the state of emergency was needed to combat foreign aggression, which he blamed for Venezuela's problems. And he said military exercises would take place next weekend to counter "foreign threats". Venezuela has the world's largest oil reserves but its economy has been severely hit by falling global oil prices. Its economy contracted by 5.7% last year and its official inflation rate is estimated to be topping 180%. There are severe shortages of food, medicines and basic goods which Mr Maduro argues are due to business leaders and the US waging an economic war against his government.

    U.S. concern grows over possible Venezuela meltdown: officials | Reuters: The United States is increasingly concerned about the potential for an economic and political meltdown in Venezuela, spurred by fears of a debt default, growing street protests and deterioration of its oil sector, U.S. intelligence officials said on Friday. In a bleak assessment of Venezuela's worsening crisis, the senior officials expressed doubt that unpopular leftist President Nicolas Maduro would allow a recall referendum this year, despite opposition-led protests demanding a vote to decide whether he stays in office. But the two officials, briefing a small group of reporters in Washington, predicted that Maduro, who heads Latin America’s most ardently anti-U.S. government and a major U.S. oil supplier, was not likely to be able to complete his term, which is due to end after elections in late 2018. They said one “plausible” scenario would be that Maduro’s own party or powerful political figures would force him out and would not rule out the possibility of a military coup. Still, they said there was no evidence of any active plotting or that he had lost support from the country’s generals. The officials appeared to acknowledge that Washington has little leverage in how the situation unfolds in Venezuela, where any U.S. role draws government accusations of U.S.-aided conspiracies. Instead, the administration of President Barack Obama wants "regional" efforts to help keep the country from sliding into chaos.

    Venezuela looters target chicken, flour amid worsening shortages: Mobs in Venezuela have stolen flour, chicken and even underwear this week as looting increases across the crisis-hit OPEC nation where many basic products have run short. Many people now get up in the dead of night to spend hours in long lines in front of supermarkets. But as more end up empty-handed and black market prices soar, plundering is rising in Venezuela, already one of the world's most violent countries. There is no official data, but rights group Venezuelan Observatory for Social Conflict reported 107 episodes of looting or attempted looting in the first quarter. Venezuela’s woes are mounting as it turns the lights offVideos of crowds breaking into shops, swarming onto trucks or fighting over products frequently make the rounds on social media, though footage is often hard to confirm. In one of the latest incidents, several hundred people looted a truck carrying kitchen rolls, salt and shampoo after it crashed and some of its load tumbled out in volatile Tachira state on Thursday, according to a local official and witnesses. Fifteen people were injured, including six security officials trying to restrain the crowd, said local civil protection official Luis Castrillon. "There was a big scuffle ... There were shots in the air and they fired tear gas," said witness Manuel Cardenas, 40. Such scenes are adding to an increasingly dire panorama in the South American oil exporter, where inflation is the highest in the world, the economy has been shrinking since early 2014, and there are frequent power and water cuts.

    Venezuela opposition slams 'desperate' Maduro state of emergency | Reuters: Venezuela's opposition on Saturday slammed a state of emergency decreed by President Nicolas Maduro and vowed to press home efforts to remove the leftist leader this year amid a grim economic crisis. Maduro on Friday night declared a 60-day state of emergency due to what he called plots from Venezuela and the United States to subvert him. He did not provide specifics. The measure shows Maduro is panicking as a push for a recall referendum against him gains traction with tired, frustrated Venezuelans, opposition leaders said during a protest in Caracas. "We're talking about a desperate president who is putting himself on the margin of legality and constitutionality," said Democratic Unity coalition leader Jesus Torrealba, adding Maduro was losing support within his own bloc. "If this state of emergency is issued without consulting the National Assembly, we would technically be talking about a self-coup," he told hundreds of supporters who waved Venezuelan flags and chanted "he's going to fall."  The opposition won control of the National Assembly in a December election, propelled by voter anger over product shortages, raging inflation that has annihilated salaries, and rampant violent crime, but the legislature has been routinely undercut by the Supreme Court.

    Hungry Venezuelans Hunt Dogs, Cats, Pigeons as Food Runs Out -- Ramón Muchacho, Mayor of Chacao in Caracas, said the streets of the capital of Venezuela are filled with people killing animals for food.  Through Twitter, Muchacho reported that in Venezuela, it is a “painful reality” that people “hunt cats, dogs and pigeons” to ease their hunger.A propósito de la noticia de ayer sobre unos militares que se robaron unos chivos para comer: pic.twitter.com/JjH2xdkRf7  People are also reportedly gathering vegetables from the ground and trash to eat as well. The crisis in Venezuela is worsening everyday due in part to shortages reaching 70 percent. This to go along with the world’s highest level of inflation. The population’s desperation has begun to show, with looting and robberies for food increasing all the time. This Sunday, May 1, six Venezuelan military officials were arrested for stealing goats to ease their hunger, as there was no food at the Fort Manaure military base.

    Venezuela Unleashes Tanks as 4 Killed, 1,200 Arrested: -- Police and National Guard killed four suspects Tuesday during a wide raid in Western Caracas that involved tanks and helicopters, as Venezuela also underwent the rare climate phenomenon known as a “solar halo.” “As has been the request of our people, we have deployed OLP New Phase in 4 areas of Caracas,” tweeted Interior Minister Gustavo Gonzalez as the operation began unfolding. Local media said eight suspected criminals were killed during the operation, but Gonzalez spoke only of four killed when resisting police action. Some 400 vehicles were used during the operation, ranging from motorcycles to tanks and choppers. The purpose of the raid, Gonzalez said was to “eradicate organized crime” and “the paramilitary.” Venezuelan government officials frequently blame the country’s high crime rate on right-wing paramilitary groups supposedly originated in Colombia and affiliated with the local anti-Maduro opposition, a charge the opposition has denied and the government failed to prove conclusively. The homicide rate in Venezuela is surging again in 2016, the Prosecutor General’s office warned in its first quarterly report of the year last week. Venezuela suffered 18,000 homicides in 2015 according to the Prosecutor General, but NGO’s put that figure closer to 28,000 murders for last year. Also during the operation, 1,131 suspects for different crimes were apprehended, the Interior and Justice Ministry said in a tweet. Seventeen cars, 19 motorcyles, 15 fire arms, all supposedly stolen, as well as unspecified amounts of illegal drugs were also seized during the operation, minister Gonzalez said.

    The Tinaco-Anaco Railway Line: A Look At How China Overextended In A Failed Venezuela -- With nearly $37 billion loaned to Venezuela since 2008, China (via its China Development Bank) had long been a source funding for the socialist country. It was easy to see how a partnership between the two would be mutually beneficial, as China would have a closer relationship with the country that as of 2015 supplied 4%-5% of its oil import needs, while Venezuela would have a virtual piggy bank to fund projects such as infrastructure.  One project the two countries partnered on was touted as South America's first high speed train. The Tinaco-Anaco Railway, a $7.5 billion project that was supposed to have a consortium of Chinese companies display to the world their engineering and construction capabilities. A glorious 300 mile long railway was to be built in Venezuela, moving 5 million passengers and 9.8 million metric tons of cargo a year, at speeds of up to 135mph. Today, however, the project is dormant. All that ended up on display, however, is simply a broken down arch that is at the entrance of the railroad workers complex. A symbol of both a failed Venezuelan state, and a carefree China lending program. AP explains It was once billed as a model of socialist fraternity: South America's first high-speed train, powered by Chinese technology, crisscrossing Venezuela to bring development to its backwater plains. Now all but abandoned, it has become a symbol of economic collapse — and a strategic relationship gone adrift. Where dozens of modern buildings once stood, cattle now graze on grass growing amid the rubble of the project's gutted and vandalized factory. A red arched sign in Chinese and Spanish is all that remains of what until 16 months ago was a bustling complex of 800 workers.That's when the project's Chinese managers quietly cleared out.

    Mexican President Warns Of War If "Gringo" Trump Wins The White House -- Donald Trump certainly knows how to manipulate the media and ruffle some feathers in order to get a reaction, this we know. Trump's plan to build a wall on the Mexican border doesn't need to be rehashed here, but one person who has let Trump's rhetoric on the subject get under his skin is former Mexican president Vicente Fox. Fox has been on an emotional roller coaster ever since Trump started in with his criticisms of Mexico.  Initially, Fox took to the airwaves to let everyone know that the wall Trump has said Mexico will pay for, ya, he's not going to be paying for that. "I declare, I'm not going to pay for that f*cking wall" As Ben Mathis from Kickass Politics writes: "in his frankest interview yet, former Mexican President Vicente Fox pulls no punches about the man he calls a "false prophet."  It was recorded the same week as his apology to Donald Trump, and President Fox strike a very different tone, doubling down on "I'm not going to pay for the f_cking wall" and adding "and please don’t take out the f_cking full word." Vicente Fox compares the man he calls the "hated gringo" and "ugly American" to Latin American dictators like Hugo Chavez and Juan Peron.  He also warns that if Trump starts a trade war, then Mexico could retaliate by stopping or limiting money transfers and remittances for US corporations and American tourists in Mexico.  Because as Vicente Fox says "Don’t play around with us, we can jump walls, we can swim rivers, & we can defend ourselves."  And he warns that if Trump becomes President, he "could take us to a war, not just a trade war."

    Snubbed by West, Russia rolls out red carpet for Asian leaders | Reuters: The Kremlin has seized on the visit by southeast Asian leaders for a summit as an opportunity to show Russia still has friends on the international stage, despite being cold-shouldered by the West over the conflict in Ukraine. Russia has had few chances to host major international gatherings since Western sanctions were imposed, so there has been considerable fanfare around this week's summit with members of the Association of South-East Asian Nations (ASEAN). A special commemorative coin was minted for the occasion, Russian President Vladimir Putin flew most of his government to the Black Sea resort of Sochi to take part, and state television broadcast a prime-time report showing how cleaners were vacuuming the carpet at the summit venue in preparation. While the formal agenda of the two-day summit that ends on Friday has focused on building Russia's ties with ASEAN member countries such as Vietnam, Thailand and Myanmar, it has also been conducted with an eye on the United States and Europe. "These are difficult times. Europe and America, by declaring sanctions against us, have basically turned away from us, or turned their backs on us," said Andrei Vorobyov, governor of the Moscow region, part of the Russian delegation at the summit. "But countries in the Asian and Pacific regions are working very actively with us, and that is very important, very nice," he told a session on the sidelines of the summit.

    Russia's budget deficit widens to 8.6% of GDP - Russia's budget deficit widened to 8.6% of gross domestic product in April, the finance ministry said Thursday. In the first four months of the year, Russia's budget deficit was 4.7% of GDP, compared with 3.3% in the January-March period. President Vladimir Putin previously said the budget deficit this year should be no more than 3% of GDP and narrowed to zero in the next few years. That could require some unpopular measures such as lower pension spending and higher taxes, government officials have told The Wall Street Journal.

    EU Expected to Extended Russian Economic Sanctions - EU foreign policy chief Federica Mogherini has predicted the EU will extend economic sanctions on Russia despite “differences” of opinion in Europe.Asked by German daily Die Welt in an interview out on Thursday (19 May) if the measures will be prolonged, she said: “I expect so. EU leaders had coupled the lifting of sanctions to full implementation of the Minsk agreements. This has not been achieved”.  The paper noted that some EU states, such as Cyprus and Hungary, were wary of renewing the sanctions or wanted at least to soften them. That list also includes Greece, Italy and Slovakia. But Mogherini said: “There have always been different views on parts of our sanctions policy. That will probably remain so. But despite the differences, unity was always present”. The economic sanctions include curbs on international lending to Russian banks, energy and arms firms as well as a ban on exports of energy industry technology and an arms embargo. They are due to expire in July unless EU states extend them by consensus at a summit in June or earlier.

    Greek Pipeline Breakthrough To Challenge Russian Gas Dominance - After years of debate, political jockeying and acrimony, a major pipeline project to bring natural gas to Southern Europe has broken ground. The Trans-Adriatic Pipeline (TAP) will connect the Caspian Sea to European markets, providing Europe with another large source of natural gas that will help the continent diversify away from Russia. The route begins at the Caspian Sea in Azerbaijan, where the South Caucuses Pipeline will carry Caspian gas from the large Shah Deniz-2 gas field, delivering it to the border with Turkey. From Turkey the gas will tie into the Trans Anatolian Pipeline (TANAP), which will take the gas across Turkey to the border with Greece where it will meet up with the aforementioned Trans-Adriatic Pipeline. The Caspian gas will then travel through TAP across Greece, beneath the Adriatic Sea and onto Italy.The pipeline projects are part of what is often referred to as the “Southern Corridor” for European gas. For years Europe has pressed for a gas pipeline through the southern corridor that would offer it an alternative to Russian gas. But TAP was not always an inevitability – before the consortium of companies took up the project, the European Union favored the Nabucco Pipeline, which instead of sending Caspian gas to Italy, would have resulted in a pipeline snaking its way through the Balkans to Central Europe.Russia pushed hard for its own route through Southern Europe. The so-called South Stream Pipeline would have sent Russian gas beneath the Black Sea to Bulgaria. European regulators worked hard to derail that pipeline on anti-competition grounds. Shortly after the death of South Stream, and following in the wake of Russia’s standoff with Europe over its incursion into Ukraine, Russia pushed the “Turkish Stream” project, which would have sent Russian gas to Turkey and then onto Southern Europe. But the project was more of an idea than a reality, and due to a set of differences between Russia and Turkey, not the least of which was the cost of the pipeline and how it would be paid for, the project never really went anywhere.

    Export Engines Cut Out: A key objective of repeated rounds of quantitative easing by international central banks has been competitive devaluation to boost exports. As we observed early last year, this was "largely why advanced economies' export volume growth has improved a bit ... Yet, even this modest uptick in export volume has come at the expense of a nosedive in export price growth" (ICO Essentials, January 2015). Updating the data we showcased at the time, we find that advanced economies' yoy export volume growth has since petered out (not shown), despite serious export price deflation. Indeed, yoy export price growth for advanced economies - which are hardly dominated by energy or commodities - fell deep into negative territory last spring, exhibiting the worst export price deflation in six years, i.e., since the Global Financial Crisis (GFC), and is still well below zero (not shown). For emerging economies, the picture is even more dire, with export volume growth slipping further into negative territory, near a six-year low (blue line). But export price growth for emerging economies is displaying deep deflation, hovering near a 6½-year low (black line). In essence, export volumes for both advanced and emerging economies have been essentially flat for almost a year and a half (not shown). This has happened even with emerging economies' export price levels plummeting by more than a quarter and advanced economies' export price levels plunging by a fifth by early 2016 - i.e., in less than two years (not shown). Plainly, we are seeing rampant export price deflation for advanced and emerging economies alike, but even this steep fall in prices has been unable to boost export volumes.Thus, competitive devaluation no longer works as a policy tool. Furthermore, negative interest rate policy (NIRP) has backfired this year, with the euro and the yen actually appreciating following rate cuts by the Bank of Japan (BoJ) and the European Central Bank, respectively. The impotence of such monetary policy could hardly be clearer

    Lacking new ideas, G7 agrees on 'go-your-own-way' approach | Reuters: A rift on fiscal policy and currencies has set the stage for G7 advanced economies to agree on a "go-your-own-way" response to address risks hindering global economic growth at their finance leaders' gathering that kicked off on Friday. Japan backed away from its previous calls for coordinated fiscal action to jump-start global growth with Finance Minister Taro Aso saying on Friday that while some G7 countries can deploy more fiscal stimulus, others cannot "due to their own situations." That chimed with Washington's stance made clear by a senior U.S. Treasury official that there was no "one-size-fits-all" for the right mix of monetary, fiscal and structural policies. "Countries with fiscal space have different choices than countries that lack fiscal space," the official told reporters on the sidelines of the G7 finance leaders' meeting in Sendai, northeast Japan. "I do think where there is fiscal space, the path-way toward growing global demand would be advanced if it's used," he said, signaling that countries like Germany should boost fiscal stimulus to help revive stagnant global growth. The U.S. official also told reporters Japan should either postpone a scheduled sales tax hike next year or take fiscal measures to compensate for the expected drag on consumption. Germany showed no signs of responding to calls for big fiscal spending. Its finance minister said on Friday the G7 ministers were now more upbeat about the global economy and stressed that a good balance of monetary, fiscal and structural policies was the only way to foster growth.

    The Wealthy in Florence Today Are the Same Families as 600 Years Ago -- New research from a pair of Italian economists documents an extraordinary fact: The wealthiest families in Florence today are descended from the wealthiest families of Florence nearly 600 years ago.The two economists — Guglielmo Barone and Sauro Mocetti of the Bank of Italy — compared data on Florentine taxpayers in 1427 against tax data in 2011. Because Italian surnames are highly regional and distinctive, they could compare the income of families with a certain surname today, to those with the same surname in 1427. They found that the occupations, income and wealth of those distant ancestors with the same surname can help predict the occupation, income and wealth of their descendants today. As they wrote for the economics commentary website VoxEU, “The top earners among the current taxpayers were found to have already been at the top of the socioeconomic ladder six centuries ago.”Their research was made possible by a fiscal crisis. In 1427, Florence was near bankrupt from an ongoing war with Milan and so the Priors of the Republic conducted a tax census of about 10,000 citizens. They took stock of the name and surname of the head of household, their occupation and their wealth. About 900 of those surnames are still present in Florence, with about 52,000 taxpayers having those names.

    IMF Wants Eurozone Debt Relief for Greece Until 2040--2nd Update - The International Monetary Fund is pressing the eurozone to let Greece skip paying interest or principal on bailout loans until 2040, say officials familiar with the talks. The IMF wants the loans to Greece to fall due gradually in the following decades, and as late as 2080, according to the IMF's proposal. The IMF's proposal, presented to eurozone governments late last week, would keep Greece's annual debt-service needs below 15% of its gross domestic product, under the IMF's relatively pessimistic forecast for Greece's long-term economic trajectory. The IMF's demands--which one official from a eurozone country described as "hardcore, really"--go far beyond what Greece's European creditors have said they are willing to do to help Greece regain its financial health. Eurozone governments, led by Germany, are reluctant to make such major concessions on their loans to Greece, which currently total just over EUR200 billion ($226 billion) with around another EUR60 billion to come under the latest Greek bailout plan. But Germany, the eurozone's dominant economic power, also wants the IMF to rejoin the Greek bailout as a lender. The IMF hasn't yet signed up to the Greek program agreed last summer. German Chancellor Angela Merkel has long viewed the IMF as essential to the credibility of the Greek bailout. Her government promised Germany's parliament, the Bundestag, last year that the IMF would join the new bailout program before Europe disburses further money to Athens. The chancellor and many of her lawmakers believe that, without the IMF, the eurozone wouldn't be able to enforce rigorous fiscal and economic overhauls in Greece in return for loans. The European Commission, which partners the IMF in overseeing the bailout, is seen in Berlin as too soft on Greece. Finland and the Netherlands also want the IMF on board.

    Germany and IMF in Staredown Over Greek Debt Relief  - Yves Smith -  Last year, the game of chicken over the Greek bailout was between Greece and the Troika. Contrary to its hopes, Greece was unable to play members of the Eurozone off against each other (a notion we’d regarded as naive) and unable to rally much support on the streets.  This year, the impasse is between the IMF and Germany. And like last year, it looks as if there is no bargaining overlap between the two side’s positions. It may be that the IMF is bluffing. But if not, the Europeans may find themselves left to their own devices.  The big divide is over the IMF insistence that Greece get significant debt relief, that it simply cannot begin to pay its obligations in full. It’s not been well reported that the IMF has already retreated from its stance last year, that Greece needed to have debt reduction (writedowns of principal amount) for the math to work. But having conceded on a key point, the IMF is holding the line as firmly as it can that Greece needs as much of a break as it can get within the “no haircuts” constraint. Recall that any writedowns would be recognized as losses immediately by the nations that loaned Greece money, which is a third rail issue politically. But the IMF is calling for big breaks. From theWall Street Journal yesterday: The IMF wants eurozone countries to accept long delays in the repayment of Greece’s bailout loans, which would fall due in the period from 2040 to 2080 under the proposal, according to officials familiar with the talks. The IMF is also pressing for Greece’s interest rate on its eurozone loans to be fixed for 30 to 40 years at its current average level of 1.5%, with all interest payments postponed until loans start falling due.

    Schaeuble said to reject IMF proposal on Greece –-- German Finance Minister Wolfgang Schaeuble is said to have rejected a proposal by the International Monetary Fund (IMF) to free Greece from all payments on its bailout loans until 2040. According to reports, the IMF has recommended that eurozone states accept long delays in the repayment of the country’s bailout loans, which would fall due in the period from 2040 to 2080 under the plan. The Washington-based Fund is also pressing for Greece’s interest rate on its eurozone loans to be fixed for 30 to 40 years at its current average level of 1.5 percent, with all interest payments postponed until loans start falling due. According to a report in Germany's Suddeutsche Zeitung on Wednesday, Schaeuble has ruled out freezing interest payments as long as he is finance minister. The German parliament should not be asked to approve changes to an agreement that was reached after much deliberation last summer, Schaeuble said according to the newspaper.

    Now or later? Euro zone, IMF at odds over when Greece should get debt relief | Reuters: The euro zone and International Monetary are struggling with Greece's debt crisis - not with Athens this time, but with each other over when to give Greece a break on its future massive debt repayments. The euro zone has begun talks on debt relief for Greece but wants to postpone the final decision until 2018; the IMF insists Greek debt repayment is unsustainable and investors need clarity now. Euro zone finance ministers are likely to forge a tentative plan when they meet next Tuesday - what in Brussels-speak is known as a political agreement. But their offer is unlikely to be anything but highly conditional, euro zone officials preparing the talks said. The gist is to find a way to lower Greece's debt-repayment burden without actually cutting the debt itself via a so-called haircut. Instead, Greece's debt would be "re-profiled" - less interest, longer maturities, limits based on growth etc. On May 9, the ministers asked their deputies to explore such specific measures which could be offered to Greece "if necessary" at the end of the bailout in 2018 if Greece implements all the agreed reforms.  The euro zone and International Monetary are struggling with Greece's debt crisis - not with Athens this time, but with each other over when to give Greece a break on its future massive debt repayments. The euro zone has begun talks on debt relief for Greece but wants to postpone the final decision until 2018; the IMF insists Greek debt repayment is unsustainable and investors need clarity now. Euro zone finance ministers are likely to forge a tentative plan when they meet next Tuesday - what in Brussels-speak is known as a political agreement. But their offer is unlikely to be anything but highly conditional, euro zone officials preparing the talks said. The gist is to find a way to lower Greece's debt-repayment burden without actually cutting the debt itself via a so-called haircut. Instead, Greece's debt would be "re-profiled" - less interest, longer maturities, limits based on growth etc. On May 9, the ministers asked their deputies to explore such specific measures which could be offered to Greece "if necessary" at the end of the bailout in 2018 if Greece implements all the agreed reforms. The caveat "if necessary" has appeared in all euro zone statements on Greek debt relief since November 2012, mainly on the insistence of countries led by Germany, which do not believe it is needed at all. The IMF has no such qualms. "To restore debt sustainability ... decisive action by our European partners to grant further official debt relief will be essential," it has said.

    Pope condemns 'bloodsuckers' who exploit poor workers | Reuters: Pope Francis condemned "bloodsuckers" who grow rich by exploiting others on Thursday, saying making "slaves" out of workers and setting unfair contracts was a mortal sin. Francis, who frequently speaks of his concern for the poor, appeared to be referring to the kind of grueling labor often done by poor migrants in rich countries across the world, but also to many other workers on precarious contracts. During mass at the Vatican, he told a story about a girl who found a job working 11 hours a day for 650 euros ($729) a month, paid "under the table". "This is starving the people with their work for my own profit! Living on the blood of the people. And this is a mortal sin," he said at the service in his Santa Marta residence. "Without a pension, without health care ... then they suspend (the contract), and in July and August (the workers) have to eat air. And in September, they laugh at you about it. Those who do that are true bloodsuckers."

    The Surprising Decision Where To House Thousands Of Dutch Refugees: In Prison -- With Europe facing two distinct challenges as a result of the ongoing refugee crisis (which in recent months has been tamed as a result Turkey withholding further immigrant outflows via the land route if only for the time being until Erdogan changes his mind and asks for more concessions), namely how to keep track of the hundreds of thousands of new immigrants, and also where to house them, the Netherlands has successfully killed these two birds with one stone.  According to the AP, with crime declining in the Netherlands, the country is looking at new ways to fill its prisons. In the past, the government has let Belgium and Norway put prisoners in empty cells and now, amid the huge flow of migrants into Europe, several Dutch prisons have been temporarily pressed into service as asylum-seeker centers.  The good news is that, according to AP, most of the 12 former prisons and jails housing asylum seekers have been so transformed that they are barely recognizable as former places of involuntary detention, though in some cases the thick cell doors and bars on windows are stark reminders of the past. The bad news is that thousands of refugees are currently living in prisons. Prisons in the cities of Haarlem and Arnhem, with their distinctive domed roofs and circular galleries of cells around a central covered courtyard, are considered national monuments and cannot be renovated. Even so, with just under 60,000 migrants arriving in the Netherlands last year, they have been temporarily pressed into service to house hundreds of asylum seekers.

    German government plans to spend 93.6 billion euros on refugees by end 2020: Spiegel | Reuters: Germany's government expects to spend around 93.6 billion euros by the end of 2020 on costs related to the refugee crisis, a magazine said on Saturday, citing a draft from the federal finance ministry for negotiations with the country's 16 states. The figure is likely to stoke concerns, particularly among growing anti-immigration movements, on the impact of new arrivals on Europe's largest economy which took in more than a million people last year, many from Syria and other war zones. The numbers arriving have fallen this year, helped by a deal between the European Union and Turkey that was designed to give Turks visa-free travel to Europe in return for stemming the flow of migrants. German weekly news magazine Der Spiegel said the finance ministry's calculations included the costs for accommodating and integrating refugees as well as tackling the root causes for people fleeing from crisis-stricken regions. Officials based their estimates on 600,000 migrants arriving this year, 400,000 next year and 300,000 in each of the following years, the report said, adding that they expected 55 percent of recognized refugees to have a job after five years. A spokesman for the finance ministry declined to comment on the figures but pointed to ongoing talks between the government and states, saying they would meet again on May 31 to discuss how to divide up the costs between them. The report said that 25.7 billion euros ($29.07 billion) would be needed for jobless payments, rent subsidies and other benefits for recognized asylum applicants by the end of 2020.

    EU-Turkey Migrant Deal Unravels Turning Greece Into Massive Refugee Camp - The EU-Turkey migrant deal, designed to halt the flow of migrants from Turkey to Greece, is falling apart just two months after it was reached. European officials are now looking for a back-up plan. The March 18 deal was negotiated in great haste by European leaders desperate to gain control over a migration crisis in which more than one million migrants from Africa, Asia and the Middle East poured into Europe in 2015. European officials, who appear to have promised Turkey more than they can deliver, are increasingly divided over a crucial part of their end of the bargain: granting visa-free travel to Europe for Turkey's 78 million citizens by the end of June. At the same time, Turkey is digging in its heels, refusing to implement a key part of its end of the deal: bringing its anti-terrorism laws into line with EU standards so that they cannot be used to detain journalists and academics critical of the government. A central turning point in the EU-Turkey deal was the May 5 resignation of Turkish Prime Minister Ahmet Davutoglu, who lost a long-running power struggle with Turkish President Recep Tayyip Erdogan. Davutoglu was a key architect of the EU-Turkey deal and was also considered its guarantor. On May 6, just one day after Davutoglu's resignation, Erdogan warned European leaders that Turkey would not be narrowing its definition of terrorism: "When Turkey is under attack from terrorist organizations and the powers that support them directly, or indirectly, the EU is telling us to change the law on terrorism," Erdogan said in Istanbul. "They say 'I am going to abolish visas and this is the condition.' I am sorry, we are going our way and you go yours."

    German politicians say Merkel left EU exposed to Turkish blackmail | Reuters: German politicians accused Chancellor Angela Merkel at the weekend of making Europe overly dependent on Turkey in the migrant crisis, leaving the bloc vulnerable to blackmail by President Tayyip Erdogan. Turkey, refusing to bow to European Union demands to rein in its broad anti-terror laws, said on Friday talks on a deal to provide visa-free travel in return for stopping illegal migrants reaching the EU had reached an impasse and the bloc must find a "new formula" to salvage the agreement. Merkel, whose popularity has suffered due to her liberal migrant policy that saw Germany take in more than one million migrants last year, had spearheaded EU efforts to secure the deal, signed in March. While the numbers of migrants have dropped sharply this year, Merkel continues to attract criticism from her conservative allies in Bavaria as well as the anti-immigrant Alternative for Germany (AfD). "I'm not against talks with Turkey but I think it's dangerous to become so dependent on Ankara," said Horst Seehofer, leader of the Christian Social Union (CSU), the Bavarian sister party to Merkel's Christian Democrats (CDU).

    First German Politicians, Now German Media in Credibility Meltdown -Mathew D. Rose -- Germany’s two major parties, Ms Merkel’s Christian Democrats and the coalition Social Democrats, are plumbing new lows in popularity and credibility So too are the nation’s media. The conflation is obvious: both are increasingly perceived as two sides of the same coin, acting in the interests of financial institutions and large corporations and their own economic advantage to the detriment of the public weal.While the Christian Democrats, despite Ms Merkel’s purported popularity, is for the first time facing the possibility of winning less than 30 percent of the vote at the next Bundestag elections, the once powerful Social Democrats are already under 20 percent in some recent polls. At this rate they could well end up behind the populist, anti-immigrant party Alternative for Germany (AfD); something that occurred in two of three state elections last month. In the past ten years the number of members of both major parties has sunk round 20 percent. In the same period the circulation of newspapers and news magazines has fallen a similar amount. Television, including state television, has allegedly lost just ten percent in the same decade. But even here the numbers are deceptive. The average age of viewers of state television is currently well over 60. When I first arrived in Germany thirty-five years ago state media (television and radio) had a monopoly. Today my children do not even know that it exists and use other media via the internet. I am surprised how many friends, colleagues and acquaintances have given up watching the evening news on state television, once an event that most Germans partook of, frustrated by its tendentious reporting.

    European corporate debt market could double in five years -BAML - (Reuters) - The European corporate debt market could double in size over the next five years as a result of the ECB's bond-buying programme, Bank of America Merrill Lynch (BAML) said on Monday. The European Central Bank will start buying the bonds of investment-grade non-financial firms from next month as part of its 1.5 trillion euro quantitative easing (QE) programme aimed at boosting inflation and growth in the euro area. BAML said this could lead to "explosive credit market growth" with around 2.5 trillion euros of investment-grade bonds sold from now until 2021. Issuance of investment-grade European corporate debt topped 18 billion euros last week, the second busiest period on record, according to IFR. "More issuance would mean more bond purchases for the central banks, which would likely drive more corporate spending ... and so on. We see the CSPP (Corporate Sector Purchase Programme), therefore, as becoming self-fulfilling over time," BAML strategists said in a note.

    How Europe Can Survive Without Introducing Sovereign Debt Limits - EU financial policymakers appear to be once more in a deadlock situation over proposals to limit the sovereign risk exposure of European banks. The strong exposure of some banks in the southern European periphery in their national sovereign’s debt was seen by many as one of the contributing factors to the ongoing sovereign debt crisis (Acharya et al. 2014, Beltratti & Stulz 2015; Brunnermeier et al. 2016). Presently, Germany is pushing for the adoption of sovereign debt ceilings to strengthen banks’ balance sheets, and to reduce the risk to taxpayers in any future scenario where EU states need to rescue failing banks (see also Andritzky et al. 2016). Germany has de facto made this project a precondition for further talks on the introduction of a common EU deposit insurance system (EDIS). Against the backdrop of the present political impasse, it is frequently overlooked that the objective of limiting banks’ sovereign risk exposure can be readily achieved using the regulatory toolkit that is already in place. Introducing risk-weighing or risk limits would thus not be necessary (although they would still remain desirable). Against the backdrop of the present political impasse, it is frequently overlooked that the objective of limiting banks’ sovereign risk exposure can be readily achieved using the regulatory toolkit that is already in place. Introducing risk-weighing or risk limits would thus not be necessary (although they would still remain desirable). A number of different channels are available. Rather than introducing general and abstract limits on the possibility to hold domestic sovereign debt or risk weight requirements, these channels rely on the assessment of individual banks’ risk profile and resolvability. The most obvious way is individual banking supervision through the ECB. Via the Single Supervisory Mechanism (SSM), the ECB has direct responsibility for the Eurozone’s large banks and exercises a more indirect oversight for smaller banks.

    Spain and Portugal likely to face fines over deficit -- The European Commission is to grant Italy budget flexibility but is expected to launch procedures to fine Spain and Portugal for their excessive deficits, when it publishes its specific country recommendations on Wednesday (18 May)."Europe has recognised a further element of flexibility," Italian prime minister Matteo Renzi said on Tuesday.Dear EUobserver  . He said letters were being exchanged between the commission and his government to set the budget margins the commission will allow for Italy in 2016 and 2017.In one of the letters, sent last week to Italian finance minister Pier Carlo Padoan and seen by EUobserver, EU finance commissioners Valdis Dombrovskis and Pierre Moscovici said they were ready to grant Italy a flexibility of 0.85 percent of GDP for 2016, under the condition that Italy reduces its deficit by a further 0.5 percent in 2017 and 2018."It must be recalled that no other member state has requested or received anything close to this unprecedented amount of flexibility," the commissioners wrote.The budget margins would be granted in compensation for the structural reforms, and investment decided by the Italian government as well as the cost of the migrant crisis and "exceptional costs directly related to the security situation".

    Eurozone slides back into deflation in April - The eurozone slipped back into deflation in April despite a stabilization in energy prices, a setback that underlines the difficulty of the challenge facing the European Central Bank as it struggles to boost consumer prices. The European Union's statistics agency confirmed on Wednesday a preliminary estimate that showed consumer prices were 0.2% below their year-earlier levels in April, making it the second month this year in which the eurozone was in deflation. The decline in consumer prices won't come as a surprise to the ECB, which had expected such an outcome during the first half of this year. But the reasons for the slide back into deflation have caused some fresh anxiety among policy makers. "I am more worried about deflation," ECB governing council member Ignazio Visco said in an interview with German business daily Handelsblatt published Tuesday. "With this come bankruptcies and very negative effects on the real economy. I believe we still face a concrete deflation risk." For much of the three years during which inflation has remained stubbornly below the central bank's target of just under 2%, falling energy prices have been the main culprit. But energy prices have rebounded after sharp falls in the first two months of the year, and indeed rose slightly during April. Instead, the main driver of the drop in consumer prices during April was a sharp drop in the rate at which services prices rose, to 0.9% from 1.4% in March. Some of that likely reflects the timing of Easter, which pushed up prices of package holidays and other services in March. But it may also be a sign of what central bankers call "second round effects," when businesses outside the energy sector start cutting their prices to reflect lower costs or falling inflation expectations among consumers. The core rate of inflation--excluding items such as food and energy, the prices of which are set mainly in world markets--fell to 0.7% from 1% in March, hitting its lowest level in a year.

    ECB weighs a helicopter money-drop program to spark euro economy - Will he or won’t he? The question applies to Mario Draghi, president of the European Central Bank. Will he fire up the ECB helicopter and drop bundles of euros hither and yon to stimulate the euro zone economy and stoke inflation? The Bundesbank – the German central bank – and Germans in general hate the very idea, which means it can’t be all bad. It’s a sentiment they better get used to, because the helicopter drops have gone from unthinkable to somewhere between possible and likely, not just in Europe, but also in Japan. And in spite of what the enraged Germans think, freebie euros landing in personal bank accounts could do the trick. More than a few economists and strategists are convinced that helicopter money is coming. “Investors are making a huge mistake in thinking that central banks are out of bullets,” Peter Berezin, managing editor of Montreal’s BCA Research, said in a May 13 note. “Helicopter money is coming and, once deployed, the policy will prove to be much more successful than most people imagine.” Germany had a collective anxiety attack in March, when Mr. Draghi, when asked about helicopter money, did not specifically rule it out. “It’s a very interesting concept that is now being discussed by academic economists and in various environments,” he said. A month later, he insisted the idea had never been discussed in the hallowed halls of the ECB’s headquarters in Frankfurt, which is still not the same as ruling it out. As he lies propped up in bed at night, contemplating his miserable little realm, where interest rates are negative, deflation an ever-present danger and unemployment still north of 10 per cent, why wouldn’t he consider it?

    “Brexit”: the real threat to globalization -- This article tackles three issues: the impact of Brexit on Britain as a whole, both politically and economically; the impact of Brexit on the European project; and the impact of Brexit on British SMEs. This allows us to have a measured approach to British voters opting to leave the single market on the 23 June referendum.  The European Union accounts for almost half of Britain's exports and imports. This corresponds to 15% of the country's GDP. EU membership is beneficial to the UK economy, because the EU is a customs union and this lowers trade barriers. This makes goods and services cheaper to British consumers. The downside of this is that Britain cannot negotiate, on its own, separate trade agreements with non-EU members. Brexit would allow this to happen, because Britain will recover full economic sovereignty. Brexit may also open the way for protectionist, import-substitution policies and a re-launch of the welfare state. Britain, as an EU member, receives the highest proportion of inward foreign direct investment (FDI) and portfolio investment. Of all countries in the world only the USA has a higher stock of FDI. This is mainly happening because of the particular role of the City of London in the structure of the European and global markets, namely the role of the City as a trading platform of financial and global services: in particular, as the Financial Times have pointed out, the the City has become the biggest centre for trading the Euro. The City manages one trillion euros of assets in cross-border funds and it dominates the global foreign exchange market, whose daily turnover is about £4 trillion.

    Half European Treasurers and CFOs see possibility of ‘Brexit’ – Greenwich Associates -  Half European Treasurers and CFOs see the possibility of 'Brexit', according to the latest official report issued by Greenwich Associates, noting that despite fears of a disorderly exit, most companies not acting to manage risks. Key Quotes "More than half of corporate treasurers and CFOs in the U.K. and continental Europe believe it is at least somewhat likely that the U.K. will leave the European Union. Most of these executives think a so-called “Brexit” would be a disorderly and potentially volatile process. Despite these beliefs, most corporate officers have not taken any actions to minimize the negative effects of a U.K. exit on their companies." Greenwich Associates interviewed treasurers at 90 large Western European corporates in the U.K. and continental Europe from April 12–27." "The study results establish conclusively that: 1) Companies in the U.K. and continental Europe see Brexit as a real possibility, and 2) Given companies’ deep levels of integration across the two markets, corporate treasury officials think a U.K. exit would have a significant impact on their own businesses and overall trade. In light of this, it is surprising to find that few executives have put in place security measures to protect their companies from the expected volatility." "Fewer than 1 in 4 corporate treasurers interviewed has put in place any hedges to protect against currency and/or interest-rate volatility — the two areas of risk exposure cited most frequently by study participants. Companies have taken even less action on other risks that they see as possible but harder to measure and protect against. Among such risks cited by financial officers are significant changes in regulation effecting trade and capital mobility, decreased access to liquidity and increasing cost of funding, and the possible introduction of a withholding tax."

    Most eurozone firms expect Brexit would hurt economy – survey - timesofmalta.com: Most companies based in the eurozone believe a British decision to leave the European Union would hurt the region as it struggles with a sluggish economy and a migration crisis, a survey showed yesterday. Seventy-nine per cent of firms based in the eurozone said a Brexit would be bad for the area, with less than four per cent saying it would have a positive impact, according to the report from accountants Grant Thornton. “What’s abundantly clear from our research is that European business leaders overwhelmingly view a Brexit as a negative development for the EU,” Francesca Lagerberg, a senior tax partner at Grant Thornton, said. She said business confidence was strong considering the various potential threats the region faced from low growth, high unemployment, migration and a potential Brexit. “Any one of these flaring up over the next few months could see that optimism wobble if the economic shocks undermine business leaders’ ability to plan and invest,” she added. The survey was based on interviews with more than 2,500 senior executives conducted in January and February. The result is in keeping with the view of senior business leaders in Britain who are largely in favour of Britain staying in the EU. Most economists expect an exit would deal a blow to Britain’s economy in both the short and longer term.

    ‘Brexit’ or Not, U.K. Is Part of Europe - Campaigners for the U.K. to leave the European Union repeatedly return to the same theme: the EU as a doomed enterprise. If the EU is sinking, they argue, time to abandon ship before it goes down.  The travails on the continent are hard to deny: a crisis over an influx of immigrants from outside the bloc and a failure to adequately police the bloc’s external borders, two deadly terrorist attacks in the space of a few months, political upheaval in many countries with the rise of nationalist political movements, and a struggle to generate economic growth. Justice Minister Michael Gove, a leading supporter of the campaign to leave the EU in June’s referendum, has likened the EU to the dying empires of history, a multinational federation “with peripheries which are either impoverished or agitating for secession.” Another Leave campaigner, a fund manager and entrepreneur named Jim Mellon, makes the economic argument. “We should leave the EU because the project itself is failing,” he argues on the Vote Leave website.  Awkwardly for Leave supporters, the eurozone grew faster than the U.K. and the U.S. in the first quarter of this year. But few people claim this heralds an economic resurgence. In any case, there is no obvious mechanism under which Brussels could force the U.K. to spend large sums to bail out a eurozone member. London might decide that its own self-interest dictates it should offer help, but it isn’t clear such a calculation would be greatly different whether it was inside or outside the EU. EU governments are also stumbling toward better management of the refugee crisis and stronger policing of the bloc’s external borders. True, that reflects a pattern in recent years under which the EU has managed rather than solved crises. But a solution to the refugee flow lies outside Europe. To the extent that refugees represent a danger—and Islamic State has infiltrated the refugee trail—few of them ever get to the U.K., which isn’t in the Schengen passport-free zone. Indeed, the U.K. checks the passports of everyone who enters the country from inside or outside the EU.

    UK Establishment Stunned As Over 300 CEOs Back Brexit: "Business, Not Government, Creates Wealth" --In a shocking slap in the face for UK PM Cameron, more than 300 business leaders are calling on Britain to vote to leave the European Union, saying that the country’s "competitiveness is being undermined by our membership." As The Telegraph reports, the letter, signed bysome of Europe's most senior business executives, claims Brussels "red tape stifles growth" and a Brexit would "create more jobs" exclaiming that "it is business - not government - which generates wealth." Perhaps this explains why Cameron, Osborne, Obama, and almost every other establishment politician and lackey has embraced 'Project Fear' when it comes to Brexit, proclaiming World War 3's imminence and all the worst parts of the bible will occur should the great unwashed masses exercise their right to vote for democracy (as opposed to a tyrannical superstate).In an attempt to redress the balance after the Bank of England and the International Monetary Fund last week warned that a Brexit would damage Britain’s economy, theletter in the Telegraph is signed by 306 business leaders in a personal capacity (and also signed by hundreds of people linked to small and medium-sized businesses). In total the backers of the letter are from businesses employing hundreds of thousands of members of staff. SIR – Britain is the fifth biggest economy in the world and, on current projections, will overtake Germany to become Europe’s powerhouse. Britain is America’s largest inward investor, and our openness and dynamism mean we attract more inward investment than any other European country. Three of the world’s top 10 universities are British, we speak the international language of business, our legal system is trusted round the world and we have an unrivalled reputation for innovation and creativity. These are just some of the reasons we believe that Britain is world-class. However, we also believe that Britain’s competitiveness is being undermined by our membership of a failing EU.

    What is Brexit-related uncertainty doing to UK growth? | British Politics and Policy at LSE: The very real risk the UK will leave the European Union, possibly leading to a massive economic disruption, has led to heightened stock market and exchange rate volatility; swings in opinion polls lead to swings in the FTSE 100 and the value of the Pound. Every time the “leave” vote surges, the stock market and pound sink as markets price in a higher risk of a post-Brexit economic downturn. We are tracking uncertainty related to the Brexit vote using our Economic Policy Uncertainty (EPU) Index. This index reports the share of newspaper articles in the Financial Times and Times of London that discuss Economics (proxied by the words “economy” or “economic”), Policy (proxied by “tax”, “policy”, “regulation”, “spending”, “deficit”, “budget” or “Bank of England”) and Uncertainty (proxied by “uncertain” or “uncertainty”). See the higher blue line in Figure 1, which highlights several economically traumatic events in the UK since 2000. Working backwards in time, we see the largest EPU spike occurs in Spring 2016 due to Brexit concerns, surpassing even the spikes around the 9/11 attacks and the Second Gulf War, the Northern Rock collapse, the global financial crisis, the European debt crisis and the Scottish independence vote. So the upcoming Brexit referendum appears to be generating an extraordinary level of economic policy uncertainty – at least as gauged by coverage in the Times and Financial Times newspapers.

    Is Central Banking Sliding Into The Quagmire Of Politics? -- The Bank of England’s governor on Friday warned that Britain risked an economic recession if citizens voted to leave the European Union (EU) in next month’s referendum. “In that scenario we would expect a material slowing in growth, a notable rise in inflation, a challenging trade-off,” Mark Carney predicted at a news conference. Prudent advice from a sober-minded central banker? Or, as critics charge, a misguided effort to sway a democratic debate by pushing an institution that should remain above the fray into the political arena? On one level the prediction represents a reasonable view of what could unfold if Britain embraces Brexit. But the BoE is also walking a fine line that separates legitimate macroeconomic analysis from political debates. Hanging in the balance is the central bank’s role as an effective steward of the nation’s economy that’s free (or mostly free) of the perception of political bias. That’s always been a delicate balance, in the UK and around the world. Central bankers, after all, draw authority from governments. But as last week’s BoE press conference suggests, keeping politics out of central banking isn’t getting any easier and it may be set to get a whole lot tougher.  It’s not that difficult to imagine the Federal Reserve getting dragged into the increasingly volatile politics linked to the US economy. Macro has always been tightly bound up with political views, but the last several years has witnessed this hazard go into overdrive. This is partly due to the sluggish recovery in the wake of the Great Recession. The weak growth has spawned any number of conspiracy theories that lay blame on the Fed for the economy’s unsatisfying recovery. Never mind that the Great Recession would almost surely have been worse without central bank intervention. Regardless, it’s getting harder for large swaths of the electorate to see the Federal Reserve as an institution that’s free of a political agenda, and a nefarious one at that.

    David Cameron moves to head off TTIP rebellion - BBC News: Downing Street has headed off a revolt over the Queen's Speech by saying it will accept a move to exclude the NHS from a controversial EU-US trade deal. Tory rebels were threatening to join Labour and the SNP to back an amendment "regretting" the lack of a bill to protect the NHS from the TTIP deal. But Downing Street has denied them the chance by saying they will back it. One of the MPs tabling the amendment, Labour's Paula Sherriff, described it as a "humiliating climbdown" by the PM. "They will now be the first government in history to officially 'regret' their own programme within days of announcing it, just months after doing the same on their Budget," she said. Conservative MP and Leave campaigner Steve Baker MP said: "The government has today admitted that the EU is a threat to our NHS. The only way we can protect the NHS from TTIP is if we Vote Leave on 23 June." But a spokesman for Number 10 said: "As we've said all along, there is no threat to the NHS from TTIP. So if this amendment is selected, we'll accept it."

    Iceland's Biggest Political Party Is Now The "Pirate Party" --Iceland’s anti-establishment Pirate Party continues to lead nationwide polls as the most popular choice for the next elections. The party — whose policies include internet freedom, drug decriminalisation, and open democracy — has consistently led the polls for the last year and, as a result, has secured more funding than any of its rivals. The 2008 financial crisis hit Iceland hard. The following year, the krona was devalued by around 50%, unemployment doubled, and capital controls were introduce. Miraculously, the country rose from the ashes to become one of Europe’s top performers in terms of growth. More recently, the political establishment has been in turmoil since three government ministers were implicated in the global Panama Papers scandal. Despite their struggle, or perhaps because of it, the list of reasons to admire Icelanders keeps on growing. Whether it’s the sentencing of senior bankers — or the mass outrage at the offshore leak, which propelled 10% of the population to the streets and oustedthe Prime Minister — the radical refusal of Icelanders to bow down and accept establishment corruption is admirable. Because of this, the surge in popularity of the once-fringe Pirate Party comes as little surprise — recent polls suggest almost half the nation supports them.

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