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

Saturday, June 18, 2016

week ending Jun 18

Video: Will the Fed Raise Rates in June? - Watch Wall Street Journal Chief Economics Correspondent Jon Hilsenrath and economics editor Sudeep Reddy as they discuss the factors the Federal Reserve will consider in deciding whether to raise short-term interest rates. This interactive video discussion took place the day before the Fed begins its June 14-15 policy meeting and includes analysis of how global economic developments may play into the rate decision.

Don't Take A Hike - Krugman - I’m hearing some buzz that the Fed may still be considering a rate hike at its upcoming meeting, or if not then soon. Let’s really, really hope this is wrong.   It’s true that measured unemployment is low by historical standards. But that’s a number depressed by low labor force participation; nobody really knows how far we are from full employment. Meanwhile, wage increases have risen but are still nowhere near worrying inflationary levels; actual inflation is below 2 percent, and both inflation expectations from surveys and implied market inflation predictions are low and falling.Oh, and job growth has slowed, along with the economy. Why would we expect an inflationary surge anytime soon, if ever?The behavior of long-term interest rates is, I think, especially telling. Such rates reflect a combination of inflation expectations and expectations about future economic strength — and they’ve been plunging, and are once again below 1.7 percent: So the market doesn’t see a near or even medium-term future in which the Fed would have good reasons to raise rates. Are people at the Fed at all sure that they know better?  On top of all this is the asymmetry of risks, which I and many others have been arguing for again and again. If the Fed waits to raise rates, and inflation overshoots its target, that’s not a deep problem — it can always raise rates, slow the economy, and get inflation down. If it raises rates and this turns out to have been premature, with the economy losing momentum and inflation falling, that’s a mistake that’s very hard to reverse when rates are still not much above zero.So even if the data suggested that a rate hike was appropriate if you abstract from uncertainty — which they don’t! — it would still make sense to wait.

The Fed Should Wait for Clarity Before Raising Rates: Thoma - Most analysts believe that the Fed will leave interest rates unchanged when it concludes its two-day monetary policy meeting this week. Let’s hope so. Both inflation and inflationary expectations remain below the Fed’s target level of 2 percent, inflationary expectations have been falling, and the most recent employment report points to a slower job market than anticipated.  Even though recent data point to weakness in the economy, some members of the Fed seem anxious to implement the next round of rate increases, perhaps when the Fed meets again in July. This continues a pattern. Time and again the Fed has indicated that a rate increase is coming soon, perhaps at the next meeting, based upon its forecasts of the future strength of the economy. Then it has been forced to delay the increase as new data arrives indicating the economy is not as robust as expected.  The day will come when rates need to be increased, but the Fed should wait until there is a great deal of certainty about the strength of the economy before taking this step. There’s a chance that the Fed will raise rates in July, but my guess is that incoming data will not provide the clarity the Fed needs to justify a “data dependent” rate increase.  Another reason to wait for a high degree of certainty before raising rates is the asymmetric costs associated with the two types of mistakes the Fed can make. Due to the lag between the time the Fed’s target interest rate is increased and its impact on the economy, the Fed must base its actions on forecasts of the economy several quarters ahead. If the Fed delays a rate increase and inflation overshoots its 2 percent target due to the economy being stronger than expected, the Fed can quickly raise rates to slow the economy and fix the problem. But if the Fed raises rates and the economy turns out to be weak, employment will be lower than if rates had been left unchanged.

FOMC Statement: No Change to Policy -- FOMC Statement:  Information received since the Federal Open Market Committee met in April indicates that the pace of improvement in the labor market has slowed while growth in economic activity appears to have picked up. Although the unemployment rate has declined, job gains have diminished. Growth in household spending has strengthened. Since the beginning of the year, the housing sector has continued to improve and the drag from net exports appears to have lessened, but business fixed investment has been soft. Inflation has continued to run below the Committee's 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation declined; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months. . The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will strengthen. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. The Committee continues to closely monitor inflation indicators and global economic and financial developments. Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

Fed leaves interest rates unchanged, signals lower rate path going forward | Reuters: The Federal Reserve kept U.S. interest rates unchanged on Wednesday and signaled it still planned two hikes this year, although a slowing economic growth path for 2016 and 2017 prompted a downgrade in where the U.S. central bank thought rates would peak. Even this year's rates projection was less secure than previously, however. Six of the Fed's 17 individual forecasts from governors and regional Fed presidents projected just one hike this year, compared with one such outlook when the forecasts were last issued three months ago. "We are quite uncertain about where rates are heading in the longer term," Fed Chair Janet Yellen told a news conference after the rate decision. The U.S. central bank lowered its economic growth forecast for 2016 to 2.0 percent growth from 2.2 percent and its outlook for 2017 to 2.0 percent from 2.1 percent. It also cut its longer term view of the appropriate federal funds rate by a quarter point to 3 percent and indicated it would be less aggressive in tightening monetary policy after the end of this year. Yellen gave no clues as to whether a rate hike could come as early as the Fed's next rate-setting meeting in July, or whether the central bank would wait for a slew of firmer data as it headed into its September meeting. Markets have all but priced out any rate rise in 2016.

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

Janet Yellen Attempts To Reassure The World That The Fed Has Not Lost Control - Live Feed -- "Hope" is now an official policy of The Fed it seems as they say - unequivocally - that the labor market "will strengthen." Never mind the uselessness of considering labor force in units of headcount in today's part-time, lower wage, gig economy. Taking the ax to growth and rate-hike-trajectory expectations, once again crushing their overly-optimistic hockey-stick expectations back to what the market already thinks. Yield curves, Fed funds futures, and Eurodollar options - as well as gold - all signal a Federal Reserve that has lost credibility and therefore its ability to 'manage' anything. Grab your popcorn and watch as we see if the press corps can do their job? July rate hike odds have collapsed to just 11% and September just 16%...

The Fed Has Whiffed Again - Massive Monetary Stimulus Has Not Helped Labor, Part 1 -- David Stockman - There is a deep irony embedded in the Fed’s savage assault on savers and its delusional doctrine of interest rate repression. While this actually results in monumental windfalls to speculators and the one percent, it’s all justified in the name of boosting the labor market and the wage bill. So the chart in Jeff Snider’s nearby post is especially salient. It shows that all this money printing has been for naught. Notwithstanding the 9X eruption of the Fed’s balance sheet from $500 billion at the turn of the century to $4.5 trillion today, growth in the most basic measure of labor input—-total hours worked——has come to a grinding halt.Compared to labor hours growth of nearly 3% annualized during the Reagan expansion of the 1980s and nearly 2% during the start-and-stop stagflationary economy of the 1970s, labor hours growth over the two boom-and-bust cycles since the Fed went full frontal on money printing in December 2000 has averaged just 0.15% per annum. Stated in aggregate terms, during the 10-year expansion between 1980 and 1990, labor hours employed in the US economy grew by 23.5%. By contrast, during the last 15 years combined, labor hours employed have risen by only 2.3%. Needless to say, this dismal outcome is not for want of potential labor supply. At the turn of the century, the civilian population aged 16 to 65 years was 177 million. That number has since grown to 205 million, meaning that the potential labor pool grew by 16% or nearly 7X faster than hours employed. These figures also stick a fork in the Fed’s  blind fixation on the U-3 unemployment rate and the nonfarm payroll numbers. Both are a relic of a half-century ago world of mines, factories, warehouses and retail shops based on a 40+ hour workweek on a year round basis.

Fed Decision Makers Wrestle With So-Called Natural Rate - WSJ:  While Federal Reserve officials debate when to next raise short-term interest rates, they also are wrestling with the question of how high to lift them in coming years. Signs point toward the new normal being much lower than in the past, which has broad implications for when the Fed should tighten monetary policy, how quickly, and how far. Fed officials disagree about their likely end point, in part because they are struggling to understand why another underlying interest rate—the mysterious natural rate—has fallen in recent years.  According to the textbooks, this so-called natural rate is the inflation-adjusted rate that’s consistent with the economy operating at its full potential, expanding without overheating. Also known as the equilibrium or neutral rate, it balances savings and investment. The natural rate can’t be observed directly; the Fed knows it has been reached only by how the economy responds.  This matters in part because the natural rate guides how the Fed sets its benchmark fed-funds rate, which influences other borrowing costs throughout the economy. If the Fed pushes rates too high, it could undermine investment and cause a recession. If it holds rates too low, demand could grow too quickly, producing inflation or financial bubbles. “The practical implication is when a Fed person talks about the natural rate of interest, what they’re telling you is what they think is the terminal rate of the next hiking cycle,” said Adam Posen, former member of the Bank of England’s monetary policy committee. Most economists figured the natural rate was around 2% just before the financial crisis. Today, seven years after the recession, most estimates are around or just below zero.  “We’re seeing no pickup, none whatsoever, in the natural rate even as the economy has gotten back to full strength,” John Williams, the San Francisco Fed president who has spent years studying it, said in a recent interview with The Wall Street Journal. “This is a huge challenge for us,” Mr. Williams said.

The Collapse of FOMC Expectations – When do you admit that you are wrong? Do you do it publicly? Do you hide it? Do you hide it plain sight? When I look at the graph for Fed funds for 2017 and later, I think the FOMC is admitting that they were wrong for a long time, and now hide that in plain sight. They don’t admit that they were wrong. They don’t admit that the economy has proven to be a lot weaker than they ever expected, and that they now expect that to persist for a while. That’s what the graphs for Fed funds and GDP say. But what does the FOMC say in its statement? It expresses confidence in future GDP robust growth, even though their expectations have collapsed to 2% real growth as far as they care to opine. Look at the above graph, and see how it has all converged to 2%.PCE Inflation? They assume it will be 2% before the year starts, and then they adapt to incoming data. There’s no model here, just a disappointed ideology that says they wish to produce a 2% PCE inflation rate, dubious as that goal is. The only thing more dubious there is their ability to achieve their ideology. Remember after the financial crisis? There were those who said unemployment would never return to 5% — that the natural rate of unemployment was permanently higher. I may have been among them. Well, now the FOMC has a new consensus. Unemployment below 5% as far as they care to opine. When I look at these graphs, particularly the ones for Fed funds and GDP growth, I see a paradigm shift where Bayesian priors have been dragged kicking and screaming by the data to No Man’s Land. Grudgingly they acknowledge the data in the graphs, but they don’t have a theory to go along with it, so their statements and minutes sound the same.

The Fed Needs More Than One Direction - Narayana Kocherlakota - Since the Federal Reserve raised its short-term interest-rate target in December 2015, much has changed for the worse: Job gains and overall output have disappointed, projections of future growth have declined, depressed inflation expectations have cast doubt on the Fed's credibility, and threats such as Britain's possible exit from the European Union have added to global uncertainty. This all suggests that the central bank should be contemplating much more radical actions than it did at today's policy-making meeting, where officials decided to leave interest rates unchanged. Despite all the disappointing data, there's no sign that Fed officials are even considering an interest rate decrease. For example, in the economic projections released along with today's policy statement, not a single member of the Federal Open Market Committee indicated that it would be appropriate for the central bank's target rate to be lower at the end of the year than it is today. The Fed is thus signaling that it is highly unwilling ever to cut interest rates, a message that is problematic for a couple reasons. First, by communicating that it would take a big shock to get it to think about lowering rates, the central bank is essentially telling businesses and investors that they will get no protection from smaller downward shocks. This leaves them feeling vulnerable, creating a drag on economic activity. Second, the lack of flexibility makes raising rates more difficult. Because the Fed doesn't want to ease, it must view each interest-rate increase as semi-permanent, meaning that it must be exceedingly cautious about making any move. As a result, its progress toward normalization -- that is, toward getting interest rates closer to where they have been historically -- is slower than it otherwise could be.

$12 trillion of QE and the lowest rates in 5,000 years ... for this?: The numbers are daunting if not shocking: $12.3 trillion of money printing, nearly $10 trillion in negative-yielding global bonds, 654 interest rate cuts since Lehman Brothers collapsed in 2008. Those actions have resulted in global growth in advanced economies that likely won't eclipse 2 percent this year, inflation levels that remain well below targets and a burgeoning global debt problem that remains unresolved, withstood only through the lowest interest rates the world has seen in 5,000 years. Put together, it all amounts to the "astonishing history investors are living through today," said Michael Hartnett, chief investment strategist at Bank of America Merrill Lynch who compiled the aforementioned statistics. It's a history of anemic economic growth during the second-longest bull market for stocks. While banks have aggressively pushed quantitative easing along with zero and negative interest rate policies, the results have been uneven. "The cocktail of QE, ZIRP and NIRP has been a potent one for Wall Street and the price of financial assets in the past eight years," Hartnett said in a report for clients, later adding, "And yet the bull market has waned in the past 18 months, there has been no 'normalization' of growth, rates and asset allocation, no 'Great Rotation,' and bonds and stocks have been trapped in a Twilight Zone of volatile trading." That has come amid little growth despite all the accommodation.  The World Bank recently slashed its expectations for gross domestic product, cutting its 2016 global estimate to 2.4 percent from 2.9 percent, from 2.2 percent to 1.7 percent for advanced economies and from 2.7 percent all the way down to 1.9 percent for the United States. Growth in Japan, despite trillions of QE, is projected at just 0.5 percent, and the euro area, which also has been actively easing, is put at 1.6 percent.

Our nation can’t afford past-its-sell-date economic orthodoxy - I've had it with my profession, macroeconomics. More specifically, I've had it with the consensus of practitioners in my profession. My disgust reached new heights Friday a week ago, when the U.S. reported "shockingly weak" or alternatively, simply "dismal" employment growth during the month of May: only 38,000 job gains, in contrast to a monthly average increase well over 200,000 over the last two years. Rather than focus on the existential macroeconomic cause of the disappointing data, my profession's town barkers immediately jumped to the conclusion that the Federal Reserve had "egg on its face" in the wake of its forward guidance in the weeks prior to the data's release, rhetorically "preparing the markets" for a hike in its policy rate this summer. It must be noted that the hike putatively being "put in play" was lifting the Fed's policy rate by one-quarter of a percentage point, to a level still far south of even 1 percentage point. Most ordinary people would submit that as long as we're talking about interest rates in terms of zero-point-something, we're talking about the moral equivalent of zero. Yet the Fed is somehow responsible for the U.S. labor market's sudden slowdown? And should have egg on its face? No, the egg belongs on the face of my profession, which refuses to openly acknowledge that the economy's existential woe is a deficiency of aggregate spending, for which fiscal policy expansion — read dramatically larger fiscal deficits — is the solution, not near-zero Fed policy rates.

There Is An Alternative To Yellen's Keynesian Bubble - Stockman Rages "Abolish The Fed" - David Stockman - The approximate hour Janet Yellen spent wandering in circles and spewing double talk during her presser yesterday was time well spent. When the painful ordeal of her semi-coherent babbling was finally over, she had essentially proved that the Fed is attempting an impossible task. And better still, that the FOMC should be abolished. The alternative is real simple. It’s called price discovery on the free market; it’s the essence of capitalism. After all, the hot shot traders who operate in the canyons of Wall Street could readily balance the market for overnight funds. They would do so by varying the discount rate. That is, they would push the rate upwards when funds were short, thereby calling-in liquidity from other markets and discouraging demand, especially from carry trade speculators. By contrast, when surplus funds got piled too high, they would push the discount rate downward, thereby discouraging supply and inciting demand.Under such a free market regime, the discount rate might well be highly mobile, moving from 1% to 10% and back to 1%, for example, as markets cleared in response to changing short-term balances. So what?  Likewise, the world is full of long-term savers like pension funds, insurance companies, bond funds and direct household investors on the supply side, and a long parade of sovereign, corporate and household borrowers on the demand side. Through an endless process of auction, arbitrage and allocation, the yield curve would find its proper shape and levels. And like in the case of a free market in money, the yield curve of the debt market would undulate, twist, turn and otherwise morph in response to changing factors with respect to supply of savings and demands for debt. What would be the harm, it must be asked, in letting economic agents in their tens of millions bid for savings in order to find the right price of debt capital at any given time as opposed to concentrating the task on 12 people who, as Janet Yellen admitted yesterday, can’t possibly figure it out, anyway?

Must-Read: Ben Eisen: Newest Inflation Expectations Likely to Trouble the Fed – DeLong -- Newest Inflation Expectations Likely to Trouble the Fed: “The Federal Reserve probably won’t like the latest data out of the University of Michigan on Friday……inflation expectations over the next five to ten years dropping to 2.3% in June, a record low…. That’s on top of market-based inflation expectations that have also fallen over the past month…. When Federal Reserve Chairwoman Janet Yellen spoke on Monday, she drew attention to inflation expectations as a key input in actual inflation. She said: It is unclear whether these indicators point to a true decline in those inflation expectations that are relevant for price setting; for example, the financial market measures may reflect changing attitudes toward inflation risk more than actual inflation expectations. But the indicators have moved enough to get my close attention. If inflation expectations really are moving lower, that could call into question whether inflation will move back to 2 percent as quickly as I expect….  The market is taking note as well. Benchmark 10-year Treasury note yields dropped to their lowest of the day after the data and recently traded at 1.63%, a new low for the year on a closing basis…

Fed Watch: Janet Yellen's Inflation Problem - Federal Reserve Chair Janet Yellen has been vexed by an inflation problem. Now she is also vexed by an inflation expectations problem. Last week she said: Uncertainty concerning the outlook for inflation also reflects, in part, uncertainty about the behavior of those inflation expectations that are relevant to price setting.  So it bears noting that some survey measures of longer-term inflation expectations have moved a little lower over the past couple of years, while proxies for these expectations inferred from financial market instruments like inflation-protected securities have moved down more noticeably. It is unclear whether these indicators point to a true decline in those inflation expectations that are relevant for price setting; for example, the financial market measures may reflect changing attitudes toward inflation risk more than actual inflation expectations. But the indicators have moved enough to get my close attention. If inflation expectations really are moving lower, that could call into question whether inflation will move back to 2 percent as quickly as I expect. Subsequently, the University of Michigan's read on long-run inflation expectations plunged to a series low:  Just for reference, consider the behavior of the inflation expectations during the last three tightening cycles: Spot the odd man out. This, one would think, should grab Yellen's attention. There is speculation of what this means for this week's FOMC statement. For example see here: “The key thing to watch will be whether the Fed changes its language on inflation expectations” They should change the language, but I don't think the will.   It makes no sense to show concern with the possibility of unanchored inflation expectations to the downside while at the same time stating that you anticipate the next policy action will be a hike. If inflation expectations are no longer stable, then any rational central banker must act accordingly, and this this case that means easing policy. Anything else is simply irrational, and the Fed should be called out for it.

Key Measures Show Inflation close to 2% in May - 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% (3.2% annualized rate) in May. The 16% trimmed-mean Consumer Price Index rose 0.2% (2.1% 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 0.2% (2.6% annualized rate) in May. The CPI less food and energy rose 0.2% (2.5% annualized rate) on a seasonally adjusted basis.  Note: The Cleveland Fed has the median CPI details for May here. Motor fuel was up 64% annualized in May.

Highest Shelter Inflation Since September 2007 Means More Headaches For A Trapped Fed -- The trap around the Fed continues to tighten. While on one hand Yellen pretty much threw in the towel on the current rate hike cycle yesterday, admitting that the local economy is no longer the driving factor in setting rates and instead has been relegated to the market's every whim, moments ago the latest May CPI came in, and it showed that core inflation continues to overshoot. Headline CPI rose 0.2% in May, in line with expectations, and rose 1.0% Y/Y, modestly below the 1.1% expected, as energy prices still pressure headline inflation (but not for long as the base effect is about to emerge), it was core inflation ex food and energy that was the problem: rising 2.2% in May, this was above the Fed's comfort zone of 2.0%, and remains driven by the all important rent and shelter category, which rose 0.4% in the past month. The full breakdown of inflation in the month. But now that energy prices are again rising, it was all about the red hot core inflation: "The index for all items less food and energy increased 2.2 percent over the past 12 months. Over 60 percent of this increase is accounted for by the shelter index, which rose 3.4 percent over the span, its largest 12 month increase since September 2007. The rent index increased 3.8 percent over the past year, while the index for owners' equivalent rent rose 3.3 percent and the index for lodging away from home advanced 3.8 percent." And some more details: The index for all items less food and energy increased 0.2 percent in May, the same increase as in April. The increase was mainly due to a rise in the shelter index, which increased 0.4 percent in May, its largest advance since February 2007. The rent index rose 0.4 percent, while the index for owners' equivalent rent increased 0.3 percent. The index for lodging away from home rose 0.7 percent after declining in March and April. The medical care index increased 0.3 percent, with the index for physicians' services rising 1.0 percent and the hospital services index increasing 0.7 percent, but the prescription drug index falling 0.4 percent. The apparel index also rose in May, increasing 0.8 percent after falling in March and April. The index for motor vehicle insurance rose 0.9 percent in May following a 1.2-percent increase in April. Also increasing in May were the indexes for personal care (0.4 percent), education (0.3 percent), and tobacco (0.2 percent).

Star Wars: The Fed Awakens - Yves Smith - This clip on the Fed and monetary misrule comes from The Nattering Nabob, who regularly provided incisive and cynical financial commentary during the crisis. Is the fact that he is becoming more active an indicator of sorts? In any event, I hope you’ll enjoy this mini-spoof.

Recession Risks: The View from Wall Street Economists - The Wall Street Journal‘s June survey of economists is out. Interestingly, no one’s mean forecast is for two quarters of negative growth in 2016Q2-Q3 (or even one quarter!), but the assigned probabilities of recession remain elevated. One point 1, see this histogram.On point 2, see this time series of recession probability assessments: The mean probability assessment is 20.7% for a recession in the next 12 months. So while not a single forecaster predicts 2 quarters — or even a single — of negative growth in 2016Q1-Q2 (as shown in Figure 1), some forecasters do perceive substantial downside risks. The risks they see are recounted in Josh Zumbrun’s WSJ RTE post So I won’t say definitively we are not in, or not close to, a recession (i.e., I won’t “Pull an Ed Lazear”). But Figure 1 contrasts strongly with the situation in May 2008, when the WSJ survey looked like this (as shown in this post), and several forecaster were predicting negative growth.  In fact the modal forecast was negative 1% when then CEA Chair Lazear said we were not in a recession.  New Deal democrat asks who in 2007Q3 foresaw a recession in 2007Q4. Figure 4 shows who forecasted average negative growth in 2007Q4-08Q1: Camilli Economics, and Combinatorics Capital.

Recession Watch and the Global Reach of Fed Policy: It is 'recession watch' time again. The May jobs report seems to have awakened the dormant recession concerns that emerged earlier in the year. See, for example, Josh Zumbrun, Jeff Spros, Edward Harrison, and Sam Ro. I was one of those observers who was concerned about a recession in early 2016. But unlike some, I never stopped worrying about it for one big reason: the global reach of Fed policy. It's tightening cycle, which began in mid-2014, has been  putting a choke hold on the global economy and this, in turn, has been straining the U.S. economy. This is something the FOMC should keep in mind as it meets this week. Here is how this has unfolded. First, the Fed began talking up interest rate hikes in earnest in mid-2014. We know this from the 1-year ahead fed fund future rate, which start rising in June 2014. One can also see this by looking to the 1-year treasury yield, which provides as an approximate guide to where interest rates are expected, on average, to go over the next year.1 The blue line in the figure below shows the 1-year treasury yield. Here we see it start to rise in 2014 about the same time the 1-year Euro yield--the red line--begins to fall. In other words, just as the Fed began raising the expected path of interest rates the ECB began doing the opposite. This policy divergence has persisted until this day as seen below:  This policy divergence, unsurprisingly, drove up the trade-weighted dollar with it as seen in the next figure: The trade-weighted dollar appreciated over 20% between mid-2014 and December 2015. This sharp appreciation of the dollar also meant those countries in the dollar block saw their currencies rise rapidly too. The most important of these countries is China. Its trade-weighted currency closely followed the dollar as seen below:As I have noted before, this appreciation of the RMB seems to have been the straw the broke the camel's back in China. The Chinese economy was already slowing down and was laden with the burden of its rapid debt growth since 2008. The Fed's talking of up of interest rates hikes could not have come at a worse time for China. Among other things, it appears to be the key reason for the capital outflow from China during this time

US Recession Odds Hit 55% According to Deutsche Bank Model -- A Deutsche Bank yield curve model says the odds of a US recession are now 55%. Specifically, the model notes the flattening of the yield curve, something I have mentioned numerous times recently. Bloomberg reports U.S. Recession Odds Climb to 55% as Yield Curve Flattens. “What are plummeting interest rates saying about the outlook for the economy? The spread between the yield on 10-year U.S. Treasury notes and two-year notes is the narrowest since 2007. A model maintained by Deutsche Bank analyst Steven Zeng, who adjusts the spread for historically low short-term interest rates, suggests the yield curve is now signaling a 55 percent chance of a U.S. recession within the next 12 months.” On June 10, I noted Yield Curve Flattens Again: 30-Yr Yield Just 19 Basis Points From Record Low.  The chart has not changed much since then.

  • The 30-year long bond is just 19 basis points from the low set in January of 2015.
  • The 10-year note is just 20 basis points from the low set in July of 2012.

US Recession Risk Is Still Low, According To Philly Fed’s ADS Index -- Recession chatter is on the rise lately. “After seven years of expansion, the U.S. economy appears to be headed for a recession,” writes an economics lecturer at Yale. Meanwhile, Bloomberg this week advised that US recession odds increased to 55% due to a flattening yield curve. And a survey of 400 real estate professionals shows that a majority expect a recession within the next 18 months. The dark forecasts may be right—or wrong. Based on the available data to date, however, the probability is still low that the US economy has fallen into an NBER-defined recession in the recent past. It’s debatable if the conventional distinction between growth and recession has any relevance these days as the US struggles with slow growth and uneven prospects for anything better. But as a baseline case for benchmarking macro analysis, it’s reasonable to consider how the numbers stack up in broad terms through a relatively objective lens. There are many ways to proceed, including the Philly Fed’s frequently updated ADS Index, which tracks six indicators, including yesterday’s numbers on initial jobless claims. Although this gauge is at the lower end of the range in recent months, the ADS Index—based on economic activity through June 11—has yet to cross over to the dark side.Although the Philly Fed doesn’t offer clear guidelines on how to interpret the ADS data (other than noting that lower values reflect weaker output), a 2010 study by the San Francisco Fed—“Diagnosing Recessions”—estimates the tipping point at -0.80 for this index. By that measure, the current ADS reading of -0.42 (based on data published June 16 for economic activity through June 11) still points to growth.

Why hasn’t the productivity crisis caused a bear market (yet)? - The 2016 calendar year may well see productivity growth in the US economy slumping to around 0.5 per cent, a catastrophic outcome for an economy in the middle of a cyclical upturn. This is part of a worldwide phenomenon which began some decades ago, and shows no sign of ending. The productivity slowdown has often been called a “puzzle”, because it has coincided with a period of rapid technological change in the internet sector. I am not sure that this is really a “puzzle”. Many of the obvious benefits of the internet revolution appear to increase human welfare without leading to increases in market transactions and nominal GDP [1]. Furthermore, there are several other plausible reasons for the productivity slowdown, including low business investment and a loss of economic dynamism since the financial crash [2]. There is however a different puzzle connected to the productivity slowdown. Given that it has greatly reduced the level and expected growth rate in nominal GDP, why has it had so little apparent impact on equities, an asset class that depends on the level and expected future growth of corporate earnings? Profits are presumably affected by GDP growth, yet continuous downward revisions to the path for GDP have been almost entirely ignored, up to now, by equity investors. With concern about the productivity crisis increasing almost daily, can this insouciance be expected to continue for much longer? This blog will discuss this issue, mainly from a US viewpoint. The conclusion is that the damaging impact of the productivity slump on the S&P 500 has so far been masked by other factors, but there are signs that this might be changing.

An Unexpected Sneak Peek of a Massive Downward GDP Revision for the U.S. -- Yesterday, the U.S. Bureau of Economic Analysis released its estimates of state level Gross Domestic Product through 2015-Q4. As it did, the BEA revised its previous quarterly GDP estimates for each state going back to at least 2005-Q1.  In doing that, the BEA's data jocks may have provided an unexpected sneak peek of how its estimates of national GDP for the U.S. will be officially changed when the agency releases is annual revisions for that data during the last week of July 2016.  In the chart below, we show the potential magnitude of the pending revision to real GDP in the U.S. The green line is how the nation's real GDP level is currently being reported by the BEA in the period from 2005-Q1 through 2015-Q4, while the black line shows how the BEA's regional data for the real GDP of the entire United States, spanning all industries, has just been reported.   There appears to be very little difference from previously reported real GDP figures from 2005-Q1 through 2006-Q3, but after that quarter, a widening gap opens up all the way through the end of 2015-Q4, at which point, the U.S.' inflation-adjusted GDP is revised downward by $324 billion (in terms of inflation-adjusted constant 2009 U.S. dollars).  Stated differently, real GDP in the U.S. is 2.0% smaller than what the BEA previously reported it to be. In terms of the percentage change of the magnitude of the revision in U.S. real GDP, the BEA's downward revision in 2016 looks to be more than double the size of 2014's and 2015's downward annual revisions.  About half of the total downward revision is concentrated during the period of 2007 through 2008, during the period leading up to and going into the first year of the Great Recession, with a second downward surge mostly taking place during 2012 and 2013, when the U.S. economy skirted the edge of an official recession in what we've previously described as a microrecession.

One Economic Sickness, Five Diagnoses - Mankiw - There is no simple way to gauge an economy’s health. But if you had to choose just one statistic, it would be gross domestic product.  Here is the sad fact: Over the last decade, the growth rate of real G.D.P. per person has averaged just 0.44 percent per year, compared with the historical norm of 2.0 percent. At a rate of 2.0 percent, incomes double every 35 years. At a rate of 0.44 percent, it takes about 160 years to double. So what’s wrong with the economy? No one knows for sure. But numerous theories are being bandied about. Here are five of them:

  • A statistical mirage Some Silicon Valley economists suggest that there really isn’t a problem. When quality improvements and new products are pervasive and so different from what came before, the national income accountants who construct gross domestic product might underestimate how much life is getting better.
  • A hangover from the crisis The recession of 2008-9 was caused by the worst financial crisis since the Great Depression of the 1930s.
  • Secular stagnation Lawrence H. Summers, former economic adviser to President Obama, has suggested that the problem predates the recent financial crisis. He points to the long-term decline in inflation-adjusted interest rates as evidence of reduced demand for capital to fund investment projects.
  • Slower innovation Robert Gordon, author of “The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War,” believes the pace of innovative activity has declined.
  • Policy missteps When Barack Obama took office in 2009, the economy was in the midst of the Great Recession. President Obama’s advisers relied on standard Keynesian theory when they proposed a large increase in government spending to energize the economy.

The U.S. Economy Is in Great Shape (Compared with Its Peers) - Lackluster economic growth in the United States remains the envy of the developed world.The U.S. economy has struggled to grow at much better than a 2% annual pace during the seven-year expansion, and employment gains have been steady but largely unimpressive compared with past recoveries.But those improvements beat those of other developed countries, says a new report from the Organization for Economic Cooperation and Development. “The U.S. economic recovery, while modest by historical standards, has been one of the strongest in the OECD,” said the organization, which has 34 member countries. That is “thanks to robust monetary policy support and an early fiscal expansion.” The U.S. economy is 10% larger than it was at its pre-recession peak. In contrast, the eurozone has grown less than 1% and Japan’s economic growth has been nearly flat during that time. The U.S. unemployment rate is among the world’s lowest. The U.S. rate slipped below the 34-country average in late 2012. While the pace of job creation in the U.S. slowed recently, the country passed its previous peak employment in 2014. Japan only approached that mark this year and the eurozone is still well below pre-recession levels.

A note on personal withholding taxes  -- Last Friday I wrote a piece dissecting the latest graph in Doomer porn, which purported to show that personal withholding taxes paid had fallen to a meager +0.1% YoY.  Since both the Daily and Monthly Treasury Reports are public and online, it didn't take long to debunk that claim.  But just to be sure, I asked Matt Trivisonno, who at his blog Daily Jobs Update has tracked withholding tax payments for the last decade, to double-check my work.  Normally, Matt charges for a subscription to the most current reports, but in this case he didn't simply verify my calculations, he sent me a graph that is completely up to date, and gave me permission to post it.  So here it is:  Measured on a rolling basis YoY, withholding taxes paid over a 3 month period have generally decelerated since midyear 2015, but have remained relentlessly positive -- and have rebounded to 4.11% by Matt's calculation as of last week. I can only assume -- since the source of the graph, Evercore, hasn't published any links to or descriptions of their data -- that somewhere in the Monthly Treasury Report is some series that is only up +0.1% YoY.  But what I can say with great confidence that it isn't personal withholding taxes paid.

China Dumping More Than Treasuries as U.S. Stocks Join Fire Sale -- For the past year, Chinese selling of Treasuries has vexed investors and served as a gauge of the health of the world’s second-largest economy. The People’s Bank of China, owner of the world’s biggest foreign-exchange reserves, burnt through 20 percent of its war chest since 2014, dumping about $250 billion of U.S. government debt and using the funds to support the yuan and stem capital outflows. While China’s sales of Treasuries have slowed, its holdings of U.S. equities are now showing steep declines. The nation’s stash of American stocks sank about $126 billion, or 38 percent, from the end of July through March, to $201 billion, Treasury Department data show. That far outpaces selling by investors globally in that span -- total foreign ownership fell just 9 percent. Meanwhile, China’s U.S. government-bond stockpile was relatively stable, dropping roughly $26 billion, or just 2 percent. "China’s U.S. portfolio doesn’t just consist of Treasuries,” said Brad Setser, a senior fellow at Council on Foreign Relations in New York. “To gauge China’s activity in the market it’s increasingly important to look beyond the Treasury market.”  The liquidation of shares suggests China’s central bank was still under pressure to raise dollars and smooth the yuan’s depreciation even though Treasuries selling abated, including through suspected custodial accounts in Belgium. The equities reduction reminds investors that while China’s $1.4 trillion trove of Treasuries dwarfs its other foreign assets, it has accumulated enough U.S. stocks to influence global markets. “Selling some of its equities is a reasonable way of raising the cash needed to finance the big drawdown in reserves,” said Setser, a former deputy assistant secretary for international economic analysis at the Treasury.

Bondage Fantasies at the WSJ - Paul Krugman Back in early 2009 the Wall Street Journal looked at a blip in interest rates — which was obviously, even at the time, driven by optimism about economic recovery, which unfortunately proved misplaced — and declared that the bond vigilantes were back. Rising rates, the paper declared, were a sign that all-wise markets feared budget deficits and inflation. Soaring rates were proof that government was the problem. Seven years on, the inflation never materialized, and interest rates all around the advanced world are at historic lows, with German 10-years having just gone negative. So the Journal has apologized for getting it all wrong, right? Hahahahaha. Instead, we now have an editorial denouncing “money for nothing“, These low rates are not a sign that governments should build infrastructure, or that inflation is too low. They “reflect a lack of confidence in options for private investment.” So rising rates show that government is the problem, and falling rates also show that government is the problem.

When private investment won’t step up…  …public investment must do so. I published this piece in today’s WaPo arguing that based on recent global dynamics–very low interest rates, strengthening dollar, capital flows, larger US trade deficit–the Fed must be very careful about raising rates. What they intend to be a tap on the brakes could end up being more than that. To their credit, they decided not to raise in their meeting this month, citing weak inflation and a slower “pace of improvement” in the job market. Surely the possibility of Brexit and the significant interest rate divergence I cite in my commentary are weighed on their thinking.  At the end of the piece, and in tons of other writings I’ve recently posted, I stress the need for infrastructure investment, including transportation, schools, water systems, and all the stuff Elizabeth McNichol talks about here. Here’s a slide I’ve been touting in this regard.Without even trying, I can think of three good reasons to invest in public infrastructure right now. First, as the figure on the left shows, real private investment is stuck way below its pre-crash trend (the figure takes logs of an index of real spending on business investment and draws a trend using data through 2007). Second, as the figure on the right shows, the need is there: the funding gap–the gap between what we spend and what we need to spend–on transportation, schools, and water systems is large. Third, like I just said, borrowing is so damn cheap. Under the assumption that these investments are at least mildly productive–and I’d argue that not poisoning kids with lead-infused water is a lot more than that–to not make these investments at today’s borrowing costs is economically…well, we’re not allowed to say “stupid” in my house, so let’s just say “shortsighted.”

In Defense Bill, Senate Approves Plan For Women To Register For Draft --  On Tuesday, the Senate passed a defense authorization bill that would require young women to register for the draft — the latest development in a long-running debate over whether women should sign up for the Selective Service. The provision would apply to women turning 18 in 2018 or later and would impose the same requirements and rules that currently apply to men.The policy is still far from being law. The House, after considering a similar provision earlier this spring, ultimately passed an authorization bill that omitted it; the two branches of Congress now must resolve the differences between their bills. And the bill faces a veto threat from President Obama over other elements of the legislation, such as the prohibition on closing down the Guantanamo Bay military prison.But the bill's passage brings women a step closer to Selective Service registration — a historic change that has bipartisan support in Congress but is firmly opposed by some conservative lawmakers.For decades, the U.S. policy of having a draft for men, and not women, was approved as constitutional by the Supreme Court.  But as NPR's David Welna reported last year, the court's reasoning relied on the fact that women were barred from combat roles.Now that women are eligible for combat duty, "Congress seems to have lost its court-endorsed rationale for limiting Selective Service registration to males only," David wrote

State Department officials call for U.S. military action against Assad regime - (CNN) More than 50 State Department officials signed an internal memo protesting U.S. policy in Syria, calling for targeted U.S. military strikes against the regime of Bashar al-Assad and urging regime change as the only way to defeat ISIS.  The cable says that U.S. policy in the Middle East has been "overwhelmed" by the continuing violence in Syria. It calls for a "judicious use of stand-off and air weapons, which would undergird and drive a more focused and hard-nosed U.S.-led diplomatic process."  CNN reviewed a draft of the memo, which has since been classified. The Wall Street Journal first reported on the memo's existence. The internal memo was sent throughout the "dissent channel," a mechanism for State Department officials to offer alternative views on foreign policy without freedom of retaliation or retaliation. It was established in the 1960s during the Vietnam War to ensure that senior leadership in the department would have access to alternative policy views on the war. The 51 officials who signed the memo are mostly from the rank and file of the department, many of them career officers in the foreign service who have been involved in Syria policy over the past several years either in Washington or overseas. There are no high-level names but they reflect a widespread view in the State Department that tougher military action in Syria is needed to force Assad to negotiate a diplomatic solution. Secretary of State John Kerry himself has advocated a more muscular U.S. military posture in Syria to force Assad to negotiate a political settlement.

Why Did 51 American State Department Officials ‘Dissent’ Against Obama and Call for Bombing Syria? - Close to half a million people are dead in Syria, as the country falls further and further into oblivion. Data on the suffering of the Syrians is bewildering, but most startling is that the Syrian life expectancy has declined by over 15 years since the civil war started. On the one side, ISIS holds territory, while on the other a fratricidal war pits the Assad government against a motley crew of rebels that run from small pockets of socialists to large swathes of Al Qaeda-backed extremists. No easy exit to this situation seems possible. Trust is in short supply. The peace process is weak. Brutality is the mood. What should America do? In the eyes of 51 U.S. diplomats who still haven’t grasped the negative outcomes of the disastrous wars launched since 2002, the solution is to bomb the world into America’s image. In an internal dissent cable addressed to Barack Obama, seasoned diplomats have urged airstrikes on the government of Bashar al-Assad in Syria. Chas Freeman, former U.S. ambassador to Saudi Arabia during the first Gulf War, told me he found the cable “unusual” in two respects. First, it garnered a large number of signatures. Most of those who signed the cable, a State Department official told me, were “rank and file” diplomats, such as a deputy to U.S. Ambassador to Syria Robert Ford and a secretary in the Near East Bureau. They had a good understanding of the current situation in the region. The second reason this cable is unusual, said Ambassador Freeman, is that the signatories “are arguing for rather than against the use of force.” Over the past 40 years, diplomats have used the “dissent channel” to caution against a rush to war. Now these diplomats are asking for an intensification of war.

Worried About “Stigmatizing” Cluster Bombs, House Approves More Sales to Saudi Arabia - The House on Thursday narrowly defeated a measure that would have banned the transfer of cluster bombs to Saudi Arabia, but the closeness of the vote was an indication of growing congressional opposition to the conduct of the U.S.-backed, Saudi-led bombing coalition in Yemen. The vote was mostly along party lines, with 200 Republicans – and only 16 Democrats – heeding the Obama administration’s urging to vote against the measure. The vote was 204-216. “The Department of Defense strongly opposes this amendment,” said Rep. Rodney Frelinghuysen, R-N.J., chairman of the House Committee on Defense Appropriations, during floor debate. “They advise us that it would stigmatize cluster munitions, which are legitimate weapons with clear military utility.” Cluster munitions are large shell casings that scatter hundreds or thousands of miniature explosives over large areas – often the size of several football fields. Some of the bomblets fail to explode on impact, leaving mine-like explosives that kill civilians and destroy farmland decades after a conflict ends. Cluster bombs are banned by an international treaty signed by 119 countries, not including the United States. The United States opposed the treaty, and instead of signing it, adopted a policy that cluster bombs should never be used in concentrated, civilian areas.

US Banks Top Cluster Bomb Investment ‘Hall of Shame’: Report -- Despite the international ban on cluster bombs, more than 150 financial institutions have invested $28 billion in companies that produce them, according to a new report released Thursday. Bank of America, JP Morgan Chase, and Wells Fargo are among the 158 banks, pension funds, and other firms listed in the "Hall of Shame" compiled by the Netherlands-based organization PAX, a member of the Cluster Munition Coalition (CMC).  The report, titled Worldwide Investments in Cluster Munitions: A Shared Responsibility (pdf), finds that the leading investors come from 14 countries including the U.S., the UK, and Canada. Of the top 10 overall investors, the U.S. is home to eight. Japan and China round out the last two.  Both the UK and Canada—along with France, Germany, and Switzerland, whose institutions are also named on the list—have signed the 2008 Oslo treaty known as the Convention on Cluster Munitions banning the use of the indiscriminate bombs under international law.  The U.S., which hosts by far the most companies on the list with 74, is not a signatory. Cluster bombs, which can be launched from the air or ground, operate by ejecting smaller sub-munitions or "bomblets" that can saturate an area of several football fields, according to CMC. They can remain volatile long after a conflict ends.

$40 billion aid package to Israel is 'largest ever' to any country, says Susan Rice - (UPI) -- U.S. National Security Adviser Susan Rice said the proposed military aid package to Israel is larger than any the United States has ever offered to any country. The 10-year aid program would give Israel up to $40 billion to upgrade its military aircraft and missile defense systems, and to defend against militants in Lebanon and the Gaza Strip, and al-Qaida and Islamic State affiliates in Syria and Egypt.  Speaking Monday in Washington to the American Jewish Committee Global Forum, Rice said the pact would "constitute a significant increase in support."  With $3.1 billion in 2015, Israel is the biggest beneficiary of U.S. foreign aid. Officials from Israel and the United States have said a $4 billion package for 2016 is under consideration. A sticking point in the long-term aid package is the strained relationship and mistrust between President Barack Obama and Israeli Prime Minister Benjamin Netanyahu. Some of Netanyahu's advisers, worried about Obama's replacement, have urged him to accept the U.S. offer soon.

An Inconvenient Truth: How The Obama Administration Became Earth's Largest Arms Dealer --With the Obama presidency in its final year, there is one central element of his foreign policy that has received little attention – the dramatic acceleration of lethal weapons exports by the U.S. military and defense contractors. As details, the Obama administration has approved more lethal weapon sales to more foreign countries than any U.S. administration since World War II. Many billions more than G.W. Bush's administration, in fact. And some of these sales will likely result in unintended consequences i.e. "blowback" – especially as more than 60 percent of them have gone to the Middle East and Persian Gulf. (After all, U.S. weapons supplied to the mujaheddin in Afghanistan to fight the Soviets were then used to help launch Al-Qaeda. Arms supplied to Iraqi security forces and Syrian rebelshave been captured by ISIS. And “allies” from Bahrain to Egypt to Saudi Arabia have used U.S.-supplied weapons to defeat homegrown democracy movements.)  On May 23rd, President Obama announced at a press conference in Hanoi that the U.S. would be lifting its decades-long embargo on sales of lethal weapons to Vietnam. Such a reversal in U.S. foreign policy raises questions: How does the U.S. arms export market actually work? Which companies in the military-industrial complex profit from these sales? Who really ends up with U.S. weapons? And most importantly, how many of those weapons could eventually be used against us?

Abby Martin on Hillary Clinton’s Hunger for Endless Wars - Abby Martin sits down with Ring of Fire’s Farron Cousins to discuss her recent report on Hillary Clinton’s war-hawkish past, and what it would mean for America if she were to take the White House.

CIA Chief Just Confirmed "War on Terror" Has Created A Lot More Terrorists -- Central Intelligence Agency director John Brennan said Thursday that, years into the United States' fight against the Islamic State, the terrorist group's reach and power have not been diminished and that it has even more fighters than al-Qaeda had at its height. Speaking to the Senate Intelligence Committee, Brennan said, "Unfortunately, despite all our progress against ISIL on the battlefield and in the financial realm, our efforts have not reduced the group's terrorism capability and global reach. The resources needed for terrorism are very modest, and the group would have to suffer even heavier losses of territory, manpower, and money for its terrorist capacity to decline significantly." He also said the group is still "a formidable adversary," adding, , "The branch in Libya is probably the most developed and the most dangerous." He also projected that it "will intensify its global terror campaign to maintain its dominance of the global terrorism agenda." And, despite the apparent failure of the military strategy, Brennan said "a long and difficult fight" would continue against the group whose number of fighters now "far exceeds what al-Qaeda had at its height."

The White House Exaggerates the Benefits of the TPP to the Open Internet -- The Obama administration makes big claims about how the Trans-Pacific Partnership (TPP) will affect the Internet. It argues that the TPP will promote a free and open Internet through binding language that limits data localization policies, bans taxes on information flows, promotes Internet interoperability (enables the Internet to work effectively around the world), and mandates civil society participation and transparency in the development of Internet regulations. The White House has also argued that the TPP “promotes E-Commerce, protects Digital Freedom, and preserves an Open Internet” because it allows the TPP signatories to challenge censorship and filtering as trade barriers. There’s no doubt that the TPP has the potential do all of these great things. But once ratified and implemented, it will do little to deliver on these promises because the TPP has a number of exceptions and loopholes allowing governments to justify their blocking, filtering, or censorship of information flows.

Obama, Clinton Begin Awkward TPP Dance - : President Barack Obama’s endorsement of Hillary Clinton last week means the current president and would-be future president are essentially joined at the hip politically for the next five months, as one is asked to continuously stump for or defend the other. But on one topic, they’ll have a rough time sharing dialogue: the Trans-Pacific Partnership. “Having come out against the landmark agreement, it’s virtually impossible for Clinton to change her position without fueling Donald Trump’s charge that she can’t be trusted and alienating Democratic supporters who oppose the pact,” writes Pro Trade’s Doug Palmer. But the “love-fest between the president and potential future president could save TPP if Clinton is elected and Republican congressional leaders decide to move on the pact in the brief ‘lame-duck’ session after the election,” Palmer adds. “I think Obama will go to her and say, ‘I want to get it done and don’t get in the way,’” said Bill Reinsch, a trade policy fellow at Stimson Center, a nonpartisan think tank. “My guess is she will go along. ... I don’t think she’ll say no.” At the same time, TPP could be the trade-deal-that-must-not-be-named when Obama and Clinton barnstorm the country. “My guess is when he campaigns with her, they’ll talk about something else,” Reinsch said. Pros can read the rest of Palmer’s article here..

Google Comes Down On The Wrong Side Of The TPP -  This is extremely unfortunate, but not surprising. Google has made some noise sounding supportive of the TPP over the past year or so, and now it's put out a blog post strongly supporting the agreement, and claiming that it's good for intellectual property and the internet. The company is wrong. The statement is right about a big problem on the internet -- the growing restrictions and limitations on the internet in different jurisdictions:  But Internet restrictions -- like censorship, site-blocking, and forced local storage of data -- threaten the Internet’s open architecture. This can seriously harm established businesses, startups trying to reach a global audience, and Internet users seeking to communicate and collaborate across national borders.  Yes, absolutely. And the TPP only tackles a tiny part of that -- and in some ways makes other aspects worse.  It's after that where the post goes off the rails:  The TPP provides strong copyright protections, while also requiring fair and reasonable copyright exceptions and limitations that protect the Internet. It balances the interests of copyright holders with the public’s interest in the wider distribution and use of creative works -- enabling innovations like search engines, social networks, video recording, the iPod, cloud computing, and machine learning. The endorsement of balanced copyright is unprecedented for a trade agreement. The TPP similarly requires the kinds of copyright safe harbors that have been critical to the Internet’s success, with allowances for some variation to account for different legal systems.   This is just wrong, and it's the most frustrating part of the post. The TPP expands copyright rules to ridiculous levels in many countries, including extending copyright terms at a time when there is no sound basis for advocating for extending copyright terms. And the "requiring fair and reasonable copyright exceptions and limitations that protect the Internet" is just wrong.  Google claiming that it requires such things is just... wrong.

Time is running out on TPP - The Trans-Pacific Partnership continues to be one of the critical unfinished issues as the Obama administration wraps up its eight-year tenure. The regional trade agreement involves 12 nations and nearly 40 percent of global GDP - including the key economies such as the United States, Japan, Canada, Mexico, Australia and Vietnam.  The pact was signed in February at a ceremony in New Zealand, but has not yet entered into force as signatory members must first ratify the deal in their respective legislatures.While TPP ratification faces challenges in many states, including Japan and Canada, the key to the agreement centres on Washington's ability to pass the TPP into law through Congress. The Obama administration has staked its reputation and the legacy of its "rebalance" strategy in large part on the realisation of TPP. TPP deal threatens livelihood of farmers in Malaysia The rebalance is framed on three key - and interconnected - pillars of US engagement in the Asia-Pacific region: economic, diplomatic and security.Strategic linchpin The trade agreement has been described by the Obama administration as a strategic linchpin that would ensure that the region adopts standards and rules guided by established trade norms. The alternative has been described - often in overly pejorative terms - as a green light for Beijing to "write the rules"in the region.

Hatch: Obama willing to dance on TPP - POLITICO: Senate Finance Committee Chairman Orrin Hatch said the Obama administration for the first time appears to be willing to meet his demands on TPP. Story Continued Below "Let's put it this way, this is the first time that they've been willing to say they want to meet the needs that I say they've got to meet," Hatch told reporters Wednesday shortly after speaking by phone to President Barack Obama. "They know this isn't a matter of me being stubborn, this is a matter of getting it done right." Hatch repeated that he still wants 12 years of data protection for biologics in the TPP instead of the current formulation that provides at most eight years of protection and possibly only five. He also said a provision that prevents tobacco companies from using investor-state dispute settlement has cost TPP at least 13-16 votes in the House and eight or more in the Senate. Because of those two issues and some other important ones, TPP doesn't have the votes to pass, said Hatch, who stopped to speak with reporters after a hearing on digital trade.

TPP's Corporate Sovereignty Chapter A 'Threat To Democracy And Regulation' -- When the negotiations for the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada were concluded in September 2014, the text was finally released after years of secrecy. At the time, the Canadian Centre for Policy Alternatives put together what remains the best overall analysis of the main text's 1598 pages, in a series of studies collectively called "Making Sense of CETA." The same organization has now published a set of analyses looking at key aspects of TPP, entitled "What’s the big deal? Understanding the Trans-Pacific Partnership".   They are all worth looking at, but Techdirt readers will probably be particularly interested in one called "Foreign investor protections in the Trans-Pacific Partnership." It's by Gus Van Harten, a well-known commentator on trade law and policy. The first part of his analysis provides a good summary of the world of corporate sovereignty, or investor-state dispute settlement (ISDS) as it is more formally known. The later section looks at some new research that provides additional insight into just how bad corporate sovereignty is for those of us who are not insanely rich.  Van Harten quotes some recent work showing that 90% of ISDS fines against countries went to corporations with over $1 billion in annual revenue or to individuals with over $100 million in net wealth. Similarly, the success rate among the largest multinationals -- those with turnovers of at least $10 billion -- was 71% in the 48 cases they initiated, compared with a success rate for everyone else of 42%. So any claim that ISDS is equally useful to all companies, including small and medium-sized businesses, is not borne out by the facts.

Ryan unveils plan to roll back Obama-era regulations -- House Speaker Paul Ryan on Tuesday unveiled the third installment of his “agenda project” with a sweeping 57-page plan to roll back regulations on energy and the environment, labor issues and the financial services industry. “The bureaucracy is not listening to the American people, and as a result less jobs, less businesses, less prosperity, lower wages,” Ryan said at an event in front of Labor Department headquarters. “We can improve the economy by making sure the regulators respect the people they’re supposed to regulate. That is not what’s happening.” The plan commissioned by a task force named by Ryan, R-Wis., is largely a repackaging of GOP agenda items that have failed to advance through the Senate and have often been met with veto threats by President Barack Obama. “Bad or unnecessary regulations can slow the economy down significantly, and the evidence suggests red tape is holding back the recovery,” said the report. “The federal government has taken very few outdated regulations off the books, while constantly adding new ones: 3,408 in 2015 alone.” Tuesday’s report is the third of a half-dozen reports that are designed to form a positive GOP agenda for the fall campaign. But House Republicans are struggling to be heard above the din created by presumptive GOP nominee Donald Trump.

Ryan unveils plan to roll back regulators' power - Congress should have more power over regulators, House Speaker Paul Ryan(R) said Tuesday. "We are calling for Washington to change the very ways it writes rules," Ryan told reporters as part of a broader GOP policy rollout. "If the proposals that are cooked up in these bureaucracies are really so important, then let the people's elected representatives decide," he added. "No major regulations should become law unless Congress takes a vote." The Republican regulatory agenda would give lawmakers the authority to reject controversial rules, while federal agencies would be slapped with a regulatory budget. The GOP plan would also eliminate costly and outdated rules. Ryan rolled out the plan Tuesday afternoon alongside a dozen other House Republicans. House Majority Leader Kevin McCarthy (R-Calif.) said business owners should not be treated like "enemies." "Regulators [should] respect the people they're supposed to regulate," Ryan added. Republican leaders called for changes to controversial financial, energy, environment, and internet regulations. The plan also includes broader regulatory reform initiatives such as the Regulations from the Executive in Need of Scrutiny (REINS) Act, which President Obama has threatened to veto. Ryan offered strong support for the REINS Act, which would give lawmakers the final say over controversial regulations. The House passed the legislation last July, but the Senate has yet to move the bill through committee. Ryan also called for regulators to be held to a budget that would limit their rulemaking activities, but critics say this would handcuff federal agencies. Republicans would also like to require federal agencies to implement the "least-costly" regulations. The GOP also plans to take another shot at creating a regulatory commission that has the power to sift through agency rulebooks and eliminate outdated regulations.

Ryan's 'Better Way' for Wall Street Includes Hensarling's Dodd-Frank Rollback - House Speaker Paul Ryan (R-Wis.) rolled out a regulatory policy agenda on Tuesday that includes a warm embrace of House Financial Services Committee Chairman Jeb Hensarling’s (R-Texas) plan to replace the 2010 Dodd-Frank Act. The latest installment of the House GOP’s “Better Way” agenda includes detailed plans to roll back the Obama administration’s hallmark financial regulation law that Hensarling discussed in a speech last week. Hensarling wants to strip the federal government’s role in designating systemically important financial institutions and exempt those institutions from numerous regulatory requirements if they hold sufficient capital. Other Hensarling priorities contained in the GOP agenda include getting rid of federal authority to infuse failing institutions with bankruptcy procedures. “House Republicans support the option for strongly-capitalized financial institutions to qualify for significant relief from duplicative and overly burdensome regulatory mandates, thereby promoting a more resilient financial sector, simplifying an overly complex regulatory system, and reducing the power and influence of Washington bureaucrats,” the GOP task force’s policy paper states. “Put simply: If you are strongly-capitalized, you should only have to comply with a simple set of regulations rather than dozens of complicated and conflicting rules.”One of the plan’s unifying principles is that Congress should have a greater say in the financial regulatory sphere, including by subjecting rules to an up-or-down vote. The task force’s plan also suggests additional restrictions on several agencies and regulatory bodies that congressional Republicans have routinely criticized during Obama’s presidency. That list includes the Consumer Financial Protection Bureau, which Dodd-Frank created. The CFPB would face a number of new restrictions under the Ryan plan. (Notably, the GOP task force didn’t propose scrapping the agency entirely, something several Republicans have called for.) The Republican plan posits “fundamentally reforming the CFPB” by installing an agency inspector general, removing its director position in favor of a five-member bipartisan commission, and subjecting the agency to the congressional appropriations process. Currently, the CFPB’s funding comes from the Federal Reserve coffers, rather than congressional appropriations.

A Comprehensive Look at Paul Ryan's Regulatory Reform Agenda -- A task force of House Republicans on Tuesday released an agenda for regulatory reform, the latest in a series of policy documents designed, according to Speaker Paul Ryan, R-Wis., to apply America’s timeless principles—liberty, free enterprise, consent of the governed—to the problems of our times. Titled “A Better Way,” the project prescribes congressional actions to address poverty, taxes, national security, health care, regulation, and the restoration of constitutional authority. With input from the public, members and staff of 10 House committees have contributed to the effort. Here is an in-depth look at “A Better Way” from several Heritage Foundation research fellows:

  1. Regulatory Reforms
  2. Financial Regulations
  3. Energy Regulations
  4. Water and Agriculture Regulations

The new tract on regulatory reform opens with the observation that the last recession ended in 2009, but the economy has only been limping along ever since. “Job growth has been weak. Household income has stayed put. Business investment has barely budged. The authors then conclude that: “One likely contributor is the growing federal regulatory burden.” That’s a considerable understatement. According to The Heritage Foundation’s newest edition of “Red Tape Rising,” the Obama administration has increased the annual cost of major rules by an astonishing $108 billion. (And that’s the government’s lowball estimate.) Combined with the regulatory burdens imposed during the administration of George W. Bush, the annual cost of red tape has increased by $176 billion since 2001. As the new regulatory reform agenda states, “It is time for serious and fundamental reform. Every step in the process needs to be revamped.” That’s for sure. When it comes to regulation, the White House, Congress, and federal agencies routinely breach legislative and constitutional boundaries. The “Better Way” identifies both systemic reforms that are urgently needed as well as reconsideration of some woefully outdated regulatory regimes that no longer reflect current conditions.

Who’s right about the financial crisis? Dodd-Frank reform depends on it - Peter J. Wallison -In the next few days, Jeb Hensarling, the chair of the House Financial Services Committee, will unveil his proposed reforms of the Dodd-Frank Act. As the night follows day, Democrats in Congress and the administration will claim that Hensarling is trying to “roll back” provisions of the act that were necessary to prevent another financial crisis.  Many Americans will agree with this charge because the public has been told over and over again by the media and the Obama administration that the financial crisis was caused by insufficient regulation of the financial system, particularly the banks and even more particularly Wall Street. Is it true? One of reasons to accept this narrative is that it was endorsed by the majority report of the Financial Crisis Inquiry Commission (FCIC), a bipartisan government-funded commission established after the crisis to tell the American people why that event occurred. The FCIC’s report, issued in January 2011, is often cited as the definitive account of the crisis. But is the FCIC a credible source? I think not. I was a member of the FCIC and dissented from the commission’s report for reasons fully explained in my recent book, Hidden In Plain Sight: What Caused the World’s Worst Financial Crisis and Why It Could Happen Again (Encounter, 2015). In doing research for the book, I found that the FCIC’s files contained a great deal of information that contradicted the principal conclusions of the FCIC’s majority. Indeed, much of the data in my book—supporting my argument — comes from the files of the FCIC itself. That contrary data would be collected by the FCIC but not reported or weighted is troubling, and should be appropriately weighted by anyone who takes its majority report seriously. I have collected a lot of this material in a paper that was posted on the AEI website. Those who are interested in the causes of the crisis should read it.

FOIA reform bill headed to Obama - A bill aimed at improving the federal government's responses to Freedom of Information Act requests passed the House on Monday and will soon be headed for the White House, where the measure is expected to be signed into law by President Barack Obama. Both houses of Congress have been considering versions of the legislation for several years, with a bill coming very close to passage in 2014 before hitting a last-minute snag. The House cleared the way for final passage of the FOIA Improvement Act on Monday by agreeing to a version of the bill the Senate passed in March and  which the White House said President Barack Obama would sign. The bill passed the House on a voice vote during the so-called suspension calendar used for non-controversial legislation. "I believe that this is the best bill we can send to the president's desk. I have no doubt that the reforms contained in this bill will significantly improve the Americans' public ability to exercise their right to access information. The most important reform is the presumption of openness," Rep. Mark Meadows (R-N.C.) said. In addition to adding a presumption in favor of disclosure to the actual text of FOIA, the bill would also create a centralized portal for FOIA requests across the government. However, the legislation was watered down somewhat from earlier versions before it passed the Senate in March. The changes were made to overcome resistance by some federal agencies and their supporters on Capitol Hill.

We're Going to Need More Tax Revenue. Here's How to Raise It. - Jared Bernstein - I recently testified before the House Committee on Ways and Means, the people who write tax law. The alleged topic of the hearing was how to generate faster economic growth, but what they really wanted to talk about was “tax reform.” As you might expect, those two words mean different things to different people. To many Republicans, tax reform means cutting taxes. Despite reams of evidence to the contrary, they’re still deeply enthralled by supply-side, trickle-down economics. So the Republicans had their witnesses testify about the growth-inducing impacts of tax cuts. One witness argued that anyone who didn’t get this was a “science denier.” I half expected the climate-change deniers on the panel to take umbrage at that accusation (“Hey, you’re talking to actual science deniers!”). Most of the Democrats on the committee rightly and soundly objected to the supply-side fairy dust, pointing out that no evidence exists to support that case. As nonpartisan tax economist Bill Gale and colleagues recently wrote, “At the federal level, there is virtually no evidence that broad-based tax cuts have had a positive effect on growth. … That has been amply demonstrated at the national level, where tax cuts have eroded revenue without discernable effect on economic activity.” To the extent that most Democrats on the committee wanted to reform taxes, it was to “lower the rates and broaden the base”—a mantra in Washington. The idea is to collect the same amount of revenues—to maintain “revenue neutrality”—by closing some of the loopholes and wasteful subsidies in the tax code. Once the taxable income base is larger, you can get the same amount of revenue with lower tax rates. While I applaud the Democrats’ realism on the folly of trickle-down, revenue neutrality is the wrong goal. Based on demographic pressures alone, we need more tax dollars. And if we want to improve our infrastructure, push back on global warming, fight poverty and inequality, and improve health and retirement security, we’re going to need still more revenue. As the table to the right shows, I identify almost $2 trillion in new tax revenues that could be collected over the next decade, based on a subset of ideas that progressives should consider.

CBO study shows that ‘the rich’ don’t just pay a ‘fair share’ of federal taxes, they pay almost everybody’s share - AEI -- The Congressional Budget Office (CBO) recently released its annual report titled “The Distribution of Household Income and Federal Taxes, 2013.” In that publication, the CBO provides detailed data on American households for each income quintile in 2013 for: a) average household “market income” (includes labor income, business income, income from capital gains, and retirement/pension income), b) average household transfer payments (payments and benefits from federal, state and local governments including Social Security, Medicare, Medicaid, unemployment insurance, and Supplemental Nutrition Assistance Program (SNAP)), and c) average federal taxes paid by households (including income, payroll, corporate, and excise taxes). Some of the key findings of the CBO analysis are displayed in the table above, with the data organized by household income quintiles. The data in the first four rows above appear in the CBO report (from Tables 1 and 3), and rows 5-8 above have been calculated separately based on data from the first four rows in the table. Scott Greenberg and John Olsen of the The Tax Foundation recently summarized some of the key findings of the CBO report in their post “Are the Rich Paying Their Fair Share Yet?”, here are their main conclusions: In 2013, the top 1% of households paid an average of 34% of their income in federal taxes. To compare, the middle 20% of households paid only 12.8% of their income in taxes. Moreover, taxes on the rich are much higher than they’ve been in recent years. Between 2008 and 2012, the top 1% of households paid an average tax rate of 28.8%. However, in 2013, this figure spiked to 34%, as a result of tax increases in the “fiscal cliff” deal and the Affordable Care Act. We’ve known for a while that taxes rose on the rich in 2013, but the new CBO report puts in perspective exactly how high taxes on rich are now, compared to the last three decades. For instance, in 2013, the top 1% of taxpayers paid a higher tax rate (34%) than in the year Reagan took office (33.2%). According to the CBO, the federal tax system is now “the most progressive it has been since at least the mid-1990s.”

Now Luxembourg, Switzerland Are Working to Bolster Tax Haven USA  --As we’ve often said before, it is counterproductive (and an analytical error) to see the fight against tax havens in purely geographical terms. When the U.S. Justice Department started taking action against Swiss bankers, this was not a battle between Switzerland and the United States: it was a battle pitting wealthy, unaccountable élites against their own societies, which just happened to be played out on this particular U.S-Swiss terrain — just as it is played out on many other terrains, day after day. Indeed, the U.S. has been fairly successful against the Swiss because it targeted Swiss banks, rather than Switzerland: the latter (geographical) approach would have been far less successful and would have resulted in the Swiss coming together in a defensive huddle to defend against Big Bully USA. For those keen on tackling tax havens, this is an important insight. Anyway, this context is important if we want to understand Luxembourg’s latest gambit, apparently to support the cause of Tax Haven USA, which is continuing to emerge as a secrecy jurisdiction of extreme concern. More recently, Switzerland seems to be following Luxembourg and also collaborating with the U.S. secrecy machine.Why would these mucky European tax havens want to support an apparent ‘competitor’ on secrecy? What’s happening now is an extremely worrying development, and the OECD needs to summon the courage to step in with an outbreak of honesty – and urgently.

Elizabeth Warren Draws Fire from Left and Right Over Clinton Endorsement - Senator Elizabeth Warren did not have a good weekend. After endorsing Hillary Clinton for President on Thursday, Warren was ridiculed by columnist Maureen Dowd in the New York Times on Sunday for previously portraying Clinton as a shill for big money interests while now vowing to jump into the ring to get Clinton elected to the highest office in the land. In a 2003 book, The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke, co-authored by Warren and her daughter, Amelia Warren Tyagi, the pair wrote that “Clinton had taken $140,000 in campaign contributions from the banking industry” and then sold out single mothers by voting in favor of a bankruptcy bill that Clinton had previously called “that awful bill.” Warren also addressed Clinton’s claim that she had worked to improve the bill by 2001 when she voted in favor of it. In a footnote in the book, Warren wrote: “…the bill would permit credit card companies to compete with women after bankruptcy for their ex-husbands’ limited income, and this provision remained unchanged in the 1998 and 2001 versions of the bill. Senator Clinton claimed that the bill improved circumstances for single mothers, but her view was not shared by any women’s groups or consumer groups.” Warren was also roundly thrashed by Seth Mandel in the New York Post. Mandel wrote:“What’s so ironic about this is that if Goldman Sachs, as an institution, were to somehow take human form and run for political office, it would be — hell, it is — Hillary Clinton…Warren can back whomever she pleases. But let’s not pretend Hillary Clinton is anything other than the manifestation of everything Warren claims to be fighting against.” Warren was also assailed across Facebook by Senator Bernie Sanders’ supporters. Warren had withheld her endorsement of Sanders during the primaries, when it could have made a pivotal difference. Sanders’  Warren was also greeted by protesters yesterday outside a World War II Veterans Club in Northampton, Massachusetts, where she was set to deliver a talk on income inequality. The protesters were dressed in all black to mourn what they saw as Warren selling out to establishment politics.

2004 Flashback: Elizabeth Warren Describes Hillary Clinton As A Puppet For Wall Street (video interview) Hillary Clinton doesn't want to release transcripts from speeches that she gave to firms on Wall Street because Clinton would be shown just as much in the hip pocket of banks as any other politician.  But don't take our word for it, take Elizabeth Warren's.   In an interview that is said to date back to 2004, Warren begins by explaining that she and then First Lady Hillary Clinton sat down and discussed the negative impacts a pending bankruptcy bill would have on women who were raising families. As a result of their meeting Warren said, Hillary went to work in the White House in order to stop the legislation, and ultimately influenced her husband to veto the bill when it came across his desk.  "She went back to Washington and I heard later from someone who was a White House staffer that there were skid marks in the hallways when Mrs. Clinton got back as people reversed direction on that bankruptcy bill.  And the proof is in the pudding. The last bill that came before President Clinton was that bankruptcy bill that was passed by the House and the Senate in 2000 and he vetoed it. In her autobiography Mrs. Clinton took credit for that veto and she rightly should." However, as Senator Clinton, now entirely beholden to banks after generous contributions made to finance her campaign, her vote was different. Funny how that all works isn't it? "One of the first bills that came up after she was 'Senator Clinton' was the bankruptcy bill - she voted in favor of it." When asked why, Warren points out that as Senator the stakes are different, and Clinton didn't want to bit the hand that fed her, rather, funded campaign coffers (and of course would later pay Clinton millions to give speeches - it's always important to have an eye toward the future). Warren concludes with some truthiness about just how cutthroat banks and other lobbyists will be in order to drain the middle class out of every penny they may have. "You know this is the scary part about Democracy today. We're talking again about the impact of money. The credit industry on this bankruptcy bill has spent tens of millions of dollars lobbying, and as their profits grow they just throw more into lobbying for how they can get laws that will make it easier and easier and easier to drain money out of the pockets of middle class families"

Wikileaks will publish ‘enough evidence’ to indict Hillary Clinton, warns Assange -- Wikileaks co-founder Julian Assange warns more information will be published about Hillary Clinton, enough to indict her if the US government is courageous enough to do so, in what he predicts will be “a very big year” for the whistleblowing website.  Expressing concerns in an ITV interview about the Democratic presidential candidate, who he claims is monitoring him, Assange described Republican presumptive nominee Donald Trump as an “unpredictable phenomenon”, but predictably, given their divergent political views, didn’t say if he preferred the billionaire to be president.He was not asked if he supported Green Party candidate Jill Stein, even though she said she would immediately pardon Wikileaks whistleblower Chelsea Manning if elected. “We have emails relating to Hillary Clinton which are pending publication,” Assange told Peston on Sunday when asked if more of her leaked electronic communications would be published. About 32,000 emails from her private server have been leaked by Wikileaks so far, but Assange would not confirm the number of emails or when they are expected to be published.

Russia Is Reportedly Set To Release Clinton's Intercepted Emails --Reliable intelligence sources in the West have indicated that warnings had been received that the Russian Government could in the near future release the text of email messages intercepted from U.S. Presidential candidate Hillary Clinton’s private e-mail server from the time she was U.S. Secretary of State. The release would, the messaging indicated, prove that Secretary Clinton had, in fact, laid open U.S. secrets to foreign interception by putting highly-classified Government reports onto a private server in violation of U.S. law, and that, as suspected, the server had been targeted and hacked by foreign intelligence service. The reports indicated that the decision as to whether to reveal the intercepts would be made by Russian Federation President Vladimir Putin, and it was possible that the release would, if made, be through a third party, such as Wikileaks. The apparent message from Moscow, through the intelligence community, seemed to indicate frustration with the pace of the official U.S. Department of Justice investigation into the so-called server scandal, which seemed to offer prima facie evidence that U.S. law had been violated by Mrs Clinton’s decision to use a private server through which to conduct official and often highly-secret communications during her time as Secretary of State. U.S. sources indicated that the extensive Deptartment of Justice probe was more focused on the possibility that the private server was used to protect messaging in which Secretary Clinton allegedly discussed quid pro quo transactions with private donors to the Clinton Foundation in exchange for influence on U.S. policy. The Russian possession of the intercepts, however, was designed also to show that, apart from violating U.S. law in the fundamental handling of classified documents (which Sec. Clinton had alleged was no worse than the mishandling of a few documents by CIA Director David Petraeus or Clinton’s National Security Advisor Sandy Berger), the traffic included highly-classified materials which had their classification headers stripped.

Russia Is Reportedly Set To Release Clinton’s Intercepted Emails  -- Yves here. The idea of Russia releasing Clinton e-mails obtained by hacking into her server, whether directly or through proxies, would be a very aggressive move if it could be attributed to them (as opposed to a non-state actor). It amounts to a foreign power interfering in US elections (not that we don’t do that, witness Obama telling British citizens why they should vote for Remain). The Wikipedia listing on the think tank that published this story is thin, but the organization does appear to have been around for a long time.  Russia would not have gone public with this threat (notice the article describes it as “messaging”) unless it preferred the US to handle l’affaire Clinton through conventional channels. But with Obama having endorsed Clinton, he has now committed himself to not indicting Clinton, and probably not indicting any of her aides (certainly not key ones like Abedin). So we will see in due course if Russia follows through on its saber-rattling.  Given its history, Wikileaks would seem to be the logical outlet, and Assange has recently said more Clinton e-mails are coming. If the leaks are made and are as damaging as you would expect, the Republicans would go nuts. If Clinton is somehow elected despite that, she would be an incredibly weak President. The Republicans almost certainly will retain control of the House and having the real dirt on what was on her server and what foreign governments almost certainly saw means they would be looking for any thin grounds for impeaching her.

Democratic National Committee Breached by Russian Hackers - NBC News: The Democratic National Committee's computer network was breached by Russian government cyber operations that have had access to the group's communications and databases since at least last summer, NBC News confirms. The sophisticated Russian groups, which have previously targeted the White House, the State Department and the Joint Chiefs of Staff, specifically concentrated on the DNC's research units and had access to all of the committee's internal communications, including chat and email applications. The DNC's opposition research unit, which sources indicate was specifically targeted by the hackers, is tasked with compiling unflattering information on Republican opponents -- particularly presumptive Republican nominee Donald Trump -- to potentially use against them in the course of a political campaign. advertisement DNC chairwoman Debbie Wasserman Schultz said on MSNBC's MTP Daily that the problem was addressed "aggressively and swiftly." "Now our network is clean and we've migrated everything to a new network," she said. "And we have very sophisticated monitoring technology that is attached to our network now so we will be able to make sure that this doesn't happen - and detect it - if there's any effort again."

'Lone hacker' claims responsibility for cyber attack on Democrats | Reuters: A "lone hacker" has taken responsibility for a cyber attack on the U.S. Democratic National Committee, which the DNC and a cyber-security firm have blamed on the Russian government. The DNC and cyber firm CrowdStrike disclosed the attack on Tuesday, saying that hackers working for Russia broke into the DNC's computer network, spied on internal communications and stole research on presumptive Republican presidential nominee Donald Trump. A Russian government spokesman responded by saying that Moscow had not been involved. On Wednesday, an individual using the moniker Guccifer 2.0 took responsibility for the attack in a post on the blogging site, saying the DNC was "hacked by a lone hacker." The DNC did not respond to a request for comment late on Wednesday evening on Guccifer 2.0's claim. CrowdStrike said it stands by findings that the Russian government was behind the attacks. Guccifer 2.0's blog includes images of documents it claims were stolen from DNC servers, including one titled "Donald Trump Report," which was dated Dec. 19, and spreadsheets purportedly containing information about party donors. Reuters was unable to verify the authenticity of the documents, which the blog said were among "thousands of files and mails" removed from DNC servers that would soon be published on WikiLeaks.

Hacker Who Breached Democratic National Committee Server Posts Confidential Trump, Hillary Files --One of the bigger news items to hit yesterday was that the Democratic National Committee accused Russian government hackers of penetrating the DNC's computer network and gaining access to the entire database of opposition research on GOP presidential candidate Donald Trump. The DNC further said that no financial, donor or personal information appears to have been accessed or taken, suggesting that the breach was traditional espionage, not the work of criminal hackers.It appears that was not entirely true, because barely 24 hours later, the alleged "Russian" hackers has emerged under the Guccifer2 handle, and instead of a group of government operatives and/or spies appears to be a "lone" hacker who incidentally a dds, "DNC chairwoman Debbie Wasserman Schultz said no financial documents were compromised. Nonsense! Just look through the Democratic Party lists of donors!" He also denounces the claim that no secret docs were stolen: "They say there were no secret docs! Lies again! Here is a secret document from Hillary’s PC she worked with as the Secretary of State." He concludes by saying that "the main part of the papers, thousands of files and mails, I gave to Wikileaks. They will publish them soon." Which in turn may explain why on Monday "Julian Assange Warns WikiLeaks Will Publish "Enough Evidence" To Indict Hillary Clinton" Curiously, "Guccifer2" he has chosen wordpress as the website where to post his initial disclosure. As such we urge readers to save and download as much as they can before this server is taken down in a matter of moment.

NATO Says It Might Now Have Grounds To Attack Russia -- On Tuesday, June 14th, NATO announced that if a NATO member country becomes the victim of a cyber attack by persons in a non-NATO country such as Russia or China, then NATO’s Article V “collective defense” provision requires each NATO member country to join that NATO member country if it decides to strike back against the attacking country. The preliminary decision for this was made two years ago after Crimea abandoned Ukraine and rejoined Russia, of which it had been a part until involuntarily transferred to Ukraine by the Soviet dictator Nikita Khrushchev in 1954. That NATO decision was made in anticipation of Ukraine’s ultimately becoming a NATO member country, which still hasn’t happened. However, only now is NATO declaring cyber war itself to be included as real “war” under the NATO Treaty’s “collective defense” provision. NATO is now alleging that because Russian hackers had copied the emails on Hillary Clinton’s home computer, this action of someone in Russia taking advantage of her having privatized her U.S. State Department communications to her unsecured home computer and of such a Russian’s then snooping into the U.S. State Department business that was stored on it, might constitute a Russian attack against the United States of America, and would, if the U.S. President declares it to be a Russian invasion of the U.S., trigger NATO’s mutual-defense clause and so require all NATO nations to join with the U.S. government in going to war against Russia, if the U.S. government so decides. NATO had produced in 2013 (prior to the take-over of Ukraine) an informational propaganda video alleging that “cyberattacks” by people in Russia or in China that can compromise U.S. national security, could spark an invasion by NATO, if the U.S. President decides that the cyberattack was a hostile act by the Russian or Chinese government. In the video, a British national-security expert notes that this would be an “eminently political decison” for the U.S. President to make, which can be made only by the U.S. President, and which only that person possesses the legal authority to make. NATO, by producing this video, made clear that any NATO-member nation’s leader who can claim that his or her nation has been ‘attacked’ by Russia, possesses the power to initiate a NATO war against Russia. In the current instance, it would be U.S. President Barack Obama.

New Book: “The Business of America Isn’t Business Anymore.” It’s Tricked Up Financial Engineering. – Pam Martens - Rana Foroohar has written the equivalent of a public guide to why Americans remain mad as hell at Wall Street and Washington and why a lot worse than a political revolution may ensue if the plutocrats don’t wake up soon. Foroohar is an assistant managing editor at Time magazine and its economics columnist. In “Makers and Takers: The Rise of Finance and the Fall of American Business,” the author lays out a number of undeniable truths, which she backs up with footnotes and facts, such as: “the business of America isn’t business anymore.” That’s given way to financial engineering tricks like loading up a company’s balance sheet with billions of dollars of debt in order to prop up the share price with buybacks of the company’s own stock. Foroohar, who has been a financial journalist for 23 years, correctly concludes that Wall Street has come to “rule” rather than to “fuel” the real economy. This has created a “dysfunctional financial system” that is doomed to another collapse, “taking us all down with it,” unless critical repairs are made soon. Foroohar maps out exactly what those repairs must be in her last chapter. The author gives a litany of examples to show how “finance has transitioned from an industry that encourages healthy risk-taking, to one that simply creates debt and spreads unproductive risk in the market system as a whole.”

Rana Foroohar: How Wall Street Is Strangling The Economy - (podcast and transcript) This week, Chris interviews Time Magazine assistant managing editor and economic columnist Rana Foroohar about the findings within her new book Makers and Takers: The Rise of Finance and the Fall of American Business. Eight years on from the biggest market meltdown since the Great Depression, the key lessons of the crisis of 2008 still remain unlearned — and our financial system is just as vulnerable as ever. Many of us know that our government failed to fix the banking system after the subprime mortgage crisis. But what few of us realize is how the misguided financial practices and philosophies that nearly toppled the global financial system have come to infiltrate all American businesses, putting us on a collision course for another cataclysmic meltdown. Drawing on in-depth reporting and exclusive interviews at the highest rungs of Wall Street and Washington, Foroohar shows how the “financialization of America” — the trend by which finance and its way of thinking have come to reign supreme — is perpetuating Wall Street’s reign over Main Street, widening the gap between rich and poor, and threatening the future of the American Dream: "There is this fundamental dichotomy in the economy now where, if you are well off, you're doing better than you ever have before in history. But the majority of Americans, the majority of workers in this country, haven’t gotten a raise in real terms since the early 1990’s. Many people in the working class, the minorities haven’t gotten one since the late 1960’s. That's a real problem in an economy that is 70% consumer spending, because at some point the math starts to not work. If people don’t have more money they can’t spend. So we get these underlying growth problems. My book is trying to look at one the reasons behind that. And I’m arguing that it is that the financial markets themselves are no longer supporting business growth."

HR 5424, “Investment Advisers Modernization Act,” a “Get Out of Madoff and Other Frauds for Free” Bill, Passes Financial Services Committee -- Yves Smith - One of the big downsides of this hotly contested Presidential race is that it’s diverted attention from legislation, allowing noxious bills to move forward. One is HR 5424, which would allow the hedge fund and private equity industry, which are rich enough to pay for the few parking-ticket-level fines the SEC hands out, to escape from virtually all enforcement efforts. Worse, it would considerably weaken protections meant to stop Madoff-type frauds, and leave retail investors exposed.  This bill was nevertheless approved by the House Financial Services Committee last week, with 12 Democrats voting in favor. As readers know, Dodd Frank stipulated that private equity and hedge funds beyond a modest size be regulated as investment advisers. That subjected them to SEC examinations. The initial round exposed widespread misconduct in private equity, including what would normally be called embezzlement. Yet the agency has fined remarkably few sanctions, and the fines have been light relative to the extent of the misconduct alleged by the SEC and unearthed by the press. To make a bad situation worse, the SEC retreated from its tough enforcement talk within months, and more recently, has been trying to fool the chump public into believing that its weak enforcement actions are having an impact when private equity form ADV filings with the SEC reveal the reverse, that many firms are continuing to engage in precisely the same conduct that the SEC has deemed to be a securities law violation. But even this cronyistic enforcement charade is an offense to these Masters of the Universe. HR 5424 would gut Dodd Frank oversight. I’ve attached a letter from Americans for Financial Reform at the end of the post, which sets forth how this bill makes a mockery of the idea of investor protection. Let me highlight some of the elements of the bill that I found particularly troubling. From its text: (unlinked picture) (AFR embed)  AFR-Investment-Advisors-Letter-5.17.16

Elizabeth Warren Slams SEC’s Mary Jo White for Putting “Information Overload” Project Ahead of Dodd Frank Rulemaking -- Yves Smith -  As reader Adrien put it, “Just in case people thought that running for VP would distract Warren from keeping tab on Mary Jo White,” Elizabeth Warren took on the SEC chairman for diverting scarce agency resources to an “information overload” project, an issue only in the minds of interests like the Chamber of Commerce, not investors themselves. Warren depicted White as performing even worse than she has prior to this date, of going in “the opposite direction” of the SEC’s mission of investor protection.  The two clips below show the tension between them. Even with the less than stellar video quality, White looks to be quietly annoyed while Warren is setting up her charge, that the White created a project that advances a pro-corporate agenda, and also takes agency resources away from long-over Dodd Frank rulemaking.   You’ll notice Warren and White disagreeing over the substance of the initiative. White first attempts a misleading feint, by trying to depict the project as part of the JOBS Act. Warren responds by saying that the JOBS Act requirements to simply disclosure apply only to a “subset” of companies and even then on a “subset” of information items. Warren keeps pressing White for evidence that investors were saying they were getting too much information  White then shifts ground and depicts her project as part of an ongoing SEC mission and does manage to cite a Thurgood Marshall decision as supporting her effort. White also describes her initiative as part of a long-standing SEC effort and contends it will increase disclosure in some areas. The Wall Street Journal takes up that theme in its coverage of the hearingThe disclosure project culminated with an April “concept release” that sought public comment on a range of disclosure topics. Far from simplifying or scaling back disclosures, the release sets the foundation for the SEC to eventually require companies to disclose more about how much in profits they park abroad and even how global warming could affect their businesses.

Corporate Capture of the Rulemaking Process, Elizabeth Warren, RegBlog: Regulatory capture is a big deal. It is one way in which powerful corporations rig the system to work for themselves—and the rest of America pays the price. The tilt in Congress is pretty much out there for everyone to see, but corporate influence works its magic even better in the shadows—and that’s where rulemaking occurs. This essay focuses on one aspect of this pervasive phenomenon: the capture of agencies as they write the rules. When it comes to undue industry influence, our rule-making process is broken from start to finish. At every stage, the process is loaded with opportunities for powerful industry groups to tilt the scales in their favor. The tilt starts early. For example, a 2011 study of U.S. Environmental Protection Agency (EPA) records from 1994 to 2009 found that industry groups held a virtual monopoly over informal communications with EPA that occurred before proposed rules on hazardous air pollutants were publicly available. On average, industry groups engaged in 170 times more informal communications with EPA than public interest players—communications that occurred before any proposed rules were even written.  Similarly, with financial regulation, the big banks and their friends have been lobbying the agencies aggressively. Following the worst financial crisis in three generations—one that resulted in taxpayers spending hundreds of billions to bail out the big banks—Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act to ensure that a crisis of that sort never happened again. This law included a provision called the Volcker Rule to stop banks from engaging in certain kinds of risky behavior. But before that rule was even written, groups representing Wall Street interests met with federal regulators 419 times, accounting for over 93 percent of meetings between federal regulators and external parties about the Rule.

Microsoft’s Massive LinkedIn Deal Is a Sign of Something Dangerous - Rana Foroohar - You know something is deeply wrong in our market system when a company like Microsoft, which has $100 billion in cash sitting in bank accounts (much of it offshore), decides it needs to borrow billions to fund its acquisition of the social networking platform LinkedIn. The deal highlights one crucial way in which our market system is no longer serving the real economy. Why would a cash-rich firm like Microsoft go into debt and cause ratings agency Moody’s to put it on a possible downgrade list? Because it will save around $9 billion in U.S. taxes by doing so. Debt is tax deductible, and borrowing will save Microsoft money relative to bringing overseas cash back home and paying the U.S. corporate tax rate on it. There are so many dysfunctional things here, it’s hard to know where to begin. As I’ve often written, I find it rich that tech companies in particular try to avoid paying their fare share of U.S. taxes, given that the federal government funded so many of the things that make them wealthy. But an even bigger issue is the way in which our tax system rewards debt over equity. Super-low interest rates make it cheap for companies to borrow. (Low rates are themselves a reaction to the financial crisis, and unlikely to rise much very soon given that the economy is still so weak. Watch this week’s Fed meeting for more.) Then, our tax code makes it easy for firms to write that debt off their tax burden. Jason Furman, the head of the National Economic Council, has estimated that the many ways in which companies can tax advantage of tax-subsidized debt loopholes make corporate debt about 42% cheaper than corporate equity.

The Building Blocks of the Banking System Are in Short Supply - One consequence of the financial crisis is that economists have stopped talking about cash and money in the bank and begun talking about “safe assets” instead. Everybody understands the usefulness of cash. Most know about the convenience and relatively few limitations of money in the bank. But safe assets require some explanation.  The term has come into use only in the decade since the crisis.  With a view to explaining the logic behind the phrase, Gary Gorton, of Yale University’s School of Management, has written a primer, The History and Economics of Safe Assets., available as a working paper on its way to its home in a journal. Gorton is a leader of the informal little college of economists that introduced the term. A “safe asset,” says Gorton, is an asset that is valued (almost always) at face value, without expensive and prolonged analysis.  It is expected to change hands among transactors, in the telling phrase of Massachusetts Institute of Technology economist Bengt Holmström, with “no questions asked,” Safe assets are designed in such a way there should no benefit to producing (private) information about a safe asset’s value, Gorton explains – at least for long periods of time.  They are the basis of the saving and transactions machinery of society – platelets in the “life’s blood” of money and credit. But human nature inevitably takes over. Once it begins to pay to distinguish between genuinely safe assets and potentially less valuable ones, the machinery breaks down: it’s time for a financial crisis. The rate and quality of the production of safe assets therefore has implications for both growth and economic stability.

Financial Scarcity Amid Plenty - Barry Eichengreen  – With interest rates at all-time lows and central banks buying everything that moves, the world is awash with credit. Yet, paradoxically, a dangerous shortage of international liquidity is putting the global economy at risk. “International liquidity” refers to high-quality assets accepted around the world for paying import bills and servicing foreign debts. These are the same assets that central banks use when intervening in foreign-exchange markets. They serve as reliable stores of value for international investors. They provide pricing benchmarks in financial markets. And they are widely accepted as collateral for cross-border loans. The key difference between these international assets and liquid assets in general, then, is that only the former are accepted in a large number of different countries and regularly used in transactions between them. The single most important form of international liquidity is, of course, US government bonds, which are held by banks, firms, and other countries’ governments. More generally, international liquidity comprises the liabilities of OECD countries’ central banks (their “high-powered money”), those countries’ AAA-rated and AA-rated central-government bonds, the debt securities of supranational organizations like the World Bank and regional development banks, and gold in official and private hands. But add them up and you immediately come to a startling conclusion. International liquidity has plummeted from nearly 60% of global GDP in 2009 to barely 30% today. This change is due, equally, to downgrades in the ratings of heavily indebted crisis countries’ government bonds, which make them unattractive for use in international transactions, and the inelasticity of other sources of supply.

Most Expensive Bond Market in History Has Come Unhinged. Or Not. - Today’s bond market is defying just about every comparison known to man. Never before have traders paid so much to own trillions of dollars in debt and gotten so little in return. Jack Malvey, one of the most-respected figures in the bond market, went back as far as 1871 and couldn’t find a time when global yields were even close to today’s lows. Bill Gross went even further, tweeting that they’re now the lowest in “500 years of recorded history.”  Lackluster global growth, negative interest rates and extraordinary buying from central banks have all kept government debt in demand, even as yields on more than $8 trillion of the bonds dip below zero. But as investors forgo any margin of safety to bid up prices higher and higher, the big worry is that the insatiable demand has blinded them to potential dangers that may result in painful losses -- especially as the Federal Reserve considers raising rates. “This absolutely leaves the markets a lot more vulnerable,” said Torsten Slok, the chief international economist at Deutsche Bank AG. Beyond the bubble of the bond market, history offers some clues. Ten-year U.S. government notes now yield less than stocks pay in dividends -- just the third time that’s happened in the past half-century. The last two times, Treasuries suffered their biggest annual losses on record. The stakes couldn’t be higher. Average yields for 10-year notes in the U.S., Japan, Germany and the U.K., which have issued more than $25 trillion in government debt, fell to 0.69 percent last week, data compiled by Bank of New York Mellon Corp. showed. That’s the lowest on record and well below the 5 percent average over the course of 145 years.

Investors hold biggest cash pile since 2001 as world gloom deepens - BAML - (Reuters) - Investors have amassed their largest cash pile since 2001 and cut equity holdings to a four-year low, rattled by worries over Brexit and policymakers' ability to bolster a fragile global economy, a Bank of America Merrill Lynch survey said on Tuesday. Even though world bond yields have never been lower and an increasing array of bank deposit rates around the world are now negative, investors are willing to hold more cash in their portfolios than at any time since November 2001. Risk appetite fell to its lowest level in four years, consistent with recession, although growth and profit expectations hit a six-month high and inflation expectations a one-year high, BAML's global fund manager survey showed. "Globally, sentiment remains weak. Global asset allocators are holding the highest average cash balance since November 2001, while equity allocations have dropped to four-year lows," BAML said on Tuesday. In a note titled "No Bulls on Bear Mountain", BAML said fund managers held an average 5.7 percent of their portfolio in cash, up from 5.5 percent in May. This could quickly present buying opportunities, however, because cash balances above 4.5 percent generate a contrarian 'buy' signal for equities, BAML said. Balances below 3.5 percent trigger a contrarian 'sell' signal. The survey of 213 fund managers with $654 billion of assets under management showed that Britain leaving the European Union was the by far biggest 'tail risk' for world markets (according to 30 percent of respondents) followed by central banks' "quantitative failure" super-loose monetary policy (18 percent).

Hedge Fund Shakeout Continues -- Yves Smith - Some readers were skeptical when we warned that the withdrawal of investor cash from hedge funds was a harginger of a sea change. In fact, the hedge fund conference, SALT, had top hedge fund managers like Dan Loeb warn of a “killing field” as more and more investors were questioning not just the lofty fees of hedge funds, but also their entire rationale, as they’ve both failed to outperform to a meaningful degree and correlate more and more with stock market performance.  The Financial Times provided an update tonight. The shrinkage of the hedge fund industry continues. However, incumbents are taking a bit of cheer from the fact that the pace of closures has slowed and volatility has returned to the markets. However, they might be careful for what they wish for, since there have been recent periods of upheaval that they’ve handled badly (famously, quant funds in the crisis, and as the article points out, the market swoon early this year).  From the Financial TimesWhile 291 hedge funds shut their doors in the first three months of 2016, just 206 new funds started up, according to data from Hedge Fund Research. Europe was the busiest region for both new funds and closures. The figures represent a slowdown in closures from the fourth quarter, when 305 funds closed, but an acceleration from the 217 seen in the first quarter of 2015. Last year saw the most closures since 2009….Market volatility in the first quarter caught many wrongfooted, with the HFRI Fund Weighted Composite Index declining by -0.6 per cent. Funds have since clawed back ground, and were up 0.8 per cent for the year through May. Improving performance, combined with the expectation for more volatility from market threats including Brexit and interest rate increases by the US Federal Reserve, have helped keep clients invested. However, the shrinkage in the industry, from $3 trillion under management to $2.8 trillion, has not yet affected fees. And that isn’t surprising. I’d expect it to take a longer period of investor skepticism to shift pricing power more decisively to them:

A Rare Loss For The HFT Lobby? SEC Staff Recommends Approval Of IEX Exchange Application - In what may be a long overdue victory for the "good guys", the WSJ reports that the SECs staff has recommended that the agency approve IEX Group Inc.’s "controversial" bid to launch a new stock exchange, signaling likely approval when the agency’s commissioners vote on the order Friday. This decision takes place despite vocal objections of not only Nasdaq, by not only the entire HFT lobby, as IEX's technology would provide an HFT-free exchange as a result of its 350-microsecond speed bump which would force all traders to be on an equal footing, but most notably despite the repeated complaints by NY Fed darling, HFT powerhouse Citadel (and employer of one Ben Bernanke), which has argued in the past that granting IEX an exchange status would corrupt US equity markets.  That would end months of debate and lobbying over the startup’s proposal to launch the first platform that slows down trading, countering the decadelong trend toward ever-greater speed. There is still a chance IEX may be rejected in the last moment: according to the WSJ, "the SEC’s three sitting commissioners aren’t required to support the staff’s views, and one may vote no. But the full commission rarely rejects a formal staff recommendation. If the SEC’s commissioners give the green light to IEX, which stands for Investors’ Exchange, it would be the first major new stock exchange in the U.S. since the SEC approved several venues in 2010 that are now owned by BATS Global Markets Inc."

Why Soros’ Bearish Bet Is Hardly Far-Fetched - Barron’s - There’s nothing like a bearish bet by a legendary macro investor to ratchet up investor fears.  In what was arguably the biggest investment story of last week, The Wall Street Journal reported that hedge-fund billionaire George Soros was betting against western markets.  The scoop, written by Greg Zuckerman, the Journal’s long-time hedge-fund beat writer, reported that Soros Fund Management LLC, which manages $30 billion for Mr. Soros and his family, sold stocks and bought gold and shares of gold miners, anticipating weakness in various markets. Zuckerman reported that Soros, who had retreated from active investing in recent years, was now more engaged in money management and quite concerned about where equity markets are heading.  In an email interview with Zuckerman, Soros wrote that his bearish concerns are being fueled by his belief that the Chinese economy will grow weaker and that the European Union could fall apart in the coming years, with Great Britain possibly being the first major country to voluntarily exit from the economic pact. But Soros is not the only respected big-picture investor who is concerned about what lies ahead for markets. In a piece Monday for Bloomberg View, Mohamed El-Erian, the ex head of the Harvard University endowment fund and the chief economic advisor for German financial-services giant Allianz, discussed six events that could weigh on markets in the weeks ahead. Among other concerns, El-Erian mentions the June 23 “Brexit” vote in the United Kingdom, a major slip by China as it tries to implement financial policies aimed at balancing liquidity support for the economy with the orderly management of a credit boom, and a “ renewed scare about the European banks that have lagged in raising capital and strengthening internal operating approaches.”

US Negative Interest Rate Bets Surge To Record Highs --As the "deflationary supernova" sweeps across the world, dragging bond yields to zero-and-beyond, even the almighty omniscent Federal Reserve has been forced to capitulate as the 'cheapness' of Treasury bonds lures the world's yield-hunters dragging it ever closer to the negative rate realities of Switzerland, Japan, and Germany. As rate-hike odds collapse, along with The Fed's credibility, so investors are increasingly betting on the chance that the inevitable negative interest rate washes ashore in a US money-market-crushing manner. While bets on 'NIRP' in 2016 have faded modestly, expectations for a 'below-zero' rate in 2017 (and implictly a stock market crash) have never been higher... We suspect the words "it could never happen here" were uttered numerous times in Switzerland, Japanese, and German halls of officialdom over the past few years...It appears not only are Treasury yields attractively 'cheap' (and "safe") to the rest of the world's bonds... But their relative moves to stocks also suggest something is amiss in equity land around the world... And so, traders are increasingly positioning for negative rates in 2017... or, as we explain below, positioning cheaply for a stock market crash... [the chart shows the cumulative open interest in par calls on eurodollar futures contracts that expire in 2016 and 2017 - basically options on short-term interest rates with a strike price of zero, such that they pay out if the Fed takes rates negative] As we explained previously, when queried whether this is indeed a trade to bet on a market drop, Michael Green responded as follows: [A reader] thought this might be an attempt by hedge funds to hedge out their exposure to rising interest rates very cheaply. My initial idea was that it actually could be a bet on negative rates (if for some reason the Fed had to come back into the picture with QE4). The bottom line: "Deep OTM puts on the S&P are very expensive while par ED calls are relatively cheap.

Theft Of Opportunity - The Impact Of Reg NMS On The Retail Investor -- There has been a certain buzz on the street revolving around possible new regulation shortly coming into effect, regarding the need for improved transparency within the capital markets.  Unfortunately, I fear the perception as to there is such a need for change has missed the mark once again. Transparency has been the keyword and focus within the scope of recent efforts, and as I aim to reveal, not the true root of the problem. The call for greater Transparency has been the safe and preferred battle cry within the capital market regulatory ranks for years. Unfortunately, greater transparency is completely meaningless to the plight of the equity market’s retail customers, without the proper infrastructure and policy to compliment. What use would a largely windowed store front and wonderful product display on main street be, if that window is not accompanied by a door for would be shoppers to enter and execute their wishes of buying those goods?  Whenever the pendulum of change makes it way into an industry, it often begins with a Robin Hood-esque cry for reform, attempted honorable cries for an effort to defend those with neither the voice, nor the power, to stand up for themselves and their rights. Usually the ground swell of reform centers itself around the ways with which to quell unjust practices, designing policy and governance to mitigate additional harm from occurring in the future. Unfortunately, in the case of the U.S. secondary Capital Markets, and specifically the policies of Regulation NMS, the root of current unjust practices lie in what seems to be unknowingly within the policies themselves. This is the first in a series of articles I am authoring to help illustrate the dire need for policy reform concerning the current capital market structure under the rules of Regulation NMS. The explanations will be overly simplified as not to lose the exact audience in need of being informed, as is the case with so many inequities in business, the power to deceive lies within the jargon.

Stock Market Rallies on Murder of Jo Cox; Wall Street Journal Defends It - The U.S. stock market was mired in red ink yesterday morning with every major Wall Street bank trading down on news that multiple polls in Britain were showing that a majority of citizens were in favor of the United Kingdom withdrawing from the European Union (EU). A referendum vote on the issue is to be held next Thursday.Then, at 12:17 p.m. New York time yesterday, Bloomberg News printed the following headline: “U.K. Lawmaker Jo Cox Is Murdered, Silencing Brexit Debate.” Cox was a Member of Parliament from the Labour Party who was an advocate for the U.K. remaining in the EU. Cox, a mother of two children, was shot and stabbed by a man said to be in favor of Brexit, the term for a British exit from the EU. On the news of her death, which fueled the market perception that it would dampen the zeal to leave the EU, the pound and euro rallied along with the Dow Jones Industrial Average and Wall Street bank stocks. After the U.S. market closed, with the Dow up 92 points on the day, an abrupt turnaround from morning trading, James Mackintosh penned an article at the Wall Street Journal taking note that markets can appear “callous,” but justifying the market reaction to the death of Cox with this line of reasoning:“But one of the points of markets is that they are amoral. Not immoral — although much of the wrongdoing uncovered after the financial crisis certainly was — but unconcerned with morality at all. They are deliberately unfeeling, heartless and unsympathetic, because they exist to balance out millions of individual views in order to allocate capital and assess risk.” This is simplistic and naively wrong on so many levels. Let’s start with the U.S. market’s ability to “allocate capital and assess risk.”

Committee Investigates FDIC's Improper Access of Inspector General's Records - Science, Space, and Technology Committee Chairman Lamar Smith (R-Texas) and Oversight Subcommittee Chairman Barry Loudermilk today sent a letter to Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg as part of the Committee’s continued oversight of cybersecurity events at the FDIC. The Committee has sent several letters to the FDIC requesting documents and communications on recent cybersecurity breaches, as well as the FDIC’s attempts to circumvent providing full and complete responses to the Committee’s requests. Today’s letter addresses concerns that the FDIC’s search for responsive materials yielded a substantial amount of internal Office of Inspector General (OIG) communications. FDIC’s gathering and review of internal OIG communications is deeply troublesome as the independence of OIGs is not only mandated by the Inspector General Act of 1978, but it is imperative to facilitating the OIG’s work. The letter also raises concerns about the FDIC failing to inform Congress of the improper access and review of internal OIG materials. “Although the Committee was led to believe that the agency would comply with the Committee’s requests after enjoying an extra two months to identify and produce all responsive materials, the Committee learned from the OIG that during the agency’s search for materials, it gathered a substantial set of internal OIG communications. This information raises serious concerns about the FDIC OIG’s ability to conduct its work in an independent manner, as mandated by the Inspector General Act of 1978 (IG Act),” the letter states. “Also troublesome is the fact that your staff has not been forthcoming with informing the Committee that the agency’s search for documents yielded a substantial number of internal OIG documents. The agency’s continued lack of transparency and responsiveness to the Committee raises serious concerns about whether the agency is attempting to skirt congressional oversight and avoid answering questions not only about its cybersecurity posture, but about its willingness to ensure that internal OIG communications, as well as communications by those within the agency that may communicate with the OIG are kept confidential,” the letter continues.

U.S. representatives question bank regulator on whistleblowers | Reuters: Leaders of the congressional committee that investigates data breaches and computer hacking blasted the main U.S. banking regulator on Thursday for possibly jeopardizing the work of its inspector general, an internal watchdog, and hunting out potential whistleblowers. Part of the House Science Committee for months has been looking into the theft of thousands of records from the Federal Deposit Insurance Corp, including two breaches in which workers downloaded more than 10,000 sensitive and private records onto portable storage devices before leaving the agency's employ. In a letter to FDIC Chairman Martin Gruenberg, Lamar Smith, the committee's chairman, and Barry Loudermilk, chairman of the subcommittee on oversight, described an agency slow to cooperate with lawmakers that fails to conduct "good faith" searches for requested information. Moreover, the two, both Republicans, said the FDIC had gathered and reviewed internal communications of its inspector general's office while collecting documents that the committee had requested.

House Panel Says FDIC Not Cooperating With Data Breach Probe - The House GOP lawmakers leading a congressional probe of a data breach at the Federal Deposit Insurance Corp. said they’re concerned that the agency may be hiding information and reviewing internal FDIC Office of the Inspector General documents. “Although the Committee was led to believe that the agency would comply with the Committee’s requests after enjoying an extra two months to identify and produce all responsive materials, the Committee learned from the OIG that during the agency’s search for materials, it gathered a substantial set of internal OIG communications,” House Science, Space and Technology Committee Chairman Lamar Smith (R-Texas) and Oversight Subcommittee Chairman Barry Loudermilk (R-Ga.) wrote in a Thursday letter to FDIC Chairman Martin Gruenberg. Smith and Loudermilk said the panel is “deeply troubled that the FDIC continues to withhold pertinent and responsive information to its cybersecurity posture from production to the Committee,” but that it’s “even more concerned by the FDIC’s gathering and review of internal OIG communications.” The committee is investigating a data breach that involved a now former employee who obtained the personal information of 44,000 people before leaving the agency. The lawmakers requested documents pertaining to the incident in an April 8 letter to Gruenberg. “The agency’s continued lack of transparency and responsiveness to the Committee raises serious concerns about whether the agency is attempting to skirt congressional oversight and avoid answering questions not only about its cybersecurity posture, but about its willingness to ensure that internal OIG communications, as well as communications by those within the agency that may communicate with the OIG are kept confidential,” Smith and Loudermilk wrote in today’s letter.

A MetLife Victory Won't Solve FSOC's Biggest Problems | Bank Think: --On June 16, the Financial Stability Oversight Council is due to file arguments on why the federal courts should uphold the council's designation of MetLife as a "systemically important financial institution." The FSOC is appealing a lower court's decision that overturned the MetLife designation, in a severe rebuke to the council of regulators created under the Dodd-Frank Act. While that battle rages in the courts, it's vital that we do not lose sight of the need to reform FSOC. Even if the initial decision against FSOC is upheld, there remains a compelling case to pursue legislation like the bipartisan Financial Stability Oversight Council Improvement Act, sponsored by Reps. Dennis A. Ross, R-Fla., John Delaney, D-Md., and 58 other Republicans and Democrats. The ruling by Judge Rosemary M. Collyer of the U.S. District Court for the District of Columbia is welcome. But it does not guarantee any procedural protections for the next company that the council targets for SIFI designation. That is because FSOC could still move a financial institution toward SIFI designation without first having to spell out for the company what the risks are, or giving the company any chance to restructure or address those risks itself. Nor would the council be required to give the company's primary regulator a chance to address those risks before FSOC designates the company as a SIFI and turns it over to the Federal Reserve for extra regulation. Instead, the next designee would have to retrace MetLife's steps to the courthouse to get due process.The FSOC Improvement Act would provide the missing safeguards. But its impact would go beyond mere process: The bill's reforms would actually make FSOC more effective in reducing systemic risk. Under the bill, the oversight council would be required to spell out clearly the risks that a prospective SIFI poses. That common-sense step is missing now, but isn't understanding a risk the first step toward mitigating it?

Texas banks face increasing risks from low oil prices: Dallas Fed | Reuters: Banks in Texas and parts of Louisiana and New Mexico are setting aside more money to guard against loan losses as the energy companies they serve struggle amid still-low oil prices, the Dallas Federal Reserve Bank said in a report Thursday. Banks in the district supervised by the Dallas Fed are also getting additional scrutiny for their commercial real estate loans, the regional Fed bank's president, Robert Kaplan, said in the report, which characterized commercial real estate as an "emerging area of concern." "Loan growth slowed markedly in 2015 and, while the region’s banks remain profitable, bankers are setting aside more in provision expense to cover possible loan losses," Kaplan wrote in an introduction to the bank's quarterly Southwest Economy report. Kaplan, who participated in this week's Fed policy-setting meeting in Washington, did not touch on the outlook for the national economy or monetary policy in his comments

Why Billions in Proven Shale Oil Reserves Suddenly Became Unproven -- Proven reserves -- gas and oil resources that are among the best measures of a company’s ability to reward its shareholders and repay its debts -- are disappearing across the shale patch. This year, 59 U.S. oil and gas companies deleted the equivalent of 9.2 billion barrels, more than 20 percent of their inventories, according to data compiled by Bloomberg. It’s by far the largest amount since 2009, when the Securities and Exchange Commission tweaked a rule to make it easier for producers to claim wells that wouldn’t be drilled for years. The SEC routinely questions companies about their reserves. Now, agency investigators are also on the hunt for inflated reserves estimates, according to a person familiar with the matter. “Reserves make up a large share of the value of these companies, so it really matters,”  “They’re looking even more closely at how companies are booking reserves, how they’re evaluating the quality of those reserves and what their intentions really are. They’re not accepting pat answers.” Drillers face pressure to keep reserves growing. For many, the size of their credit line is tied to the measure. Investors want to see that a company can replace the oil and gas that’s been pumped from the ground and sold. There are two ways to increase reserves: buy more or find more. Fracking made it easier to do the latter, and the industry lobbied the SEC to count more undeveloped acreage as proved reserves, arguing that shale prospects are predictable across wide expanses. The SEC agreed, with two key limits. First, the wells must be profitable to drill at a price set by an SEC formula. The companies got a temporary reprieve for 2014 because the SEC number was about $95 a barrel even though crude had plummeted to less than $50 by the time results were reported in early 2015. That advantage has disappeared. When companies reported their 2015 reserves this year, the SEC price was about $50.  The SEC also requires that undeveloped wells be drilled within five years of being added to a company’s books. The five-year plan can’t just be wishful thinking. “The mere intent to develop, without more, does not constitute ‘adoption’ of a development plan,” the SEC explained in 2009. Despite those limitations, reserves surged 67 percent in the five years after the 2009 rule change, according to 53 companies that have records going back that far. Almost half the gains came from wells that existed only on paper.

Regulators to Banks: We’ll Size Up Your Risks - WSJ: International regulators want to limit banks’ leeway in assessing the riskiness of their assets, a step that critics say could crimp lending, dent profits and worsen risk rather than reduce it. A committee of overseers in Basel, Switzerland, since the end of last year has proposed five different rules that would require banks to use standardized calculations instead of their own when measuring possible losses on everything from loans to interest rates to fraud. The Basel Committee on Banking Supervision is considering a series of rule revisions as part of their effort to finalize postcrisis capital rules. Regulators agreed to spend this year addressing weaknesses spotlighted by the financial crisis, including minimizing the variance in how banks weigh their own risk in three key areas: credit risk, market risk, and operational risk. One proposal would stop banks from calculating their own exposure to other banks, large corporations and stockholdings. Another imposes tougher capital requirements on swaps, bonds and other securities that banks plan to trade. Capital requirements often depend on lenders’ exposure to risk. The moves reflect regulators’ frustration with varying loss estimates across banks. Some bankers also have questioned whether peers are playing down risks in the hope of boosting profit.The 29-member Basel Committee includes representatives from the U.S., Germany, Netherlands, European Union and China. It doesn’t set banking rules directly, but makes recommendations for member countries to implement. Yet Basel rules have significant influence over how member countries regulate their banks.Leading industry trade groups have sharply criticized the proposed changes, saying they would do more harm than good. They say the proposed rules are a de facto way to boost capital requirements beyond current levels already criticized by some executives as onerous.

Bank rules not hindering U.S. economy: FDIC chief – Metro: (Reuters) - Banking rules meant to protect the U.S. financial system from collapse are not harming the economy or damaging financial markets, the chairman of the Federal Deposit Insurance Corp said on Wednesday, contrary to the views of industry groups. U.S. regulations requiring banks to toughen underwriting standards and pull back from some risky lending in the wake of the 2008 financial crisis have not harmed the economy, said FDIC Chairman Martin Gruenberg. Bank loans are growing faster than gross domestic product while lending to the commercial and industrial sector is outpacing an important measure of corporate borrowing, he said. "I believe the evidence suggests that the reforms put in place since the crisis have been consistent with, and supportive of, the ability of banks to serve the U.S. economy," Gruenberg said during a luncheon in Washington. Gruenberg lauded community banks as an engine of economic growth and lamented that so few small lenders are in the market. "We could use more community banks in this country," he said. "We're going to try and work on that." Leaders of the banking industry have criticized regulations such as the Dodd-Frank Wall Street Reform and Consumer Protection Act, which has added layers of federal supervision and lending rules. "The growing volume of banking regulations is negatively impacting customers,"

Big foreign banks in U.S. get extension for 'living will' plans: (Reuters) – Four big foreign banks with large American operations are being given an extra year to detail plans on how they would sell or liquidate the assets of their U.S. subsidiaries if they were to fail, regulators said on Wednesday. Barclays, Deutsche Bank, UBS Group and Credit Suisse will have until July 2017 to submit their resolution plans, or “living wills,” to U.S. government regulators. The previous deadline had been next month. The regulators granted the extension because the banks are in the process of simplifying their organizational structures under a separate rule, the Federal Reserve and Federal Deposit Insurance Corporation said in separate statements. The banks must satisfy that intermediate holding company requirement, set by the Fed, by July 1. The result of that process will affect foreign banks’ living wills plans, regulators said. The living will process is required by the Dodd-Frank financial reform law passed in 2010 in response to the financial crisis, and is intended to protect U.S. taxpayers from having to bail out failing banks. The law requires bank holding companies based in the United States with more than $50 billion (£34 billion) in assets, including subsidiaries of foreign banks, to meet more stringent standards for safety and soundness.

Screen Scraping vs. APIs Is a Sideshow. Here's the Real Battle | Bank Think --The battle lines have seemingly been drawn when it comes to financial data. On one hand, data aggregators want to be the customer advocate by giving customers unfettered access to their bank data via application programming interfaces, screen scraping and other methods. On the other hand, some banks are now trying to help the financial industry move away from screen scraping as they view the technique as unsafe. As an industry, we need to think about this debate differently and focus on the bigger picture: new revenue sources.It's true that banks don't want to share customer data. Why would they want to? But the reality is that many customers do want to share their data, and we expect this trend to continue and magnify. APIs are a much better way for customers to share data than screen scraping because customers don't have to give away their usernames and passwords to nonbanks. I have written research on the use of APIs in the banking industry for many years now and am passionate about their ability to transform the industry. But there is much more at stake here than screen scraping versus APIs, and banks' unease about sharing customer data. These are side issues, not the real problem. The real problem is that customers have data in too many different kinds of siloes. Customers should own their data. However, right now their data is about as siloed as a bank's application architecture is. For example, my bank data is in multiple places because I use several different banks for various products and services. I also have insurance, healthcare, legal, education, government and other data in yet many more places. Data is much less accurate and useful for me when it's scattered across different companies' login portals.

Banks Stay Out of the Privacy Debate at Their Own Peril | Bank Think: In the ongoing debate over how consumers' data can be used by retailers and marketers, banks seem largely paralyzed on the issue, letting others argue the merits of more or less data access. Yet with the push for data privacy possibly leading to costly new regulations, now is the time for banks to weigh in. If they don't, they run the risk that the public policy debate could eventually hurt their historical "trusted agent" position. The current data privacy debate is contentious and unproductive. At one extreme are powerful digital aggregators and fintech players arguing that they must be free to mine and use consumer data without restrictions in order to bring consumers convenience, choice and better service. At the other extreme, consumer advocates contend that data mining and sharing is a fundamental violation of consumer privacy. As the two camps go on arguing in circles, digital commerce is rapidly expanding — online shopping accounted for 39% of 2015 U.S. holiday sales — exposing consumer data to unprecedented vulnerabilities. Banks may be cautious about wading into the debate since the two extremes seem impractical. They would not want to be seen calling for unfettered freedom for businesses to use and share consumer data, nor are they likely to support making all consumer data off limits. But there is an alternative solution in between: putting consumers in the driver's seat of deciding how their data can be used and by whom. The financial services industry's voice in the data privacy policy debate would carry considerable weight. Research shows that consumers trust their primary bank to safeguard their personal information far more than they trust digital aggregators and digital commerce players like Amazon, Apple or Google. And banks should get involved in the debate over privacy policy before events beyond their control take hold.

Big Banks Will Look More Like Google by 2025 | Bank Think: In the ongoing battle of big banks versus fintech companies, there will be an ultimate victor: the incumbent. By 2025, leading banks will operate as digital financial superstores that blur the line between technology companies and banks. The banking transformation process, years in the making, is only accelerating due to the recent rapid change in customer expectations. One-click ordering from Amazon, tracking fulfillment requests from Uber and other innovations are altering business customers' perceptions about what is possible and what is expected in e-commerce. These tech companies are setting new standards. Bank customers likewise expect their banking interactions to be easy, fast, transparent and on their own terms. Up until now, the nonbanks have been leading the way to redefine the digital banking experience at a time when incumbent banks have been buried in regulation and cost cutting that has made onboarding, loan applications and other standard functions more difficult, time-consuming and frustrating. Such troubles have created an opening for nonbank lenders and fintech providers to leverage cutting-edge technology and their own largely unregulated status to deliver the type of service and experience consumers have come to expect from the best Internet and mobile sites. That said, it is tough for new providers to reach scale, so partnerships with, capital infusions from and acquisitions by banks are accelerating at a rapid pace. And ultimately, these very same pressures are pushing banks inexorably toward a new model where banks will feel and operate more like tech companies with banking licenses. About 65% of banks' technology spending — funds previously focused on new products and enhancements — was deflected over the last 24-36 months to address regulatory gaps in compliance, risk, security and fraud. Looking ahead, with much of that investment made, banks can pivot back more towards customers' digital needs. Already, they are moving faster on all fronts — including the frequency of their app updates — and making investments in technology.

Small Banks Find Strength in Numbers with Anti-Fraud Network -- As the song goes, "I get by with a little help from my friends." That sentiment is truer than ever for banks, particularly when it comes to detecting fraud. For instance, The Fauquier Bank in Warrenton, Va., was able to identify a customer tied to a check-kiting scheme thanks to a bank in Oregon. Turns out, the customer had opened accounts and intentionally written bad checks at various small banks across the country. The Fauquier Bank and the bank in Oregon are both part of the FRAMLxchange, an information-sharing network created last year by Verafin, a compliance vendor. "We were then able to shut down that customer's account, and we would not have known if we didn't have these collaborations," said Josh Brown, director of security at Fauquier. That kind of interaction is exactly what Verafin had in mind when it established the network. "We have been seeing over the past several years a trend in financial crime of not attacking a single financial institution, but hiding fraudulent activity across multiple institutions," said Brendan Brothers, co-founder of Verafin. "When it comes to community banks, they often have difficulty identifying that activity, [and] they only see a small slice." The exchange, which is a free service, was initially open to Verafin customers that participate in the 314(b) program, a voluntary provision of the USA Patriot Act. It permits financial institutions, upon providing notice to the Treasury Department, to share information with one another strictly for the purpose of identifying and reporting to federal authorities any activities that may involve money laundering or terrorist financing.

What Would Happen If the Lights Went Out for a Long, Long Time? » Atlanta Fed - In 1859, a massive geomagnetic solar storm known as the Carrington Event caused extensive damage to telegraph systems and other nascent electrical devices worldwide. Telegraph lines sparked and telegraph operators could send and receive messages without the use of electric batteries. The Northern Lights lit up the sky in all of North America. Though not widely reported, on July 23, 2012 a massive cloud of solar material similar in magnitude to the Carrington storm erupted off the sun's surface, radiating out at 7.5 million miles per hour. Fortunately the impact of the solar storm missed Earth by nine days because of the Earth's orbit position. One report estimates that a Carrington-level storm today could result in power outages affecting as many as 20–40 million Americans for a duration ranging from 16 days to two years at an economic cost of up to 2.5 trillion dollars. A research paper in Space Weather estimated the odds of a Carrington-level storm at about 12 percent over the next 10 years. Early warning of such a storm is possible since satellites can detect impending storms and have the potential to provide a minimum one-day warning before it hits Earth. So what would happen if the lights went out in much of the United States because of such a cataclysmic event? One could anticipate serious disruption of electronic payments such as ACH, cards, and wire transfers in the affected areas and beyond. What would one do to facilitate commerce in such an emergency? Well, cash and, to a lesser degree, checks could come to the fore. Use of checks would be problematic given the electronification of checks, high risk of fraud, and overdrawn accounts if banking systems are not up and running. Cash would have fewer problems if it were on hand to distribute to the affected population. Perhaps cash accompanied by ration books could be used to mitigate hoarding.

WTF™ Citibank? --I had to verify this on several websites because it seemed like an April Fool’s joke but it checks out: Citigroup Inc sued AT&T Inc on Friday, saying the phone company’s use of “thanks” and “AT&T thanks” in a new customer loyalty program infringed its trademark rights to the phrase “thankyou.” Yes, Citi trademarked thankyou. No space! What an innovation! Now they are suing because AT&T has a similar customer loyalty program using “thanks” and “AT&T thanks”. The IP system is out of control.

Fintech Firms Press OCC for Specialized Charter | American Banker: — Fintech companies are asking a federal regulator to create a specialized charter that would allow them to comply with federal rules instead of facing a state-by-state licensing framework. In comment letters to the Office of the Comptroller of the Currency, the Chamber of Digital Commerce is seeking a "fintech or 'bank-light' charter," while the Innovative Lending Platform Association envisioned a licensing system to "prevent [the] application of an inefficient and duplicative patchwork of state and federal laws." ILPA members Kabbage, OnDeck and CAN Capital were seconded by the Center for Financial Services Innovation, the Milken Institute and Coin Center, which all called for a nonbank charter or variations of one. Fintech companies are often hampered by their money-services-business status, which can make it difficult to obtain and keep a bank account due to compliance issues, and have long clamored for a unified licensing system akin to a bank charter. But an OCC white paper released in March and several recent statements from the agency that it is considering creating a charter have sparked renewed discussion. "It stimulated the thinkers out there," Cliff Stanford, a financial lawyer who has worked with fintech startups, said in an interview. "The ideas are going to bubble up." But even if the OCC were willing to create a limited-purpose charter — like those used by credit card banks, for instance — the agency would have its own obstacles to face. The OCC can charter institutions, but it doesn't have the power to grant deposit insurance, which is the purview of the Federal Deposit Insurance Corp.

House Bill Introduced to Repeal Durbin Amendment - ABA -- Rep. Randy Neugebauer (R-Texas) today introduced H.R. 5465, a bill that would repeal Dodd-Frank’s Durbin Amendment, which institutes a cap on debit interchange fees charged by institutions with $10 billion or more in assets. Neugebauer noted that as a result of the Durbin Amendment, some banks reduced their free checking account offerings, increased account fees and instituted higher minimum balance requirements. “What the Durbin Amerndment did… was artificially shift over $30 billion in revenue from one industry to another,” Neugebauer said. “Instead of promoting free market principals and technological advancement, such as enhanced data security capabilities, the Durbin Amendment was nothing more than a government action to manipulate the marketplace. This legislation will restore competition in the marketplace, remove arbitrary government price caps, and ensure consumers have affordable access to basic banking services.” ABA expressed strong support for the bill. “When the government picks winners and losers in the marketplace, consumers lose. The Durbin Amendment has distorted the market to the detriment of small businesses, consumers and banks of all sizes,” said ABA President and CEO Rob Nichols. “Retailers would rightfully oppose laws setting the price of milk or paintbrushes in their stores. After a half decade of trial and failure, we hope Congress will allow this divisive and outdated retailer giveaway to fade into the rearview mirror.”

Durbin amendment is a failure for customers: Repeal the merchant markup | TheHill: For more than four years price-fixed interchange fees have enabled retailers to enjoy an extra $36 billion in revenue under the Durbin Amendment—at the expense of customers. Despite assurances that this income would be passed on to debit customers in the form of lower prices, retailers have taken advantage of this defective policy to pad their bottom lines leaving customers with broken promises and empty wallets. Thankfully, House Financial Services Chairman Jeb Hensarling and Congressman Randy Neugebauer are addressing the Durbin Amendment which is allowing retailers to exploit the electronic payments system. Since 2011, the legislation has only harmed customers and placed undue stress on financial institutions and their ability to offer low-cost products.  Chairman Hensarling has worked tirelessly to examine obstacles for consumers and financial institutions to promote economic growth through the Financial CHOICE Act. One of these proposed changes is eliminating the Durbin Amendment and we applaud the Chairman for his leadership by recommending to repeal this harmful failed policy. We also support legislation authored by the Chairman of the Subcommittee on Financial Institutions and Consumer Credit, Congressman Randy Neugebauer,who deserves credit for the stand-alone proposal to repeal the Durbin Amendment. A recent study by the Federal Reserve Bank of Richmond surveyed a diverse set of merchants and found that more than three-fourths in the sample did not change their prices after the Durbin Amendment was implemented. And, surprisingly, the study also found that one in four merchants actually increased prices since the Durbin Amendment took effect.

SEC Said to Study Muni Bank Loan Disclosure That Vanguard Wants - The U.S. Securities and Exchange Commission is considering whether to require state and local governments to disclose bank loans and private placements, according to people familiar with the matter, reflecting bondholders’ concerns about the fast-growing segment of municipal finance. The rule, known as 15c2-12, requires securities dealers to ensure that states and local governments report updated financial information and material events to bondholders. Mutual funds, investment banks and credit analysts have been pushing regulators to respond to extend such requirements to bank loans, which become more prevalent since the 2008 crisis, particularly among smaller borrowers. “We need a full picture on the balance sheet of our issuers,” said Hugh McGuirk, who oversees $23 billion of municipal bonds at T. Rowe Price Inc. in Baltimore. “If we’re not seeing the breadth and depth of that market with the terms that go along with it that increases the probability of some sort of surprise.” Direct lending by banks has proliferated in the $3.7 trillion market as states, local governments and non-profits find they can borrow at rates comparable to those on bonds, without the fees or disclosure requirements associated with public-debt offerings. In 2015, S&P Global Ratings evaluated 126 bank loans totaling $5.2 billion. Estimates of the size of the market run as high as $80 billion a year, said Nat Singer, chair of the Municipal Securities Rulemaking Board, the municipal market’s self-regulator.

Sizing Up the CFPB’s Favorite Enforcement Targets: Mortgage lenders, debt collectors and credit card companies have borne the brunt of the Consumer Financial Protection Bureau's public enforcement actions over the past four years, yet banks have paid the most in penalties and restitution, according to a new study released by an agency insider. Banks were the subject of 25% of the agency's 122 enforcement actions between 2012 and 2015, but paid more than 63% of the civil money penalties and 65% of the $11 billion in consumer relief collected by the agency during that time. The findings were part of a 59-page study by Christopher Peterson, a special adviser to CFPB Director Richard Cordray and a professor at the S.J. Quinney College of Law at the University of Utah. His study yields insights into where the agency is targeting its enforcement activities. Among the results: No bank has ever contested a public enforcement action and the 14 cases alleging abusive practices were all against nonbanks. Roughly 24% of the CFPB's enforcement actions have been contested. Peterson said he hopes the study will be used to rebut criticisms that the CFPB is overreaching its authority, arguing it shows the agency stays within its mandate. It's "a needle to deflate the absurdly overheated political rhetoric used to grandstand against the CFPB's mission and accomplishments," Peterson wrote. Though Peterson is connected with the agency, the study contains a disclaimer that the views do not represent the CFPB or its staff. The agency declined to comment on its findings, which are due to be published soon in the Tulane Law Review.

CFPB Plan Will Halt Traditional Lenders' Small-Dollar Loan Progress | Bank Think: The burden of proposed federal rules on small-dollar loans is a key factor in determining whether banks and credit unions innovate and offer alternatives to payday loans. But the importance of flexibility from regulators in spurring development of small-dollar loan products is not just academic. Short-term credit solutions already in the marketplace likely wouldn't have made it out of the design stage in a harsher regulatory environment. The payday lending abuses regulators are targeting present traditional lenders with a clear opportunity. Using new technology, banks and credit unions can help people tackle life's financial emergencies with short-term, small-dollar loans at reasonable rates. However, meeting this need is at risk under the Consumer Financial Protection Bureau's well-meaning but too restrictive draft rules on small-dollar lending. The reasons people need access to such loans include everything from an unexpected car repair to cash-only purchases to tooth trouble.Mission-driven financial institutions such as WSECU think about these consumers a lot. Our goal is to care for members who need convenient access to money when other options aren't available. Regulators clearly have these borrowers on their minds too. The CFPB thought about those consumers to the tune of 1,300 pages of specific, restrictive proposed rules on small-dollar lending. The bureau isn't alone. The U.S. Treasury also recently offered its take on what it says are needed system changes, calling for greater transparency in marketplace and online lending. While we applaud the intention to curb the abuses of bad lenders, unfortunately, the rules as proposed by the CFPB may also have the unintended effect of driving away consumer-friendly financial institutions that provide better alternatives.These could include institutions doing great work with underserved communities like Shreveport Federal Credit Union in Louisiana or San Francisco's Northeast Community Federal Credit Union, both of which offer payday loan alternatives that would be at risk given the compliance pressures of the draft rules.

Consumer Groups Pressure CFPB to Tighten Payday Plan - Consumer advocates are urging the Consumer Financial Protection Bureau to strengthen its proposal to rein in payday lending, arguing it would still allow borrowers to be abused. During a briefing Monday on Capitol Hill, consumer, faith and civil rights group said that the plan should close certain loopholes, including tightening exceptions to ability-to-repay requirements and allowing lenders to make a payment test based on default rates similar to other players in the industry. "The very nature of this business depends on people borrowing and then reborrowing and racking up more fees. That is bad enough, but what is just as troubling is the way these loans have been aggressively marketed in communities of color and other vulnerable population's including older Americans who rely on social security," said Rob Randhava, senior counsel at the Leadership Conference on Civil and Human Rights. "While there is a real need for the credit that currently is being served in those communities, that credit that sounds easy but adds up to the equivalent of a triple-digit interest rates and does a lot more harm than good." The advocates said that, while the proposal is a step in the right direction, more can still be done, including at the state level, where interest rates can be capped. Fifteen states and D.C. currently ban the product outright or limit it to 36% APR or less. "But payday lenders are always trying to roll back these state interest rate limits," said Rebecca Borné, senior policy counsel at the Center for Responsible Lending. The CFPB proposal encourages installment loans to be priced at 36% APR or below, but the agency by law cannot institute a firm interest rate cap. As a result, the plan allows exemptions for loans to offer higher rates in certain circumstances.

Attack ad aims at possible Cordray run for Ohio governor - Columbus Dispatch: Richard Cordray isn’t running for governor — at least not yet — but an outside group is spending money to try to shoot down the possibility. Protect America’s Consumers winds up a monthlong ad campaign today in Ohio, Indiana, Montana, North Dakota, West Virginia and Washington, D.C. The group also launched a website attacking Cordray and has promoted that site through advertised tweets. The ad buys are small — probably around $50,000 nationwide, including $12,500 in Columbus on cable TV, according to Tim Kay, director of political strategy at NCC Media, which tracks cable ad buys — but they speak to the interest in Cordray’s political future. The ads oppose a politician who isn’t yet running for anything. Cordray, a 57-year-old former Ohio attorney general turned director of the new federal Consumer Financial Protection Bureau, has been considered a possible Democratic candidate for Ohio governor in 2018. “Part of it is there is so much money in the system now for political advertising,” said Kyle Kondik of the University of Virginia’s Center for Politics. “You see small ad buys in places you might not necessarily expect.” Kondik said that although he has heard of ads targeting senators expected to run for re-election in 2018, the ads against Cordray are unusual.

Who's Behind the Campaign Attacking CFPB Chief Cordray? | American Banker: Richard Cordray, the director of the Consumer Financial Protection Bureau, is the target of a new TV ad campaign that alleges he is courting potential donors for a run as governor of Ohio by enacting a plan that would benefit trial lawyers. The ads appear to be the work of Lincoln Strategy Group, a political strategy firm based in Phoenix, which has been tied to allegations of voter fraud and accused of sending its operatives to public events featuring Cordray. In one TV ad, Cordray's face is superimposed on a cartoon body surrounded by bags of money while a narrator states: "Running for office is extremely expensive, so Richard is using his immense power at the CFPB to make a new regulation that will massively benefit Richard's biggest potential donors."  The ad is referring to the CFPB's May proposal to restrict the use of arbitration clauses. Some firms have portrayed the plan, which would allow consumers to bring class-action lawsuits against banks, credit card companies and other financial firms, as a giveaway to plaintiff's attorneys. The ads generally seek to undermine the credibility of the agency and portray Cordray as using his role to further his political ambitions. Cordray's five-year term ends in mid-2018 and he is barred from campaigning for office while he serves as the CFPB's director. Cordray, 57, has never said that he plans to run for governor of Ohio when current Gov. John Kasich's term expires in 2018. But there has been speculation that Cordray is considered a possible Democratic candidate. "Director Cordray is solely focused on his work leading the federal Consumer Financial Protection Bureau," said CFPB spokesman Sam Gilford.

Why Banks Can Put GSE Buyback Worries Behind Them | Bank Think: While at Fannie Mae, I was struck by bankers' fears that they would need to buy back loans from the government-sponsored enterprises, not just during the crisis but also just a few months ago, before I left the company. The good news for banks is that fear isn't justified based on what the GSEs have seen in actual repurchases. True, there were plenty of repurchases across the industry during and following the Great Recession, but understanding why that occurred and why repurchase concerns have eased should help increase confidence in lending. When a loan is sold to Fannie or Freddie Mac — which are widely known as housing "agencies" — the originator represents and warrants that the loan meets the respective GSE's eligibility and underwriting guidelines. This "reps and warranties" obligation is necessary because the agencies do not review loan files prior to purchase. If the loans are later found to be ineligible or defective, the agencies will require a repurchase or "put-back" to the lender. The crisis-era repurchases accelerated as Fannie and Freddie identified a correlation between defaults and underwriting defects in originating loans that were found to have violated the agencies' requirements. But since then, dare I say, the industry has changed dramatically. The number of repurchases is way down. In a recent filing, Fannie reported that it had issued repurchase requests on a sparse 0.26% of the more than $470 billion in unpaid principal balance of single-family loans acquired in the 12 months ending in September 2015. And a Freddie executive recently posted on the company's website that completed repurchases had "dropped from a peak of $4.2 billion in 2010 to about $400 million in 2015, a 95 percent drop."

Angelo Mozilo Will Not Face U.S. Charges for Mortgage Fraud - The Justice Department’s pursuit of Angelo R. Mozilo, one of Wall Street’s most recognizable names tied to the subprime mortgage crisis, is ending with a whimper.After dropping a criminal investigation of Mr. Mozilo earlier, federal prosecutors recently decided against filing a civil fraud case against him, his lawyer, David Siegel, confirmed on Friday.Prosecutors in Los Angeles, in coordination with those at the Justice Department in Washington, spent more than two years reviewing the merits of pursuing a civil fraud case against Mr. Mozilo, a co-founder of Countrywide Financial, which was one of the largest originators of subprime mortgages in the run-up to the financial crisis.Mr. Mozilo, 77, and several other former Countrywide executives received letters in the last few weeks from federal prosecutors notifying them that the prosecutors had officially ended an investigation into the sale of billions of dollars of mortgages to home buyers with questionable credit histories, Mr. Siegel said. He added his client was “pleased to see the investigation concluded.” News of the Justice Department’s decision was first reported on Friday by Bloomberg News.

Majority stake in MERSCORP Holdings acquired by NYSE parent company ICE - HousingWire: Intercontinental Exchange, ICE, announced on Friday that it plans to acquire a majority equity position in MERSCORP Holdings, the owner of Mortgage Electronic Registrations Systems, collectively known MERS, sending a signal to the market that MERS is finally vindicated. “This transaction underscores MERSCORP Holdings’ efforts to strengthen the value to its member institutions and continue to support MERS’ role as a national mortgage registry,” said Kurt Pfotenhauer, chairman of MERSCORP Holdings. “The investment of capital and resources from ICE will enhance the effectiveness and efficiency of MERS for our more than 5,000 member organizations,” continued Pfotenhauer. ICE is an operator of global exchanges and clearing houses and provider of data and listings services, which includes being the owner of the New York Stock Exchange. As part of the acquisition, ICE and MERS entered into a software development agreement to modernize and enhance the MERS System, strengthening its value to stakeholders, including homebuyers and regulators. MERSCORP Holdings owns and operates the MERS System, a national electronic registry that tracks the changes in servicing rights and beneficial ownership interests in U.S.-based mortgage loans. The registry was forced into the spotlight after the financial crisis and received a lot of backlash for its presumed role in the run-up to the crisis.

Mortgage Document Fabrication is Alive and Well… Yves Smith - Michael Redman of the 4ClosureFraud blog send a job listing that reminded us of the bad old days of 2010, when more and more evidence was coming to light about the how pervasive the problems with mortgage securitizations were, and how in turn that was leading to widespread abuses in foreclosures. A bit of background for those of you new to this issue. [...]  Now to Michael Redman’s evidence that the old abuses are still very much with us (emphasis his) Fraudclosure: Select Portfolio Servicing Help Wanted – Chain of Title Specialist Job Description:  Provides assistance in demonstrating the Investor has the appropriate legal authority to initiate actions through a complete Chain of Title, by recognizing and preparing the required documents to complete the Note with applicable Endorsements, along with any Assignments and other necessary legal documents. Can work independently with the Investor, Client, Custodian, and Attorney Network to resolve any document exceptions in a professional and timely manner. Principal Duties:

1. Facilitates document requests in a timely manner
2. Comprehensive understanding of proving up all Chain of Title requirements
3. Resolves document exceptions through collaborative efforts with areas outside the Department
4. Conducts training for new and existing employees
5. Assist in gathering required documents for all audits

Minimum Qualifications:

1. Detail oriented
2. Document processing experience
3. Excellent written and verbal communication skills
4. Ability to lift boxes weighing 25 lbs
5. Proficient in Microsoft Office (Excel and Word)

Yves again. I assume you can see how brazen this is. And notice how the successful applicant needs to be able to lift somewhat heavy boxes and operate imagine software. Pixelated signatures are a sign of a doctored document; the PSAs, consistent with state laws, called for wet-ink signatures.

The Subprime Mortgage Is Back: It's 2008 All Over Again! --Apparently the biggest banks in the US didn’t learn their lesson the first time around... Because a few days ago, Wells Fargo, Bank of America, and many of the usual suspects made a stunning announcement that they would start making crappy subprime loans once again! I’m sure you remember how this all blew up back in 2008. Banks spent years making the most insane loans imaginable, giving no-money-down mortgages to people with bad credit, and intentionally doing almost zero due diligence on their borrowers. Fraud was rampant. If you wanted to qualify for a $500,000 mortgage, all you had to do was tell your banker that you made $1 million per year. Simple. They didn’t ask, and you didn’t have to prove it. Fast forward eight years and the banks are dusting off the old playbook once again. Here’s the skinny: through these special new loan programs, borrowers are able to obtain a mortgage with just 3% down. Now, 3% isn’t as magical as 0% down, but just wait ‘til you hear the rest.At Wells Fargo, borrowers who have almost no savings for a down payment can actually qualify for a LOWER interest rate as long as you go to some silly government-sponsored personal finance class.  I looked at the interest rates: today, Wells Fargo is offering the exact same interest rate of 3.75% on a 30-year fixed rate, whether you have bad credit and put down 3%, or have great credit and put down 30%. But if you put down 3% and take the government’s personal finance class, they’ll shave an eighth of a percent off the interest rate. In other words, if you are a creditworthy borrower with ample savings and a hefty down payment, you will actually end up getting penalized with a HIGHER interest rate.

How bad is rent control when housing supply is artificially restricted by law? --Many of you have been asking me about this NYT article on the pressures for rent control in Silicon Valley.  If no (or few) new apartment blocks will be built anyway, what is wrong with rent control in that setting? One effect is that rent control will limit the incentive for prospective builders to fight to overturn current building restrictions. A second effect of rent control is that it will lower the quality of the apartment stock.  This outcome has some second best properties, since a lower-quality, lower-price selection of apartments is probably what the market would have delivered under freer conditions.  Still, quality will fall in inefficient ways.  For instance sizes of apartments already are given, so landlords will cut back on maintenance.  Rather than well-maintained but smaller apartments, we will see overly large but run-down abodes. At rent-controlled prices there will be excess demand for apartments.  The “plums” will go to those who bribe, those who are well-connected, those who are skilled at breaking the law, and, to some extent, those who have low search costs.  The latter category may include well-off people who hire others to search for them.  So overall I still don’t think this is a good idea.  Even if the current housing stock is fixed, rent control probably will create costs in excess of its benefits, and without significantly desirable distributional consequences.  Kommenterlein adds: “The rental housing stock isn’t fixed – it will decline rapidly with rent control as rental apartments are converted into Condos and sold at market prices.”

Startup lets landlords scan tenants’ Facebook to check if they can pay rent - A UK startup has developed software for landlords that lets them analyze potential tenants using data from their social media accounts. Score Assured claims its service is simply another way for renters to secure a house in competitive markets, but following coverage of the business by The Washington Post this week — and negative reaction from many users on social media — the company now says it may reconsider how its software operates.  Landlords use the company's Tenant Assured program to send requests for profiles to would-be tenants. These then grant the program access to data from one or more social media networks (including Facebook, Twitter, LinkedIn, and Instagram), which it uses to create a one-time report on the individual. This process scans private conversations and public posts to record information about the user's personality, life events (like giving birth or getting married), and even their "financial stress level" — a measure of how easy it is for them to pay their rent, based on the frequency with which keywords like "no money," "poor," and "staying in," appear in their posts. Understandably, the reaction to this sort of analysis being used as a tool by landlords has not been positive. Simply scanning for keywords is a pretty crude measure of anything, especially something as fluctuating and relative and "financial stress." The Post noted out that some information collected by the startup has a protected status under US housing discrimination law, and a lawyer specializing in this topic told Gawker: "The designer of [Tenant Assured] may be legally exposed, despite the claim that it is only passing information along."

How I Helped Inflate the Housing Bubble - Narayana Kocherlakota - People are still trying to figure out who was responsible for the run-up and subsequent collapse of U.S. housing prices that spawned the 2008 financial crisis. Some, for example, say it's the fault of the Federal Reserve, which kept interest rates low to combat the weak economy and low inflation of the early 2000s. Actually, I have an admission to make: I should take some of the blame. Let me start by noting that Fed story doesn't quite fit the facts. Land prices sharply accelerated in the five years starting in 1996, when the central bank's short-term interest-rate target was between 4.75 percent and 6.5 percent -- hardly low, especially given that the economy was entering recession toward the end of that period. Something of importance, though, did happen in 2005: My wife and I bought a house in Minneapolis (this was several years before I became president of the Minneapolis Fed). The price seemed high, but we figured we'd be fine in the Twin Cities, which historically hadn’t seen much in the way of housing booms or busts. We thought that prices might not keep rising, but they wouldn't fall all that much either. The interest rate on our mortgage, which was between 5 percent and 6 percent, didn’t play a big role in our willingness to overpay. But we turned out to be wrong about Twin Cities housing prices. As part of our move to Rochester, where I now work as a professor of economics, we recently sold that house. Including money spent on renovations over the years, our capital loss came to about 45 percent of the 2005 purchase price. Back when we bought the place, I would have said that such a loss was completely impossible. I wasn’t alone in making this mistake. All around the country in the mid-2000s, people were buying -- or choosing not to sell -- at prices that probably seemed high. Many of them probably thought like I did about the future evolution of housing prices. Like me, they were wrong. Such collective mistakes drive housing bubbles. They recur throughout history -- the earliest records of real estate bubbles go back at least to the Roman Empire. I’m highly skeptical of any country's ability to design a financial system that will eliminate such mistakes.Rather, policy makers must be better prepared when booms and busts do happen – for example, by being even more aggressive with monetary and fiscal stimulus in the event of a sharp downturn in asset prices.

MBA: "Mortgage Applications Decrease in Latest MBA Weekly Survey" --From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey Mortgage applications decreased 2.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 10, 2016. The previous week’s results included an adjustment for the Memorial Day holiday. ...The Refinance Index decreased 1 percent from the previous week. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. The unadjusted Purchase Index increased 17 percent compared with the previous week and was 16 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) decreased to its lowest level since January 2015, 3.79 percent, from 3.83 percent, with points decreasing to 0.32 from 0.33 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.  The first graph shows the refinance index since 1990. Refinance activity was higher in 2015 than in 2014, but it was still the third lowest year since 2000. Refinance activity increased a little this year since rates have declined. The second graph shows the MBA mortgage purchase index. The purchase index is "16 percent higher than the same week one year ago".

Lawler: Single-Family Home Production in 2015: Small Number, Big Homes --From housing economist Tom Lawler: Single-Family Home Production in 2015: Small Number, Big Homes. At the beginning of June the Census Bureau released its annual report for 2015 on the characteristics of new privately-owned residential structures, including but not limited to square footage, number of bedrooms and bathrooms, type of wall material, and sales prices. In terms of single-family homes completed last year, one of the more striking aspects of the report was the incredibly small number of modestly-sized single-family homes completed last year. Below is a summary of homes completed from 1999 to 2015 by square-footage ranges. Of the estimated 648,000 single-family homes completed last year, just 136,000, or 21%, were homes with square footage of less than 1,800. The number of “moderately-sized” single-family homes completed in 2015 was little changed 2011, when overall single-family home completions hit at a “record” low. In sharp contrast, the number of homes with 3,000 or more square feet of floor area last year was up 76% from 2011’s level.Here is a chart showing the historical median square footage of single-family homes completed.  It is a little difficult to compare the distribution of single-family homes completed in recent years relative to earlier decades, because Census has changed the square-footage ranges in its reports over time. However, from 1999 to 2007 there are data for both the “old” ranges and the “new” ranges, and by looking at some historical relationships one can approximate completions for various ranges over time, which I have done in the table below.There have been numerous articles over the last year or two discussing some of the possible reasons for the dearth of construction of moderately-sized (and priced) single-family homes over the past few years, and I won’t today discuss the “why’s.” However, it seems highly unlikely that single-family starts (and completions) will move back up to more “historic” levels unless there is a rebound in the construction of “smaller,” and less expensive, homes.

Housing Starts decreased to 1.164 Million Annual Rate in May -- From the Census Bureau: Permits, Starts and Completions Privately-owned housing starts in May were at a seasonally adjusted annual rate of 1,164,000. This is 0.3 percent below the revised April estimate of 1,167,000, but is 9.5 percent above the May 2015 rate of 1,063,000. Single-family housing starts in May were at a rate of 764,000; this is 0.3 percent above the revised April figure of 762,000. The May rate for units in buildings with five units or more was 396,000. Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,138,000. This is 0.7 percent above the revised April rate of 1,130,000, but is 10.1 percent below the May 2015 estimate of 1,266,000.  Single-family authorizations in May were at a rate of 726,000; this is 2.0 percent below the revised April figure of 741,000. Authorizations of units in buildings with five units or more were at a rate of 381,000 in May. The first graph shows single and multi-family housing starts for the last several years. Multi-family starts (red, 2+ units) decreased in May compared to April. Multi-family starts are up 8% year-over-year. Single-family starts (blue) increased in May, and are up 10% 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 May were close to expectations, and combined starts for March and April were revised up slightly.

A Mixed Report For US Housing Construction In May -- New residential housing construction dipped slightly in May, falling 0.3% vs. the previous month, the US Census Bureau reports. Meanwhile, newly issued building permits rose 0.7% last month. The mixed profile also shows up in the year-over-year changes for both indicators, albeit in reverse. The key takeaway: the recent slowdown in housing construction growth will probably linger for the foreseeable future. That’s not dire news, but today’s update suggests that the housing sector’s ability to boost economic growth generally may be waning. Note that building permits fell on a year-over-year basis for the second month in a row. Considered a leading indicator for construction activity, permits slumped 10.1% in May vs. the year-earlier level–more than twice the annual decline in April.  Housing starts, by contrast, rebound in year-over-year terms, rising 9.5%. That’s a refreshing change from April’s mild decline. Nonetheless, today’s update reflects a relatively subdued rate in residential housing construction vs. recent history. The optimistic view is that housing will continue to grow at a modest pace. A degree of support for this outlook can be found in this week’s survey data from the National Assoc. of Home Builders (NAHB). The trade group’s Housing Market Index in June rose to its highest reading in five months. “Builders in many markets across the nation are reporting higher traffic and more committed buyers at their job sites,” NAHB Chairman Ed Brady said in a statement. The implication: We’ll see firmer numbers in construction activity in this year’s second half. “All along we expected this would be a pretty gradual recovery and that’s largely coming true,” the chief economist at Raymond James Financial tells Bloomberg. “We’re still very far from a boom period in housing at all here, but I think the fundamentals are still pretty good.”

Comments on May Housing Starts - The housing starts report this morning was close to consensus, and there were upward revisions to the prior two months (combined).  Also starts were up 9.5% from May 2015.  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). 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 up 2.5% year-to-date, and single-family starts are up 14.5% 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). 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). 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). The second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer.  Note the exceptionally low level of single family starts and completions. The "wide bottom" was what I was forecasting several years ago, and now I expect several years of increasing single family starts and completions.

NAHB: Builder Confidence increases to 60 in June --The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 60 in June, up from 58 in May. Any number above 50 indicates that more builders view sales conditions as good than poor.  From the NAHB: Builder Confidence Rises Two Points in June After holding steady for the past four months, builder confidence in the market for newly constructed single-family homes rose two points in June to a level of 60 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This is the highest reading since January 2016....“Rising home sales, an improving economy and the fact that the HMI gauge measuring future sales expectations is running at an eight-month high are all positive factors indicating that the housing market should continue to move forward in the second half of 2016,” said NAHB Chief Economist Robert Dietz....All three HMI components posted gains in June. The component gauging current sales conditions rose one point to 64, the index charting sales expectations in the next six months increased five points to 70, and the component measuring buyer traffic climbed three points to 47. Looking at the three-month moving averages for regional HMI scores, the South registered a two-point uptick to 61 and the West rose one point to 68. The Northeast dropped two points to 39 and the Midwest fell one point to 57. This graph show the NAHB index since Jan 1985.

Retail Sales increased 0.5% in May -- On a monthly basis, retail sales were up 0.5% from April to May (seasonally adjusted), and sales were up 2.5% from May 2015. From the Census Bureau reportThe U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for May, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $455.6 billion, an increase of 0.5 percent from the previous month, and 2.5 percent above May 2015. ... The March 2016 to April 2016 percent change was unrevised at up 1.3 percent (±0.2%).This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).  Retail sales ex-gasoline were up 0.3%.  The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.  Retail and Food service sales ex-gasoline increased by 3.6% on a YoY basis. The increase in May was above expectations for the month, and retail sales for March and April were revised up. A solid report.

US Retail Sales Up A Solid 0.5% In May - Retail spending in the US rose 0.5% in May, the Census Bureau reports–a bit better than economists expected. The gain marks a sharp downshift from April’s 1.3% bounce. But April’s unusually strong advance isn’t sustainable and so it’s no great tragedy that today’s report is weaker by comparison. Overall, looking at the last two monthly increases suggests that there’s still a healthy glow for retail sales. A less-encouraging profile emerges, however, when we focus on the year-over-year trend, which is probably more reliable for analyzing the appetite for spending. Consumption is still climbing a decent if unspectacular pace in annual terms through May. But recent history suggests that gravity’s slight but persistent hand is at work. Headline retail spending rose 2.5% for the year through last month, down from 3.0% through April. Stripping out gasoline sales paints a firmer trend, but the deceleration in year-over-year spending growth is becoming conspicuous this year. Indeed, retail ex-gas consumption climbed 3.7% in May vs. the year-earlier level, which is at the low end of the annual range in recent years.There’s certainly no smoking gun in today’s report. It’s reasonable to argue that the consumer is still inclined to spend at a rate that’s consistent with economic expansion. But we’re near the lower range of growth that passes the smell test for concluding that a growth bias is still a credible alive and well.The question is whether the slow slide will endure? If it does, there could be trouble lurking in this year’s second half. Unfortunately, today’s numbers don’t make a strong case for arguing that the downside momentum has run its course.

Retail Sales Up In May 2016? Rolling Averages Decline.: Retail sales improved according to US Census headline data. Our view of this month's data is significantly more negative, There was a decline in the rolling averages. Backward data revisions were generally up. Econintersect Analysis:

  • unadjusted sales rate of growth decelerated 1.0 % month-over-month, and up 1.9 % year-over-year.
  • unadjusted sales 3 month rolling year-over-year average growth decelerated 1.7 % month-over-month, 2.8 % year-over-year.
  • unadjusted sales (but inflation adjusted) up 1.8 % year-over-year
  • this is an advance report. Please see caveats below showing variations between the advance report and the "final".
  • in the seasonally adjusted data - there was only weakness in home furnishings, building materials and brick & mortar retailers.
  • U.S. Census Headlines: seasonally adjusted sales up 0.5 % month-over-month, up 2.5 % year-over-year (last month was originally reported at 3.0 % year-over-year).

U.S. retail sales point to strong domestic demand | Reuters: U.S. retail sales rose strongly in May as Americans bought automobiles and a range of other goods, even as they paid more for gasoline, suggesting that economic growth was gaining steam despite a sharp slowdown in job creation. Other data on Tuesday hinted at a steady build-up of inflation pressures, with import prices recording their largest increase in just over four years in May as the drag from a strong dollar and lower oil prices fades. "As has been the case in the prior two years, the modest first-quarter disappointment in consumer spending now appears to be a short-lived soft patch," said Michael Feroli, an economist at JPMorgan in New York. "This number also lends credence to the idea that the big miss on May payrolls may have been sending an overly pessimistic signal on growth." The Commerce Department said retail sales increased 0.5 percent last month after surging by an unrevised 1.3 percent in April. The second straight month of gains boosted sales 2.5 percent from a year ago. Excluding automobiles, gasoline, building materials and food services, retail sales rose a solid 0.4 percent last month after an upwardly revised 1.0 percent increase in April. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously reported to have risen 0.9 percent in April. Economists had forecast both overall retail and core sales gaining 0.3 percent last month. In a separate report, the Labor Department said import prices increased 1.4 percent last month, the largest rise since March 2012, after advancing 0.7 percent in April. In the 12 months through May, import prices fell 5.0 percent, the smallest decline since November 2014.

Retail Sales Growth Slows As 'Home-Buying'-Proxy Tumbles -- Following April's gas-price-surge-driven spike in retail sales (by the most in 13 months), May and June have seen various sections of the retailing world collapse, as we detailed here., and growth slowed acordingly with a 0.5% rise MoM (though beating expectations of a 0.3% rise). Before everyone breaks out the champagne for the new recovery, we note that the biggest contributor to May's gains was a 2.1% jump in gasoline station spending - which is "unequivocally bad" right? YoY growth in retail sales slowed to just 2.5% as furniture and building materials (home-buying proxy) declined notably. Escape velocity not achieved...The breakdown shows spending at gasoline stations surge but home-buying-proxy "building materials" declined sharply... Of course, this is government-adjusted data... Of course we note that non-store retailers (internet - amazon) now account for more than 10% of US retail sales in April and May. Charts: Bloomberg

U.S. Retail Sales Fall in 1st Two Weeks of June -- Redbook - WSJ: National retail sales fell 1% during the first two weeks of June from the comparable period in May, Redbook Research reported Tuesday. The decline compared with a target for a decline of 0.8%. The Johnson Redbook Sales Index also showed seasonally adjusted sales for the period rose 0.6% from a year earlier, compared with expectations for an increase of 0.8%. During the second week of June, sales rose 0.7% from a year earlier. Redbook noted temperatures have warmed up to seasonal levels in many regions and sales of hot weather items such as fans and air conditioners have improved. Elsewhere, promotions have driven sales of seasonal items as retailers prepare for the fall season, Redbook stated. Retailers also are turning their attention to Father’s Day, which falls on Sunday, June 19. June is a five-week month on the retail calendar that ends July 2.

A Tale of Three Retail Sales --Lee Adler --The Commerce Department reported that the seasonally adjusted headline number for Retail Sales rose in May by an estimated 0.5%. That figure will be revised multiple times in the months and years ahead as more data comes in and the seasonal adjustment factor is repeatedly revised until its curve reasonably approximates the actual data. In the game of Pin the Tail on The Number, Wall Street economists undershort, coming in with a consensus guess of +0.3%. The reported number was a "beat" in that regard. The actual, not seasonally adjusted number rose by $20.5 billion or 4.5% from April. The best way to tell if that's a good number or not is to compare it with May's performance last year. May of 2015 saw a month to month gain of $27.4 billion or 6.1%. Compared to last year, this year fell short. The year to year gain this May was 1.9%, which is also not too impressive, especially considering that the headline number is not adjusted for inflation. Deflating the Census Bureau's nominal retail sales data, which the mainstream media dutifully regurgitates, results in only a slightly more realistic figure. Deflating by CPI, which has a long term record of understating actual inflation, CPI adjusted "real" retail sales rose by 0.9% year to year. That number got some help from a brief period of falling CPI, thanks to weak gasoline prices in 2015. To get a picture of how sales are going without the distortion of wildly volatile gas prices and the swings in gasoline sales that result from that, we can look at real retail sales excluding gas. A more accurate deflator for this figure would be the retailers' cost as shown by the PPI for finished retail goods. To get an idea of how much the average consumer is actually purchasing, each month we can divide by population. By this measure, the unit volume of sales per capita fell by 0.9% year over year after being virtually flat the year before.

Jack Ma Says Fakes “Better Quality and Better Price Than the Real Names” - Alibaba’s Jack Ma stepped into a firestorm on Tuesday with a comment that fakes were sometimes better quality than originals. “The problem is the fake products today are of better quality and better price than the real names,” he said at Alibaba’s investor day in Hangzhou. “They are exactly the same factories, exactly the same raw materials but they do not use the names.” Mr. Ma’s comments caused social-media outrage among some who felt he was dodging responsibility for the longstanding presence of counterfeit goods on Alibaba’s online bazaar Taobao. Luxury brands have long criticized Alibaba for not doing more to crack down on fakes and even today, it isn’t difficult to find cheap, fake goods on the website. The comments come as Alibaba is facing a mounting controversy over counterfeit merchandise on its websites. Last month, a prominent group, the International AntiCounterfeiting Coalition, suspended a newly created category under which Alibaba was admitted, after U.S. fashion brand Michael Kors and Gucci America Inc. withdrew in protest. Michael Kors called Alibaba “our most dangerous and damaging adversary” in a letter to the coalition.

Online Shoppers Want Delivery Faster, Cheaper, Survey Shows - WSJ: Online shoppers who are already pushing retailers to give more for less are about to get even more demanding, a new survey shows. In its latest survey of over 1,000 U.S. consumers, supply chain consulting firm AlixPartners LLP found that consumers expect to wait an average of 4.8 days for delivery, down from 5.5 days in 2012. And the share of those who are willing to wait more than five days has declined to 60% from 74% in four years. Although more than half of those surveyed have never used same-day shipping, a growing number say offers of free shipping “greatly” impact their ordering decisions. Over half of shoppers said they browse products online based on the available shipping methods, the survey said. The survey results underscore the big and growing role that shipping holds in the competition for e-commerce, a factor that is pressuring margins for retailers as they cope with the high cost of delivering goods to homes in a timely manner. Consumers increasingly make their buying decisions based on convenience when shopping across more categories—pushing retailers to upgrade their supply chains and delivery networks to accommodate the changing demands.

Why the poor spend more on restaurants than all but the very rich -- A new study on how rich and poor spend their money shows that low-income Americans spend as much of their money at restaurants as all but the wealthiest citizens.   The JPMorgan Chase Institute examined 15 billion anonymous credit and debit transactions in 15 large metropolitan areas to see how spending varies based on income. The 20% of Americans in the lowest-income bracket spent more money on gas than any other income group. They also spent a large share of their income on groceries. That’s no surprise. Staples such as fuel and groceries are always a big expense for low-income households. What is a surprise was the share of income spent by the poor at restaurants: 16.6%.  Only the richest Americans spent more, devoting 17.8% of their income to restaurants. Are the poor living beyond their means and splurging at Spago, Mesa Grill or Le Cirque? Hardly. Other studies show that low-income Americans largely spend money on food outside the home at fast-food chains or other places to get a quick meal for cheap.  In many cases, single-parent families or poor households are stretched for time, according to a major 2014 report by National Geographic called “The New Face of Hunger.” They lack cars, rely on spotty public transportation to get from job to job and often face long commutes. Fast food is a quick fix when a parent gets home late and the kids are hungry.

Smith & Wesson Sales Hit All Time High, Up 200% Since Obama Election -- Moments ago, America's legendary gun company reported Q4 earnings which, not surprisingly, beat estimate on the top and bottom line, reporting EPS of $0.66, far above the $0.54 expected, on revenue of $221.1 million, $7 million higher than consensus had expected. The stock, while not at its all time high which it hit earlier this year, is surging on the results, however, it was the tremendous topline growth in revenue that has to be seen to be believed. See if you can spot the catalyst that unleashed SWHC's unprecedented growth burst.  Yes, you are reading that chart correctly: Smith and Wessons sales are up 200% since Obama was elected.As for the future, SWHC forecast 2017 sales of $740-$760 million, which smashed expectations of $732 million, and which we are confident will be very easily beat, especially thanks to the latest attempt by the president to implement yet another set of gun control executive orders.And this of course: the number of FBI background checks, a direct proxy for gun sale in any given month, which just hit an all time high for the month of May.

As Gun Grabbing Fever Grips Dems, AR-15 Sales Go BALLISTIC - An increase in sales of guns and ammo should not be any sort of surprise this week. Between an Islamic terror attack in Orlando and a frenzy among Democrats to blame responsible gun owners and American Christians for that attack, stocking up on guns and ammo is a predictable, and reasonable response. But this is no small bump. And it's not in just one location. Or even just one demographic. First, this report from Fox: Wallace claimed that he has sold more than 15 AR-15’s per hour and may know the reasons as to why there is such a rise in sales. "[People] are afraid that the government is going to take [guns] away and there are folks that are in fear because of the times that we are living in today and those are two big reasons,” he said. That's a lot of AR-15s. And that's just one location. The Toledo Blade reports the same phenomenon taking place locally.“The ARs are going through the roof. Sales are strong for the week so far,” said Mr. Bruning, who also teaches gun-safety classes. Several buyers were purchasing parts to assemble their own assault rifles because if restrictions are passed, the parts will be grandfathered in, he added. Fox 31 in Denver reports skyrocketing news sales as well, to a particular demographic. George Horne, the owner of The Gun Room, Denver’s oldest firearms dealer, said Tuesday business is booming at his store. "For this time of year I’d say its three to four times what we normally have," he said

FBI: US Homicide Rate At 51-Year Low --The US homicide rate in 2014, the most recent year available, was 4.5 per 100,000. The 2014 total follows a long downward trend and is the lowest homicide rate recorded since 1963 when the rate was 4.6 per 100,000. To find a lower homicide rate, we must travel back to 1957 when the total homicide rate hit 4.0 per 100,000. Homicide rates were considerably higher in the United States during the 1970s, 80s, and 90s, but over the past 25 years, have fallen nearly continuously:  Ask the average American if crime is falling in the United States, however, and you're unlikely to hear about how homicide is at a 50-year low.  As Pew has reported in recent years, in fact, the American public is "unaware" that the homicide rate in the United States has fallen by 49 percent over the past twenty years. And while Pew doesn't report on it, it's also a safe bet that the public is also unaware that homicide rates have collapsed as total gun ownership in the United States has increased significantly. Over a recent 20 year period, the number of new guns in the US that were either manufactured in the US or imported into the US increased 141 percent from 6.6 million new guns in 1994 to 16 million in 2013. That means a gross total of 132 million new guns were added into the US population over that time period.

Home Depot Files Antitrust Lawsuit Against Visa, MasterCard - WSJ -- Home Depot filed an antitrust lawsuit against Visa and MasterCard, reigniting claims from a decade ago that merchants pay too much for debit- and credit-card transactions and adding new contentions about the effectiveness of chip-based cards to reduce fraud. The lawsuit comes several years after Home Depot and hundreds of other retailers opted out of a settlement, then valued at $7.25 billion, in a price-fixing case that addressed many of the same issues. This time, the do-it-yourself retailer also contends that Visa and MasterCard colluded to prevent the adoption of new chip-based cards that require consumers to enter a personal identification number, or PIN, to authorize a transaction. “Visa and MasterCard know perfectly well that a signature alone, without the additional step of requiring a PIN, provides virtually no protection against many types of payment card fraud,” Home Depot said in the lawsuit filed Monday in U.S. District Court for the northern district of Georgia. The new chip cards being rolled out in the U.S. are embedded with a computer chip. This creates a unique code for each transaction, reducing the chance that criminals can create counterfeit cards. Chip cards have long been used around the world, where they often require a PIN instead of a signature.U.S. bank executives have said that they don’t want to burden Americans with a PIN when they are using their credit cards at the checkout line.The banks collect higher merchant fees for signature-based credit-card transactions than PIN-based ones. “While chip-and-PIN authentication is proven to be more secure, it is less profitable for Visa, MasterCard, and their member banks and it provides a greater threat to their market dominance,” the lawsuit claimed.

CPI Increased 0.2 Percent in May - The consumer price index increased 0.2 percent in May, as the indexes for energy and all items less food and energy rose during the month. Over the last twelve months, the all items index rose 1.0 percent before seasonal adjustment. The energy index increased for the third consecutive month, rising 1.2 percent. The gasoline index drove the increase, rising 2.3 percent after an 8.1 percent increase in April. Fuel oil and natural gas prices also increased, rising 6.2 percent and 1.7 percent respectively. The food index fell 0.2 percent following a 0.2 percent gain in April. Prices for food at home fell 0.5 percent, the fifth decline in the past seven months. Food away from home also fell 0.5 percent in May. Prices for all items less food and energy increased 0.2 percent, the same increase as in April. The advance was primarily due to a rise in the shelter index, which increased 0.4 percent, its largest advance since February 2007.

Consumer Price Index June 16, 2016: Whatever pressure may be building in import & export prices or even producer prices, it has yet to give much of a boost to consumer prices which rose only 0.2 percent in May. Core prices, that is prices excluding food and energy, also came in at plus 0.2 percent. Year-on-year rates aren't going anywhere, at only plus 1.0 percent for total prices and plus 2.2 percent core prices. Though the 2.2 percent rate does exceed the Fed's 2 percent target, core consumer prices are not what the Fed tracks most closely, rather core PCE prices which typically run 1/2 point lower. Housing costs rose 0.3 percent and at a year-on-year 2.4 percent are showing tangible pressure. Medical care is at the top of list showing pressure, up 0.3 percent but still at a manageable year-on-year rate of plus 3.2 percent. Other readings are much flatter, including a 0.7 percent year-on-year rise for food and a 0.5 percent rise for apparel. Energy prices, though rising 1.2 percent in the month, are still down 10.1 percent on the year with gasoline down 16.9 percent. It's the trend that counts most and the trends for consumer prices are still flat, not yet reflecting the recovery in oil prices. This report does not lift the chances for a rate hike at the July FOMC.

May 2016 CPI: Inflation Little Changed: According to the BLS, the Consumer Price Index (CPI-U) year-over-year inflation rate was 1.0 % - an insignificant increase from last month's 1.1 %. The year-over-year core inflation (excludes energy and food) rate worsened 0.1% to 2.2 %, 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 0.2 percent in May on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.0 percent before seasonal adjustment.  The food index declined in May, but the indexes for energy and all items less food and energy rose, resulting in the seasonally adjusted all items increase. The food index fell 0.2 percent, as all six major grocery store food group indexes declined. The energy index increased 1.2 percent as the gasoline index rose 2.3 percent and the indexes for fuel oil and natural gas also advanced. The index for all items less food and energy increased 0.2 percent in May. The shelter index rose 0.4 percent, and the indexes for medical care, apparel, motor vehicle insurance, and education were among indexes that also increased. These advances more than offset declines in an array of indexes including used cars and trucks, communications, household furnishings and operations, airline fares, and new vehicles. The all items index rose 1.0 percent for the 12 months ending May, compared to a 1.1-percent increase for the 12 months ending April. The index for all items less food and energy rose 2.2 percent over the last 12 months. The food index has risen 0.7 percent over the last year, with the index for food at home declining 0.7 percent and the index for food away from home rising 2.6 percent. The energy index has declined 10.1 percent over the past 12 months, with all major components falling over the span.

Rent and Gas Raises CPI --  Robert Oak - The Consumer Price Index increased by 0.2% for May.  Gasoline alone increased another 2.3% for the month.  Inflation with food and energy price changes removed increased 0.2% with shelter and medical costs once again driving the increase.  From a year ago overall CPI has risen 1.0%.  Without energy and food considered, prices have increased 2.2% for the year.   CPI measures inflation, or price increases. Yearly overall inflation is shown in the below graph. This is clearly going to change as gas prices raise their ugly head. Core inflation, or CPI with all food and energy items removed from the index, has increased 2.2% for the last year. For the past decade the annualized inflation rate has been 1.9%, so this is running above. Core CPI's monthly percentage change is graphed below. This month core inflation increased 0.2%. Within core inflation, shelter increased 0.4%, with monthly rental costs increasing the same, 0.4% while home ownership increased 0.3%. Used cars and trucks dropped -1.3%. Car insurance increased 0.9% for the month and the previous month increased 1.2%. The energy index is down -10.1% from a year ago. The BLS separates out all energy costs and puts them together into one index. For the year, gasoline has declined --16.1%, while fuel oil has dropped -23.6%. Graphed below is the overall CPI energy index. Graphed below is the CPI gasoline index and we can see prices are now rising dramatically, boo-hoo. 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 0.4% and is up 3.4% for the year, which is a lot. Rent of a primary residence just keeps increasing and this month by 0.4% and is up 3.8% for the year. Graphed below is the rent price index. Food prices decreased -0.2% for the month. Food and beverages have now increased just 0.7% from a year ago. Groceries, (called food at home by the BLS), slid a whopping -0.5% for the month, and are down -0.7% for the year. This is the fifth consecutive decline and all areas of groceries decreased in price. Eating out, or food away from home increased 0.2% for the month and is up 2.6% for the year. Graphed below are grocery prices, otherwise known as the food at home index. Medical care is a large part of core inflation. Medical care services were up 0.5% for the month and have increased 3.5% for the year. Graphed below is the overall medical care index, which increased 0.3% for the month and is up 3.2% from a year ago. Below is a graph of the medical commodities index, which is mostly prescription drug prices. Medical commodities decreased by -0.2% for the month and is up 2.2% for the past year.

May 2016 CPI - Here is an update on inflation.  Core inflation was above trend in January and February, giving hope that we might see a persistent upward trend.  But, since then, inflation outside of rent has fallen back toward the 1% range.  The upward pressure on core CPI inflation is coming from shelter. Core minus shelter inflation is back below 1.5% and shelter inflation appears to be continuing its climb above 3%. In 1999 and 2004, when tightening cycles began, at least housing had been healthy and tightening began as shelter inflation was moderating. This shelter inflation is a supply-side problem, not a monetary issue. Before 2007 it mostly came from supply constraints in the Closed Access cities. Since then, it has been exacerbated by the nationwide clampdown on lending. In both previous cases, I think that the real decline in housing expansion that came from tightening led to rising shelter inflation, which induced the Fed into too much tightening - to disastrous effect in 2007. In this case, we had a shortage of housing and persistently rising shelter inflation already in place when the Fed started positioning itself for contractionary policies. Source I was hoping that core CPI excluding shelter would find some support from natural expansion of the economy and save us from ourselves. But this recent downturn is what I have been fearing. If the Fed reads shelter inflation as a monetary issue, then they will add deprivation to deprivation. Maybe we will be saved by the fact that the PCE price index is the Fed's official guide and it is less sensitive to shelter inflation.

Actual Consumer Goods Inflation Vs. BLS and Fed Fantasy - The Wall Street Examiner: Buried deep in the data tables of the BLS’s Producer Price Index (PPI) for May is an item that reveals the long running fallacies of the CPI and the Fed’s favorite inflation fantasy, the BEA’s Personal Consumption Expenditure price index (PCE). The revealing item is the PPI for finished consumer goods. It represents the price changes that retailers pay for their finished goods inventory. It has persistently outrun the widely followed CPI and the Fed’s favorite PCE by a wide margin ever since inflation began to rebound in 2010 from the pits of the recession in 2009. For either the CPI or PPI to be believable in light of this data, it would be necessary to believe that retailers never pass along their persistently increasing costs to consumers. That’s unbelievable on its face. We can look at how the BLS constructs CPI so that it persistently understates actual inflation. The BLS manipulates CPI lower by overweighting housing to approximately 40% of Core CPI, then by grossly undercounting housing inflation. A variety of sources, such as the NAR, Corelogic, Redfin, FHFA, and even the widely followed, massively flawed Case Shiller, have reported that housing inflation has been running at roughly 6% for the past couple of years. It was even higher than that in the initial rebound from the 2011 low. But these increases were not included in the official “inflation” measures. The BLS eliminated house prices from the CPI in 1982, substituting a manufactured number called owner’s equivalent rent (OER). Without going into the details of how that number is conjured up, which I have covered in the past, it has been imputed at 2.5%-3% in recent years. Because of the BLS’s refusal to recognize housing inflation, replacing it with a number that understates the actual rate, the CPI has persistently understated overall inflation. CPI is a tortured index whose purpose has always been to index government payments to keep the annual increase in social security, salary, and government contract payments to a minimum. It was never intended to represent actual inflation. This is a fact that economists and the mainstream media seem to have missed or purposely ignored.

The consumer is still all right -- With May's CPI reported, I can now update real retail sales and real retail sales per capita. The former is a short leading indicator, the latter a longer leading indicator.  To cut to the chase, here they are: Both have set new highs. While there are lots of production-side metrics that are consistent with recession, like industrial production, manufacturer's sales, and the inventory to sales ratio, the consumer side of the economy continues to be doing OK.

April 2016 Business Sales and Inventories Data Remains Mixed.: Econintersect's analysis of final business sales data (retail plus wholesale plus manufacturing) shows unadjusted sales degraded compared to the previous month. There was a marginal improvement in the rolling averages. Inventory growth was mixed (depending on whether one looked at the unadjusted or adjusted data). The inventory-to-sales ratios remain at recessionary levels. Econintersect  Analysis:

  • unadjusted sales rate of growth decelerated 3.1 % month-over-month, and down 2.9 % year-over-year
  • unadjusted sales (but inflation adjusted) down 1.5 % year-over-year
  • unadjusted sales three month rolling average compared to the rolling average 1 year ago accelerated 0.2 % month-over-month, and is down 0.2 % year-over-year.
  • unadjusted business inventories growth down 0.2 % month-over-month (up 1.0 % year-over-year with the three month rolling averages showing inventory build), and the inventory-to-sales ratio is 1.42 which is at recessionary levels (well above average for this month).

US Census Headlines:

  • seasonally adjusted sales up 0.9 % month-over-month, down 1.3 % year-over-year (it was reported down 1.7 % last month).
  • seasonally adjusted inventories were up 0.1 % month-over-month (up 1.0 % year-over-year), inventory-to-sales ratios were up from 1.37 one year ago - and are now 1.40.
  • market expectations (from Bloomberg) were for inventory growth of 0.1 % to 0.4 % (consensus +0.2 %) versus the actual of +0.1 %.

Business Inventories/Sales Ratio Hovers At Recessionary Highs Despite 'Adjusted' Car Sales Surge --Despite the biggest MoM jump in business sales since February 2014 (up 0.9% MoM driven by a 3.2% surge in auto sales), the crucial inventory-to-sales ratio remains stubbornly high in recession territory. Year-over-year, inventories have risen 1.0% while sales have tumbled 1.3% (massively helped by a dramatic seasonal adjustment from -2.9% actual YoY drop in sales). "Adjusted" Sales and Inventories...Driven by a huge seasonal adjustment... Which leaves the inventory overhang ominously high still... This won't end well. Charts: Bloomberg

Final business and retail sales add to evidence suggesting shallow industrial recession has bottomed  --Today began a 3 day blizzard of manufacturing and sales data spanning April to June.  This morning we got total business sales for April and retail sales for May. Tomorrow we get May industrial production and the June Empire State Index.  On Thursday the June Philly Fed Index will be reported.  I'll just briefly note that we need to wait for tomorrow's inflation report before we know what May real retail sales were.  *If* the CPI is in line with +0.3% expectations, then real retail sales for May will set another record -- another indication that the consumer economy is OK and we are not on the cusp of any recession. Here are real retail sales per capita through April:  This morning's April business sales report showed that total Business inventories rose +0.1%, but sales grew a strong 0.9%. Sales at all levels -- Retail, wholesale and manufacturing -- grew, and only wholesale inventories increased, while retail and manufacturing inventories shrank, as shown in the table below: As a result, the total business inventory to sales ratio declined: This pattern of increased sales and decreasing inventories is what happens just after a recovery from a recession starts. It adds to the evidence that March was the bottom of the shallow industrial recession. But the acid test will be the industrial production report tomorrow.

PPI-FD June 15, 2016: Federal Reserve policy makers will have something special to talk about at today's FOMC finale, that is early signs of what may be long awaited inflationary pressures. May's producer prices final-demand index rose an almost fierce looking 0.4 percent for the hottest reading since May last year. The strength is tied not only to energy, which rose 2.8 percent in the month, but also to trade services which jumped 1.2 percent in what may hint at the successful passing through of higher costs. Prices excluding food & energy rose 0.3 percent and when excluding services, along with food & energy, prices fell 0.1 percent in the month. Year-on-year rates in this report remain soft, at minus 0.1 percent overall and only plus 1.2 percent less food & energy. But the monthly gains are not only encouraging, they follow what are similar signs of strength in yesterday's import & export price report. The deflationary effects of last year's strength in the dollar and collapse in oil prices may now finally be clearing, providing a new floor from which prices will hopefully begin to rise. But this is conjecture that awaits confirmation in tomorrow's consumer price report.

May 2016 Producer Prices Year-over-Year Inflation Is Now Insignificantly Contracting (graphs) The Producer Price Index year-over-year inflation is insignificantly in contraction. The intermediate processing continues to show a large deflation in the supply chain. The PPI represents inflation pressure (or lack thereof) that migrates into consumer price. The BLS reported that the headline Producer Price Index (PPI) finished goods prices (now called final demand prices) year-over-year inflation rate declined from 0.0 % to -0.1 % (reversing last months growth)...The producer price inflation breakdown: In the following graph, one can see the relationship between the year-over-year change in crude good index and the finish goods index. When the crude goods growth falls under finish goods - it usually drags finished goods lower.Removing food and energy (core PPI) was originally done to remove the noise from the index, however the usefulness in the twenty-first century is questionable except in certain specific circumstance. Econintersect has shown how pricing change moves from the PPI to the Consumer Price Index (CPI). This YoY change implies that the CPI, should continue to come in around 1.0% YoY.

Core Producer Prices Surge Most Since Jan 2015, Gasoline Prices Soar - While inflationary pressures remain relatively nascent, today's Producer Price Index data for May suggests The Fed may face some more pressure soon. Final Demand rose 0.4% MoM, more than expected and the highest since May 2015. However, core PPI (ex food and energy) rose 1.2% YoY (higher than expected) - the most since January 2015. The main driver of PPI in May was a 2.8% surge in energy prices (in particular a 6.6% spike in gasoline prices). The last 3 months have seen the biggest rise in PPI gasoline since Aug 09. The index for final demand goods rose 0.7 percent in May, the largest advance since a 1.2-percent jump in May 2015. Two-thirds of the May 2016 increase can be traced to prices for final demand energy, which climbed 2.8 percent. The indexes for final demand goods less foods and energy and for final demand foods both moved up 0.3 percent. Over one-third of the increase in the index for final demand goods is attributable to gasoline prices, which advanced 6.6 percent.  The index for final demand services rose 0.2 percent in May after inching up 0.1 percent in April. The May increase can be traced to margins for final demand trade services, which advanced 1.2 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Conversely, prices for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services fell 0.2 percent and 0.6 percent,  respectively.

Import and Export Price Year-over-Year Deflation Moderated in May 2016.: Trade prices continue to deflate year-over-year - although the rate of deflation again declined this month. Import Oil prices were up 16.2 % month-over-month, and export agricultural prices increased 2.9 %. .

  • with import prices up 1.4 % month-over-month, down 5.0 % year-over-year;
  • and export prices up 1.1 % month-over-month, down 4.5 % year-over-year

There is only marginal correlation between economic activity, recessions and export / import prices. Prices can be rising or falling going into a recession or entering a period of expansion. Econintersect follows this data series to adjust economic activity for the effects of inflation where there are clear relationships. Econintersect follows this series to adjust data for inflation.

California Seaports Report Slight Increase in Cargo Volume in May - WSJ: California’s seaports are hoping May was just the beginning of an upswing in trade volume going into the summer months. The Port of Long Beach reported handling its highest volume of import and export containers in May since last year’s peak month of August. Dockworkers received 330,639 loaded import containers, measured as 20-foot-equivalent units, or TEUs. On the export side, the port handled 138,594 loaded TEUs. The Port of Oakland counted 81,293 loaded import TEUs in May, which was also its highest import volume since last August. Oakland’s export performance in May was a bright spot on the Pacific coast, as dockworkers shipped 83,969 loaded TEUs of exports—more than that port has reported in a single month since October of 2014. Exports have lagged behind nationwide as the dollar gained strength last year, making U.S. goods more expensive to overseas customers. As the dollar has weakened in recent months, exports have made a slight comeback. But this year, the West Coast ports’ performance has been sluggish. Compared with the first five months of 2015, imports were down 1.5% in Long Beach and exports were flat. Compared with 2014, imports were off by 1.6% and exports were down by almost 15% through Long Beach. The West Coast ports were plagued with extreme congestion during the first several months of last year, as labor negotiations wrapped up between the dockworkers and port employers. A backlog of dozens of ships took weeks to clear after the parties reached an agreement in late February.

May 2016 Import Sea Container Count Trends Are Improving. -  Only the rolling averages for exports and imports remain in negative territory after two months of soft data. Month-over-month, year-over-year, and year-to-date data are now is in expansion. 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: (table) There is reasonable correlation between the container counts and the US Census trade data also being analyzed by Econintersect. But trade data lags several months after the more timely container counts. Econintersect considers import and exports significant elements in determining economic health (please see caveats below). recession levels.

The US Trade Surplus in Services - The US has been running a trade surplus in services for the last few decades, and it's getting larger. Here's a figure generated with the help of the ever-useful FRED website run by the Federal Reserve Bank of St. Louis. It shows monthly trade data. The blue line shows the monthly US trade deficit in goods. The red line shows the monthly US trade deficit in goods-plus-services. The red line being above the blue line shows that the US trade surplus in services In the 1990s and early 2000s, the US monthly trade surplus in services (that is, the amount the red line is above the blue line) was typically in the range of $8 billion per month: in the last few years, it's been more like $18 billion per month. It's likely that the predominant area of growth in US trade in the future will come from exporting services--managerial expertise, legal, financial, entertainment, technological, design, logistics--rather than physical objects. This figure shows that exports of services used to be about 27-29% of exports of goods-plus-services combined, but the share of services in total goods-and-services exports is now above 33% and rising. A fair number of Americans and politicians argue that a trade deficit is in large part a result of unfair trade practices by other countries. Essentially all actual economists disagree with that claim. Economists instead see trade deficits are arising from broad patterns of national production, consumption, and saving. A low-saving economy like the US consumes more than it produces--which it can do by running a trade deficit and importing more than it exports. . Unfair trade practices can certainly restrict overall flows of trade, but they aren't a main cause of trade deficits and surpluses. That said, I wonder how many of those who think that trade deficits are a result of unfair trade practices by other countries are willing to stick to the logic of their position when it comes to US trade surpluses in services. If trade surpluses are a sign of unfair trade practices, then doesn't the ongoing US surpluses in services trade prove that the US is using unfair trade practices in services?

Rail Week Ending 11 June 2016: Rail Contraction Continues: Week 23 of 2016 shows same week total rail traffic (from same week one year ago) contracted according to the Association of American Railroads (AAR) traffic data. The contraction this week was less than last week. The deceleration in the rail rolling averages began over one year ago, and now rail movements are being compared against weaker 2015 data.A summary of the data from the AAR: For this week, total U.S. weekly rail traffic was 513,471 carloads and intermodal units, down 7.5 percent compared with the same week last year. Total carloads for the week ending Jun. 11 were 248,039 carloads, down 8.7 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 265,432 containers and trailers, down 6.3 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 16.4 percent to 11,149 carloads; farm products excl. grain, and food, up 2 percent to 16,545 carloads; and grain, up 0.6 percent to 20,300 carloads. Commodity groups that posted decreases compared with the same week in 2015 included petroleum and petroleum products, down 23.5 percent to 10,820 carloads; coal, down 18.3 percent to 73,279 carloads; and metallic ores and metals, down 9.9 percent to 22,642 carloads. For the first 23 weeks of 2016, U.S. railroads reported cumulative volume of 5,522,488 carloads, down 13.5 percent from the same point last year; and 5,914,283 intermodal units, down 2.3 percent from last year. Total combined U.S. traffic for the first 23 weeks of 2016 was 11,436,771 carloads and intermodal units, a decrease of 8 percent compared to last year.

CEOs Turn More Bullish About Business Investment -  More chief executives say their firms intend to step up capital expenditures this year, hinting at a rebound for slumping business investment. The economic outlook among top leaders is improving and firmer investment plans are the primary driver, according to Business Roundtable’s second-quarter CEO Economic Outlook Survey, released Wednesday. The group’s members are chief executives at the country’s largest firms. The survey found that 37% of CEOs polled plan to increase capital spending in the next six months versus 18% who plan to cut back. The first quarter survey showed 34% planned increases and 23% said they’d reduce such spending. Companies’ hiring plans and sales projections also improved modestly, but the investment plans were the primary driver for the CEO outlook index rising to 73.5 in the second quarter from 69.4 in the first. Figures above 50 indicate expansion. The latest reading remains below the average of 79.8 since 2004. Despite the recent outlook improvement, CEOs downgraded their view of 2016 economic growth to 2.1% from 2.2%. The Commerce Department said the economy grew at a 0.8% annualized pace in the first quarter. “Increased plans for near-term sales, investment and hiring indicates modest economic improvement,” said Doug Oberhelman, CEO of Caterpillar Inc. and chairman of Business Roundtable. But weak growth expectations “points to an economy that continues to perform below its potential.” He renewed his call for Washington lawmakers to act on “pro-growth policies.” He said those include ratifying the Trans-Pacific Partnership trade deal and updating the tax system.

Industrial Production June 15, 2016: A steep drop in vehicle production pulled industrial production lower in May, down 0.4 percent. Vehicle production had been leading this report but fell 4.2 percent in the month excluding which the headline loss would have been 2 tenths less severe at 0.2 percent. Utility output is always volatile and fell 1.0 percent, which isn't helpful, but mining for once is, up 0.2 percent for the first gain since August last year. The manufacturing component, hit especially by vehicles, is the big disappointment, down 0.4 percent in the month. Declines sweep sub-components including consumer goods, business equipment and construction supplies. Year-on-year, manufacturing volumes are unchanged in what is reminder of how soft the factory is. There are also downward revisions to April including manufacturing where the gain is 1 tenth more modest at 0.2 percent. The weakness of the factory sector, and its exposure to foreign markets and declining business investment, is contrasting very sharply right now with strength in the consumer sector. Note that the traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures

Fed: Industrial Production decreased 0.4% in May  --From the Fed: Industrial production and Capacity Utilization Industrial production decreased 0.4 percent in May after increasing 0.6 percent in April. Declines in the indexes for manufacturing and utilities in May were slightly offset by a small gain for mining. The output of manufacturing moved down 0.4 percent, led by a large step-down in the production of motor vehicles and parts; factory output aside from motor vehicles and parts edged down 0.1 percent. The index for utilities fell 1.0 percent, as a drop in the output of electric utilities was partly offset by a gain for natural gas utilities. After eight straight monthly declines, the production at mines moved up 0.2 percent. At 103.6 percent of its 2012 average, total industrial production in May was 1.4 percent below its year-earlier level. Capacity utilization for the industrial sector decreased 0.4 percentage point in May to 74.9 percent, a rate that is 5.1 percentage points below its long-run (1972–2015) average.This graph shows Capacity Utilization. This series is up 8.2 percentage points from the record low set in June 2009 (the series starts in 1967). Capacity utilization at 74.9% is 5.1% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007. Note: y-axis doesn't start at zero to better show the change. The second graph shows industrial production since 1967. Industrial production decreased 0.4% in May to 103.6. This is 18.5% above the recession low, and 2.0% below the pre-recession peak. This was below expectations of a 0.1% decrease.

US Industrial Output Tumbles In May -- US industrial activity slumped 0.4% in May, well below expectations. The monthly decline reverses April’s bounce and throws cold water on the notion that output was heading toward a summer revival. The manufacturing component fell, too, posting a 0.4% drop that pushed this slice of output into the red in year-over-year terms for the first time this year, according to this morning’s update from the Federal Reserve.  Industrial production overall continues to slide in the one-year column. The 1.4% annual decrease through May marks the ninth straight month of contraction—the longest run of red ink since the Great Recession. Today’s news gives the Fed another excuse to delay raising interest rates at today’s FOMC meeting. The ongoing weakness in industrial activity also keeps the crowd wondering if the US macro trend is stumbling. Although a formal recession signal is still MIA, based on a broad review of available numbers through May, the persistently negative industrial trend is a reminder that the economy has run out of road for shrugging off disappointing data.

Industrial Production Plunges For 9th Straight Month - Longest Non-Recession Streak In 100 Years -- For the 9th month in a row, US Industrial Production declined YoY - down by 1.4% - with 0.4% monthly drop twice as bad as expected. Every subcomponent of the data also declined markedly. Most worryingly, and despite near record highs in stocks, this is the longest streak of IP weakness without a broad economic recession in US history... it's different this time? Every segment is in decline...Leaving this the longest streak of industrial production weakness in US history without an 'official' recession...  We are sure this doesn't matter - just transitory... Charts: Bloomberg

Mixed evidence for the end of the shallow industrial recession: I have written several times in the last month that it looked like the "shallow industrial recession" I have been describing for the past year bottomed in March. That might still be true, but the bad news is, Industrial Production this morning certainly didn't help the cause. April was revised from +0.7% to +0.6%, and May came in at -0.4%: The bad news is, manufacturing was a big part of that decline, and the last new high was in January. The silver lining is, mining (commodities) has been the epicenter of the shallow recession, and that ticked higher, for only the third time in 18 months: As the below graph shows, the second derivative -- the change in the YoY% decline in mining -- is improving: This suggests that the commodity production collapse that has driven the recession is now ending or is likely to end sometime later this year. Another marker for the end of a recession, especially a deflationary one, is that the YoY% decline in industrial commodities reaches its maximum. This has been true for 100 years. Well, commodity prices in the PPI increased in May, and it looks very likely that the YoY% change in commodity prices was at its worst at the end of last year: Yet another marker is an improvement in the ISM manufacturing new orders index above 50. The pattern is: - first, new orders turn - second, business sales turn - finally, business inventories turn Here is the graph of new orders (green, left scale) compared with sales (blue) and inventories (red) for the last 20 years:

Empire State Mfg Survey June 15, 2016: It's been up and down for the Empire State report which, fortunately, is back up in the June report, at 6.01 for the third positive reading of the last four months. New orders, at 10.90, are also up for the third time in four months as are shipments at 9.32. Unfilled orders, however, fell deeper into contraction at minus 10.20. This is a negative indication for employment which is already dead flat at a zero reading. Destocking of inventories is picking up speed and the length of delivery times is shortening, both consistent with weak conditions. Price data are mixed with input costs continuing to show pressure but with selling prices continuing to edge lower. Turning back to positives, the 6-month outlook is up more than 6 points to 34.84 which is very solid and the best reading of the year. The take off for the Empire State report, which is trying to get into the air, has been bumpy but the strength in new orders is unquestionably a solid positive for the factory outlook. This report may lift expectations for a solid gain in tomorrow's Philly Fed report where the consensus is very soft, at only plus 0.8.

June 2016 Empire State Manufacturing Index Returns to Expansion.: The Empire State Manufacturing Survey jumped like a rabbit into expansion, after its major decline last month..

  • Expectations were for a reading between -6.00 to -2.00 (consensus -3.50) versus the 6.0 reported. Any value above zero shows expansion for the New York area manufacturers.
  • New orders subindex of the Empire State Manufacturing Survey returned to expansion, whilst the unfilled orders sub-index declined and remains in contraction.
  • This noisy index has moved from -2.1 (June 2015), 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), -9.0 (May) - and now +6.0.

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: The June 2016 Empire State Manufacturing Survey indicates that business activity expanded modestly for New York manufacturers. The headline general business conditions index climbed fifteen points to 6.0. The new orders index and the shipments index rose from negative values to 10.9 and 9.3, respectively—a sign that orders and shipments were increasing after last month's decline. The inventories index fell to -15.3, indicating that inventories were lower, and the employment index was zero, signaling that employment counts were unchanged. The prices paid index held steady at 18.4, suggesting that moderate input price increases were continuing, and the prices received index was near zero, indicating that selling prices were stable. Firms were more optimistic about the six-month outlook this month, and capital spending plans picked up.

Empire Fed Rises Above Highest Estimate On Jump In New Order As Employment Conditions Deteriorate -- In a rare glimpse of sunlight for the recessionary US manufacturing sector, moments ago the Empire Fed Manufacturing Survey reported that contrary to expectations of another contractionary print (consensus was looking for -4.9%), General Conditions in June 2016 expanded modestly for New York manufacturers with the headline general business conditions index climbing a whopping fifteen points to 6.0, above the highest estimate of 2.0. Unfortunately for workers, the headline did not translate into better work conditions as the number of employees index declined to 0.0, the worst print since March, while the average employee workweek remained in contraction at -5.1. This rebound was driven by the new orders index and the shipments index which rose from negative values to 10.9 and 9.3, respectively—a sign that orders and shipments were increasing after last month’s decline. On the other hand, the inventories index fell to -15.3, indicating that inventories were lower, and the employment index also fell from 2.08 to zero, signaling that employment counts were unchanged. The prices paid index held steady at 18.4, suggesting that moderate input price increases were continuing, and the prices received index was near zero, indicating that selling prices were stable. Firms were more optimistic about the six-month outlook this month, and capital spending plans picked up.Here is the full breakdown:

  • General business conditions rose to 6.01 from -9.02 in the last month; with the forecast range from -7.50 to 2.00 based on 49 estimates
  • Prices paid rose to 18.37 vs 16.67
  • New orders rose to 10.9 vs -5.54
  • Number of employees fell to 0 vs 2.08
  • Work hours rose to -5.1 vs -8.33
  • Inventory fell to -15.31 vs -7.29
  • Six-month general business conditions rose to 34.84 vs 28.48

That said, keep in mind that this index has been extremely volatile in recent months, surging to 10 in April, only to tumble in May after spending most of the past 12 month in negative territory.

Philly Fed Manufacturing Survey showed Expansion in June --From the Philly Fed: June 2016 Manufacturing Business Outlook Survey Firms responding to the Manufacturing Business Outlook Survey reported little growth this month. Though the indicator for general activity was positive in June, other broad indicators continued to reflect general weakness in business conditions. The indicators for both employment and work hours remained negative. Forecasts of future activity weakened from last month but continued to suggest that manufacturers expect growth over the next six months.... The diffusion index for current activity rose almost 7 points, to 4.7, and returned to positive territory this month after two consecutive negative readings ... The survey’s labor market indicators suggest continued weak employment conditions. The employment index was negative for the sixth consecutive month, falling from –3.3 in May to –10.9 in June. Though nearly 72 percent of the firms reported no change in employment this month, the percentage reporting decreases (20 percent) exceeded the percentage reporting increases (9 percent).
emphasis added 
This was above the consensus forecast of a reading of 2.0 for June.

Philadelphia Fed Business Outlook Survey June 16, 2016: The Philly Fed's headline index, which is a measure of general sentiment based on a single question, can often read much differently than the assessment of actual conditions. And this is the case for the June report where the constructive looking 4.7 headline doesn't match the details which are almost uniformly negative. New orders, at minus 3.0, are contracting for a second month while contraction in unfilled orders, at minus 12.6, is deepening. At minus 2.1, shipments are in a third month of contraction. Employment, at minus 10.9, has been in contraction for the entire year. The sample appears to be destocking and delivery times are shortening, both indications of weakness. The only signs of actual life in this report are in prices. Input costs are going up, a reflection of fuel and raw materials, while selling prices are edging higher. Otherwise this report, including the 6-month outlook which continues to show less and less optimism, does not confirm the strength of Wednesday's Empire State report and will not lift the outlook for what is a very flat factory sector.

June 2016 Philly Fed Manufacturing Survey Slightly In Expansion: The Philly Fed Business Outlook Survey is now slightly in expansion. Key elements marginally declined and remain in contraction. The only other manufacturing survey released so far for this month is also in expansion. 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 improved from -1.8 to +4.7. Positive numbers indicate market expansion, negative numbers indicate contraction. The market expected (from Bloomberg) -3.4 to 3.9 (consensus +0.8).  The diffusion index for current activity rose almost 7 points, to 4.7, and returned to positive territory this month after two consecutive negative readings (see Chart). About one-quarter of the firms reported increases in activity, similar to last month, while 20 percent of the firms reported decreases, down from 26 percent last month. More than 52 percent of the firms reported steady activity. The current new orders and shipments indexes, however, remained slightly negative, slipping 1 and 2 points, respectively. Nearly 55 percent of the respondents reported no change in new orders this month, and 45 percent reported no change in shipments. As with the other broad indicators this month, the unfilled orders, delivery times, and inventories indexes all remained negative. The survey's labor market indicators suggest continued weak employment conditions. The employment index was negative for the sixth consecutive month, falling from -3.3 in May to -10.9 in June. Though nearly 72 percent of the firms reported no change in employment this month, the percentage reporting decreases (20 percent) exceeded the percentage reporting increases (9 percent). The average workweek index edged up slightly but remained negative, at -13.1.

Philly Fed Jumps On Surge In Prices Paid; Jobs, New Orders, & "Hope" Plunge --The jump in Philly Fed (from -1.8 to +4.7, beating expectations of +1.0) is considerably less exuberant than the mainstream would like to believe. The biggest driver of this jump back into 'expansion' was a huge surge in "Prices Paid" to the highest since Oct 2014. We are not sure how that is such great news as Prices Received collapsed. Furthermore, number of employees tumbled, New Orders fell to 4 month lows, and average workweek remains deep in contraction. Additionally, 'Hope' fell as the six month outlook dropped to 3 month lows. But apart from all that, yay... Philly Fed is up.Is this good news?

The Surprising Problem With U.S. Manufacturing: It's Creating Too Many Jobs - An ongoing theme of our reports from “career technical” schools—like this high school in Georgia and this community college in Mississippi and these high schools and tech-training centers in California and South Carolina, and these colleges in Vermont and Maine—is that for people with appropriate training, medium-wage skilled jobs actually exist:

  • At this moment in U.S. economic history, the demand for people who can work as high-end repair technicians, in construction trades, in manufacturing factories, in high-end shipping and logistics jobs, and in other fields is relatively strong.
  • And at this moment in technical and economic history, the “maker tools” that have democratized the process of hardware innovation are fostering the growth of the new companies that (according to the important Kauffman foundation report, discussed here) account for nearly all the net job creation in the country.

That’s background for an interesting new column by Conor Sen in Bloomberg View. The title is the sobering-sounding “The End of the U.S. Manufacturing Renaissance (such as it was).” But the trends it reports are very different from what you might infer from that headline. Job openings in manufacturing are at a 15-year high. Layoffs are at a long-term low. Wages are rising faster in manufacturing than in the economy as a whole. The unemployment rate in manufacturing is below the overall average. Please go to the item for the full presentation, but here is one of several representative charts, showing continued recovery after the crash of 2008.

U.S. farmers fret as property taxes soar amid souring incomes | Reuters: Collapsing prices for U.S. corn and soybeans have made it harder for some farmers to pay their property taxes, at a time when these tax bills are soaring and the rate of farm bankruptcies is growing. Over the past three years, farmland property taxes have jumped as much as 400 percent in parts of the United States, according to state and federal government data. One farmer in Ohio said his property tax bill has skyrocketed to more than $100 an acre from less than $20 seven years ago. Farmers say the problem, in many cases, is rooted in the reversal in the grain market. They now are scrambling to come up with the money to pay tax bills based heavily on incomes they enjoyed when crop prices were booming in 2012. Back then, their taxes were much less because they were based partly on previous years when crop prices were lower. Now farm incomes are falling due to cooling export demand and plummeting grain prices. In the Midwest, Chapter 12 farm bankruptcy filings in the first quarter of 2016 soared 60 percent from the same period in 2013, according to court data. In the nation as a whole, Chapter 12 filings are up 18 percent over the same period. "I hear a lot of, 'It's your fault for not saving enough,'" said Aleta Crowe, whose family farms about 2,500 acres of grain crops in southwestern Indiana. "If your property taxes doubled or tripled, would you have thought a few years ago to save money for taxes?"

NFIB: Small Business Optimism Index increased in May --Earlier from the National Federation of Independent Business (NFIB): Small Business Optimism Rises Modestly in May The Index of Small Business Optimism rose two tenths of a point in May to 93.8 ... according to the National Federation of Independent Business’ (NFIB) monthly economic survey released today. ... Fifty-six percent reported hiring or trying to hire (up 3 points), but 48 percent reported few or no qualified applicants for the positions they were trying to fill. Hiring activity increased substantially, but apparently the “failure rate” also rose as more owners found it hard to identify qualified applicants. ... Twenty-seven percent of all owners reported job openings they could not fill in the current period, down 2 points, but historically strong. This graph shows the small business optimism index since 1986. The index increased to 93.8 in May.

May 2016 Small Business Optimism Insignificantly Improves.: The Index of Small Business Optimism rose two tenths of a point in May to 93.8, a negligible increase showing no real enthusiasm for making capital outlays, increasing inventories, or expanding Half of the gain came in the two labor market components, an encouraging development. The market was expecting the index between 92.2 to 94.0 with consensus at 93.5 - versus the actual at 93.8. NFIB chief economist Bill Dunkelberg states: The bottom line is that without an empowered small business sector, the economy will grow at a mediocre pace. Politicians in Washington credit any insignificant growth in the economy to their policies, but realistically, it's the increase in the population. At this point, we should expect the same slow growth for the rest of the year. At 93.8, the Index remains well below the 42-year average of 98. Four of the 10 Index components posted a gain, four declined, and two were unchanged. The biggest increase was Expected Business Conditions, which rose five points, a good sign but still nine percentage points below last year's reading. Owners are still reporting that they cannot find qualified workers and cite it as their fourth "Single Most Important Business Problem." Earning trends among small businesses fell another point and sits at a dismal reading of negative 20. The political climate continues to be the second most frequently cited reason for why owners think the current period is a bad time to expand.

Weekly Initial Unemployment Claims increase to 277,000 --The DOL reported: In the week ending June 11, the advance figure for seasonally adjusted initial claims was 277,000, an increase of 13,000 from the previous week's unrevised level of 264,000. The 4-week moving average was 269,250, a decrease of 250 from the previous week's unrevised average of 269,500. There were no special factors impacting this week's initial claims. This marks 67 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.

Real Unemployment Rate More Than Double The Official Number, CLSA Finds -- While everyone loves to focus on the headline unemployment rate as a reason to say the economy is doing well, especially those at the Fed trying to justify hiking rates into a recession, or those in the current administration trying to establish a legacy of being a market whisperer, the facts get in the way of that narrative. We continuously remind those who are interested in the truth that the number of Americans who are no longer in the labor force has hit an all time high of 94.7 million. If one were to factor in the low labor force participation rate, the actual unemployment rate would be significantly higher than the 4.7% headline. According to CLSA economists, who have updated an analysis we first did in the summer of 2010, if the participation rate stayed at the levels before the financial crisis, the unemployment rate would be 9.6%, more than double what it is today. So the next time you hear that the economy is doing well because of "falling unemployment", refer them the "fringe" CLSA economists, and whatever you do, don't tell the Washington Post.

Which Labor Market Data Should You Believe? - When the unemployment rate falls below 5 percent, it usually means things are going pretty well. It was 4.7 percent in May, a level last seen in November 2007. A different measure of the economy’s health, however, is beeping and flashing red. It says that labor market conditions have deteriorated with each passing month this year. In May, it fell to its lowest level in seven years. Called the Labor Market Conditions Index, it has been billed as a more complete measurement than that old war horse, the unemployment rate. There are two possible explanations for the index’s decline: one somewhat comforting, and the other scary.Let’s do comfort first. It’s possible we’re not making progress because we’ve more or less arrived at our destination — what economists call full employment. This somewhat misleading term doesn’t mean that everyone has a job. It means that the reservoir of people seeking work has receded to a historically normal level. There is some evidence for this. Notably, the low unemployment rate.But there are also some pretty strong reasons for skepticism. My personal favorite: In 2007, about 88 percent of men between the ages of 25 and 54 were working. Now, roughly 85 percent of such men are working. That’s a difference of about two million men, most of whom probably would like jobs. The scary explanation? Job growth is slowing because the economy is losing steam.Fed officials, and other economists, have been grappling with the divergence between relatively weak reported economic growth and relatively strong job growth. Those at the Fed have largely taken the view that labor market data is more accurate, which has been true over time.

BLS: Unemployment Rates stable in 41 states in May -- From the BLS: Regional and State Employment and Unemployment Summary:  Unemployment rates were significantly higher in May in 5 states, lower in 4 states and the District of Columbia, and stable in 41 states, the U.S. Bureau of Labor Statistics reported today. .. South Dakota and New Hampshire had the lowest jobless rates in May, 2.5 percent and 2.7 percent, respectively. The rate in Arkansas (3.8 percent) set a new series low. (All region, division, and state series begin in 1976.) Alaska had the highest unemployment rate, 6.7 percent. This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession. The size of the blue bar indicates the amount of improvement. The yellow squares are the lowest unemployment rate per state since 1976. The states are ranked by the highest current unemployment rate. Alaska, at 6.7%, had the highest state unemployment rate. The second graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 11 states with an unemployment rate at or above 11% (red). Currently no state has an unemployment rate at or above 7% (light blue); Only seven states and D.C are at or above 6% (dark blue).

Unemployment rates are far below US level in 16 states  (AP) — Unemployment rates have fallen to very low levels in a third of U.S. states, a trend that may push up wages in those areas. The Labor Department says the unemployment rate is now significantly below the national figure of 4.7 percent in 16 states. It fell to 3.8 percent in Arkansas last month, the lowest on records dating back to 1976. Steady hiring has lowered unemployment throughout the U.S. But rates have also fallen for a bad reason: many of those out of work have stopped searching for jobs. The government doesn’t count people as unemployed unless they are actively looking for work. That has pushed the rate lower than it would otherwise be in many states. Employers added a significant number of jobs in just three states last month, while four states lost jobs. Employment was essentially unchanged in 43 states. That reflects the tepid figures nationwide: Employers added just 38,000 jobs last month in the U.S. as a whole. South Dakota had the nation’s lowest rate in May, at 2.5 percent, followed by New Hampshire, at 2.7 percent. Many states with very low unemployment rates are small. Nebraska’s rate was 3 percent in May, and Maine’s was 3.5 percent. But some are larger and more representative of the U.S. economy as a whole. Colorado, with a booming software and information technology sector, boasts an unemployment rate of just 3.4 percent. Minnesota, which includes a thriving medical technology industry, has a rate of 3.8 percent. Virginia, which has many federal government workers and contractors, also has a rate of 3.8 percent. When businesses have fewer unemployed people to choose from, they may be forced to offer higher wages to attract workers.

More Than Half of U.S. Workers Are Leaving Some Vacation Days Unused - More than half of U.S. workers left some vacation time unused in 2015, depriving the American economy of $223 billion in spending on restaurants, home-improvement projects, hotels and other travel, according to a new study. The main culprit: the spread of smartphones, the Internet and other technologies increasing employees’ attachment to work. “The constant connectivity makes us feel so integral and indispensable that we have a harder time getting away,” said Katie Denis, the Senior Director of Project: Time Off, a travel-industry initiative that commissioned the research. The study found that workers used 16.2 vacation days on average last year, compared with the long-term average of 20.3 days from 1976 to 2000. More than half of workers surveyed as part of the research — 55% — left days unused last year, up from prior years, Ms. Denis said, though figures aren’t exactly comparable because the methodology changed. The online survey included 5,641 people who work more than 35 hours weekly and get paid time off. Conducted by GfK, it was based on a representative random sample of the U.S. population and included managers. Oxford Economics, an economic analysis firm, used the survey results and data from the Labor Department’s Bureau of Labor Statistics’ Current Population Survey to estimate historical levels of vacation activity. In total, Americans left 658 million vacation days unused last year. Of those, 222 million were forfeited because they couldn’t be rolled over or paid out in any way. That means an average of two full days were forfeited per worker.

Laid-Off Americans, Required to Zip Lips on Way Out, Grow Bolder - — American corporations are under new scrutiny from federal lawmakers after well-publicized episodes in which the companies laid off American workers and gave the jobs to foreigners on temporary visas. But while corporate executives have been outspoken in defending their labor practices before Congress and the public, the American workers who lost jobs to global outsourcing companies have been largely silent. Until recently. Now some of the workers who were displaced are starting to speak out, despite severance agreements prohibiting them from criticizing their former employers. Marco Peña was among about 150 technology workers who were laid off in April by Abbott Laboratories, a global health care conglomerate with headquarters here. They handed in their badges and computer passwords, and turned over their work to a company based in India. But Mr. Peña, who had worked at Abbott for 12 years, said he had decided not to sign the agreement that was given to all departing employees, which included a nondisparagement clause. Mr. Peña said his choice cost him at least $10,000 in severance pay. But on an April evening after he walked out of Abbott’s tree-lined campus here for the last time, he spent a few hours in a local bar at a gathering organized by technology worker advocates, speaking his mind about a job he had loved and lost. “I just didn’t feel right about signing,” Mr. Peña said. “The clauses were pretty blanket. I felt like they were eroding my rights.” . “I have heard from workers who are fearful of retaliation,” . “They are told they can say whatever they want, except they can’t say anything negative about being fired.”

The New Economy and Its Discontents: Low-Wage Workers Propose a Good Work Code for Silicon Valley: By some estimates, as many as 53 million people living in the United States are now self-employed. Many work as independent contractors or freelancers, hired and fired at the click of an app. With flexibility comes a measure of freedom but also of insecurity; a measure of independence but also of isolation. Digital sector workers may not stand on a speeding production line or operate deadly machines, but they still can still face danger on the job. Subjective feedback or "ratings" systems are open to abuse. Online businesses love to talk up their new technologies and innovative business models, but non-office, non-factory workplaces are still sites of profound power struggle. Just as in the old economy, workers, creators and consumers are finding they have to organize and fight for their rights. Palak Shah, Social Innovations Director of the National Domestic Workers Alliance, is working with low-wage digital workers and Silicon Valley employers to develop a Good Work Code. In addition to helping create this code of conduct for digital employers, she's worked in state government for Massachusetts Gov. Deval Patrick, and for the grassroots with the Los Angeles Bus Riders Union, Generation Five and Oakland Rising in the Bay Area.

American pay and productivity for typical workers: Still not growing together  James Sherk at the Heritage Foundation has written a piece claiming that there has been no gap between growth in productivity and growth in pay. It’s written largely as an attempted debunking of our work, but since there’s not actually any bunk in this work, the attempt fails.  Sherk raises many issues. Some have a bit of validity to them, some do not. I’ll discuss some of the nitpickier bits of his piece a bit later. In the end, however, the difference between his findings and ours boils down to the fact that he ignores the effect of rising inequality in driving a wedge between productivity and pay. And it’s true that if you ignore inequality, you get a much sunnier view of American wage performance in recent decades. But that’s the whole point, no? Past all the hand-waving, the difference between Sherk’s findings and ours is completely dominated by the same single point of contention that comes up in every debate about growth in productivity and pay: the difference between average versus typical pay growth. The title of our most recent piece on this topic is: Understanding the Historic Divergence Between Productivity and a Typical Worker’s Pay. That “typical” in the title is important. We look at two measures of hourly pay that we argue are relevant for typical American workers: average pay for private-sector production and non-supervisory workers from the Current Employment Statistics (CES) and the median worker from the Current Population Survey (CPS). Production and non-supervisory workers constitute 80 percent of the private workforce. We think that seems pretty typical. The median worker in the CPS is that worker who earns higher hourly pay that half of the workforce and lower hourly pay than half. This also seems broadly representative to us.

Liberal Return Policies for Consumers Can Reduce Retail Workers’ Pay -  These days, people are returning goods in record numbers, and often in worse condition, encouraged by the flexible return policies adopted by e-commerce sites like Amazon and the brick-and-mortar stores trying to keep pace.But unlike returns at online retailers, those at many department stores have a side effect: They can unexpectedly lower a worker’s paycheck weeks or months after a sale is made.“If you’re thinking, ‘This is my income for the week,’ and then you find out a month later, ‘Oh that wasn’t my income at all,’ you have to plan pretty far into the future,” said Stephanie Luce, a professor of labor studies at the City University of New York. Some of the country’s leading department stores allow returns for up to one year, like Nordstrom, or set no time limit at all, like Macy’s. The commissions paid to sales representatives at Macy’s can be affected by returns made within six months, while returns at Nordstrom affect workers for up to a year.These windows, union leaders say, are too long and fuel a culture of returns that has added instability to the paychecks of retail workers.   .“When you have a return policy that says ‘We’ll take anything back anytime,’ well, then returns go up,”

The Minimum Wage Pain Continues: Hundreds More To Be Fired At Walmart --Walmart reported relatively decent Q1 results, however one item that was apparent is that costs are still a factor in the business, as operating income was lower y/y even on increased revenues. We've discussed many times the fact that Walmart has been overly eager to boost everyone's wage in order to appease the living wage crowd, and as a result the company has had to move forward with massive layoffs and store closings to try and mitigate the impact on profits. Earlier this month we also noted that Walmart is testing out drones that when operational, will be able to carry out what once were human tasks in its large distribution centers. This effort will further position the company to be able to shed more labor and benefit expense in the future. That said, Walmart isn't waiting for the drone initiative to come online. The company recently announced that the accounting function at roughly 500 stores, mostly on the West Coast, will be eliminated and the job responsibilities will be handled by a shared service center at Walmart's Bentonville, Arkansas headquarters the WSJ reports. The function was used to count cash, as well as handle invoicing for companies that bring product directly to the store instead of the warehouse. Invoicing will move to Bentonville, and machines will now be used to count the cash at each location. Mark Ibbotson, executive VP for central operations at Walmart US said the current system is dated and error-prone, "we really want to pull our workforce onto the floor" - yes, or reduce headcount and labor costs, one of the two.

How Will You Cope With A Lower Standard Of Living? The forces are mounting that will eventually overwhelm most Americans and send their standard of living to unknown depths. Americans that have only known the post WWII prosperity are ill equipped and educated to deal with depression level living. Easy credit and instant gratification have created a nation of whining, self absorbed, entitlement minded people with no moral or mental toughness. Doug Casey believes we are headed for what he calls a super depression created by the ending of a debt super cycle. The bigger the debt cycle the bigger the depression that follows. That’s how reality works and most people are not prepared for reality. When this depression, which has already started, gets momentum, it will overwhelm the plans of a society that is expecting to get things like social security, pensions and payouts from retirement plans they have paid into for many years. All of those things will disappear almost overnight and leave society gasping and stupefied over what to do. Their reactions will be to yell and scream and try to identify who to blame but the only person they should blame is the one in the mirror. Many very smart people have raised the alarm and done their best to warn the sleeping public, but those slumbering masses have ignored the warnings and hit the snooze button one more time. The masses do not understand economics, do not want to understand economics and they will pay dearly for that ignorance in the coming days. When the real unemployment rate becomes common knowledge as it increases substantially, people will be left to survive on what resources they have saved up outside the banking system that cannot be stolen by the politicians and bankers. That is a key point here. The assets you have outside the system that cannot be stolen from you with a few key strokes on some computer.

Census data: Half of U.S. poor or low income - CBS News: Squeezed by rising living costs, a record number of Americans — nearly 1 in 2 — have fallen into poverty or are scraping by on earnings that classify them as low income. The latest census data depict a middle class that's shrinking as unemployment stays high and the government's safety net frays. The new numbers follow years of stagnating wages for the middle class that have hurt millions of workers and families. "Safety net programs such as food stamps and tax credits kept poverty from rising even higher in 2010, but for many low-income families with work-related and medical expenses, they are considered too `rich' to qualify," said Sheldon Danziger, a University of Michigan public policy professor who specializes in poverty. "The reality is that prospects for the poor and the near poor are dismal," he said. "If Congress and the states make further cuts, we can expect the number of poor and low-income families to rise for the next several years."

Why don’t we have universal basic income? - In the mid-nineteen-seventies, the Canadian province of Manitoba ran an unusual experiment: it started just handing out money to some of its citizens. The town of Dauphin, for instance, sent checks to thousands of residents every month, in order to guarantee that all of them received a basic income. The goal of the project, called Mincome, was to see what happened.  Evelyn Forget, an economist at the University of Manitoba, found was that life in Dauphin improved markedly. Hospitalization rates fell. More teen-agers stayed in school. And researchers who looked at Mincome’s impact on work rates discovered that they had barely dropped at all. The program had worked about as well as anyone could have hoped.Mincome was a prototype of an idea that came to the fore in the sixties, and that is now popular again among economists and policy folks: a basic income guarantee. There are many versions of the idea, but the most interesting is what’s called a universal basic income: every year, every adult citizen in the U.S. would receive a stipend—ten thousand dollars is a number often mentioned. (Children would receive a smaller allowance.)One striking thing about guaranteeing a basic income is that it’s always had support both on the left and on the right—albeit for different reasons. Martin Luther King embraced the idea, but so did the right-wing economist Milton Friedman, while the Nixon Administration even tried to get a basic-income guarantee through Congress. These days, among younger thinkers on the left, the U.B.I. is seen as a means to ending poverty, combatting rising inequality, and liberating workers from the burden of crappy jobs. For thinkers on the right, the U.B.I. seems like a simpler, and more libertarian, alternative to the thicket of anti-poverty and social-welfare programs.

Congresswoman Calls for Drug-Testing the One Percent, Not the Poor -- A Wisconsin congresswoman, "sick and tired, and sick and tired of being sick and tired, of the criminalization of poverty," plans to introduce a bill requiring drug tests for the rich before high-dollar tax deductions are approved. U.S. Rep. Gwen Moore, a Democrat from Milwaukee, told the Guardian in an interview Wednesday that her initiative was inspired by fellow Wisconsinite Paul Ryan's new "anti-poverty" plan, unveiled last week in front of a Washington, D.C. drug treatment center. At the time, Moore denounced that proposal as "a series of discriminatory policies meant to stigmatize the most vulnerable among us." She said to the Guardian this week: "When he stood in front of a drug treatment center and rolled out his anti-poverty initiative, pushing this narrative that poor people are drug addicts, that was the last straw." In turn, Moore plans to introduce on Thursday the "Top 1% Accountability Act," which the Guardian explains "would force taxpayers with itemized deductions of more than $150,000—which, according to 2011 tax data compiled by the IRS, would only be households with a yearly federal adjusted gross income of more than $1m—to submit to the IRS a clear drug test from a sample no more than three months old, or take the much lower standard deduction when filing their taxes."

The biggest questions about gun violence that researchers would still like to see answered - There are a few big things we know about gun violence in America: The US has way more guns per capita than any other country. It has far more gun homicides per capita than other wealthy countries. States with more guns have more gun deaths. And people with guns in their homes are more likely to be killed or to kill themselves with guns. But just as importantly, there’s a lot that researchers still don't know. There’s frustratingly little evidence on what policies work best to reduce gun violence. (Australia saw a drop in homicides and suicides after confiscating everyone’s guns in the 1990s, but that would likely never happen here.) Experts still don’t have a great sense of what impact stricter background checks have, or how the "informal" gun trade operates, or even how people use guns in crimes.  "We have superficial knowledge of most gun violence topics," says Michael Nance, director of the Pediatric Trauma Center at the Children’s Hospital of Philadelphia. And this ignorance has serious consequences. It’s awfully hard to stop gun violence if we can't even agree on basic facts about how and why it happens. This ignorance is partly by design. Since the 1990s, Congress has prevented various federal agencies from gathering more detailed data on gun violence. The Centers for Disease Control and Prevention (CDC), which has elaborate data gathering and monitoring programs for other public health crises like Ebola or heart disease, has been dissuaded from researching gun violence. The Bureau of Alcohol, Tobacco, Firearms, and Explosives can't distribute much of its trace data for research purposes. Obamacare limits doctors' ability to gather data on patients' gun use.

Economic Growth Slowed in Most States Last Year -- Economic growth slowed in more than half of the states in the U.S. last year, underscoring the mixed fortunes across much of the country as commodity prices crashed while other sectors gained steam.  Gross domestic product, a broad measure of economic output, either slowed or shrank in 28 states last year, according to Commerce Department data released on Tuesday. By comparison, growth slowed in only nine states the prior year.  Farm states Iowa, Kansas and Nebraska, energy-focused Oklahoma, Wyoming, Alaska and Montana, and New Mexico all saw GDP contract last year. (Despite its contraction, Alaska’s economy actually performed better in 2015 than 2014, when it shrank at an even greater rate.) Those states economies are likely a reflection of falling farm incomes, which were hit by tumbling crop prices, and a big slowdown for the oil and coal industries. To be sure, the overall U.S. economy expanded last year and most states are still growing–just not as fast. And some parts of the country are doing particularly well. Both California and Oregon’s economies expanded at a 4.1% seasonally adjusted annual rate, leading the nation. Texas was next at 3.8%, suggesting much of the state’s economy had diversified enough to shrug off the collapse in oil prices. California’s economy accounts for about 13.8% of economic output in the U.S., making it the nation’s largest. Texas is next at 8.8%, followed by New York at 8.1%.

Supreme Court Strikes Down Puerto Rico Debt-Restructuring Law – WSJ  —The Supreme Court on Monday struck down Puerto Rico’s effort to restructure its public utility debts, increasing pressure on Congress to finish work on pending legislation to help the U.S. territory address its growing debt crisis. The court’s 5-2 decision said Congress, in prior legislation on municipal bankruptcies, didn’t give Puerto Rico the ability to enact its own bankruptcy process. The ruling eliminated the slim chance that the territory could write its own bankruptcy plan, leaving Congress as the only plausible way to avoid a disorderly restructuring of Puerto Rico debt. The island is about $70 billion in debt and has missed bond payments  The U.S. House passed a bipartisan bill last week to create a debt-restructuring process for the territory, which would be overseen by a seven-member federal board. No federal funds would be spent on the plan, which awaits action in the Senate. President Barack Obama supports the bill, calling it “the only option on the table to save Puerto Rico from spiraling out of control.” A spokesman for the Puerto Rico government had no immediate comment. “We are grateful for the Supreme Court’s careful consideration of the case, and are pleased that we now can put this litigation behind us,” said Matthew D. McGill, who represented bondholders Franklin Resources Inc. and Oppenheimer Holdings Inc. and an investment adviser, Blue Mountain Capital Management LLC. The bondholders hold approximately $1.56 billion in bonds issued by the Puerto Rico Electric Power Authority.

Prosecutors: Congressman led ‘white-collar crime spree’ (AP) — Federal prosecutors say a veteran congressman on trial in a racketeering case led a “white-collar crime spree” that stretched from Philadelphia to Washington. U.S. Rep. Chaka Fattah’s monthlong corruption trial is nearing an end with closing arguments Monday from Justice Department lawyer Jonathan Kravis. The 11-term Philadelphia Democrat is accused of taking an illegal $1 million campaign loan to help pay for his failed 2007 mayoral bid. Prosecutors say he also used federal grants and nonprofit funds to enrich his family and friends. Defense lawyers say Fattah’s former political consultants devised the schemes. Two have pleaded not guilty and testified against him. Fattah’s lawyers are expected to make closing arguments later in the day.

Chicago's Property Taxes Jump Nearly 13 Percent - Illinois residents already pay the second-highest property taxes in the nation, according to the Tax Foundation. Now Chicago homeowners can expect higher rates still. On average, they face a 12.8 percent increase this year, according to a release form the office of Cook County Clerk David Orr. That figure translates to a median $412.87 hike. Suburban homeowners, meanwhile, will see a slight increase, +1.7 percent in the North Suburbs and +2.1 percent in the South Suburbs. We've expected the hike since last year, as the massive debt load and unfunded pension crisis prompted the City of Chicago to pass a $588 million property increase, which will take place through 2018. This year’s $363 million bill represents the largest bill. In 2015, Mayor Rahm Emanuel promised safeguards that would protect owners of homes valued at $250,000 or less-a solution that never materialized. Emanuel spoke Tuesday about working with aldermen on a new option: a post-hoc rebate that, according to the Tribune, is highly unlikely to be passed before payments are due on Aug. 1. Property taxes continue to be an endless source of anxiety here in Chicago, and not just among homeowners. Chicagoist examined the effects of Emanuel’s increase shortly after its proposal last year in terms of rental rates, and experts determined an increase was all but inevitable. According to some mid-year figures, that prophecy has already fulfilled itself. Concerns over gentrification are also closely linked to property taxes, of course; and some neighborhoods are now feeling the pinch in that regard, as well.

Is the nation’s third-largest school district in danger of collapse?  -- In September 2015, the Chicago Tribune ran an editorial that wondered whether the Chicago Public School District would collapse under the weight of its mind-numbing financial problems. It hasn’t yet, but money mismanagement, inadequate funding and failed education policy are combining with a host of other factors to raise the issue of whether the nation’s third-largest school district is in existential danger. The governor of Illinois is fighting with the mayor of Chicago over funding; the mayor is in a long-term fight with teachers over a controversial pension system, charter schools and other issues, and many parents remain furious with the mayor for closing dozens of traditional public schools three years ago while promoting the expansion of charter schools. Teachers are working under an expired contract and may soon stage their second strike since 2012, when their week-long walkout had public support.  Dozens of principals, including some from the district’s best schools, have decided to leave, but those who are staying were warned recently that they could see 39 percent cuts in funding. That goes for teachers, after-school programs and enrichment programs. Chicago public schools, long in dire financial straits, face a budget deficit of more than $1 billion and must contribute $676 million to the Chicago Teachers Pension Fund by June 30, which, the Chicago Sun Times says, would leave only $24 million in the district’s coffers.  Long accustomed to borrowing its way out of financial ruin, the district has seen its credit ratings drop to “junk.” Earlier this year, the district cut the size of one of its bond offers and, as Reuters said, agreed “to pay interest costs rivaling Puerto Rico’s in order to lure investors into the deal.” 

Kansas City asks, How little money is too little for schools? - Kansas City, Kan., saw impressive education gains during the 2000s, then lost $50 million. Today, they’re trying to keep up reforms on a shoestring – while suing the state over funding.  Teachers in financially strapped urban districts are used to saving money where they can. In that respect, Kansas City, where in 2014 nearly 90 percent of the students were poor enough to qualify for free or reduced-price lunch, is not unusual. But since 2009, according to David Smith, the district’s chief of communications and government relations, the district has had to cut more than $50 million from its already tight budget because of state cutbacks, threatening progress in a district that had seen some significant and surprising gains for its students. Kansas’s governor and Legislature also are making national headlines for not equalizing education funding between low-income and wealthier districts. The state Supreme Court has warned that it could prevent schools from opening in the fall if the state refuses to comply with its most recent order to increase funding. But whether or not the school district gets the cash, it says it is going forward with an ambitious plan to add a requirement that, to get their diplomas, high-schoolers must either score a 21 on the ACT, complete a year of college, or earn a technical certificate. Kansas City’s persistence in the face of the funding shortfalls raises questions reformers across the nation have battled over for decades: Can districts raise expectations and improve achievement on a shoestring? How little money is too little for schools to function well, and what could be achieved with more?

The New Education Reform Lie: Why Denver Is a Warning Sign, Not a Model, for Urban School Districts - Scott Gilpin works in advertising, so he’s used to dealing with people in the promotions business. He’s just not used to seeing them operating a local public school. When he toured his first charter, a school in the Strive Preparatory network, he couldn’t help but take note of the school’s staffing structure, which could have supported a mid-sized promotional campaign: his guide was the chief of external affairs for the network, and the school boasted a senior director of development and an associate director of recruitment, too. Gilpin—who sent his children to the local public school they were zoned for, as his parents had done—wondered, “What kind of local public school needs to recruit its students?” As Gilpin would learn, lots of new Denver schools are that “kind of school.” Across the city, Denver has opened 27 charter schools in the last five years, and plans to start up six more in the 2016-17 school year – effectively doubling the number of charter schools in the city in less than six years, according to a recent report from the Center for Popular Democracy, a left-leaning research and advocacy organization in Washington, DC. Yet this rush to expand charters is hardly justified by the performance of the ones already in operation. According to CPD, based on the school performance framework Denver uses to evaluate its own schools, “Forty percent of Denver charter schools are performing below expectations.” And of those schools, 38 percent are performing significantly below expectations. Nevertheless, numerous articles and reports in mainstream media outlets and education policy sites enthusiastically tout Denver as the place to see the next important new “reform” in education policy in action. Recent reports from other Beltway-based think tanks, on both the right and the left of the political spectrum, also hail Denver as a model for advancing “school choice” and charter schools that have the power to “transform” the education of low-performing students. Earlier this year, the Brookings Institution named Denver the second-best of the nation’s 100+ largest school districts that provide parents with options for “school choice.” But Gilpin and other Denverites tell a different story about Denver-style urban school reform.

Student accused of violating university 'safe space' by raising her hand -- A university student was threatened with being thrown out of a meeting after being accused of violating “safe space” rules - by raising her hand. Imogen Wilson, the vice-president for academic affairs at Edinburgh University Students’ Association (EUSA), spoke out against safe space rules becoming “a tool for the hard left to use when they disagree with people”, following the incident last week. Ms Wilson, 22, was subject to a “safe space complaint” over her supposedly “inappropriate hand gestures” during a student council meeting. “Safe space is essential for us to have a debate where everyone can speak, but it can’t become a tool for the hard left to use when they disagree with people.”  According to the association’s rules, student council meetings should be held in a “safe space environment”, defined as “a space which is welcoming and safe and includes the prohibition of discriminatory language and actions”. This includes “refraining from hand gestures which denote disagreement”, or “in any other way indicating disagreement with a point or points being made”. “Disagreements should only be evident through the normal course of debate,” it says. Ms Wilson said she raised her arms in disagreement after being accused by another speaker of failing to respond to an open letter, despite in fact having made efforts to contact the letter’s authors.A complaint was made against Ms Wilson, who was then subjected to a vote on whether she should be removed from the room. Although the vote went in her favour, with 18 people voting to remove her and 33 voting for her to be allowed to remain, she was later threatened with another complaint after shaking her head while someone was speaking

The Chilling Effect of Fear at America's Colleges - No great universities exist in the world without a deep institutional commitment to academic freedom, free inquiry, and free expression. For the past 60 years, American research universities have been vigilant against external and internal attempts to limit or destroy these values. The First Amendment scholar Geoffrey Stone has noted that free expression, in one form or another, has been continually under attack on campuses for the past 100 years. Today, these core university values are being questioned again, but from a new source: the students who are being educated at them.Consider few recent cases: Brown University, Johns Hopkins University,Williams College, and Haverford College, among others schools, withdrew speaking invitations, including those for commencement addresses, because students objected to the views or political ideology of the invited speaker. Brandeis University began to monitor the class of a professor who had explained that Mexican immigrants to the United States are sometime called “wetbacks,” a comment about the history of a derogatory term that outraged some Mexican American students. Black students at Princeton University protested against the “racial climate on campus” and demanded that Woodrow Wilson’s name be removed from its school of Public and International Affairs. The chilling effect of these kind of restrictions on speech were not lost in 1947 on Robert Hutchins, the president of the University of Chicago, who opined during the McCarthy period: “The question is not how many professors have been fired for their beliefs, but how many think they might be.”

How to Be a Student Protester: 1968 vs. 2016 | Vanity Fair: Amid the contentious presidential election of 1968, college campuses erupted in protest. What’s eating at their 2016 contemporaries? Vanity Fair breaks it down.

Trends in Employment at US Colleges and Universities - Cleveland Fed A number of commentators have argued that the priorities of colleges and universities in the United States are misplaced. One area of concern is the growth of amenities, such as recreation centers and lavish dormitories.1 Additionally, some have argued that a proliferation of administrators is responsible for the rising cost of college.2 Meanwhile, there is also concern about the increasing role of part-time adjuncts and other nontraditional faculty.3 Many of the issues in higher education that have caused concern are related to employment, and much of what is known about these issues is based on anecdote or on a limited use of data. There has been little systematic study of employment in higher education. This Economic Commentary explores trends in employment at colleges and universities in the United States between 1987 and 2013. Some of the results from this analysis are in line with conventional wisdom. For example, I document that a declining proportion of faculty are full-time employees. On the other hand, some of the results are counter to popular belief. For example, I find that the share of college employees who are executives, administrators, or managers has not changed appreciably over time. I use data from the Integrated Postsecondary Education Data System (IPEDS) Fall Staff survey. IPEDS is conducted by the National Center for Education Statistics in the US Department of Education. It is roughly a census of colleges and universities, and thus coverage is very broad. I use data on fall employment by occupational category at four-year colleges in the United States in the odd-numbered years between 1987 and 2013.4 I drop data from 1991 due to data irregularities.5 The number of institutions covered by this analysis rises over time from 2,585 in 1987 to 3,065 in 2013. Between 1987 and 2011, the IPEDS data report for each university the number of full-time and the number of part-time employees in the following seven mutually exclusive and exhaustive categories:

The Decline Of Research At Public Universities Erodes Public Trust - When Marc Edwards, a professor of environmental engineering at Virginia Tech, helped uncover the water contamination crisis in Flint, he did so mostly by burning through his own money. Although the water contamination crisis in the Michigan town had been going on for quite some time, it took Edwards’ testing and FOIA requests to legitimize the crisis in eyes of the media — which eventually featured the controversy in national headlines. But Edwards’ prominent role in exposing these kinds of issues, as he did when he investigated Washington D.C.’s water supply, has cost him professionally in the past, but he’s continued to criticize government agencies. Edwards’ story is indicative of a larger problem in higher education: The way we currently fund research through public universities is limiting research opportunities that could save lives and improve the health of the public. As public universities lose state funding, and are increasingly forced to function more like any other business, universities have to shift priorities. CEO-like presidents are hired, poorly paid adjuncts are called upon to fill in the gaps, and schools treat low-income and homeless students as “risks.” But another big problem is that these universities also lose their research missions — and as a country, we suffer for it.With fewer resources in this area, researchers do fewer partnerships with communities, there is less innovation, and public trust in research falls, Edwards argued. Although 7 in 10 adults say that government funding in scientific research usually pays off in the long term, the share of the public who views U.S. scientific achievements as the best in the world has fallen 11 points from 2009, a 2015 Pew Research survey shows.

Visualizing The Over-Education Bubble - Student Loan Delinquencies Are Soaring --What do you get when you combine skyrocketing tuition costs, a lack of growth inhigh-paying jobs, moral hazard, and America’s largest-ever generation of students? As VisualCapitalist's Jeff Desjardins explains, it’s a recipe for a mountain of $1.3 trillion in student loan debt – much of which is not being paid for. (Infographic Courtesy of: Visual Capitalist.) With many students graduating with high debt loads, a growing number of students are becoming delinquent on their loans. The most recent estimate by the Federal Reserve Bank of New York estimates the percent of 90+ day delinquent loans to now be at 11.0%. This puts student loans at a higher delinquency rate than credit cards (7.6%), auto loans (3.5%), and mortgages (2.2%). It’s also particularly interesting because historically credit cards have had the highest rates among all types of consumer credit. Despite this, student loans “passed” credit cards in delinquency frequency at the end of 2012.Why are student loans the most troubled form of consumer debt right now? It’s the result of a clear mismatch between supply and demand for college-educated workers. Have college graduates been oversold on the prospects of a college degree? Or is the market for high-paying jobs not materializing as expected in the current low-growth economy? Either way, many college grads are punching below their weight in the job market. In a 2014 study, economists affiliated with the Federal Reserve Bank of New York found that up to 49% of recent college graduates aged 22 to 27 were working in careers that do not requite any college education.

The Disadvantages of Being Stupid -- As recently as the 1950s, possessing only middling intelligence was not likely to severely limit your life’s trajectory. IQ wasn’t a big factor in whom you married, where you lived, or what others thought of you. The qualifications for a good job, whether on an assembly line or behind a desk, mostly revolved around integrity, work ethic, and a knack for getting along—bosses didn’t routinely expect college degrees, much less ask to see SAT scores. As one account of the era put it, hiring decisions were “based on a candidate having a critical skill or two and on soft factors such as eagerness, appearance, family background, and physical characteristics.” The 2010s, in contrast, are a terrible time to not be brainy. Those who consider themselves bright openly mock others for being less so. Even in this age of rampant concern over microaggressions and victimization, we maintain open season on the nonsmart. People who’d swerve off a cliff rather than use a pejorative for race, religion, physical appearance, or disability are all too happy to drop the s‑bomb: Indeed, degrading others for being “stupid” has become nearly automatic in all forms of disagreement. . An evening of otherwise hate-speech-free TV-watching typically features at least one of a long list of humorous slurs on the unintelligent (“not the sharpest tool in the shed”; “a few fries short of a Happy Meal”; “dumber than a bag of hammers”; and so forth). This gleeful derision seems especially cruel in view of the more serious abuse that modern life has heaped upon the less intellectually gifted. Few will be surprised to hear that, according to the 1979 National Longitudinal Survey of Youth, a long-running federal study, IQ correlates with chances of landing a financially rewarding job. Other analyses suggest that each IQ point is worth hundreds of dollars in annual income—surely a painful formula for the 80 million Americans with an IQ of 90 or below. When the less smart are identified by lack of educational achievement (which in contemporary America is closely correlated with lower IQ), the contrast only sharpens.

Former college students score a rare win that could have a big impact - The New Jersey Supreme Court recently decided whether two former for-profit college students have the right to sue their school.  A pair of former students who say they were duped by their for-profit college will be able to continue pursuing their claims in court, the New Jersey Supreme Court ruled earlier this week, in a decision that has the potential to influence the way other high court judges view widespread, but controversial clauses that make it more difficult for consumers to sue businesses. Annemarie Morgan and Tiffany Dever say representatives at Sanford Brown Institute convinced them to enroll in the school’s ultrasound certificate program by implying it was accredited and that the school’s career center would help them land a job in the field. In court documents, the two say they later discovered those claims weren’t true. Morgan and Dever sued, but because they signed a document when they enrolled that included a mandatory pre-dispute arbitration clause — a provision that requires consumers to settle disputes with businesses in a private process called arbitration — the school argued they couldn’t pursue their claims in court. Earlier this week, the New Jersey Supreme Court ruled that the arbitration clause, which Sanford Brown claimed designated an arbitrator to determine whether any claims should continue in arbitration or in court, failed to “satisfy the elements necessary for the formation of a contract.” Now the case will go back to the trial court, unless Sanford Brown appeals the decision to the United States Supreme Court.

Obama Plan Eyes Debt Relief for Defrauded Students - Students who have been defrauded by their colleges will have a clearer path toward debt forgiveness and legal recourse under a set of education reforms to be issued by the Obama administration on Thursday.The proposed rule, drafted by the Department of Education and aimed at for-profit colleges, would allow borrowers to have their federal student loans forgiven in cases of fraud. It would also bar any university that accepts federal student loan dollars from forcing students into mandatory arbitration agreements. These agreements are common across the for-profit college industry, and have been widely criticized as a way to strong-arm students into settling claims against their school out of court. The regulation would also bring increased transparency to what the administration describes as “predatory institutions.” Colleges experiencing financial distress or facing major consumer lawsuits would be required to prove their solvency to the Department of Education. “Financially risky” schools would also be obligated to warn its students if alumni are struggling to repay their loans. The proposal comes more than a year after the for-profit chain, Corinthian Colleges, closed its doors following a federal investigation that found widespread “misrepresentation of job placement rates” to students. Roughly 16,000 students were left in limbo after it collapsed. “We won’t sit idly by while dodgy schools leave students with piles of debt and taxpayers holding the bag,” Secretary of Education John B. King Jr. said in a statement announcing the plan. “All students who are defrauded deserve an efficient, transparent, and fair path to the relief they are owed, and the schools should be held responsible for their actions.” The rules are the latest in string of measures by the Obama administration designed to crack down on the for-profit college industry, which has come under fire from critics who say it leaves graduates with inadequate training, meager job prospects and mounting loan payments.

These Debt Slaves are the Government’s Largest Asset Class, and It will Haunt the Economy for Years  - Wolf Richter - Endless discussions of how important inflation is to the US economy, and how there hasn’t been enough of it in recent years, and how more inflation would be a godsend, has become the standard. The threat of lethal deflation is being brandished to rationalize all kinds of absurd monetary policies. And we know why: inflation is good only for debtors, in an over-indebted country. But that’s not true either. Because a lot of debtors, particularly those who funded their education with loans, are being strangled by … inflation.  “College Tuition and Fees constitute one of the biggest threats to our economic outlook,” writes Jill Mislinski at Advisor Perspectives, which runs an excellent series of analyses and updates on the topic. The chart below (by Advisor Perspectives) shows the Consumer Price Index sub-component for college tuition and fees (red line) going back to 1978. It also shows the price increases of autos (blue line) and medical care (purple line), “both of which pale in comparison”:  But it’s even worse: This chart only shows data for federal loans to students. It does not include non-federal loans to students. No hard data exists for this. The New York Fed, which tracks household debt and credit via surveys, estimates that, based on its survey results, total student loans from federal and private lenders has reached a record $1.26 trillion. And it considers 11% of the outstanding balance in default! Which begs the questions, as Advisor Perspectives puts it, “What line item is the largest asset in Uncle Sam’s financial accounts?”Student Loans. They’re a liability for students and former students, often for decades to come. They crimp their spending behavior, delay home purchases, and trigger credit problems. Even hopelessly indebted student-loan debtors cannot get their student loans discharged in bankruptcy. But these loans are an asset to the other side. Student loans have ballooned into the largest financial asset category on the balance sheet of the federal government, accounting for 45.7% of total federal financial assets, up from around 17% before the Great Recession, and up from about 9.5% in 2000:

Social Security, Obama, and the CRFB - Obama once offered to cut Social Security as part of a Grand Bargain with the Republicans.  Now he says he thinks Social Security ought to be expanded. The Committee for a Responsible Federal Budget (CRFB) answers him with their usual list of reasons why Social Security is going to ruin the country. [ here ] I am going to try to explain to you what’s wrong with this picture. The most important thing to understand is that Social Security is not welfare. The government does not pay for it.  The rich do not pay for it.  The workers who will get the benefits pay for it. It is a mandatory savings and insurance program.  Workers are required to save about 6% of their wages by means of the FICA deduction from their paycheck  In return, these savings are protected from inflation and market losses. And they are insured against personal bad luck including a lifetime of low wages (being unable to save enough),   Their savings earn an effective interest directly from the growth in the economy through “pay as you go” financing, so that in retirement workers will get back about three times as much as they put in. Roosevelt thought it was critical that Social Security be paid for by the workers themselves and not be welfare, “so no damn politician can take it away from them.” But the “damn politicians”  have been telling the Big LIe for eighty years, and now everyone talks about Social Security as if it IS welfare.  The enemies of Social Security have always understood that calling SS welfare, or even turning it into welfare, is the first step to taking it away from the workers.  But it is only recently that the Left has decided to “save Social Security” by turning it into welfare. I think this has happened because the Left has bought the Big Lie.  After hearing so much about the “looming XX Trillion Dollar Unfunded Deficit!” they have decided that the only way to save Social Security is to find the money to close the deficit,  and since the only people in America who have money are the rich, it’s “obvious” that the way to save Social Security is to tax the rich.  [This is not to be confused with Bill Clinton and Newt Gingrich's grand bargain that the "obvious" way to save Social Security was to raise the retirement age... so the poor would not be able to retire when they get too old to work.] Just the other day  Michael Hiltzik  (LA Times) , a friend of Social Security, discovered that Social Security can be “saved” by any or all of a large number of new taxes on the rich.

California to ask feds to allow undocumented immigrants to use Obamacare - (UPI) -- California could become the first state to ask the federal government to let undocumented immigrants buy insurance under the Affordable Care Act, known as Obamacare. Gov. Jerry Brown, a Democrat, signed legislation Friday that attempts to allow people in the country illegally to purchase the insurance through Covered California without costing the state or federal government anything. Undocumented immigrants are barred from the insurance exchanges but Obamacare allows states to apply for a federal waiver if the federal government doesn't have to pay for the costs. Up to 390,000 people who earned an income too high for Medi-Cal could purchase the insurance through the exchange. "The current policy disallowing immigrants from purchasing care with their own money is both discriminatory and outdated," Sen. Ricardo Lara, who wrote legislation, said in a statement. "I thank Gov. Brown for advancing justice today."  Republicans in the legislature said it would overburden the healthcare system, possibly increase premiums and attract more undocumented immigrants to the state. Brown last year signed a bill allowing 170,000 people under the age of 19 who are in the county illegally to sign up for Medi-Cal.

Controversy erupts over Medicare observation care requirements - In just two months, a federal law kicks in requiring hospitals to tell their Medicare patients if they have not been formally admitted and why.  But some physician, hospital and consumer representatives say  a notice drafted by Medicare for hospitals to use may not do the job. The law was a response to complaints from Medicare patients who were surprised to learn that although they had spent a few days in the hospital, they were there for observation and were not admitted. Observation patients are considered too sick to go home yet not sick enough to be admitted.  They may pay higher charges than admitted patients and do not qualify for Medicare's nursing home coverage.The NOTICE Act requires that starting Aug. 6, Medicare patients receive a form written in "plain language" after 24 hours of observation care but no later than 36 hours. Under the law, it must explain the reason they have not been admitted and how that decision will affect Medicare’s payment for services and patients’ share of the costs.  The information must also be provided verbally and adoctor or hospital staff must be available to answer questions. And patients could have questions, said Brenda Cude, a National Association of Insurance Commissioners consumer representative and professor of consumer economics at the University of Georgia. She said the notice is written for a 12th-grade reading level, even though most consumer materials aim for no more than an 8th-grade level.   It “assumes some health insurance knowledge that we are fairly certain most people don't have." Medicare is soliciting feedback on the draft notice through June 17.

Health Insurance Companies Set to Raise Obamacare Premiums - Millions of people who pay the full cost of their health insurance will face the sting of rising premiums next year, with no financial help from government subsidies. Renewal notices bearing the bad news will go out this fall, just as the presidential election is in the home stretch.  "I don't know if I could swallow another 30 or 40 percent without severely cutting into other things I'm trying to do, like retirement savings or reducing debt," said Bob Byrnes, of Blaine, Minnesota, a Twin Cities suburb. His monthly premium of $524 is already about 50 percent more than he was paying in 2015, and he has a higher deductible. advertisement Millions of people who pay the full cost of their health insurance will face the sting of rising premiums next year, with no financial help from government subsidies.  President Barack Obama's health law provides income-based subsidies for consumers who buy individual policies on and state insurance markets. About 10 million people get assistance, helping reduce the uninsured rate to a historically low 9 percent. But there's no subsidy for those making more than $47,520 for an individual and $97,200 for a family of four - cutoffs that represent four times the federal poverty level. Also, subsidies are not available for consumers at any income level who purchase outside of or a state marketplace. Those who remain uninsured risk fines.

Consumers could be facing sticker shock with ACA health premiums next year - Premiums for health plans sold through the federal insurance exchange could jump substantially next year, perhaps more than at any point since the Affordable Care Act marketplaces began in 2013.An early analysis by the Kaiser Family Foundation shows that proposed rates for benchmark silver plans — the plans in that popular tier of coverage that determine enrollees’ tax subsidies — are projected to go up an average of 10 percent across 14 major metropolitan areas.The analysis, released Wednesday, is based on insurers’ initial filings in 13 states and the District of Columbia. As in previous years, it shows how differently the health-care law is playing out across the country depending on regions and insurers.Only in Providence, R.I., and Indianapolis would monthly premiums for the second-lowest-cost silver plans drop. Increases would range sharply, from 4 percent in Albuquerque to 16 percent in the District and 18 percent in Portland, Ore.Overall, the benchmark plan premium in these cities would rise twice as much on average as the increase last fall.Insurers have been warning that premiums could spike by double-digit percentages in 2017 — and several plans have raised the specter of rate increases of 50 percent or more.Insurers blame enrollees, saying they are sicker than companies had expected they would be when setting rates in the health-care law’s first two years.Larry Levitt, a senior vice president at the foundation, characterizes 2017 as a “market correction year,” with companies trying to position themselves to make money over the ACA’s long haul.“The biggest things going on here are that insurers initially guessed wrong,” Levitt said. “They had to guess how many people [would enroll] and how much health care they would use. And insurers mostly guessed wrong, and now insurers are playing catch-up.”

Study: Popular ObamaCare plans to see double-digit premium hike -- Premiums for the most popular ObamaCare plans are expected to rise by an average of 11 percent next year, according to new research that will likely fuel GOP attacks against the healthcare law. Health insurers are seeking steeper premium hikes in 2017 than in previous years, according to a report released Wednesday by the Kaiser Family Foundation. The report offers the most comprehensive and alarming data so far about the premium costs that ObamaCare customers will see when they renew their coverage this fall. Still, the figures are not final; for many states, there is a regulatory battle with health insurers before officials will approve the rates.  The Obama administration has also underscored that the vast majority of people using the government’s marketplaces receive subsidies and will therefore not be paying the full price of the premium increases. "This is just the beginning of the rates process, and despite headlines suggesting double digit increases, proposed rates aren't what most consumers actually pay," Health and Human Services spokesman Ben Wakana wrote in a statement. Experts had already predicted 2016 to bring higher costs to healthcare customers because it’s one of the first years in which insurers can use their existing customer data to predict how much they’ll be spending on coverage. Under ObamaCare, several major insurers reported older and less-healthy customers than expected, driving up costs. The research looks at lowest-cost and second-lowest silver marketplace plans, the most common plans, in major cities in 13 states where all data are available.

Walgreen Terminates Partnership With Blood-Testing Firm Theranos - Drugstore operator Walgreen Co. formally ended a strained alliance with Theranos Inc. as regulators near a decision on whether to impose sanctions against the embattled Silicon Valley firm.  Some officials at the Walgreens Boots Alliance Inc.unit had grown frustrated at not getting more details and documentation from Theranos after learning it had corrected tens of thousands of blood tests, including many performed on samples collected from patients at Walgreens pharmacies, according to people familiar with the partnership.  In a news release late Sunday, Walgreens said it had told Theranos it was terminating their nearly three-year-old partnership, effective immediately, and that it was shutting down Theranos lab-testing services in Walgreens locations. It said it would work over the next several days to help transition its customers.  “In light of the voiding of a number of test results, and as the Centers for Medicare and Medicaid Services has rejected Theranos’s plan of correction and considers sanctions, we have carefully considered our relationship with Theranos and believe it is in our customers’ best interests to terminate our partnership,” Brad Fluegel, Walgreens’ senior vice president and chief healthcare commercial market development officer, said in a statement. The move is a significant blow to Theranos. The 40 Theranos blood-draw sites inside Walgreens stores in Arizona, which the company calls “wellness centers,” have been the primary source of revenue for Theranos and its conduit to consumers, analysts say. The tie-up also has given the blood-testing firm a stamp of credibility since it was publicly announced in September 2013.

FedEx Depicted by U.S. as Drug Courier in Corporate Disguise - FedEx Corp. took advantage of its “legitimate” corporate identity, size and sophistication to engage in criminal behavior by delivering illegal prescriptions from Internet drug stores, federal prosecutors said at a trial. The government will rely on “dozens and dozens” of internal e-mails to show that FedEx knew for a decade that it was shipping drugs for pharmacies that were “shady, sneaky” and “on the run” from the U.S. Drug Enforcement Administration, Assistant U.S. Attorney John H. Hemann said Monday in his opening statement at the San Francisco trial. “These are not my words, they are their words at the time,” Hemann told U.S. District Judge Charles R. Breyer, who will decide the case without a jury. FedEx, which contends it did nothing wrong, is accused of scheming with online pharmacies to ship painkillers, anxiety meds and diet pills obtained without valid prescriptions. To win a guilty verdict on charges of conspiracy and money laundering, carrying fines of as much as $1.6 billion, prosecutors must prove that FedEx knew the sales were illicit and intended for the drugs to be distributed illegally.Breyer has voiced doubt about the government’s case during the buildup to the trial. While acknowledging that the case is “challenging,” Hemann disputed Breyer’s earlier characterization of it as a “novel prosecution.” “This case is unique because it involves a massive volume of illegal drugs,” Hemann said. Though FedEx was able to get away with it because it relied on an “air of legitimacy,” the company should be treated the same as a person coming across the border with illegal drugs, he said. “This drug courier should be treated in this court just like your honor would treat every other drug courier,” the prosecutor argued.

United States of Paranoia: They See Gangs of Stalkers -  Nobody believed him.  But Timothy Trespas, an out-of-work recording engineer in his early 40s, was sure he was being stalked, and not by just one person, but dozens of them. He would see the operatives, he said, disguised as ordinary people, lurking around his Midtown Manhattan neighborhood. Sometimes they bumped into him and whispered nonsense into his ear, he said. “Now you see how it works,” they would say. At first, Mr. Trespas wondered if it was all in his head. Then he encountered a large community of like-minded people on the internet who call themselves “targeted individuals,” or T.I.s, who described going through precisely the same thing. The group was organized around the conviction that its members are victims of a sprawling conspiracy to harass thousands of everyday Americans with mind-control weapons and armies of so-called gang stalkers. The goal, as one gang-stalking website put it, is “to destroy every aspect of a targeted individual’s life.” Mental health professionals say the narrative has taken hold among a group of people experiencing psychotic symptoms that have troubled the human mind since time immemorial. Except now victims are connecting on the internet, organizing and defying medical explanations for what’s happening to them.The community, conservatively estimated to exceed 10,000 members, has proliferated since 9/11, cradled by the internet and fed by genuine concerns over government surveillance. A large number appear to have delusional disorder or schizophrenia, psychiatrists say.

FDA Warns Whole Foods of ‘Serious Violations’ After Inspections - The Food and Drug Administration (FDA) has warned Whole Foods of a series of “serious violations” it found while inspecting a food preparation facility in Massachusetts, including conditions that support the growth of the bacteria that causes listeria. The FDA detailed its findings from inspections conducted in February in a lengthy letter it sent to Whole Foods executives last Wednesday. The facility packed and prepared food under “insanitary conditions whereby they may have been contaminated with filth or rendered injurious to health,” the letter said. The violations stemmed from employees handling products in areas where “condensate from ceiling joints was dripping onto the surface below,” according to the FDA. Employees were also spotted touching exposed products without washing their hands or changing gloves after first cleaning work surfaces.  FDA laboratory analysis of swabs taken from surfaces where food makes contact at the site also confirmed the presence of the bacteria Listeria welshimeri, which was non-pathogenic, meaning it is incapable of causing disease. Still, its presence is seen as an indicator for the probable presence of Listeria monocytogenes, the FDA said. “This finding demonstrates that conditions exist in and on your equipment that would support the presence and growth of Listeria monocytogenes and indicates that your cleaning and sanitation practices may not be adequate,” the letter said. “Your firm should consider improving your environmental monitoring program to verify the adequacy of your cleaning and sanitation operation.”

USDA: People Make The Choice To Eat Unhealthy Food -- Last week, I examined how obesity among low-income households cannot be explained by simply claiming that low-income people don't have access to healthy food. It is claimed that supermarkets and other places that sell food are too far away from low-income neighborhoods for households to access them. It is assumed that low-income people will eat fast food instead. This is known as the "food desert" concept in which some places are devoid of food choices.  In that article I quoted sources which concluded that there is not actually compelling evidence that low-income neighborhoods have fewer grocery stores than other neighborhoods.  Now, it appears that the USDA (as of May 2016) has recently caught up with a multitude of other sources and found that "the effect of food store access on dietary quality may be limited" and in many cases, is "negligible." When the USDA report says "limited" they mean very limited. The study concluded that when food choices are less constrained (i.e., when low-income shoppers experience an increase in choices for food stores) "low-access consumers purchased 0.42 percent more fruits, 0.55 percent more vegetables, 0.61 percent more low-fat milk products, and 0.33 percent less nondiet drinks." The study did find, not surprisingly, that people will travel further to stores they believe to offer lower-prices. But, this further travel did not lead to significantly improved dietary habits. Indeed, two recent studies showed that putting a new grocery store in the neighborhood did nothing to improve diets:

Facing Up to the World’s Health Crises….and the TPP Would Make Mattes Worse  - Yves here. This post is yet another reminder of how short-sighted the elites in the US have become. For instance, the UN regards universal health care as a critical first line of defense against impending health disasters. Yet the wealthy appear to operate from the delusion that they can isolate themselves from the rest of society. Even if they repair to compounds with their own butlers, nannies, cleaning and maintenance staff, they would still want services from people they would not have as employees, like trainers and medical professionals, and they’d need to get deliveries of food and supplies, or have their staffs procure it. Any option puts them in contact with the larger community, which means communicable diseases. Similarly, if they have an accident, medical emergency, or need surgery, they will have to go to a hospital. Even if their room is in a wing for the rich, they will still be cared for by nurses and orderlies that go back to modest income neighborhoods…again meaning they cannot isolate themselves from communicable diseases. Remember that even now, infections like pneumonia and MRSA contracted in a hospital are a major cause of death. In 2010, a conservative estimate was 48,000, 50% more than died in car accidents that year.

U.S. farm groups throw shade at EU - U.S. farm groups are calling out the European Union for not doing enough in bilateral trade talks to remove barriers to U.S. agricultural exports, an echo of complaints out of Paris and other European capitals that the United States is not willing to make room for more EU farm exports.  “The fact is the EU is a different animal from any trading partner with which we have undertaken [free-trade agreement] negotiations, and we are highly skeptical of its level of commitment to truly opening its shielded market,” Randy Mooney, chairman of the National Milk Producers Federation, told the House Ways and Means Committee's trade panel on Tuesday. The Missouri dairy farmer, one of five witnesses who addressed the subcommittee during a hearing to discuss agricultural exports, said NMPF members are worried the Obama administration will gloss over some of the sector’s deepest concerns in order to strike a TTIP deal this year. National Pork Producers Council President John Weber was equally blunt, noting EU officials have a history of using regulation to keep out food imports and have indicated an unwillingness to eliminate tariffs on U.S. beef, pork and poultry products. The U.S. agriculture industry's skepticism is a problem for U.S. Trade Representative Michael Froman, who has the difficult task of trying to get TTIP to the finish line before the end of the Obama administration. In a speech to the National Council of Farmer Cooperatives at a nearby hotel, he sought to assure farmers he has their backs in the talks, while reaffirming the goal of trying to wrap up negotiations by year’s end.

Pollution in People: Cancer-Causing Chemicals in Americans’ Bodies -- Hundreds of cancer-causing chemicals are building up in the bodies of Americans, according to the first comprehensive The Pollution in People inventory of carcinogens that have been measured in people, which was released Tuesday by the Environmental Working Group (EWG).   EWG spent almost a year reviewing more than 1,000 biomonitoring studies and other research by leading government agencies and independent scientists in the U.S. and around the world. The nonprofit research group found that up to 420 chemicals known or likely to cause cancer have been detected in blood, urine, hair and other human samples.  Studies of the causes of cancer often focus on tobacco, alcohol and over-exposure to the sun. But the World Health Organization and many other scientists believe nearly 1 in 5 cancers are caused by chemicals and other environmental exposures—not only in the workplaces, but in consumer products, food, water and air. EWG’s review bolsters the findings and ongoing research of the Halifax Project, a collaboration of more than 300 scientists from around the world who are investigating new ways in which combinations of toxic chemicals in our environment may cause cancer. While most cancer research focuses on treatment, the Halifax Project and EWG’s Rethinking Cancer initiative are looking at prevention by reducing people’s contact with cancer-causing chemicals.  “At any given time some people may harbor dozens or hundreds of cancer-causing chemicals. This troubling truth underscores the need for greater awareness of our everyday exposure to chemicals and how to avoid them.”

Our Bodies Have So Many More Cancer-Causing Chemicals Than We Thought -- An estimated 1.7 million people will be diagnosed with cancer in 2016. While some of this is rooted in sheer genetics, many of these cases may be sparked by substances in the air, soil, food, and materials around us. A new report released today by the Environmental Working Group shows just how many of these substances end up inside of us. Pulling data from places like the Centers for Disease Control and Prevention, EWG detected up to 420 possible carcinogens—the name for cancer-causing agents—in people's bodies. "A lot of [known or likely carcinogens] are in products we buy off the shelf and assume are safe," said Curt Dellavalle, lead author on the report. Using data from the CDC's National Health and Nutrition Survey, the report outlines the cancer risk based on a person's exposure to certain chemicals. Over half of the people tested had levels of arsenic and acrylamide in their bodies high enough to give them a more than 1 in 10,000 risk of cancer. Arsenic is used in products like pesticides, and acrylamide is sometimes found in food packaging and certain foods—potato chips and French fries have been found to have higher-than-average amounts of it. Other commonly found chemicals included benzene, found in petroleum, and DDT and DDE pesticides.   Individuals vary greatly in their exposure to different chemicals. . "Many of the carcinogens this study documents in people find their way into our bodies through food, air, water and consumer products every day," "Dozens of them show up in human umbilical cord blood—which means Americans are exposed to carcinogens before they’ve left the womb."

Exclusive: Studies find 'super bacteria' in Rio's Olympic venues, top beaches | Reuters - Scientists have found dangerous drug-resistant "super bacteria" off beaches in Rio de Janeiro that will host Olympic swimming events and in a lagoon where rowing and canoe athletes will compete when the Games start on Aug. 5. The findings from two unpublished academic studies seen by Reuters concern Rio's most popular spots for tourists and greatly increase the areas known to be infected by the microbes normally found only in hospitals. They also heighten concerns that Rio's sewage-infested waterways are unsafe. A study published in late 2014 had shown the presence of the super bacteria - classified by the U.S. Centers for Disease Control and Prevention (CDC) as an urgent public health threat - off one of the beaches in Guanabara Bay, where sailing and wind-surfing events will be held during the Games. The first of the two new studies, reviewed in September by scientists at the Interscience Conference on Antimicrobial Agents and Chemotherapy in San Diego, showed the presence of the microbes at five of Rio's showcase beaches, including the ocean-front Copacabana, where open-water and triathlon swimming will take place. The other four were Ipanema, Leblon, Botafogo and Flamengo. The super bacteria can cause hard-to-treat urinary, gastrointestinal, pulmonary and bloodstream infections, along with meningitis. The CDC says studies show that these bacteria contribute to death in up to half of patients infected.

Antibiotic-Resistant Bacteria Found in Rio de Janeiro Waterways Ahead of Olympics -- Evidence of antibiotic-resistant “super bacteria” has been found at several Olympic sites in Rio de Janeiro, Brazil, including waters that will host the swimming portion of the triathlon and in the lagoon where rowing and canoe athletes will compete this summer. Two studies have connected five beaches—Copacabana, Ipanema, Leblon, Botafogo and Flamengo—and Rio de Janeiro’s Rodrigo de Freitas lagoon to the superbug bacteria, Reuters reported.Copacabana, which had microbes present in 10 percent of the water samples studied, will be the site of open-water and triathlon swimming events. Flamengo, which had microbes in 90 percent of the water samples, will host sailing competitions. The lagoon, which is seen by scientists as the breeding ground for the bacteria, will host rowing and canoe events, according to Reuters. Scientists say the super bacteria can cause hard-to-treat urinary, gastrointestinal, pulmonary and bloodstream infections, which contribute to death in up to half of infected patients. Meningitis has also been linked to exposure to the superbug. The Centers for Disease Control and Prevention (CDC) reported antibiotic-resistant infections usually “require prolonged and/or costlier treatments, extend hospital stays, necessitate additional doctor visits and healthcare use and result in greater disability and death.”

“Genetically MODIfied Babies In Gujarat?”“…There are physically deformed children being born and miscarriages that are stressful. I keep listening to these stories. But today, there is technology. I can assure you that this can be treated in the womb… All such women who are pregnant… families who give birth to speech- and hearing-impaired and physically challenged children… On the one hand, there will be a hospital where such mothers can go… and by sonography they can be treated, and on the other hand there can be research on such families to find out what is the reason behind this? Whose DNA should be changed to get rid of these problems? Therefore in this year’s budget, a woman and child care hospital will be ready in Ahmedabad in eight months which will solve these problems.”  - Anandiben Patel, Chief Minister of Gujarat, India told a MahilaSammelan in PaviJetpur in ChhotaUdepur on the occasion of Gujarat Foundation Day. (Indian Express, May1, 2016)  Genetically modified babies in Gujarat? That’s a bombshell! There has been neither any national debate on the issue; nor any consultation with stake-holders; Parliament is being by-passed as no corresponding law on the subject has been enacted;the Indian Council of Medical Research (ICMR) is taken by surprise;so too, the Indian Medical Association of allopathic doctors. No scientific-ethical studies have been undertaken before going ahead with genetically modified babies. With just one country (U.K.) in the whole world having legislated on this issue in 2015, is India being projected as the second country to start genetic modification of babies. Is this part of Make in India policy? There is deathly silence of the so called national press on the issue; there are no op-ed articles or editorials in major national English language dailies.

Permanently Changing a Species: What Could Go Wrong? - Global Justice Ecology Project: The National Academies of Sciences released a new report today, which calls for robust safety assessments for “gene drive modified organisms.” The NAS says the controversial new genetic engineering technology is not ready for release into the environment. These genetic engineering technologies under development go far beyond genetic engineering as we’ve seen it, and raise threats to food security, biodiversity and human safety. The NAS describes gene drives as “stimulating biased inheritance of particular genes to alter entire populations.” In other words, gene drives force a genetically engineered trait to be expressed in every single generation, driving engineered traits through an entire species to permanently change it or cause it to go extinct.While the NAS report offers thoughtful insights and useful warnings about gene drives, it falls far short of offering a blueprint for responsible governance to ensure that the technology will not be used for hostile purposes, reckless corporate profit or at the expense of health and the environment. There is only one responsible path forward for gene drives — we need a moratorium on commercial or environmental releases of this technology. There must be strong and clear international regulations and oversight. We must ensure that corporations and governments (particularly militaries) are not developing gene drives and cannot misuse this technology in ways that could have profound ecological, health or socio-economic impacts. There must be strict regulations on lab research, especially given the risk of accidental escape of gene drive organisms, even from high security labs.

Monsanto Issued Two GMO Permits Despite Objection From 5 Million Nigerians  -- The National Biosafety Management Agency (NBMA), the regulatory body for biotechnology in Nigeria, has issued two permits to Monsanto Agriculture Nigeria Limited for the commercial release and market placement of genetically modified (GMO) cotton and the confined field trial of GMO maize. The two permits were signed by NBMA director-general Rufus Ebegba on May 1, which happened to be a public holiday.  According to the Premium Times, this comes despite assurances from Minister of State for Environment Ibrahim Jibril that “Nigeria would not mortgage the safety of its citizens by introducing unproven products into the country.” The move has sparked widespread condemnation from 100 organizations representing more than 5 million Nigerians, including farmers, faith-based organizations, civil society groups, students and local community groups. The coalition has previously expressed concerns about the human health and environmental risks of genetically altered crops. They noted that Monsanto’s genetically enhanced crops are designed to tolerate the use of the herbicide glyphosate which was declared as a possible carcinogen by the World Health Organization’s International Agency for Research on Cancer (IARC) in March 2015. “This is extremely shocking,” Nnimmo Bassey, the director of the Health of Mother Earth Foundation, said in response to the development. “Little wonder officials of NBMA, National Biotech Development Agency (NABDA) and their pro-GMO train have been fighting tooth and nail to fool Nigerians by claiming that GMOs are safe! They approved the poorly concocted applications and issued these permits on a Sunday when government offices do not open. In fact, 2nd May was also a public holiday.”

'Biblical' moth influx threatens to devastate crops - BBC News: Scientists have learned that cabbage and cauliflower crops could potentially be "devastated" by a species of moth arriving from continental Europe. BBC News understands that tens of millions of diamondback moths are thought to have come to the UK in the past week. This is 100 times the number that arrive in the entire year. Researchers describe the species as a "super pest" because it is thought to be resistant to several insecticides. An alert has been issued by researchers at the Rothamsted Research in Harpenden in Hertfordshire. The Twitter feed @migrantmothUK reported a two mile cloud of moths on Saturday night near Leominster. One subscriber to the feed reported that it was like "driving through rain". Steve Nash, who administers the feed, said much worse was yet to come. "Once the progeny of this influx arrives in mid-July, numbers could be biblical," he said. Dr Steve Foster, who works at Rothamsted Research described how they devastate crops. "There are swarms of them, a bit like plagues of locusts - there are so many of them that they seem like a brown cloud." Dr Foster and his colleagues learned of the infestation on Friday. They will study the moths to see if they can identify an insecticide that can be used against them as a matter of urgency.

Why energy crops have been a major flop with UK farmers --In only a few years, biomass has become a major UK power source, supplying 3% of the total electricity supply. However, despite government incentives, UK farmers are largely unwilling to grow the feedstock for the biomass plants. Most of it has to be imported. A decade ago, the UK authorities confidently expected farmers to devote swaths of land to growing the likes of short-rotation willow and poplar and perennial grasses. These were to help feed one of the UK’s promising new renewable power sources – biomass energy, which burns plant materials to produce heat and power. Locally farmed energy crops were supposed to help reduce the biomass stations’ dependence on imported plant materials. One projection in 2009 envisaged their planted area expanding by a factor of 275 to reach 2.2 million hectares in the UK by 2030, representing a radical transformation of the agricultural landscape. Yet, since then, the planted area has been declining. This is despite government incentives for farmers and the potential for energy crops to tick many policy boxes – as well as biomass they help with agricultural diversification, make productive use of marginal and surplus farmland and help improve the ecosystem. The assumption in government circles seems to have been that, given sufficient incentives, large numbers of farmers would switch. According to research that I recently co-authored, this seems to have underestimated the complexity of the decision.

Ethanol, bioenergy no threat to food security: report | Reuters: Bioenergy produced from crops does not threaten food supplies, researchers funded by the U.S. government, World Bank and others said in a report on Tuesday, dealing a potential blow to critics of the country's biofuels program. There is no clear relationship between biofuels and higher prices that threaten access to food, as some prior analysis has suggested, according to the research partly funded by the U.S. Department of Energy. Environmentalists and others have long argued that the increased use of ethanol, produced from corn in the United States and sugarcane in Brazil, threatens global food security, which the World Health Organization defines as "access to sufficient, safe, nutritious food." Critics of biofuels, which are used for transportation, say they could threaten food supplies. "There may not be as tight a link as people think" between commodities prices and food security, Siwa Msangi, a co-author of the paper said. A 2012 drought in the United States that slashed corn output, for example, caused ethanol plants to shutter or reduce output but not a notable change in food prices, the report said.  The U.S. Renewable Fuel Standard (RFS) has been mired in a years-long debate between biofuels advocates, environmentalists and oil companies.Research shows the standard has caused grasslands and wetlands to be converted into farms to produce biofuels, said Emily Cassidy, a research analyst with the Environmental Work Group, which has criticized the RFS."Most biofuels are made from food, like corn and soy, which competes for feed and animal feed production. That ultimately has a big impact on markets," Cassidy said.

Cluck you: Bolivia rejects Bill Gates' donation of hens -- The Bolivian government has rejected a donation of hens offered by the US billionaire Bill Gates, as officials said the tech magnate needs to study up on the Andean nation’s thriving poultry sector. “How can he think we are living 500 years ago, in the middle of the jungle not knowing how to produce?” the Bolivian development minister, César Cocarico, told journalists. “Respectfully, he should stop talking about Bolivia.” The Microsoft founder and philanthropist recently said he would donate 100,000 hens to countries with high poverty levels, mostly in sub-Saharan Africa but including Bolivia. Bolivia produces 197m chickens annually and has the capacity to export 36m, the local poultry producing association said.

Why Do Bee Colonies Collapse? -- It’s a good question—one scientists continue to grapple with 10 years after colony collapse disorder was first identified. So far, they’ve identified at least 60 stress factors that may contribute to the phenomenon.  One of the most talked-about involves neonicotinoids, a class of insecticides chemically related to nicotine. Widely used by farmers and consumers since the 1990s, these “neonics” have recently made news due to Maryland legislation that would outlaw consumer use of neonicotinoids by 2018. The bill passed the House and Senate in April and was awaiting Governor Larry Hogan’s signature at press time. For now, the insecticides remain legal throughout the United States, though Lowe’s has vowed to phase out all neonic products by mid-2019, and the Home Depot has announced it will phase out plants treated with the chemicals within the next two years. Another major threat to American honeybees: the parasitic varroa mite (Varroa destructor), which arrived from Asia in 1987. The brownish-red bugs, no larger than the head of a pin, are now found in all 50 states. Pregnant mites enter a bee colony’s brood cells and rapidly multiply, sucking the bees’ blood, weakening their immune systems, and exposing them to disease. An unchecked infestation can wipe out a colony in less than two years. Researchers at Washington State University are testing a theory that mycelium from certain mushroom species might strengthen bees’ immune systems or even kill varroa mites outright. Early experiments offer a glimmer of hope for the pollinators.

Lost colonies found in a data mine: Global honey trade but not pests or pesticides as a major cause of regional honeybee colony declines - Abstract: Recent losses of honeybee (Apis mellifera) colonies have been linked to several non-exclusive factors; such as pests, parasites, pesticides (e.g., neonicotinoids) and other toxins. Whereas these losses pose a threat to apiculture, the number of globally managed colonies appeared to be less affected because beekeepers replace lost colonies. From a socioeconomic and ecological perspective the number of managed colonies is arguably more relevant when addressing the issue of apiculture and pollination services provided by honeybees. We here use the FAO data base to dissect the interactions between the global honey market and the number of colonies. Global scale analyses do not show a general colony decline. Whereas Western Europe and the US show suffer colony declines, other regions show considerable increase. We could not find any link between the colony dynamics and the occurrence of specific pathogens or the use of pesticides. In contrast, changes in the political and socioeconomic system show strong effects on apiculture. In addition, many countries show a tight negative correlation between honey import and the number of managed colonies. For some countries, the amount of honey produced per colony is highly positively correlated with the amount of honey imports, and we cannot exclude large scale relabeling of imported to nationally produced honey. It is very clear that honey trade is a dominating factor for the number of managed colonies since countries with a strong import and export ratio are those suffering most strongly from colony declines.

The Trans-Pacific Partnership Will Hurt Farmers and Make Seed Companies Richer  - In March of 2009, the Biotechnology Industry Organization (BIO), the biotech industry’s trade association and lobbying arm, submitted a letter to the Office of the United States Trade Representative (USTR), which was in the early stages of negotiating the Trans-Pacific Partnership.  The “BIO will focus its comments on issues relating to (i) agricultural biotechnology and (ii) matters concerning intellectual property rights,” the six-page letter read. “BIO appreciates this opportunity to comment on the proposed TPP FTA, and we look forward to working closely with USTR as this initiative proceeds.”  While the terms of the TPP were kept secret from the public and policymakers during negotiations, USTR negotiators relied heavily on input from the corporate insiders who populate the US government–appointed Industry Trade Advisory Committees (ITACs). A representative from BIO sits on ITAC-15, the committee that focuses on intellectual property (IP) rights, and BIO spent roughly $8 million on lobbying each year while the TPP was under negotiation, paying firms like Akin Gump Strauss Hauer & Feld $80,000 annually to lobby for “patent provision in the Trans-Pacific Partnership trade negotiations.”  The results of this lobbying blitz were unknown until the final text of the agreement was released in November of last year.  While many have scrutinized its potential for offshoring jobs, lowering wages, and raising drug prices, few have paid attention to the TPP’s impact on the sector BIO prioritized above any other: agricultural biotechnology. Experts have called the TPP a “big win” for the biotech seed industry, and many warn that the trade deal will further enrich seed companies at the expense of farmers’ rights.

Light Pollution Masks the Milky Way for a Third of the World’s Population - “One third of humanity cannot see the Milky Way,” said Fabio Falchi a researcher from the nonprofit organization the Light Pollution Science and Technology Institute in Italy. “It is the first time in human history that we have lost the direct contact with the night sky.” Mr. Falchi and a cohort of dark-night knights have spent the last year creating an interactive world atlas that shows the global effect of artificial light on how most of us see the sky after the sun sets. They released the map to the public on Friday in the journal Science Advances. The new atlas is an improved version of their original one, which was released in 2001.The color-coded map, using data collected by the Suomi NPP satellite, quantifies the brightness of the night sky across the world, ranging from dark, pristine views like that over the ocean, to major cities where artificial light has completely obliterated the natural darkness.By comparing the brightness atlas with population density maps, the team found that light pollution affects 80 percent of the world’s population, and that two out of three Europeans and four out of five Americans live in areas where light masks the Milky Way.“It demonstrates just how far lights from large metropolitan areas spread through the atmosphere,” said Dan M. Duriscoe, a physical scientist from the National Park Service, who contributed to the atlas. “Observers on the ground hundreds of kilometers away are still under the influence of that light.”

Lake Erie’s Toxic Algae Bloom Forecast for Summer 2016 -- As summer gets into full swing, the people of Toledo, Ohio, begin what has become a disturbing annual ritual—the wait for a toxic algae bloom to erupt across Lake Erie. This year, however, the anticipation may be mixed with hope, as state and federal officials take on this persistent problem.  The harmful blooms have a notorious history. In 2011, toxic algae in the open waters of Lake Erie’s Western Basin were 50 times higher than the World Health Organization limit for safe body contact. That same year, levels were 1,200 times higher than the limit for safe drinking water, according to the U.S. Environmental Protection Agency (EPA). In August 2014, toxic algae shuttered the Toledo, Ohio drinking water treatment plant for several days, leading to advisories against the use of tap water in the city.  In total, more than 500,000 people were impacted. And the summer of 2015 produced the largest algae bloom in Lake Erie in 100 years. While it didn’t reach earlier toxicity levels, the bloom covered 300 square miles. Lake Erie is the 12th largest lake on the planet and provides drinking water source for 11 million people. It’s the smallest and shallowest of the Great Lakes.  While algae are a natural presence in fresh water systems, large harmful outbreaks are linked to excessive levels of phosphorus in the lake waters. Coming into contact with the toxic algae or swallowing algae-laden water, can cause rashes, vomiting, numbness and difficulty breathing, among other symptoms.  The algae problem begins when phosphorus enters the Erie watershed, primarily through agriculture fertilizer and manure runoff.. In the U.S., the Maumee River Basin with its 6,500-mile watershed is the largest phosphorus contributor.

There’s Nothing Average About This Year’s Gulf of Mexico ‘Dead Zone’ --  Union Of Concerned Scientists - The National Oceanographic and Atmospheric Administration (NOAA) released Thursday its annual forecast for the size of the Gulf of Mexico “dead zone”—an area of coastal water where low oxygen is lethal to marine life. They say we should expect an “average year.” That doesn’t sound so bad, but as we wrote last year, the dead zone average is approximately 6,000 square miles or the size of the state of Connecticut. Average is not normal.   Dead zones—also known as hypoxic zones—can occur naturally, but human activity perpetuates their presence. Hypoxia in the ocean results from low dissolved oxygen, a state that occurs when excess pollutants, such as nitrogen and phosphorus, enter bodies of water. These pollutants have various natural and man-made sources, but they are critical nutrients for plant growth and thus the active ingredients in fertilizers applied to farm fields. However they get into water, these pollutants make delicious food sources for algae, which “bloom” as a result of the buffet. Dead algae sink and decompose in water, which depletes oxygen, suffocating other marine organisms. It has been a wet spring across most of the U.S., including the Midwest and it is true that the amount of rainfall (and thus water moving through and over the soil) impacts the size of the dead zone from year to year. But so do the practices on farms and these are much more within our control than the rain.

80% of Ocean Plastic Comes From Land-Based Sources, New Report Finds Ocean plastic pollution is an increasingly devastating crisis, and this new infographic shows exactly where the plastic trash is coming from, where it ends up and why it’s important to start our fight against this environmental scourge at the beach.  The graph, provided by UK-based Eunomia Research & Consulting, shows that more than 80 percent of the annual input of plastic litter, such as drink bottles and plastic packaging, comes from land-based sources. The remainder comes from plastics released at sea, such as lost and discarded fishing gear. Significantly, Eunomia was able to come up with a new estimate of annual global emissions of “primary” microplastics, such as microbeads, fibers or pellets. (“Secondary” microplastics are the result of larger pieces of plastic breaking down into smaller pieces.) The firm calculated that emissions of microplastics range from 0.5 to 1.4 million tonnes per year, with a mid-point estimate of 0.95 million tonnes. Vehicle tires are the biggest culprits, releasing 270 thousand tonnes of debris into our waterways annually.  These tiny non-biodegradable pieces of plastic are a cause for worry, as they are being gobbled up by plankton and baby fish like junk food, and works its way up the food chain. Microplastics have been found in in ice cores, across the seafloor, vertically throughout the ocean and on every beach worldwide. As EcoWatch mentioned previously, microplastics are also very absorbent, meaning they pick up the chemicals it floats in.

Australian Government Pledges $1 Billion To Save The Great Barrier Reef From Climate Change  -- Prime Minister Malcolm Turnbull, now seeking reelection, announced Monday the creation of $1 billion fund to protect the Great Barrier Reef from the bleaching events that climate change and water pollution cause, the Sydney Morning Herald reported. An Australian dollar is about 74 cents in the United States.  The announcement comes three months after Australia’s government raised the bleaching threat for the World Heritage site to its highest level, as scientists said in March that bleaching off the coast of northern Australia was the worst they had ever seen. Meanwhile, Australia has been experiencing high summer and fall temperatures. In early March, high temperatures were about 4 degrees Celsius hotter than normal. Located on the northeastern coasts of Australia, the Great Barrier Reef is the world’s largest collection of coral reefs. Some 1,500 species of fish and 4,000 types of mollusk thrive there. Reefs are living ecosystems made up of coral, solid limestone, coral sands, algae, and other organic deposits. But the Great Barrier Reef -- similar to others across the world -- has had a tough time in the last two decades as warming temperatures, more acidic water, overfishing, chemical runoff, and disease have sparked massive coral die-offs.  This year it's been particularly catastrophic for corals, with reefs around the world suffering from the third recorded global coral bleaching event. This bleaching started in 2014 and is the longest recorded in history. To make matters worse, bleaching was exacerbated this year by a strong El Niño, which heated up ocean temperatures around the world, all while greenhouse gas-driven climate warming continues.

First Mammal Goes Extinct Due to Human-Caused Climate Change --- The Bramble Cay melomys—a rodent found only on Australia’s Great Barrier Reef—has been declared extinct, according to a new study from researchers at the Queensland’s Department of Environment and Heritage Protection and the University of Queensland.  Alarmingly, this could be the first mammal species wiped out due to human-induced climate change.  The researchers came to the conclusion after failing to find a single specimen of the melomys, also called the mosaic-tailed rat, from its only known habitat. “A thorough survey effort involving 900 small mammal trap-nights, 60 camera trap-nights and two hours of active daytime searches produced no records of the species, confirming that the only known population of this rodent is now extinct,” the study states. Sea-level rise and weather events in the Torres Strait region, which lies between Australia and the Melanesian island of New Guinea, was determined as the root cause of the loss. The scientists said that the events destroyed the animals’ sole habitat on Bramble Cay, a small vegetated coral cay in northern Australia. Research showed that Bramble Cay had reduced dramatically in size from approximately 2.2 ha in 2004 to only 0.065 ha, equivalent to a 97 percent loss in the span of 10 years. “The key factor responsible for the extirpation of this population was almost certainly ocean inundation of the low-lying cay, very likely on multiple occasions, during the last decade, causing dramatic habitat loss and perhaps also direct mortality of individuals,” the study states.

Coral 'bright spots' offer clues to protecting threatened reefs | Reuters: Some coral reefs are thriving and scientists say they may guide efforts to curb threats such as over-fishing and climate change which are blamed for widespread global declines. A major study has identified 15 "bright spots" among more than 2,500 coral reefs in 46 nations, including off Indonesia, the Solomon islands and Kiribati where given local stresses there were far more fish than predicted. And the Great Barrier Reef off Australia, the world's biggest, was performing in line with expectations given its remoteness and high level of protection, lead author Joshua Cinner, a professor at James Cook University in Australia, told Reuters of the study published on Wednesday in Nature. Australian Prime Minister Malcolm Turnbull, facing a tight re-election battle, on Monday pledged an A$1 billion ($740 million) fund for the reef, which scientists say is suffering widespread coral bleaching due to climate change. The report found that in many coral reef bright spots, local people depended heavily on reefs for food and took part in owning and managing fish stocks, while many also had deep waters near the reefs that fish could use as a refuge.

Carbon dioxide levels in atmosphere forecast to shatter milestone -- Atmospheric concentrations of CO2 will shatter the symbolic barrier of 400 parts per million (ppm) this year and will not fall below it our in our lifetimes, according to a new Met Office study. Carbon dioxide measurements at the Mauna Loa observatory in Hawaii are forecast to soar by a record 3.1ppm this year – up from an annual average of 2.1ppm – due in large part to the cyclical El Niño weather event in the Pacific, the paper says. The surge in CO2 levels will be larger than during the last big El Niño in 1997/98, because manmade emissions have increased by 25% since then, boosting the phenomenon’s strength. The Met Office also attributes around a fifth of the current El Niño’s severity to forest fires, which were started by humans and exacerbated by drought.The paper’s lead author, Professor Richard Betts of the Met’s Hadley Centre and Exeter University, said the fact that the 400ppm threshold had been breached a year earlier than expected carried a warning for the future. “Once you have passed that barrier, it takes a long time for CO2 to be removed from the atmosphere by natural processes,” he said. “Even if we cut emissions, we wouldn’t see concentrations coming down for a long time, so we have said goodbye to measurements below 400ppm at Mauna Loa.”

El Nino drives fastest annual increase on record of carbon dioxide: The rising concentration of atmospheric carbon dioxide has passed a symbolic threshold early due to the fastest annual increase on record.  The human-caused rise in atmospheric concentration of carbon dioxide is being given an extra boost this year by the natural climate phenomena of El Niño, say climate scientists in a paper published in today's edition of the journal Nature Climate Change. As a result, 2016 will be the first year with concentrations above 400 parts per million all year round in the iconic Mauna Loa carbon dioxide record.   Lead author Professor Richard Betts, of the Met Office Hadley Centre and University of Exeter, said: "The atmospheric carbon dioxide concentration is rising year-on-year due to human emissions, but this year it is getting an extra boost due to the recent El Niño event - changes in the sea-surface temperature of the tropical Pacific Ocean. This warms and dries tropical ecosystems, reducing their uptake of carbon, and exacerbating forest fires. Since human emissions are now 25 per cent greater than in the last big El Niño in 1997/98, this all adds up to a record CO2 rise this year."  Professor Betts and colleagues forecast the rise this year to be a record 3.15 + - 0.53 parts per million. The average concentration in 2016 is forecast to be 404.45 +-0.53 parts per million, dropping to 401.48 +- 0.53 in September before resuming their ongoing rise next year. The scientists already successfully predicted this year's maximum concentration of 407 parts per million last month.  Carbon dioxide concentrations also show modest ups-and-downs with the seasons. Plants draw down CO2 in the summer and release it again in the autumn and winter. Professor Betts said: "Carbon dioxide at Mauna Loa is currently above 400 parts per million, but would have been expected to drop back down below this level in September. However, we predict that this will not happen now, because the recent El Niño has warmed and dried tropical ecosystems and driven forest fires, adding to the CO2 rise".

Antarctic CO2 Hit 400 PPM For First Time in 4 Million Years - We’re officially living in a new world.  Carbon dioxide has been steadily rising since the start of the Industrial Revolution, setting a new high year after year. There’s a notable new entry to the record books. The last station on Earth without a400 parts per million (ppm) reading has reached it.  A little 400 ppm history. Three years ago, the world’s gold standard carbon dioxide observatorypassed the symbolic threshold of 400 ppm. Other observing stations have steadily reached that threshold as carbon dioxide spreads across the planet’s atmosphere at various points since then. Collectively, the world passed the threshold for a month last year. In the remote reaches of Antarctica, the South Pole Observatory carbon dioxide observing station cleared 400 ppm on May 23, according to an announcement from the National Oceanic and Atmospheric Administration on Wednesday. That’s the first time it’s passed that level in 4 million years (no, that’s not a typo).

May Shatters Yet Another Monthly Heat Record as CO2 Levels Soar - May shattered yet another monthly heat record, according to new data from NASA. While May was 0.93 C above the 1951-1980 average for the month, it was actually the first month since October to be less than 1 C warmer than average. Despite an abating El Niño, scientists still expect 2016 to be the warmest year ever recorded, breaking the record set just last year.  Carbon dioxide levels in the atmosphere are also forecast to shatter a “symbolic barrier” this year, jumping a record 3.1 parts per million (ppm) and permanently passing 400 ppm. El Niño has played a big role in the recent surge in CO2 levels, the scientists say, reducing plants’ ability to sequester carbon dioxide. “We won’t be looking at below 400 ppm in our lifetimes,” said Richard Betts, an author of the study and scientist at the UK Met Office.  Concentrations must be kept below 450ppm to keep global warming below 2 C. For a deeper dive: News: The Guardian, Washington Post, Mashable, Climate Home, Climate Central, AP,, BBC

May 2016 Was the 8th Consecutive Warmest Month on Record For the Earth, NASA Says  - May 2016 was the warmest May on record for the earth, according to an analysis released Monday by NASA's Goddard Institute for Space Studies. The top three warmest Mays in NASA's dataset have all now occurred in the last three years. The global temperature departure in May 2016 was 0.93 degrees Celsius [1.67F] above the 1951-1980 average. This beat the previous May record set in 2014 by 0.07 degrees Celsius [0.126F]. This also marks the eighth consecutive month in a row in NASA's dataset that the earth has recorded its warmest respective month on record. Every month from October 2015-April 2016 had a departure of 1 degree Celsius or greater above the 1951-1980 average used by NASA. The departure from average in a single month had never exceeded 1 degree Celsius prior to October dating back to 1880. May fell just short of this mark at 0.93 degrees Celsius above the average, but still ranks as the eighth largest departure from average for a given month. May 2016 also continues a string of 370 consecutive months [30 years, 10 months] at or warmer than average. The last colder-than-average month in NASA's database was July 1985.

Las Vegas Going Dry? Largest Reservoir In America Reaches Record Low --Las Vegas and its 2 million residents and 40 million tourists a year may have a problem. As we noted a month ago, America's largest reservoir Lake Mead reached a record low, nearing levels that would force the Interior Department to declare a "shortage," which will lead to significant cutbacks for Arizona and Nevada. Well it has got worse... At 1072 Feet, Lake Mead has never been more empty... Under the federal guidelines that govern reservoir operations, the Interior Department would declare a shortage if Lake Mead’s level is projected to be below 1,075 feet as of the start of the following year. In its most recent projections, the Bureau of Reclamation calculated the odds of a shortage at 10 percent in 2017, while a higher likelihood – 59 percent – at the start of 2018. But those estimates will likely change when the bureau releases a new study in August. Rose Davis, a public affairs officer for the Bureau of Reclamation, said if that study indicates the lake’s level is going to be below the threshold as of Dec. 31, a shortage would be declared for 2017. That would lead to significant cutbacks for Arizona and Nevada. California, which holds the most privileged rights to water from the Colorado River, would not face reductions until the reservoir hits a lower trigger point.

The Weird Weather That Entrenched California’s Drought -- Several months after storms fueled by a fierce El Niño exploded over the northern Sierra Nevada, California’s mountain snowpack has nearly disappeared. Scientists bid adieu last week to an El Niño that had been among the strongest on record, but that brought disappointingly few wintertime snowflakes and raindrops to the Southwest. Snow that bucketed down in northern California during a string of March storms has largely withered during a sunny and warm spring. Those unexpected meteorological forces pushed California into the fifth year of a drought that has already cost the state billions of dollars and thousands of farm-related jobs. The prolonged crisis is illuminating the need to reimagine how water is stored and used in the West as the world warms up. As summer begins, California’s snowpack is “pretty much getting close to bare,” said Frank Gehrke, California’s chief snow surveyor. “This is coming off of last year being the worst year on record in terms of snowpack.”

Karachi opens heat relief centres in bid to cut death toll: - Last summer, temperatures as high as 45 degrees Celsius led to more than a thousand heat-related deaths in Karachi. This year, as it prepares for the peak of summer heat, the city has opened 179 heatstroke centres to try to hold down the death toll. Officials have also trained scores of new ambulance drivers and are working with utility companies to try to keep electricity and water flowing as the city's 24 million people battle summer heat during the month-long Islamic fast of Ramadan, when drinking water and eating is forbidden during daylight hours. Imams have said those whose life is at risk from the fast need not keep to it in extreme conditions. "If a doctor says that your life is threatened due to the scorching heat, or you have a medical condition and it is going to get worse due to the fasting, then you can skip the daily fast,"   As climate change brings ever hotter summer temperatures to some of the world's already sizzling spots, finding ways to reduce the risks is crucial, medical and climate change experts say. In Pakistan's southern Sindh province, temperatures have already hit 52 degrees (125 degrees Farenheit) in Larkana, with Jacobabad and Moenjodaro just slightly cooler, according to the Pakistan Meteorological Department. In the port city of Karachi, where temperatures so far remain below 40 degrees Celsius, heat relief centres are open, providing drinking water to passersby. Last summer, more than 1,270 people died in Karachi, and nearly 36,000 were hospitalised or hit by water and electricity shortages during 13 consecutive days of scorching temperatures in June and July.

Destruction of Alaska continues under record heat -- In a state that insulates the floors of buildings to avoid thawing out the permafrost beneath them, this is really bad news. According to the latest data from NOAA: "For the first time in its modern climate history, Alaska's average spring temperature hit 32.0 degrees F, breaking a record set in 1998. A new warm record was also set for the warmest year to date." And the news doesn't get any better looking back to April ...The Alaska April temperature was record high at 33.3°F, 10.0°F above the 1925-2000 average and 0.4°F warmer than the previous record set in 1940. Record warmth was observed across the southern parts of the state with much-above-average temperatures for central and northern Alaska. Temperatures more than 12°F above average were observed across western parts of the state. Anchorage had its warmest April on record with a temperature of 43.5°F, 2.8°F warmer than the previous record set just last year.  Parts of the Yukon River observed the earliest ice break up on record and Fairbanks observed a record-early 'green up', or start of the vegetation growing season.  In fact, as the site Climate Central notes, the past three January-May periods are among the four warmest in Alaska's records.

Four billion-dollar weather disasters in May 2016 - According to the May 2016 Catastrophe Report from insurance broker Aon Benfield, four billion-dollar weather-related disasters hit the planet in May--a wildfire in Ft. McMurray, Canada, flooding from Tropical Cyclone Roanu in Sri Lanka, flooding in Northern Europe, and a drought in India. Between January - May 2016, there were sixteen billion-dollar weather disasters. This is well ahead of pace of thirteen such disasters in January - May 2013--the year that ended up with the most billion-dollar weather disasters on record: 41.  Here is the tally of billion-dollar weather disasters for January - May 2016:
1) Drought, Vietnam, 1/1 - 6/1, $6.7 billion, 0 killed
2) Drought, India, 1/1 - 6/1, $5.0 billion, 0 killed
3) Flooding, Germany, France, Austria, Poland, 5/26 - 6/6, $5.0 billion, 17 killed
4) Severe Weather, Plains-Southeast U.S., 4/10 - 4/13, $3.75 billion, 1 killed
5) Wildfire, Fort McMurray, Canada, 5/1- 5/30, $3.1 billion, 0 killed
6) Winter Weather, Eastern U.S., 1/21 - 1/24, $2.0 billion, 58 killed
7) Winter Weather, East Asia, 1/20 - 1/26, $2.0 billion, 116 killed
8) Severe Weather, Rockies-Plains-Southeast-Midwest U.S., 3/22 - 3/25, $1.75 billion,
9) Tropical Cyclone Roanu, Sri Lanka, India, Bangladesh, Myanmar, China, 5/14 - 5/21, $1.7 billion, 135 killed
10) Drought, Zimbabwe, 1/1 - 3/1, $1.6 billion, 0 killed
11) Flooding, Argentina and Uruguay, 4/4 - 4/10, $1.3 billion, 0 killed
12) Severe Weather, Plains-Midwest-Southeast-Northeast U.S., 3/4 - 3/12, $1.25 billion, 6 killed
13) Severe Weather, Plains-Midwest-Southeast-Northeast U.S., 2/22 - 2/25, $1.2 billion, 10 killed
14) Flooding, Plains-Rockies U.S., 4/15 - 4/19, $1.0 billion, 9 killed
15) Severe Weather, Plains-Southeast U.S., 3/17 - 3/18, $1.0 billion, 0 killed
16) Tropical Cyclone Winston, Fiji, 2/16 - 2/22, $1.0 billion, 44 killed

Senator: Red Cross Misled Congress, Refused To ‘Level With the People’ on Haiti Money --A blistering Senate report on the American Red Cross raises fundamental questions about the integrity of the country’s most storied charity and its stewardship of donors’ dollars. The report, which was released today by Sen. Charles Grassley, R-Iowa, and contains nearly 300 pages of supporting documents, found:

  • After the 2010 Haiti earthquake, the Red Cross spent tens of millions of dollars more than it has previously acknowledged on internal expenses. The Red Cross told Grassley that the money was largely spent on oversight to make sure the Haiti aid was used properly. But Grassley’s office found that the charity “is unable to provide any financial evidence that oversight activities in fact occurred."
  • Red Cross CEO Gail McGovern made false statements to Grassley’s office about whether the charity cooperated with congressional investigators.
  • McGovern and her subordinates have kept the charity’s own internal investigations and ethics unit “severely undermanned and underfunded.” The charity is “reluctant to support the very unit that is designed to police wrongdoing within the organization.

Grassley launched his investigation following stories by ProPublica and NPR on Red Cross failures in providing disaster relief, including after the Haiti earthquake. The group raised nearly half a billion dollars after the disaster, more than any other nonprofit. But our reporting found that, for example, an ambitious plan to build housing resulted in just six permanent homes.

Canada's eastern boreal forest could thrive with climate change, study suggests - Here's some good news for the animals that live in Eastern Canada's boreal forest and the forestry industry that operates there — the trees that dominate the boreal forest can do just fine in the warmer, drier temperatures expected with global climate change. Black spruce are found across North America from Newfoundland to Alaska, and are the most common tree in the eastern boreal forest. A new study has found that in Quebec north of the 49th parallel, black spruce seem to thrive and grow better in warmer, drier years, which are expected to become more frequent with climate change. "That area might be a refuge for all these migrating birds or all these species that use this habitat — it is good news," said Loïc D'Orangeville, lead author of the new study, published this week in the journal Science. Animals that rely on the eastern boreal forest include many songbirds that nest there, caribou, snowshoe hare, lynx and sable, he said, adding that black spruce are also important commercially for use in the pulp and paper industry. Unfortunately, the new study shows that Quebec trees south of the 49th parallel, which require more water due to the longer growing season, grew less well during warmer, drier years. That's similar to what's been found for black spruce farther west, where there is less rain.Still, the study predicts that between 2041 and 2070, based on median climate warming projections, about 70 per cent of Quebec black spruce trees between the 49th and 52nd parallels should grow better than they do now.

Greenland witnessed its highest June temperature ever recorded on Thursday - Nuuk, Greenland’s capital, soared to 75 degrees (24 Celsius) Thursday, marking the warmest temperature ever recorded in the Arctic country during June. Nuuk sits on Greenland’s southwest coast, where the country’s warmest weather typically occurs.  It was warmer in Nuuk than it was in New York City, where the high was only 71 degrees.  The Danish Meteorological Institute has confirmed on a preliminary basis that the Nuuk measurement would replace the previous record of 73.8 degrees (23.2 Celsius), which wasset in Kangerlussuaq on June 15 in 2014. That temperature was also recorded in southwest Greenland about 200 miles (320 km) north of Nuuk.  John Cappelen, a senior climatologist at the DMI, told The Washington Post that the warm weather was brought on by winds from the east that set up between high pressure over northeast Greenland and low pressure south of Greenland. When winds come from the east over Nuuk, they blow downhill, which leads to an increase in temperature. This is the result of adiabatic warming, where air is compressed from low pressure (at the top of a mountain) to high pressure (at sea level). It’s the same kind of dry warmth that occurs as a result of Santa Ana winds in Southern California.  Thursday’s toasty reading in Nuuk marks the second exceptionally warm temperature recorded in southwest Greenland since April, when the ice melt season began about a month prematurely. At the time, so much ice was melting that scientists at the DMI couldn’t believe what they were seeing. “We had to check that our models were still working properly,”

Greenland Hits Record 75°F, Sets Melt Record As Globe Aims At Hottest Year -- Joe Romm -  Last Thursday, Greenland’s capital hit 75°F, which was hotter than New York City. This was the highest temperature ever recorded there in June — in a country covered with enough ice to raise sea levels more than 20 feet. It comes hot on the heels of the hottest May on record for the entire globe, according to NASA. As the map above shows, May temperature anomalies in parts of the Arctic and Antarctic were as high as 17°F (9.4°C) above the 1951-1980 average for the month. And this all follows the hottest April on record for the planet, which followed the hottest March on record, the hottest February on record, and the hottest January on record. NASA says there is a 99 percent chance this will be the hottest year on record — even though the current record-holder for hottest year, 2015, had blown out the previous record-holder, 2014.   Dr. Stefan Rahmstorf, Head of Earth System Analysis at the Potsdam Institute for Climate Impact Research, tweeted: NASA data: hottest May on record makes the 12-months running mean global temperature anomaly (shown) rise to + 1 °C   Greenland in particular has been shockingly warm this spring. Here, for instance, is “land surface temperatures for April 2016 compared to the 2001–2010 average for the same month” from NASA: NASA reports that some parts of Greenland were 36°F (20°C) warmer than “normal” — and remember, in this map, the new “normal” is the 2001–2010 average, which means it already includes a century of human-caused warming.  As we reported in mid-April, rainfall plus scorching temperatures over the country jump-started the summer melt season weeks early. On April 11, a remarkable 12 percent of Greenland’s massive ice sheet was melting — “smashing by a month the previous records of more than 10 percent of the ice sheet melting,” according to the Danish Meteorological Institute (DMI). The record temperatures in June also led to an unusually high ice melt — covering nearly 40 percent of the ice sheet:

Record temps cause surface melting in Greenland to explode: With parts of Greenland experiencing record high temperatures of late, melting of snow and ice at the surface has been skyrocketing. This follows a record low extent of Arctic sea ice in May, and other troublesome signs that global warming is taking off in the high north. The satellite image above of Greenland’s southwest coast shows what’s happening at the surface: numerous blue melt ponds, and the telltale grayish-blue coloration indicative of melting snow and ice. (Make sure to click on the image for the full-size version.) The graph above tells the tale: a spike in melting far in excess of the average melt percentage for this time of year, following on from two earlier spikes in May and April. It has already been an extraordinary melt season in Greenland — one that began very early. The first spike evident in the graph above came so early in the year that it prompted a Danish climate scientist to say that she and her colleagues were “incredulous.”   The second spike was even bigger, prompting Ted Scambos of the National Snow and Ice Data Center to say that “the Arctic is going to go through hell this year.” Now, we’ve got a third melting spike that blows the others right out of the water. Overall, what’s happening in Greenland looks very similar to what occurred in 2012, when surface melting during the warm season was far in excess of any earlier year in the satellite record, which dates to 1979.

Climate Change Just Opened a 'Gateway to the Underworld' in Siberia - In Siberia’s boreal forest gapes a monstrous chasm local Yakutians call a “gateway to the underworld,” connecting this life to the next. The ominous crater, which looms a mile long and reaches depths of nearly 400 feet, appeared without warning some 25 years ago. According to geological surveys, it’s been growing at an annual rate of more than 60 feet. Yet, outside of Batagai, a rural town in the Sakha Republic’s Verkhoyansk district, little is known about this natural phenomenon. Based on what we do understand, the Batagaika crater probably isn’t an entrance to hell. But it is likely a harbinger of something dreadful to come. And, predictably, climate change has a whole lot to do with it. Sometime during the early 1990s, an industrial facility allegedly cleared a parcel of forest, not knowing that eviscerating the tree stand would kick off a catastrophic geologic event. As climate change worsened around the globe, unprecedented heat waves rippled across Yakutia—one of the coldest places on Earth—melting the exposed layers of glacial ice that had not been seen for up to 200,000 years. Then, one day, the land began to buckle and slump.  The Batagaika crater is what scientists are now calling a “megaslump”: an immense void, or “thermokarst,” in the geomorphology of a permafrost landscape. These sudden rifts appear when permafrost is allowed to rapidly thaw, causing scar zones to sink into the “saturated slurry.” They can remain active for decades at a time. And while understandably terrifying, thaw slumps are a pretty typical feature in Arctic environments like Siberia.  But some scientists see the Batagaika megaslump as an anomaly, and a potentially irreversible sign of worse things to come.   “I expect that the Batagaika megaslump will continue to grow until it runs out of ice or becomes buried by slumped sediment. It’s quite likely that other megaslumps will develop in Siberia if the climate continues to warm or get wetter,”

Giant holes are bursting open in Siberia, and you can hear the explosions from 60 miles away --Giant holes are popping up all over the frigid tundra of northern Russia, and no one is quite certain where they come from.  However, The Siberian Times reports that witnesses are now describing explosive events that may be connected to the appearance of these mysterious craters.  Reindeer herders spotted one of the first huge holes in 2013, in the region's Taimyr Peninsula. It was about 13 feet wide, nearly 330 feet deep, and - as they stumbled across their find - the men "were almost swallowed up by the crater," the Siberian Times wrote.  The herders never saw what made the hole, which has since grown to a whopping 230 feet wide and filled with water.  But villagers who live dozens of miles away are finally coming forward to say they heard and saw something strange shortly before the crater was found, according to the Russian news outlet:  [R]espected scientist Dr Vladimir Epifanov, the sole leading expert to so far visit the site, said: 'There is verbal information that residents of nearby villages - at a distance of 70-100 km [43-62 mi] - heard a sound like an explosion, and one of them watched a clear glow in the sky.'  Since the crater appeared in winter 2013, more have shown up - including a 100-foot-wide crater on Siberia's Yamal Peninsula, which a pilot first spotted n 2014. Lacking a better explanation, aliens and underground missiles were floated as possible theories, according to The Washington Post.  But the truth - which the new eyewitness reports may help support - is that the holes might come from climate change.  Scientific American reports that Arctic zones are warming at a breakneck pace, and the summer of 2014 was warmer than average by an alarming 9 degrees Fahrenheit, according to another story in Nature. As a result, scientists at NOAA think that permafrost, the permanently frozen ground that covers the tundra, is starting to thaw in these warmer temperatures.

Kerry tours Arctic Circle to see climate change impact (AP) — U.S. Secretary of State John Kerry on Thursday visited Norway’s extreme north, viewing areas where climate change has melted ice and opened new sea lanes. Trailed by staff and journalists in small Zodiac-type inflatable boats, Kerry and Norway’s foreign minister motored in an Arctic scientific vessel from a research station in Ny-Alesund, the world’s northernmost civilian settlement. The short cruise took Kerry and his delegation across the iceberg strewn Kongsifjorden (King’s Bay Fjord), where puffins and other Arctic birds skirted the waters, to the Blomstrand Glacier. The glacier has receded significantly in the past 25 years to 30 years, with summer temperatures that can now be 8 degrees and 11 degrees higher than they once were, according to Jan-Gunnar Winther, the director of the Norwegian Polar Institute, who guided Kerry and Foreign Minister Borge Brende. “It’s stunning,” Kerry told reporters from aboard the vessel as it idled in front of the massive ice wall. “This is the center of change within the center of change.” As America’s top diplomat, Kerry has made the health of oceans and combating the effects of climate change a priority, and he will host an international conference on oceans in September, the third such event he has organized since taking office in 2013.

Global warming feared to trigger tropical evacuations -  (Xinhua) -- Two U.S. researchers have foreseen dramatic population declines in Mexico, Central America, Africa, India and other tropical locales due to climate change. Solomon Hsiang, Chancellor's Associate Professor of Public Policy at the University of California, Berkeley, and Adam Sobel, a professor of applied physics and math at Columbia University, suggest that global warming by just 2 degrees Celsius is likely to force some tropical plant, animal and human populations to relocate hundreds of kilometers from their current homes. Earth's temperature rise of average 2 degrees this century is considered "optimistic" compared to business-as-usual forecasts. Using a model to demonstrate how climate dynamics in the tropics can magnify the consequences of warming as it is experienced on the ground, the pair conclude in a research published in the latest issue of journal Scientific Reports that even small changes can have dramatic impacts. "We're not making specific predictions about migration patterns of individual species, but the geophysical constraint is that, as the tropics get hotter, you'll have to go far, essentially leaving the tropics, to cool off," said Sobel. And because the tropics are uniformly hot, when things get hotter by a small amount, populations will have to move far to find relief.

Shattered records show climate change is an emergency today, scientists warn - May was the 13th month in a row to break temperature records according to figures published this week that are the latest in 2016’s string of incredible climate records which scientists have described as a bombshell and an emergency.  The series of smashed global records, particularly the extraordinary heat in February and March, has provoked a stunned reaction from climate scientists, who are warning that climate change has reached unprecedented levels and is no longer only a threat for the future. Alongside the soaring temperatures, other records have tumbled around the world, from vanishing Arctic sea ice to a searing drought in India and the vast bleaching of the Great Barrier Reef. The UK has experienced record flooding that has devastated communities across the country and scientists predict that the flash floods seen by parts of the country in recent days will increase in future.  “The impacts of human-caused climate change are no longer subtle – they are playing out, in real time, before us,” says Prof Michael Mann, at Penn State University in the US. “They serve as a constant reminder now of how critical it is that we engage in the actions necessary to avert ever-more dangerous and potentially irreversible warming of the planet.” “These [records] are very worrying signs and I think it shows we are on a crash course with the Paris targets unless we change course very, very fast. I hope people realise that global warming is not something down the road, but it is here now and it affecting us now.”

Low oil prices could 'hamper' action on climate change, say scientists - Carbon Brief - Falling oil prices since 2014 have raised the question of how far the sudden availability of cheaper fossil fuels will impact efforts to tackle climate change. A new study in Nature Energy assesses how energy use could respond to sustained high and low oil prices. It finds that the price of oil could, in some cases, influence energy demand more than a carbon price. . It also assesses other factors that could influence emissions as the price of oil fluctuates. Low oil prices mean that people use more oil, which could be bad news when it comes to emissions. A low oil price means that emissions could be higher every year by 6-7 gigatonnes (Gt), compared to the high oil price that the researchers modelled. They found that this difference was the same in both the baseline and the mitigation case.Between 2010 and 2050, this amounts to a large volume of CO2. Cumulatively, it means that emissions are almost 140GtCO2 higher when there is a low oil price, compared to the high price scenario. On an annual basis, this represents a difference of 3.5 to 4GtCO2 in 2030, and 6 to 7GtCO2 in 2050, between the two oil price scenarios. To put this into context, the Intended Nationally Determined Contributions that countries set out before the UN climate conference in Paris last year amount to savings of around 3.6GtCO2 equivalent in 2030.

Wall Street Journal accepts environmentalist ad but charges extra -- The Wall Street Journal’s editorial pages may be the beating heart of climate-change skepticism, but the newspaper apparently was willing to entertain an alternative view — for a price. The leading business newspaper is letting an obscure environmental group challenge the Journal editorial page’s orthodoxy on the issue, although it will cost the group thousands of extra dollars to run its kickoff ad on the page.  The Partnership for Responsible Growth, based in Washington, approached the Journal last month with plans to run 12 ads, in print and digital form, promoting a proposed fee on carbon-fuel producers. It sought to place its print ads on the newspaper’s op-ed page, where columns blasting environmentalists in general and climate-change activism in particular are standard fare.The group’s first ad, however, seemed to have hit a little too close to home.“Exxon’s CEO says fossil fuels are raising temperatures and sea levels,” its headline reads. “Why won’t the Wall Street Journal?” The ad goes on to call out the Journal’s editorial position — long held and staunchly defended — that climate change is complex and the science surrounding it is still uncertain: “If the CEO of the world’s largest company accepts the basic physics that humans are heating the climate with excess C02, why won’t the editorial board of this newspaper?” the copy says. “Isn’t it about time?”  No dice, said the Journal’s advertising department, according to the environmental group. The newspaper — owned by News Corp., one of two companies controlled by Rupert Murdoch — initially rejected the first ad but accepted 11 subsequent ads, none of which mention the Journal. According to internal documents supplied by the environmental organization, the newspaper is charging the group $36,528 for the Journal-bashing ad while charging $27,309 each for the eight ads that follow it (the last three in the series are freebies, known as “bonus” ads).Journal spokeswoman Colleen Schwartz denied that the paper initially rejected the first ad. “We do welcome the debate,” she said. And that premium price? It’s actually not a premium, Schwartz said, but the standard, non-discounted rate. Any advertiser that challenges something in the paper can expect to pay this rate, she said. All other ads are subject to negotiation and discounts. And that’s what happened here: The partnership paid the standard rate for the first ad and received discounted prices for the rest of the series, she said.

What Charles Koch really thinks about climate change - Charles Koch had been talking for more than an hour — about markets, philosophy and why he is spending hundreds of millions of dollars to fund university research, particularly in economics — when the subject turned to climate change. The question, from The Washington Post’s Jim Tankersley (who wrote about the main thrust of the interview here), was whether any evidence could persuade the libertarian billionaire that regulation of carbon emissions is necessary to head off disastrous global warming.Koch’s answer went on for several minutes. He did not deny global warming, but he did downplay the risks of climate change, based on his read of the scientific evidence. The full exchange sheds new light on Koch’s beliefs about climate and carbon regulation Here, then, we provide an annotated transcript of those comments, highlighting areas where Koch does — and, where he doesn’t — align with what scientists have to say about the subject, and more generally exploring his remarks. The questions are Tankersley’s, the answers are Koch’s and the notes are from energy and environment writer Chris Mooney.

Why won't Clinton support a carbon tax? Trump. --  Presumptive Democratic presidential nominee Hillary Clinton isn't talking about one of the biggest policies on climate change, reinforcing what some say is a division among Democrats about how to achieve great cuts to carbon dioxide emissions in almost every facet of our powered life.The policy is a carbon price. The party's disagreements over promoting one or supporting executive orders to address rising temperatures could be illuminated as the Democratic platform is hammered out over the next five weeks, with Vermont Sen. Bernie Sanders, Clinton's opponent for the nomination, promising to prioritize policies like a carbon tax.   The policy has been beaten legislatively at least three times. But many climate advocates and economists say it's still the key to cutting enough emissions to avoid damaging warming around the globe. It could be needed in 10 years or earlier, many say. "I do think it's the indispensable tool,"  A carbon price is omnipresent in climate circles. Early goals to cut carbon might be met without it, like Obama's pledge in the Paris Agreement to reduce emissions 26 to 28 percent by 2025. But after that, many experts assume some kind of price on emissions will be used to eliminate all but the most difficult sources. The effort would whittle down U.S. greenhouse gas emissions to just 20 percent of what they were in 2005 by 2050. You won't find Clinton talking about that this year. She withstood Sanders' criticisms about not supporting a carbon tax throughout the spring primary contests in part because promoting that policy could expose her to politically damaging attacks by presumptive Republican nominee Donald Trump, observers say. Clinton has supported carbon pricing in the past.

For Donald Trump, climate change is a 'hoax' — except when it threatens his golf business -- Trump's seaside golf course in County Clare, Ireland — on the western coast, just south of Galway — has suffered from serious erosion. The Trump Organization has filed for permission from the local county planning board to build a seawall that would protect the golf course from future damage. Politico's Ben Schreckinger, who has been reporting the story, says Trump’s filing explicitly states that global warming and its effects, such as sea level rise and the increased strength of storms, will make the erosion worse over the coming century and is one of the chief reasons they need to build the wall. Schreckinger says he had been following the story of the wall for months in Irish media. He then began to look deeper into government filings, where he discovered exactly how Trump's firm is arguing the need for a wall. When Trump bought the golf course, it had already suffered terrible erosion during the winter of 2013-2014, Schreckinger says. It was an unusually stormy winter, with the kind of weather scientists would point to as an example of climate change’s effects. Some parts of the golf course saw 10 meters of erosion over the course of just that winter. One storm, just days before Trump closed on this purchase, took away six to eight meters in one day, Schreckinger says. Publicly, Trump maintains his skepticism of climate change. He has called it “pseudoscience” and declared, “I'm not a believer in man-made global warming. The weather is changing; it’s always changing.”Trump has also declared that he would “cancel” the Paris climate agreement, saying it is "bad for US business.”

Exxon Sues Massachusetts Attorney General to Block Climate Fraud Investigation  -- ExxonMobil filed a lawsuit against Massachusetts Attorney General Maura Healey in an effort to block a subpoena that would require the oil and gas giant to hand over 40 years of internal communications relating to whether the company misrepresented its knowledge of climate change to investors.The 33-page injunction was filed in federal district court in Fort Worth, Texas on Wednesday.In the searing complaint, Exxon called the investigation a “fishing expedition” that is “nothing more than a weak pretext for an unlawful exercise of government power to further political objectives.”“Attorney General Healey is abusing the power of government to silence a speaker she disfavors,” the complaint states.Exxon believes Healey’s April 19 subpoena violates its constitutional rights on free speech, unreasonable search and seizure and equal protection, Reuters reported. The company seeks either an injunction to halt the investigation or for the court to rule that the investigation is without legal merit.In response to the lawsuit, Healey’s office said that its investigation is “based not on speculation, but on inconsistencies about climate change in Exxon documents which have been made public.”  “The First Amendment does not protect false and misleading statements in the marketplace,” Healey’s communications director Cyndi Roy Gonzalez said in a statement provided to EcoWatch.

Brazil’s scientists start street protests against ministry merger -- Brazil’s scientists have been taking to the streets to protest against last month’s demotion of their country’s science ministry (MCTI) – but politicians say the demonstrations won’t change the controversial decision. The protests followed an efficiency drive by interim president Michel Temer, who took office in May after Dilma Rouseff was impeached. He angered researchers by merging the MCTI with a telecommunications ministry. The move was part of a bid to cut public expenses, Temer said: overall, he cut the number of ministries in his cabinet from 32 to 22. Researchers, already struggling with massive funding cuts, saw the move as weakening the status of science, which has had its own cabinet ministry for most of the past three decades. “The government is signaling that science is unimportant and shall remain so”, says Sergio Rezende, a physicist at the Federal University of Pernambuco in Recife, who was science minister from 2005 to 2010. Within days of Temer’s action, the culture ministry — which he also demoted — was reinstated after protests by artists. Inspired by that action, some researchers launched the Internet campaigns #VoltaMCTI (“come back, MCTI”) and #FicaMCTI (“stay, MCTI”) and scheduled demonstrations. In Natal, 200 people, some in white lab coats, some wearing paper masks of Temer and Albert Einstein, demonstrated on 2 June. In a protest in Rio de Janeiro two days later, a banner carried a picture of the interim president with the words, “Without science there’s no Viagra”. (Temer, 75, is married to a beauty queen 32 years his junior.) This week, protests continued in university campuses and outside national labs and public buildings in Rio, Porto Alegre, Brasília, Belo Horizonte, Petrópolis and Belém.

Addressing Climate Change Could Be More Costly Than Thought - For all of the discussion around the dangers of climate change, one issue is often forgotten – the cost of fixing the problem. Cutting carbon emissions enough to halt changes to the Earth’s atmosphere is likely to prove extraordinarily costly. So much so that the process is going to put a huge financial burden on many nations and keep billions mired in poverty. That’s the conclusion of M.J. Kelly, a leading engineering professor and scientist with Cambridge University in a recently published study. Dr. Kelly also sees the Paris Climate Accord as irrelevant from a climate change perspective, with the quest to reduce carbon emissions being at best costly, and very likely quixotic. Kelly sees carbon cuts as having a devastating effect on modern life around the world. Kelly’s views, while not shared by many other scientists, are based on a cost perspective rather than a view on the process of global warming. Kelly concludes that global warming is occurring, but rather than being as detrimental as many experts fear, he sees it instead as having a significant beneficial effect on fertilization and crop yields. Kelly’s conclusions are notable in that they coincide with a recent report by the International Energy Agency. In that report, the IEA called for “concrete action” to address climate change in the wake of last year’s accord which was ratified by almost 200 nations. The IEA cites “massive changes in the energy system” that are needed to meet the goals of those accords. The IEA cites the cost of those changes and the required decarbonization as being roughly $9 trillion. Further, an additional $6.4 trillion would be needed to make other industries more environmentally friendly in order to help sustain low carbon trends. Given that level of costs, it’s unclear where the money would come from. The total wealth of the U.S. for instance - including stocks, bonds, bank accounts, real estate, everything – is roughly $85 trillion. It’s unclear that the country is going to be willing or able to give up 20 percent of its total wealth to help the rest of the world.

Study: Most fossil fuels unburnable without carbon capture - The majority of fossil fuel reserves are unburnable if the world is to avoid dangerous climate change, but carbon capture and storage (CCS) could “unlock” greater use, a new study concludes. The white paper, from Imperial’s Sustainable Gas Institute, challenges previous findings that CCS makes little difference to the quantity of fossil fuels that can be burned, within a 2C carbon budget. Carbon Brief runs through the report’s findings and what it might mean for fossil fuel firms. CCS has a decidedly mixed reputation. Some strongly support it, whereas many view it with suspicion, as a technological fix that promises to allow existing energy firms to continue business as usual.Indeed, oil and gas majors, such as BP, Shell and ExxonMobil, are among the loudest CCS advocates. So it’s worth noting that the Sustainable Gas Institute was set up in 2014 with an £8.2m grant from oil and gas firm BG Group, which was recently bought by Shell. Setting out its purpose, the new report says: “This white paper has considered whether carbon capture and storage (CCS) technology has the potential to enable access to more fossil fuel reserves in the future, where these reserves would otherwise be ‘unburnable’.” Note that this explicitly frames the question in terms of enabling access to more fossil fuels, rather than in terms of securing the energy the world needs while avoiding dangerous climate change. Fossil fuels are useful, but using them is not an end in itself. In contrast, bodies such as the Intergovernmental Panel on Climate Change (IPCC) have asked if the world could limit warming to 2C without CCS (the IPCC says it could), and whether the alternatives would be more costly (the IPCC says it would cost twice as much without CCS).

The Dirty Part of Green Energy: The apparent ubiquitous proliferation of hillsides stuffed with majestic 400-foot wind turbine blades seemingly innocently whirling to churn out kilowatt after kilowatt of sacrosanct green energy, are now embedded as quaint Americana. Just gaze at these mammoths and breathe deep the hardy pristine air, visualize shrinking carbon footprints and global warming being in the past tense.  I spent time studying power industry arcana to convert things like kilowatts to megawatts to Btu’s to the energy output of a Mcf of natural gas. A Mcf, one thousand cubic feet, is the standard unit to quote this commodity. One Mcf trades as of June 14 traded at about $2.60. Seeking to understand analogous energy outputs, I compared a natural gas well making 1 MMcf (one million cubic feet) per day versus a 1.5 MW (megawatt) wind turbine. The results were astonishing. It requires 25, yes twenty-five, 1.5 MW wind turbine to produce the energy of one natural gas well that produces 1 MMcf per day. I did my first calculations looking at the number of kWh (kilowatt hours) that each generated in one year. So sure my arithmetic skills had atrophied, I re-ran my numbers using a different metric, looking at how many Btu’s (British Thermal Units) each source yielded in one year. The results were the same, less than one-half of one percent differential. Still wobbly, and out of my field of expertise, I contacted senior fellow at the Manhattan Institute and wind energy expert, Mr. Robert Bryce. He does his figures using BOE/d (barrel of oil equivalent/day). Nearly identical to mine, his numbers yielded the gas well spewing out 24.6 times the energy of the wind turbine. (All calculations are shown below)[1]

Volkswagen Not Alone in Flouting Pollution Limits - - One diesel car tested by the German government emitted more than 12 times as much poisonous nitrogen oxide as allowed. Another was five times over the limit, and yet another six times over.The cars were not produced by Volkswagen, the company at the center of a widespread emissions scandal. They were a Jeep, a General Motors sedan and a Mercedes-Benz.A growing stack of recent government and private studies has made increasingly clear that Volkswagen was hardly the only company to flout pollution limits. While Volkswagen illegally manipulated test results, the other carmakers in Europe just took advantage of a loophole that allows them to throttle down emissions controls whenever there is risk of engine damage — which in some cases is nearly all the time.Such information has awakened Europeans to the real environmental cost of diesel, with far-reaching reputational and financial consequences for the auto industry. Companies are now on the defensive in their core diesel market of Europe, as environmental groups push for tougher regulations, authorities haul auto executives before hearings and politicians call for an end to favorable fuel taxes.“It’s just a question of who’s cheating legally and who’s cheating illegally,” said Ferdinand Dudenhöffer, a professor at the University of Duisburg-Essen who follows the auto industry. “They’re all bad.”

Can the world go all-electric? -- Recently, word leaked out that Norway may ban the sale of diesel- and gasoline-powered vehicles by 2025. The move toward electric vehicles is part of a dream shared by those concerned about climate change and about fossil fuel depletion (especially oil depletion), namely, turn the world into one big all-electric paradise. Run everything we can on electricity. Theoretically, this is possible, but getting there won't be easy. First, such a transition will take time. In the Norwegian example cited above, the transition to an all-electric private car fleet would take about 15 years based on Norwegian private car registrations in 2015 and the current total number of registered private cars.  But the ban wouldn't take effect until 2025. While Norwegian electric car registrations are rising, so are total car registrations. Even if we generously assume that the rise in electric car registrations between now and 2025 will shave five years off the transition, that still means Norway won't achieve an all-electric private automobile fleet until 2035. And, Norway is already a leader in the move toward all-electric transportation. Other countries lag far behind. The Norwegian example points out a second difficulty in the transition to an all-electric world. Norway gets 95.9 percent of its electricity from hydroelectric dams. It gets another 1.6 percent from wind turbines. Only 2.5 percent of its electricity comes from thermal power plants, the kind that burn fossil fuels such as coal and natural gas and that provide 66 percent of the world's electricity. Transitioning to electric transportation in places that primarily burn coal, natural gas and/or diesel fuel to produce electricity would undermine the goal of lowering greenhouse gas emissions. In thermal power plants, the ones that burn fossil fuels, two-thirds of the energy produced is lost in the form of heat. Only one-third is turned into electricity.

Still Living in a Fossil Fuel World -- An enormous number of pixels are spent on renewable energy, but when one looks at actual numbers, we are still living in a fossil fuel world. Here are some illustrative charts from the most recent annual BP Statistical Review of World Energy, released June 2016.  Here's a breakdown of world energy consumption. The big slices are all fossil fuels: green is oil; red is natural gas; grey is coal. The little slices are carbon-free sources of energy: nuclear is light orange, hydroelectric is blue, and renewables are darker orange. As the report notes: "Oil remains the world’s dominant fuel and gained global market share for the first time since 1999, while coal’s market share fell to the lowest level since 2005. Renewables in power generation accounted for a record 2.8% of global primary energy consumption." Reserves of fossil fuels are not running down. Here are figures showing the years remaining of reserves of oil, natural gas, and coal. The figures show a breakdown by region, which isn't especially relevant given that energy can be shipped between regions. Instead, focus on the gray line showing reserves at the world level. Reserves of oil and natural gas, as measured by years remaining, are not declining over time. Reserves of coal are declining, but there is more than century of reserves remaining. It may seem obvious that reserves must decline over time, but technological change doesn't just work with renewables like solar and wind. It also finds new sources of fossil fuels and new methods of extraction.

Toward a More Reflective Planet – The last time the atmosphere held as much carbon dioxide as it does today was about three million years ago – a time when sea levels were 10-30 meters higher than they are now. Climate models have long struggled to duplicate those large fluctuations in sea levels – until now. Indeed, for the first time, a high-quality model of Antarctic ice and climate has been able to simulate these large swings. That is smart science, but it brings devastating news.  The new model shows that melting in Antarctica alone could increase global sea levels by as much as one meter (3.2 feet) by the end of this century – well above prior estimates. Worse, it suggests that even extraordinary success at cutting emissions would not save the West Antarctic Ice Sheet, locking in eventual sea-level increases of more than five meters. As little as one meter could put at risk entire cities, from Miami to Mumbai, and cause enormous economic disruption.  We need to turn down the heat – and fast. To this end, albedo modification – a kind of geoengineering intended to cool the planet by increasing the reflectivity of the earth’s atmosphere – holds tremendous promise. Injecting synthetic aerosols that reflect sunlight into the stratosphere, for example, could help counter the warming caused by greenhouse gases. The mechanism is similar to wearing a white shirt in the summer: white reflects sunlight and cools what is underneath, whereas darker colors absorb sunlight and heat.  To be sure, even in the best-case scenario, solar geoengineering alone could not stabilize the world’s climate. For that, we must both stop pumping carbon pollution into the atmosphere and learn how to remove what is already there. That is why emissions cuts should receive the lion’s share of resources devoted to combating climate change.  But, as the recent study shows, emissions cuts alone cannot save the West Antarctic Ice Sheet and prevent a drastic sea-level rise. If they are pursued in conjunction with moderate albedo modification, however, there is a chance of halting rising temperatures, helping to keep the world under 1.5° Celsius above pre-industrial levels, the more ambitious target agreed at the Paris climate talks last December.

Supreme Court rejects challenge to Obama mercury air pollution rule | Reuters: The U.S. Supreme Court on Monday turned aside the latest effort by a group of states led by Michigan to block Obama administration environmental regulations limiting power plant emissions of mercury and other toxic pollutants. The justices opted not to hear the states' appeal of a December U.S. appeals court decision allowing the mercury rules to remain intact while the administration responded to last year's Supreme Court ruling that the government should have considered the compliance costs when crafting the regulations. Opponents of the regulations, which went into effect in April 2015 and affect mainly coal-fired power plants, have estimated they would cost $9.6 billion a year and raise electricity bills. Monday's action marked the second time this year the Supreme Court has spurned the states on the issue. Chief Justice John Roberts on March 3 declined their request for a stay to put the regulations on hold. The Environmental Protection Agency has "blatantly refused" to follow the 2015 high court ruling, prompting the states to ask the Supreme Court to intervene again, said Andrea Bitely, a spokeswoman for Michigan Attorney General Bill Schuette, a Republican. An EPA spokesman said the regulations "cut harmful pollution from power plants, saving thousands of lives each year and preventing heart and asthma attacks."

Judge says waste leak from coal plant ponds is ‘alarming’ — A state judge expressed alarm at the estimated 200 million gallons of contaminated water seeping annually from leaky ash-storage ponds at a Montana power plant serving customers across the Pacific Northwest — a problem that’s persisted for years after the company and state officials said they were addressing it. A 2012 deal between Montana environmental regulators and the Pennsylvania-based manager of Colstrip Steam Electric Station was intended to clean up decades of contamination of surrounding water tables. The agreement, known as an administrative order on consent, came after the plant’s six owners paid $25 million in a separate settlement to Colstrip residents whose water was fouled by the plant’s ash ponds. District Judge Robert Deschamps said he found it “alarming” that 380 gallons of wastewater continues to seep from the ponds every minute. That’s equivalent to nearly 200 million gallons a year. Claims by plant manager Talen Energy that the seepage was being effectively controlled “is clearly a disputed fact,” Deschamps wrote in a Wednesday ruling. “What is a reasonable amount of time in which the (state) should act versus conduct further study, given there has already been 30 years of seepage and the (administrative order) itself was seven years in the making?” Deschamps wrote. The judge rejected arguments from Montana Department of Environmental Quality officials that they were appropriately handling the matter. That means environmentalists can proceed with a lawsuit challenging the 2012 agreement, which set few deadlines for action and could entail years of further study.

Group sues Duke Energy over coal ash; cites ‘contamination’ of Mayo Lake - Duke Energy is the target of another lawsuit over its coal ash, this one filed by a nonprofit group that advocates for the Roanoke River basin in northern North Carolina. The Roanoke River Basin Association says Duke’s Mayo power plant in Roxboro, near the Virginia line north of Raleigh, violated the federal Clean Water Act. It claims the 6.9 million tons of ash at Mayo has illegally contaminated the popular fishing destination Mayo Lake, a nearby stream, wetlands and groundwater with toxic metals. Mayo is two counties east of Duke’s 2014 ash spill into the Dan River, which triggered a state-ordered shutdown of all its ash ponds. The Dan is part of the Roanoke River basin. “Duke Energy has polluted the Roanoke River basin with more coal ash than any other area of North Carolina,” Mike Pucci, president of the Roanoke River Basin Association, said in a statement. “We suffered the Dan River spill and do not deserve more Duke Energy pollution at Mayo.” The lawsuit was filed in the middle district of U.S. District Court, where a similar lawsuit over Duke’s Buck power plant near Salisbury is before the court. Both are so-called “citizen suits” that claim state and federal officials aren’t aggressively enforcing environmental laws.

Coal Production Plummets to Lowest Level in 35 Years -  Coal production in the United States is plummeting to levels not seen since a crippling coal strike 35 years ago, according to a report released by the Energy Department on Friday. The coal industry in recent years has been plagued by bankruptcies as power utilities increasingly moved to replace coal with cheap natural gas and renewable sources, like solar and wind energy. Coal was once the dominant source of the nation’s electricity generation, but consumption of the fossil fuel has declined by nearly a third since its peak in 2007.Once gradual, the decline in coal mining appears to be picking up momentum. Coal production in the United States of 173 million tons for January through March was the lowest in any quarter since 1981. The quarterly production total represented a 17 percent decline from the previous quarter, the steepest quarter-over-quarter drop in nearly 32 years.Part of the reason for the production drop were the above-normal temperatures through much of the nation in recent months, which lowered electricity demand. Utilities had stockpiled an additional 34 million tons of coal during the final months of 2015, anticipating a colder winter.But the Energy Department noted broader forces at play in its brief report.  “Coal production has declined because of increasingly challenging market conditions for coal producers,” the report said. “In addition to complying with environmental regulations and adapting to slower growth in electricity demand, coal-fired generators also are competing with renewables and with natural gas-fired electricity generation during a time of historically low natural gas prices.”

US coal production drops to levels not seen since a 1980s miners’ strike | Ars Technica: The first three months of 2016 saw a plunge in the US' coal production that may be without precedent. The US Energy Information Administration, which has figures going back to the 1970s, shows only a single quarterly drop of similar magnitude—and that one came during a workers' strike back in the early 1980s. Excepting periods of labor problems, US coal production has not been this low since the EIA started tracking it. Part of the problem is temporary. The winter was unusually mild, which lowers energy use in general. As a result, many of the coal-burning electrical plants had large stockpiles of coal on hand; they burned through these reserves rather than ordering new coal. But most of the issues are systemic. Coal is now being undercut by renewables and natural gas, which are displacing some of the demand. Utilities are responding to those low prices by adding new renewable and gas capacity. That additional capacity comes at a time when the US' electricity demand has been growing at an unexpectedly slow pace. Combined, these factors have resulted in less use of existing coal plants. New environmental regulations are also forcing the oldest and least efficient plants to shut down early. Most of these are also coal. Finally, demand overseas has not made up for slumping domestic use. Combined, these issues have led to a number of bankruptcies among coal producers (although those companies continue to operate while restructuring their debts).

Development banks threaten to unleash an infrastructure tsunami on the environment --We are living in the most explosive era of infrastructure expansion in human history. The G20 nations, when they met in Australia in 2014, argued for between US$60 trillion and US$70 trillion in new infrastructure investments by 2030, which would more than double the global total value of infrastructure.  Some of the key players in this worldwide infrastructure boom are huge investors such as the World Bank. The past few years and decades have seen the rise of major new investment banks, such as the recently founded Asian Infrastructure Investment Bank (AIIB), and the dramatic growth of funds such as the Brazilian Development Bank (BNDES). The new banks, along with traditional big lenders such as the World Bank, the International Monetary Fund, and the Asian, African, and Inter-American Development Banks, are very fond of funding big infrastructure such as roads, dams, gas lines, mining projects, and so on. Some people had hoped that these banks would promote sustainable and socially equitable development, but it now seems that they could end up doing precisely the opposite.  The next few decades are expected to see some 25 million km of new paved roads, thousands more hydroelectric dams, and hundreds of thousands of new mining, oil and gas projects.

Environmental Groups Change Tune on Nuclear Power - WSJ: Some of the nation’s most influential environmental groups are softening their longstanding opposition to nuclear power, marking a significant shift in the antinuclear movement as environmentalists’ priority shifts to climate change. The change is lowering one of the biggest political hurdles facing the nuclear power industry in the U.S. and comes at a critical time, as several financially struggling reactors are set to shut down. “Because the historical context is that these groups were opposed to nuclear, their absence on the opposition front is noticed,” said Joe Dominguez, executive vice president for governmental and regulatory affairs for Exelon Corp., the biggest owner of nuclear plants in the U.S. “I think it’s pretty significant.” Nuclear power, which emits no greenhouse gases, provides roughly 20% of U.S. electricity and 60% of carbon-free electricity, according to federal data. Pressed by cheap natural gas and state policies that favor renewables over nuclear power, roughly a dozen reactors are either poised to shut down in the coming years or have already. The Sierra Club, the country’s oldest and largest environmental group, is debating whether to halt its longtime position in support of shuttering all existing nuclear-power plants earlier than required by their federal operating licenses. The environmental group’s leaders see existing reactors as a bridge to renewable electricity and an alternative source of energy as the group campaigns to shut down coal and natural gas plants. The Environmental Defense Fund is similarly deciding to what extent it should adjust its policy, potentially lending its support to keeping open financially struggling reactors.

Utility head blamed for late mention of Fukushima ‘meltdown’ — An outside investigation team appointed by the operator of Japan’s damaged Fukushima nuclear plant said Thursday that an instruction from then-company president to avoid mentioning “meltdown” delayed disclosure of the status of three reactors. Tokyo Electric Power Co. described the Fukushima reactors’ condition as less serious “core damage” for two months after the March 2011 earthquake and tsunami wrecked the plant. The panel of three TEPCO-commissioned lawyers said TEPCO used the milder expression despite knowing the damage far exceeded its meaning, following an instruction by then-president Masataka Shimizu. The investigation, however, found that TEPCO’s delayed acknowledgement broke any law. In the 70-page report, the lawyers said Shimizu instructed his deputy not to use the word “meltdown” during news conferences immediately after the crisis when officials were peppered with questions about the reactor conditions. At the very beginning, TEPCO’s vice president at the time, Sakae Muto, had mentioned a “possibility of a meltdown” until March 14, 2011. Video footage of a news conference that day shows a company official rushing over to Muto when he was about to respond to a question about conditions of the reactors, showing him a memo and hissing into his ear: “The Prime Minister’s Office says never to use this word, never.” Yasuhisa Tanaka, lawyer who headed the investigation, said interviews of 70 former and current TEPCO officials, including Muto, showed that Muto had planned to use the word “meltdown” until he saw the memo. The memo containing Shimizu’s instruction was never found, however, Tanaka said.

The US dropped 67 nuclear bombs on this tiny island nation — and now it’s far more radioactive than we thought - More than 60 years after the US dropped dozens of nuclear bombs on the Marshall Islands, residents of the tiny nation still may not be able to return.   Radiation levels in some areas of the country are almost double what is deemed safe for human habitation, according to a new Columbia University study in the journal Proceedings of the National Academy of Sciences.   Between 1946 and 1958, the US tested 67 nuclear weapons on the Marshall Islands, a chain of atolls in the Pacific Ocean with a population of just 52,000.  The most famous test, the "Bravo shot," was dropped on Bikini Atoll in 1954 and was 1,000 times more powerful than the bomb dropped on Hiroshima.  Residents of the atoll were displaced, and today it remains uninhabited.  The researchers discovered that radioactive materials on Bikini Atoll are producing 184 millirems of radiation a year - almost double the safety standard of 100 set by the US and the Marshall Islands. Some parts of the region hit a whopping 639 millirems per year.  Scientists had once predicted Bikini Atoll's radiation levels to be as low as 16 millirems a year, suggesting that the radiation has persisted far longer than previously imagined, according to Science News.  There is a silver lining for the Marshallese: The other five islands analyzed in the study fell safely below the 100-millirems-per-year threshold.

A Nuclear Weapon That America Doesn’t Need -  Feinstein and Tauscher - PRESIDENT OBAMA spoke last month in Hiroshima about charting a course to a future free of nuclear weapons. He discussed the “persistent effort” necessary to eliminate the threat of nuclear war.To advance that goal, the president should reconsider the Defense Department’s effort to develop a new nuclear weapon called the Long-Range Standoff Weapon.The Air Force is set next year to accelerate the development of this new nuclear cruise missile. It would carry an upgraded W-80 nuclear warhead and be able to penetrate the world’s most advanced air-defense systems.We agree that a safe, reliable nuclear stockpile is needed. Our backgrounds, voting records and entire careers show that we understand and value the deterrent effect of our nuclear stockpile. However, building new nuclear weapons like this one could be unnecessary, costly and dangerous.Like our current nuclear cruise missile, the Long-Range Standoff Weapon could strike an adversary’s territory from great distances. But there are compelling reasons not to introduce a cruise missile that could increase the risk of nuclear war.

First new U.S. nuclear reactor in almost two decades set to begin operating - Today in Energy - U.S. (EIA) - The Tennessee Valley Authority's (TVA) Watts Bar Unit 2 was connected to the power grid on June 3, becoming the first nuclear power plant to come online since 1996, when Watts Bar Unit 1 started operations. Watts Bar Unit 2 is undergoing final testing, producing electricity at incremental levels of power, as TVA prepares to start commercial operation later this summer. The new reactor is designed to add 1,150 megawatts (MW) of electricity generating capacity to southeastern Tennessee.  Watts Bar Unit 2 is the first nuclear plant in the United States to meet new regulations from the U.S. Nuclear Regulatory Commission (NRC) that were established after the 2011 earthquake and tsunami that damaged the Fukushima Daiichi Nuclear Plant in Japan. After the NRC issued an operating license for the unit in October 2015, 193 new fuel assemblies were loaded into the reactor vessel the following month. TVA announced at the end of May that the reactor achieved its first sustained nuclear fission reaction.  Construction on Watts Bar Unit 2 originally began in 1973, but construction was halted in 1985 after the NRC identified weaknesses in TVA's nuclear program. In August 2007, the TVA board of directors authorized the completion of Watts Bar Unit 2, and construction started in October 2007. At that time, a study found Unit 2 to be effectively 60% complete with $1.7 billion invested. The study said the plant could be finished in five years at an additional cost of $2.5 billion. However, both the timeline and cost estimate developed in 2007 proved to be overly optimistic, as construction was not completed until 2015, and costs ultimately totaled $4.7 billion.

Ohio PUC chairman seeks balance in tackling carbon emissions -- As Ohio pursues parallel -- and contrary -- paths in response to U.S. EPA's Clean Power Plan, one central person who will help determine the state's energy future is Asim Haque, chairman of the Public Utilities Commission of Ohio. But the quirky energy politics of this purple state are not going to make it easy. Haque on May 9 was elevated to chairman of the commission by Gov. John Kasich (R) following the resignation of Andre Porter. Haque had been appointed to the commission in 2013 and was reappointed earlier this year to serve until 2021. He identifies with neither major political party and calls himself an independent.  Kasich has made a political departure from Republican gospel by publicly acknowledging the need to combat climate change, Haque noted in a recent interview with EnergyWire. "But while one can believe in climate change, how to attack it can vary from person to person," he said. "What we don't want to have happen is for there to be dire economic consequences associated with either legislation or regulation to curb carbon emissions. So trying to find that balance is challenging." Republicans in the Ohio Legislature have been pushing for legislation that would require an agency to get approval from lawmakers before submitting a state plan to comply with the federal carbon rule for power plants. GOP leaders also want to extend a freeze on renewable energy and efficiency standards until 2020. Lawmakers adjourned before sending a bill to Kasich.

Feds charge Warren man with dumping fracking waste into Mahoning River tributary - Youngstown Vindicator  — A former employee of a Youngstown-based company has been charged with violating the federal Clean Water Act by directing another employee to dump fracking waste into a Mahoning River tributary, the U.S. Attorney said Monday. David N. Jenkins, 34, of Warren, was charged via criminal information with one count of making unpermitted discharges in violation of the act.  Ben Lupo, owner of Hardrock Excavating LLC, directed Jenkins to contact employees about emptying the stored waste liquids into the stormwater drain at night, which Jenkins did, the U.S. Attorney said. Lupo is serving a 28-month federal prison term and was fined $25,000 after he pleaded guilty to violating the act.Located at 2761 Salt Springs Road, Hardrock provided services to the oil-and-gas industry in Ohio and Pennsylvania, including the storage of brine and oil-based drilling mud used in hydrofracturing, or fracking.The facility had about 58 mobile storage tanks, each holding about 20,000 gallons.  Lupo, of Springfield Township, directed employees to empty some of the waste liquid stored at the facility into a nearby wastewater drain on or about Nov. 1, 2012, when they were alone after dark.  The last time an employee emptied some of the waste liquid into the drain was Jan. 31, 2013, federal authorities said.

Fifth oilfield waste dumping defendant charged - Youngstown Vindicator A fifth defendant has been charged with violating the federal Clean Water Act in the dumping of oilfield waste into a Mahoning River tributary late in 2012 and early in 2013. David N. Jenkins, 34, of Warren, was charged via criminal information with one count of violating the act by directing Michael P. Guesman, another employee of Hardrock Excavating LLC, of 2761 Salt Springs Road, to dump fracking waste into a storm drain flowing into that unnamed tributary without a permit, the U.S. attorney said Monday. Ben Lupo, Hardrock’s owner, directed Jenkins to contact employees about emptying the stored waste liquids into the stormwater drain at night, the U.S. attorney said. Lupo is serving a 28-month prison term and was fined $25,000 after he pleaded guilty to violating the act. He is scheduled to be released Oct. 11 from the Federal Medical Center, Devens in Ayer, Mass. Hardrock provided services to the oil and gas industry in Ohio and Pennsylvania, including the storage of brine and oil-based drilling mud used in hydrofracturing, or fracking. The facility had about 58 mobile storage tanks, each holding about 20,000 gallons. Lupo, 65, of Springfield Township, directed employees to empty some of the waste liquid stored at the facility into the drain on or about Nov. 1, 2012, when they were alone after dark.

Monroe County Man Sentenced For Dumping Fracking Byproduct - This week, Donald Hercher was sentenced in U.S. District Court after the resident of Sycamore Valley — a small village southwest of Woodsfield — pleaded guilty to dumping 50 gallons of oily brine water per week into a roadside ditch near Rias Run, which eventually flows into the Ohio River.Court documents state the 67-year-old Hercher owned Hercher Oil Co., which operates about 30 oil and natural gas wells. April 6, 2011 is the day investigators caught Hercher dumping, according to U.S. Attorney for the Southern District of Ohio spokeswoman Jennifer Thornton.The brine water Hercher admitted to dumping can contain numerous substances that could be either naturally occurring from the shale formation, or chemicals added during the fracking process. Brine water can also contain traces of radioactive elements released from the shale formations, such as radium and uranium.Although drillers now recycle much of their brine, the substance eventually needs to go to an injection well site.Hercher pleaded guilty to unpermitted discharge under the federal Clean Water Act. As part of the agreement, Hercher will pay a $70,000 fine, serve four days in prison and serve two years probation. He will also be required to complete 104 hours of community service, as well as pay $5,000 to the National Fish and Wildlife Foundation.Hercher also must submit a statement to Southeast Ohio Oil and Gas Producers and Ohio Oil and Gas Association that urges other companies to avoid similar dumping. He has been ordered to prepare an article to be published in at least three trade journals to educate readers on the “Waterways of the U.S.”

Zoning may be valid strategy against local drilling - While the Ohio Supreme Court has ruled that state regulation of oil and gas drilling overrides local permitting or bans on that activity, the high court has not ruled on whether local municipalities can use traditional zoning to control where oil and gas drilling can occur in a town or city. This unanswered question could be an important one for many communities in oil- and gas-rich areas of Ohio. It could determine whether these communities have any control over high-impact oil-and-gas development within their borders.  In the meantime, a small city in Northeast Ohio, Munroe Falls, filed a lawsuit May 27 that eventually could lead to a speedier clarification on this issue, if not its resolution.  In its precedent-setting ruling in Morrison (Munroe Falls) vs. Beck Energy in February 2015, the Supreme Court hinted that traditional zoning might be a constitutionally valid way to dictate where oil and gas activities are allowed in a municipality, though that wasn’t the prime thrust of the ruling. The Supreme Court mainly ruled that Munroe Falls could not set up its own permitting system that forbids or controls what the state allows in ORC 1509 – in this case, the drilling of oil and gas wells. With the 4-3 split vote on the ruling, all it would take is one justice on the majority side of Morrison vs. Beck Energy – one who thinks that traditional zoning is compatible with state oil and gas regulation – to flip the opinion in the other direction if the right case came along. Enter Munroe Falls, yet again wading into this crucial debate. The city on May 27 filed a complaint against Beck Energy (of Ravenna, Ohio) in an attempt to keep the company from drilling an oil and gas well in the middle of town, not far from a wellfield that supplies water to Munroe Falls, Cuyahoga Falls and Silver Lake, all suburbs on the northeast edge of Akron. The lawsuit seeks a declaratory judgment in Summit County Common Pleas Court on “whether Munroe Falls has the right to enforce its zoning ordinances relative to oil and gas wells within its municipal jurisdiction; to declare whether Beck Energy is required to obtain a zoning certificate and/or zoning variance from Munroe Falls prior to drilling (its sought-after well); and further requests a stay (suspension) of all drilling activities by Beck until such a time as this court determines all matters in controversy…”

Fracking Effects Worry Doctors in Barnesville, Freeport - — Dr. Russell Lee-Wood said when he began practicing family medicine in the Barnesville and Freeport areas 21 years ago, the breathing problems he diagnosed in patients were relatively rare or minor. During the last six years — as Marcellus and Utica shale frackers have installed well sites, compressor stations, processing plants and related infrastructure in eastern Ohio — Lee-Wood said cases of asthma and emphysema have become more common and severe. The situation is especially bad when there is significant flaring taking place, he said. “These industrial leaks are like an invisible oil spill happening every day. I have seen firsthand that this pollution can cause significant health problems in my patients who live in the communities surrounded by oil and gas development,” Lee-Wood said. Three national environmental advocacy groups joined Wednesday to launch the “Oil & Gas Threat Map.” The sponsors include the Clean Air Task Force, Earthworks and the Fractracker Alliance. “The Oil & Gas Threat Map shows that oil and gas air pollution isn’t someone else’s problem, it’s everyone’s problem,” Earthworks Executive Director Jennifer Krill said. “Our homes and schools are at risk while most state regulators do nothing. Although completely solving this problem ultimately requires ditching fossil fuels, communities living near oil and gas operations need the U.S. Environmental Protection Agency to cut methane and toxic air pollution from these operations as soon as possible.” In multiple legal advertisements during the last few years, natural gas producers have confirmed the potential to discharge various materials into the air from the operations at well sites, compressors and refineries. Now, residents can view for themselves how close they may live to areas with such pollution at  “The trouble is that it hangs over the area,” Lee-Wood said of the pollution from flaring. “Maybe you can stay indoors, but that is like being in prison. I really wish the EPA would start doing some air monitoring to deal with this.”

New map shows methane threat from drilling in Ohio - Akron Beacon Journal - The Ohio Environmental Council, Earthworks, and Clean Air Task Force (CATF) launched, a new tool that maps the locations of the 90,313 oil and gas facilities operating in Ohio and the populations, schools and hospitals within a half mile radius of those facilities. Peer-reviewed science shows that living near polluting oil and gas facilities is associated with negative health impacts, including fetal defects and respiratory ailments. “This is an important new tool for Ohioans, who can enter their own address, find out if they live within a threat zone, and see if their community has an increased risk of cancer and respiratory health problems due to oil and gas related air pollution” stated Melanie Houston, Director of Oil and Gas for the Ohio Environmental Council. The Obama administration recently finalized the first national standard for new sources of methane pollution from the oil and gas industry but this new standard fails to address the impacts of existing sources of methane pollution. In Ohio, more than 3.1 million people - nearly one third of the state’s population - live in areas within a half mile of oil and gas facilities associated with negative health impacts, including fetal defects and respiratory ailments. Safeguards are urgently needed to protect the public from existing sources of methane and other air pollution. To access the map, visit

12.4 million Americans live within a half mile of oil, gas wells - Akron Beacon Journal - Two eco-groups have released a new United States map that shows 12.4 million Americans living within a half-mile of gas and oil facilities.  Air quality in 238 counties is impacted by drilling and there are 1.2 million wells in the U.S., according to Earthworks and the Clean Air Task Force.  Here is an announcement from Earthworks that arrived today: For the first time, you can see all the oil & gas wells nearby. Search our new map to see if your home, school or medical facility is within 1/2 mile of oil & gas facilities  Today, Earthworks and our partners launched a groundbreaking new tool that documents every oil and gas well in the country, in addition to many of the compressor and processing plants.  Nothing like this has ever be compiled before. We took publicly available and privately held data to create the most comprehensive, searchable fracking threat map ever created.  And you helped make it possible. Earthworks members and friends contributed their stories and lent their time to helping us document this pollution on the ground. The map includes interview videos with people directly impacted by drilling and fracking, as well as infrared video showing the otherwise invisible pollution associated with these sites. SEARCH THE MAP: Find your home and see if you are in the threat radius. Then share it with your friends, family and neighbors.

Interactive Map Shows Where Toxic Air Pollution From Oil and Gas Industry Is Threatening 12.4 Million Americans -- Two leading national environmental groups—Clean Air Task Force (CATF) and Earthworks—unveiled a suite of tools Wednesday designed to inform and mobilize Americans about the health risks from toxic air pollution from the oil and gas industry. For the first time, Americans across the country can access striking new community-level data on major health risks posed by oil and gas operations across the country. The oil and gas industry is the country’s largest and fastest-growing source of methane emissions. And its facilities emit numerous other hazardous and toxic air pollutants along with methane—including benzene, formaldehyde, acetaldehyde and ethylbenzene. That toxic pollution presents significant cancer and respiratory health risks, underscoring the need for the U.S. Environmental Protection Agency (EPA) to clean up existing sources of toxic air pollution without delay.. The EPA’s current regulations addressing the industry’s toxic air pollution are limited and the NSPS does not cover the 1.2 million existing facilities in 33 states. CATF’s report, Fossil Fumes, and Earthworks’ Oil & Gas Threat Map focus specifically on toxic pollutants from those facilities and their resulting health impacts.The Oil and Gas Threat Map maps the nation’s 1.2 million active oil and gas wells, compressors and processors. Using the latest peer-reviewed research into the health impacts attributed to oil and gas air pollution, the map conservatively draws a half mile health threat radius around each facility. Within that total area are:

  • 11,543 schools and 639 medical facilities
  • 184,578 square miles, an area larger than California

For each of the 1,459 counties in the U.S. that host active oil and gas facilities, the interactive map reports:

  • instances of elevated cancer and respiratory risk
  • total affected population (with separate counts for Latino & African-Americans)
  • total affected schools and medical facilities

Hot Mess: How Radioactive Fracking Waste Wound Up Near Homes And Schools - The energy that lights up, turns on, cools and heats our lives leaves a trail of waste. Natural gas is no exception. The waste from the gas drilling known as “fracking” is often radioactive. The gas industry produces thousands of tons of this “hot” waste and companies and state regulators throughout the Ohio River valley and Marcellus Shale gas region struggle to find safe ways to get rid of it. Last August a convoy of trucks carrying a concentrated form of this waste traveled from northern West Virginia to Irvine, Kentucky. The small town in Estill County lies near the Kentucky River, where Appalachian hills give way to rolling farm country. The trucks were headed for a municipal waste facility called Blue Ridge Landfill. Just across Highway 89 from the landfill is the home where Denny and Vivian Smith live on property where their ancestors have lived since the 1800s.  From their sun porch, facing east, the Smiths can see the entrance to Blue Ridge Landfill. From their front door, facing west, they can see Estill County High School and Estill County Middle School, with a combined enrollment of about 1,200 students. The trucks that arrived in Irvine last summer left more than 400 tons of low-level radioactive waste in a facility that was not engineered or permitted to accept that sort of material. That has left the community, the parents of schoolchildren, and especially the Smiths with a lot of questions and concerns. The question now reverberating through Irvine and the state agencies investigating the incident: How did this happen? The answer, in part, lies in the weak federal oversight and patchwork of state regulations regarding this type of waste. A report from the Center for Public Integrity calls the radioactive waste stream from horizontal oil and gas operations “orphan waste” because no single government agency is fully managing it. Each state is left to figure out its own plan. Ohio, for example, hasn’t formalized waste rules, while New York, which banned fracking, still allows waste disposal “with little oversight,”

Federal Report Appears to Undercut EPA Assurances on Water Safety in Pennsylvania - Since 2009 the people of Dimock, Pennsylvania, have insisted that, as natural gas companies drilled into their hillsides, shaking and fracturing their ground, their water had become undrinkable. It turned a milky brown, with percolating bubbles of explosive methane gas. People said it made them sick.  Their stories — told first through an investigation into the safety of gas drilling by ProPublica — turned Dimock into an epicenter of what would evolve into a national debate about natural gas energy and the dangers of the process of “fracking,” or shattering layers of bedrock in order to release trapped natural gas.  But the last word about the quality of Dimock’s water came from assurances in a 2012 statement from the U.S. Environmental Protection Agency.. The agency’s stance was widely interpreted to mean the water was safe.  Now another federal agency charged with protecting public health has analyzed the same set of water samples, and determined that is not the case.  The finding, released May 24 from the Agency for Toxic Substances and Disease Registry, a part of the Centers for Disease Control and Prevention, warns that a list of contaminants the EPA had previously identified were indeed dangerous for people to consume. The report found that the wells of 27 Dimock homes contain, to varying degrees, high levels of lead, cadmium, arsenic, and copper sufficient to pose ahealth risk. It also warned of a mysterious compound called 4-chlorophenyl phenyl ether, a substance for which the agency could not even evaluate the risk, and noted that in earlier water samples non-natural pollutants including acetone, toluene and chloroform were detected . Those contaminants are known to be dangerous, but they registered at such low concentrations that their health effects could not easily be evaluated. The water in 17 homes also contained enough flammable gas so as to risk an explosion. The new conclusions appear to call into question the EPA’s assurances, and could well reignite a smoldering controversy over whether the agency had prematurely abandoned its research into the safety of fracking in Dimock and other sites across the country. ProPublica reported in 2012 that the agency had curtailed investigations it had begun into potential water contamination in Pennsylvania, Texas and Wyoming.

EPA bans disposal of fracking waste water at public treatment plants -- The U.S. Environmental Protection Agency has banned the disposal of hydraulic fracturing waste water at public sewage plants, formalizing a voluntary practice that removed most fracking waste from Pennsylvania plants starting in 2011. The EPA on Monday finalized a rule that prevents operators from disposing of waste from unconventional oil & gas operations at publicly owned treatment works [POTW's]. The rule is designed to prevent the entry into public water systems of contaminants such as heavy metals, chemical additives and high concentrations of salt that are associated with fracking, and which public water systems are typically not equipped to treat. Most energy companies stopped sending fracking waste water to public treatment plants starting in 2011 when the administration of former Pennsylvania Gov. Tom Corbett called on the industry to end the practice. Myron Arnowitt, Pennsylvania Director for the environmental group Clean Water Action, said compliance with the Corbett administration’s request was “not 100 percent” but that most energy companies have since then found other ways of disposing of or treating the water, including industrial treatment plants, underground injection wells, and recycling. “It’s not going to affect tons of sources right this second,” Arnowitt said. But the existence of the new rule will deter any renewed effort to dispose of waste at public treatment plants if and when gas production recovers from its current slump, putting more pressure on disposal facilities in the region of the Marcellus and Utica Shales, Arnowitt said.

EPA Bans Fracking Wastewater from Sewage Treatment Plants  - The U.S. Environmental Protection Agency (EPA) has banned fracking wastewater from public sewage plants, citing the inability of these plants to handle toxic and radioactive pollutants. Clean water and public health advocates, along with more than 30,000 Americans, had submitted comments in favor of the EPA rule, finalized earlier this week. The final rule formalizes a practice in place since 2011, when fracking chemicals were detected in some Pennsylvania rivers and officials ordered 15 treatment plants to stop accepting and treating fracking waste.. Much of the fracking fluid mixture returns to the surface as toxic wastewater, often with radioactive elements.  Municipal water treatment plants, which treat waste and then release it into drinking water supplies, aren’t suited to treat such hazards. The mixture of bromides in wastewater and the chlorine used at sewage treatments plants also can produce a toxin linked to bladder cancer, miscarriages and still-births.  Even under the rule issued this week, fracking wastewater disposal still presents a conundrum for public health and safety. Plants designed to treat fracking waste are far from foolproof, as Duke University researchers found in Pennsylvania. Waste often spills into rivers and streams during storage and shipment. And studies show injecting the waste deep underground is likely causing earthquakes.

EPA Bans Frack Filth From Public Water Treatment Plants -- The EPA has finally banned something that is illegal even in Texas – dumping frack filth in public water treatment plants. The fact that this was done at all in Pennsylvania and was attempted in New York confirms my suspicion: Texans may be a bunch of neolithic thugs that are going to vote for Trump like so many mindless zombies  – but we are not as ignorant about frack filth as the frack babies and frack shills of Fracksylvania. Be grateful for the small things. The U.S. Environmental Protection Agency has banned the disposal of hydraulic fracturing waste water at public sewage plants, formalizing a voluntary practice that removed most fracking waste from Pennsylvania plants starting in 2011. The EPA on Monday finalized a rule that prevents operators from disposing of waste from unconventional oil & gas operations at publicly owned treatment works [POTW’s]. The rule is designed to prevent the entry into public water systems of contaminants such as heavy metals, chemical additives and high concentrations of salt that are associated with fracking, and which public water systems are typically not equipped to treat.

Pennsylvania counties see less money from gas drilling fee (AP) — Pennsylvania counties and municipal governments will see less money from a state fee on Marcellus Shale gas wells, as expected. The Pennsylvania Public Utility Commission said Wednesday that impact fee revenue from Marcellus Shale wells dropped by $36 million to about $188 million. That’s the lowest annual payment in the five-year history of the impact fee, and it’s the second year of decline. A persistent slump in natural gas prices and the aging of Pennsylvania’s Marcellus Shale wells have reduced the value of the fee, according to the utility commission, which collects the fee and distributes it. Checks will go out before July 1. Most of the money, about $102 million, will go to county and municipal governments where the gas wells are drilled. About $68 million will be earmarked for environmental programs, roadway repairs, water and sewer infrastructure upgrades and other projects. The rest, about $18 million, goes to state agencies. Among counties, the biggest recipients will be Washington County at $5.7 million, down more than $800,000 from the year before, Susquehanna County at $5.3 million and Bradford County at $4.9 million. Among municipalities, Morris Township in Greene County will receive the most, at $848,000, followed by Auburn Township in Susquehanna County, at $805,000, and Cogan House Township in Lycoming County, at $799,000. Under the impact fee law, counties and municipalities can choose to use the money in more than a dozen ways. Typically, they put most of it in rainy-day funds or spend it on infrastructure projects and public safety and emergency preparedness.

NC WARN alleges criminal fraud in methane studies at fracking sites -- NC WARN, a Durham environmental advocacy group, and a Fayetteville engineer have teamed up to lodge federal allegations of scientific fraud against a Texas engineering professor who led key studies into methane leakage at shale gas drilling sites around the country.  NC WARN filed the charges with the Environmental Protection Agency, asking the agency’s Office of Inspector General to investigate what the Durham group describes as misleading science that gives the fossil fuel industry political cover to continue spewing methane into the atmosphere.  NC WARN is pressing the EPA to start regulating methane emissions at the thousands of natural gas drilling and production sites around the country. In its EPA complaint, the organization is demanding a zero-emission standard on valves and pipes that are releasing the methane, a greenhouse gas that has 84 times the heat-trapping power of carbon dioxide. Touché Howard, the Fayetteville engineer who also works as a firefighter in Durham, is involved because he’s a retired chemical engineer who had worked for decades as monitoring natural gas leaks for the oil and gas industry. Howard, 54, invented the HiFlow technology in 1993 that was used in two studies that NC WARN wants the EPA’s inspector general to investigate.“We used the terms scientific fraud and coverup because we believe there’s possible criminal violations involved,” said NC WARN executive director Jim Warren. “The consequence is that for the past 3 years the industry has been arguing, based largely on the 2013 study, that emissions are low enough that we shouldn’t regulate them.”

State Senate wants moratorium on fracking in Massachusetts - The Massachusetts Senate is backing a 10-year moratorium on fracking in the state. The bill was approved unanimously on Thursday. It would also bar the disposal in Massachusetts of wastewater from fracking. Also known as hydraulic fracturing, fracking involves the injection of millions of gallons of water along with sand and chemicals to shatter underground rock and free shale gas or oil. There are currently no fracking operations in the Bay State. Critics of the process hope to ensure that no drilling occurs around the Hartford basin, a rock formation in the Connecticut River Valley that may contain gas deposits. Democratic Sen. Marc Pacheco, who sponsored the bill, argues fracking can release harmful chemicals, contaminate groundwater and cause small earthquakes. The measure now goes to the House.

Supporters tout pipeline benefits - The planned Atlantic Coast Pipeline set to run through Nash County will make natural gas more affordable in the region, according to a local energy official and a utilities representative. Rocky Mount Energy Resources Director Richard Worsinger and Tammie McGee, a Duke Progress Energy spokeswoman, contend the pipeline will be safe, reliable and efficient, countering claims made by members of the newly-formed nonprofit action organization Nash Stop The Pipeline. The proposed Atlantic Coast Pipeline is a partnership between Duke, Dominion Transmission and other utility companies to deliver approximately 2 billion cubic feet of natural gas for 592 miles through pipeline from West Virginia through Virginia into North Carolina. Worsinger has worked in the electric and natural gas utility industry for 32 years. He serves on the Gas Pipeline Advisory Committee of the Pipeline and Hazardous Materials Safety Administration, under the U.S. Transportation Department, which regulates natural gas. He’s also the chairman of the American Public Gas Association, a nonprofit organization that advocates for municipal and community-owned natural gas utilities like Rocky Mount. He said natural gas is helping the return of various industries from overseas back to the United States, a reduction in the nation’s dependence on foreign oil and is supplanting coal as the preferred fuel to generate electricity. “Natural gas pipelines are the safest form of energy transportation. Period,” Worsinger said.

Federal agencies hold key to proposed route of Atlantic Coast Pipeline - The circuitous path of the Atlantic Coast Pipeline now loops through nine properties protected by Virginia conservation easements on its way to a critical proposed crossing of the Blue Ridge Mountains above the Wintergreen resort in Nelson County, where the natural gas transmission line would traverse at least one other state conservation easement. All but one of the affected easements came into the 42-inch pipeline’s path under a new route proposed this year in response to concerns expressed by the U.S. Forest Service. That is the same federal agency that holds the key to the proposed crossing of the Appalachian National Scenic Trail by drilling through the mountain near Wintergreen’s sole entrance. Dominion, the Richmond-based energy company that leads the $5 billion pipeline project, has proposed to compensate for crossing state-protected properties by offering conservation easements on an 1,100-acre farm in Highland County and 85 acres along the Rockfish River in Nelson. But the state foundation that holds the easements isn’t sure it will have the final say on whether to accept the land swap for a route that ultimately would be determined by the Federal Energy Regulatory Commission, or FERC. “The scale of the proposal is unprecedented,” said Jason McGarvey, communications and outreach manager for the Virginia Outdoors Foundation. “The fact that we’re dealing with a federal entity making a federal decision about where to site the final pipeline also is unprecedented.”

A rare tour of the Strategic Petroleum Reserve - The world’s largest emergency stockpile of crude oil is quickly falling apart. The stockpile’s infrastructure, which currently stores 695.1 million barrels at four sites along the US Gulf Coast, is nearing the end of its design life and in need of a roughly $2 billion makeover, US Department of Energy officials claim. “We’ve had several significant equipment failures over the last couple years that have affected our operational capability,” said Bob Corbin, the DOE deputy assistant secretary who oversees the stockpile, formally known as the US Strategic Petroleum Reserve. In April, a water pipe at the DOE’s Big Hill site in Winnie, Texas failed, less than a year after a crude oil storage tank failed at the Bryan Mound SPR site near Freeport, Texas. Throughout the system, pipes are corroding, tank floors need to be replaced, wells are failing mechanical integrity tests and pump motors, after decades of dealing with harsh weather and salty air off the Gulf of Mexico, are breaking down beyond repair, DOE officials claim. Corbin said these issues complicate the ability of DOE to both drawdown and distribute crude oil at times of severe supply distributions, which is the primary reason the SPR was created more than four decades ago. They also complicate US’ ability to meet obligations under international agreements and could endanger energy security.

In Oklahoma, $50 oil may test new quake regulations | Reuters: Oil producers around the country enticed by crude's jump to $50 a barrel are hoping to get production back on line, but for producers in Oklahoma, new regulatory barriers may keep key parts of the state shut due to worries about earthquakes. Crude's recent rebound will mark the first test of more stringent regulations recently implemented in Oklahoma - and already, companies are looking for workarounds. Seismic activity has soared in the state in the last five years, linked to disposal of saltwater from fracking activity. Fracking is the process of drilling down into the earth and injecting liquid at high pressure in order to extract oil or gas, which has prompted environmental concerns. In Oklahoma, those concerns revolve around the increased seismic activity which is tied to the creation of wastewater wells. Oklahoma officials were eventually forced to take action through directives - initially voluntary – that have since become hard mandates designed to limit earthquakes. Scientists are uncertain about whether the regulations can stop the phenomenon, which has serious implications for Oklahoma, one of the top U.S. energy-producing states. Until now, low oil prices meant producers were not drilling anyway. But that might change now that crude has posted its first sustained climb to $50 in nearly a year.  At the end of May, the state finalized plans to cut saltwater disposal from oil and gas drilling in north-central and central Oklahoma, just one month after it implemented a similar plan to cut injection in northwestern Oklahoma.

New Mexico wrestles with cleanup costs at oil wells (AP) — New Mexico regulators overseeing oil leases on state trust lands are seeking to set aside more funding as they grapple with repairing damage in the wake of spills of oily salt water by a Texas-based company. State Land Commissioner Aubrey Dunn unveiled proposed legislation Wednesday to create a fund that could accumulate up to $5 million to help restore state trust lands after unforeseen damage from oil-industry spills along with illegal dumping, wildfires and even invasive plant species. Dunn said the restoration and remediation fund would divert 1 percent of revenues from the state’s land maintenance fund, or roughly $700,000 a year. The maintenance fund receives money from renewable resources — such as grazing, rights-of-way and business leases — along with rental payments from oil and natural gas developers. It is the source of the State Land Office’s operating budget. “We need to build up a fund to handle things that aren’t going to be covered by annual appropriations” from the state general fund, Dunn told the Associated Press. “Our goal at the Land Office is to maintain the land for future generations. We feel like we need that type of fund.” The State Land Office is locked in litigation with Siana Operating of Midland, Texas, on accusations that the company trespassed and spilled waste at a well site on state trust lands where it stopped making lease payments several years ago. In all, the agency says it is owed $284,000 in fees, cleanup costs and penalties. Siana Operating representatives could immediately be reached. The company is disputing the claims.

Colorado studying the health effects of fracking | The Salt Lake Tribune: New data on air pollution from fracking wells in Colorado will be a big help in assessing whether the emissions are harmful to human health, state officials say. A three-year study released Tuesday measured methane — a greenhouse gas — and ozone-causing compounds that were released from new natural gas wells in western Colorado. The research, by Colorado State University professor Jeff Collett, didn't measure the emissions' health effects, but state officials will use the data in computer modeling to assess the risks, said Mike Van Dyke of the Colorado Department of Public Health and Environment. "This study is incredibly useful," said Van Dyke, chief of environmental epidemiology, occupational health and toxicology for the health department.The state expects to hire outside researchers by the end of next month to begin modeling the human health risks, using the western Colorado research as well as data from a second study Collett is conducting at wells near the state's urban Front Range. The state risk study is expected to be completed in January 2018. Collett's study is the first time researchers have been able say with certainty they were measuring pollution only from drilling operations and not from other sources, Van Dyke said. Van Dyke believes Collett's study is the first of its kind in the country.

Colorado Scientists Detail Results of Fracking Air Pollution Study:  A study of air pollution from western Colorado fracking wells found the highest rate of emissions came just after fracking was completed. The research released this week didn’t measure the effects on human health, but it will help state officials devise such a study later.Fracking, or hydraulic fracturing, uses pressurized water, sand and chemicals to break open underground formations and release oil and gas. The study looked at methane and ozone-causing compounds released from new fracking wells. Jeff Collett, a professor of atmospheric science at Colorado State University, said the study found the emissions rate was highest when gas began to flow from the well, pushing the water and chemicals back out. The $1.7 million study was funded by Garfield County and drilling companies. Collett discussed it with county commissioners Tuesday.

The Continued Attempt to End Shale Development in Colorado – This Time Through the Voter Initiative - An attempt to put restrictions on shale development, so as to effectively end it, is nothing new in Colorado. Just this year, several Democrats attempted to push a bill through the Colorado House of Representatives that would have given local governments specific authority to regulate the siting of oil and gas facilities. The Colorado House voted down that bill. But that has not stopped other efforts to end new shale development activities in the state. There are currently three voter initiatives in the signature-gathering stage that could have substantial impacts on Colorado’s oil and gas development – Initiative #78, Initiative #63 and Initiative #75.

Fracking and Drinking Water: the Connection Is Becoming Clear --While not necessarily a new practice, fracking has certainly garnered its fair share of headlines—due in part to both an increase in its implementation as well as the level of aggressiveness in which it is used. One side effect of fracking, and the one that is quite controversial in certain areas of the country where fracking occurs, is that it is believed to be the source of increased seismic activity. In other words, areas of the country like Texas, Oklahoma and Colorado—rarely known for earthquakes prior to the introduction of fracking—are now experiencing a record number of tremors. Activists against the practice claim that it all makes sense; inject a high-pressure solution of water, sand and emulsifiers into a brittle, laminated, fracturable layer of earth (shale) and things can get slippery—literally you can have huge sections of earth “sliding” into a new position, otherwise known as an earthquake. Now for the lesser known result that’s a much bigger risk to the population—the contamination of groundwater. To understand this threat, let’s revisit what we know about fracking; it’s the injection of a high-pressure slurry of water, particulates and chemicals deep into the earth. And it is this cocktail of contaminants that’s making its way into drinking water, according to a peer-reviewed study recently published in Environmental Science and Technology. The catalyst for this study started eight years ago in Pavillion, Wyoming. Residents of this community atop one of the state’s numerous natural gas basins first noticed an odd taste and smell to their drinking water. The Environmental Protection Agency (EPA) came in and determined that the local water contained toxic chemicals, yet they dropped the matter without publishing a final report as to the source. It was only through the perseverance of the former EPA scientist behind the initial testing that comprehensive results were recently made public.

Mysterious Gas Leak In A Town Surrounded By Wells | Inside Energy: The search is continuing for the source of a gas leak that shut down a school in Midwest, Wyoming at the end of May. Fleur de Lis, the company that operates the neighboring Salt Creek oil field, says it has plugged one leaking well near the school, worked on another six and is continuing to monitor as many as 30 other wells in the area. The Salt Creek field is the oldest in Wyoming, and an Inside Energy analysis of the state oil and gas database shows there are more than 700 active and abandoned wells in a one mile radius around the Midwest school. Many of those wells were drilled decades ago, and those that have been abandoned may or may not be properly plugged. In the past, it was common for companies to abandon wells by filling them with mud or even fence posts. It's also possible that not all well locations are known. A 2006 study by the National Energy Technology Laboratory identified several dozen wells in a single square mile of the Salt Creek Field that were not in company databases. Staff at Midwest School first reported a strange odor on May 25 and initial air quality testing detected high levels of carbon dioxide as well as volatile organic compounds inside the school. Students finished out the school year at the old North Casper Elementary School.

Toxic Chemicals Found in Residents Living Near Oil and Gas Operations in Pavillion, Wyoming --A coalition of community and environmental health groups released Thursday a first-of-its-kind research combining air monitoring methods with new biomonitoring techniques to determine if toxic air emissions from natural gas operations could be detected in the bodies of nearby residents. The study, When the Wind Blows: Tracking Toxic Chemicals in Gas Fields and Impacted Communities, found evidence of eight hazardous chemicals emitted from Pavillion, Wyoming gas infrastructure in the urine of study participants. Many of those chemicals were present in the participants’ bodies at concentrations far exceeding background averages in the U.S. population. “If your drinking water is contaminated with toxic chemicals you might be able to make do with another source, but if your air is toxic you can’t choose to breathe somewhere else,” Deb Thomas, director of ShaleTest who lives in Wyoming and was one of the study leaders, said. “No matter which way the wind blows, gas development involves so many emissions sources that people can’t help but to be exposed to toxic chemicals from their operations. Unfortunately, this is what everybody who is living with oil or gas drilling now has to look forward to if that drilling leads to production.”

Natural Gas Flaring In North Dakota Has Declined Sharply Since 2014 -- The volume of North Dakota’s natural gas production that is flared has fallen sharply in both absolute and percentage terms since 2014. In March 2016, 10% of North Dakota’s total natural gas production was flared, less than one-third of the January 2014 flaring rate, which was at 36%. Flaring rates and volumes have significantly decreased as North Dakota’s total natural gas production has continued to grow, setting a monthly total natural gas production record of 1.71 billion cubic feet per day in March 2016. The North Dakota Industrial Commission established targets in September 2015 to reduce natural gas flaring.  Natural gas is flared (burned) rather than vented (released into the air) without combustion for both safety and environmental reasons. Vented, unprocessed natural gas contains hydrocarbons that are heavier than air, such as propane and butane, which can be hazardous if ignited. Methane, the primary component of natural gas, is also a potent greenhouse gas. Flaring natural gas produces carbon dioxide, which, while also a greenhouse gas, has a much lower global warming potential (a measure of how various gases can affect the atmosphere’s radiative balance) than methane. Natural gas flaring in the United States is not confined to North Dakota, but since 2012, North Dakota has had the highest volumes of flared natural gas. By law, North Dakota prohibits natural gas venting.

North Dakota oil output drops 70,000 barrels daily in April -- (AP) — North Dakota’s oil production decreased by about 70,000 barrels a day in April. The Department of Mineral Resources says the state produced an average of 1.04 million barrels of oil daily in April. North Dakota’s production record was set in December 2014 at 1.22 million barrels daily. North Dakota also produced 1.61 billion cubic feet of natural gas per day in April, down from a record 1.71 billion cubic feet daily set in March. The April tally is the latest figure available because oil production numbers typically lag at least two months. There were 28 drill rigs operating in North Dakota’s oil patch on Wednesday — the lowest number since July 2005.

Could the Bakken end up with too much pipeline capacity? --For the past five years, crude oil producers in the Bakken have depended on railroads to transport a significant share of their output to market—there simply hasn’t been enough pipeline capacity out of the tight-oil play. Now, construction of the long-awaited, 450 Mb/d Dakota Access Pipeline (DAPL) is finally poised to begin, and a late-2016 online date for DAPL is planned. DAPL’s capacity would enable producers to further reduce their use of crude-by-rail, but with Bakken production on the decline, will DAPL really be needed? And what about additional out-of-the-Bakken takeaway capacity being planned? Today, we consider the challenges and pitfalls of developing midstream infrastructure in fast-changing markets, focusing on Bakken crude. Assuming construction starts in early summer, the Dakota Access Pipeline (an Iowa issue) and Energy Transfer Crude Oil Pipeline (a pipeline reversal, Illinois to Texas) are planned to be operational late this year.  DAPL will give the Bakken sufficient pipeline (and in-region refinery) capacity to receive more than 100% of the Bakken’s crude output.  That won’t make the Bakken’s vast CBR capacity superfluous—far from it.  For one thing, only a few Bakken producers would have direct access to DAPL, and some don’t have access to existing pipeline out of the region either. For another, many producers that signed take-or-pay contracts for CBR capacity have time left on their deals, and would be unlikely to double-pay for takeaway capacity (that is, pay their CBR obligations and pay to use a pipeline). Perhaps the bigger question is whether DAPL’s completion late this year (again, assuming all goes well on its federal permits and during construction) will affect the need for another out-of-the-Bakken pipeline project—Enbridge’s proposed 616-mile Sandpiper Pipeline from near Tioga, ND, to Enbridge’s crude terminal in Superior, WI.  Sandpiper would provide Bakken producers with access to a different set of refineries. Whether that is enough to push the Enbridge project over the finish line remains to be seen, given what may be an emerging surplus of Bakken pipeline takeaway capacity.

Railroad says broken bolt caused Oregon train derailment  -- At least one broken bolt holding the rail in place caused the fiery derailment of a Union Pacific train moving volatile crude oil through the Columbia River Gorge on the Oregon-Washington border, railroad officials say. Union Pacific spokesman Justin Jacobs said Saturday that the company filed a report Friday with the Federal Railroad Administration citing one or more broken bolts as the cause of the June 3 derailment. “We are unaware of any time when this has happened in the past,” Jacobs said. “This is an unusual failure.” He said there’s no evidence of malevolent activity by anyone to damage the tracks. “There’s nothing to indicate that would be the case,” he said. The type of bolt that broke is unique in that it’s only used on curved sections of track, Jacobs said. He noted the train was going 26 mph in a 30 mph zone so it’s not clear why the bolt failed. As a result, he said, the company is now in the process of checking similar bolts in curved sections of its 32,000 miles of track in 23 states. No one was injured in the derailment, but the tiny town of Mosier, Oregon, was evacuated after four cars caught fire. Of the 96 cars all loaded with crude oil, more than a dozen derailed. Mosier Fire Chief Jim Appleton, who fought the blaze after the derailment, said he appreciated Union Pacific’s maintenance and safety procedures but the risk of one broken bolt resulting in such a disaster or potentially worse disasters means regulators should not allow shipments of crude oil to travel by train through the area

More crude oil heads to US West Coast, even as rail permitting delays abound: (video) Shipping crude oil to the US West Coast has never been easy, but moving crude by rail is becoming more difficult as permitting challenges delay projects. Joshua Mann describes how rail compares to pipelines, as well as how financial incentives to bring in crude from other regions can change by the time projects become operational.

Wildfire near California oil refinery burning out of control  (AP) — A California wildfire spurred by strong gusts mushroomed in size and burned out of control Thursday in a remote coastal area west of Santa Barbara, forcing the evacuation of hundreds of campers, some homes and an oil refinery as it crept toward the ocean. Winds and rising temperatures across the dry Western U.S. also worsened wildfires in other states. A blaze in central New Mexico grew to more than 3 square miles and forced residents to flee at least 50 homes after sending up a towering plume of smoke that blanketed the state’s largest city in a thick haze. In eastern Arizona, a small community was evacuated and residents of five others were told to prepare to leave after a wind-whipped wildfire charred nearly 4 square miles within hours Wednesday. Fires also had threatened homes in Nevada and Utah.  Heat and wind were expected to pose problems for crews in those states and California, where there was no containment of the nearly 2-square-mile blaze drawing closer to an ExxonMobil oil facility in a canyon of heavy brush.“The refinery has fire around it, and companies in place protecting it,” Santa Barbara County fire Capt. Dave Zaniboni said, adding that it has a cleared buffer zone. ExxonMobil has evacuated non-essential employees, and those that remain are helping protect it against the flames, company spokesman Todd Spitler said.

Ancient Satellite Busts Massive Gas Storage Leak, Fracking Next -  NASA has just reported that its EO-1 satellite has picked up the trail of emissions from the massive methane leak at a natural gas storage facility near the gated community of Porter Ranch in California. Okay, so they took their time about reporting it — the leak dates back to last fall and it was fixed by February — but the important thing is, this is the very first time that an orbiting spacecraft has confirmed methane emissions from one identifiable facility. That’s significant because it means that orbiting spacecraft could become an effective means of detecting significant, fixable sources of methane on a global basis. That news comes at a bad time for the fracking industry, which is coming under increased scrutiny for bleeding out methane gas from drilling operations among (many) other ills. For those of you new to the topic, the Porter Ranch methane leak involved a SoCal Gas storage facility at Aliso Canyon, resulting in thousands of evacuations from the well-to-do community.The leak began last October and it took crews until February to stop it. Over the winter, NASA’s Jet Propulsion Laboratory set EO-1 to the task of monitoring the methane leak, deploying a spectrometer called Hyperion.. The findings are available at the journal Geophysical Letters under the title, “Space-based Remote Imaging Spectroscopy of the Aliso Canyon CH4 Super-emitter.”  Here in the US, evidence is mounting that there are significant fugitive methane emissions from fracking sites and from conventional drilling sites. Leaks can also occur along transmission pipelines and storage facilities. The problem is finding all of them, and now we know that satellite observation can provide a reliable, efficient way of gathering measurements.

Climate scientists urge Obama to rule out more Arctic oil and gas exploration -- Nearly 400 international scientists called on Barack Obama to rule out further expansion of oil and gas exploration in Arctic waters under US control. The letter, signed by prominent Arctic, marine and climate specialists – including a former member of Obama’s administration, urges the president to rule out any future hunting for oil in the waters of the Chukchi and Beaufort seas. “No new oil and gas leasing or exploration should be allowed in the Chukchi and Beaufort seas in the foreseeable future, including in the next five-year leasing plan,” the scientists write in the letter. The letter follows a series of new heat and melting records in the Arctic, which have stunned scientists. Last week it was warmer in Nuuk, the capital of Greenland, than in New York City. The Danish Meteorological Society said the 75F temperature was the second heat record since April, and followed a very early start to the ice melt season. In addition to putting the entire Beaufort and Chukchi seas off-limits for the next oil and gas leasing offer, from 2017 to 2022, the letter urged the administration to consult native Alaskan groups on any further Arctic developments. The scientists said in the letter that expanding Arctic marine protection would help counter the effects of climate change.

Radioactive Ranchers? Elements Found Downwind of Intensive Fracking --  It began in 2009 when the so-called Cardium oil boom abruptly dotted the rolling landscape with scores of well pads, oil batteries, and new access roads. The companies were drilling lateral wells, which turn 90 degrees and travel for kilometres underground, extending under people's barns and homes. (Tight oil costs more to extract and produces lower quantities of oil.) As industry fracked these deep, far-reaching wells with millions of gallons of water, toxic chemicals, and sand under high pressure and then burned off unwanted raw gas, the Hawkwoods and many of their neighbours began complaining about noxious emissions and earth tremors. Some officials with the Alberta Energy Regulator (AER) initially responded to general complaints in the region by saying fracking was proven and safe and that it couldn't cause earthquakes -- claims now proven false by a variety of scientific studies.Meanwhile, songbirds disappeared from the Lochend area, north of Cochrane where the Hawkwoods live, while the chemistry of local groundwater started to show changes in the amount of sodium, chloride, barium, strontium, and uranium. At their own ranch, the Hawkwoods observed that their well water levels rose during highly pressurized fracking operations and then returned to normal once the fracking stopped. Then came reports from nearly a dozen nearby residents about hair loss, respiratory problems, skin rashes, and rare cancers. Many families later moved from the region.  After losing an unprecedented number of cattle in 2013, the Hawkwoods tested soil where the cattle had urinated and found high levels of radioactive materials. Not even seeds would germinate in the soil. That discovery convinced the couple to test themselves for radioactive elements and to purchase a Geiger counter. The special test, analyzed at the London Health Sciences Centre in Ontario, showed that the ranchers had ''high'' levels of uranium and strontium above the lab's ''reference range'' in their urine, probably due to exposure from soil, water or air.

Internal Documents Reveal How MSNBC Show Worked To Promote Fracking – Steve Horn - Cable TV network MSNBC has made headlines in recent days for apparently moving away from its “Lean Foward” progressive brand, catering instead to a more center-to-right-leaning crowd. “People might start accusing us of leaning too far to the right,” the station says in a new advertisement featuringMSNBC’s conservative personalities — an array of Republican identities such as Michael Steele, Steve Schmidt and Ben Ginsberg. But on the issue of hydraulic fracturing (“fracking”) for shale oil and gas, documents from 2011 obtained under Oklahoma’s Open Records Act demonstrate that the network saw itself as a promoter of both the controversial drilling method and natural gas vehicles. NBCUniversal, at the time, was owned on a 49-percent basis by the natural gas utility and electricity company General Electric (GE) and is now wholly owned by Comcast. The documents, obtained from Oklahoma State University (OSU), relate to the filming of an episode of “The Dylan Ratigan Show” on the OSU campus in April 2011. The episode came two and a half years before the network announced in late-2013 that its website would run native advertisements (content that looks like original news) on behalf of fracking lobbying group America’s Natural Gas Alliance. ANGA is now part of the American Petroleum Institute(API).That episode of Ratigan’s show featured oil and gas industry hedge fund tycoon T. Boone Pickens, who now serves as a fundraiser for Republican Party presidential candidate Donald Trump, and who was stumping at the time for his pro-fracking “Pickens Plan.” The emails offer a rare look inside the making of an episode of a popular MSNBC show and a glimpse into a future business relationship, too.

A bullish EIA storage report signals a big shift in the US natural gas market -  The U.S. Energy Information Administration (EIA) on Thursday (June 9) reported a surprisingly bullish 65-Bcf injection for the week ended June 3—that was 8.0 Bcf below our Natgas Billboard estimate and more than 10 Bcf below the Bloomberg industry average assessment. In response, the CME/NYMEX Henry Hub July natural gas contract screamed about 15 cents higher following the report to a settle of $2.617/MMBtu, the highest daily settle for the prompt month in nearly 9 months. Thursday’s gains extended a rally that began on May 31 (2016) just after the July contract rolled to the front of the futures curve. It’s likely the rally was initially spurred by market participants looking to cover their short positions. But in the past week, an increasingly bullish fundamental picture has emerged prompting us to raise our price outlook (in our June 10 NATGAS Billboard report). In today’s blog, we analyze the fundamentals behind rising natural gas prices.  Ever seen a flash mob? It starts out small and seemingly spontaneous, with one or two brazen outliers busting out in what seem like an involuntary convulsion completely incongruous with what’s going on around them. But it quickly escalates into a well-timed, choreographed and synchronized ambush on unsuspecting onlookers as one after another apparent bystanders start joining in. And then, before you know it, it’s over—everyone and everything looks just as they did before. It’s as if it never happened. And you’re left feeling a little shell-shocked, inexplicably giddy, and also a little bit disoriented.

US shale oil production forecast to fall in July: EIA - Oil  -- Oil output in the biggest producing shale areas in the US is forecast to decrease 118,000 b/d in July from June to 4.723 million b/d, according US Energy Information Administration estimates released Monday. The decrease was in line with the precipitous fall in oils rigs operating in US shale. The rig count peaked in October 2014 at 1,609 and finished last week at 328, according to Baker Hughes data. The steepest drop in production was expected in Texas' Eagle Ford shale where output is anticipated to shrink 58,000 b/d to 1.212 million b/d, followed by a 28,000 b/d decrease in North Dakota and Wyoming's Bakken shale oil to 1.024 million b/d, according to the EIA's Drilling Productivity Report. The largest oil producing shale region in the US, the Permian basin of West Texas and New Mexico, is forecast to lose 10,000 b/d of production to 2.019 million b/d, the report said. While production has continued to trend lower, the rigs still operating are forecast to produce more barrels per day than before as drilling techniques continue to improve. In the Permian new-well oil production per rig is forecast to grow by 13 b/d to 493 b/d, the Bakken is expected to increase new-well output by 17 b/d to 832 b/d, with the Niobrara and Eagle Ford each expected to grow new-well production by 23 b/d to 915 b/d and 994 b/d, respectively.An EIA formula shows the Bakken would need to have 62 rigs operating, up from current 24 rigs, to maintain current production. The Permian basin would need to have 150 rigs, eight more than now. The Eagle Ford would require 89 rigs operating, from 26 currently and the Niobrara would need 31 rigs, 12 higher than its current rig count.

Rising Oil Prices Encourage Shale Producers, Dissuade Investors -  The oil market just hit a yellow light. Crude’s advance of more than 90 percent from a 12-year low earlier this year has U.S. shale producers starting to return to their drilling rigs, threatening to slow further gains. "The $50-to-$60 a barrel area is the sweet spot,"  . "You start to have producers come back at $50, but a lot of them come in at $60." Money managers were cautious in the week ended June 7, betting more heavily on a price drop than on further gains, according to data from the Commodity Futures Trading Commission. West Texas Intermediate rose 2.6 percent to $50.36 a barrel on the New York Mercantile Exchange during the report week and was down 44 cents to $48.63 at 1:56 p.m. New York time on Monday. Prices have climbed enough for Continental Resources Inc. to dispatch fracking crews to unfinished wells in the Bakken shale region, Chief Executive Officer Harold Hamm said June 9. Those wells were left uncompleted as tumbling prices forced explorers to halt projects to conserve shrinking cash flows. Helmerich & Payne Inc., the biggest drilling-rig contractor in the U.S., and Independence Contract Drilling Inc. said last week they were receiving more queries from oil explorers. "Everyone is questioning the price when U.S. rigs come back," Paul Sankey, an energy analyst at Wolfe Research LLC, said June 10 on Bloomberg Radio. "At $55 to $60 we would return to growth in the U.S."

US shale oil producers evolve in survival of the fittest - In the movie Jurassic Park, the most memorable image is the subtlest: the water rippling in a cup that shows the earth-shaking Tyrannosaurus Rex is coming. For oil producers around the world, the rising number of rigs drilling for oil in the US should be seen the same way: as a faint but ominous sign of an approaching threat.The US shale industry has been in decline, but it is far from extinct, and some companies can thrive even with prices at around today’s levels. Any rival producers that need higher prices to be financially viable should be worrying about being eaten alive. The rebound in activity in the US is so far only modest. The number of rigs drilling the horizontal wells used for shale oil production has risen by 13 in the past two weeks to 262, according to Baker Hughes, the oilfield services group, down from a peak of 1,115 in November 2014. The rigs that are being put back to work, though, reflect decisions taken a few weeks ago, when oil prices were lower than they are today. If prices remain stable for a while at about $50 per barrel — and still more if they move higher — more companies are likely to join in the revival. US oil production has been dropping since April last year, and is set to keep falling for the rest of 2016 at least. But Wood Mackenzie, the consultancy, thinks that the decline can be halted with only about 50-100 more rigs starting to drill horizontal wells again. The prospect of the US resuming its position as a growing supplier to global crude markets creates what Paul Sankey of Wolfe Research describes as a “soft ceiling” on prices. Scott Sheffield, chief executive of Pioneer Natural Resources, one of the most active shale drillers, expects a long-term oil price of about $60 per barrel. It will fluctuate around that level, he says, and at times could go to $40 or $80. But any producer that needs oil to be consistently above $60 will be in trouble.

Signs suggest we are in the final phase of the oil cycle - More consolidation in oilfield services is likely and inevitable given the “lower for longer” environment for oil prices, according to top oil analysts. Merger and acquisition activity has already been significant in the sector, the Baker Hughes - Haliburton deal unraveling notwithstanding. Siemens acquired Dresser-Rand in 2014 for $7.6 billion, Schlumberger acquired Cameron in 2014 for $14.8 billion and FMC Corp acquired Technip earlier this year. Oppenheimer analyst Fadel Gheit said he sees an active consolidation environment in the second half of 2016.  “Consolidation is always the last phase in the oil price cycle as companies revise their business model to survive in a lower for longer oil price environment,” he said. Even with oil prices doubling since their lows earlier this year, many in the industry are preparing for “lower-for-longer” levels. “Oil producers are adjusting their capital spending budgets to cope with the new realities for a new ‘normal oil price’ of around $65 per barrel level,” Gheit said. He added that “significantly higher or lower prices likely to trigger market response and the price becomes self-correcting.” Within oil, Gheit said oil service stocks have led other energy industry groups in consolidation. “We think the rest will follow,” he said.

'Insane' U.S. diesel, gasoline prices hard to crack for refiners | Reuters: The hot summer months are the boom time for U.S. gasoline sales, and naturally the season when refiners are all-in on pumping out the motor fuel for drivers on U.S. highways. But an unusual glut of gasoline - just as refiners are ramping up to produce more - has caught them on the wrong side of distillate margins for the second time in less than 12 months. Instead of minting bigger profits on refining gasoline, they are seeing margins shrink because of oversupply, potentially leading to disappointing earnings. U.S. gasoline inventories are currently about 9 percent above their five-year average, according to data from the U.S. Energy Information Administration. The gasoline oversupply has presented refiners with the unusual dilemma of whether to switch summer output towards distillates. It is a mirror image of what happened with distillate products in the winter, when weak demand for diesel and heating oil left a big surplus in those products, and hammered independent refiners' earnings at a time when those products are normally in high use. Typically, gasoline trades at a premium to diesel during the hot months of June, July and August. However, on Wednesday, gasoline's premium to diesel and heating oil fell to a mere one cent, down from a peak of 29 cents in early April. "Gasoline is on the verge of trading under diesel... in JULY!!! That's insane," a trader at a U.S. bank said in an instant message.

Gasoline Profit Margins Sink, Pressuring Refiners to Adjust -- Refiners are considering producing more diesel and jet fuel now that gasoline profit margins have fallen to the narrowest seasonal levels since 2010. Those margins have dropped by $5 a barrel in just over two weeks as high imports have kept U.S. inventories elevated even as gasoline demand rises, said Andy Lipow, president of Houston-based Lipow Oil Associates LLC. The streak of declines wasn’t stopped by yesterday’s U.S. Energy Information Administration projection that summer gasoline demand will rise to a record 9.5 million barrels a day. "We’re seeing the economics change to the point that many refiners along the coast are looking at maximizing jet fuel and diesel at the expense of gasoline," Lipow said. "Refiners will start maximizing diesel output right in the middle of the summer gasoline driving season." Gasoline imports into the U.S. East Coast, which primarily come from the refineries in eastern Canada and Europe, have kept U.S. inventories at the highest levels seen in at least 20 years, EIA data show. East Coast imports, which dropped 77,000 barrels a day to 785,000 last week, are nearly double the year-earlier level. Oil trading company Trafigura Ltd. has added to inventories by bringing more than 1 million barrels of gasoline ashore from floating storage tankers in the Gulf of Mexico since mid-April, according to U.S. Customs data compiled by Bloomberg. Those supplies are unlikely to show up in weekly EIA import figures, William Brown, EIA senior analyst, said by e-mail, as the shipper is responsible for identifying an origin country on the government’s forms. "This has resulted in some oddities," Brown said. The falling margins are hurting refiners. The BI North America Refining & Marketing index fell 4.49 points to 286.90 today, 28 percent below a year earlier.

Yahoo to discontinue legacy Messenger service used by traders - US tech company Yahoo will discontinue its legacy Messenger service used by large sections of the energy and commodity industries for written conversations on August 5, 2016, it said late Friday. The company announced the move in a progress report on product prioritization. It is now focusing on a new messenger service geared to social media users, not traders and energy market professionals. "We encourage you to upgrade to the new Yahoo Messenger ahead of time, as versions 11.5 (Windows), 3.0 (Mac), 1.x (Android) and below, and older versions of Yahoo Messenger for iOS will be discontinued," said Yahoo, adding that a date of August 5 had been set.The new platform records conversations on the cloud and allows users to delete their chat history, something compliance officers at trading companies are unlikely to agree to, market sources have said.

Giant Wildfire Is No Longer the Canadian Oil Industry's Biggest Problem - Harbir Chhina helped develop the game-changing steam technology that allowed companies to tap the world’s third-largest reserves in Canada’s oil sands. It was a moonshot that paid off. Now the oil-sands industry, still recovering from last month’s wildfires, needs another one. Without a technological breakthrough like steam injection three decades ago, the flows that have transformed the country’s economy could slow to a trickle. In a world that has plenty of cheap crude, and increasingly demands cleaner energy, the oil sands look dirty, as well as expensive. The search for cleaner and cheaper techniques may be less urgent than fighting the blaze, which knocked out more than 1 million barrels of daily output and forced the evacuation of an entire city. But in the long run it’s a bigger threat. Will it prove to be a terminal one? Not according to Chhina, who says he’s as optimistic as he was in the 1980s when the oil-sands began to take off, triggering hundreds of billions of dollars of investment. Canada’s spending on research and development has been declining since 2001, and is only about two-thirds of the OECD average. . No other G7 country is so dependent on commodities and their fickle prices. Chhina and colleagues are making a start, experimenting with simpler ways of melting the nearly solid bitumen buried under the boreal forest. Solvents like butanes are currently the likeliest candidates, though microwaves are an intriguing alternative. Researchers are testing a technology that would fire the waves into horizontal bore-holes so that they’d heat the bitumen, like food, without affecting the surrounding container of rock and sand. Another oil-sands giant, Canadian Natural Resources Ltd., is looking at ways of harnessing the carbon dioxide and heat from its operations. Such techniques may have promise, but the challenge is to replicate them on a commercial scale.

Alberta’s abandoned well problem grows with O&G bankruptcy filings -- “They guaranteed us that something would happen in the next six months. We never heard back [from the regulators or the oil companies],” Alberta rancher Tony Bruder told CBC News.  Due to the oil price slump and the resulting O&G bankruptcy filings, Bruder is one of many Canadian landowners that might soon be dealing with the hassle of abandoned oil and gas wells on his own land. As reported by the CBC, the Redwater Energy court decision “ruled that in the case of a bankruptcy, energy companies must use their remaining assets to pay back their lenders before cleaning up old well sites.”A landowner lawyer commented on how the decision “effectively neutralizes” the means developed by state regulators for exceptional environmental cleanup efforts. As of early June, Alberta is home to roughly 69,000 capped wells and another 79,000 wells that have been inactive for a year or more. As reported by the CBC, the cost of sealing and reclaiming a well far exceeds the cost of a year’s lease fees.  As the oil price slump persists, many landowners are realizing they hold no power to say no to a well on their property. Additionally, they are unable to sway companies in their decision to clean and cap an old well. The CEO of a financial company owned by Alberta told the CBC, “I think there’s an issue with abandoned wells in Alberta, period.” However, it was noted that the ruling “was launched for clarity, so that lenders would know if they have appropriate security in place before making loans.” The Alberta Energy Regulator is appealing the ruling. To read more about Alberta’s growing abandoned well problem, read the full story at CBC News.

Oilsands growth makes it nearly impossible for Canada to meet Paris Agreement targets: report - CBC News: Even with provincial climate plans in place, anticipated growth in Alberta's oilsands and British Columbia's natural gas sector will make it nearly impossible for Canada to reduce emissions to agreed-upon levels under the Paris Agreement, according to a new report. "Short of an economic collapse, it is difficult to see how Canada can realistically meet its Paris commitments in the 14 years remaining without rethinking its plans for oil and gas development," author David Hughes, an earth scientist, said in a release. The report comes from the Parkland Institute, a research centre within the University of Alberta, and the Canadian Centre for Policy Alternatives, a left-leaning think tank.  If oilsands production grows to Alberta's new annual limit of 100 megatonnes and B.C. builds the five liquefied natural gas (LNG) export terminals it is proposing, Hughes estimates it would be nearly impossible for the rest of the country to reduce emissions fast enough to compensate. Meeting the Paris Agreement targets under that scenario would require everyone else to reduce emissions 55 per cent below 2014 levels, Hughes said.

House GOP again subpoenas State Department over Keystone  - The House Oversight Committee says it has subpoenaed Secretary of State John KerryJohn KerryAs VP, Warren could lead the way for Democrats Iran video dispute part of pattern at State Department House GOP again subpoenas State Department over Keystone MORE for Keystone XL pipeline documents. In a Friday statement, Oversight Committee Chairman Jason Chaffetz (R-Utah) said the State Department is not cooperating with an investigation into the November decision to block the Keystone oil pipeline. Chaffetz has sent Kerry two letters requesting documents and communications related to the “key determination” that the pipeline would have an impact on climate change and the decision to cite “U.S. climate leadership” in the denial of the project. In a letter to Kerry last week, Chaffetz said the committee would issue a subpoena if the State Department did not respond by today. It is the second Keystone-related subpoena issued by the committee: Last year, it subpoenaed “reports, recommendations, letters and comments” related to the review of the project. While the State Department responded, Oversight requested more documents. “Producing mostly publicly available documents to the committee and calling it responsive is pitiful,” Chaffetz said in a statement. “It demonstrates a contempt of Congress’ constitutional right to conduct oversight. We will use every tool available to obtain the information we need to properly and fully investigate this matter.”

Canada lent billions to oil, gas and mining companies. Then it made a profit -- On the same day that President Barack Obama rejected TransCanada Corp’s proposed Keystone XL pipeline, a Canadian Crown corporation threw the company a lifeline. Export Development Canada (EDC), a taxpayer-owned organization that operates as a commercial investment bank, signed two deals on that day — Nov. 6, 2015 — offering between $150 million to $350 million in loans to TransCanada, a Calgary-based company. The timing was purely coincidental. The deals renewed an annual arrangement with the Crown corporation, which is part of a syndicate of about 20 financial institutions that are supporting TransCanada Pipelines in the U.S. Large multinational corporations regularly take out short-term loans for operations. Some of them in Canada get help from EDC for their activities abroad. But deals like these illuminate the surprisingly symbiotic relationship between industry and the federal government. EDC has provided more than $28 billion worth of financial support to Canadian oil, gas, metals and mining companies since 2015, helping along some of the country’s industry giants. These include companies such as Cenovus, ConocoPhillips, Crescent Point Energy, Enbridge, Encana, Husky, Spectra Energy and Suncor. The deals support industry jobs and the economic benefits that go with them. They also help generate a healthy revenue stream for the government through interest payments.

TransCanada Wins Bid for Underwater Gas Pipeline Across Gulf of Mexico – Steve Horn -  TransCanada, owner of the proposed Keystone XL pipeline currently being contested in federal court and in front of a North American Free Trade Agreement (NAFTA) legal panel, has won a $2.1 billion joint venture bid with Sempra Energy for a pipeline to shuttle gas obtained from fracking in Texas’ Eagle Ford Shale basin across the Gulf of Mexico and into Mexico. The 500-mile long Sur de Texas-Tuxpan pipeline, as reported previously by DeSmog, is part of an extensive pipeline empire TransCanada is building from the U.S. to Mexico. The pipeline network is longer than the currently operating southern leg of the Keystone pipeline (now dubbed the Gulf Coast Pipeline). Unlike Keystone XL, though, these piecemeal pipeline section bid wins have garnered little media attention or scrutiny beyond the business and financial press.  The Sur de Texas-Tuxpan proposed pipeline route avoids the drug cartel violence-laden border city of Matamoros by halting at Brownsville and then going underwater across the U.S.-Mexico border to Tuxpan. After it navigates the 500-mile long journey, Sur de Texas-Tuxpan will flood Mexico’s energy grid with gas under a 25-year service contract. That energy grid, thanks to the efforts of the U.S. State Department under then-Secretary of State and current Democratic Party presumptive presidential nominee Hillary Clinton, has been privatized under constitutional amendments passed in 2013.TransCanada and Sempra were the only bidders. TransCanada owns the joint venture with Sempra—coined the Infraestructura Marina del Golfo, Spanish for “marine infrastructure of the Gulf”—on a 60-percent basis.

Eagle Ford shale to benefit from $3.6B pipeline projects - Eagle Ford shale producers are benefiting from Mexico’s need for more electricity. Mexico’s state-owned Federal Electricity Commission recently awarded $3.6 billion in pipeline projects to TransCanada, Spectra Energy and others. The projects will transport shale gas from Texas to Mexico to help meet the country’s growing electricity needs. For decades, Mexico’s electric power infrastructure has been hampered by inefficiency and short supply.  TransCanada announced, along with a Mexican joint-venture partner, that it will construct and operate a $2.1 billion natural gas pipeline in Mexico. The Sur de Texas pipeline will ship natural gas into Mexico’s main gas transmission system from both U.S. shale plays and offshore sources. Its route will deliver natural gas from the border through the Gulf of Mexico and into Tuxpan.  The pipeline project will double TransCanada’s natural gas capacity in Mexico. The company currently owns and operates five other pipelines in the country.“We are extremely pleased to further our growth plans in Mexico with one of the most important natural gas infrastructure projects for that country’s future,” TransCanada president and CEO Russ Girling said in a press release. “This new project brings our footprint of existing assets and projects in development in Mexico to more than $5 billion, all underpinned by 25-year agreements with Mexico’s state power company.” Houston-based Spectra Energy was awarded a $1.5 billion contract to build a pipeline from Nueces County, Texas, to the Mexican border at Brownsville. The Texas portion of the pipeline is planned to be completed in 2018 and will transport up to 2.6 billion cubic feet of natural gas a day.

Mexico to offer farm-out on deep water field in Gulf: (AP) — Mexico’s state-owned oil company announced Friday it will offer a farm-out arrangement to private firms to join in the exploration of a deep-water field in the Gulf of Mexico. It would be the first time that Petroleos Mexicanos has formed an association with a private firm for deep-water drilling. Pemex Director Jose Antonio Gonzalez called it “a watershed moment in Pemex’s history.” The Trion field, located in the Perdido belt just 25 miles (40 kilometers) south of the U.S. maritime border, is estimated to hold the equivalent of 480 million barrels in proved, potential and possible oil and gas reserves. The company, known as Pemex, said the offer will be put up for bid in coming days and a winner will be announced on Dec. 5. Officials estimate it will take $11 billion in investments to develop the field in waters about 8,200 feet (2,500 meters) deep. Farm-outs are agreements where service providers take an interest in field, usually part of the oil and gas production, rather than payment. Gonzalez did not specify what compensation the farm-out scheme would involve.

No impact from Brazilian oil workers strike: Petrobras - A 24-hour warning strike by Brazilian oil workers has not affected crude oil and natural gas production, despite union claims to the contrary, state-led oil company Petrobras said Friday. "Petrobras informs that the company's activities are normal," the company said in an emailed response to questions. The latest work action to hit Petrobras started at midnight Thursday, when workers refused shift changes at onshore fields in Bahia state that were recently put up for sale, the Federation of Oil Workers, or FUP, said in a strike update. FUP is an umbrella union representing many of Petrobras' 80,000 direct employees. Oil workers were protesting impeachment proceedings underway against President Dilma Rousseff, as well as Petrobras' plans to sell off assets. "The strike is in defense of sovereignty and democracy, and against the dismantling of the company, delivery of the subsalt into foreign hands and attacks against workers' right that are on the agenda of the coup government of Michel Temer and Petrobras Chief Executive Pedro Parente," FUP said in a statement.  Workers carried out a similar 24-hour warning strike May 10 to protest Rousseff's pending impeachment. Brazil's Congress approved the impeachment proceedings, with then-Vice President Michel Temer taking over as president May 12. Temer will finish the remaining two years of Rousseff's second term if the Senate votes to impeach Rousseff at the conclusion of the trial.

Niger Delta Avengers Reject Calls To End Oil Attacks, Warn May Start "Taking Lives" --The always amusing, if quite violent, Niger Delta Avengers (profiled here for the first time one month ago), who as we some sarcastically said "hold the price of oil in their hands", only to realize this was all too real, alongside ever louder questions of just who is funding this brand new splinter group (not to mention its chatty Twitter account and its GoDaddy-hosted website), has again refused to sit down and negotiate a resumption in oil production, much to the chagrin of virtually other Nigerian miliants.  And, in a just issued a press "statement" on its website, it explains that it sees no need to sit down with the government for "any proposed dialogue and last peace talk." As the website notes, the NDA needs "conducive atmosphere” to commit to dialogue for the following reason, grammar mistakes all as per the original: We want the federal government to commit members states of the multi national Oil Corporations to commit independent mediators to this proposed dialogue; we believed that it is only such environment that will engender genuine dialogue that will be aimed at setting up a framework for achieving the short, medium and long term demands of the Niger delta to de-escalating this conflict and bring about a lasting peace.  The NDA also repeats warning to oil companies not to repair pipelines, oil and gas facilities damaged by attacks. We can only assume this is the demand of the NDA's unknown financial backer, who stands to gain much more from keeping Nigeria oil output as low as possible. 

Nigeria: Police dispute new attack claim by oil militants - (AP) — Local police are disputing claims that Nigerian oil militants struck another pipeline in the Niger Delta, saying an explosion was instead caused by a gas leakage. Cordelia Nwawe, police spokesperson for Akwa Ibom state, said Friday that engineers were “working to rectify the leakage” from the pipeline owned by the Nigeria National Petroleum Corporation. The Niger Delta Avengers claimed responsibility for the attack in a Twitter post on Thursday morning. Attacks in recent months have ended years of relative peace in the delta and cost Nigeria its place as Africa’s biggest oil producer, now held by Angola. Last week Nigeria’s government ordered the military to halt attacks in the oil-producing south and urged militants to halt bombings to allow a dialogue, but the Niger Delta Avengers have refused negotiations.

Africa’s largest oil producer might be facing a new threat -- Angola, Africa's largest oil producer, might be facing a new threat.  Reuters' Ed Cropley reports that in late May five militants traveled by speedboat, boarded an offshore Chevron gas platform, and threatened petroleum workers.  The men reportedly claimed that they were part of the rebel group called the Front for the Liberation of the Enclave of Cabinda (FLEC), which wants independence for Angola's oil-rich province of Cabinda.  It's unclear whether or not they were actually FLEC members. Reuters reports that the provincial governor, Aldina da Lomba Catembo, said that although there might still be "some people with guns... FLEC does not exist."  But one of the oil workers who was present at the situation in May "scoffed" at the idea that FLEC no longer existed, according to Cropley.  FLEC is a small, splintered group that's been active in various forms since the 1960s - first against colonial Portugal, and then Angola. It has not done much since 2000, but it became internationally well-known in 2010 after several spokesmen took credit for an attack on a bus shuttling Togo's soccer team to the Africa Cup of Nations.  Notably, the Cabinda province, which accounts for about half of Angola's oil production, is one of the poorest regions in the country - even despite the oil money.

Trouble Is Brewing in Nigeria’s Oil Country — Every attack on an oil pipeline leaves Felix Timileami feeling as if he’s on top of the world. The 39-year-old, who belongs to a recently formed — and as of yet unnamed — militant group, has taken part in raids on a number of oil facilities in the Niger Delta. Last month, they hit one operated by Royal Dutch Shell. “It’s the only means to vent our anger and to draw the world’s attention,” says Timileami, who hails from the Delta city of Warri. For six decades, the people of this swampy southern region have been the sore losers in Nigeria’s scandalous game of crony capitalism. Oil worth billions of dollars is pumped directly through communities here, but residents see almost none of it. For most of the 2000s, an insurgency fueled by bitter resentment claimed thousands of lives and, at its height, cut Nigeria’s oil production in half. Now, after a brief respite, it is beginning to re-emerge. Seven years after an amnesty agreement persuaded most militants to put down their weapons in exchange for monthly stipends — and in some cases, contracts to guard the same pipelines they used to bomb — the Niger Delta, a region of more than 20 million people, is suddenly sliding back into chaos. This month, a militant group calling itself the Niger Delta Avengers has already claimed three separate attacks on oil installations and promised to cut the country’s oil output to zero. The Ijaw Youth Council, an influential grassroots organization that has its roots in the armed struggle of the 2000s and advocates for local control of natural resources, said last week that the security situation is “rapidly deteriorating and getting out of control.” At issue is President Muhammadu Buhari’s perceived abandonment of the region. Already viewed suspiciously in the Delta because he is a Muslim from the north, Buhari has courted trouble by slashing funds for the amnesty program and revoking some of the security contracts. When he abruptly called off his first planned presidential visit to the region last week, people saw it as proof that he does not care about Christians in the south of the country.

Gazprom Neft abandons crude oil supply talks with India due to logistics drawbacks -  Russia's Gazprom Neft is no longer discussing potential crude deliveries to India due to its "difficult" logistics but may return to the issue at a later stage if the market conditions become attractive for such operations, Gazprom Neft CEO Alexander Dyukov said Thursday. India is seeking to secure additional deliveries of energy resources from Russia but supplies have been limited to existing infrastructure that was being used at full capacity and makes it difficult to increase eastbound deliveries for the time being. "Indeed, we discussed the possibility of spot deliveries to the Indian market but did not reach any agreement at the time. It is not exactly our market as logistically it is far away from our key exports ports [located in the western part of Russia]," Dyukov said. But the situation may change and "perhaps at some moment we would return to the discussion of this delivery opportunity," Dyukov told reporters on the sidelines of the St Petersburg International Economic Forum.India and Russia are actively discussing ways to strengthen cooperation, including in the energy sector, with a major Indian delegation headed by oil minister Dharmendra Pradhan presenting at the event.  Indian companies recently inked several cooperation deals with Russian oil producers, including on shareholding in Rosneft's key East Siberian upstream asset Vankor. In August 2015, India's ambassador to Russia, Pundi Srinivasan Raghavan, said his county was discussing a crude supply contract with Gazprom Neft, following the signing of a major supply contract between Rosneft and Indian refiner Essar in July 2015. India "is interested in long-term contracts on deliveries of Russian crude oil," he said at the time, adding that the companies are currently discussing "terms and timeframes for such contracts."

Falling global oil reserves: Pricing blip or panic alarm? - For years global oil majors have brushed off speculation that an imminent peak in global oil reserves spells the beginning of the end of the hydrocarbon age. There is a long-term trend of new oil finds and improved recovery outpacing consumption each year, they say, underpinning future output and returns. BP’s latest benchmark energy review, however, makes this line a tougher sell. The figures show that, since 2011, the world oil reserves have flatlined and are now dropping. Total proven reserves peaked at 1.7 trillion barrels in 2014 and, had BP not revised its 2013 figure downwards, last year’s 1.698 trillion barrel total would have marked the second consecutive fall since BP’s data began in 1980. A key metric for future production potential, proven reserves are notoriously a moving target. By definition they should account for the economic recoverability of the oil at prevailing prices and not everyone uses the same yardstick. To what extent oil prices affect BP’s proven reserves figures is unclear and the historical correlation is weak. Many countries use opaque reserves accounting criteria and apply less rigorous measures for economic recoverability. Others, including the US and Brazil, use more stringent rules. Brazil wrote down a fifth of its proven reserves last year partly due to lower prices, accounting for most of the outright fall in 2015. The price impact makes the recent slowdown in proven reserves even more troubling. Reserves hit their apogee as oil prices surged to all-time highs over $100/b, a move which should make more, not less, oil in the ground worth developing and hence “proven.”

Is $100 oil on the horizon? - Oil investors are buying contracts that will only pay out if crude rises well above $100 a barrel over the next four years — a clear sign some believe today’s bust is sowing the seeds of the next boom. The options deals, which brokers said bear the hallmarks of trades made by hedge funds, appear to be based on the belief that current low prices will generate a supply crunch as oil companies cut billions of dollars in spending on developing fields. The International Energy Agency forecasts that non-OPEC supply will suffer its biggest decline in more than two decades this year. “The market faces a supply crunch in the next 24 months,” said Francisco Blanch, head of commodities research at Bank of America Merrill Lynch in New York. “Some hedge funds are betting that oil prices will need to rise sharply to bring demand down again — that’s why they are buying deep out-of-the-money call options.” Over the last month, investors have bought call options — giving the right to buy at a predetermined price and time — for late 2018, 2019 and 2020 at strike prices of $80, $100 and $110 a barrel, according to data from the New York Mercantile Exchange and the U.S. Depository Trust & Clearing Corp. Even before the most recent flurry, some investors had already built super-bullish positions. The largest number of outstanding contracts — or open interest — across both bullish and bearish options contracts for December 2018 is for calls at $125 a barrel. For December 2020, it’s for $150 calls.

Why the Oil Price Rally Might Falter - - Last year's oil price rally ran out of steam in early May after 112 days. This year's has already lasted longer (140 days so far) and prices have risen further, but there are worries that, it, too, may be running ahead of market fundamentals. While prices seem unlikely to collapse again, there are good reasons to expect a pause in their upward march.Crude prices have nearly doubled from the lows reached in mid-January. Brent rose above $50 a barrel last Monday and stayed there all week. West Texas Intermediate crude narrowly failed to do the same after breaking through the psychological barrier on Tuesday. Brent prices have risen an average 18 cents a day since mid-January, remarkably similar to the 19 cents a day early last year.Sure, there's a real risk of structural supply shortages down the road, as oil companies have slashed spending on new projects, but they're not here yet. What we do have is a number of unforeseen disruptions, most recently in Canada and Nigeria, with a further deterioration in Libya, which have helped eliminate the surplus.  The U.S. Energy Information Administration saw disruptions removing more than 3.6 million barrels a day of potential supply in May, probably more than at any time since Iraq invaded Kuwait in 1990. Many stoppages have lasted years already and may last many more. Some output may never be fully recovered.  But some might return quite quickly. The biggest new disruption is already being resolved: the wildfire that swept through Alberta's oil sands and cut daily production by about 1.2 million barrels. Canadian production is returning slowly and will continue to add supply.  And while even the cheeriest optimist would hesitate to call an end to U.S. output declines, production there has just risen for the first time in three months on a week-by-week basis. Continental Resources has started fracking wells that it had drilled, but left uncompleted as prices collapsed. There were 4,290 such wells in the U.S. at the end of 2015 and others may follow Continental's lead,

ECB: Recent Oil Price Drop Driven by Weakening Global Demand (MNI) - The European Central Bank said in Monday that the decline in oil prices seen between mid-2015 and early 2016 were largely the result of decreasing demand rather than growing supply, leading to less of a boost to global growth than otherwise may have occurred. "While most of the oil price decline in 2014 could be explained by the significant increase in the supply of oil, more recently the lower price has reflected weaker global demand," the ECB wrote in a pre-release of its monthly Economic Bulletin. The implication of this development was that the more recent decline in oil prices would provide a lesser stimulus to economic growth than the previous one, the ECB said. Citing simulations, the ECB estimated that a purely supply-driven drop in oil prices by 10% would boost global GDP by 0.1%-0.2% while an entirely demand-driven drop would correspond with a GDP decrease of more than 0.2%. Knock-on effects on the global economy from oil-exporting countries hit by low oil prices was one reason why the recent oil price shock had not proved to be a bigger boon for global GDP. "The adverse impact on net oil-exporting countries appears to have been rather severe, and has been accompanied by negative spillovers to other emerging market economies," the ECB noted.

Oil prices slide even as IEA bumps up demand forecast -  Oil prices fell Tuesday, pushed lower for the fourth consecutive day as market sentiment continued to turn, despite a bullish report from the International Energy Agency. The global benchmark, Brent, was trading down 1.4% at $49.66 a barrel midmorning in London. Its U.S. counterpart, West Texas Intermediate was down 1.6% at $48.09 a barrel. The International Energy Agency on Tuesday revised its demand forecast upward for this year by 100,000 barrels a day, to 1.3 million barrels a day from 1.2 million barrels a day. The demand will be led by emerging markets in India and China as the manufacturing industry grows, the report said. The IEA also released its first demand forecast for 2017, for 1.3 million barrels a day. But the body warned that should supply be restored in Nigeria and Canada there could be a dip in prices. Nigerian output fell 250,000 barrels a day to 1.37 million barrels a day in June, levels not seen in almost 30 years. Gains to demand were limited as the IEA indicated that supply was strong from elsewhere in the world. Oil output in Kuwait and the United Arab Emirates was up in May by 120,000 barrels a day and 70,000 barrels a day, respectively. Despite the report, market bullishness is dissipating as U.S. production shows signs of recovering. Late on Monday, the U.S.-based Genscape Inc. tipped a 525,000-barrel increase in U.S. crude stockpiles in the week ended June 10. Last Friday, Baker Hughes Inc. reported the number of rigs drilling for oil in the U.S. rose for the second-straight week.

Oil Tumbles To $47 Handle After Unexpected Crude Inventory Builds Across The Entire Complex -- Oil fell today despite a bullish IEA report cutting its estimate for oil surplus (despite 2 weeks running of increasing rig counts and production and builds in gasoline and distillates last week). With crude inventories down 3 weeks in a row, API's print was expected to come in at -2.33mm barrels but instead built by 1.16mm barrels, sending oil prices lower. Cushing stockpiles were expected to drop 600k barrels (despite Genscape's 234k build estimate) but soared 664k barrels. Gasoline and Distillates both saw the biggest builds since January.  API:

  • Crude +1.16mm (-2.33mm exp)
  • Cushing +664k (-600k exp, +234k Genscape)
  • Gasoline +2.254mm
  • Distillates +3.725mm

These are across the board builds with Gasoline and Distillates really ugly... and crude plunge to a $47 handle...Charts: Bloomberg

Oil price unlikely to rise much further, global agency says (AP) — The price of oil is unlikely to rise much further after rallying almost 90 percent since January, as the global market shows signs of stabilizing, the International Energy Agency said Tuesday. The Paris-based agency, which advises the world’s top oil consuming nations, nudged up its estimate for global oil demand this year in its monthly report. It noted, however, that supply and past inventories remain high. “At halfway in 2016 the oil market looks to be balancing,” said the IEA in its monthly market report. After touching a 13-year low in January, the international price of oil has rallied to trade above $50 a barrel in recent days and has struggled to advance any further. On Tuesday, the Brent benchmark for international oil was down 56 cents at $49.79 a barrel. In its report, the IEA raised its forecast for world demand in 2016 to 96.1 million barrels a day, up 0.1 million barrels from its previous prediction. It expects demand to grow next year by 1.3 million barrels a day, the same as this year. However, the IEA noted that large volumes of production remain affected by shutdowns. That’s true particularly in Nigeria, where regional militants have blown up pipelines, and Libya, which is struggling to emerge from conflict. When that oil starts returning to market, it would boost supply, weighing on prices. Inventories are also high globally after three years of overproduction, the agency said. “This is likely to dampen prospects of a significant increase in oil prices,” its report concluded.

Oil Spikes After DOE Inventories Data Refutes API For 3rd Week In A Row, Production Drops -- Following last night's across the board inventory builds reported by API, oil prices have bounced modestly but remain lower (below $48) ahead of DOE's data. However, for the 3rd week running, DOE data refuted API showing a smaller than expected 933k draw in crude inventories and a large draw in gasoline (-2.62mm vs API's +2.25mm). Distillates inventories rose for the 2nd week in a row and Cushing saw its biggest build in 5 weeks. However, oil prices are rising on the data as well as the fact that US production resumed its decline after last week's brief increase. API:

  • Crude +1.16mm (-2.33mm exp)
  • Cushing +664k (-600k exp, +234k Genscape)
  • Gasoline +2.254mm
  • Distillates +3.725mm


  • Crude -933k (-2.33mm exp)
  • Cushing +904k (-600k exp, +234k Genscape)
  • Gasoline -2.62mm
  • Distillates +786k

Once again DOE data opposes API data...though we note Cushing saw a large build...Production resumed its decline to fresh multi-year lows after last week's brief rise... And the reaction in crude is to erase the API losses... As Goldman explains, supply may be on the rise... We further believe that at current prices, we can see a pick up in brownfield investment, consistent with our conversations with producers looking to maximize cash flow while limiting incremental spending. Importantly, this is a short-cycle investment which can drive large production rebounds, as was the case in 2009. Further, our European and US Energy equity analysts recently commented on how producers are guiding to even faster and larger cost declines than they had expected. Companies also appear ready to start sanctioning projects again after an 18-month hiatus, aggressively competing for capital and helped by governments ready to reduce tax take or local content requirements to attract investment. Several US producers have also become explicit on reducing their drilled but uncompleted well backlog. Our estimate of the US oil backlog (in excess of normal drilling activity) suggests that it represents 0.5 mb/d of additional production over the next 18 months if brought online by year-end. Further, a few producers have been able to issue high-yield debt for the first time since last October, with the explicit target of increasing drilling, and we have seen over the past two weeks several producers raising guidance as well.

Weekly Crude Oil Inventory Report - Bullish - Summary:

  • Bullish with refiners possibly setting up the market for a future ‘surprise’.
  • Domestic production decreased by 29,000 barrels per day. Almost all of it in the Lower 48.
  • Crude oil inventories decreased by 900,000 barrels.
  • Gasoline inventories decreased by 2.6 million barrels.
  • Distillate inventories increased by 800,000 barrels.

Overall, this was a bullish report mostly because of a material decrease in production in the Lower 48. In terms of inventories, the decrease in crude oil stocks was mostly offset by an equivalent increase in distillate inventories. Gasoline stocks decreased by a moderately large amount but the change was driven by a reduction in refinery utilization at a time when refiners should be increasing production in anticipation of the driving season.

Oil down fifth day; Brexit, Fed hike fears offset U.S. crude draw | Reuters: Oil prices fell for a fifth straight day on Wednesday, their longest losing stretch since February, on worries Britain might leave the European Union while the U.S. Federal Reserve signaled plans for two U.S. rate hikes this year despite slower growth expectations. A weekly draw in U.S. crude stockpiles helped crude futures pare losses during the session, before prices fell again in post-settlement trade. Brent crude futures' front-month LCOc1 settled down 86 cents, or 1.7 percent, at $48.97 a barrel. In post-settlement trade, it fell as low as $48.56 by 3:46 p.m. EDT (1946 GMT). The front-month in U.S. crude's West Texas Intermediate (WTI) futures CLc1 settled down 48 cents, or 1 percent, at $48.01 per barrel. The session low was $47.55. In post-settlement it fell to $47.45. Goldman Sachs said in a note that crude would need to trade at $45-$50 per barrel for the market to reach a supply deficit in the second half of 2016. Oil prices have fallen without a break since June 8, for a total loss of about 7 percent. Just a week ago, Brent hit 2016 highs of nearly $53 a barrel and WTI reached toward $52 after a rash of supply disruptions, mostly out of Nigeria and Canada. Wednesday's decline came as global markets slumped on fears that Britain could vote on June 23 to leave the EU. The dollar .DXY dipped against a basket of currencies but remained close to a June 3 high on worries of the so-called Brexit. A stronger dollar makes crude, priced in the U.S. currency, costlier in the euro and others.

US gasoline demand ties record: EIA : (Argus) — US gasoline demand rose to match a record high last week, helping to draw down national inventories of the fuel despite rising domestic production, according to the Energy Information Administration. Weekly implied gasoline demand rose by 2pc from the previous week to 9.8mn b/d, matching a record set in August 2007, according to the EIA. Ultra-low sulfur diesel demand also rose, higher by 6.7pc to 3.8mn b/d. Gasoline inventories fell by 2.6mn bl to 237mn bl, the strongest drop for the week in at least the past ten years and a draw during a week that over the past decade averaged a 700,000 bl build, according to EIA data. A massive 2.1mn bl draw on midcontinent inventories, followed by a 1.6mn bl draw on the west coast and 191,000 bl decline in the Gulf coast, more than offset a 1.3mn bl build in Atlantic coast gasoline storage. Refinery and pipeline outages roiled the midcontinent last week and sent Chicago-area gasoline prices to a nearly 16.6¢/USG premium to the Nymex gasoline benchmark on 8 June. Prices have since retreated to a 4.2¢/USG premium at yesterday's settlement. Ultra-low sulfur diesel inventories were flat to the previous week. A 319,000 bl draw on the west coast, to 11.7mn bl, neatly balanced a 320,000 bl build in the US Gulf coast, to 41.5mn bl. All other regions were effectively unchanged. Crude throughputs at US refineries held steady at 16.3mn b/d, with rising Atlantic coast and Rocky mountain rates offsetting falling west coast processing. Midcontinent rates were unchanged at 3.7mn b/d. Gasoline production adjusted for ethanol increased above 10mn b/d for the first time since 13 May, according to the EIA, with production rising in every US region. ULSD production increased by 2.5pc from the previous week to 4.7mn b/d, its highest volume since 1 January.

Oil slides 4 percent on worry of market turmoil if UK leaves EU | Reuters: Oil prices slumped about 4 percent and hit one-month lows on Thursday, settling down for a sixth straight day, on fears of global economic turmoil if Britain exits the European Union. It was the longest slide for oil since early January, when prices fell seven days in a row before hitting 12-year lows below $30 a barrel on worries about a global crude glut. This time around, a resurgent dollar is hammering crude futures and other commodities on speculation that Britain could vote to end its EU membership. The dollar hit two-week highs, then eased back on the sterling's strength as Britain suspended campaigning over its EU membership status after a deadly attack on a Member of Parliament. Oil pared losses as the sterling rose, but crude tumbled again in post-settlement trade to reach new lows on the day. Brent crude futures' front-month contact settled down $1.78, or 3.6 percent, at $47.19 per barrel. In post-settlement trade, it fell to as low as $46.94, its lowest since May 12. Brent has lost about $5 a barrel, or around 10 percent, over the past six sessions. Prior to that, it hit an eight-month high of nearly $53 on supply disruptions out of Nigeria and Canada. The front-month in U.S. West Texas Intermediate (WTI) crude futures settled down $1.80, or 3.8 percent, at $46.21 a barrel. It got to a May 13 low of $45.91 after the close. Drawdowns in U.S. crude inventories over the past month have not provided much support to oil with investors focused more on a possible rise in production as Brent and WTI traded above $50 a barrel each. U.S. energy firms added rigs drilling for oil for a second week in a row last week.

U.S. Oil-Rig Count Rises for Third Straight Week - WSJ: The number of rigs drilling for oil in the U.S. rose by nine over the past week to 337, marking the third straight week of gains, according to oil-field services company Baker Hughes Inc. The U.S. oil-rig count, viewed as a proxy for activity in the sector, has fallen sharply since oil prices began to drop in 2014. The number of U.S. oil rigs peaked in October 2014 at 1,609. The nation’s gas-rig count rose by one in the past week to 86. The U.S. offshore-rig count was 21, unchanged from last week but down six from a year ago. Oil prices were rebounding on Friday, snapping a six-day losing streak, as the dollar weakened and markets priced in a higher possibility that the U.K. will vote to remain in the European Union in a referendum next week. U.S. crude recently rose 2.9% to $47.56 a barrel.

US Rig Count Rises 10 This Week to 424 in 3rd Week of Gains - — The number of rigs exploring for oil and natural gas in the U.S. rose by 10 this week to 424, marking the third-consecutive week the count has increased after a slide that lasted months and pushed the count to record-low levels amid depressed energy prices.A year ago, 857 rigs were active.Houston oilfield services company Baker Hughes Inc. said Friday 337 rigs sought oil and 86 explored for natural gas. One was listed as miscellaneous.Among major oil- and gas-producing states, Texas gained 13 rigs and West Virginia increased two.Alaska and Louisiana fell by one apiece.Arkansas, California, Colorado, Kansas, New Mexico, North Dakota, Ohio, Oklahoma, Pennsylvania, Utah and Wyoming were unchanged.The U.S. rig count peaked at 4,530 in 1981. It bottomed out last month at 404.

Oil Fears Mount As Rig Count Rises For A Third Straight Week - The U.S. oil and gas rigs count is up today according to today’s Baker Hughes report, marking the third straight week of increases for the oil side of things. The number of active U.S. oil rigs rose by 9 this week, after rising by 3 last week. The total number of U.S. oil rigs in production as of today’s report is 337. When last week’s report came out with the second straight week of increases, oil prices slid. Despite today’s news—and despite those who are worried that more rigs means more oil, which means lower prices—WTI was up $1.34 to $47.55 as of 2:00pm EST today, over the previous close. The number of active gas rigs also rose this week, up one from 85 to 86, bringing the total number of active oil and gas rigs to 424. The increase in the number of rigs, although modest, should come as no surprise—oil prices have shot up almost 80 percent since the dark times of February, and the market is now more attractive. For those who are afraid that this increase will immediately translate into increased production—and inevitably the end of the oil price rally—it may come as some comfort to know that even though the higher oil prices may indeed entice a few players to ramp up production, it is unlikely that today’s prices, which are still disappointingly shy of the $100 per barrel WTI seen just years ago, will create an instant and massive entry back into the production game. For the rig count to return to what it was just a year ago, the U.S. oil and gas industry would have to bring 433 more oil and gas rigs online—more than double today’s total.

Oil: Horizontal Rig Counts Increased Slightly Again: A few comments from Steven Kopits of Princeton Energy Advisors LLC: "US horizontal oil rig counts were up 2 this week to 265, now 17 off the cycle trough five weeks ago. ... US vertical rigs were up sharply, +7 to 48. We can now call the cycle bottom here for May 27." ClickGraph Courtesy of Steven Kopits of Princeton Energy Advisors LLC. CR Note: This graph is horizontal rig count only (not vertical). The increase is still pretty minor.

Crude Slides To $47 Handle As US Oil Rig Count Rises At Fastest Pace In 10 Months -- With oil prices are already sliding quite markedly, it seems traders are questioning demand assumptions (as growth hopes fade), and with the oil rig count now up for 3 weeks in a row (up 9 to 337 this week) it appears supply expectations may not be helping either. The last 3 weeks have seen 21 oil rigs added (the most since Aug 2015) and the biggest percentgae rise in oil rigs since Aug 2010.  The rig count continues to track the lagged oil price perfectly as we have been explaining...The question remains, will a rising rig count stall the oil rally?

OPEC Turmoil Could Turn Balanced Market Into Shortfall -- IEA --  Link here. Data points, observations, comments from the linked article follow:

  • world oil production will nearly match consumption in 2017; will end several years of oversupply
  • to meet demand, OPEC needs to pump an extra 650,000 bopd over the year
  • to do that would require solutions to Nigeria's militant attacks; Libya's political divisions; and, Venezuela's economic crisis -- Bloomberg is not optimistic on any of these
  • by end of next year (2017), OPEC would need to pump nearly 1 million bbls above last month's production level to keep the market balanced 
  • Nigeria: production at a 28-year low of 1.4 million bopd (about 500,000 bbls below full capacity)
  • Libya: at 270,000 bopd in May, just a fraction of the 1.6 million bopd it pumped under Qaddafi in 2011
  • Venezuela: at 2.3 million bopd last month, the lowest since 2009; on track to drop another 100,000 bopd
  • Iran: could provide some relief; currently around 3.7 million bopd
  • global supply: after two years of oversupply, the west has more than 3 billion bbls in storage (sounds like a lot; 3 billion bbls / 100 million bbls = 30 days) -- but that oversupply is said to be "enormous" and "dampens the prospects of a significant increase in prices"
  • OPEC: will pump 33.3 million bopd in 2017 compared to 32.6 million bopd in May, 216 -- IEA
  • but Bloomberg notes that if OPEC output falls short of IEA estimates, those stockpiles would start to shrink rapidly (yes, 3 billion bbls / 100 million bbls = 30 days)

Goldman Sachs hired prostitutes to win Libyan business, court told - Goldman Sachs bankers paid for prostitutes, private jets and five-star hotels and held business meetings on yachts to win business from a Libyan investment fund set up under Gaddafi regime, the high court in London was told yesterday. The allegations came at the start of a legal claim by the Libyan Investment Authority for $1.2bn (£846m) from the investment bank. Lawyers for the LIA are claiming for losses on nine trades that Goldman Sachs executed for the fund between January and April 2008. The LIA lost almost all its investment through the trades – one of which was the largest that the bank had undertaken in a single stock – while Goldman Sachs generated “eyewatering” profits of over more than $200m from the trades, Roger Masefield, a QC for LIA, said. The LIA, Masefield told the court, felt betrayed as the trades generated excessive profits for Goldman and were unsuitable for the LIA, which was staffed by individuals who had not been appointed on merit. Once the losses emerged, Masefield said one Libyan official described Goldman as the “bank of mafiosa”.

'US Ally' Qatar Arrests Dutch Rape Victim For "Having Sex Out Of Wedlock" - If you're itching to go out clubbing in Qatar, make sure you keep your hand over your drink. A 22 year old Dutch woman said she was drugged by a Syrian man during a party in March at the Crystal Lounge nightclub at the W Doha Hotel, and woke up in an unfamiliar apartment. Upon waking up the woman known as "Laura" realized that she had been sexually assaulted, and subsequently reported the incident to the Qatari police. The police, in turn, arrested Laura on March 14 on charges of committing illicit sex acts, and have held her ever since. Brian Lokollo, Laura's lawyer argued: "She went dancing, but when she returned to the table after the first sip of her drink, she realized that she had been drugged. She really didn't feel very well. The young woman remembers nothing more until the following morning, when she woke up in a totally unfamiliar apartment and realized to her great horror that she had been raped." Laura finally learned her fate on Monday, as she was convicted by the Qatari court of "having sex out of wedlock." The court sentenced Laura with a one-year suspended sentence and deportation to the Netherlands, Al Jazeera reports. A court official described the one-year suspended sentence as "lenient", adding "had she been a Muslim woman, she would have received at least five years in jail. No one can get out of such charges here in Qatar."  As far as the man, identified as Omar Abdullah al-Hasan, he was also convicted of having sex outside of marriage, which is a serious offense in Qatar. al-Hasan was sentenced to 100 lashes for illicit sex acts, and another 40 lashes as punishment for public drunkenness - he too will be deported.

Iran Plans Oil-Refinery Expansion to Cut Gasoline Imports - Iran plans to increase its refining capacity for crude and condensate by more than 70 percent within the next four years as it works to improve the quality of fuel sold on the domestic market and wean itself off imported gasoline. The Persian Gulf oil producer will raise capacity to about 3.2 million barrels a day by 2020 from 1.85 million currently by building five plants, Abbas Kazemi, managing director of National Iranian Oil Refining & Distribution Co., said in an interview in Tehran. The country also needs about $14 billion in investment to upgrade units at five existing refineries to produce gasoline that burns more cleanly than grades currently available in the country, he said. Iran, OPEC’s third-largest oil producer, is boosting energy output after international sanctions curbing its access to oil markets were eased in January. Since then, Iran has restored oil production near to pre-sanctions levels and raised output of natural gas at the offshore South Pars field, part of the world’s largest deposit. One of the new refineries, the 360,000 barrel-a-day Persian Gulf Star, is scheduled to start operating by March, Kazemi said. The refinery will process condensate, the light oil found in gas deposits. Iran is seeking to use its condensate to make gasoline for transportation or naphtha for use in chemical plants.

Iran's Khamenei threatens to 'set fire' to nuclear deal if West violates - (Reuters) - Iran's Supreme Leader, Ayatollah Ali Khamenei, threatened on Tuesday to "set fire" to the nuclear deal sealed with world powers if U.S. presidential candidates reneged on the agreement. Presumptive Republican candidate Donald Trump said last August it would be hard to "rip up" the deal, but if elected president he would "police that contract so tough they don't have a chance". Iran can expect a shift in relations with the United States to a more aggressive posture under a Republic president, a reversal of the warming trend nurtured by Democratic President Barack Obama. "The Islamic Republic won't be the first to violate the nuclear deal. Staying faithful to a promise is a Koranic order," Khamenei said, according to state media. "But if the threat from the American presidential candidates to tear up the deal becomes operational then the Islamic Republic will set fire to the deal." He did not identify any candidate and said he did not see a difference between Democrats and Republicans in the comments that state media said he made in a meeting with senior officials including President Hassan Rouhani, who championed the agreement. Hillary Clinton, who Obama has endorsed to succeed him in the Nov. 8 election, said in March in a speech to a pro-Israel lobby group in Washington that Iran still posed a threat to Israel and needed to be closely watched.

OPEC's chasm of doom - OPEC's members are divided by many things: language; size; politics; sometimes outright war. And money. Don't forget money. If you want to understand why OPEC has responded to its current crisis with all the cohesion of cat herding, some numbers in the Energy Information Administration's "OPEC Revenue Fact Sheet," published on Tuesday, provide some important clues. First up, estimated revenue, adjusted for inflation: The estimate for this year, $337 billion in real terms, is barely a third of 2012's peak -- and, uncannily, exactly the same as the consensus forecast for the combined revenue of Exxon Mobil and Chevron in 2016. Of course, those two only have to pay their employees, creditors and shareholders. OPEC's members have about 700 million people to answer to, roughly double the amount in 1980. So, on a per capita basis, those numbers look worse:  What really stands out from that chart isn't just that net oil exports are set to generate less than $500 per man, woman and child this year. It's that even when oil was trading in triple digits a few years ago, the export revenue per person was still less than half what it was at the beginning of the 1980s. The need to diversify away from oil, such as Saudi Arabia is touting, reflects not just an acute crisis but a long-festering, chronic economic condition. The added twist, which is forcing OPEC to crack rather than coalesce, is that while all members are suffering, the degree of pain differs widely: Can it be any accident that Nigeria, sitting at the bottom of that chart, is currently convulsed by violence that has taken the country's oil production to its lowest level in 27 years (which in turn pushes the revenue lower)?

Saudi Arabia tells OPEC it pumped 10.27 mil b/d in May, up from Apr's 10.262 mil - OPEC said Monday the current oversupply on world oil markets will ease over the coming quarters due to the "slowing pace" of US crude inventory builds but it maintained both its both global oil demand growth and supply growth estimates for 2016. In its latest monthly oil market report, OPEC said it expected the call on its crude this year to average 31.6 million b/d, unchanged from its forecast a month ago and representing unchanged year-on-year growth of 1.8 mil b/d. The group also left its forecasts for 2016 world oil demand and supply broadly unchanged, with year-on-year demand growth of 1.40 million b/d and non-OPEC supply expected to fall by 740,000 b/d from the previous year. World oil demand is estimated to average 94.18 million b/d this year, with consumption in Asia, led by India anticipated to be the main contributor to oil demand growth. The report noted US oil demand, mainly supported by rising gasoline requirements, continued to grow, and that the European oil demand outlook for 2016 remains "slightly positive, mainly as a result of improving industrial production and a continuously growing auto market." OPEC expects non-OPEC oil supply for 2016 to average 56.40 mil b/d a fall of 740,000 b/d from last year, the same as its forecast last month, despite various changes in different regions; it is forecast to contract by "Downward revisions were seen mainly in Canada, Brazil and Colombia. These are offset by upward revisions in the US, the UK, Russia and Azerbaijan," it said. OPEC said the re-balancing on the market was gradually occurring as seen in the slowing pace of inventory builds in US commercial crude stocks.

Saudi Arabia’s Weapons Imports Lead Surge in Global Arms Sales -- A surge in weapons purchases by Saudi Arabia, leading a coalition of nations fighting in Yemen, helped push global arms sales up more than 10 percent last year, according to an annual report. The world defense market climbed to $65 billion in 2015, up by $6.6 billion from 2014, the consulting company IHS Inc. said in its Global Defence Trade Report published Sunday. That’s the largest yearly increase in the past decade, according to the Englewood, Colorado-based company. While Saudi purchases jumped about 50 percent to $9.3 billion, growth was seen across much of the Middle East and Southeast Asia.  . The study examined trends in the global defense market across 65 countries. The boost in Saudi weapons imports came as the kingdom led a coalition targeting Shiite Houthi rebels in Yemen and as it works to counter its regional rival Iran. Saudi Arabia’s purchases in the past year include Eurofighter Typhoon jets, F-15 warplanes and Apache helicopters, as well as precision-guided weapons, drones and surveillance equipment, Moores said. Egypt, whose economy has struggled since the 2011 ouster of former President Hosni Mubarak, became the world’s fourth-biggest weapons importer, spending almost $2.3 billion, according to the report. Before 2013, the country spent $1 billion or less annually, but "there’s been this ramp-up,"  Iraq spent almost as much as Egypt as it shifts money from operations and personnel toward procurement, IHS said. The country is battling Islamic State militants in long-troubled Anbar province and is preparing for the eventual battle to retake the northern city of Mosul.

$28 bln invested in cluster weapon producers in 4 years -- More than $28 billion has been invested in the production of deadly cluster munitions over the past four years, according to a report released Thursday. The Cluster Munition Coalition said in a statement that the report on worldwide investments in the weapons -- which release submunitions or bomblets on impact -- found 158 financial institutions involved in funding their production. As a result, the Coalition is calling on the institutions and governments “to put an end once and for all to investment in producers of cluster bombs.” Cluster bombs are banned under international law, but only 100 countries have actually become state parties to that convention. At present, countries like Syria and Yemen are being bombarded with cluster munitions, added the report.  Cambodia-based Denise Coghlan, head of the Cambodian Campaign to Ban Landmines, told Anadolu Agency on Thursday that the use of the weapons in those countries is “an incredible disaster in terms of creating danger for displaced people and refugees”. “ For these financial institutions to be spending this much money perpetuating these weapons is a mortal outrage,” Coghlan stressed. . Munitions produced by Textron were found to have been used by Saudi-led coalition forces in Yemen since 2015. “The vast majority of the financial institutions (138) are from countries that have not joined the 2008 Convention on Cluster Munitions,” It said that between 2015 and this year, 91 percent of the cluster munitions casualties in Yemen “were civilians, including deminers”, and that 22 percent of the civilian casualties were children.

Saudi Arabia invested $3.5 billion in Uber. That could be bad news for the global economy - Uber has raised an astonishing $3.5 billion from Saudi Arabia's sovereign wealth fund. It's one of the biggest venture capital investments in history and brings Uber's overall fundraising haul to $11 billion. But while Uber is bragging about the investment, it could reveal a troubling trend in investment trends overall. In the long run, economic growth depends on our ability to convert cash into productive assets like factories, trucks, machinery, or computer software. But for the most part, recent "investments" in Uber aren't like that. Uber is planning to use its billions to fund brutal, zero-sum price wars with competitors around the world. Those investments might allow Uber to expand its share of the global ride-hailing market and make big profits for its investors. But money spent on money-losing price competition isn't investment. Price wars do nothing to increase the world's productive capacity. So the fact that so much money is being invested in Uber — and in other companies deliberately losing millions in an effort to gain market share — could be an ominous sign. It suggests that it's getting harder and harder to spend money in ways that boost long-term economic growth.

Saudi Arabia Has Funded 20% Of Hillary's Presidential Campaign, Saudi Crown Prince Claims -- In what may be the pinnacle of hypocrisy, moments ago Hillary Clinton, while speaking live on national security and addressing the Orlando shooting took some time from her constant bashing of the Second Amendment and calling for a ban on assault rifles, to say some less than kind words about Saudi Arabia whom it accused of supporting radical organizations.  There is nothing wrong with that statement, as it is the whole truth - Saudi Arabia's involvement in supporting terrorism stretches from Sept 11 all the way through to ISIS - however, where there  is a big, and potentially law-breaking,  problem is what Jordan's official news agency, Petra News Agency, reported on Sunday citing the Saudi crown price, namely that Saudi Arabia is a major funder of Hillary Clinton’s campaign to become the next president of the United States. As MEE notes, the Petra News Agency published on Sunday what it described as exclusive comments from Saudi Deputy Crown Prince Mohammed bin Salman which included a claim that Riyadh has provided 20 percent of the total funding to the prospective Democratic candidate's campaign.  As a reminder, It is illegal in the United States for foreign countries to try to influence the outcome of elections by funding candidates.

U.S. Officials Fear Saudi Collapse If New Prince Fails - NBC News: The Saudi prince who seems to have won a family power struggle is meeting with U.S. officials this week -- some of them the same officials who are concerned his reign could be ruinous and hurt the regional security U.S. officials crave. Officials in the national security establishment believe Saudi Arabia is at a crossroads, and that if the prince doesn't succeed, now and later as king, there could be chaos in the Kingdom. "It's him or it's ISIS," said one Saudi expert who asked that his name not be used. Mohammed Bin Salman, Saudi Arabia's 30-year-old deputy crown prince, is on a tour of the U.S. that will include New York and Silicon Valley. His biggest meetings are with top U.S. officials in Washington, D.C., this week, including Secretary of State Kerry on Monday and a scheduled visit with President Obama at the White House Friday morning. But the big news, suggest U.S. officials, is that bin Salman is here at all, since he's technically second-in-line to his father King Salman's throne. He seems to have gained the upper hand on his cousin and rival Mohammed Bin Nayef, the crown prince and a longtime U.S. favorite. The trip is essentially a state visit without the fanfare. Bruce Riedel, former national intelligence officer for the Mid-East and a member of President Obama's transition team, said that U.S. leaders now need to familiarize themselves with a man who may be king soon. King Salman is 80 and fragile and Bin Nayef, who the U.S. would've preferred as his successor, is seriously ill. "We've put a lot of markers down on Mohammed bin Nayef. It's the smart move to do the same with Bin Salman. It's an opportunity to get to know him."

Country That Executes Gay People Pledges To Help US Avenge Orlando Shooting - Here is further proof that US foreign policy fact is stranger than fiction: one day after the Orlando shooting where some 50 patrons of a homosexual bar were gunned down, US Secretary of State John Kerry sat down to dinner with with Saudi Prince Mohammed bin Salman in Washington, D.C. and, according to the State Department, "discussed this weekend's shooting in Orlando and expressed their shared commitment to continue their cooperation in combatting the spread of violent extremism, both regionally and internationally." Yes, the same country that follows as a matter of official policy the exact treatment of homosexuals as was meted out by the Orlando shooter has expressed concern over extremism! Saudi Arabia's own "violent extremism" doesn't end at its treatment of homosexuals.As the defense minister of the Saudi kingdom, Saudi Prince Mohammed bin Salman is responsible for the brutal and genocidal war on Yemen and for Saudi Arabia's strong backing of radical jihadists -- including al-Qaeda -- who for the past five years have killed tens of thousands in attempt to overthrow secular Syrian president Assad. Also, if reports about the contents of the still-classified "28 Pages" of the 9/11 report are accurate, the Saudi government played a role in the al-Qaeda attacks on the United States. Imagine sitting down to dinner with Mohammed bin Salman and listening with a straight face as he bleated on about human rights and the need to combat violent extremism. Is there enough (non-alcoholic) beverages on earth to make a meal like that go down?

CIA chief expects release of 9/11 documents to clear Saudi Arabia | Reuters: CIA chief John Brennan said on Sunday he expects 28 classified pages of a U.S. congressional report into the Sept. 11, 2001 attacks on the United States to be published, absolving Saudi Arabia of any responsibility. "So these 28 pages I believe are going to come out and I think it's good that they come out. People shouldn't take them as evidence of Saudi complicity in the attacks," Brennan said in an interview with Saudi-owned Arabiya TV, according to a transcript provided by the network. The withheld section of the 2002 report is central to a dispute over whether Americans should be able to sue the Saudi government, a key U.S. ally, for damages. The U.S. Senate passed a bill on May 17 allowing the families of Sept. 11 victims to do so, setting up a potential showdown with the White House, which has threatened a veto. Saudi Arabia denies providing any support for the 19 hijackers - most of whom were Saudi citizens - who killed nearly 3,000 people in the Sept. 11 attacks. Riyadh strongly objects to the bill. It has said it might sell up to $750 billion in U.S. securities and other American assets if it became law. Brennan called the 28-page section merely a "preliminary review."

Exclusive: Venezuela in talks with China for grace period in oil-for-loans deal - sources | Reuters: Venezuela is in talks with China to obtain a grace period in its oil-for-loans deal that would improve the OPEC nation's capacity to make bond payments amid an economic crisis, sources briefed on the proposal have told Reuters. Venezuela has borrowed over $50 billion from China under the financing arrangement created by late socialist leader Hugo Chavez in 2007, in which a portion of its crude and fuel sales to the world's second-biggest economy are used to pay down loans. The two-year rout in oil markets has left the government of President Nicolas Maduro struggling to meet the original terms of the agreement, which require that state oil company PDVSA set aside more barrels for debt services when prices fall. Venezuela is now seeking a one-year grace period in which it would only pay interest on the loans, according to two oil industry sources and one finance industry source who asked not to be identified because they are not authorized to speak about the issue. The sources said state oil company PDVSA would receive cash payments for shipments that currently go to pay principal. The change would improve PDVSA's 2016 cash flow by $3 billion if it took effect this month, two of the sources estimated. That would make it easier for PDVSA to meet heavy bond payments this year amid an ongoing collapse in a socialist economy facing Soviet-style scarcity and daily food riots. It could also ease investor concerns of a default that have made its paper the riskiest of any emerging market debt.

China Wants to Build a Deep Sea 'Space Station'  - China’s plans to secure sovereignty over the South China Sea were illuminated this week in a discovery of the nation’s blueprints for a deep sea “space station.” The manned deep sea platform would sit 9,800 feet under disputed waters in the South China Sea, and would be a key resource in China’s offshore mining efforts, according to a Chinese Science Ministry presentation recently viewed by Bloomberg. Dozens of crew members would be able to survive underwater for up to a month at a time on the station.  Little is publicly known about the project, but China included the construction of an oceanic base in its five-year economic plan, and deep sea exploration was a key priority under the country’s Scientific Innovation 2030 initiative. So far, no one has ever attempted to man an underwater station at this depth for an extended amount of time. In 2012, China announced its intentions to build a mobile, nuclear-powered underwater mining station that would house a crew of 33 people for two months. The Pacific Ocean base was proposed by the China Ship Scientific Research Centre, and likely secured backing from the nation’s 863 Program, a fund known to bankroll military R&D projects. Whether this station has ties to the South China Sea platform is unclear. President Xi Jinping has not been coy about his efforts to assert dominance over the highly disputed waters. China, Taiwan, Vietnam, Malaysia, Brunei, and the Philippines are currently locked in a conflict over territorial and jurisdictional claims to the region’s potential wealth of natural resources. The South China Sea is believed to hold an estimated 11 billion barrels of oil and 190 trillion cubic feet of natural gas, and also possesses one-third of the world’s shipping routes. Approximately $5.3 trillion of total annual trade passes through the South China Sea. China has been visibly flexing its marine science arm for past five years. In 2012, “oceanauts” descended more than 22,000 feet into the Pacific Ocean’s Mariana Trench aboard the manned submersible Jiaolong. The mission was hailed as scientific in nature, but was also a bold demonstration of the country’s deep sea technological capabilities. Over the next five years, China has stated plans to build both manned and unmanned submersibles able to surpass the hadal zone—the deepest parts of the ocean.

China will need to cut 3.5 million jobs across six core industries as tonic for excess capacity, says UBS - China’s excess capacity problem is daunting by any yardstick.The nation’s ability to produce manufactured goods outstrips not only the demands of the mainland economy, but that of the entire global economy, as indicated by deflation in factory gate prices, according to economists.Factories and other major industrial plants are running well below capacity, highlighting the lacklustre demand.According to UBS, the steel sector is running at 67 per cent of capacity, while coal is at 65.8 per cent. Further declines in utilisation can be expected as the economy cools further.New research by UBS indicates that a 10 per cent capacity reduction will be needed across six core industries to help bring supply and demand into closer alignment. These excess capacity sectors include coal, steel, cement, flat glass, aluminium smelting and ship building. The cuts will trim 3.5 million jobs, according to UBS Economist Tao Wang.“Two million direct jobs are expected to be cut in the excess capacity six sectors,” Wang said. “In addition, another 1.5 million workers may lose their jobs in other related sectors.”Wang estimated that the resulting factory shutdown could boost the unemployment rate in China’s non-farm sectors by 0.5 to 0.6 percentage point.“The government will likely provide compensation to some of the directly affected workers, partly through the central government’s special fund,” Wang said in a report.Liao Qun, chief economist at Citic Bank International in Hong Kong, agreed, saying the biggest concern is massive job losses, particularly in less developed regions.

China Tries to Redistribute Education to the Poor, Igniting Class Conflict - — Cheng Nan has spent years trying to ensure that her 16-year-old daughter gets into a college near their home in Nanjing, an affluent city in eastern China. She wakes her at 5:30 a.m. to study math and Chinese poetry and packs her schedule so tightly that she has only 20 days of summer vacation.So when officials announced a plan to admit more students from impoverished regions and fewer from Nanjing to local universities, Ms. Cheng was furious. She joined more than 1,000 parents to protest outside government offices, chanting slogans like “Fairness in education!” and demanding a meeting with the provincial governor.“Why should they eat from our bowls?” Ms. Cheng, 46, an art editor at a newspaper, said in an interview. “We are just as hard-working as other families.”  Parents in at least two dozen Chinese cities have taken to the streets in recent weeks to denounce a government effort to expand access to higher education for students from less developed regions. The unusually fierce backlash is testing the Communist Party’s ability to manage class conflict, as well as the political acumen of its leader, Xi Jinping.The nation’s cutthroat university admissions process has long been a source of anxiety and acrimony. But the breadth and intensity of the demonstrations, many of them organized on social media, appear to have taken the authorities by surprise.  At issue is China’s state-run system of higher education, in which top schools are concentrated in big prosperous cities, mostly on the coast, and weaker, underfunded schools dominate the nation’s interior. Placement is determined almost exclusively by a single national exam, the gaokao, which was administered across China starting on Tuesday. The test is considered so important to one’s fate that many parents begin preparing their children for it before kindergarten. The government has threatened to imprison cheaters for up to seven years.

Need a Loan in China? Hand Over a Nude Photo - naked capitalism - Yves here. Steve Keen, one of the few economists to predict the global economic crisis, has identified China as a prime candidate for Japan-style zombification, based on its rapid growth in debt from an already not-shabbly level. China has engaged in stop-and-go economic policies, tightening credit, then loosening it again when growth weakens too much. And signs of strain are growing. The Financial Times reported that companies are stretching their payables. China optimists are arguing that housing inventories are clearing, which portends further growth. MacroBusiness debunked that notion yesterday: Inventory clearance “on track”. Sure, if a barely perceptible slowing in the uptrend and more recent reversal upwards is “on track”. And this is only tiers 1&2. In the tier 3&4 cities there is no change.Chinese realty will slow as the year runs on and floor space under construction will slow with it. I still expect new starts growth to fall away all year and gross floor space under construction to end flat.The short answer to the question is China clearing it’s housing glut is “no”, that will only happen when prices fall enough to make property affordable. Today, MacroBusiness gave a broader look at signs of stress in China’s shadow banking system. Via the FT:Chinese loan sharks are demanding nude photos as collateral from female borrowers which can be used for blackmail if they fall behind on their repayments. The aggressive tactics are an example of the drastic debt recovery measures that are being employed in the slowing Chinese economy.The democratisation of finance in China via peer-to-peer lenders and the vast shadow banking system, with interest rates sometimes topping 30 per cent, have proved an inflammatory mix and fuelled a surge in souring loans.Female college students in the southern province of Guangdong were told to hand over naked photos of themselves holding their ID cards, with lenders threatening to make them public if they failed to repay their microloans, according to the Nandu Daily, the local newspaper.

The Notorious 120% LTV Mortgage Is Back --Back at the height of the US housing bubble, when various subprime mortgage originators were glad to hand out NINJA mortgages, some went so far to give the debtor more money than they needed for a house purchase, with the assumption that any residual may go to help fixing up the house in advance of a flip. These were the infamous 100%+ LTV loans, where the bank would hand over more cash than the value of the actual property. This worked for a few years - as long as the value of the property was rising fast enough, and could be flipped promptly to willing buyers it wasn't a problem. However, once the housing bubble burst, this particular type of loans disappeared from the US landscape, and as a result of new mortgage guidelines it will unlikely be making a return any time soon. However, with China desperate to reflate its once-burst housing bubble (as every other bubble including stocks, bonds, and yes - even rebar - has burst) and with no regulators to oversee the insanity in the local housing market, it means that the infamous 120% LTV mortgage has finally resurfaced. As SCMP reports, Sun Hung Kai Properties Ltd., Hong Kong’s largest developer surprised the market on Wednesday by offering an unprecedented home loan worth as much as 120% of the flat value without the need to submit income proof in order to woo buyers for its new project in Yuen Long. Buyers of SHKP’s Park Yoho Venezia who opt for the “King’s Key 120” scheme will receive a three-year financing loan up to 120 per cent of the flat’s value, much higher than the standard bank mortgage ceiling of 60 per cent for flats below HK$10 million, and 50 per cent for those more than HK$10 million.

China orders demolition of half of world’s largest Tibetan Buddhist institute -- The Chinese government has demanded the removal of more than 5,000 monks and nuns from Larung Gar Buddhist Academy, and plans to demolish 50 percent of residences at the historic monastery. According to Free Tibet, some residences have already been destroyed, and the government has threatened to demolish the entire monastery if Larung Gar’s religious authorities don’t comply with the demands.The school is the largest Tibetan Buddhist institute in the world, situated in the remote Gharze Prefecture of China’s ‪Sichuan‬ Province. There are currently over 10,000 residents at the monastery, and the government’s order demands the population be reduced to 5,000. The monastery has been given a deadline of September 30, 2017 to reduce the population — demands that come as part of a strict crackdown on religious freedom in Tibet.The only direct reason given for the orders is that the community is in need of “ideological guidance.” According to Human Rights Watch, the proposed restrictions are thought to stem from concerns about the growing population size at the monastery and the subsequent fire risks. Other demands include installing camera surveillance and screening procedures and for the monastery to accept joint management with government officials. In 2001, local authorities evicted thousands of monks and nuns and bulldozed over 1,000 residences at Larung Gar. After much public backlash, the community was largely left alone and allowed to grow again.

U.S., China talks ratchet up a BIT --  The United States and China have exchanged updated negative list offers in their bilateral investment treaty negotiations, POLITICO has learned. The new offers will likely be a point of discussion as U.S. and Chinese negotiators close out a week’s worth of meetings today, although the gathering in Washington is not being considered a formal round of talks. Story Continued Below The two sides committed at last week's high-level Strategic and Economic Dialogue to updating market access this week. Beijing last updated its negative list, which lists sectors excluded from investment liberalization, in September. U.S. Treasury Secretary Jack Lew on Thursday said he had not seen a full analysis of China’s revised offer. "But [China] certainly led us to expect a list that would be the basis for working together going forward, even though it wouldn’t be the final end result. I hope that’s the case when our experts go through the list, but the jury is out because it still really is happening in real time,” he said at an event hosted by the American Enterprise Institute.

Yuan Headed for New Low vs. US Dollar? -- The rally in the Yuan from January through mid-March has mostly been erased. If the yuan continues to sink, protectionists in the US will howl.  Included in the protectionist group are Donald Trump, president Obama, Hillary Clinton, and Bernie Sanders, to varying degrees. Trump is the leader of the protectionist group. Bloomberg reports Yuan Falls Most in Two Months as Trading Resumes After Holidays.The yuan headed for its biggest loss in two months as the currency traded for the first time since Wednesday.The yuan lost 0.4 percent to 6.5879 at 10:04 a.m. in Shanghai, approaching a five-year low against the dollar. A gauge of the greenback’s strength climbed 1.1 percent when mainland markets were closed for holidays. The central bank set the reference rate 0.3 percent weaker. “There is a high chance the yuan will break the January low,” . “The fundamentals for the yuan are weak: the economy is slowing and capital is flowing out of China.”

And Now, Price Deflation in India and China?  -- Deflationary tendencies were already evident in China from about five years ago in terms of producer prices behaviour. This was not a surprise given the huge expansion of production capacity that had marked the previous decade, which had led to both production gluts and significant overcapacity in many producing sectors. This was for some time partially hidden by the construction boom unleashed as part of the recovery-and-stimulus package unleashed by the government. But as that package also led to dramatic increases in debt across all sectors, it too now seems to have run out of steam.  As a result, as Chart 1 shows, producer prices in China have been mostly falling or flat since mid-2011. For the last three years, even consumer prices have decelerated, which is somewhat surprising in an economy that is still supposedly growing at around 6.5 per cent in terms of GDP.The case of India – described in Chart 2 – is even more surprising. In fact, the Indian economy is not usually described as on currently facing demand deficiency, and supply bottlenecks are more usually mentioned as the major constraints on economic activity. Yet even in India, while retail inflation (or the consumer price index) still remains relatively high (in excess of 5 per cent per annum) it has fallen considerably from the earlier rates of around 8-10 per cent. Much of this is the result of food price inflation, which obviously impacts directly and disproportionately on the bottom half of households. However, the proxy for producer prices (wholesale prices) show a sharp deceleration even in India. More significantly, wholesale prices in India have actually been falling (on a year-on- 2 year basis) since January 2015, that is for well more than year now. This obviously will have a similar depressing effect on both producer expectations and investment in India.

Fitch warns Japan ratings downgrade possible after tax hike delay | Reuters: Fitch Ratings warned on Monday that it could downgrade Japan's sovereign rating after Prime Minister Shinzo Abe delayed an increase in the nationwide sales tax by two-and-a-half years due to worries the economy has not shaken off deflation. Japan's anemic growth is also a credit weakness because Abe's attempts to reflate the economy, known as "Abenomics," have not raised potential growth, Fitch said in a statement. The government could avoid a downgrade if it lays out new steps to meet its fiscal discipline targets, but a lack of measures to bolster confidence in its fiscal policy could lead to a downgrade, Fitch said. "The government has decided to postpone the tax increase, which leaves us to revise our assessment of the government's commitment to fiscal consolidation," said Andrew Colquhoun, head of Asia-Pacific sovereigns at Fitch. "If it looks like the debt ratio is going to go on rising, then the next move in the rating could be downwards." Fitch revised down its outlook for Japan's A sovereign debt rating to negative from stable on Monday, a move that was not wholly unexpected given the market's disappointment that critical fiscal reforms had been put on the back burner. Japan's A rating is five notches below the top AAA rating. In general, the time frame for the negative outlook is the next 18 months to two years

10-year JGB yield hits record low of minus 0.210%- Nikkei Asian Review: -- Long-term interest rates dropped to record lows in Tokyo on Thursday morning, as speculation that the U.S. Federal Reserve will slow its pace of interest rate hikes spurred bond buying. The yield on the benchmark 10-year government bonds fell to a record low of minus 0.210%, down 0.015 percentage point from the previous day. Demand for Japanese government bonds, considered a safe-haven asset, picked up as concerns continued to grow that Britain may vote to leave the European Union in a referendum next week. The yield on 20-year JGBs fell 0.020 percentage point on the day to a record low of 0.120%, while the yield on 30-year JGBs slid 0.020 percentage point to 0.190%, also a record low.

Bounty offered to kill Philippine president elect Rodrigo Duterte -  Philippine authorities on Thursday said it found offers guaranteeing a million dollars to whoever kills the nation’s President-elect Rodrigo Duterte, who has declared war on drug dealers and offenders.  He didn’t show aspects of who might be behind these offers, EFE News reported.  Dela Rosa’s statements come after Duterte, who has vowed to wipe out drugs and crime from the Philippines in under six months, also declared monetary benefits that are substantial for citizens who kill drug lords on several occasions.“I plead for you to quit f***ing this state, and we’ll be alright,” he warned drug dealers. Recent months have seen Duterte’s popularity skyrocket in the Philippines, as a result of his tough-talking against crime and drugs, two of the main issues affecting the nation. On 9 May, he appeared victorious in the presidential elections, winning a majority 39 per cent vote in comparison with the other nominees. Nevertheless, he’s also been criticized by human rights organizations, who accuse him of inciting violence by recommending extra-judicial killings of drug or robbers peddlers to reduce crime rates.

RBI Governor Rajan’s Fight Against Crony Capitalism: In any country in the world, a central banker who has managed to reduce inflation from 11 percent to 5 percent while simultaneously enabling an increase in growth from 5 percent to 8 percent in just three years would have a guaranteed reconfirmation. Not in India. The Governor of India’s Central Bank, Raghuram Rajan, much admired by the international press, is under heavy attack in his country. ... Why such anger? With his work, Rajan is fighting not only inflation, but also the inefficiency of the banking system, burdened by bad loans. The Indian banking system is mainly in public hands and was used to finance crony capitalism, which has held the country back for too many years. ...   As Governor, Rajan has rightly decided to force the banks to cut down exposure to their most dubious borrowers, even at the cost of bringing out non-performing loans. ... Though it was the right thing, this policy has produced collateral damage: banks’ share prices were affected, and even more affected were those Indian oligarchs who had enjoyed easy credit. They are the ones fueling dissent, because Rajan has dared to publicly criticize the behavior of some of them. ... Despite these attacks, public opinion is strongly on Rajan’s side. ... Rajan is the dream of the new India: young, competent, and reached the top of the Indian central bank because of his skill, not because of his political alignment. ... By late August, Indian Prime Minister Narendra Modi will have to decide whether to reconfirm him. This decision is the litmus test for change in India. On one hand is the young India, competent and meritocratic, that is conquering the world with its software and products, on the other hand is the India of the great political and economic dynasties, who established their power on political connections, if not directly on corruption, and that use a false sense of national identity to protect their declining power. It’s up to Modi to choose.

Pakistan Launches $8.5 Billion Railway Upgrade Project --Pakistan government has approved an $ 8.2 billion project to upgrade the 1,872 km Karachi - Peshawar rail track, bridges, tunnels, and culverts, according to International Railway Journal. The new track will support increased axle load of up to 25 tons, up from 22.8 tons which is now the norm in South Asian countries. The higher axle load capacity will allow heavier freight trains carrying more freight per train for greater trade overland.  China will provide 85% of the financing for the project. It will be done in two phases, with the first due for completion in December 2017 and the second in 2021.  It will be part of an international rail link that will connect Pakistan with China, Central Asia and Europe. It will extend south from the city of Kashgar in the Xinjiang Uygur autonomous region in Western China to Pakistan's deep-sea Gwadar Port on the Arabian Sea, according to Zhang Chunlin, director of Xinjiang's regional development and reform commission. "The 1,800-kilometer China-Pakistan railway is planned to also pass through Pakistan's capital of Islamabad and Karachi," Zhang Chunlin said. "Although the cost of constructing the railway is expected to be high due to the hostile environment and complicated geographic conditions, the study of the (international rail link) project has already started," Zhang said. "China and Pakistan will co-fund the railway construction. Building oil and gas pipelines between Gwadar Port and China is also on the agenda," Zhang added.

Pakistan uses 1.5 million Afghan refugees as pawns in dispute with U.S. – For decades, Afghans fleeing conflict have found a tenuous haven in next-door Pakistan, which has allowed millions to settle there but periodically threatened to send them back. Now, amid new tensions with Washington over drone strikes and fighter jet subsidies, Pakistan says it plans to deport at least 1.5 million refugees within the next two weeks.According to a report Friday by Bloomberg News, Pakistani military officials say they need to return the refugees as part of a "border management program." But experts say such a move would provoke a humanitarian disaster in Afghanistan, which is ravaged by poverty, economic stagnation and an aggressive Taliban insurgency that has displaced more than 1 million people from their rural homes."Afghanistan isn't now prepared to embrace a large influx of Afghan immigrants from neighboring nations, given the security problems and lack of resources," an adviser to the Afghan Ministry of Refugees and Repatriation in Kabul told the news service.The struggling country has already absorbed several million returnees since 2001, when the extremist Taliban regime fell and an elected government took power with Western backing. Over the past year, moreover, hundreds of thousands of desperate Afghans have fled to Europe, joining the mass flood of illegal migrants from the Middle East.  But there are signs that the threat of forced mass repatriations may be mostly a rhetorical salvo in the complicated political game between Pakistan and the United States over Pakistan's role in the ongoing Afghan conflict. Pakistani civilian officials said this week that they seek a "dignified" return for long-term refugees and may allow them to remain through the end of 2017, as international rights groups have urged.

The U.S. (Again) Escalates The War In Afghanistan -- When Obama came into office he promised to end the hopeless war in Afghanistan. Immediately the Pentagon ambushed him with requests for a "surge" with some additional 40,000 troops. Under pressure Obama agreed to a lower number and set a 18 month limit for their deployment. Those troops occupied some meaningless areas in Afghanistan and when they were withdrawn those areas fell back to Taliban rule. Currently the U.S. has some 10,000 troops and more than 20,000 "contractors" in Afghanistan. There are additional troops from NATO allies. Since 2014 these troops are restricted in their tasks to fighting Al-Qaeda and are not supposed to support Afghan government troops.  But the idea of turning the war over to local troops without losing to the Taliban failed. Afghan troops are giving ground especially in the south and have a high attrition rate. It is obviously that without change the whole south would fall to the Taliban by end of the year. This would hardly matter to anyone but the people living there many of whom have no problem with their Taliban brethren. Several steps taken by the U.S. have made it more unlikely that the conflict will come to an end. The primary Taliban demand in any peace talks is the the removal of all foreign troops from the country. The U.S. and the U.S. installed puppet government have rejected that. Instead of finally giving up the U.S. military wants to continue to occupy Afghanistan. The U.S. recently killed a innocent taxi driver in south Pakistan and his passenger, the Taliban commander Mansour, with a military drone strike. All available science on the issue says that assassinating the leader of a resistance movement does not end such movements but let them intensify their conflict and cause more civilian casualties. The Taliban operations did not halt for one moment. A new hardline leader was elected and bigger operations against Afghan troops were launched.

The level of household debt to disposable income has hit a new high -  The ratio of household debt to income has hit a fresh record high and the debt mountain doesn't look like reducing any time soon.  New key household financial statistics from the Reserve Bank for the three months to the end of March show that household debt is now at a record high of 163% of disposable income, up from 162% as of December.  For the year to the end of March household disposable income was $151.155 billion, versus $246.246 billion of financial liabilities.  With the RBNZ's earlier released Sector Credit figures for April showing that the the total amounts owned on housing mortgages alone rose by nearly $1.8 billion in that month, the ratio of debt to income is likely to keep blowing out in the foreseeable future.   Ironically, however, as the debt pile continues to grow it is, for the moment, becoming more easy to service due to the low interest rates.  The RBNZ figures show that in the year to March the total amount of financial liabilities increased by over $16 billion, or 7.2% and yet during the 12 month period the amounts of interest required to be paid on a quarterly basis actually dropped by 3.9%.  In terms of serviceability of the debt, in the March quarter the amount paid in interest represented just 8.8% of the March quarter disposable income.  Go back to March 2015 and the amount of interest paid represented 9.6% of of quarterly disposable income. So, the amount owed is rising fast - but the ability to service the debt is improving as the effect of interest rate declines in the past 12 months continues to feed through to lower mortgage rates.  If you go back to the tail end of the last housing boom, the quarterly debt servicing ratio peaked at 14.2% of disposable income in September 2008.

Nigeria to loan cash-strapped states 90 billion naira, finance minister says | Reuters: Nigeria's government will loan its states a total of 90 billion naira ($453 million), in its latest effort to augment their monthly income and ease strain caused by plunging oil revenues, the country's finance minister said. The funds will help tide the 36 states over for a year as they get their finances in order, Finance Minister Kemi Adeosun said late on Tuesday. The loan is structured as 50 billion naira for three months and then 40 billion for nine months. She did not say what the interest rate on the loans would be. "It is a loan and it is fully repayable, although it has a secured tie against future dividends, revenues and any amount that government might owe the states," Adeosun said at a meeting with state finance commissioners. "The loan is a bond and it has been guaranteed by the federal government." Several Nigerian states borrowed in the domestic bond market and from banks to fund infrastructure projects at the peak of oil prices. But as crude prices dropped, many states have been unable to pay bills or salaries. Last year, several state governments got financial help from the central bank and Debt Management Office, to clear a backlog of unpaid salaries and other expenses after their combined debts climbed to around 658 billion naira . In April nearly two-thirds of states struggled to pay salaries despite a federal bailout, the government said. It then allowed them to defer loan deductions of 10.9 billion naira for March so that they will have funds to cover salaries .

Not The Onion: Morocco Bans Sharing Newspapers To Protect Publisher Business Models It's no surprise that traditional newspaper publishing is a struggling business. That's been the case for a long time, leading to a variety of silly proposals to try to prop up their failing businesses. There's been talk of changing copyright law to ban linking to or paraphrasing newspaper articles online. There's been a lot of focus on somehow harming search engines, as if they're the problem that newspapers face. There have been proposals to create a special version of the hot news doctrine to stop search engines from linking to stories. And, of course, over in the EU there's been a years-long push to "tax" links, which was so broad in Spain that Google News shut down in that country. That law, designed to protect newspapers, actually harmed them.  However, I don't think any proposal we've seen is crazier than what's happening in Morocco, where apparently newspaper publishers are lashing out at anything they can think to blame in response to decreasing revenue -- including people in cafes sharing newspapers with others. And thus, a compliant government has now banned the practice. No one's putting any spin on this other than "OMG, newspapers are making less money, and let's 'protect' them."

Global Money: A Work in Progress  - Yves Smith - Today global money is largely private credit money, the issue of a profit-seeking bank that promises ultimate payment in public money which is the issue of some state, quite possibly a different state from the one where the bank is chartered and does its business.  Global money is also largely dollar-denominated, even when the ultimate users of that money lie completely outside the United States.  The issue of dollar-denominated US Treasury bonds is just part of the huge stock of dollar assets and liabilities; the stuff of dollar hegemony is the private credit money dollar, not the issue of the state. Although global money is substantially private credit money, the fact that it is denominated in dollars means that the Fed is de facto, if not de jure, the ultimate lender of last resort for global money.  Therein lies the rub.  De facto the Fed’s responsibility is global but de jure its authority is only local.  The Fed is essentially hybrid, both government bank and banker’s bank, and also both US central bank and global central bank. The great challenge of the present time is the politics of managing the hybrid reality of the global dollar system. In the normal course of business, banks meet their gross settlement obligations substantially through offset, and then meet any net deficit by borrowing from other banks in global money markets.  Normally this settlement process functions noiselessly and without intervention by any public authority.  But breakdown or dysfunction in interbank money markets, as occurred between 2007 and 2009, send net deficit banks to their own individual national central banks as backstop.  In 2008, these national central banks revived a network of borrowing arrangements, so-called liquidity swaps, to acquire needed means of ultimate global payment for their client banks.  It is the network of central bank liquidity swaps, centered on the Fed but functioning as a network, that today serves as global lender of last resort.

Global Safe Yields Continue Their Downward March -- So yields on Germany's 10-year government bonds have gone negative. Put differently, investors are now paying the German government to take and hold their funds for ten years!  Many are blaming this development on Brexit fears and the ECB's bond buying program. While this is a reasonable proximate explanation, the recent decline is part of a far bigger story: interest rates on safe assets across the world have been declining since 2008. This can be seen in the figure below. This downward march of safe yields is a consequence of the safe asset shortage problem. What we are seeing in Germany is just the latest manifestation of it. What the above figure should make clear is that this safe asset shortage problem has been going on outside of QE programs and before central banks started doing negative interest rates. So don't blame central banks for the low interest rates.1 This downward march of safe yields across the globe is a big deal. It indicates the global economy needs more safe assets and lower interest rates to clear. However, at some point, the effective lower bound (ELB) will kick in and prevent rates from going lower. When that happens something else will have to adjust--output--and there will be a global race to the ELB. In other words, be ready for more! If you think pension funds, banks, insurance companies are scrambling for yield now, you ain't seen nothing yet! More importantly, the Cabellero, Fahri, and Gourinchas analysis suggest a global growth slowdown is likely too.  So what are the solutions to the safe asset shortage problem? I will refer you again to the figure I used in my last safe asset post for the answers. My preferred solution is to try the 'shock and awe' approach to improve the economic outlook via a NGDP level target backstopped by Treasury.

Charting the lowest interest rates in 5,000 years, worst commodity returns in 80 years - Looking to dazzle friends and family at the next summer barbecue? Well, drop this little fact on them: global interest rates are at their lowest in 5,000 years. Not only that, you can tell the acquaintance who brags about his gold bars in the bank vault that returns on commodities are the worst since 1933. Sounds crazy you may say, but that’s just the kind of history Bank of America Merrill Lynch rolled out in the third edition of “Longest Pictures” note. The assembly of more than 100 charts illustrates the long-term history of returns, volatility, valuation and ownership of financial assets. Pushing aside the mindblowers listed above, they also found corporate bond returns have never been higher going all the way back to 1915. The first chart shows the lowest global interest rates going all the way back to 3,000 B.C. Michael Hartnett, chief investment strategist, and his team at Bank of America Merrill Lynch, say that’s down to a combination of quantitative easing, zero interest-rate policies and negative interest-rate policies. That means borrowing costs are lower than what was on offer at the time of the Pharaohs of the First Dynasty of Egypt (3,000 B.C.) to Napoleon through to Alexander Hamilton and right up to those living through the crash of 1929: The same chart made the rounds last summer courtesy of Hartnett’s team, but remains relevant as investors stare at a growing pool of subzero bond yields and continued ultralow interest rates. On Tuesday, the yield on Germany’s benchmark 10-year government bond jointed the negative-yield club. (more graphs)

Why This Time is Completely, Utterly, Totally Different...Like the Difference between a Hurricane and an Ice Age -- A destructive storm like a hurricane can do significant short term damage and leave long term issues to be resolved.  But when it is done and over, life generally returns to "normal".  However, what we are facing economically, financially, societally is not a storm but instead more akin to an ice age.  The changes taking place and culminating now have been millennium in the making and will be many decades more before some new "norm" is established.     I'm going to show that the combined OECD+China+Russia+Brazil (which make up 43% of the global population but consume 70% of all the oil) are in the midst of a demographic transition which will change everything...not like a temporary storm or hurricane but like a climate shifting ice age that will require massive change and realignment to sustain ourselves.  The long period of population growth, and specifically of the growth of the core 15-64yr/old population among these nations, which has driven economic activity for millennia and certainly since WWII has come to an end.  But not only come to an end but is about to start shrinking significantly.  The implications of a pie no longer growing but moving to outright shrinkage will change everything.To explain why this time truly is different (and why new, entirely different thinking & solutions are necessary), I'm going to use oil consumption as a proxy for general global consumption.  Oil consumption is broken down among four groups: 

  1. The wealthy 34 OECD members (membership HERE)
  2. China, Russia, Brazil
  3. India, Africa
  4. Rest of World

Outlined below are the groupings 2013 population (% of global total) vs. changing oil consumption.  The OECD nations with 17% of global population consume 50% of the oil.  China, Russia, Brazil combined are 24% of global population and consume 19% of the oil.  India and Africa are 33% of the population and consume 8% of the oil.  A growing India and Africa simply haven't the income, savings, access to or utilization of credit to allow their growth to offset the loss of the growth among the OECD, China, Russia, & Brazil.

The World Needs to Boost Infrastructure Spending, but Many Countries Are Cutting Back - The world needs to dramatically ramp up spending on infrastructure to keep up with economic growth, according to a new report from the McKinsey Global Institute. But many major economies are going in the other direction. Researchers estimate the world needs to increase investment by about 0.4% of global output between now and 2030 to meet the increasing demand to move people and goods. That translates into an additional $350 billion of annual spending. The report includes spending on transportation, power, water and telecommunications infrastructure. That’s a daunting gap to fill, particularly at a time when the world’s major economies appear to be in retreat. Many developed country members of the group of 20 largest economies are cutting back infrastructure spending after boosting it in the aftermath of the recession. All this comes despite frequent and urgent calls from international gatherings of finance officials for more infrastructure spending to jolt economic growth and invigorate productivity. The U.S., for instance, spent 3.2% of gross domestic product on public infrastructure in 2014, down from 4.2% in 2009. The eurozone spent 2.7% in 2014, down from 3.6% and the U.K.’s investment fell from 3.4% to 2.7% during that period.

Argentina's Former Public Works Secretary Caught Burying $8.5 Million -- Back in April, an Argentine prosecutor requested that former President Cristina Fernandez de Kirchner be investigated in a wide-ranging money laundering probe that allegedly involved a prominent government contractor and associate.   However, things started to get a bit dicey for Kirchner when a prominent businessman named Lazaro Baez was arrested. Baez was the owner of leading construction firms and partner of hotel and property businesses with Kirchner and her late husband the WSJ reported at the time. In a further tangled web of potential corruption, an imprisoned former associate of Baez named Leonardo Farina implicated Kirchner, her late husband, and Baez as part of a plea bargain. According to reports, Farina testified to the laundering of hundreds of millions of dollars out of Argentina through offshore companies in Panama, Belize and the Seychelles to a Swiss bank.Prosecutors allege that Baez, who set up his construction company just days before Kirchner took office in 2003 and has made millions through public projects, was the one who transferred the money abroad through an intricate network of shell companies. The Judge in the case labeled Baez a flight risk and a "suspect in a conspiracy to launder $5.1 million using bags filled with cash." We provide the background above because it brings us to more recent news. On Tuesday, the former public works secretary under Kirchner, Jose Lopez, was arrested after he was caught burying bags containing an estimated $8.5 million in cash in the grounds of a convent near Buenos Aires.Police were tipped off by a neighbor who saw Lopez taking bags out of his car in the middle of the night. Lopez, who currently serves as a lawmaker in the Mercosur parliament, was found with an assault rifle and six bags containing dollars, euros, yen, and Qatari riyal Bloomberg reports.

Cyprus Officials in Stealth Talks with Victoria Nuland on Turkish Troop Plan -- Cyprus President Nicos Anastasiades is holding secret negotiations this week with Victoria Nuland (lead image, right), the US State Department official in charge of Turkey, Ukraine and Russia, on a plan to maintain Turkish military forces in Cyprus under the flag of the North Atlantic Treaty Organization (NATO).  Anastasiades has sent his aide, Nicos Christodoulides (lead image, left), to negotiate in Washington; he met with Nuland on Monday.  After losing control of the Cyprus Parliament to an increasingly nationalist vote in an election on May 22, Anastasiades has remained behind at the presidential palace in Nicosia, where he met on Tuesday with the NATO official now conducting Cyprus negotiations for the United Nations, Espen Barth Eide. The Cyprus Foreign Minister, Ioannis Kasoulides, is due to met US Secretary of State John Kerry, on June 13.  So sensitive is the US-Turkish plan for Cyprus that American reporters for Associated Press and Reuters at the State Department have refused to ask Nuland about the talks. Gayane Chichakyan, a Washington-based reporter for the Russian government television company Russia Today (RT), has also refused to lift the news blackout. Greek and Cyprus media have been reporting details of the Nuland plan after they details were leaked from proposals circulated by Turkish and US diplomats. The Nuland plan calls for the government in Ankara to withdraw some of the Turkish forces which have been occupying the north of the island since they invaded in 1974. Fresh Turkish troops and arms would then be redeployed in a NATO base to be opened in the area.

NATO Begins Encirclement Of Russia -- Via German Economic News, translated by Eric Zuesse - NATO prepares a veritable military buildup in Eastern Europe: German soldiers are operating in Lithuania, the British take over Estonia, and US soldiers move in to protect Latvia. The Canadians will be in Poland. Also in the Mediterranean, combat units are being increased. Russia perceives the activity as a threat, but hasn’t yet announced any countermeasures. At the NATO summit during July 8th-9th in Warsaw, the Alliance will adopt a massive military presence along Russia’s border. Russia is classified by NATO as a threat. NATO Secretary General Jens Stoltenberg recently said in Washington that the US and the EU have the right in the form of NATO to defend its territories on foreign soil. Critics of this strategy believe that it’s possible this upgrade will increase significantly the danger of a conflict between the superpowers. Wednesday in Brussels, the defense ministers want the military alliance to take decisions which will then be sealed by the leaders in Poland. NATO wants to strengthen its military presence on its eastern borders significantly, and to position foreign combat troops battalions in Poland and the three Baltic states. Germany is the core of the Association in Lithuania, the British in Estonia, and the United States is expected to be that in Latvia. What remains unclear, however, is who will be sending troops to Poland.Maybe Canada will take on this task, it was last reported from Polish diplomatic sources as quoted by Reuters. “’The summit in Warsaw will be President Obama’s last (NATO summit) and the U.S. wants it to be a success. It will ensure that the fourth framework country is found, possibly by leaning on Canada,’ the source said. ‘Washington will bend over backwards here.’” Germany wants to send at least 600 soldiers to Lithuania, which will constitute the core of the local battalion there with about 1,200 soldiers.

NATO orders four additional battalions to Russian border - The North Atlantic Treaty Organization (NATO) is sending 4,000 additional troops to Eastern Europe in the name of reassuring Poland and the Baltic states, the alliance’s Secretary General Jens Stoltenberg confirmed on Monday. “We will agree to deploy by rotation four robust multi-national battalions in the Baltic states and Poland,” Stoltenberg told NATO officials. The US, Germany and Britain will each contribute 1,000 soldiers, with Canada expected to confirm its own contingent of 1,000. The deployments are among the most provocative actions taken by the NATO high command in the course of its anti-Russian buildup, now well into its second year. With ever greater recklessness, the US and European ruling elites are sowing the seeds of war across the width and breadth of the Eurasian landmass. The announcement of new troop deployments comes in the midst of Operation Anaconda 2016, involving more than 30,000 NATO forces in the biggest war drill held in Poland since the end of the Second World War. Some 12,500 of the 30,000 soldiers are American. In Eastern Europe, under the guise of “rotational deployments,” NATO has established a permanent military force. Put forth for public consumption as a response to Russian “meddling” in Ukraine and alleged provocations by Russia’s military along the frontiers of NATO’s eastern member states, the real purpose of NATO’s spearhead force is to prepare for a ground invasion across Russia’s western border.

Germany's Schaeuble Warns Europe Needs More Refugees "To Prevent Inbreeding" -- German Finance Minister Schäuble is touted to replace Merkel, and as Martin Armstrong explains, like other politicians of his age, he too is just in a state of denial. Despite the fact that two-thirds of Germans are fed up with Merkel over the immigration issue, Schäuble is calling for more immigration into Europe. Otherwise, Europe will "degenerate into [an] inbred" continent. As Deutsche Wirthschaft reports (via Google Translate)... Federal Finance Minister Wolfgang Schäuble (CDU), Europe faces ever greater hurdles for migrants warned strongly... "The [border] closure is what would make [Europe] broken, which could degenerate us in inbreeding," he told the German weekly Die Zeit. In Germany deceive Muslims contribute to openness and diversity: "Look at times but the third generation of Turks, especially the women. That is nevertheless an enormous innovatory potential. " But above all, the cause of global flight and migration movements is not to raise the effort the innovative potential of Germany. The causes of migration are war, hunger, exploitation, land theft and ethnic cleansing. Would these reasons disappear, the majority of refugees would stay in their home - and perhaps the Europeans would have to search for their innovative potential have to go to other countries. Once a career politician has an idea in their head, they will defend it to the end. I suppose this is why they defend the refugees when they rape European girls. Meanwhile, the United States has issued a travel advisory for all Americans to warn them about traveling to Europe this summer.

Emotional toll of reporting the refugee crisis surprises news organisations - The harrowing reports from the frontline of the refugee crisis, beamed on to our TVs and printed by newspapers, have had a strong emotional impact on many people safe at home. Yet the organisations covering the crisis have been surprised by the emotional toll it has taken on reporters trying to tell the story. Counterintuitively, the very fact journalists are reporting from a position of safety about people in such dire situations is making it more difficult for even hard-bitten war reporters to cope with. “For the combat veterans, I think some of them are particularly hard hit. There’s this feeling when you’re covering this kind of story in a war zone, you’re experiencing some of the same dangers as people around you,” says Phil Chetwynd, global editor-in-chief for Agence France-Presse. “The thing people have found very hard is that there is no danger to you at all, yet you’re watching boats being overturned and people drowning.” BBC diplomatic correspondent Caroline Hawley, who has covered the Middle East extensively, returned recently from the Greek island of Lesbos, where she sensed the disconnect troubling some of her colleagues. “You’re prepared if you go into a conflict zone, you take your flak jacket with you … When you go to a war zone, you really put up the psychological barriers.” War zones necessitate a certain type of mindset and a certain type of preparation. But the scale and proximity of the refugee crisis allowed organisations like the BBC to send a mixture of people, from veteran correspondents to those new to foreign deployments. “Because you have this huge range and mix of people it is impossible to identify the kind of risks that you might come up against, the kind of trauma you might experience, because if you’re dealing with a war zone, you kind of know what you’re dealing with but this was unprecedented,”

More Collateral Damage From Negative Interest Rates  -- Bankers in the Eurozone’s core nations, in particular Germany, are fast losing patience with the European Central Bank’s rampant forays into the markets and with its ambitions to drive interest rates deeper into the negative. That now includes Germany’s two largest banks, Deutsche Bank and Commerzbank, that are in a coordinated manner and apparently with the backing of the government counterattacking the ECB for its destructive policies. But it’s one thing for bankers and politicians in one of Europe’s most financially conservative nations to express dismay; it’s quite another when the supposed biggest beneficiaries of ECB policy begin complaining. This is precisely what is happening in the Eurozone’s fourth largest economy, Spain. In the latest edition of the Bank of Spain’s Economic Bulletin, the governor of the Bank of Spain, Luis María Linde, cautioned about one of the primary effects of the ECB’s monetary medicine on Spanish households: the growing dependence of Spanish household wealth on the performance of Spain’s stock market. While Linde describes this trend as a “side-effect” of ECB policy, the reality is that pushing savers into riskier investments — in particular, into stocks — was always one of the overarching goals of central banks’ financial repression. With interest rates in the Eurozone at their lowest point in history and yields of even some corporate bonds below zero, yield-seeking savers feel they have little choice but to invest their money in riskier assets. Spanish households currently own 26% of all listed shares, according to data from the Spanish stock exchange, or BME. It is the highest level in 12 years and double the EU average. In other words, ECB policy is working a treat in Spain. The problem is that the Madrid Stock Exchange General Index (MADX) is not exactly firing on all cylinders, despite all the increased demand among retail investors. In fact, it’s down 14% so far this year and according to the Bank of Spain’s forecasts, is likely to lose a further 6% over the remainder of the year. If the forecast rings true, it will be only the third year on record that the MADX has suffered a contraction of more than 20%, following a 23% slide in 2002 and a 40% collapse in 2008.

Negative rates - if we just understood them we'd take the medicine - It is sometimes easy to treat economic policy in the abstract and overlook its human cost. Or make claims involving the Greater Good. Such claims always merit close scrutiny. This Bloomberg piece by Narayana Kocherlakota, former president of the Federal Reserve Bank of Minneapolis touched that nerve. Negative rates provide as many questions as answers. But some things are clear. "Almost" retirees looking at annuity rates are major losers. As are serial savers, poor fools. Thrift is not cool, Aesop. We know these things but they do not (or no longer) shock majority swathes of our ranks. Those that it does understand Bernie, Nigel, Marine, Pablo, Heinz-Christian and Donald. So we are to pay banks to guard our savings. And be paid to borrow - which, by the way, is already the case for some mortgagees in Sweden and Denmark. House prices love it. Small Scandinavian children, bewildered, are asking "You mean the bank pays us to spend their money, Daddy?" Yes, my child. Well, not "their" money. But that's another story ("Cinderella can't figure out how to debase the krone").  Banks, whatever one thinks of them, are not universally looking like they want to play along and "understand and fully support" Mr. Kocherlakota's message. Here's a report that Commerzbank is considering simply hoarding the cash - rather than lending it - to get away from ECB negative rates. Does it imply cultural changes to spending behaviour? Clearly.  But mostly it exasperates and lends fodder to either edge of the political spectrum. Policy is pursued, essentially, through currency manipulation. Unfortunately, the current ZIRP / NIRP novelty of this path presents insurmountable obstacles to widespread capital stock formation and investment. Encouraging that, once upon a time, was how serious policy sought to improve productivity and create growth.

German 10-Year Government Bond Yields Dip Below Zero for First Time - WSJ: Yields on the 10-year government debt of Germany dipped below zero on Tuesday for the first time on record, in a dramatic sign of the outsize effect of central-bank policy and investors’ search for safe havens. The yield on the bund fell to minus 0.001% when European markets opened, from 0.02% at the close on Monday according to data from Tradeweb. The 10 year yield fell as low as -0.03% in morning trading. Government-bond yields have been falling for the past year across the developed world as investors look for safety and central banks push interest rates close to zero and into negative territory. The European Central Bank has contributed to the fall in bund yields through its massive bond-buying program, aimed at lowering financing costs across the eurozone. On Tuesday, concerns that the U.K. will vote to leave the European Union after a referendum next week added to the mix, pushing investors further into safe assets such as the bund. Opinion polls are increasingly pointing to a so-called Brexit on June 23, spurring worries about a stretch of uncertainty that could hurt the global economy. “There’s been a flight to quality as a result of political risk—the U.K. referendum is coming, followed by Spanish elections three days later,” said Justin Knight, head of European rates strategy at UBS. Spain goes to the polls on the June 26 in an election that could extend political deadlock in the country.

German 10-year sovereign bond yields turn negative for first time: The yield on the 10-year benchmark German bund fell into negative territory for the first time ever on Tuesday morning, amid global growth concerns and jitters over the U.K.'s upcoming referendum on its European Union membership. At around 8.30 a.m. London time, the yield hit zero and briefly fell into negative territory as investors continued to flock to safe-haven assets. Bond prices and yields move in opposite directions and a negative yield implies that investors are effectively paying the German government for the privilege of parking their cash. By the end of the European trading day, the yield was still just in negative territory at -0.0020 percent. A spokesperson for the German Federal Debt Agency spoke immediately after the milestone was reached, stating that the tradability of federal securities is "still very high." "The federal debt-management strategy is long-term, therefore, the current absolute yield level plays only a subordinate role. Our target remains a sustainable balance between cost and planning security for the debt portfolio," the agency said in an email to CNBC. The move comes as the European Central Bank has ramped up its bond buying program in recent months as well as investor uncertainty over whether the U.K. will stay in the European Union. The latter is sparking volatility across financial markets with a beneficiary of the tumult being government bonds. The latest trigger has been two new polls out of the U.K. which showed the Brexit camp is gaining momentum.

Are German Bonds Riding a Bubble? - With yields on 10-year German bonds now negative for the first time in recorded history, the natural question is how long this rally can be sustained.A look at money markets suggests it might not be as easy as it seems.The price of the sovereign debt—which moves opposite to yields—of nations perceived as havens has surged since the U.S. issued a gloomy jobs report this month, which made investors jittery about global prospects. Analysts also say fears of the U.K. voting to leave the European Union on June 23 have added urgency to the search for safe financial assets.However, a key driver of sovereign bond yields is always where investors expect the central bank to set interest rates in the future. This is because investors can choose between rolling over safe cash every day in money markets or locking up their money for longer in safe government bonds.But investors don’t seem to have changed their perception of where the European Central Bank will take interest rates in the future, suggesting the desire for safety is the primary reason driving yields on German bonds, or bunds, to plummet. At the same time, it means the gulf between investing in bunds or doing the same in money markets has been widening. This can be gauged by looking at the spread between the rate paid in money markets and how much bunds return once investors have stripped off the interest-rate risk from them, which is done through derivatives called asset swaps.

France Is The Only Country To Have Positive 10 Year REAL Sovereign Yield (Among Germany, France, USA and Japan) - France is a winner in the global demolition derby for negative real sovereign yields. Among leading economies, Germany, France, USA and Japan, all the others have negative 10 year sovereign yields. Bear in mind that the real 10 year sovereign yield is defined as the current nominal yield less core CPI. Of course, inflation is low in each of these countries. The flip side to low inflation and low sovereign yields are Venezuela and Brazil, both with high inflation and high 10 year sovereign yields. Of course, Canada and the US have the lowest 10 year sovereign yields. But Chile’s 10 year sovereign yield (denominated in US dollars) is only 100 basis points higher than the US 10 year yield. Brazil if having all sorts of problems, especially with Golden State Warriors phenom guard Steph Curry withdrawing from the upcoming Olympic games in Brazil Not a lot to cheer about in Brazil or Venezuela. But plenty to cheer about in Chile!!

Did negative rates in Europe trigger massive cash hoarding?: For a long time, economists believed that negative interest rates – charging savers to keep money in the bank instead of paying them interest – were close to impossible. If confronted with negative rates, people and institutions would hoard currency, economists reasoned. After all, earning zero interest on $500 in currency is better than paying a fee to keep $500 in the bank. Recently, however, central banks in Denmark, Sweden, Switzerland, the euro zone and Japan cut their rates below zero, testing those long-standing beliefs. ... A a quarter of the world’s economy is now experiencing negative interest rates as central banks seek to spur economic growth.According to the available evidence, it doesn’t appear that cash hoarding is a problem right now in the economies with negative interest rates. ... The most obvious reason that households haven’t begun to hoard cash is that, in most countries, negative rates haven’t affected most ordinary customers—just the banks themselves. That’s in part because of the way central banks have structured negative rates and in part because of business decisions that banks have made to shield their retail customers. Another reason is that rates are only slightly negative... That may not be enough to justify the costs involved in storing large amounts of cash – buying safes, arranging insurance and so on.Economists agree that the longer negative rates are maintained (or the longer people believe they will be maintained), and the more negative the rates go, the more likely banks are to charge small depositors a negative rate and the more likely banks and their customers are to switch to holding cash. ... If more banks follow suit and customers begin to feel the impact of negative rates, the evidence may tell a different story.

Switzerland withdraws longstanding application to join EU - The upper house of the Swiss parliament on Wednesday voted to invalidate its 1992 application to join the European Union, backing an earlier decision by the lower house. The vote comes just a week before Britain decides whether to leave the EU in a referendum. Twenty-seven members of the upper house, the Council of States, voted to cancel Switzerland’s longstanding EU application, versus just 13 senators against. Two abstained.  In the aftermath of the vote, Switzerland will give formal notice to the EU to consider its application withdrawn, the country’s foreign minister, Didier Burkhalter, was quoted as saying by Neue Zürcher Zeitung. The original motion was introduced by the conservative Swiss People’s Party MP, Lukas Reimann. It had already received overwhelming support from legislators in the lower house of parliament in March, with 126 National Council deputies voting in favor, and 46 against.  Thomas Minder, counsellor for the state of Schaffhausen and an active promoter of the concept of “Swissness,” said he was eager to “close the topic fast and painlessly” as only “a few lunatics” may want to join the EU now, he told the newspaper.

IMF, Germany to legalize Slavery in Greece with “single minimum wage system” They never run out of ideas. Did you know, there is a “single minimum wage system” foreseeing that an employee receives the same wage in the entire working life? I didn’t. But the International Monetary Fund did. Or it may have neoliberally invented it. IAccording to this system, employees in the private sector will receive the same “net salary” (without allowances and increases) during the entire working life, i.e. during entrance to labor market and exit for retirement. According to this logic, the employee will receive a basic salary -maybe in the level of the “minimum wage” all though his working life! This system that crashes hard-earned labor rights and make a living impossible is part of the long list of creditors’ demands to Greece that have to be fulfilled for the second Program Review in October. What if the IMF has not decided yet if it will participate in the program or not. It has a counseling role, the labor reforms clearly bear the signature and the mentality of the IMF austerity and “competitiveness” concept and some of the ‘reforms’ have been already voted by the New Democracy-PASOK government in 2013! But the upcoming law has also hinds towards Germany and Berlin.In the sense of creditors and the IMF, Labor Reforms mean wages decreases, abolishing of allowance and collective bargain agreements.  Abolishing the 13th and 14th salary (Christmas, Easter and Vacation bonus) Further decrease of the minimum wage as of 1.1.2017 – currently minimum wage is €586 gross/month and €510 for those below 25. Until 2011, it was 200 euro more. Abolishing all increments and bonuses: a fixed minimum wage with no other increase except the regular increase due to working experience (such increases normally occur every 3 years). Now the lenders wants to scarp all increases due to working experience.

Greece gets the nod for next tranche of bailout cash -- Greece has fulfilled all the necessary measures to receive a new slice of bailout money from its international creditors. The progress was announced following a meeting of the board of governors of the European Stability Mechanism in Luxembourg.  Pierre Moscovici the European Commissioner for Economic and Financial Affairs made the announcement:“Huge progress has been achieved. And this is why I’m so happy that we could, a few minutes ago, decide in the board of governors of the ESM the disbursement of 7.5 billion euros for Greece. And I think this will really bring oxygen to the Greek economy. That’s what we expect, that’s what we want”.  Marking successful end of the 1st review of Greece’s ESM programme w/ Euclid Tsakalotos. A good moment for #Greece — Pierre Moscovici (@pierremoscovici) June 16, 2016 The decision on the transfer of funds to Greece will be made by the Board of Directors of the European Stability Mechanism on Friday ahead of the ECOFIN Council.

Spain's public debt surpasses 100% in 20-year high | Bangkok Post: news: Spain's public debt rose above 100 percent in the first quarter to its highest level in 20 years, the central bank said Wednesday as Madrid faces an EU sanctions threat for public overspending.  Debt as a proportion of economic output hit 100.5 percent in the first quarter up from 99.2 percent at the end of 2015, the bank said in a statement. It had already surpassed the symbolic 100-percent mark in the first quarter of 2015, when it hit 100.2 percent. Spain's public debt stood at 1.09 trillion euros ($1.23 trillion) at the end of March. The debt, as well as Spain's public deficit, are contentious issues as general elections approach at the end of the month, particularly after acting Prime Minister Mariano Rajoy promised tax cuts. His conservative government has promised to bring the public debt down to 99.1 percent of economic output by the end of 2016 and reduce the public deficit to 3.6 percent. Despite the return to growth Spain's public deficit came in at 5.0 percent of gross domestic product (GDP) last year, far higher than the target of 4.2 percent Madrid agreed with Brussels. The European Union has set a public deficit limit of 3.0 percent of GDP and debt limit of 60 percent of economic output.

The Pain in Spain Is Easy To Explain - A few weeks back, the New York Times looked at the “mystery” of Spain’s high level of unemployment. The article highlighted a real debate about the right level of job protection in Spain, and in Europe. But the headline obviously stuck in my mind. I do not think there should be any significant debate over why Spain continues to have a very high level of unemployment. Look at employment. It is down well over over 10 percent from its pre-crisis levels. Even with the current recovery, there are over 2.5 million fewer people at work in Spain today than in 2007 (18 million versus 20.7 million workers over age 15 using the harmonized EU data; the national data has a similar change but a slightly higher level). And domestic demand is also down well over 10 percentage points.  No mystery.* If demand in the United States was 10 percent below its 2007 level, rather than roughly 10 percent above its 2007 level, I would certainly hope that there would not be much of a debate on the source of a weak labor market.  And—unless the stories European policy makers tell themselves are off—Spain’s labor market institutions should work better today than they did prior to the crisis. It is thus hard to see changes in labor laws since 2005 can explain why there are fewer people working now than in 2005. That gets at the critical issue. The kind of structural reforms that facilitate an internal devaluation have an ambiguous impact on employment, especially in the short-run—a point now recognized by the IMF. Lower wages increase competitiveness, and support exports. But lower wages also mean less demand throughout the economy.

Why the far right is on the rise -- Before long a domino is going to fall: a far-right candidate failed to become president of Austria by just 30,000 votes. The day before that election, the president of the European Commission, Jean-Claude Juncker, warned: “There’s no debate or dialogue possible with the far right” (1). But what better gift could there be for the far right, which boasts of being outside the system, than that type of admonishment from the former prime minister of the tax haven of Luxembourg, who became EC president through horse-trading between the right and the socialists? In Austria, the right and the socialists governed together for 39 of the past 69 years, and were swept away in the first round of the presidential election… Juncker, who has an opinion on everything, also pronounced on the planned El Khomri law (amending Frances labour laws, in a neoliberal direction), which the majority of French people hate: “The labour law reform, desired and imposed by the Valls government, is the minimum that needs to be done.” The minimum, that is, compared to “reforms such as those that were imposed on Greece.”  Eurogroup president Jeroen Dijsselbloem recently admitted that he didn’t entirely grasp the meaning of the structural deficit, which no state is supposed to exceed: “As an indicator, it is hard to predict, hard to manage and hard to explain. One of my frustrations is that it goes up and down without me really knowing why” (2). Yet the European institutions punish Greece because of such opaque statistics. They have imposed on it a vote on a budget bill 7,000 pages long, three large rises in value added tax, the cut-price privatisation of airports, an increase in the retirement age to 67, higher health insurance costs and the end of protection for small property owners who cannot repay their loans. Greece has just received in return a loan mainly intended to allow it to pay back the interest on its external debt. The IMF has conceded that that debt is “unsustainable”, but Germany refuses to allow it to be cut

Flat-pack policies: new Podemos manifesto in style of Ikea catalogue  -- In a rare touch of humour in the dour world of Spanish politics, the anti-austerity party Podemos has published its manifesto in the style of the Ikea catalogue.  As in the Swedish furniture catalogue, the manifesto is organised on a room-by-room basis, with candidates pictured at home in the kitchen, on the sofa, in the garden or working at their desks looking homely and approachable.  The party leader, Pablo Iglesias, is featured looking pensive on his balcony, working at a table in a sparsely furnished room and watering a solitary ivy plant. His second-in-command, Íñigo Errejón, is pictured busy with documents and relaxing with a book. Where possible, the photos correspond with policies. So the policy on social land use is illustrated by party organiser, Pablo Echenique, sitting among pot plants on his terrace. Other party members are depicted feeding their fish, hanging out washing, making the bed and brushing their teeth. The photographs serve as a reminder of how young Podemos members are. There is little evidence of either children or grey hair. The party chose the format because “we want it be the most-read manifesto ever produced” said Podemos co-founder Carolina Bescansa at its launch. The manifesto, which includes a detailed breakdown of policies at the end, is available in paper form for €1.80 (£1.40) including postage.

Time to fly my Neoliberal Freak Flag again! - Brad DeLong - I see this very differently than the extremely-sharp leader of the Seventh Social-Democratic International Dani Rodrik does. The Greek and the Spanish electorates vote loudly that they want to stay in the EU and even in the Eurozone at all costs, rather than threaten to exercise their exit option. The German electorate votes loudly that they want fiscal austerity at all costs. Thus the policies are a result of those--democratic--decisions. The problem is not that Europe has too little democracy. The problem is that it has the wrong kind. Issues of fiscal stance are technocratic issues of economic governance. The task is to balance aggregate demand with potential output--to make the demand for safe, liquid, stores of value at full employment equal to the supply of such assets provided by governments with the exorbitant privilege of issuing reserve currencies and whatever other actors (if any) maintain credibility as safe borrowers. These are not properly what Angela Merkel and company have turned them into: things for the Germany electorate to vote on as it participates in what Dani Rodrik rightly calls a morality play about prudence and fecklessness. The monetary issue of whether to stay in the Eurozone or to pursue adjustment-through-depreciation is also a technocratic issue. It is an issue of proper economic governance in order to maximize speed and minimize the pain of structural adjustment. It is not properly what it has become: a thing for the Greek and Spanish electorates to vote on in a different morality play, one of whether the Mediterranean is or is not a full part of "Europe".

French President Threatens to Outlaw Protests Against Labor Reforms naked capitalism by Yves Smith - The US news has been so dominated by the Orlando shooting, the Jo Cox murder and Brexit vote, and the jousting of the US presidential election, that it’s hard to keep tabs on other important stories. This Real News Network segment gives the latest developments on the labor protests in France. (video & transcript)

Farage Threatens To "Destroy The Old EU" As Marc Faber Says Brexit "Best Thing In British History" - The European Union is an "empire that is hugely bureaucratic," warns Marc Faber, telling CNBC that he thinks that "a Brexit would be bullish for global economic growth," because "it would give other countries incentive to leave the badly organized EU." The Gloom, Boom & Doom-er explained that Brexit is a risk Britain should be willing to take, and that it would not be a disaster, "on the contrary, it would be the best thing for Britain that would ever happen!" As CNBC reports, Faber defended his case by citing Switzerland, which is not a member of the EU nor the European Economic Area, but instead operates in the "single" market. That enables the Swiss to have rights in the U.K., but theoretically allows them to operate independently of both groups."Switzerland is doing much better than any other country in Europe. So maybe Britain would do the same?" said Faber. While the Swiss franc has been relatively flat in the last month, notable highlights for Switzerland include the completion of a $12 billion rail tunnel, the longest in the world. With expectations that Britain opts to leave the EU, Faber advised that investors should prepare for a market sell-off in the immediate aftermath, but that there will be long-term benefits. "The establishment has said that if a Brexit occurs, they lose the export market. That's not true. They can make bilateral agreements," he exclaimed. Faber advised that European nations should turn their focus to Asia, notably China and India, when it comes to finding fresh export partners. With this in mind, he concluded that Brexit would be a positive development for Britain and for Europe at large

EU referendum: British public wrong about nearly everything, survey shows - The British public have it wrong on immigrants and wrong on the EU. According to their research by Ipsos MORI, British people think far more EU citizens live in the UK than actually do, that we pay far more money to the EU budget than is the case, and that we significantly overestimate the amount of benefits paid to EU migrants. In a survey of 1,000 people, weighted to represent the nation’s demographic profile in terms of age, gender, ethnicity and other factors, respondents claimed that, on average, 15 per cent of the UK population are EU immigrants. That would be 10.5m people. The correct figure is 3.5m. Those who intend to vote Leave in the referendum put the figure at 20 per cent. ‘Remainers’ put the figure at 10 per cent.One in seven people (15 per cent) believe ‘at least one Euro-myth’, including bans on barmaids showing too much cleavage, and the forcible renaming of Bombay Mix to Mumbai mix. Neither are real. 24 per cent of people believe overly bendy bananas are banned from import to the UK under EU law. (‘Malformed bananas’ are banned from export under an EU regulation.) 84 per cent of people think the UK is in the top three contributors to the EU budget. 23 per cent think it is the single biggest. In fact the UK is in fourth place, behind Germany, which pays 21 per cent, France (16 per cent) and Italy (12 per cent). The UK pays 11 per cent. But the UK receives less money back than Germany, Italy, Spain and France, a fact not lost on 58 per cent of respondents

After hit to sterling, polls shows Britons divided over EU membership | Reuters: Two polls on Saturday showed voters were still closely divided over whether to end Britain's European Union membership, a day after another survey put the 'Leave' campaign 10 points ahead, underlining the contradictory polling less than two weeks before the referendum. The pound weakened by as much as 1.2 percent against the U.S. dollar immediately after an ORB poll for the Independent newspaper, showing a sharp swing toward a vote for Britain to exit the EU, was published on Friday evening. Betting odds on Brexit also shortened after the survey, conducted on June 8 and 9, putting the 'Leave' camp 10 points ahead of 'Remain,' the latest in a run of polls to show rising support for a British exit from the EU. But two surveys published on Saturday showed divergent results with one giving a two-point lead to supporters of Britain's EU membership and a second poll showing those in favor of Brexit were one point ahead. Britons will vote in a June 23 referendum on whether to leave the world's largest free trade area, a decision with far-reaching implications for politics, the economy and trade but contrasting polls have made it difficult to predict the outcome.

Why a Leave Vote May Not Result in a Brexit --  Yves Smith - The officialdom in England and in much of the rest of the advanced world is suddenly in alarm over the possibility of a Brexit. US Treasury yields sank last Friday as investors ran for cover, and the flight to safety continued today as a surge in the yen led to a 3% fall in the Nikkei.  The UK's elites had been confident that frequent, loud “Don’t Touch That Dial” warnings, with vivid descriptions of all of the horrors that would ensue, would herd voters into line well before the June 23 polling date. Instead, an online poll commissioned by the Independent showed the Leave campaign to be winning by a stunning 55% to 45%. That revelation coming on top of weak economic data from the US, put Mr. Market in a funk. The Financial Times’ “poll of polls” puts Leave in the lead by a smaller margin, 46% to 44%. Moreover, the sense is that with only 10 days to the decision date, the Leave campaign is gaining momentum. The Conservatives have realized that having a bunch of toffs, big banks, and intrusive foreign leaders tell British citizens how economically damaging a Brexit would be seems only to have persuaded voters at most that the people at the top of the food chain would take a hit. Voters seem to be in a bloody-minded enough mood to be willing to take a hit if they can inflict some pain on their putative leaders and take the banking classes down a notch or two. Another sentiment (and one that the elites appear to deny) is that voters are willing to pay an economic cost, even a large one, for more national sovereignity. So now Labor leaders have been moved to the front line of the sales campaign. But even the referendum next week results in “Leave” getting the most results, that does not mean a Brexit will necessarily happen. There are at least two ways that the will of the public could be thwarted.Peter Hitchens outlines one possibility, that Parliament refuses to honor the vote. From the Daily Mail: I think we are about to have the most serious constitutional crisis since the Abdication of King Edward VIII. I suppose we had better try to enjoy it. If – as I think we will – we vote to leave the EU on June 23, a democratically elected Parliament, which wants to stay, will confront a force as great as itself – a national vote, equally democratic, which wants to quit. Are we about to find out what actually happens when an irresistible force meets an immovable object?

While Young Britons Favor Staying in E.U., They Aren’t Big on Voting - The New York Times##: On June 23, tens of thousands of young Britons will be gathered at the Glastonbury music festival, whose headliners include Coldplay, Muse and Adele. Others will be avidly following the European Soccer Championship in France or biting their nails in anticipation of the next episode of hit teenage soap “Hollyoaks.”Oh, and there is the referendum that day asking them whether Britain should leave the European Union. Holding the attention of young voters — and getting them to turn out on June 23 — is one of the biggest challenges for both sides in the campaign over Britain’s place in Europe, especially for the advocates of remaining in the European Union. Polling suggests that younger people are more favorable to continued British membership in the bloc than are older voters, and in a close race could decide the outcome.The problem for the pro-European forces is that young people are historically less likely to vote. In this case, some analysts say, it could be particularly hard to motivate them, not just because many of them will be immersed in summer activities, but also because they are being asked to embrace the status quo rather than to take up an idealistic cause of change of the type that typically energizes young people.

Brexit vote is about the supremacy of Parliament and nothing else: Why I am voting to leave the EU:  Ambrose Evans-Pritchard -- With sadness and tortured by doubts, I will cast my vote as an ordinary citizen for withdrawal from the European Union. Let there be no illusion about the trauma of Brexit. Anybody who claims that Britain can lightly disengage after 43 years enmeshed in EU affairs is a charlatan or a dreamer, or has little contact with the realities of global finance and geopolitics. Stripped of distractions, it comes down to an elemental choice: whether to restore the full self-government of this nation, or to continue living under a higher supranational regime, ruled by a European Council that we do not elect in any meaningful sense, and that the British people can never remove, even when it persists in error. For some of us - and we do not take our cue from the Leave campaign - it has nothing to do with payments into the EU budget. Whatever the sum, it is economically trivial, worth unfettered access to a giant market. Today's EU is a deformed halfway house that nobody ever wanted We are deciding whether to be guided by a Commission with quasi-executive powers that operates more like the priesthood of the 13th Century papacy than a modern civil service; and whether to submit to a European Court of Justice (ECJ) that claims sweeping supremacy, with no right of appeal. It is whether you think the nation states of Europe are the only authentic fora of democracy, be it in this country, Sweden, the Netherlands, or France -

JPMorgan CIO Crushes Cameron's Scaremongery: Brexit "Hardly The Stuff Of Economic Calamity" -- First The Telegraph, then The Sun, and today The Spectator all came out on the "Leave" side of the Brexit debate. However, perhaps even more shocking to the establishment is the CIO of a major bank's asset management arm dismissing the apparent carnage that Cameron, Obama, and Osborne have declared imminent, warning that, "many articles on the Brexit vote overstate its risks and consequences." As JPM's Michael Cembalest adds, the reality is"hardly the stuff that economic calamity is made of." As The Spectator concludes, "the history of the last two centuries can be summed up in two words: democracy matters." As JPMorgan Asset Management CIO Michael Cembalest explains... My sense is that many articles on the Brexit vote overstate its risks and consequences for the UK, and/or overstate the vote’s impact on political movements and economic malaise in the Eurozone that predate it by months and years. Here are some thoughts on issues I have seen raised over the last few weeks.“UK growth will suffer a huge hit”. Of all the analyses I’ve read about a possible Brexit scenario, I found Open Europe’s report to be the most clear-headed and balanced. Their realistic case estimates the cumulative impact of Brexit on UK GDP at just -0.8% to 0.6% by the year 2030; hardly the stuff that economic calamity is made of.“UK-EU trade will collapse”. Not necessarily. Norway, Iceland and Switzerland have entered into agreements with the EU on trade and labor mobility (European Economic Area, European Free Trade Area). As shown below, these three non-EU countries export as much to the EU as its members do. Such agreements could serve as a template for post-Brexit trade between Britain and the EU, if both sides see it in their mutual self-interest.

This Week’s Brexit Briefing – At A Glance --With less than a week to go before the June 23 referendum on the U.K.’s membership of the European Union, the campaigningwas suspended following the killing of a Labour lawmaker Jo Cox. Until that tragic development, the debate was notable mainly for achieving peak ridiculousness and new heights of anxiety.  A flotilla of pro-Brexit boats helmed by U.K. Independence Party leader Nigel Farage floated up the Thames to London and was confronted by a pleasure cruiser manned by singer-songwriter Bob Geldof. In what James Mackintosh describes as a shift from denial to fear, the financial markets finally got alarmed as opinion polls showed a swing toward the Leave camp. There were more exchanges about the alleged bias of forecasts from the Bank of England and others showing a severe hit to the economy after an exit. And the Sun newspaper came out in favor of Leave.

IMF says EU exit 'largest near-term risk' to British economy - BBC News: A UK exit from the European Union could mean the UK misses out on up to 5.6% of GDP growth by 2019, the IMF has warned. Brexit is the "largest near-term risk" to the UK economy, the IMF said in its annual UK economic outlook. It added that the net economic effects would probably be "negative and substantial". But economists for the Brexit campaign said the consensus that a UK exit would be bad for the economy was "based on flawed EU-centric models". Meanwhile, Russian President Vladimir Putin has accused UK Prime Minister David Cameron of holding the referendum to "blackmail" and "scare" Europe, and France's economy minister says Britain would become as significant as Guernsey if it voted to leave.

Why Brexit Is Such a Threat to the New World Order - Pam Martens - If you think that a referendum vote on June 23 by UK citizens on whether to withdraw from the European Union (called Brexit, short for British Exit), is simply a proxy on whether the UK should dislodge itself from the edicts of Brussels, think again. It’s morphed into a much broader debate on whether citizens worldwide should surrender their right to a participatory democracy in order to further the interests of multinational corporations, secret trade agreements packed with secret court tribunals, global banking hegemony and central banks attempting to keep all these balls in the air for their one percent overlords. One particular central bank is sure to come under fire today. Members of the British Parliament have been warning Mark Carney, head of the Bank of England (BOE), to not engage in political lobbying on the issue of Brexit, which he is perceived to have been doing for months. Carney is already the subject of skepticism in the U.K. He’s a former Goldman Sachs executive, former Governor of the Bank of Canada and the first foreigner to run the BOE in its 300-year history. Carney appears to have spit in the eye of Parliament again today with the release of the BOE’s Monetary Policy Committee statement, which was filled with a litany of horrors on what could happen if the UK leaves the European Union. "On the evidence of the recent behaviour of the foreign exchange market, it appears increasingly likely that, were the UK to vote to leave the EU, sterling’s exchange rate would fall further, perhaps sharply. This would be consistent with changes to the fundamentals underpinning the exchange rate, including worsening terms of trade, lower productivity, and higher risk premia. In addition, UK short-term interest rates and measures of UK bank funding costs appear to have been materially influenced by opinion polls about the referendum.  These effects have also become evident in non-sterling assets: market contacts attribute much of the deterioration in global risk sentiment to increasing uncertainty ahead of the referendum. The outcome of the referendum continues to be the largest immediate risk facing UK financial markets, and possibly also global financial markets."

Brexit – The End of the Universe - Mathew D. Rose - The other morning I was astounded by an interview I heard in German state radio.  One of the moderator’s first questions was if it would not be better if Germany’s Finance Minister Wolfgang Schäuble, the EU Commission president Jean-Claude Juncker and Donald Tusk, the president of the European Council went to Britain to make the case for Remain in the upcoming referendum. This question reflects some very basic problems that are plaguing Europe’s elite and its obsequious media. The first is a specifically German one: Authority should not be questioned. In other words when such powerful figures as the German Finance Minister and the presidents of the European Commission and Council tell you to vote Remain, then there can be no doubt what you should do. Everyone is supposed to forget the recent records of these three politicians. Schäuble has pretty much single-handedly transformed Europe’s recession into a depression as well as reducing Greece to a perpetual humanitarian crisis. Juncker, as prime minister in Luxemburg, created a tax system there, which permitted large corporations to pay hardly any taxes on their European profits, to the detriment of the member states’ taxpayers. Instead of being jailed, he was made head of the EU Commission. Tusk rammed a neo-liberal EU policy down the throats of the Poles, resulting in them recently electing an anti-EU, ultra-conservative party with an absolute majority into government. That is the first time since the post-communist era that any party has obtained such a mandate. These are some rather impressive accomplishments. To make matters worse, Schäuble has employed his usual tactic of bullying to influence the British, making it perfectly clear that in the case of Brexit “In is in and out is out”. There will be no good will, no compromises. Do not think this is simply polemic. It is the same sort of thing he told the Greeks before he crushed them. Britain may not have the Euro, but a nation defying German hegemony by leaving the EU is a dangerous precedent and must be made an example of – see Greece. There is a large arsenal of economic weapons available to the Germans and they have no scruples about using them.

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