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

Saturday, June 4, 2016

week ending Jun 4

There Goes the Fed's Credibility -  Narayana Kocherlakota - Back in January 2012, the Federal Reserve promised to keep its preferred measure of inflation close to 2 percent over the longer run. More than three years later, that promise remains unfulfilled, casting doubt on the central bank's willingness to deliver.The latest reading for the measure, known as the price index for personal consumption expenditures, showed annual inflation running at only 1.1 percent in April. Excluding volatile food and energy prices, the inflation rate was 1.6 percent. Here's a chart showing how both have fallen well short of 2 percent for more than three years: Some would say that central banks are out of ammunition, that the Fed has thrown everything it has at the problem of sub-target inflation and failed to make progress. Actually, though, the Fed has been deliberately tightening monetary policy over the past three years. Just last week, Chair Janet Yellen made a point of saying that the Fed intends to keep raising interest rates in the coming months. To understand the Fed's motivations, consider this: Would it have started pulling back on stimulus in May 2013 if its short-term interest-rate target had been at 5 percent instead of near zero, and if it hadn’t been holding trillions of dollars in bonds? I strongly suspect that the Fed would instead have added stimulus by lowering interest rates. If so, then the Fed's current course is driven not by state of the economy, but by a desire to get interest rates and its balance sheet back to what is considered "normal." Savers, bankers and many politicians agree with this objective. They want "normal" -- meaning higher -- interest rates. The Fed, however, promised to focus on actual economic outcomes such as inflation, not on those voices. It can’t break that promise without undermining people’s faith in its willingness to keep promises in the future. This erosion of faith is visible in Treasury bond prices, which suggest that traders have been lowering their expectations of long-term inflation (specifically, annualized inflation for the five-year period starting five years from now):

Fed’s Evans Sees Case for Holding Rates Until Inflation Hits 2% -  The Federal Reserve should consider holding off on additional interest-rate increases until inflation rises to the U.S. central bank’s target, said Federal Reserve Bank of Chicago President Charles Evans. “In order to ensure confidence that the U.S. will get to 2 percent inflation, it may be best to hold off raising interest rates until core inflation is actually at 2 percent,” Evans said in remarks prepared for a speech Friday in London. “The downside inflation risks seem big -- losing credibility on the downside would make it all that more difficult to ever reach our inflation target. The upside risks on inflation seem smaller.” Evans, an influential participant on the rate-setting Federal Open Market Committee who doesn’t vote this year on policy, laid out a couple possible cases that will be debated at the panel’s June 14-15 meeting. He said that while “it may be appropriate” to increase the Fed’s benchmark rate twice this year, “any move toward more aggressive tightening” than that could bring back financial-market turmoil that hit the U.S. economy in the first three months of 2016. “I still judge that risk-management arguments continue to favor providing more accommodation than usual to deliver an extra boost to aggregate demand,” he said. “Such a boost would provide a buffer against possible future downside shocks that might otherwise drive us back to the effective lower bound.” The Chicago Fed chief said he doesn’t expect any additional improvement in core inflation, a measure that strips out volatile food and energy prices, in 2016. The Fed’s preferred gauge, based on the prices of personal consumption expenditures, was 1.6 percent in April, up from 1.4 percent at the end of last year.

Revisiting the Case for International Policy Coordination-- NY Fed - Prompted by the U.S. financial crisis and subsequent global recession, policymakers in advanced economies slashed interest rates dramatically, hitting the zero lower bound (ZLB), and then implemented unconventional policies such as large-scale asset purchases. In emerging economies, however, the policy response was more subdued since they were less affected by the financial crisis. As a result, capital flows from advanced to emerging economies increased markedly in response to widening interest rate differentials. Some emerging economies reacted by adopting measures to slow down capital inflows, acting under the presumption that these flows were harmful. This type of policy response has reignited the debate over how to moderate international spillovers.   Some early academic research suggested that the benefits of policy coordination tend to be small. This conclusion stems from traditional models of the global economy that often illustrate a world in which countries share the burden of macroeconomic shocks among themselves and do not face significant trade and current account imbalances. Without such imbalances, international spillovers become largely irrelevant. This scenario does not reflect the current global economic environment, which indicates that the benefits of policy coordination may now be more pronounced.

Fed's Beige Book: "Modest economic growth" in most Districts --Fed's Beige Book "Prepared at the Federal Reserve Bank of Minneapolis and based on information collected before May 23, 2016. "Information received from the 12 Federal Reserve Districts mostly described modest economic growth since the last Beige Book report. Economic activity in April through mid-May increased at a moderate pace in the San Francisco District, while modest growth was reported by Philadelphia, Cleveland, Atlanta, Chicago, St. Louis, and Minneapolis. Chicago noted that the pace of growth slowed, as did Kansas City. Dallas reported that economic activity grew marginally, while New York characterized activity as generally flat since the last report. Several Districts noted that contacts had generally optimistic outlooks, with firms expecting growth either to continue at its current pace or to increase.  And on real estate:  Construction and real estate activity generally expanded since the last report, and the overall outlook among contacts remained positive. Commercial construction activity increased in Philadelphia, Richmond, and Minneapolis. Strong project pipelines were reported in Cleveland, and some contractors in Atlanta noted one- to two-year backlogs. An uptick in industrial construction was cited in St. Louis, while activity was varied across markets in Boston. Residential construction increased in most Districts but was mixed in Richmond and Dallas, where some markets saw a decline in single-family construction. Commercial real estate activity increased in most Districts that reported. Absorption of space increased in Atlanta and Kansas City, while Dallas reported healthy demand for office space. A decline in vacancy rates and a rise in rents were noted in Chicago and Minneapolis. Contacts in San Francisco said demand for commercial real estate expanded further, particularly in urban areas with robust technology and health care industries.

June 2016 Beige Book: Reading Between The Lines - The Economy Might Have Improved A Little.: The consolidated economic report from the 12 Federal Reserve Districts (Beige Book) shows "modest economic growth since the last Beige Book report". The previous report said "continued to expand in late February and March, though the pace of growth varied across Districts". My interpretation is that the Fed is saying the rate of economic expansion has marginally improved since the last report - but it still is not something to write home about. Please see the end of this post for words the Federal Reserve uses when the economy is entering a recession. The Beige Book completely missed the 2001 recession, and was late in seeing the Great Recession. This report is based on information collected on or before 23 May 2016. The summary for this 01 June 2016 release reads as follows:Economic activity in April through mid-May increased at a moderate pace in the San Francisco District, while modest growth was reported by Philadelphia, Cleveland, Atlanta, Chicago, St. Louis, and Minneapolis. Chicago noted that the pace of growth slowed, as did Kansas City. Dallas reported that economic activity grew marginally, while New York characterized activity as generally flat since the last report. Several Districts noted that contacts had generally optimistic outlooks, with firms expecting growth either to continue at its current pace or to increase. Consumer spending was up modestly on balance in many Districts, though contacts in the Boston, Cleveland, Minneapolis, and Dallas Districts reported mixed or flat activity, and New York reported weakened sales. Many Districts reported modest growth in nonfinancial services. Manufacturing activity was mixed across Districts. Construction and real estate activity generally expanded since the last report, and the overall outlook among contacts in these industries remained positive. Overall loan demand was up moderately in all but one of the Districts that reported it, and many Districts reported steady to good credit availability. Crop conditions were promising in many Districts, but low commodity prices continued to put pressure on agricultural incomes. The energy sector remained weak. Employment grew modestly since the last report, but tight labor markets were widely noted; wages grew modestly, and price pressure grew slightly in most Districts.

2Q16 GDP Forecast: 2.5%; Down From 2.9% Earlier -- June 2, 2016  - GDP now, updated yesterday: The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 2.5 percent on June 1, down from 2.9 percent on May 31.  After this morning's construction spending release from the U.S. Census Bureau and this morning's Manufacturing ISM Report On Business from the Institute for Supply Management, the forecast for real residential investment growth decreased from 7.9 percent to 4.2 percent, the forecast for real nonresidential structures investment growth decreased from -2.8 percent to -6.5 percent, and the forecast for real government spending growth decreased from 1.2 percent to 0.4 percent. GDP will be updated again tomorrow. 

US Default Risk Hits 8-Month Highs -- While still relatively low, USA sovereign CDS spreads have risen to 8-month highs, surging off early March lows. The reasons are likely numerous though we suggest the 4 surges in the last 3 months appear to line up with notable 'events'...  While correlation does not imply causation, it does waggle its eyebrows suggestively and gesture furtively while mouthing "look over here." Note: Sovereign CDS represent a combination both default and devaluation risks. Could it be that Trump's honest comments on the creditworthiness of the USA are beginning to resonate with market participants as the probability of his winning in November rises?

The Defense Department is ruining America: Big budgets, militarization and the real story behind our Asia pivot -- You have to tip the cap to Defense Secretary Carter. People in Washington spin things as a matter of course, as Ben Rhodes, President Obama’s deputy national security advisor, just explained in that New York Times profile considered in this space a few weeks ago. The spin is the thing. But never mind all that. Ashton Carter spins aircraft carriers, and right before your eyes. There he was last month, a few weeks before Obama’s current swing through Asia, on the flight deck of the John C. Stennis as it passed through a narrow strait in the South China Sea hard by the People’s Republic’s territorial waters, pronouncing in the somber tones these people favor that China is militarizing the western Pacific. The Stennis, you need to know, is a nuclear-powered supercarrier that forward-deploys for indefinite periods with a strike group of escort vessels attending it. It travels with eight squadrons of attack craft on its deck—25 to 30 fighter jets. A week before this occasion Carter attended 10 days of joint military drills in the Philippines—the first time a Sec Def has done so in the decades these things have been held. A week after it, our Ash sent half a dozen A-10 Thunderbolts, heavily armed jets designed to support ground troops, to buzz the Scarborough Shoal, which is among the disputed land formations in the South China Sea over which Beijing and other Asian nations claim sovereignty. We will pay for our failures to pay attention to the world around us and our place in it, and do not say no one warned you. We are, indeed, already paying—a point to which I will return.

Pentagon: Special Ops Killing of Pregnant Afghan Women Was “Appropriate” Use of Force --An internal Defense Department investigation into one of the most notorious night raids conducted by special operations forces in Afghanistan — in which seven civilians were killed, including two pregnant women — determined that all the U.S. soldiers involved had followed the rules of engagement. As a result, the soldiers faced no disciplinary measures, according to hundreds of pages of Defense Department documents obtained by The Intercept through the Freedom of Information Act. In the aftermath of the raid, Adm. William McRaven, at the time the commander of the elite Joint Special Operations Command, took responsibility for the operation. The documents made no unredacted mention of JSOC. Although two children were shot during the raid and multiple witnesses and Afghan investigators alleged that U.S. soldiers dug bullets out of the body of at least one of the dead pregnant women, Defense Department investigators concluded that “the amount of force utilized was necessary, proportional and applied at appropriate time.” The investigation did acknowledge that “tactical mistakes” were made. The Defense Department’s conclusions bear a resemblance to U.S. Central Command’s findings in the aftermath of the horrifying attack on a Médecins Sans Frontières hospital in Kunduz, Afghanistan, last October in which 42 patients and medical workers were killed in a sustained barrage of strikes by an AC-130. The Pentagon has announced that no criminal charges will be brought against any members of the military for the Kunduz strike. CENTCOM’s Kunduz investigation concluded that “the incident resulted from a combination of unintentional human errors, process errors, and equipment failures.”

The Price of Perpetual War - The United States has entered an era of perpetual war. The U.S. military has been at war for 15 straight years with no end in sight, and President Obama will soon have the dubious distinction of being the only American president to have been at war for all eight years of a two-term presidency. The traditional logic of American wars — that the United States would mobilize, fight, win, and end its wars through overwhelming force of arms — no longer seems to apply. Today’s wars can be characterized more as conflicts in the gray zone, ambiguous battles with less-defined shapes and even less-clear outcomes. This increasingly blurred line between peace and war is posing a range of new challenges for the U.S. military, for elected officials, and for the nation as a whole. . Recent surveys show that more than 80 percent of Americans believe that ISIL and international terrorism are the biggest threat to the United States. While these worries may be overstated, they nevertheless drive policymakers to action. The United States has responded by deploying small teams of U.S. special operations forces to a range of countries — from Syria to Yemen to Libya to the Central African Republic — to help support local governments and their militaries in countering these malign actors.

Eric Holder now says Edward Snowden performed 'public service' (CNN) Former U.S. Attorney General Eric Holder says Edward Snowden performed a "public service" by triggering a debate over surveillance techniques, but still must pay a penalty for illegally leaking a trove of classified intelligence documents. "We can certainly argue about the way in which Snowden did what he did, but I think that he actually performed a public service by raising the debate that we engaged in and by the changes that we made," Holder told David Axelrod on "The Axe Files," a podcast produced by CNN and the University of Chicago Institute of Politics."Now I would say that doing what he did -- and the way he did it -- was inappropriate and illegal," Holder added. Holder said Snowden jeopardized America's security interests by leaking classified information while working as a contractor for the National Security Agency in 2013. "He harmed American interests," said Holder, who was at the helm of the Justice Department when Snowden leaked U.S. surveillance secrets. "I know there are ways in which certain of our agents were put at risk, relationships with other countries were harmed, our ability to keep the American people safe was compromised. There were all kinds of re-dos that had to be put in place as a result of what he did, and while those things were being done we were blind in certain really critical areas. So what he did was not without consequence."

Senate Panel Advances Whistleblower Reforms - A key Senate panel on the eve of the Memorial Day holiday approved a package of 19 government reform bills that includes a reauthorization of the Office of Special Counsel while imposing major changes. The reauthorization of OSC, the main governmentwide outlet for whistleblower complaints, would strengthen that agency’s access to documents, clarify what information agencies must provide to the OSC during investigations, require greater detail on performance in the agency’s annual report, and formalize an arrangement with an outside inspector general for OSC’s own employees to file complaints about prohibited personnel practices or retaliation. The bill (S. 2968), sponsored by Sens. Ron Johnson, R-Wis., and Chuck Grassley, R-Iowa, cleared the Homeland Security and Governmental Affairs Committee on May 25 as part of a 19-bill package Johnson titled the Bolster Accountability to Drive Government Efficiency and Reform Washington Act (or BADGER Act). The proposed reauthorization until 2021 comes at a time when the OSC is dealing with criticism about allegedly hasty processing of non-high-profile complaints from some of its own disgruntled employees and as the Government Accountability Office is embarking on an examination of the agency’s procedures and effectiveness. “Reports of whistleblower retaliation are increasing every year across the federal government,” Johnson said in a statement to Government Executive. “The Office of Special Counsel plays a vital role in ensuring that employees who have the courage to come forward are not punished for doing what is right. This bill will help ... right the wrongs committed against federal whistleblowers, and it will ensure that federal agencies are taking steps to correct and prevent whistleblower retaliation.”

Lame Duck TPP Push Hands Trump A Powerful Issue Against Clinton --More and more the word is getting out that President Obama, along with the giant multinational corporations and Wall Street, will launch a push in Congress to pass the Trans-Pacific Partnership (TPP) during the “lame duck” legislative session following the election.  President Obama should put a stop to this talk right now. It hands Republican presidential nominee Donald Trump a powerful issue to use against – and embarrass – Hillary Clinton, should she become the Democratic nominee. The Los Angeles Times has a story, “Obama races to cement the big Pacific Rim trade deal that all his potential successors oppose,” that includes this: The most optimistic timeline in Congress appears to be for the deal to come to a vote in the lame duck session. Obama predicted recently lawmakers might vote after at least the primary election season had ended. A few other examples: Wall Street Journal, May 24: “Obama Reasserts Hope for TPP Passage This Year“, The Hill, May 6: “President Obama urging Congress to pass TPP“:The Obama administration is working closely with lawmakers on Capitol Hill to build support for the 12-nation Trans-Pacific Partnership (TPP), arguing that delaying votes on the deal will make it harder to pass the agreement, the president said in a Washington Post op-ed. … Congressional leaders have said that the deal won’t likely be considered until the lame-duck session after the November elections.The Hill, April 25: “Chamber’s Donohue: TPP vote likely after the elections“:U.S. Chamber of Commerce President Tom Donohue said Monday that election-year pressures will force the Senate to vote on the Trans-Pacific Partnership (TPP) during a lame-duck session to protect several vulnerable Republican incumbents. You get the picture. It’s coming.

WSJ editor: Trump needs to be destroyed in the November election to teach GOP voters a lesson: Appearing on CNN, an opinion page editor from the Wall Street Journal left no doubt how he feels about presumptive GOP presidential nominee Donald Trump, saying not only will he not vote for him, but that Trump needs to be crushed in the November election as a lesson to Republicans. Pressed by host Fareed Zakaria if he was going to get behind Trump as the Republican nominee, conservative columnist Bret Stephens got right to the point. “I most certainly will not vote for Donald Trump,” Stephens began tersely. “I will vote for the least left-wing opponent to Donald Trump and I want to make a vote that makes sure he is the biggest loser in presidential history since, I don’t know, Alf Landon.” Then Stephens went off: “It’s important that Donald Trump, or what he represents, this kind of quote ‘ethnic conservatism or populism,’ be so decisively rebuked that the Republican Party and the Republican voters will forever learn their lesson that they cannot nominate a man so manifestly unqualified to be president in any way, shape or form.” “So they have to learn a lesson perhaps the way Democrats learned a lesson from McGovern in ’72,” he added.

Use estate taxes to fund inheritance for all - David Johnson - Before my maternal grandmother died in 1998, she and my mother agreed that she'd split her estate — itself spring-boarded by my great-grandfather’s business acumen and maintained through sound investing — into thirds for me, my sister and my mother. Because my mother was already well-off, my nana wanted to make sure her grandchildren were secure, too. So at 28 years old, I received several hundred thousand dollars (after taxes). And if my parents, who are in their late 70s, die before me, I will receive another inheritance. Inherited wealth has made a huge difference in my life. Because of it, I didn’t accrue debt in graduate school. When my daughter was born, we had to pay $14,000 out of pocket for the procedure, due to complications and limited health insurance — but I didn’t have to borrow to cover the bill. Three years ago, we even bought a house in the expensive San Francisco Bay Area. I feel guilty about these advantages. In the U.S., family wealth is a racial marker. In 2013, the median wealth of white households was $141,900; for black households it was $11,000; Hispanic households, $13,700. If cars are not counted, the median worth of black households shrinks to $1,700, with 40% of families having zero or negative net worth.   British economist Sir Anthony Atkinson has an excellent idea: Use the estate tax to fund inheritance for all. He proposes that each citizen be endowed a minimum inheritance upon reaching adulthood, with the program being funded by a restored estate tax. By his calculations, if implemented in the United Kingdom, the program could promise a capital endowment of slightly more than £5,000 (nearly $7,300) per young adult from estate tax revenue alone. . Another idea, inspired by Britain's now defunct Child Trust Fund program, would give each newborn a savings account that could be safely invested over time and be accessed at adulthood.  Inheritance — the gift of financial security and opportunity — is something to which no child is entitled but which every child deserves. There’s an easy way to provide this gift to all: Stop wealthy parents from spoiling their children too much.

CEO Bonuses: How Pro Forma Results Boost Them - Earnings before the bad stuff can do good things for executive pay. Last year was tough for many companies, so many asked investors to imagine what things would have looked like if the tough things had never happened. This led to the biggest divergence since 2009 between pro forma results, which exclude items such as restructuring charges and stock-based compensation, and results under generally accepted accounting principles, or GAAP. But these adjusted metrics aren’t just showing up in earnings releases. Pro forma figures have been proliferating in annual proxy statements, too. There, when used with compensation metrics, they can help executives draw bigger pay packets. Research firm Audit Analytics finds that the term “non-GAAP” appeared in 58% of proxies for companies in the S&P 500 that have released them so far this year. Five years ago, that term showed up in 27% of proxies for current S&P 500 constituents. There is nothing improper about using non-GAAP measures as long as they are disclosed properly. And corporate boards decide on the measures they want to use for compensation purposes. Plus, there is an argument to be made for sometimes excluding items from results for compensation purposes. If, say, a natural disaster hits a company with expensive repairs, perhaps an adjustment is in order. But other items that often get excluded in pro forma results, such as layoff-related charges, do seem like a reflection of management’s performance. And boards have too often shown a willingness to set awfully low bars for executives to clear. That, though, can disadvantage shareholders and wreck the idea of pay for performance. In that vein, the dramatic rise in the number of companies using pro forma measures to determine bonuses would indicate the balance between shareholders and executives is being skewed in executives’ favor.

US Commercial Bankruptcies Soar (despite Rosy Scenario) - The post-February euphoria in the US bond market has been a sight to behold, stirred up by NIRP and QE in Japan and the Eurozone. The ECB is beginning to buy corporate bonds, including euro-denominated corporate bonds issued by US companies. This is pushing larger amounts of corporate euro bonds into the negative-yield absurdity.   But beneath the market euphoria, reality continues to plod forward. Standard & Poor’s reported that among the companies it rates there were 12 defaults in May, which pushed its speculative-grade corporate default rate up to 4.1%, the highest since December 2010 when it was recovering from the Financial Crisis. In January, so just five months ago, the default rate was still 2.8%. That’s how fast credit is deteriorating. Even during the early phase of the Financial Crisis, in September 2008, when Lehman Brothers filed for bankruptcy, and when all heck was breaking lose, the default rate was “only” 2.96%, before skyrocketing and eventually peaking at 12% in November 2009. These are the largest US corporations, rated by Standard & Poor’s. But about 99% of the 19 million or so businesses in the US are small, generating less than $10 million a year in revenues, according to Dun & Bradstreet. None of them are rated by Standard & Poor’s, and none of them figure into its default rate. Another 0.96% or 182,578 businesses are medium-size with sales between $10 million and $1 billion. Only a smallish portion of them are rated by Standard & Poor’s, and only those figure into its default rate. The rest, the vast majority, are flying under Standard & Poor’s radar. And how are they doing? Here’s a clue: Total US commercial bankruptcy filings in May soared 32% from a year ago, to 3,358,the American Bankruptcy Institute (in partnership with Epiq Systems) just reported. It was the seventh month in a row of year-over-year increases in commercial filings.

The Rich Can Relax: Barron’s Says “The Stock Market Won’t Crash – Yet” - One thing that makes the rich different is that they will pay $5 for the May 30 issue of Barron’s, which is dispensing the peculiarly indecisive wisdom that “The Stock Market Won’t Crash – Yet.” The other thing that makes the rich different is that they’re the ones heavily invested in this stock market. According to the most recent 2013 Federal Reserve “Survey of Consumer Finances,” which is conducted every three years, the rate of direct or indirect stock ownership by the top income group “increased 3.9 percentage points from 2010 to 2013, reaching 92.1 percent, slightly above the 91.7 percent found in the 2007 survey.” According to a Gallup poll conducted between April 6-10 of this year, 46 percent of Americans have no money invested in the stock market – not in individual stocks or stock mutual funds or self-directed 401(k)s or IRAs. The amount of Americans with zero money invested in the stock market has grown by 12 percentage points since April of 2007. That was the year before century-old iconic names on Wall Street began blowing up like a smoldering stack of Roman candles at a fireworks factory and the U.S. Treasury and Federal Reserve hooked up a bulging firehose to douse the inferno that ended up doubling the national debt over the ensuing years and multiplied the Fed’s balance sheet five-fold. How much reliance should you put on Barron’s assurance that no crash is imminent? In an article titled “A Bullish Call,” Barron’s Kopin Tan wrote on December 17, 2007, the year before the onset of the greatest crash since 1929-1932, the following:“If the case for U.S. stocks is built on global growth and lower interest rates, other factors, too, suggest that the market is heading higher. For one, Washington is determined to avert a financial disaster, particularly in an election year…”

How Finance Took Over the World: - Bloomberg Odd Lots Podcast - The U.S. spends 8 percent of its GDP on finance — twice the amount it did 40 years ago, according to a recent post by economist Brad DeLong. That figure set off a flurry of commentary with some asking how “the financialization of the world” came to be and others attempting to answer that very question. This week, we speak with Satyajit Das about the prominent role played by finance in the economy, markets, and monetary policy. A former banker, trader, and corporate treasurer, Das is well-placed to walk us through the development of global financialization and its pitfalls - including the world's outsized reliance on debt-fuelled growth. Along the way we talk banker bonuses, negative interest rates, home safes, and (of course!) alien invasions.

Goldman Sachs Financed Hillary Clinton’s Son-in-Law to Make Bullish Greek Bets After It Structured Unseemly Greek Debt Deals that Hobbled that Country  Pam Martens - The vampire squid has now popped up in the middle of a potential new scandal involving the Clintons, while uproar over its payment of $675,000 to Hillary Clinton personally for three speeches is still simmering. Clinton, a presidential candidate, has thus far refused to release the transcripts of those speeches, despite numerous editorials calling on her to do so.  On May 10, the New York Times gently dropped a bombshell on the hedge fund investing world of New York’s one-percenters. Hillary and Bill Clinton’s son-in-law, Marc Mezvinsky, who married their only child, Chelsea, in an opulent 2010 wedding, was shuttering the Eaglevale Hellenic Opportunity Fund after it had lost 90 percent of its value. That is a staggering loss for a hedge fund, which is, as its name implies, supposed to have hedges in place to prevent that kind of loss.The fund with the steep losses is part of a larger hedge fund firm run by Mezvinsky and two former colleagues at Goldman Sachs, Bennett Grau and Mark Mallon. The idea that a hedge fund should wait until it had only 10 percent of its clients’ assets remaining before shutting down is causing angst in billionaire circles, as are many other details surrounding this hedge fund. According to a 2015 article in the Wall Street Journal, the same fund had already lost 48 percent in 2014 – raising the question as to why it wasn’t shuttered then, when clients could have gotten a sizeable amount of their principal returned.

Our Politico Story on Why Clinton Does Not Deserve the Sanders Vote  Yves Smith - The Naked Capitaism commentariat has arrived. It’s the frame for our latest story in Politico: Why Some of the Smartest Progressives I Know Will Vote for Trump over Hillary. Mind you, the piece morphed a bit during the editing process. It had started out focusing on the large policy differences between what Sanders voters want and what Clinton is offering. It made the point that some, and potentially many, were sick and tired of the “lesser evilism” that the Democratic party had used to keep the left in line. The party has relied, successfully, on the idea, made explicit by Bill Clinton, that progressives have no where to go.  That argument is still there. But it seemed so incredible to orthodox-thinking Beltway types that voters might follow through on the implications, which is not voting for Hillary, which would risk a Trump victory. I got incredulity at the idea that some might actually vote for him out of a view that Trump despite his staggeringly visible personal character flaws (an ego totally out of control, and a corresponding lack of self-discipline) and his shifting and often bonkers policy ideas, that he might nevertheless represent the lesser evil, or cribbing from Glen Ford, the less effective evil. So to drive the point home, the article uses NC readers to show that some well-informed progressives understand full well what the Clintons represent and they’ve had it with them. These voters regard Trump as an acceptable risk to inflict punishment on Team Dem for decades of abusing workers and ordinary citizens and to put an end to the Clintons’ dynastic ambitions.  This article was meant to penetrate the DC narrative all sensible people will fall in line and vote for Clinton when Sanders is knocked out of the picture (probable but not a given). If it succeeded, it will get people in the Clinton bubble riled up. Read it here.

The SEC Fines a Private Equity Firm for Broker-Dealer Fee Violations. Are KKR, Apollo, Blackstone, TPG, Carlyle and Lots of Others on Its Hit List? -  Yves Smith - We’ve been writing for some time about the peculiar failure of the SEC to target private equity firms for acting as unregistered broker-dealers. The agency has finally roused itself and has fined an itty bitty firm, Blackstreet Capital Management. Needless to say, it’s not clear whether the agency is simply putting the industry on notice that it needs to clean up its act and register if they continue to collect transaction fees from portfolio companies, or whether it is warming up for larger enforcement actions. If the latter, it would be a very big deal, because this is considered to be a serious violation of securities laws and the punishment is therefore hefty: dollar for dollar for the amount of fees impermissibly charged. The SEC applied the classic dollar-for-dollar formula in the case of Blackstreet. If you read the order, the total amount to be disgorged of $2,339,000 is the sum of the transaction fees of $1,877,000 (p. 5), plus the impermissible operating partner fees of $450,000 (p. 5), plus the political contributions of $12,000 (p. 6).  We discussed in a 2014 post how widespread this misconduct is:The Bloomberg story acknowledges that the billions in fees collected by the PE industry over decades appear to have been illegal, noting that an SEC official “…signaled in a speech last year that transaction fees the private-equity industry had been taking for decades may have been improper because the firms weren’t registered as broker-dealers….  The industry flack also claims that the billions paid in transaction fees were not for broker-dealer services (although the argument is so absurd it doesn’t seem to be made with much enthusiasm). Yes, Washington DC is a generally fact-free zone, but let’s look at the language from an actual transaction agreement: [...] This is broker-dealer activity as clear as day. . We’ve cited almost identical language in other posts on this topic. This formulation is not an aberration. It is absolutely standard in large buyout deals, and literally hundreds of examples of it can be found in SEC filings.

Facing the Financial Industry’s Cyber Challenge With Lessons From IT History -- Irving Wladawsky-Berger, WSJ - Nowhere is the challenge of cybersecurity greater than in the financial industries. While this financial ecosystem has served us well so far, it’s rather complicated, inefficient and inflexible. We rightfully worry that the current ecosystem may not be up to the scalability, security and privacy requirements of our 21st century digital economy, especially when you include the additional few billion people worldwide conducting financial transactions over their smartphones and IoT devices whose transactions have to be carefully validated. I had the chance to share my thoughts on the challenges, but also the opportunities, we can expect from the continued growth of the e digital economy at a May 16 public meeting in New York City hosted by President Barack Obama’s Commission on Enhancing National Cybersecurity. Transforming something as complex as the financial ecosystem is a tall order, but as any student of IT history can tell you, the emergence of disruptive technologies can bring together key stakeholders. In my introductory remarks I noted that while the world’s financial community has developed a very sophisticated ecosystem, including the global payment infrastructures, government regulatory regimes and the management of personal identities, transforming this highly complex ecosystem has proved to be very difficult. It requires the close collaboration of its various stakeholders, including a large variety of financial institutions, merchants of all sizes, government regulators in just about every country, and huge numbers of individuals around the world. All these stakeholders must somehow be incented to work together in developing and embracing new financial innovations. Not surprisingly, change comes slowly to such a complex ecosystem. I then mentioned some pertinent lessons that I’ve learned over my long career in the IT industry. In the early decades of the IT industry, different vendors brought to market their own proprietary systems and networks. Just sending an e-mail using a particular vendor application to another user in a different institution using another vendor’s application was quite cumbersome.

No Easy Fix for Fraud on Swift Networks | American Banker: Given the news about the recent bank thefts carried out over the Swift messaging system, banks might be wondering if there is an alternative for cross-border payments. Flatly, there isn't -- at least not today, or at least not one that would offer the depth of Swift services while addressing the safety concerns raised by the heists. For banks, that is likely unsettling news. After the revelation by Symantec researchers that linked North Korea to the series of recent attacks targeting banks in Asia and gaining access to the Swift messaging system, the worldwide financial industry is on increased alert. "If there is an alternative, I'm not aware of it. It's pretty crazy – you've got some networks that could handle the payments part, but that's not the only information that flows over the Swift network," said Patricia Hines, a senior analyst at Celent. "There is no direct competitor for the broad strokes of what they do." For starters, there is the entry-point issue. The hackers are entering the network at the bank level, they aren't breaching Swift's network. Any alternative system would still need to address the security issues at the banks that are putting the whole network at risk. A network that is made up of many members – Swift works with 11,000 banks and other financial services firms -- is only as secure as its weakest link, said Dana Bowers, chief executive of financial technology vendor Venminder. Some have suggested that a blockchain-based solution could prevent the thefts given its distributed and transparent qualities, but some security experts say hackers could still get in. "The issue is of these compromised credentials that look legitimate," . "With a blockchain solution, if [a fraudster] could obtain the private key, then the core issue of the impersonation of a legitimate user is still there."

Real Breach in Swift Heists May Be Banks' Complacency | American Banker: When the chief information officer of First Horizon National in Memphis, Tenn., read about a cybertheft of $81 million from the Bangladesh Bank's account at the Federal Reserve Bank of New York in February, and that the hackers may have gained access to the payments-related messaging system Swift, he swung into action. Livesay began a review of First Horizon's own Swift environment, paying particular attention to potential vulnerabilities tied to usernames and passwords. Yet he has sensed his banking peers have been slow to react, even as reports of Swift-related incidents have multiplied. "Initially a lot of people wanted to say it was an isolated incident," he said. "Some people might be lulled into overconfidence that these things are not occurring in the U.S., they're occurring in Asia and the Philippines, where banks in some cases might be less secure than we think we are in the U.S." If true, it appears the complacent ones made a bad call, especially after word last week that the hostile North Korean government might have been involved in some of the breaches. Normally in a crisis banks are quick to say they are on top of it, but officials at many banks contacted for this story — with a few notable exceptions — were reluctant to discuss the breaches that allowed access to the Swift network, their reactions to it, or what questions they might be getting from regulators. One would think, after the legal, PR and other costs associated with payments-related breaches in recent years at U.S. retailers, banks would be ready for this sort of thing — or at least have well-scripted assurances.

The Occupy movement has grown up — and looks to inflict real pain on big banks --Capitalizing on populist anger toward Wall Street, a coalition of more than 20 labor unions and activist groups on Tuesday launched a new campaign to reform the financial industry.   The group, Take On Wall Street, plans to combine the efforts of some of the Democratic Party’s biggest traditional backers, from the American Federation of Teachers and the AFL-CIO to the Communications Workers of America. The group says it will aim to turn the public’s lingering anger at the financial sector into policy initiatives that could change the way that Wall Street works.  Among its biggest targets will be doing away with a law that allows private equity managers to pay lower taxes through something known as the “carried interest loophole.” These managers receive a share of profits for any gains they create for their clients, and this income is treated as long-term capital gains and taxed at a lower rate. “We know that because of this loophole that there are many hedge fund and Wall Street millionaires that pay a lower tax rate than truck drivers, nurses, [and] teachers,” said Sen. Tammy Baldwin (D-Wis.), who has introduced several pieces of legislation targeting Wall Street in recent years and is a supporter of the new coalition.  The group is pouncing during a period in which Wall Street has found itself the target of both Republican and Democratic presidential candidates. Democratic candidate Bernie Sanders has called for breaking up the big banks and criticized rival Hillary Clinton for accepting money from Goldman Sachs to deliver speeches, while Republican presumptive nominee Donald Trump has been critical of carried interest.  “I think the tone of the election has reminded many people just how deeply felt the frustration and anger is about the way that Wall Street has shaped the economy in its own interest,” said Lisa Donner, executive director of Americans for Financial Reform, a coalition of more than 200 civil rights, consumer, labor, business, investor, faith-based, and civic and community groups.

Nuns With Guns: The Strange Day-to-Day Struggles Between Bankers and Regulators - WSJ: Among the new federal banking regulations there is one that financial wonks call “TRID,” the TILA-Respa Integrated Disclosure rule. Attendees at a recent training school here for bank compliance staff, who must learn and enforce such rules, said they deciphered TRID’s true meaning: “The reason I drink.” The sobering reality of banking in 2016 is that lenders are awash in new regulations, and growing armies of rule-interpreters and enforcers—for good or ill—are bringing striking changes to banks’ internal cultures. The 2010 Dodd-Frank law, passed in the wake of the financial crisis and designed to prevent another, is one of the most complex pieces of legislation ever. At more than 22,200 pages of rules, it is equivalent to roughly 15 copies of “War and Peace” and covers matters from how much capital banks must set aside to how they can advertise.Those rules and others have spawned a regulatory apparatus that is the fastest-growing component of the financial sector, with banks hiring tens of thousands of new staff whose job is to keep their employers right with the new regime. Federal agencies have dispatched thousands of their own minders to set watch at banks.The heightened regulatory environment led 46% of banks to pare back their offerings for loan accounts, deposit accounts or other services, according to an American Bankers Association survey of compliance officers last year. It is also costly. The six largest U.S. banks by assets in 2013 together spent at least $70.2 billion that year on regulatory compliance, up from $34.7 billion in 2007, according to the most recent study by policy-analysis firm Federal Financial Analytics Inc., which said costs have continued to mount since then.The dynamic can be maddening for all sides, with regulators, internal compliance executives and employees operating like rival tribes, according to interviews with more than three dozen current and former employees who have worked on these issues inside the country’s banks and regulatory agencies. At a Barclays BCS -3.02 % PLC town hall after Dodd-Frank rules began to go in place, bank compliance executives shared images of how each group thinks of the other, said someone familiar with the meeting. To represent bankers, compliance executives showed an image of the Wild West: cowboys on horses with guns.On the other side, to show how bankers view compliance officials, the executives revealed a picture of nuns carrying guns, an indicator that the group was seen as ultraconservative but still dangerous.

Billionaire Steve Schwarzman just went off on the Dodd-Frank Act - Billionaire Steve Schwarzman can't stop hammering the Dodd-Frank Act.  At the Bernstein Thirty-Second Annual Strategic Decisions Conference 2016, the Blackstone Group chairman and CEO discussed issues ranging from Brazil's economic growth to distressed energy companies in the US.  Among his biggest concerns was the impact of financial regulation. Here's Schwarzman: What's happening during that period is the junk bond market just went on sabbatical when illiquid. So, for all of you Dodd-Frank lovers, here's what happens when you have a commitment to regulation and reform, and you don't quite understand all of the implications. So, when they passed the Volcker rule, there were 25 firms making markets in junk bonds. Guess how many there are now. Five. That's 25 to 5. Triumph? You decide. Okay. So, what happens when things get difficult, that market now just locks up. That is not healthy for the capital markets. And this is happening all over. It's when you get almost all the market makers out of doing market making, right? So, it affects the treasury market. It affects all markets, and liquidity is coming down because we mandated that to make the world safer. This does not make the world safer by the way. This is not encouraging the world to be safe because when people need to sell, and there isn't liquidity, what happens? They sell something anyhow, and so you develop these odd outcomes, right? In 2010, Congress passed the Dodd-Frank legislation intended to discourage risky behavior and avoid another financial crisis. Part of the law — the "Volcker rule" — restricts banks' abilities to speculate in markets and invest in private equity funds. Some blame the new regulations for killing market liquidity, as higher capital requirements limit Wall Street's ability to step in to buy securities as prices drop.  The regulation also required private equity firms with more than $150 million in assets, such as Blackstone, to register as investment advisors, which are subject to annual examinations. Last October, the firm paid a $39 million fine after the SEC found that Blackstone charged excessive "monitoring" fees, which are paid annually by the companies owned by the private equity firm.

Get to Know the Fed's Other Stress Test | American Banker: — As the Federal Reserve moves forward with its implementation of the Basel Committee requirements for long-term liquidity, many are questioning why they are necessary in light of the agency's existing liquidity stress-testing regime. The Comprehensive Liquidity Assessment and Review — not to be confused with its better-known stress test cousin, the Comprehensive Capital Analysis and Review — is an annual examination of the largest banks' liquidity positions and risk management, and has been in place since 2012. The program subjects each of the largest banks to horizontal qualitative and quantitative analyses to determine whether their liquidity plans are up to snuff. But CLAR is not as well known and certainly not as well understood in the regulatory landscape as CCAR, and part of that is because its inner workings are unknown. "I don't think that's ever been made public," said Karen Shaw Petrou, managing partner of Federal Financial Analytics. "They may have described it publicly, but the conditions, the terms — it's not like CCAR, where there's rule after rule after rule." Instead, CLAR is implemented as part of the enhanced supervision by the Large Institution Supervision Coordinating Committee, or LISCC — a body within the Fed that oversees U.S.-based global systemically important banks, U.S. operations of foreign G-SIBs, and nonbanks designated by the Financial Stability Oversight Council (though to date, only the banks have been subject to CLAR, though the nonbanks are subject to other liquidity supervision).

Fed Eyes Higher Stress Test Capital Levels for Biggest Banks | American Banker: — Two Federal Reserve governors said Thursday that the central bank will likely require the biggest banks to apply their capital surcharges in order to pass the annual stress tests — a standard that could be costly for some institutions to meet. "It is likely, I believe, that we will incorporate the full amount of the surcharges into the post-stress capital requirements," Fed Gov. Jerome Powell said during a question-and-answer session at a conference here. "It is also likely that it will not be a dollar-for-dollar increase in the capital requirements. It will be a substantial increase in the requirements, but there will be some offsets." His comments came after Fed Gov. Daniel Tarullo, who chairs the board's Supervisory Committee, said in an interview with Bloomberg TV that those "offsets" effectively mean a relaxation of some assumptions that have been built into the Fed's Comprehensive Capital Analysis and Review. Those provisions were meant to capture some of the same unknown or unknowable risks that are more methodically considered in the surcharge rule, which applies to the eight largest U.S. banks. "There are some things that have been put into the stress tests over time that are really quite conservative assumptions that were meant to take into account some of the same factors," Tarullo said. "Now that we're doing that in a more explicit way … some of those things that we put in place before might be adjusted as well. So even though it will be a significant increase, it won't be dollar for dollar."

Federal Reserve to toughen stress tests for big US banks - Financial Times - Federal Reserve officials have confirmed plans to toughen the annual round of stress tests for the biggest, most complex banks, while extending relief to smaller lenders with less than $250bn in assets. Daniel Tarullo, the Fed’s lead banking supervisor, said in an interview with Bloomberg TV on Thursday that the eight banks deemed to be “global systemically important financial institutions”, will be required to incorporate capital surcharges into their minimum capital thresholds in the tests. Separately, at a banking-industry event, Fed governor Jerome Powell said the central bank’s move — which is likely to take effect in the 2018 stress tests — would make big banks “fully internalise the risk” they pose to the economy. According to Mr Powell, the point is to raise capital requirements to a level at which banks consider selling assets and relying less on wholesale funding. The eight Sifis — which face capital surcharges ranging from 1 per cent to 3.5 per cent of their total risk-weighted assets — are JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, Morgan Stanley, Bank of New York Mellon and State Street. These banks will see a “significant increase” in capital levels once the surcharges are fed into the stress-testing process, Mr Tarullo said. “We need to have those … institutions more resilient than other banks in the economy.”  Banks taking the test have grown more comfortable with the process in recent years, increasing requests to return capital by about 50 per cent, as a proportion of their stressed capital, between 2013 and 2015. Fitch, the rating agency, expects that ratio to rise again in the 2016 test, pushing closer to a 30 per cent dividend payout threshold that the Fed has said will receive closer scrutiny.  But by layering on extra capital requirements for the biggest banks, the Fed will check those ambitions and prompt banks to reduce their footprints further. JPMorgan announced in January that it had shrunk its balance sheet by about $220bn in 2015 by cutting customer deposits and reducing its use of derivatives.

Fed Plans to Make Stress Tests Easier for Midsize Banks | American Banker: – Federal Reserve Board Gov. Daniel Tarullo said Thursday that he expects the agency to eliminate the qualitative requirements in the annual stress testing program for most midsize banks as early as next year. In an interview with Bloomberg TV Thursday morning, Tarullo said that as part of its continuing review of its Comprehensive Capital Analysis and Review stress-testing program, the Fed has determined that the qualitative aspects that have beguiled so many smaller banks should be cut. That change can be made as soon as the 2017 round of stress tests – the 2016 round are already in progress and the results should be expected "late this month," he said. "As we did our evaluation, the conclusion we came to was that we can achieve what we need on risk management and capital planning at those regional banks with the normal supervisory program that we have over the course of the year," Tarullo said. "I think the direction in which we're moving would be for banks that are under $250 billion in assets and are basically very traditional banks … to take them out of the qualitative side of the test. I hope and expect that will relieve a lot of the compliance costs." Tarullo reiterated that, for the largest global systemically important banks, or G-SIBs, the stress tests will likely become harder over time, saying that the post-stress capital requirements will likely include some portion of the additional capital surcharge buffer that the Fed requires for those banks. "It won't be just a straight addition of the surcharge, but effectively this will be a significant increase in capital," he said.

Liquidity Did Not Cause Living Will Failures: FDIC Official | American Banker: — A lack of liquidity wasn't what caused most of the largest U.S. banks to fail their living wills test, a Federal Deposit Insurance Corp. official said Thursday. Instead, regulators wanted the banks to show a credible methodology for taking themselves apart. "It wasn't about adequacy of the liquidity," Brent Hoyer, a deputy director in charge of risk management supervision at the FDIC, said during a panel discussion here. "The answer could be, reduce your friction." The FDIC and Federal Reserve announced in April that out of the eight global systemically important banks, only one — Citigroup — had filed a bankruptcy plan acceptable to both agencies. Public documents detailing the banks' deficiencies unveiled new ways to measure a bank's liquidity capacity in resolution, called Resolution Adequacy and Positioning and Resolution Liquidity Execution Need. But several other issues were raised by regulators, including the complexity of the financial institutions and the governance processes put in place to ensure that resolution is triggered in time. "All of the obstacles are fundamental, and all the obstacles they have to overcome," Hoyer said. He added, however, that for firms that elected the single-point-of-entry strategy — where a holding company files for bankruptcy while the core lines of businesses are allowed to keep running — funding was essential to the plan.

Former FDIC Risk Analyst Under Investigation for Stolen Living Will Data | American Banker: — Allison Aytes, a former Federal Deposit Insurance Corp. employee in its Office of Complex Financial Institutions, is under investigation by federal authorities for allegedly stealing big banks' living will data on her way out. Aytes left the agency in the summer of 2015, according to sources with knowledge of the issue, who said she downloaded sensitive information onto a thumb drive pertaining to the resolution plans of some of the banks. According to her LinkedIn profile, Aytes had worked as a cross-border risk analyst since 2010. When the FDIC learned of the breach, the FBI searched her residence, sources said. It appears Aytes remains under criminal investigation. When reached by phone, Aytes declined to comment on the matter and referred all calls to Peter Pullano, a criminal defense attorney at Tully Rinckey, a law firm based in Washington. Pullano did not respond by deadline to multiple calls. The FDIC also declined to comment on the issue. The FDIC's Office of Inspector General disclosed on May 12 that it was investigating the leak of sensitive data related to big banks' resolution plans.  The breach apparently sparked a change in how the FDIC tracks down suspicious downloads. In September 2015, the agency reconfigured its data loss prevention program to ensure that it would also detect downloads to portable media devices, American Banker has found.

Some questions concerning equity-financed banking - John Cochrane has another fun and provocative post making his pitch for equity-financed banking. He makes a lot of great points. But I'm still left feeling a little uneasy. In particular, I wonder whether some of his sweeping claims have any firm theoretical backing. It could be I just haven't thought hard enough or long enough about it. In any case, in the spirit of promoting discussion, let me describe some of the things that bother me.. The main question I have is: where's the theory? In the benchmark neoclassical model, the theorem states that under a very specific set of assumptions, the liability structure of a firm does not matter. We know that these assumptions (e.g., symmetric information) do not literally hold in reality. When information is asymmetric, debt can be superior way to fund assets relative to equity (see here and here, for example). Demandable debt may have socially desirable properties when liquidity demands are private information; see here. In a world where exchange media (including collateral assets) are valued, it could matter very much how the "pizza" is sliced into tranches designed to serve special uses.What explains the widespread use of the debt contract and the prevalence of fractional reserve banking? The explanation is unlikely (in my view) to be "government distortions" or "greedy bankers." It seems to me that asymmetric information in financial markets is a pertinent real-world friction. Could it be that debt represents a sort of "second-best" solution to the problem of efficient (low-cost) financing in a world of asymmetric information? Might the same not be true of demandable debt? Implicitly, Cochrane must be thinking that these benefits are quantitatively small. Maybe so, but senior liability tranches do seem rather highly valued in the market place, especially as exchange media. Private monetary instruments have always been in the form of debt, not equity. Why has this been the case?

Strong CFPB Rule Needed Even in Payday-Free States | Bank Think - With much press around the Consumer Financial Protection Bureau's proposed payday lending rule, the experiences of people in states that have already banned the product have received surprisingly little media attention. With federal curbs on payday loans approaching, we should look to the experiences of these states to consider the ripple effects that a strong or weak national payday lending rule could have. After all, 90 million people — nearly a third of our nation's population — live in the 14 states and the District of Columbia that ban payday lending. We are three of those 90 million people. We live in Arkansas, Montana and North Carolina — three states that effectively prohibited payday lending during the last decade. Though our states differ culturally and economically, their experiences with payday lending have been the same. Consumers are much better off without the product. Payday loans are high-cost, predatory products that are marketed as a source of short-term, emergency credit, but they actually ensnare people in long-term debt traps.States that have banned the product are reporting positive results. Take North Carolina. After the Tar Heel state banned payday lending in 2006, the state commissioned a study in 2007 to examine the effects of the ban. One of the study's key findings: Most former payday loan borrowers reported that the ban had had a positive effect on their households. And contrary to what the payday lending industry would have people believe, the study also found that North Carolina's payday lending ban did not reduce access to credit — a finding that is consistent with the experiences of advocates and credit counselors in other states that ban payday lending.

Payday Borrowing’s Debt Spiral to Be Curtailed -- The payday loan industry, which is vilified for charging exorbitant interest rates on short-term loans that many Americans depend on, could soon be gutted by a set of rules that federal regulators plan to unveil on Thursday. Some 16,000 lenders run online and storefront operations that thrive on the hefty profits. Under the guidelines from the Consumer Financial Protection Bureau — the watchdog agency set up in the wake of 2010 banking legislation — lenders will be required in many cases to verify their customers’ income and to confirm that they can afford to repay the money they borrow. The number of times that people could roll over their loans into newer and pricier ones would be curtailed.The new guidelines do not need congressional or other approval to take effect, which could happen as soon as next year. The Obama administration has said such curbs are needed to protect consumers from taking on more debt than they can handle. The consumer agency — which many Republicans, including Donald J. Trump, have said they would like to eliminate — indicated last year that it intended to crack down on the payday lending market. “The very economics of the payday lending business model depend on a substantial percentage of borrowers being unable to repay the loan and borrowing again and again at high interest rates,” said Richard Cordray, the consumer agency’s director. “It is much like getting into a taxi just to ride across town and finding yourself stuck in a ruinously expensive cross-country journey.” Lenders say the proposed rules would devastate their industry and cut vulnerable borrowers off from a financial lifeline.

CFPB's Payday Lending Proposal Would Shut Out Banks | American Banker: The Consumer Financial Protection Bureau issued its long-awaited proposal Thursday to regulate payday, auto title and certain high-cost installment loans without a key provision that would have allowed banks to compete by offering their own small-dollar loans. The move was a blow for some larger banks, which had been planning to return to the space after being shut out of it by other federal regulators. But the proposal did not include a provision the CFPB floated last year that would have provided an exemption from certain underwriting requirements if the monthly payment did not exceed 5% of the borrower's gross monthly income. At least three of the ten biggest banks had been contemplating launching new products based on the 5% provision. "As proposed, this CFPB regulation would freeze banks out of the market," said Alex Horowitz, a senior research officer on the small dollar loan project at the Pew Charitable Trusts. "There is nothing in here that is viable for banks. The CFPB missed the mark, they went heavy on process and light on clear standards." The agency's decision was one of the biggest differences between the new proposal and an outline the agency released last year — and its rationale for the change was not immediately clear. But banking industry representatives said the CFPB missed a big opportunity to let banks offer consumers affordable small-dollar loans. "Judging from tonight's highly restrictive proposal, the bureau continues to miss the mark ... and effectively forces most banks to stay on the sidelines due to greater compliance burdens," said Richard Hunt, president of the Consumer Bankers Association. Some consumer advocates had other complaints, arguing the plan left large loopholes that would allow existing payday lenders to continue some abusive practices. "There is still a great deal of work to be done on this proposal to ensure it truly protects consumers from the devastation wrought by high-cost, low-dollar predatory loan products," said Mike Calhoun, president of the Center for Responsible Lending.

CFPB's Payday Plan May Upend State Usury Laws | American Banker: The Consumer Financial Protection Bureau's complex payday lending proposal is sparking concerns that state legislatures will try to repeal existing usury laws and allow a parade of pro-payday-lending bills to move forward. The bureau's proposal, released Thursday, includes what consumer advocates are calling "loopholes" that would still allow lenders to charge triple-digit annual percentage rates for some long-term loans. As a result, many see payday lenders as likely to shift their policies from short to longer-term credit, while still charging high rates. At the same time, however, consumer advocates fear that the payday lending industry will use the CFPB's proposal as cover to rollback protections in states that ban or restrict such loans, arguing the agency has given the business its stamp of approval. "The payday lenders are using the CFPB's proposal as a Trojan Horse to bring payday loans into states like Pennsylvania by saying the CFPB has approved this kind of product," Kerry Smith, a staff attorney at Community Legal Services of Philadelphia, said during a public hearing on the plan Thursday in Kansas City. There are 36 states that allow payday lending, with the 14 others, such as Pennsylvania and New York, either banning the product or setting such low interest rate caps that it's difficult for lenders to operate profitably.

Payday-Lending Curbs: Thumbs Down From Banks, Thumbs Up From Fintech - WSJ: In unveiling new rules Thursday to shake up the payday-lending market, federal regulators said they wanted to curb what they consider abusive practices, while encouraging new lenders to enter the market and maintain credit for hard-up, low-income borrowers. But many conventional lenders—credit unions and community banks—said the new rules were too onerous to encourage them to try to expand in a market that many have abandoned to smaller storefront and online lenders. Prominent online lenders, on the other hand, said they could step up their business in the small-dollar credit market under the new regulations, seeing opportunity for the rapidly growing sector to expand even further. The “field hearing” was one of the Consumer Financial Protection Bureau’s longest—and rowdiest—since the agency was created five years ago. Regulating payday lending is highly controversial because it is seen as a product that has helped millions of Americans under financial duress and yet often predatory because the fees can be more expensive than the loan amount itself and trap people in a repeated cycle of debt. About 1,000 people—consumer activists from community organizations, church groups, social-service agencies, as well as representatives of the payday-lending industry—filled the art deco Music Hall downtown to cheer and challenge witnesses commenting on the new rules.  The supporters of the CFPB’s new rule came largely from churches and nonprofit organizations that serve the inner city, while the opponents of the rule included sales agents from payday-lending stores in the Kansas City metropolitan area and the broader region. 

New Payday-Loan Rules Won’t Stop Predatory Lenders -  Dave Dayen - A borrower taking out a $500 loan could still pay over 300 percent in annual interest, despite new rules designed to crack down on predatory small-dollar lending out Thursday from the Consumer Financial Protection Bureau (CFPB). The proposed consumer protections for payday loans, auto title loans, and high-cost installment loans focus on making the lenders document borrowers’ incomes and expenses to confirm that they have the ability to make their payments and still maintain basic living expenses. Payday lenders currently do minimal financial checks before issuing loans. That could prevent deceptive practices. But actually enforcing underwriting standards is more difficult than enforcing specific product safety rules. One more enforceable provision, limiting monthly payments on some loans to no more than 5 percent of a borrower’s paycheck, was considered by the CFPB but rejected. Small-dollar loans have become massively popular in America, perhaps because an estimated 47 percent of Americans are in such precarious financial shape that they would have trouble coming up with $400 in an emergency, according to Federal Reserve data. Payday lenders take advantage of this desperation to trap consumers in a cycle of debt, with products designed to roll over endlessly, ringing up additional interest and fees. Auto title loans use a borrower’s car as collateral, subjecting them to repossession if they default. Over 12 million Americans use payday loans and similar products each year. “The problem with payday loans is they’re dangerous simply because the lender gets direct access to a borrower’s checking account, and that’s going to continue,” said Nick Bourke, director of the small-dollar loans project at the Pew Charitable Trusts.

CFPB Pours Cold Water on Banks' Deposit Advance Hopes | Bank Think: If your car required a $400 repair tomorrow, could you afford it? According to the Federal Reserve, for almost half of Americans the answer is unfortunately no. Millions of Americans live paycheck to paycheck and need help making ends meet. Yet regulators in Washington continue to chip away at products and services that provide short-term, small-dollar credit, thereby leaving consumers with very few and more expensive alternatives. Banks had been hopeful that the Consumer Financial Protection Bureau's small-dollar lending proposal would provide needed flexibility to institutions to provide consumers with better options. But the CFPB's just-released plan misses  the mark. Historically, federal banking regulators have encouraged banks to help finance these small-dollar consumer loans. For many banks, this is an ideal scenario: customers receive the services they want – and need – but remain in the well-regulated and supervised banking system. In response, some banks, working closely with regulators, developed a way to meet short-term lending needs through deposit advance products. These loans were carefully designed to ensure strong safeguards, like a highly predictive ability-to-repay analysis that took into account a customer's cash flow patterns and direct deposit history. Deposit advance products were cheaper than payday loans, offered greater transparency, required substantial disclosures and compliance with federal law, received positive feedback from borrowers, and had low default rates.

Troubling Signs on the Horizon for Banks in FDIC Data | American Banker: — While there were positive signals like loan growth and improved interest margins in the Federal Deposit Insurance Corp.'s first-quarter report card, there were also signs of trouble for the future, including larger institutions' ongoing exposure to the energy sector. Problems in the oil and gas market helped drive earning down by 2% to $39.1 billion for the industry overall, even though more than 60% of financial institutions reported higher earnings. Only 5% of banks were unprofitable in the quarter, the lowest mark since 1998. Still, a jump in the number of noncurrent loans, particularly for commercial and industrial credits, was a sign of alarm. Overall, loans at least 90 days past due grew by 2.4%, or $3.3 billion, driven by a $9.3 billion increase in noncurrent C&I loans, which the FDIC attributed partly to the energy industry. "The direct impact is on the larger institutions, particularly a group of regional banks" in oil-rich regions, said FDIC Chairman Martin Gruenberg during a briefing Wednesday. "For most community banks the exposures are indirect," he added, tied to the "secondary impact [of low oil prices] on local economies." The FDIC cited sharply lower energy prices for reducing the ability of "many borrowers to service their debts." The average noncurrent loan rate on C&I loans rose significantly to 1.24% from 0.78% during the quarter, the highest noncurrent rate for such loans since yearend 2011. (Noncurrent rates declined for all other major loan categories during the quarter.) Energy woes also spurred banks to increase their loan-loss provisions, which jumped nearly 50% to $12.5 billion, compared with last year. It was the seventh straight quarter in which banks increased loan-loss reserves and the largest quarterly increase in more than three years. More than a third of banks reported higher loan-loss provisions than in the year-earlier quarter, with most of the increase happening at bigger banks. Provisions for banks with $10 billion or more of assets rose 55%, while smaller banks' provision rose by only 16%.

Energy Troubles Sapped Bank Earnings in 1Q: FDIC | American Banker: — Ties to the energy sector hurt the banking industry in the first quarter as earnings fell 1.9% to $39.1 billion compared with a year earlier, the Federal Deposit Insurance Corp. said Wednesday. But the agency's Quarterly Banking Profile also showed some encouraging signs, including strong loan and operating revenue growth. "By many measures, the industry had a positive quarter," FDIC Chairman Martin Gruenberg said in prepared remarks for a briefing on the results. "However, banks are operating in a challenging environment." He cited a rise in noncurrent loans tied to energy exposure, along with low trading income and net interest margins. One good sign was growth in loan balances, which jumped by $100 billion, largely due to a $71 billion increase in commercial and industrial loans. The year-over-year 6.9% loan balance growth rate was the fastest since 2008, despite a $33 billion drop in credit card balances in the first quarter, which the FDIC attributed to consumers paying down the balances they had run up during the holiday season. Commercial real estate loans also helped drive the trend, shooting up by $38 billion. Yet noncurrent loan balances also rose sharply; loans 90 days or more past due or in nonaccrual status rose by 2.4%, or $3.3 billion. C&I loans were the main culprit for this trend, the FDIC said. Net operating revenue grew 2.7% to $172.9 billion year over year. Net interest income grew by 6.4%, or $6.7 billion — a faster clip than noninterest income, which declined 3.4%. Loan loss provisions also grew 49.7% year-over-year (by $4.2 billion), prolonging a trend of growing reserves that has now lasted for seven quarters.

May 2016: Unofficial Problem Bank list declines to 205 Institutions -- This is an unofficial list of Problem Banks compiled only from public sources. Here is the unofficial problem bank list for May 2016.  During the month, the list fell from 214 institutions to 205 after 12 removals and three additions. Assets dropped by $1.6 billion, even after a $343 million increase with the roll to 2016q1 figures, to an aggregate $60.8 billion. A year ago, the list held 324 institutions with assets of $91.2 billion. We were expecting the FDIC to release first quarter industry results and an update on the Official Problem Bank List but the FDIC was a no-show. Actions have been terminated against Home State Bank, National Association, Crystal Lake, IL ($603 million); International Bank of Chicago, Chicago, IL ($503 million); Pan American Bank, Los Angeles, CA ($160 million Ticker: PAMB); Citizens Bank & Trust Company, Eastman, GA ($130 million); American Founders Bank, Inc., Lexington, KY ($100 million); and SouthFirst Bank, Sylacauga, AL ($89 million Ticker: SZBI). Pan American Bank had been operating under an enforcement action since 2005. Other departure methods included the failure of First CornerStone Bank, King of Prussia, PA ($107 million); voluntary liquidation of SouthBank, a Federal Savings Bank, Huntsville, AL ($65 million); and the mergers of National Bank of California, Los Angeles, CA ($424 million Ticker: NCAL); National Bank of Tennessee, Newport, TN ($144 million); Park Federal Savings Bank, Chicago, IL ($142 million Ticker: PFED); and American Bank of Huntsville, Huntsville, AL ($113 million). The removal SouthBank is an infrequent way to leave the list with the last voluntary liquidation removal being Hartford Savings Bank, Hartford, WI, back in March 2014.  Added this month were Delaware Place Bank, Chicago, IL ($265 million); Indus American Bank, Edison, NJ ($247 million); and The First National Bank of Scott City, Scott City, KS ($121 million). This is the most new monthly additions to the list since December 2015.

FHFA to Shed More Light on GSE Nonperforming Loan Sales: The Federal Housing Finance Agency is set to make the sales of nonperforming loans by Fannie Mae and Freddie Mac more transparent, including providing information on trends at the individual pool level, according to a top agency official. Eric Stein, a special adviser to the FHFA, said that the agency will publish performance data hopefully by the end of the quarter. "We will be able to see if there are outliers" who are "not doing a good job, and would not be eligible for future sales," said Stein, speaking at an Urban Institute seminar on the government’s nonperforming loan sales. Housing researchers have argued that the FHFA has not revealed enough data about the loan sales, making it hard to evaluate the program’s effectiveness and provide feedback. Freddie was first government-sponsored enterprise to test the NPL market in 2014. Since then, Fannie and Freddie combined have sold close to 39,000 nonperforming single-family loans, totaling $8.2 billion. On average, the loans sold by the GSEs are three years' delinquent. The two GSEs combined have nearly 200,000 nonperforming loans that are at least one-year delinquent.

Civil Rights, Consumer Groups Urge FHFA to Recapitalize Fannie and Freddie: Several civil rights and community development groups wrote Tuesday to urge the Federal Housing Finance Agency to recapitalize Fannie Mae and Freddie Mac. The joint letter included the Center for Responsible Lending, the National Community Reinvestment Coalition and Amalgamated Bank. "Our organizations are deeply concerned that under the Preferred Stock Purchase Agreements with the Treasury Department, the capital buffers of Fannie Mae and Freddie Mac will be completely eliminated by the end of 2017," said the letter to FHFA Director Mel Watt. "This course of action is likely to destabilize the housing economy, undermine efforts to make housing finance more accessible and affordable, and drive up the costs of homeownership." At the start of this year, the two government-sponsored enterprises had a capital buffer of $1.2 billion. This capital cushion will automatically be reduced to $600 million in 2017 and to zero by the end of 2018 under the Preferred Stock Purchase Agreements. However, Freddie Mac reported a $200 million comprehensive loss for the first quarter, raising fears it could run through its capital cushion even faster.

Here We Go Again: Wells Fargo Is Trying To Give Mortgages To Low-Income, Debt-Heavy Millennials Living At Home -- Just last week we reported that Wells Fargo was reintroducing 3% down mortgages on its own, without going through the FHA. The reason we said, was that due to Wells' mortgage origination pipeline drying up, the bank was desperate to find new and innovative ways to boost lending.  Now we have direct confirmation that indeed Wells Fargo is desperate, and the plan to boost mortgage lending is to... drum roll... lure millennials out of the comfort of their parents home and into a house of their own. The fact that millennials don't make much money and are drowning in debt apparently doesn't bother Franklin Codel, head of home lending for the bank. Codel said Wells Fargo is now in a position to capitalize on the "very important" trend of millennials who have been unable or unwilling to buy property. "Demographics, ultimately, will win out and many of these folks will start families and want to become homeowners." said Codel, according to the Financial Times. The target for Codel is understandable, with more millennials living at home today than at any other point in time since the great depression it's easy to see what would drive that discussion.  However, what shouldn't be forgotten is the fact that there is a reason that millennials are living at home, often times rent free. Millennials are making less money than prior generations, and student loan debt is so burdensome that it doesn't make it feasible to do otherwise.

Advocate Group to CFPB: Can You Help with Translation?: The Consumer Financial Protection Bureau and other federal banking agencies should do more to protect consumers with limited English proficiency, a report from Americans for Financial Reform says. Many companies tailor product offers to people who do not speak English, but that commitment often ends at the point of sale, the group says. "Typically, once LEP consumers are sold the product, they receive complicated information regarding all of the important terms in English," the report says, noting that many will then turn to their children to interpret "legal terms and other highly specialized terminology" in mortgage paperwork and other financial documents. Roughly 25.3 million people, or 9% of the U.S. population, were considered limited English proficient in 2014, according to census data included in the report. Americans for Financial Reform argued that failure to accommodate LEP consumers may violate many federal laws. For instance, failing to provide language-access services for borrowers in the loss-mitigation process could constitute a violation of the Equal Credit Opportunity Act or make a lender or servicer liable under provisions of the Fair Housing Act and the Civil Rights Act of 1964. AFR provided a list of recommendations for industry leaders and regulators, including making it a requirement to provide free oral interpretation services when requested and to make any file from a servicer or lender available in a borrower’s preferred language. It said key mortgage documents including the TILA-RESPA Integrated Disclosure and the Uniform Residential Loan Application should be translated "in a reasonable number of preferred languages."

MBA: "Mortgage Applications Decrease in Latest MBA Weekly Survey" - From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey Mortgage applications decreased 4.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 27, 2016. ...The Refinance Index decreased 4 percent from the previous week. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. ... The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 28 percent higher than the same week one year ago. ...The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) remained unchanged at 3.85 percent, with points decreasing to 0.36 from 0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The first graph shows the refinance index since 1990. Refinance activity was higher in 2015 than in 2014, but it was still the third lowest year since 2000. Refinance activity increased a little this year when rates declined. The second graph shows the MBA mortgage purchase index. According to the MBA, the unadjusted purchase index is 28% higher than a year ago.

Refinancing is dead: a generation of Hard Times will continue until secularly real wages improve - Writing from The Bonddag Blog On Monday I gave what I think is a reasonable roadmap to the next recession. I want to follow up on this a little. The post from nearly 10 years ago was entitled, Are Hard Times Near? The great decline in interest rates is ending.” The theory is right in the title. Since the 1970s, real average hourly earnings had declined. Average Americans coped by spouses entering the workforce, by borrowing against appreciating assets, and by refinancing as interest rates declined. By 1995 the spousal avenue peaked. Borrowing against stock prices ended in 2000. Borrowing against home equity ended in 2006. When interest rates failed to make new lows, the consumer was tapped out, and began to curtail purchases. A recession began – and its effects have lingered and lingered. Hard Times were indeed near. Here is a graph from 1981 of mortgage rates and 10 year treasuries: In that article in 2007, I wrote that the consumer might yet have one more chance to refinance debt. In fact after the recession it turned out there were two: in 2009 and again in 2013. Ten year treasuries made a 60 year+ low in 2013 at 1.50%. Even if treasuries, and mortgage rates tied to them, make a new low, the floor is somewhere north of 0%. That -1.5% decline in a mortgage payment on a $250,000 house would be $3750 a year, or a little over $300 a month. That’s the most extreme case. Even if interest rates make new lows, households that refinance are likely to see more on the order of $100 or $200 per month of freed up cash — not enough to power much consumer spending. Yesterday Molly Boesel of Core Logic confirmed this, writing in her blog Because a refinance isn’t free, a simple rule of thumb is to add 100 basis points to the current market mortgage rate as the rate at which borrowers would have an incentive to refinance…. According to the chart [bleow], most borrowers hold mortgages with rates up to 4.50 percent, with 62 percent of mortgages and 72 percent of UPB in this range.

A Worrisome Pileup of $100 Million Homes - One of the latest symbols of the overinflated luxury housing market is a pink mansion perched above the Mediterranean on the French Riviera.The 13,000-square-foot property, built and owned by the fashion magnate Pierre Cardin, is composed of giant terra cotta orbs arranged in a sprawling hive. The home’s name befits its price. “Le Palais Bulles,” or “the Bubble Palace,” is being offered for sale at approximately $450 million. The listing is part of a global pileup of homes listed for $100 million or more. A record 27 properties with nine-figure prices are officially for sale, according to Christie’s International Real Estate. That is up from 19 last year and about a dozen in 2014. If you add in high-priced “whisper listings” that are offered privately, brokers say the actual number of nine-figure listings worldwide could easily top 40 or 50. “It’s just a new world in terms of what people are building and offering for sale.” The rise in nine-figure real estate listings comes just as sales of luxury real estate have cooled. Many say the sudden surge in hyperprice homes — often built and sold by speculative investors — is the ultimate bubble signal. “When you have a record number of homes for sale at a price point of $100 million or more, that tells you these homes aren’t selling,” said Jonathan Miller, president of Miller Samuel Inc., a real estate appraisal and research firm. “It’s not as deep a market as some might hope.” Last year, only two homes in the world sold for over $100 million, according to Christie’s. One was a 9,455-square-foot house in Hong Kong purchased for $193 million by Jack Ma, the chief of Alibaba. The other was a townhouse in London that sold for $132 million.

Last Time this Happened, the Housing Market Collapsed - The most expensive home listed for sale globally is in Bel Air, a neighborhood in Los Angeles. Its main house is a 74,000-square-foot monstrosity. Among the special attributes: a 30-car garage. The compound, being erected by speculative builder Nile Niami, has an asking price of $500 million. Seven of the world’s 10 most expensive listings are in the US. Four of them are in Los Angeles, including lesser abodes, such as a 38,000-square-foot mansion with a 5,300-square-foot master suite, several guesthouses, and staff housing, for $150 million. Other countries have cool stuff for sale too, such as Pierre Cardin’s 13,000-square-foot “Le Palais Bulles” (“the Bubble Palace”) on the French Riviera, listed for about $450 million. More supply of speculative super-homes is coming, including this gem, according to the New York Times: “Real estate agents and developers say a home under construction in Bel Air is likely to have more than 50,000 square feet of living space” and “the world’s largest safe.” It will be listed for “around $300 million.” For the first time ever, there are now officially 27 residences listed for sale globally with price tags above $100 million, according to Christie’s International Real Estate. That’s up 42% from last year, and up 125% from 2014! Some super-priced homes are offered only privately, rather than through public channels, to avoid the hoopla that this sort of QE-wealth-effect creation brings. “Brokers say,” according to the Times, that with those “whisper listings,” the total “could easily top 40 or 50.”  But last year, only two homes in that 9-figure price category actually sold, according to Christie’s: a house in Hong Kong acquired by Alibaba’s Jack Ma for $193 million, just as Hong Kong’s housing bubble has begun to implode; and a townhouse in London that went for $132 million. In 2014, only five sold. In the prior three years combined, only eight sold. And now there are perhaps over 50 for sale…. And when was the last time this sort of pile-up happened? In 2007 and 2008, just as the housing market was beginning to spiral down and as the Financial Crisis was beginning to mature. So now, the same signs are popping up once again.

Case-Shiller: National House Price Index increased 5.2% year-over-year in March -- From the WSJ: U.S. Home Price Growth Remained Robust in March, Case-Shiller Says The S&P/Case-Shiller Home Price Index, covering the entire nation rose 5.2% in the 12 months ended in March, slightly less than a 5.3% increase in February. The 10-city index gained 4.7% from a year earlier and the 20-city index gained 5.4% year-over-year... Month-over-month prices the U.S. Index rose 0.7% in March before seasonal adjustment; the 20-city index rose 0.9% and the 10-city index rose 0.8% from February to March.  After seasonal adjustment, the national index rose 0.1% month-over-month, the 10-City index posted a 0.8% increase, and the 20-City index reported a 0.9% month-over-month increase.

Case-Shiller Home Price Rise Beats Expectations By Most In 2 Years - Following February's disappointing slowdown in home price appreciation, March's S&P/Case-Shiller 20-City home price index stabilized, rising 5.43% YoY (beating 5.16% expectations by the most in 2 years). However, the national home price index slowed further from 5.32% YoY in Feb to 5.15% YoY in March with Seattle, San Francisco, and Denver seeing the greatest monthly increases. The March home-price gains follow a round of more timely data that showed purchases of existing and new homes and contract signings on previously owned houses all strengthened more than expected in April after the economy’s sluggish start to the year. Potential buyers still might be challenged by limited inventories, especially among lower-priced homes, while finding support from steady job gains and cheap borrowing costs. “The economy is supporting the price increases with improving labor markets, falling unemployment rates and extremely low mortgage rates,” David Blitzer, chairman of the S&P index committee, said in a statement. “Another factor behind rising home prices is the limited supply of homes on the market.”

Case-Shiller Home Price Index March 2016 Rate of Growth Unchanged: The non-seasonally adjusted Case-Shiller home price index (20 cities) year-over-year rate of home price growth was unchanged at 5.3%.  20 city unadjusted home price rate of growth was unchanged month-over-month. [Econintersect uses the change in year-over-year growth from month-to-month to calculate the change in rate of growth]  Note that Case-Shiller index is an average of the last three months of data.  Comparing all the home price indices, it needs to be understood each of the indices uses a unique methodology in compiling their index - and no index is perfect. The National Association of Realtors normally shows exaggerated movements which likely is due to inclusion of more higher value homes. Case Shiller's David M. Blitzer, Chairman of the Index Committee at S&P Indices: Home prices are continuing to rise at a 5% annual rate, a pace that has held since the start of 2015. The economy is supporting the price increases with improving labor markets, falling unemployment rates and extremely low mortgage rates. Another factor behind rising home prices is the limited supply of homes on the market. The number of homes currently on the market is less than two percent of the number of households in the U.S., the lowest percentage seen since the mid- 1980s. Price movements vary across the country. The Pacific Northwest and the west continue to be the strongest regions. Seattle, Portland, Oregon and Denver had the largest year-over-year price increases. These cities also saw some of the largest declines in unemployment rates among the 20 cities included in the S&P/Case-Shiller Indices. The northeast and upper mid-west regions were at the other end of the ranking. The four cities with the smallest year-over-year prices gains were Washington DC, Chicago, New York, and Cleveland. The unemployment rates in Chicago and Cleveland rose from March 2015 to March 2016.

Case-Shiller Graphs: National House Price Index increased 5.2% year-over-year in March -- S&P/Case-Shiller released the monthly Home Price Indices for March ("March" is a 3 month average of January, February and March prices). This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index. From S&P: Home Prices Continue Steady Gains in March According to the S&P/Case-Shiller Home Price Indices  mThe S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, reported a 5.2% annual gain in March, down from 5.3% the previous month. The 10-City Composite and the 20-City Composites’ year-over-year gains remained unchanged at 4.7% and 5.4%, respectively, from the prior month...Before seasonal adjustment, the National Index posted a month-over-month gain of 0.7% in March. The 10-City Composite recorded a 0.8% month-over-month increase while the 20-City Composite posted a 0.9% increase in March. After seasonal adjustment, the National Index recorded a 0.1% month-over-month increase, the 10-City Composite posted a 0.8% increase, and the 20-City Composite reported a 0.9% month-over-month increase. After seasonal adjustment, six cities saw prices rise, one city was unchanged, and 13 cities experienced negative monthly price changes.

Real Prices and Price-to-Rent Ratio in March -- The year-over-year increase in prices is mostly moving sideways now around 5%. In March, the index was up 5.2% YoY.  In the earlier post, I graphed nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller, CoreLogic and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $274,000 today adjusted for inflation (37%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation). It has been almost ten years since the bubble peak.  In the Case-Shiller release this morning, the National Index was reported as being 3.0% below the bubble peak.   However, in real terms, the National index is still about 17% below the bubble peak. The first graph shows the monthly Case-Shiller National Index SA, the monthly Case-Shiller Composite 20 SA, and the CoreLogic House Price Indexes (through March) in nominal terms as reported. In nominal terms, the Case-Shiller National index (SA) is back to November 2005 levels, and the Case-Shiller Composite 20 Index (SA) is back to June 2005 levels, and the CoreLogic index (NSA) is back to August 2005. Real House Prices The second graph shows the same three indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices. In real terms, the National index is back to February 2004 levels, the Composite 20 index is back to November 2003, and the CoreLogic index back to February 2004. In real terms, house prices are back to early 2004 levels. This graph shows the price to rent ratio (January 1998 = 1.0). On a price-to-rent basis, the Case-Shiller National index is back to August 2003 levels, the Composite 20 index is back to June 2003 levels, and the CoreLogic index is back to October 2003. In real terms, and as a price-to-rent ratio, prices are back to late 2003 and early 2004 levels - and the price-to-rent ratio maybe moving a little more sideways now.

Just Released: 2016 SCE Housing Survey Shows Modest Decline in Home Price Expectations -- The Federal Reserve Bank of New York’s 2016 SCE Housing Survey indicates that home price growth expectations have declined somewhat relative to last year, but the majority of households still view housing as a good financial investment. Mortgage rate expectations have also declined since last year’s survey, and renters now perceive that it has become somewhat less difficult to get a mortgage if they wanted to buy a home.  This latest survey marks the third installment of the SCE Housing Survey, which has been fielded annually every February since 2014. With this release the New York Fed is also unveiling a new SCE Housing Survey interactive web feature, which presents time trends for variables of interest for the overall sample, as well as for various demographic groups. As in previous years, we are also releasing a detailed background report, which describes the sample and presents summary statistics for a larger number of questions.  The primary goal of the SCE Housing Survey is to provide rich and high-quality information on consumers’ experiences, behavior, and expectations related to housing. The survey, among other things, collects data on households’ home price growth perceptions and expectations, intentions regarding moving and buying in the future, and access to credit. For homeowners, we collect detailed information on their mortgage debt, past actions and experiences—such as foreclosure or refinancing—and expectations regarding future actions—such as taking out new debt or investing in the home. For renters, among other things, we elicit preferences for owning and perceptions regarding the ease of obtaining a mortgage.

New Home Sales Blow Through The Roof --  Robert Oak - The April 2016 New Residential Single Family Home Sales increased by an astounding 16.6% from March.  The monthly gain is also unusually outside the ±15.4% margin of error.  Monthly sales increased by 88,000 annualized units to 619,000 for the month.  This is the highest monthly percentage gain in 24 years and new home sales are now at an eight year high.  Sales were 545,000 a year ago.  The gain is clearly an unusual month for the annual gain is 23.8%.  The annual gain has a ±22.8% error margin.  In the new homes Census survey, amounts are annualized and represent what the yearly volume would be if just that month's rate were applied to the entire year.  The amounts are also seasonally adjusted.  The gains all point to a tightening housing market and thus prices will continue to rise.  Who can actually afford these homes is another matter.  The April 2016 average home sale price was $379,800.  This is a 7.3% monthly price rise and a very high amount of money as the average new home price.  From a year ago the average price has increased 13.5%. The median home price is $321,100,  This is a whopping 7.8% increase from the previous month.  For the year, the median new home sales price has increased a 9.7%.   Median means half of new homes were sold below this price and both the average and median sales price for single family homes are not seasonally adjusted. New homes available for sale is now 243,000 units, a -0.4% decline from last month.  From a year ago inventories have increased 17.4% and this is outside the ±6.0% margin of error.  The monthly error margin is ±1.6%.  The graph below shows how long it would take to sell the new homes on the market at each month's sales rate.  For February, the time stands at a very low 4.7 months.  This is -14.5% of a drop from last month and a 6.0% annual change.  The median time a house was completed and on the market to the time it sold was 4.3 months.  A year previous that time period was 4.0 months.

U.S. Houses Are Still Getting Bigger - Americans want bigger houses. Or at least that’s what they’re getting. The median size of a new single-family house was 2,467 square feet last year, the biggest on record, according to Census Bureau data out this week. With all that floor space, homes are 61% larger than the median from 40 years earlier and 11% larger than a decade earlier. “McMansion” may not be a popular term post-housing bust. But American homes have not only been getting larger, they’re also including more bathrooms and amenities such as air conditioning. Some 93% of new houses had air conditioning in 2015 compared with 46% in 1975. About 96% of new homes last year had at least two bathrooms versus 60% four decades earlier. That may go some way toward explaining rising prices. The median sales price of a new home was $296,400 last year, according to Census, a new high. Even when adjusted for inflation, new-home prices hit a record last year.  More recent data suggest the housing market is gaining strength amid steady job creation and low mortgage rates, though rising prices and short supplies are constraints. U.S. new-home sales in April posted their strongest month in more than eight years. And sales of existing homes, which account for the bulk of the market, rose for the second straight month in April, the National Association of Realtors said last month. A separate Commerce Department report out last week showed housing starts rebounded in April, leaving builders on pace to break ground on 778,000 single-family homes this year. Still, the number of starts remain well below historical norms.

McMansions Are Back And Are Bigger Than Ever -- There was a small ray of hope just after the Lehman collapse that one of the most lamentable characteristics of US society - the relentless urge to build massive McMansions (funding questions aside) - was fading. Alas, as the Census Bureau confirmed this week, that normalization in the innate American desire for bigger, bigger, bigger not only did not go away but is now back with a bang. According to just released data, both the median and average size of a new single-family home built in 2015 hit new all time highs of 2,467 and 2,687 square feet, respectively. And while it is known that in absolute number terms the total number of new home sales is still a fraction of what it was before the crisis, the one strata of new home sales which appears to not only not have been impacted but is openly flourishing once more, are the same McMansions which cater to the New Normal uberwealthy (which incidentally are the same as the Old Normal uberwealthy, only wealthier) and which for many symbolize America's unbridled greed for mega housing no matter the cost. Not surprisingly, as size has increased so has price: as we reported recently, the median price for sold new single-family homes just hit record a high of $321,100.

Changes to unrelated-adult housing rules could bring intentional communities out of the shadows -- Most families and neighborhoods don’t involve much forethought; as most teenagers would attest, you can’t choose your parents. Intentional communities — a form of housing co-operative where residents form a household organized around an idea — have a long history in cities like Minneapolis. But thanks to the city’s longstanding “unrelated adult” ordinances, these unique households have often been forced to remain off the books, technically illegal but overlooked by trusting neighbors. That might change this year as people from Minneapolis’ intentional communities are pushing changes to the city’s housing ordinance. If the proposed change passes, intentional communities might be embraced not just culturally, but legally in Minneapolis.The legal status of intentional communities in Minneapolis depends on the context. Some, like the Students' Co-operative on the University of Minnesota campus’ “frat row,” persist under antiquated zoning which allows for more residents. But most intentional communities in Minneapolis operate under the bureaucratic radar. It’s a tacit concept that doesn’t sit well with people like Lisa. “My understanding of the law is that more than five unrelated folk can’t live together legally,” she said. “[Intentional communities] function because we don’t cause too much trouble, and people who live there know their City Council member or something. It has to function through people’s privilege, which is pretty messed up.”

Construction Spending decreased 1.8% in April - Earlier today, the Census Bureau reported that overall construction spending decreased 1.8% in April compared to March: The U.S. Census Bureau of the Department of Commerce announced today that construction spending during April 2016 was estimated at a seasonally adjusted annual rate of $1,133.9 billion, 1.8 percent below the revised March estimate of $1,155.1 billion. The April figure is 4.5 percent above the April 2015 estimate of $1,085.0 billion.  Private and public spending decreased in April: Spending on private construction was at a seasonally adjusted annual rate of $843.1 billion, 1.5 percent below the revised March estimate of $855.9 billion ... In April, the estimated seasonally adjusted annual rate of public construction spending was $290.8 billion, 2.8 percent below the revised March estimate of $299.2 billion.  This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted. Private residential spending has been increasing, but is 35% below the bubble peak. Non-residential spending is only 3% below the peak in January 2008 (nominal dollars). Public construction spending is now 11% below the peak in March 2009. The second graph shows the year-over-year change in construction spending. On a year-over-year basis, private residential construction spending is up 8%. Non-residential spending is up 3% year-over-year. Public spending is up 1% year-over-year. Looking forward, all categories of construction spending should increase in 2016. Residential spending is still very low, non-residential is increasing (except oil and gas), and public spending is also increasing after several years of austerity. This was well below the consensus forecast of a 0.6% increase for April, however construction spending for February and March were revised up.

April 2016 Construction Spending Growth Rate Declined.: The headlines say construction spending slowed, and was well below expectations. The backward revisions make this series wacky - but the rolling averages declined.

  • Growth decelertion 6.5 % month-over-month and Up 4.5 % year-over-year.
  • Inflation adjusted construction spending up 2.6 % year-over-year.
  • 3 month rolling average is 8.8 % above the rolling average one year ago, and down 1.6 % month-over-month. As the data is noisy (and has so much backward revision) - the moving averages likely are the best way to view construction spending.

US Census Analysis:

  • Down 1.8 % month-over-month and Up 4.5 % year-over-year (versus the reported 8.0 % year-over-year growth last month).
  • Market expected 0.1 % to 0.9 % month-over-month (consensus +0.6) versus the -1.8 % reported

Construction spending (unadjusted data) was declining year-over-year for 48 straight months until November 2011. That was four years of headwinds for GDP.

U.S. construction spending posts largest drop in more than five years | Reuters: U.S. construction spending recorded its biggest decline in more than five years in April as outlays fell broadly, which could prompt economists to lower their second-quarter growth estimates. Construction spending tumbled 1.8 percent after an upwardly revised 1.5 percent jump in March, the Commerce Department said on Wednesday. April's drop was the largest since January 2011. Economists polled by Reuters had forecast construction spending rising 0.6 percent in April after a previously reported 0.3 percent increase in March. Construction outlays were up 4.5 percent from a year ago. The weak construction report bucked fairly strong April data on consumer spending, industrial production, goods exports and housing, which have bolstered views the economy was regaining speed after growth braked to a 0.8 percent annualized rate in the first quarter. As a result of the soft report, second-quarter gross domestic product estimates, currently ranging as high as a 2.9 percent rate, could be cut. However, the sharp upward revision to March's construction spending suggests the first-quarter GDP growth estimated could be revised higher. In April, construction spending was held down by a 1.5 percent drop in private construction, which was the largest decline since January 2013. Outlays on private residential construction also fell 1.5 percent as spending on multifamily buildings tumbled 3.1 percent. Spending on private nonresidential structures plunged 1.5 percent in April. Weak spending on nonresidential structures such as gas and oil well drilling contributed to slow economic growth at the start of the year. Public construction spending dropped 2.8 percent in April as outlays on state and local government construction projects, the largest portion of the public sector segment, tumbled 3.0 percent. Federal government construction spending slipped 0.2 percent.

Construction Spending Collapses - Worst April Since 2009 -- Following a hope-strewn bounce in February and March, US Construction Spending plunged 1.8% in April (massively worse than the expected 0.6% rise). This is the biggest monthly drop since January 2011 as while religious construction surged 9.6%, Commercial, Healthcare, and Education construction all plunged with Communications and highway building collapsing 7.7% and 6.5% respectively. We ares ure wether will be blamed but the 1.5% drop in residential construction is rather notable for an April - it is the weakest April since 2009.

Personal Income increased 0.4% in April, Spending increased 1.0% -- The BEA released the Personal Income and Outlays report for April:  Personal income increased $69.8 billion, or 0.4 percent April, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $119.2 billion, or 1.0 percent.  ...Real PCE -- PCE adjusted to remove price changes -- increased 0.6 percent in April, in contrast to a decrease of less than 0.1 percent in March. ... The price index for PCE increased 0.3 percent in April, compared with an increase of 0.1 percent in March. The PCE price index, excluding food and energy, increased 0.2 percent, compared with an increase of 0.1 percent.  The April PCE price index increased 1.1 percent from April a year ago. The April PCE price index, excluding food and energy, increased 1.6 percent from April a year ago.  The following graph shows real Personal Consumption Expenditures (PCE) through April 2016 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.The dashed red lines are the quarterly levels for real PCE. The increase in personal income was at consensus expectations. And the increase in PCE was above the consensus. A solid start for Q2. On inflation: The PCE price index increased 1.1 percent year-over-year due to the sharp decline in oil prices. The core PCE price index (excluding food and energy) increased 1.6 percent year-over-year in April.

Personal Spending Spikes Most Since Aug 2009 As Fuel Costs Surge -- Having disappointed in March (just +0.1% MoM), expectations for April's personal spending were sky high at +0.7% MoM, despite expectations of a 0.4% rise in incomes. Analysts were not disappointed as the headline spending print was a 7-year high +1.0% MoM spike driven by a 3.8% MoM surge in Energy spending. With income rising as expected at 0.4% MoM, and thanks to revisions, the savings rate tumbled to its lowest since 2015. Sustainable? The 2nd biggest spike in spending since 2005... Thanks to the biggest monthly spike in energy spending since September 2005... With spending spiking and income rising only modestly - and thanks to revisions - the savings rate plunged in April... So last month's 5.4% savings rate - which was already the highest since 2012 - was revised to 5.9%, and it plunged back to 5.4% from there. Charts: Bloomberg

April 2016 Personal Consumption Growth Exceeds Expectations.: The data this month showed significant expenditure growth. The expenditure year-over-year growth rate increased as much as the income growth rate decreased. This is a good start for 2Q2016 GDP if one considers GDP as a good measure of the economy.

  • The monthly fluctuations are confusing. Looking at the inflation adjusted 3 month trend rate of growth, disposable income growth rate trend decelerated while consumption's growth rate accelerated.
  • Real Disposable Personal Income is up 3.3 % year-over-year (3.7 % last month), and real consumption expenditures is up 3.0 % year-over-year (2.6 % last month)
  • this data is very noisy and as usual includes moderate backward revision (detailed below) - this month the changes modified the year-over-year trends.
  • The second estimate of 1Q2016 GDP indicated the economy was expanding at 0.8 % (quarter-over-quarter compounded). Expenditures are counted in GDP, and income is ignored as GDP measures the spending side of the economy. However, over periods of time - consumer income and expenditure grow at the same rate.
  • The savings rate continues to be low historically, declined 0.5% this month - which means the increase in consumption came at the expense of savings..

The inflation adjusted income and consumption are "chained", and headline GDP is inflation adjusted. This means the impact to GDP is best understood by looking at the chained numbers. Econintersect believes year-over-year trends are very revealing in understanding economic dynamics. Per capita inflation adjusted expenditure has exceeded the pre-recession peak.

Personal income and spending, Chicago PMI, Consumer confidence, Dallas Fed, State Street investor confidence- - Yet another pretty good April release that I suspect will be reversed in May, as has happened with several other data series. And the increased spending on gasoline due to higher prices coincided with a reduction in the savings rate, as April spending outstripped income. And note that March’s +.1 was revised to 0 with this April number also subject to revision. Highlights April was definitely the month of the consumer as consumer spending surged 1.0 percent for the largest monthly jump of the economic cycle, since August 2009. The spending gain reflects strength in vehicle sales, which boosted durable spending by an outsized 2.3 percent in the month, and also reflects price effects for gasoline as spending on nondurable goods rose 1.4 percent. Spending on services, which is a bulwark of this report, rose a very solid 0.6 percent in the month. The income side of today’s report is also strong, up 0.4 percent which includes a 0.5 percent rise for wages & salaries. Consumers tapped into their savings for the spending rush as the savings rate fell 5 tenths to what is still a very solid 5.4 percent. Price data are mixed as the PCE core rate — which is the Fed’s most important gauge — rose only 0.2 percent with the year-on-year rate decidedly flat at an unchanged 1.6 percent and still, despite the gain for wages, 4 tenths below target. The overall price index shows more life, up 0.3 percent on the month and 3 tenths higher on the year at plus 1.1 percent. The spending side of this report is an eye catcher and if repeated in May could very well, despite the lack of pressure on core prices, raise the chances for a June FOMC rate hike. Note that unit vehicle sales, to be posted on tomorrow’s calendar, will offer the first substantial clues on consumer spending in May. "

US Government "Finds" Americans Had $70 Billion More In Disposable Income -- Just one week after the US Department of Commerce quietly slashed historical US capex spending by billions of dollars following a major data revision...... it was time for another major revision to a series that is nearer and dearer to most Americans' hearts, namely Disposable Personal Income. As we noted earlier, today's Personal Income and Spending report revealed that personal spending in April surged by 1%, or the most since August 2009 driven in part by a major jump on energy goods and services. Also driving the rebound was increased spending on motor vehicles and parts (+5.1% v. -1.4%) which was the largest 1 month gain since March 2014 (+6.0%). However, what was far more notable, were the prior revisions to US personal saving which saw the March print, already the highest since 2012, spike from 5.4% to 5.9%. It was only the April spending surge that pushed the savings rate back to what until last month was a three year high. But what prompted this major revision higher in savings? As it turns out, the US government decided to revise how much spending power Americans have (recall personal savings is simply personal income less personal spending) and as part of today's report it announced the following revision: Estimates have been revised for October through March. Changes in personal income, in current-dollar and chained (2009) dollar DPI, and in current-dollar and chained (2009) dollar PCE for February and for March -- revised and as published in last month's release -- are shown below.

These 7 data points reveal the sorry state of Americans’ finances -  More Americans may think they’re “living comfortably” or “doing okay,” but many are far from fine. In a survey of about 5,700 people released Wednesday by the Federal Reserve, respondents said they are doing better than in recent years, but the results show they are still facing tough choices, leading them to make some bad financial moves, from taking on risky loans to undersaving for retirement. Here are a few highlights:

  • 1. Americans have very little in emergency savings. About 46% of adults who responded to the Fed’s survey said they could not cover an emergency expense of $400 without selling something or borrowing money.
  • 2. They still can’t afford some health-care costs. About 22% of those who responded to the survey said they had a major unexpected medical expense for which they had to pay for out of pocket within the last year. . And other respondents said they skipped medical procedures and visits because they could not afford to pay for them.
  • 3. A large number of adults have absolutely no retirement savings. About 31% of non-retired adults have no retirement savings or pension at all — the same number that reported no retirement savings in 2014.
  • 4. Even those with retirement savings are unsure how to invest. Among respondents to the survey who have a 401(k), IRA or retirement savings, only 15% said they were “very confident” about their ability to make the right investment decisions for the account.
  • 5. Student loans aren’t the only kind of education-related debt. About 41% of adults who had at least some education beyond high school said they went into debt for those costs.More than 90% of those respondents said they turned to student loans, 21% said they had credit-card debt that was education-related and 3% said they have a home equity loan or line of credit used for education expenses.
  • 6. Many are still not completing higher education. Only 16% of young adults ages 25 to 34 whose parents both have a high school degree or less reported completing at least a bachelor’s degree.
  • 7. People like buying new cars, but don’t always have a plan for how to pay for them. About two thirds of those who purchased a new or used vehicle took out a loan to do so; half of those loans were from the location where they bought the vehicle and the other half mostly came from a bank, credit union or Internet lender.

Government may access citizens’ phone location data without a warrant – US Court of Appeals -- A federal appeals court has overturned a 2015 ruling prohibiting police from accessing citizens’ cell phone location data without a warrant, ruling that the Constitution allows the US government to obtain such records without a judge’s permission. The Fourth US Circuit Court of Appeals in Richmond, Virginia voted 12-3 that the Fourth Amendment permits the government to access cell-site location information (CSLI) without a court warrant. The Fourth Amendment ensures that “the right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated.”  However, this amendment does not cover location data, “undeniably” non-content information that customers share with mobile service providers every time they use their phones, Judge Diana Gribbon Motz wrote for the majority. “Whenever he expects his phone to work, he is permitting – indeed, requesting – his service provider to establish a connection between his phone and a nearby cell tower,” she wrote. “A cell phone user thus voluntarily conveys the information necessary.” Motz stressed that “location matters,” pointing out that every user understands this when they step out “to get a signal.”

The Secretive World of Selling Data About You: Consumer scores are similar to FICO credit scores, but unlike them aren’t regulated as to what factors can be used and how transparent the score and its contributing factors are to the scored individual.  You’ve probably had the experience of receiving mail, paper or electronic, from companies that obviously obtained your name from another company’s list of customers. But what if you were to have a medical operation refused, without knowing it was because the hospital obtained a secret report that listed you as unlikely to pay? What if a college covertly turned you or your child down because they suspected you were unlikely to complete four years of payment? What if you didn’t get a job, without knowing it was because of a report that listed you as a possible drug addict? Those are the claims being made by critics of data brokers, companies which collect personal information on people through both public and private sources—from court records to websites to store sales—and provide it to a wide range of buyers. A large portion of data brokerage is used for identity verification or fraud prevention. Much of it is used for traditional marketing. But data brokers are serving a growing clientele eager to know a person’s ethnicity, spending habits, sexual orientation, and specific illnesses such as HIV, diabetes, depression or substance abuse. This information may be found directly in data broker records, or, increasingly, it may be predicted from other data. It’s practically impossible for anyone to find all the information being passed around about themselves, or to correct it. As shady as it might sound, the entire industry is completely legal.

Consumer Confidence May 31, 2016: Consumer confidence slowed in May in what is, however, a mixed report that includes some positives. The headline index fell 2.1 points to a lower-than-expected 92.6 vs a revised 94.7 in April. The assessment of the jobs market is mostly lower but not entirely. In a negative, those describing jobs as currently hard to get rose 1.6 percentage points to 24.4 percent but April's 22.8 percent was unusually low and a likely outlier. Looking at the future assessment of the jobs market, more see fewer jobs ahead, at 18.1 percent vs. April's 16.7 percent. But now the good news and that's modest improvement in future income expectations where optimists rose 4 tenths to 16.2 percent and remain well ahead of pessimists which are at 12.4 percent. Buying plans are also a positive as more expect to buy a house within the next six months, up 7 tenths at 6.0 percent, and more expect to buy a car, up 8 tenths to 12.6 percent. Inflation did improve, up 1 tenth to 4.9 percent which is still low, however, for this particular reading. Indications on consumer confidence are generally mixed such as this report and similar indications from the weekly consumer comfort index. Clearly on the positive side, however, has been the closely watched consumer sentiment index which, in last week's update, showed solid strength in May. The bottom line, however, is whether the consumer is spending and, based on the latest home sales and this morning's personal income & outlays data, the answer is definitely yes. Watch tomorrow's calendar for vehicle sales and the first hard data on consumer activity in May.

Consumer Confidence Plunges To 10-Month Lows As Job 'Hope' Fades -- The Conference Board's consumer confidence measure has hovered around the 95 level for the last 6 months (as gas prices dipped and ripped, as stock prices dipped and ripped, and as political chaos reigned). This 'stability' is in stark contrast to other surveys of confidence such as Bloomberg's and Gallup's which are both at multi-month lows... until today. Consumer Confidence plunged to 92.6 (missing expectations of 96.1 by the most since November). May's dismal print (a 3 sigma miss) is below the lowest of 68 economist estimates as expectations slipped modestly but Present Situation tumbled with optimism on jobs sliding to 6-month lows.  Finally, government confidence data declines to other survey's realities...

Gasoline Prices: Down 40 cents per gallon from last year on Memorial Day --According to, gasoline prices are down to a national average of $2.33 per gallon. One year ago for the week of Memorial Day, prices were at $2.75 per gallon, and for the same week two years ago prices were $3.75 per gallon. This is the lowest Memorial Day gasoline prices since 2005 (even lower than in 2009). Ten years ago, price were at $2.94 per gallon, and fifteen years ago at $1.74.According to Bloomberg, WTI oil is at $49.61 per barrel, and Brent is at $49.60 per barrel.  Last year on Memorial Day, Brent was at $65.37 per barrel, and two years ago Brent was at $110.01.

They're Baaaack: Gas-Guzzlers Take Over The Roads Again - Sadly, everyone has seemingly forgotten that the lessons of the past can help prepare us for the future. For example, one would assume that the sting of owning an truck or SUV during the financial crisis would stick with consumers long enough to deter them from falling back into the same trap again just because oil was trading lower... then again, just as assuming market participants would remember that time period, one would be wrong. So here we are once again. Last year, SUVs outsold any other type of passenger vehicle in Europe for the first time, and the trend has continued into 2016 as Bloomberg reports.The same is occurring in the US, as today light trucks, vans, and SUVs account for 60 percent of the total vehicle sales, a level only reached briefly in 2005 when Brent averaged $55/bbl - meaning that once again low oil prices have lured consumers back into buying less fuel efficient vehicles.In April, the average car sold achieved a fuel economy of 25.2 mpg, down from a peak of 25.8 mpg set in August 2014. As Bloomberg notes, at current trends, 2016 will mark the first drop in average US fuel economy since at least 2007. "Fuel economy improvement is really flatlining. The gains completely stopped right at the same time that oil prices started to decline" said Sam Ori, executive director of Energy Policy Institute at the University of Chicago.

U.S. Light Vehicle Sales increase to 17.4 million annual rate in May --Based on a preliminary estimate from WardsAuto, light vehicle sales were at a 17.37 million SAAR in May (Preliminary estimate excluding Jaguar Land Rover and Volvo).  That is down about 1.5% from May 2015, and up slightly from the 17.32 million annual sales rate last month. This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for May (red, light vehicle sales of 17.37 million SAAR from WardsAuto). This was above the consensus forecast of 17.2 million SAAR (seasonally adjusted annual rate). The second graph shows light vehicle sales since the BEA started keeping data in 1967. Note: dashed line is current estimated sales rate. Sales for 2016 - through the first five months - are up about 2% from the comparable period last year.

Heavy-Duty Truck Orders Tumbled 31% in May - WSJ: Trucking companies ordered fewer new big rigs in May than they did a year ago, reflecting concerns that freight volumes will stay low heading into the peak shipping season. The industry ordered 14,300 Class 8 trucks, the type used on long-haul routes, extending a deep slowdown this year. The figure was down 31% from the same month in 2015, though up more than 4% from April, according to ACT Research. The trucking industry went on a vehicle buying binge in 2014 and 2015, and many companies are now struggling to find enough freight to fill their expanded fleets. Most large trucking companies have said they will sharply reduce purchases of new trucks until the market shows signs of improvement. Orders typically see a lull in May, but were still well below the 18,000 to 19,000 new vehicles per month needed just to replace aging and damaged trucks, analysts said. A turning point may be some time off, analysts say. Freight volumes typically pick up in late summer, as stores restock for back-to-school and holiday shopping seasons. However, retailers are holding onto historically high inventories, meaning they need to buy fewer goods to keep shelves full and replenish warehouse stocks. For the trucking industry, that means fewer trips between ports and distribution centers, or between warehouses and stores.

U.S. rail traffic falls 6.8 percent in May -- U.S. railroads reported a 6.8 percent decrease in carload and intermodal traffic last month compared with May 2015, the Association of American Railroads (AAR) announced yesterday. Carload traffic for the month totaled 962,571 carloads, down 10.3 percent, while intermodal traffic rolled in at 1,049,631 containers and trailers, down 3.3 percent compared with the same month last year. Combined, U.S. carload and intermodal originations were 2,012,202, according to an AAR press release. "Most economists think the economy has picked up in the second quarter from the dismal 0.8 percent growth in the first quarter, but so far railroads aren't seeing much of it," said John Gray, AAR's senior vice president of policy and economics. AAR officials noted that May 2016 rail traffic data does not include Memorial Day, but the holiday was included in May 2015 data. Last month, half of the 20 carload commodity categories tracked by AAR posted gains compared with May 2015. Those included: miscellaneous carloads, up 30.8 percent or 5,854 carloads; crushed stone, gravel and sand, up 5.3 percent or 4,670 carloads; and chemicals, up 3.8 percent or 4,514 carloads. Commodities that logged decreases were led by coal, which was down 29.6 percent or 109,276 carloads. Also reflecting decreases were petroleum and petroleum products, down 20.3 percent or 11,988 carloads; and metallic ores, down 12.9 percent or 3,701 carloads. Excluding coal, carloads slipped 0.2 percent last month compared with a year ago. "A variety of environmental and market forces continue to punish coal, and high business inventory levels and excess truck capacity, among other things, are pressuring rail intermodal volumes," Gray said. "Railroads are focusing on what they can control — providing safe, reliable service while looking forward to the forces they can't control turning their way."

Airfreight demand picks up but prospects look bleak - Air Cargo News: Air cargo demand picked up in April but IATA is downbeat in its expectations for the months ahead. The latest figures from the airline organisation show a 3.2% year-on-year improvement in air cargo demand in April led by growth in the Middle East and Latin America, with increases of 7.7% and 6.8% respectively. However, IATA said that that growth appeared to be stronger than in preceeding months of 2016 because of the disappearance of the distorting factor related to the 2015 industrial action at US west coast seaports which created a surge in airfreight demand. The organisation also warned that due to weak world trade, air cargo demand remained soft and lagged behind the relatively robust passenger side of the business. The first quarter of 2016 saw the first annual decline in trade volumes since the global financial crisis in 2009, and the World Trade Organization (WTO) predicts only sluggish growth for the remainder of 2016. “While the April uptick in demand growth for air cargo is encouraging, the overall economic environment is not. The decline in global trade does not bode well for air cargo markets in the months ahead,” said IATA’s director general and chief executive Tony Tyler. Yields also came under pressure during the month, IATA said, as the industry-wide load factor of 43.5% was 1.4 percentage points lower than the same month last year.

Trade Deficit at $37.4 Billion in April --Earlier the Department of Commerce reportedThe U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $37.4 billion in April, up $1.9 billion from $35.5 billion in March, revised. April exports were $182.8 billion, $2.6 billion more than March exports. April imports were $220.2 billion, $4.5 billion more than March imports.  The trade deficit was smaller than the consensus forecast of $41.0 billion.  Note: There were major revisions in this report, mostly exports were revised up for the last several years. The first graph shows the monthly U.S. exports and imports in dollars through April 2016.  Both imports and exports increased in April. Exports are 11% above the pre-recession peak and down 5% compared to April 2015; imports are 5% below the pre-recession peak, and down 5% compared to April 2015. The second graph shows the U.S. trade deficit, with and without petroleum. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products. Oil imports averaged $29.48 in April, up from $27.68 in March, and down from $46.47 in April 2015. The petroleum deficit has generally been declining and is the major reason the overall deficit has declined a little since early 2012. The trade deficit with China decreased to $24.3 billion in April, from $26.8 billion in April 2015. (Note that there were labor issues last year, and the ships were unloaded in March and April - pushing up imports from China). The deficit with China is a substantial portion of the overall deficit.

April 2016 Trade Data Improves But In Contraction Year-over-Year: A quick recap to the trade data released today continues to paint a relatively dismal view of global trade. The unadjusted three month rolling average value of exports accelerated and imports decelerated (but all rolling averages are in contraction). Many care about the trade balance which improved because exports improved more than imports. Import goods growth has positive implications historically to the economy - and the seasonally adjusted goods and services imports were reported up month-over-month. Econintersect analysis shows unadjusted goods (not including services) growth up 1.6 % month-over-month (unadjusted data) - down 7.6 % year-over-year (down 1.9 % year-over-year inflation adjusted). The rate of growth 3 month trend is decelerating and barely positive year-over-year. Exports of goods were reported up, and Econintersect analysis shows unadjusted goods exports growth deceleration of (not including services) 1.1 % month-over month - down 7.6 % year-over-year (down 2.3 % year-over-year inflation adjusted). The rate of growth 3 month trend is accelerating and is statistically unchanged year-over-year. 

  • The improvement in seasonally adjusted (but not inflation adjusted) imports was oil imports. Export increase was due to autos.
  • The market expected (from Bloomberg) a trade deficit of $-44.0 B to $-40.4 B (consensus $-41.0 billion deficit) and the seasonally adjusted headline deficit from US Census came in at a deficit of $37.4 billion.
  • It should be noted that oil imports were up 11 million barrels from last month, and down 5 million barrels from one year ago.
  • The data in this series is noisy, and it is better to use the rolling averages to make sense of the data trends.

US factory orders up 1.9 percent in April, best in 6 months - (AP) -- Orders to U.S. factories increased by the largest amount in six months but much of the strength came from a rise in demand for commercial aircraft. A key category that tracks business investment plans fell. Factory orders increased 1.9 percent in April, the biggest gain since a 2.4 percent rise in October, the Commerce Department reported Friday. Orders had been up 1.7 percent in March after having fallen in February. Demand in a category that serves as a proxy for business investment spending declined 0.6 percent after a small 0.3 percent increase in March and a 2.1 percent February decline. Manufacturing has been hurt in the past year by a big plunge in investment spending in the oil industry and weakness in exports, which reflect a global slowdown and the strong dollar. Orders for durable goods such as autos and appliances increased 3.4 percent, unchanged from a preliminary report, while demand for nondurable goods such as chemicals and paper, increased 0.4 percent after a 1.4 percent rise in March. The increase was led by a 65.3 percent surge in orders for commercial aircraft, a volatile category from month to month, which was rebounding after two months of declines. Orders for machinery fell 1.9 percent, led by an 86.1 percent plunge in demand for mining and oil field equipment. This sector has been hurt by the cutbacks in exploration and drilling that have come after the big plunge in energy prices. Demand for computers rose 3.5 percent while orders for furniture dropped 2.2 percent in April.

April 2016 Manufacturing New Orders Improved: US Census says manufacturing new orders improved. Our analysis says sales improved but less than the headline numbers. The rolling averages improved, but remain in contraction. Aircraft new orders were the major tailwind - but most of the data was mixed.

  • The seasonally adjusted manufacturing new orders is up 1.9 % month-over-month, and down 2.3 % year-to-date (last month was down 2.0 % year-to-date)..
  • Market expected (from Bloomberg) month-over-month growth of 0.3 % to 3.0 % (consensus +2.0 %) versus the reported +1.9 %.
  • Manufacturing unfilled orders up 0.6 % month-over-month, and down 1.6 % year-to-date.
  • Unadjusted manufacturing new orders growth accelerated 0.1 % month-over-month, and down 2.7 % year-over-year.
  • Unadjusted manufacturing new orders (but inflation adjusted) up 0.1 % year-over-year - there is deflation in this sector.
  • Three month rolling new order rolling averages accelerated 0.2 % month-over-month, but is down 1.8 % year-over-year.
  • Unadjusted manufacturing unfilled orders growth accelerated 0.8 % month-over-month, and down 1.6 % year-over-year

As a comparison to the inflation adjusted new orders data, the manufacturing subindex of the Federal Reserves Industrial Production growth decelerated 3.0 % month-over-month, and up 0.5 % year-over-year.

Factory Orders Scream Recession... And This Is How A Big Miss Was Avoided -- Even without digging too deep into the factory orders number, it was dreadful: while "rising" 1.9% monthly, or in line with expectations, the series posted its 18th consecutive annual decline. A stretch of declines this long has never happened before in US history without the economy being in concurrent recession.However, since we always enjoy peeking behind the headlines, we noticed something typically fishy. As noted above, the factory orders data met expectations of a 1.9% sequential increase. There was, however a catch. Taking a look at the headline factory orders series reported in June vs May, one notices a substantial revision lower to the series. Zooming one one finds precisely how the Department of Commerce made sure the series "met" the expectations. Because while Wall Street was expecting a bounce of 1.9% from the original March print of $458.4 billion, or a number which would have been $467 billion, instead it got a 1.9% bounce... from the downward revised $451.8 billion. In other words, instead of a "meet" of 1.9%, if one used the original April print, the sequential increase in May was only 0.5%. Then again, with the US economy in recession, even we wonder why we are splitting hairs.

Dallas Fed Mfg Survey May 31, 2016: The Dallas manufacturing production index fell into negative territory with a reading of minus 13.1 from a positive 5.8 reading in April. At the same time, the May general activity index sank to minus 20.8 from minus 13.9 last time. This was the 17th consecutive negative reading. New orders also fell back into negative territory. After popping up 6.2 in April after four consecutive declines, new orders dropped to a reading of minus 14.9. Employment remains weak, at minus 6.7 for a fifth straight contraction. Price data showed some life with wages up and raw materials, which had been week, also up. Selling prices, however, remain a negative, at minus 3.3, an improvement from minus 6.6 in April. The ongoing recovery for oil is having a positive effect on energy prices and is likely to have a wider positive effect for the Texas manufacturing area eventually. However, this report is a setback.

Dallas Fed: Regional Manufacturing Activity declined in May -- From the Dallas Fed: Texas Manufacturing Activity Declines - Texas factory activity declined in May after two months of increases, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell from 5.8 to -13.1, hitting its lowest reading in a year.  Other measures of current manufacturing activity also reflected contraction this month. The new orders index fell more than 20 points to -14.9 after pushing into positive territory last month. The growth rate of orders index has been negative since late 2014 and fell to -14.7 in May after climbing to near zero in April. The capacity utilization and shipments indexes returned to negative territory after two months of positive readings, coming in at yearlong lows of -11.0 and -11.5, respectively. Perceptions of broader business conditions were more pessimistic this month. The general business activity index declined from -13.9 to -20.8, and the company outlook index fell 10 points to -16.1. Latest readings on employment and workweek length indicated a fifth consecutive month of contraction in May. The employment index moved down three points to -6.7. ... The impact of lower oil prices is still being felt in the Dallas region. This was the last of the regional Fed surveys for May. Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Dallas Fed Tumbles (Again) - 17th Consecutive Month Of Contraction This is the 17th month in a row of contraction for Dallas Fed's manufacturing survey as the headline print plunged to -20.8 from -13.9 (missing expectations of a hopeful bounce to -8.0 by 6 standard deviations). Despite the unequivocally good rebound in oil prices, sentiment in Dallas remains dismal with new orders crashing as even 'hope' has now given way to realism as the 6-month outlook tumbles back into negative territory. This is a 6 standard deviation miss... It appears higher oil prices are not helping... As The Dallas Fed reports, Texas factory activity declined in May after two months of increases, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell from 5.8 to -13.1, hitting its lowest reading in a year. Other measures of current manufacturing activity also reflected contraction this month. The new orders index fell more than 20 points to -14.9 after pushing into positive territory last month. The growth rate of orders index has been negative since late 2014 and fell to -14.7 in May after climbing to near zero in April. The capacity utilization and shipments indexes returned to negative territory after two months of positive readings, coming in at yearlong lows of -11.0 and -11.5, respectively. Perceptions of broader business conditions were more pessimistic this month. The general business activity index declined from -13.9 to -20.8, and the company outlook index fell 10 points to -16.1. Latest readings on employment and workweek length indicated a fifth consecutive month of contraction in May. The employment index moved down three points to -6.7. Sixteen percent of firms noted net hiring, and 22 percent noted net layoffs in May. The hours worked index posted a double-digit decline from its April reading, coming in at -11.8. Charts: Bloomberg

Chicago PMI May 31, 2016: Highlights: Businesses in the Chicago area are reporting slowing conditions with the PMI down 1.1 points to a sub-50 contractionary reading of 49.3. New orders, which slowed in the prior month, are now also in outright contraction as are backlog orders. Production is also in contraction while employment, though slowing, is still above 50 -- but likely not for long given the weakness in orders and production. A key indication of overall weakness is sharp contraction underway in inventories which are at their lowest point since November 2009. The decrease in inventories points to caution among businesses which apparently do not see demand improving. The prices paid index slowed but remains above 50 to indicate monthly growth, which is a plus right now as policy makers try to stimulate inflation. The Chicago PMI has been up and down this year though the trend is pointing lower. Still, this report is dwarfed in importance by the big surge posted in this morning's consumer income and spending data. The Chicago PMI samples companies from both the manufacturing and non-manufacturing sectors.

May 2016 Chicago Purchasing Managers Barometer Now In Contraction.: The Chicago Business Barometer which recently has spent more time in contraction than expansion returned to contraction. This survey came in below expectations. From Bloomberg, the market expected the index between 49.0 to 52.2 (consensus 50.7) versus the actual at 49.3. A number below 50 indicates contraction. Chief Economist of MNI Indicators Philip Uglow said, While expectations are that growth in the US economy will bounce back in Q2, the evidence from the MNI Chicago Report shows activity weakening from an already low level. Firms ran down stocks at the fastest pace for more than 6 years in May, and while a rebuilding over the coming months could support output, the underlying message appears to be that businesses are not confident about the outlook for growth. From ISM Chicago: The MNI Chicago Business Barometer fell 1.1 points to 49.3 in May from 50.4 in April, the lowest level since February and the sixth time it has been in contraction over the past 12 months. Following the decline in April, the latest results show activity stumbling in the second quarter, following only moderate growth in Q1. Barring a solid revival in June, Q2 could be the weakest outturn since Q4 2015 given the April-May average of just 49.9. The Barometer's decline was led by a 6.6 point fall in Production and was accompanied by a mild setback in New Orders, with both falling below 50. While these were the only components that fell between April and May, out of the five components which make up the Barometer, four of them were in contraction. Only Supplier Deliveries was above 50.

US Manufacturing Weakest Since 2009: "No Comfort For Those Looking For A Rebound" -- Following China's drop, Japan's plunge, and Brazil's crash, US Manufacturing PMI slipped once again to 50.7 - its weakest since September 2009 amid " subdued client demand and heightened economic uncertainty." New orders bounce is over as it fell to its weakest since Dec 2015 and worse still input costs are surging to 9 month highs as employment suggest payrolls will remain under pressure. ISM Manufacturing data improved marginally - leaving 50% of the last 10 months in contraction and 50% in expansion. The improvement seesm based on a rise in prices paid and customer inventories - hardly a positive sustainable trend. As Markit concludes, "for those looking for a rebound in the economy after the lacklustre start to the year, the deteriorating trend in manufacturing is not going to provide any comfort.” ISM and PMI Manufacturing  indices had recoupled in the last 2 months after ISM's big plunge. ISM Breakdown:

  • PMI rose to 51.3 vs 50.8 last month
  • New orders fell to 55.7 vs 55.8
  • Employment unchanged at 49.2 vs 49.2
  • Supplier deliveries rose to 54.1 vs 49.1
  • Inventories fell to 45.0 vs 45.5
  • Customer inventories rose to 50.0 vs 46.0
  • Prices paid rose to 63.5 vs 59.0
  • Backlog of orders fell to 47.0 vs 50.5
  • New export orders unchanged at 52.5 vs 52.5
  • Imports unchanged at 50.0 vs 50.0

ISM Mfg Index June 1, 2016: A slowing in delivery times gave a lift to the ISM's manufacturing index which rose 5 tenths to a higher-than-expected but still subdued 51.3 for May. The delivery index jumped 5 points to 54.1 to reflect delays that are often, but perhaps not in this case, tied to strong demand and resulting congestion in the supply chain. In contrast, key readings in the report are mostly little changed with new orders down 1 tenth to 55.7, which is well above 50 and pointing to solid rates of general activity in the months ahead. Export orders, in an important positive, remain above 50, unchanged at 52.5, though total backlog orders moved into contraction, down 3.5 points to 47.0. Production slowed but remains above 50, down 1.6 points to 52.6. Efforts to work down inventories are a likely factor behind the slowing in production as raw material inventories fell 1/2 point and remain below 50 at 45.0. Low inventories are a plus for employment which however continues to struggle in this report, unchanged at 49.2 for the 6th straight sub-50 reading in a row. The prices paid index, which is a measure of input costs, rose 4.5 points and is well above 50 at 63.5 in what is good news for policy makers who are trying to stimulate inflation. The increase in costs likely reflects higher energy prices and also higher steel prices. Focusing on orders is essential to understand this report -- and new orders are solid and export orders are the highest they've been since November 2014. For a factory sector that has been barely above water, the ISM offers a welcome indication of health.

ISM Manufacturing index increased to 51.3 in May --The ISM manufacturing index indicated expansion for the third consecutive month in May, following five months of contraction. The PMI was at 51.3% in May, up from 50.8% in April. The employment index was at 49.2%, unchanged from 49.2% in April, and the new orders index was at 55.7%, down from 55.8% in April. From the Institute for Supply Management: May 2016 Manufacturing ISM® Report On Business®  "The May PMI® registered 51.3 percent, an increase of 0.5 percentage point from the April reading of 50.8 percent. The New Orders Index registered 55.7 percent, a decrease of 0.1 percentage point from the April reading of 55.8 percent. The Production Index registered 52.6 percent, 1.6 percentage points lower than the April reading of 54.2 percent. The Employment Index registered 49.2 percent, the same reading as in April. Inventories of raw materials registered 45 percent, a decrease of 0.5 percentage point from the April reading of 45.5 percent. The Prices Index registered 63.5 percent, an increase of 4.5 percentage points from the April reading of 59 percent, indicating higher raw materials prices for the third consecutive month. Manufacturing registered growth in May for the third consecutive month, as 14 of our 18 industries reported an increase in new orders in May (down from 15 in April), and 12 of our 18 industries reported an increase in production in May (down from 15 in April)."

ISM new orders and inventories: manufacturing recession has ended: New orders from the May ISM manufacturing index showed surprising strength, with a reading over 55 (blue in the graphs below) for the third month in a row, while inventories (red) continued to shrink stoutly, with a reading just above 45. Here is a graph of new orders and inventories for the last 10 years, with both series normed to 0 to show how these two readings have correlated with the economy: This is in stark difference to the regional Fed new orders indexes in May, all of which sank out of expansion:

  • Empire State down -16.5 to -5.5
  • Philly down -1.5 to -1.5
  • Richmond down -18 to 0
  • Kansas City -3  to -3
  • *Dallas down -20.9 to -14.9
  • Month over month rolling average: -3 from -2 to -5

While I am disappointed that the regional Fed indexes did not accurately forecast the ISM index, the fact remains that the ISM index is much more reliable -- it is national and has a nearly 70 year history of reliably signaling expansions and contractions: Here is the entire history of new orders and inventories from the index since its inception in 1948:  There has *never* been a recession with new orders over 55 (let alone 3 months in a row!). When inventories have contracted below the 45 reading and then improved to it, that has almost always correlated with being early in a recovery from a downturn.  This bodes well for May industrial production and total business sales, two of the most important coincident measures of the economy.  In short, while "it's different this time" is always a possibility, it is increasingly likely that the industrial recession led by commodity extraction and transport bottomed out in March. 

ISM New York Collapses To 7-Year Lows -- ISM New York's purchasing managers survey collapsed in May from 57.00 to 37.2 - the lowest since April 2009. The bloodbath is the biggest monthly drop since May 2007. While 'hope' rose rather stunningly from 56.0 to 68.0 - the highest in years, current employment and 'quantity of purchases' both plunged to cycle lows.  So much for that April bounce!  Note we have adjusted the chart by centering ISM NY 50 print at 0 which separates expansion from contraction.  Transitory?

ISM Non-Mfg Index June 3, 2016: The ISM's non-manufacturing index confirms what is proving to be a very weak month of May for the nation's economy. The index fell a very sharp 2.8 points to 52.9 to signal the weakest rate of monthly growth since January 2014. The report's employment index, in what matches this morning's data from the government, is the weakest component, down 3.3 points to a 49.7 level that signals marginal month-to-month contraction in the sample's employment levels. But there is a solid signal of strength in the report as new orders, though falling 5.7 points, are still well over the breakeven level at 54.2. Yet even here, the rate of growth is the slowest since February 2014. Another plus, or at least not a negative, is no change for backlog orders which are at 50.0, still the weakest reading since May 2015. Demand for the nation's services is always a plus for trade data but this report is hinting at a downturn with the export index at 49.0 and the lowest level since April last year. ISM's sample was active as far as output goes with the business activity index at 55.1, yet still down 3.7 points, and were still active importers with the related index at 53.5 for only a half point dip. Prices are also a positive, up 2.2 points to 55.6 and reflecting increases underway in energy prices in what is welcome news for policy makers who are trying to stimulate inflation. Otherwise, however, there is very little welcome news at all in the May report. This report has been consistently upbeat which underscores the unwelcome importance of today's results.

ISM Non-Manufacturing Index decreased to 52.9% in May --The May ISM Non-manufacturing index was at 52.9%, down from 55.7% in April. The employment index decreased in May to 49.7%, down from 53.0% in April. Note: Above 50 indicates expansion, below 50 contraction.  From the Institute for Supply Management: May 2016 Non-Manufacturing ISM Report On Business®  "The NMI® registered 52.9 percent in May, 2.8 percentage points lower than the April reading of 55.7 percent. This represents continued growth in the non-manufacturing sector at a slower rate. The Non-Manufacturing Business Activity Index decreased to 55.1 percent, 3.7 percentage points lower than the April reading of 58.8 percent, reflecting growth for the 82nd consecutive month, at a slower rate in May. The New Orders Index registered 54.2 percent, 5.7 percentage points lower than the reading of 59.9 percent in April. The Employment Index decreased 3.3 percentage points to 49.7 percent from the April reading of 53 percent and indicates contraction after two consecutive months of growth. The Prices Index increased 2.2 percentage points from the April reading of 53.4 percent to 55.6 percent, indicating prices increased in May for the second consecutive month. According to the NMI®, 14 non-manufacturing industries reported growth in May. Respondents’ comments are mixed and vary by industry and company. Overall, the report reflects a cooling-off and slowing in momentum from the previous months of growth for the non-manufacturing sector." This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.This was below the consensus forecast of 55.5, and suggests slower expansion in May than in April.

May 2016 ISM Services Index Slows: The ISM non-manufacturing (aka ISM Services) index continues its growth cycle, but declined from 55.7 to 52.9 (above 50 signals expansion). Important internals declined but remain in expansion. Market PMI Services Index was released this morning, it also declined but remains in expansion.. This was below expectations (from Bloomberg) of 54.8 to 56.5 (consensus 55.5). For comparison, the Market PMI Services Index was released this morning also - and it improved into expansion.  US Services Purchasing Managers' Index (PMI) is based on monthly questionnaire surveys collected from over 400 U.S. companies which provide a leading indication of what is happening in the private sector services economy. It is seasonally adjusted and is calculated from seven components, including New Business, Employment and Business Expectations. There are two sub-indexes in the NMI which have good correlations to the economy - the Business Activity Index and the New Orders Index - both have good track records in spotting an incipient recession - both remaining in territories associated with expansion.This index and its associated sub-indices are fairly volatile. The Business Activity sub-index declined 3.7 points and now is at 55.1. The New Orders Index declined 5.7 and is currently at 54.2.

US Services Economy 'Bounce' Dies - ISM/PMI Near "Weakest Expansion Since The Recession" -- The brief April bounce in US Services economy has died as PMI slipped back to 51.3 as Markit warns "the service sector reported one of the weakest expansions since the recession." This weakness was followed by ISM Services which plunged to its lowest since Feb 2014, crushing the hopes of the April bounce. Employment plunged into contraction and New Orders tumbled, with the surveys pointing to GDP growing at an annualised rate of just 0.7-8% in the second quarter.

Weekly Initial Unemployment Claims decrease to 267,000 --The DOL reported: In the week ending May 28, the advance figure for seasonally adjusted initial claims was 267,000, a decrease of 1,000 from the previous week's unrevised level of 268,000. The 4-week moving average was 276,750, a decrease of 1,750 from the previous week's unrevised average of 278,500. There were no special factors impacting this week's initial claims. This marks 65 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.

ADP: Private Employment increased 173,000 in May  - From ADP: Private sector employment increased by 173,000 jobs from April to May according to the May ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis....Goods-producing employment dropped by 1,000 jobs in May after losing a 7,000 (revised) in April. The construction industry added 13,000 jobs, in line with the previous month. Meanwhile, manufacturing lost 3,000 jobs after losing 10,000 the previous month. Service-providing employment rose by 175,000 jobs in May, a slight increase over April’s upwardly revised 173,000. The ADP National Employment Report indicates that professional/business services contributed 43,000 jobs, up from April’s upwardly revised 38,000. Trade/transportation/utilities grew by 28,000, up a bit from the 24,000 jobs added the previous month. Financial activities added 13,000. .. Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth has moderated this spring as energy companies and manufacturers shed jobs. Retailers are also more circumspect in their hiring. Despite the recent slowdown, job growth remains strong enough to reduce underemployment.”This was close to the consensus forecast for 175,000 private sector jobs added in the ADP report..

ADP: A Mild Rebound For US Private Payrolls In May -- Private-sector job growth in the US remained modest in May, according to this morning’s update of the ADP Employment Report. Although companies added slightly more workers last month vs. April, the monthly increase—175,000—was still close to the slowest advance on a month-to-month basis over the last three years. Two other employment releases—the government’s jobless claims data and Challenger Gray’s job cuts report—offer more encouraging data. Overall, it’s fair to say that the latest employment figures offer an upbeat profile, but with several caveats. Let’s start with the ADP report. The main takeaway: job growth is still forging ahead, but the trend continues to slow, albeit marginally so. The year-over-year growth in private-sector employment ticked down again in May, rising 2.04% vs. a year ago. That’s still a solid pace, but it’s also the slowest rate in two years. That’s a sign that the labor market recovery is aging. The deceleration phase could roll on for some time before dipping to a critical level that triggers a recession warning. In any case, the evidence is mounting that the strongest phase of job growth is behind us. That’s not the end of the world, but it’s a reminder that the margin for disappointment is narrowing. Weaker-than-expected economic news in the months ahead will be harder to dismiss when labor-market growth is easing. “Job creation appears to have slowed as we move further into 2016,” says Ahu Yildirmaz, head of the ADP Research Institute. “Challenging global conditions affecting hiring at large companies and a tightening labor market for skilled workers are among the factors that may be contributing to the slowdown.”

ADP Employment "Moderates" As Manufacturing Jobs Fall Again -- Printing a perfectly as-expected 173k rise in jobs for May, ADP Employment change offers hope for tomorrow's payrolls to give The Fed the go-ahead for a rate-hike. This is still the second lowest print since last September as manufacturing (and goods-producing) jobs fell once again. A little hope for tomorrow... But note that today's ADP report does not include the Verizon strike data which means that the 173k ADP print is likely higher than what tomorrow's payrolls print will be (by around 25-35k)  As ADP notes...  Payrolls for businesses with 49 or fewer employees increased by 76,000 jobs in May, down from an upwardly revised 101,000 in April. Employment at companies with 50-499 employees increased by 63,000 jobs, up from last month’s 39,000. Employment at large companies – those with 500 or more employees – increased by 34,000, up from April’s 25,000. Companies with 500-999 employees added 11,000 and companies with over 1,000 employees added 24,000 this month "Job creation appears to have slowed as we move further into 2016,” said Ahu Yildirmaz, VP and head of the ADP Research Institute. “Challenging global conditions affecting hiring at large companies and a tightening labor market for skilled workers are among the factors that may be contributing to the slowdown.” Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth has moderated this spring as energy companies and manufacturers shed jobs. Retailers are also more circumspect in their hiring. Despite the recent slowdown, job growth remains strong enough to reduce underemployment.”  The charts:

The Verizon Strike and the May Employment Report --Approximately 40,000 Verizon workers went on strike on April 13th, and returned to work on June 1st. What will be the impact on the May employment report? These workers were on strike during the reference period in May and will not be counted as employed.  Since the strike is over, they will be counted as employed in the June 2016 report.   To see the impact, we can look back at the Verizon strike in 2011.  That strike started on Aug 6th and ended on Aug 20th.  Those workers were not employed during the August reference period, and the BLS reported a loss of 48.6 thousand telecommunications workers in August 2011, and a gain of 43.0 thousand workers in September 2011 seasonally adjusted (SA). The impact from the strike on the May employment report will be obvious in the Information Super Sector under the Telecommunications Industry. This is one of the first items I will check tomorrow morning. If the employment report shows a loss of 40,000 telecommunications workers (SA), then it will be reasonable to add those to the headline employment number to look at the underlying trend (they will be added back in the June BLS report - and we will need to subtract those workers in June to see the underlying trend). As an example, if the BLS reports 120,000 jobs added in May, and 40,000 telecommunication jobs lost in May, the underlying trend would be 160,000 (and the reverse in June). Note: Some of the recent increase in the 4-week average of unemployment claims is probably related to the Verizon strike too.

May Employment Report: 38,000 Jobs, 4.7% Unemployment Rate -- From the BLSThe unemployment rate declined by 0.3 percentage point to 4.7 percent in May, and nonfarm payroll employment changed little (+38,000), the U.S. Bureau of Labor Statistics reported today. Employment increased in health care. Mining continued to lose jobs, and employment in information decreased due to a strike. ... The change in total nonfarm payroll employment for March was revised from +208,000 to +186,000, and the change for April was revised from +160,000 to +123,000. With these revisions, employment gains in March and April combined were 59,000 less than previously reported. Over the past 3 months, job gains have averaged 116,000 per month....In May, average hourly earnings for all employees on private nonfarm payrolls increased by 5 cents to $25.59, following an increase of 9 cents in April. Over the year, average hourly earnings have risen by 2.5 percent.

May Jobs Report – The Numbers - WSJ: The Labor Department said the pace of hiring slowed sharply in May. This is the last jobs report before the Federal Reserve’s June 14-15 meeting, where policy makers will decide their next step on interest rates. Here are highlights–or lowlights–from Friday’s report.  U.S. employers added a seasonally adjusted 38,000 jobs in May, the worst monthly performance since September 2010—when the economy shed jobs. The latest number was well below the 158,000 forecast by economists. Over the past three months, employment growth has averaged 116,000, a big slowdown from the 219,000 average during the 12 months prior to May. Some 31,500 Verizon Communications Inc. workers went on strike last month, a labor dispute that showed up in Friday’s jobs numbers. Employment in the information sector fell by 34,000 in May. Verizon struck a deal with the Communications Workers of America and International Brotherhood of Electrical Workers at the end of last month, returning workers to their jobs. If that contract is ratified later this month, May’s telecom losses should reverse in the June employment report. Average hourly earnings of private-sector workers rose 5 cents to $25.59 last month. That’s a 2.5% increase from a year earlier and a little better than the 2.1% average during the latest expansion. The average workweek, meanwhile, held steady at 34.4 hours last month. Wage growth has barely beat inflation in recent years, so a stronger uptick in take-home pay would be welcome. The unemployment rate was 4.7% in May, showing that 7.4 million Americans who wanted a job couldn’t find one last month. That was the lowest level since November 2007 but largely reflected more people dropping out of the workforce. The unemployment figure averaged 4.6% in the years before the recession then peaked at 10% in 2009. The current reading is close to the rate many economists consider full employment. The headline unemployment rate gets much of the attention, but it’s not the only measure of labor-market slack. An alternative rate, which includes people looking for work, stuck in part-time jobs or who have been discouraged about finding a job, held steady at 9.7% in May. That matches the lowest level since 2008. In May, the share of Americans participating in the workforce fell to 62.6%, the lowest level of the year. The rate started climbing in the fall and through the early months of the year, but that trend seems to have reversed. If the labor market gets stronger, that should draw more workers back, but an aging population means it likely won’t return to levels seen in the years just before the 2007-2009, when the level hovered around 66%.

BLS Jobs Growth Rate Pretty Bad In May 2016.: The BLS job situation headlines bad. Jobs growth decelerated this month - and the previous month's data was downwardly revised. The Verizon stike did not help but most the internals were weak. Economic intuitive sectors were mixed. The effect of the Verizon strike was a reduction of 34,000 jobs as shown on the graph below.

  • The unadjusted jobs increase month-over-month was well below average for times of economic expansion.
  • Economic intuitive sectors of employment were mixed.
  • This month's report internals (comparing household to establishment data sets) was consistent with the household survey showing seasonally adjusted employment improving 26,000 vs the headline establishment number of growing 38,000. The point here is that part of the headlines are from the household survey (such as the unemployment rate) and part is from the establishment survey (job growth). From a survey control point of view - the common element is jobs growth - and if they do not match, your confidence in either survey is diminished. [note that the household survey includes ALL jobs growth, not just non-farm).
  • The household survey removed 458,000 people from the workforce.
  • BLS reported: 38K (non-farm) and 25K (non-farm private). Unemployment rate significantly declined to 4.7% from 5.0%.
  • ADP reported: 173 K (non-farm private)
  • In Econintersect's May 2016 economic forecast released in late April, we estimated non-farm private payroll growth at 120,000 (based on economic potential) and 240,000 (fudged based on current overrun of economic potential);
  • NFIB comments on this Jobs Report is towards the end of this post.

Job Growth Plunges in May, Although the Unemployment Rate Falls to 4.7 Percent -- The Labor Department reported that the economy created just 38,000 new jobs in May, the weakest job growth since September of 2010, when it lost 52,000 jobs. In addition, the jobs numbers for the prior two months were revised down by 59,000, bringing the average for the last three months to just 116,000. The household survey showed a drop of 0.3 percentage points in the unemployment rate, but this is not especially good news. The decline was almost entirely due to people leaving the labor force. The employment-to-population ratio [EPOP] was unchanged at 59.7 percent, 0.2 percentage points below the peak for the recovery. The drop in EPOPs is especially disturbing since it is among prime-age workers and it is for both women and men. The EPOP for prime age workers is still 2.5 percentage points below its pre-recession peak and 4.0 percentage points below the peaks reached in 2000. While many analysts have tried to explain this drop as a supply side story, it seems implausible that a very slight downward trend for men would happen to sharply accelerate in 2001, just as the upward trend for prime age women reverses to a downward trend, due to supply side factors. The only plausible explanation is that the demand for labor has weakened sharply.Consistent with this pattern, older workers have accounted for a disproportionate share of recent job growth. Employment of workers over age 55 has increased by 831,000 (2.5 percent) over the last year. By comparison, employment has risen by just 460,000 for workers between the ages of 35-44 and 35,000 for workers between ages 45-54. Workers between the ages of 25-34 have been big job gainers, increasing employment by 743,000 over the last year. Other data in the household survey was mixed. The number of people involuntarily working part-time jumped by 468,000 (7.8 percent). However, the duration measures of unemployment all fell in May. The percentage of unemployment due to voluntary quits was little changed. The number of people who chose to work part-time continued its upward path, growing by 137,000. It is now 656,000 above its year-ago level. There was little positive news in the establishment survey. While the strike at Verizon lowered the May jobs number by roughly 35,000, the picture would be little different without the strike. The weakness was widely spread across sectors. Only the healthcare sector showed much strength, adding 45,700 jobs, although the relatively high-paying professional and technical services sector added 25,800 jobs. The restaurant sector added 22,200 jobs roughly the same as its average over the last year.

The May Jobs Report Stifles Optimism (6 graphs) In recent weeks there has been increasing optimism about the strengthening U.S. economy based on increases in consumption and improvements in the housing sector.  This was accompanied by increasing chatter about a possible June or mid-summer rate increase by the Fed. The latest jobs report throws cold water on that optimism. The Bureau of Labor Statistics announced that payroll employment increased only 38,000 in May, the smallest increase since June of 2011. Of the 38,000 increase 25,000 was in the private sector. In addition, there were downward revisions to the previous two months totalling 59,000; down 22,000 in March and 37,000 in April.   The service sector was the driver of the increase, up 61,000, and almost all of that in health care, up 55,400. Mining employment continued its decline, down 11,000 after falling 26,000 over the previous two months.  Average weekly hours has been stuck at 34.4 for the past three months and average hourly earnings showed almost no change over the month, $25.54 in April and $25.59 in May.  The household survey from the BLS shows a 458,000 decline in the labor force (employed plus unemployed), and the number of persons unemployed fell by 484,000, leading to an  unemployment rate decline from 4.98% to 4.69%. The employment to population ratio held steady at 59.7.   These tepid results may be a delayed reflection of the slow growth in the first quarter and it may be the Q2 will continue to look stronger.  It does suggest that the Fed may scale back its intentions to continue to raise interest rates above the zero lower bound. In addition, slowing wage growth implies that inflation may flag as well, further depressing the nominal interest rate. There will undoubtedly be calls for more direct fiscal stimulus in the form of infrastructure investment to counter the low rate of investment and job growth. But that is unlikely to be forthcoming in an election year and given the increasing debt/gdp of the U.S.. As the rest of the world has stagnated, the United States has been the largest source of growth over the past few years. With poor employment reports over the past few months, it is unclear whether the US economy is strong enough to continue to be the global driver of growth.

Record Low 4.7% Unemployment Rate Hides Ominous Signs -- Robert Oak - The May 2016 unemployment report on the surface sounds like great news.  The unemployment rate dropped to an astoundingly low 4.7%.  This is a -0.3 percentage point drop from last month and a level not seen since November 2007.  Yet the statistics which make up the unemployment rate actually shows something terrible.  The unemployment rate dropped because 664,000 people dropped out of the labor force with almost half a million no longer counted as unemployed.  The labor participation rate dropped by -0.2 percentage points while the civilian participation rate did not change.  One month is not a pattern , yet seeing record low participation rates is not the way to lower the unemployment rate.  Many other economic indicators show a stalled economy and the unemployment appears to be catching up with the other first quarter bad economic news.  This article overviews and graphs the statistics from the Employment report Household Survey also known as CPS, or current population survey.  The CPS survey tells us about people employed, not employed, looking for work and not counted at all.  The household survey has large swings on a monthly basis as well as a large margin of sampling error.  This part of the employment report is not about actual jobs gained but people and their labor status. Those employed now stands at 151,030,000, a monthly increase of 26 thousand.  From a year ago, the ranks of the employed has increased by 2.282 million.  That's almost a quarter of a million less in annual gain than last month but still a very good showing for annual growth in employment. Those unemployed number 7,436,000, a monthly -484,000 decline. In terms of percentages this is a whopping -6.1% monthly drop.  From a year ago the unemployed has decreased by -1,183,000.  Normally this would be a good thing, yet it is clear many are simply no longer participating in the labor force instead of finding a job. Those not in the labor force is 94.708 million.  The monthly increase was an astounding 664,000.  April's not in the labor force gain was 562,000.  That means in two month's time the increase in those not participating in the American work life rose by 1.226 million.  The below graph are the not in the labor force ranks.  Those not in the labor force has increased by 1,619,000 in the past year, obviously the majority of that gain occurring in the past two months. The labor participation rate is 62.6%.  This is a -0.2 percentage point decrease from last month.  Pre-recession, the January 2008 labor participate rate was 66.2% a far cry from what we see today.  Ignoring labor participation rates after 2008, one has to go to the late 1977 to find rates this low.  Below is a graph of the labor participation rate for those between the ages of 25 to 54, which decreased by -0.2 percentage points from last month.  The rate is 81.0%, a level not seen since December 1984, discounting events after 2008.   In January 2008 the prime working years labor participation rate was 83.3%.

Labor Dept: US Job Growth Slows To A Crawl In May -- US job growth fell hard last month, the Labor Department reports. Private-sector payrolls increased by a thin 25,000 in May, the smallest monthly gain in five years. Even adding the estimated loss of 30,000-plus workers due to the Verizon strike last month still leaves payrolls in a dire state via the latest monthly profile. It could be noise, of course–it’s always hazardous to make assumptions about the economy from one data point. Nonetheless, the sight of the year-over-year growth rate in private employment dipping below the 2% mark for the first time in two years suggests that the recent deceleration in the labor market recovery is picking up speed. “Boy, this is ugly,” economist Diane Swonk tells The New York Times. “The losses were deeper and more broad-based than we expected, and with the downward revision to previous months, it puts the Fed back on pause.”  The optimistic spin is that the next update on payrolls will benefit from the return of formerly striking Verizon workers. But the expected cure from mended labor relations may be less than satisfying since the strike only represents 40,000 workers at most. As a result, today’s update still looks unusually weak no matter how you slice the numbers.  “The slowdown in job growth looks pretty pervasive across industries,” advises Michael Feroli, chief U.S. economist at JPMorgan Chase, via Bloomberg. “It raises some questions about the momentum of growth and about the outlook. The easy thing to say is, this takes June off the table for a Fed hike. To get to July, we’re going to need a pretty nice rebound in the data.” Note, however, that yesterday’s ADP national estimate of private payrolls looks dramatically brighter. The firm reported that US companies added 173,000 jobs last month. Clearly, one number is wrong—big time. Deciding which data set is misleading us will take a month or two. Note, however, that initial jobless claims continue to print at levels that are close to a multi-decade low, which implies that job growth will roll on at a healthy pace. But as I discussed yesterday, there are cracks in this seemingly upbeat picture via the raw year-over-year trend in claims. New filings for unemployment benefits increased 6.6% last week vs. the year-earlier level. The annual rise is the fourth time in the past five weeks that claims headed higher vs. year-ago figures. If claims continue to rise on a year-over-year basis, this leading indicator will signal trouble for the business cycle in a more convincing degree.

Jobs report suggests last month’s blip may be turning into an unfortunate trend -- This morning’s jobs report showed that the economy added a disappointing 38,000 jobs in May. While this number is depressed by the 35,000 Verizon workers who were striking during the reference period, even adding those workers back into the mix gives us a total number that’s lower than recent trends.  Payroll job growth has averaged only 116,000 jobs the past three months, and 150,000 this year so far. This is a noticeable slowdown compared to the growth in jobs last year (which averaged 229,000 per month). While the pace of job growth is expected to slow as the economy approaches full employment, May’s rate of growth was not even strong enough to keep up with growth in the working age population. The unemployment rate fell to 4.7 percent—typically a sign of a strengthening economy, but in this case, the fall is almost entirely due to would-be workers dropping out of the labor force. This is especially troubling for the prime-age workforce, those 25-54 years old (shown in the figure below). After hitting a low-point of 80.6 percent in September 2015, the prime-age labor force participation rate (LFPR) has been on the rise, reaching 81.4 percent in March. I expected the downward blip in April to be followed by a return to the recent upward trend. Unfortunately, it appears that the “blip” continued, with the LFPR falling 0.2 percentage points two months in a row down to 81.0 percent.

How the Verizon Strike Hit May’s Jobs Report, and What It Means for June’s Figures -- Verizon’s strike was widely expected to hit May’s jobs report, and did. But the bounce back coming in June’s report will not come close to offsetting the disappointment from the overall May figures. The seven-week strike by many of the telecom giant’s workers ended with workers returning Wednesday. The government’s reference date for its establishment survey—the one behind the nonfarm payrolls calculation—is the pay period that contains the 12th day of the month. For the purposes of the May jobs report, that was in the thick of Verizon’s strike. The work stoppage reduced last month’s payrolls figure by about 35,000, the Labor Department said, in line with its estimate before the release. But the strike impact is “nowhere near enough to justify the weakness in the overall numbers,”. Also behind the paltry 38,000 increase in May jobs: Construction head count dropped 15,000, manufacturers shed 10,000 jobs and miners cut 11,000 positions. Service providers, who have been propelling job growth, added just 61,000 to their ranks. That is less than half of the April increase. Even adding back the 35,000 idled telecom workers, May payrolls only grew by 73,000. Heading into the report, economists at Goldman Sachs said their strike-adjusted estimate was 200,000 — equal to the average increase over the preceding three months. The Labor Department’s separate household survey, which isn’t influenced by the strike, now shows a four-month trend of slowing job creation. From April, that number was up just 26,000. And from March, it tumbled some 290,000. Sharp labor-market shrinkage explains the drop in the unemployment rate.

Americans Not In The Labor Force Soar To Record 94.7 Million, Surge By 664,000 In One Month - So much for that much anticipated rebound in the participation rate. After it had managed to rise for 5 months in a row through March, hitting the highest level in one year, the disenchantment with working has returned, and the labor force participation rate promptly slumped in both April and May, sliding 0.4% in the past two months to 62.60%, just shy of its 35 year low of 62.4% hit last October. This can be seen in the surge of Americans who are no longer in the labor force, who spiked by 664,000 in May, hitting an all time high of 94.7 million. As a result of this the US labor force shrank by over 400,000 to 158,466K, down from 158,924K a month ago, and helped the unemployment rate tumble to 4.7%, the lowest level since 2007. Adding the number of unemployed workers to the people not in the labor force, there are now over 102 million Americans who are either unemployment or no longer looking for work.

312K Full-Time Jobs Were Lost In Last Two Months, Offset By 118K Part-Time Hires -- While we already assessed the quantitative aspect of today's jobs report, which we characterized as abysmal because even when factoring in the 35,000 Verizon job losses, there was some 130,000 unexplained layoffs (sorry, it wasn't the weather), it is time for a look at the qualitative aspects of the report. And, we are sad to report, that things here go from bad to worse: while in the recent past disappointing headline payrolls were at least offset by an improvement in full-time jobs, this did not happen in May. Instead, in what may have been a BLS "kitchen sink" month, the US government reported that in May 59,000 full-time jobs were lost. This, however, was "offset" by 118,000 part-time jobs as America's transformation to a part-time worker society is bag with a vengeance. Worse, over the past two months, the US labor force has seen a whopping 312K full-time jobs lost, offset by 118K part-time job gains. The longer-term trend also shows a clear reversal pattern as increasingly more part-time jobs are created to replace axed full-timers. And keep in mind you ain't seen nothing yet: once the full impact of soaring Obamacare costs hits in a few months, business will scramble to reclassify workers as part-time to circumvent the law's profit-extracting limitations.

The May Jobs Report in 12 Charts -- U.S. employers added only 38,000 jobs in May, the worst month since September 2010. The unemployment rate, however, fell to 4.7%, the lowest since November 2007. Here’s a look — in charts — at some of the other key trends to follow in the monthly employment report. Including May’s weak reading, so far this year the economy has added 149,600 jobs per month on average. That’s the worst start to a year since 2009. The standard measure of unemployment only includes people who are actively looking for work. Broader measures of unemployment and underemployment have also declined in recent years. These measures include discouraged and marginally attached workers who would like to work but have given up searching for employment. The broadest measure of underemployment was unchanged at 9.7% this month. This measure includes workers who have given up searching and also part-time workers who would prefer to work full time. The labor force is defined as all Americans who are working or actively looking for work, over the age of 16. The share of Americans in the labor force slipped to 62.6% this month, while the employment rate was unchanged at 59.7%. People ages 25-54 are most likely to work because they are out of school but not yet thinking about retirement. Among this age group, labor force participation and employment are higher. The share of Americans who went from not being in the labor force—that is, they weren’t actively looking for work—to finding a job surged over the last two years, but it has stabilized this year.Meantime, the share of unemployed people who are giving up their job hunt and dropping out of the labor force has steadily declined and is near the low level reached at the end of the previous two economic expansions in 2001 and 2007. . The economy has added more than 10 million full-time positions since the recession officially ended seven years ago, a period in which part-time employment is up by around 500,000. . Since the economy slid into recession in December 2007, there are still more part-time jobs than full-time jobs. The gap has narrowed substantially, but in May the progress ebbed, as part-time employment rose and full-time employment ticked down. . The unemployment rate, at 4.7%, is back to where it was before the economy last entered recession, but those who have been unemployed for more than six months is still higher than it was back then. . The average spell of unemployment has gotten shorter in recent years, but remains longer than was typical before the recession or in the 1990s. . The further someone has gone in school, the lower their unemployment rate is likely to be. . The unemployment rate differs considerably for different races and genders. Black men typically have higher unemployment than black women. Hispanic women typically have higher unemployment than Hispanic men. White men had higher unemployment during the recession, but face a similar rate now as white women.

Comments: A Disappointing Employment Report - (graphs) The headline jobs number was very disappointing, and there were downward revisions to job growth for prior months.  The key negatives were few jobs added (only 38 thousand, although the Verizon strike cut the job growth by about 37 thousand), a decline in the participation rate, and a sharp increase in the number of people working part time for economic reasons. A few positives include wage growth, a lower unemployment rate (however, for the wrong reason - a lower participation rate), and fewer long term unemployed.This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation. On a monthly basis, wages increased at a 2.4% annual rate in May, and April was revised up. The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 2.5% YoY in May.  This series is noisy, however overall wage growth is trending up.Note: CPI has been running under 2%, so there has been real wage growth. The number of persons working part time for economic reasons increased sharply in May. This level suggests slack still in the labor market. These workers are included in the alternate measure of labor underutilization (U-6) that was unchanged at 9.7% in May.  This graph shows the number of workers unemployed for 27 weeks or more.  According to the BLS, there are 1.885 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 2.063 million in April, and the lowest since July 2008.This is generally trending down, but is still high.There are still signs of slack (as example, part time workers for economic reasons increase sharply, and elevated U-6), but there also signs the labor market is tightening (decline in long term unemployed, slight pickup in wages).  Overall this was a disappointing report.

The Funniest BLS Report Ever --Only a captured government drone could put out a report showing only 38,000 new jobs created, with the working age population rising by 205,000, and have the balls to report the unemployment rate plunged from 5.0% to 4.7%, the lowest since August 2007. If you ever needed proof these worthless bureaucrats are nothing more than propaganda peddlers for the establishment, this report is it. The two previous months were revised significantly downward in the fine print of the press release. It is absolutely mind boggling that these government pond scum hacks can get away with reporting that 484,000 people who WERE unemployed last month are no longer unemployed this month. Life is so fucking good in this country, they all just decided to kick back and leave the labor force. Maybe they all won the Powerball lottery. How many people do you know who can afford to just leave the workforce and live off their vast savings? In addition, 180,000 more Americans left the workforce, bringing the total to a record 94.7 million Americans not in the labor force. The corporate MSM will roll out the usual “experts” to blather about the retirement of Baby Boomers as the false narrative to deflect blame from Obama and his minions. The absolute absurdity of the data heaped upon the ignorant masses is clearly evident in the data over the last three months. Here is government idiocracy at its finest:

  • Number of working age Americans added since March – 406,000
  • Number of employed Americans since March – NEGATIVE 290,000
  • Number of Americans who have supposedly voluntarily left the workforce – 1,226,000
  • Unemployment rate – FELL from 5.0% to 4.7%

May’s seriously downbeat jobs report puts kibosh on Fed rate hike; underscores need for deep infrastructure dive -- In an unexpectedly downbeat jobs report, employers added only 38,000 jobs last month, the worst month for job gains since employment started recovering in 2010. Downward revisions trimmed the employment gains for the prior two months by 59,000, and the labor force participation rate fell again in May, as it had in April. That drove the unemployment rate down to a recovery low of 4.7 percent, but for the wrong reason: not because of people getting jobs but because of people leaving the job market.  Given the volatility in these monthly reports, I have been appropriately cautious in suggesting that the US job engine has truly downshifted. However, a look at JB’s monthly smoother now at least tentatively supports that conclusion. Going from 12, to 6, to 3 month averages of monthly job gains shows a steady deceleration from 200,000 to 116,000.  This new, slower trend could, of course, reverse if growth picks up and part of May’s very low topline number is due to the strike at Verizon, a one-off event which, according to the Bureau, reduced the payroll count by about 35,000. But even adding those information workers back into May’s tally, the three-month bar in the smoother would rise to 127,000, still well below the 200,000 trend over the last 12 months. The negative report surely puts the nail in the coffin of a Fed rate hike at their meeting later this month. Prior to the report, the futures market probability of a June hike was about 20 percent. After the release, it quickly fell to 4 percent. Weak job creation is weighing on the labor force participation rate, which is down 0.4 tenths of a percent over the last two months. At 62.6 percent, the LFPR is back to where it was last December. While retiring baby-boomers have been correctly cited as a structural—vs. cyclical—factor lowering participation, the recent decline has also occurred among “prime-age” workers, those 25-54. In other words, what we’re seeing here is more than a benign, demographic trend; it’s a trend that is also a function of weak labor demand failing to pull people into to the job market. Most goods-producing industries shed jobs in May, including durable manufacturing, down 18,000. Over the past 12 months, this important manufacturing sub-sector has shed 80,000 jobs, a sharp reversal from the addition of 120,000 jobs in the prior 12 months. The stronger dollar, which makes our exports less price-competitive, is a major factor in this unfortunate turnaround.

How Men Can Pay a High Price for Taking a Part-Time Job - For unemployed men, taking a part-time job may be nearly as damaging to their future career prospects as simply staying home. David Pedulla, a sociologist at the University of Texas at Austin, sent out thousands of fake resumes to test how gender and work history affected callbacks by potential employers looking to interview the simulated job candidates. He found that women in part-time jobs were more than twice as likely to get a callback as were men in part-time jobs. In fact, part-time male workers fared only a little better than unemployed men. When it comes to part-time work, there appear to be “penalties for men that are as strong as the penalty for unemployment, while for women we see no penalty,” Mr. Pedulla said. An estimated one in six U.S. workers lost a job during the recession years of 2007, 2008 and 2009, and unemployment remained stubbornly high even years into the economic recovery. A growing body of research indicates that the financial and psychological damage from a period of joblessness can be significant and long-lasting, especially for people who remain out of work for an extended period. Mr. Pedulla’s research, published this spring in the American Sociological Review, involved a field experiment: 2,420 applications submitted to 1,210 job openings in five U.S. cities between November 2012 and June 2013.

As union membership has fallen, the top 10 percent have been getting a larger share of income -- As union membership has fallen over the last few decades, the share of income going to the top 10 percent has steadily increased. Union membership fell to 11.1 percent in 2014, where it remained in 2015 (not shown in the figure). The share of income going to the top 10 percent, meanwhile, hit 47.2 percent in 2014—only slightly lower than 47.8 percent in 2012, the highest it has been since 1917 (the earliest year data are available). When union membership was at its peak (33.4 percent in 1945) the share of income going to the top 10 percent was only 32.6 percent. The single largest factor suppressing wage growth for working people and suppressing union membership over the last few decades has been the erosion of collective bargaining. This erosion has affected both union and nonunion workers alike, contributing to wage stagnation and growth in inequality. To boost wages for working people, policymakers need to intentionally tilt power back to working people by strengthening their rights to stand together and negotiate collectively for better wages and benefits, raising and improving labor standards, and achieving persistent low unemployment.

 The mystery of weak US productivity - -- Look around you. From your drone home delivery to that oncoming driverless car, change seems to be accelerating. Warren Buffett, the great investor, promises that our children’s generation will be the “luckiest crop in history”. Everywhere the world is speeding up except, that is, in the productivity numbers. This year, for the first time in more than 30 years, US productivity growth will almost certainly turn negative following a decade of sharp slowdown. Yet our Fitbits seem to be telling us otherwise. Which should we trust — the economic statistics or our own lying eyes? A lot hinges on the answer. Productivity is the ultimate test of our ability to create wealth. In the short term you can boost growth by working longer hours, for example, or importing more people. Or you could lift the retirement age. After a while these options lose steam. Unless we become smarter at how we work, growth will start to exhaust itself too. Other measures bear out the pessimists. At just over 2 per cent, US trend growth is barely half the level it was a generation ago.It is possible we are simply mismeasuring things. Some economists believe the statistics fail to capture the utility of setting up a Facebook profile, for example, or downloading free information from Wikipedia. The gig economy has yet to be properly valued. Yet this argument cuts both ways. Productivity is calculated by dividing the value of what we produce by how many hours we work — data provided by employers. But recent studies — and common sense — say our iPhones chain us to our employers even when we are at leisure. We may thus be exaggerating productivity growth by undercounting how much we work.

If wages and incomes are rising, why are people so angry about the economy? - The electorate, we are told, is angry. They, or at least a significant subset of them, are upset about trade deals, immigration, feckless lawmakers, jobs, incomes and wages.And yet, recent data show the following:* Real median income is on the rise, and the steepest growth in real middle-class incomes has been occurring in recent years. What’s wrong with that?!The data, estimated by the group Sentier Research and shown in the figure below, isn’t the government’s official measure, and it leaves out various income sources, like the value of medical benefits, but it’s a decent benchmark of market-based income for middle-class households. The measure is indexed to 100 in 2000 so the line tracks the percent change in real median income relative to that year. * The percent of adults who say they’re “doing okay” or “living comfortably” has been improving overall in the past few years, as you might expect in an improving economy. But as the next figure, from a recent survey by the Federal Reserve, shows, the biggest gains have been for the group with “high-school or less,” the very people who are supposed to be most angry. Again, whussup?* Finally, consumer sentiment, as shown below, is back to where it was at the peak of the last business cycle. Was everybody so darned annoyed back then? I don’t think so (at least until the housing bubble burst). The unemployment rate’s at 5 percent (you can see its sharp decline in the first figure above), we’re adding more than 2 million jobs a year, and the Federal Reserve is talking about having to hit the economic brakes out of fear that the economy is growing too quickly (for the record, I think that would be a mistake). Them’s the facts, folks. Again, with all this going on, how is a negative vibe merchant like Trump gaining so much traction disparaging the current economy?Well, let’s start by looking back at those figures.

The Surging Cost of Basic Needs -- For low-income households, it’s no surprise that a large proportion of their spending goes to basic needs, such as housing and food, while high-income households have traditionally had more discretionary spending. But how do families cope when the cost of housing goes up, or the cost of transportation goes down? And how have their budgets adjusted in light of these changes in order to pay for everything?  A new report from The Hamilton Project of the Brookings Institution looks at how the composition of household spending across income levels has changed over the past 30 years. Analyzing data from the U.S. Census Bureau’s Consumer Expenditure Survey, the report found that budgets have indeed shifted—particularly for low-income families. The report found that low-income households are devoting a greater share of their budget to basic needs compared with 30 years ago. In fact, low-income and middle-income households (defined as the lowest and middle quintiles of the income distribution) now spend roughly 80 percent of their budget on housing, food, transportation, health care, and clothing. For low-income households, 40 percent of their budget went to housing—a 5.5 percent increase from 1984.

A Universal Basic Income Is a Poor Tool to Fight Poverty -  Eduardo Porter - Why doesn’t the government just give everybody money?Figure out a reasonable amount — the official poverty line amounts to about $25,000 for a family of four; a full-time job at $15 an hour would provide about $30,000 a year — and hand every adult a monthly check. The minimum-wage worker stretching to make it to payday, the single mother balancing child care and a job — everybody would get the same thing.Poverty would be over, at a stroke.Being universal — that is, for the homeless and the masters of the universe alike — the program would be free of the cumbersome assessments required to determine eligibility. It would also escape the stigma typically attached to programs for the poor.And it would be politically secure. Programs for the poor are often maligned as poor programs. Indeed, defunding antipoverty programs rarely carries political consequences because the poor rarely vote. It’s another story entirely when everybody benefits. The idea of universal basic income sounds extravagant, right? Well, the Finns and even the Swiss are thinking about it. On Sunday, Swiss citizens will vote in a referendum on whether to hand out 30,000 francs a year — just over $30,000 — to every citizen, regardless of wealth, work status or whatever. In the United States, the idea has the support of thinkers on the left like Andrew Stern, former president of the Service Employees International Union. Some thinkers on the right, too, have managed to overcome their general distaste for government welfare to support the idea. This month, Charles Murray of the American Enterprise Institute will publish an updated version of his plan to replace welfare as we know it with a dollop of $10,000 in after-tax income for every American above the age of 21.

A universal basic income could absolutely solve poverty - Vox -- Eduardo Porter has a column up with the provocative headline "Why a Universal Basic Income Will Not Solve Poverty," which intrigued me because my understanding from reading coverage by Vox's own Dylan Matthews and others was that a UBI most certainly would solve poverty. Having read Porter, I remain unconvinced. His argument turns out to be something more like "a universal basic income would be expensive" or "a universal basic income is an example of a poorly targeted public policy." The former is clearly true, and the latter is at least something clearly worth talking about. But Porter's own numbers make it very clear that a UBI would eliminate poverty in the United States and would do so at a price that, though high, is within the realm of possibility.  The idea of a UBI is that we could mail the checks (the "basic income") to everyone (make it "universal") rather than just to old people. Small checks would reduce the poverty rate modestly. Big checks would reduce it enormously. But of course, sending everyone a big check would cost a lot of money. How much money are we talking about? Well, here's how Porter sees it: As Robert Greenstein of the left-leaning Center on Budget and Policy Priorities put it, a check of $10,000 to each of 300 million Americans would cost more than $3 trillion a year.  Where would that money come from? It amounts to nearly all the tax revenue collected by the federal government. Nothing in the history of this country suggests Americans are ready to add that kind of burden to their current taxes. Cut it by half to $5,000? That wouldn’t even clear the poverty line. And it would still cost as much as the entire federal budget except forSocial Security, Medicare, defense and interest payments. Let's rerun the numbers with a little more precision, though we won't change Greenstein's ballpark estimate of the cost.

Why the Very Poor Have Become Poorer --According to the Census Bureau, the percentage of Americans living in poverty is higher today than it was in the late 1960s. Last year I argued in these pages that these “official” poverty statistics are extremely misleading.1 When the United States first explicitly defined an official poverty line in 1969, it was supposed to be adjusted every year to ensure that it represented a constant standard of living. However, two problems arose and were never fixed. First, the Consumer Price Index, which was supposed to be used to adjust the poverty line for inflation, turned out to have flaws that made it rise faster than the cost of living. Second, the official measure uses pretax money income to measure families’ economic resources; but anti-poverty measures enacted since then, such as the expansion of food stamps and then the Earned Income Tax Credit (EITC), made low-income families’ total economic resources increase faster than their pretax money income. As a result of these problems, roughly half the families now counted as officially poor have a higher standard of living than families with incomes at the poverty line had in 1969. In $2.00 a Day: Living on Almost Nothing in America, Kathryn Edin and Luke Shaefer argue that what they call “extreme” poverty roughly doubled between 1996 and 2012. If they are right—and I think they are—the reader might wonder how I can still claim that poor families’ living standards have risen. The answer is that inequality has risen even among the poor. Half of today’s officially poor families are doing better than those we counted as poor in the 1960s, but as I learned from reading $2.00 a Day (and have spent many hours verifying), the poorest of the poor are also worse off today than they were in 1969. $2.00 a Day is a vivid account of how such families live. It also makes a strong case for blaming their misery on deliberate political choices at both the federal and state levels.

The Rich Don't Move Away Because of Taxes -- Rich people do move for tax reasons, but only about 2.2 percent of the time, the study estimates, with little impact on revenues in the states they leave behind. If states increase their top tax rate by 10 percent, they risk losing just 1 percent of their population of millionaires, the researchers found, using a statistical model based on millionaires' past movements from state to state.  “Millionaire tax flight is occurring, but only at the margins of significance,” write the authors, Stanford University sociology professor Cristobal Young, his Stanford colleague Charles Varner, and two U.S. Treasury Department economists, Ithai Lurie and Richard Prisinzano. The researchers analyzed 45 million tax records, covering every filer who reported income of at least $1 million in any year from 1999 to 2011, and found that the rich are in fact less likely to move around than the poor. Typically, about half a million households report such an income, and only 2.4 percent of these taxpayers move from state to state in any given year. That compares with 2.9 percent of the general population and 4.5 percent of those earning about $10,000 a year.

Subsidy Tracker Reaches Major Milestones - Subsidy Tracker, the free subsidy database created in 2010 by Good Jobs First, has reached major milestones in its coverage of state, local, and federal subsidies.  This month’s enhancements to the database bring it to a once-unimaginable 500,000 individual incentive awards with a cumulative nominal subsidy value of $250 billion! That’s starting to add up to real money!  I explained two years ago how to use the data from Megadeals or Subsidy Tracker to compare a proposed economic development incentive package with past subsidies given in the same industry to get some idea whether the proposal represented a gross overpayment for a given investment. This method relies on finding good matches by industry, location, unemployment rate, and so on. The more deals available to search means your chances for finding good comparables improves proportionately. This can only enhance the ability of citizens’ groups, labor organizations, etc., to independently analyze proposed costly incentive packages. As Philip Mattera, Good Jobs First Research Director, says, the steady expansion of Subsidy Tracker “reflects the improvement in government transparency over the past decade.” I can personally remember when the first statewide transparency law was passed in Minnesota in 1995; transparency has improved exponentially since then, although there is much progress that still needs to be made. One notable recent innovation in Subsidy Tracker is a matching system to determine the ultimate corporate parent of subsidy recipients. According to Mattera, it now includes 2,606 parent companies, a threefold increase since 2014. This is critical information, given that so many companies hide their corporate connections through misleading names.

To Pay for Subsidies to Massive Corporations, States Are Waging War on Poor Families - To witness the consequences of a political system captured by and utterly subservient to the interests of organized wealth, take a quick look at the state of Oklahoma. There we see the embodiment of the economic trends that have, over the past several decades, harmed working families and lifted the wealthiest: While providing a windfall of cash to special interests, particularly big oil, the state is cutting education and slashing funds allocated for the earned income tax credit, widely recognized as one of the more effective anti-poverty programs. As the state cuts benefits for the poor, "Oklahoma’s tax breaks for the oil and gas companies — among the most generous in the nation — gave the industry $470 million in tax relief last year," a recent New York Times editorial observes. "It's despicable to balance the budget on the backs of the most vulnerable population" while refusing to push any of the burden onto the wealthiest, lamented State Representative Emily Virgin. One can look, also, to Wisconsin, where the Koch-backed governor Scott Walker achieved political prominence on the basis of his record of "taking on" unions and his philosophical approach to governance, which, though shrouded in libertarian garb, largely consists of socialism for the rich and austerity for everyone else. In July of 2015, Walker cut the budget of the University of Wisconsin, one of the nation's top public schools, by $250,000 — the same amount, coincidentally, that he, the very next month, allocated for the construction of a brand new stadium for the state's basketball team, the Milwaukee Bucks.As government increasingly defers to the interests of those who now bankroll political campaigns — not just in a handful of states, but nationwide — union influence has dwindled, deep poverty has soared, and the middle class has collapsed. The war on poverty has thus been enveloped and surpassed by a different war — the war for corporations.

Pew report: CT deep in debt, even considering its high income -- Long recognized as one of the most indebted of states, Connecticut’s chief offset against that burden was its tremendous wealth. But even weighed against personal income, what Connecticut owes to its bondholders and retired public-sector workers ranks as fifth-worst among the states, according to a new analysis by The Pew Charitable Trusts. The report also found Connecticut followed a national trend between 2003 and 2013 as its pension debt worsened faster than any other long-term obligation, reaching its highest point in a decade. “Although a number of states have taken steps in recent years to shore up their pension savings or cut costs by modifying benefits — mostly for new workers — unfunded pension liabilities have grown more than debt or unfunded retiree health care costs,” Pew researchers wrote. The pension crisis is driven by a combination of factors, they added, including lower-than-expected investment returns and historic under-funding issues. And while the report only uses data through 2013, it notes that strong investment earnings for many states in 2014 “may have been undercut by weak investment returns” in 2015 and 2016.

Illinois lawmakers near session's end without state budget - again -- Illinois lawmakers have one day left to end an 11-month budget stalemate and pass a spending plan for next year before their spring session ends and it becomes more difficult. Democrats remain deadlocked Tuesday with Gov. Bruce Rauner and his fellow Republicans on how to pass a budget for the fiscal year beginning July 1. Lawmakers need a simple majority to pass a budget before they adjourn Tuesday night. After that they'll need three-fifths support from each chamber.  Rauner wants business-friendly legislation he says will spur economic growth in exchange for signing off on a tax increase to address a $5 billion deficit. Democrats say Rauner's ideas hurt the middle class. The Senate is expected to consider a $7 billion out-of-balance budget passed by the House. But Rauner said he'll veto it.

How to Save Puerto Rico - Three and a half million Americans live on an island that is in economic free-fall, and Congress still isn’t sure whether it will throw them a lifeline. A bipartisan bill to help Puerto Rico is expected to come to a vote soon in the House. It has flaws and it is facing opposition on many fronts, but at this late hour it offers the island its best chance of survival. This is how urgent the situation is: Thousands of residents leave for the mainland every month to seek jobs and better public services, and the exodus will accelerate if nothing is done to change Puerto Rico’s trajectory.  With its economy in decline for a decade, the island has accumulated huge debts that it cannot repay. It owes $72 billion to investors and about $46 billion to government pension funds. The island started missing bond payments in January and it is expected to default on a nearly $2 billion payment due on July 1, which will surely prompt creditors to file a wave of lawsuits seeking repayment. Two weeks ago, Republican and Democratic lawmakers in the House and the Obama administration reached a compromise on aiding Puerto Rico. The bill they have negotiated would establish a financial control board to oversee the island’s government and help restructure its debt in federal court, in a process similar to bankruptcy. The legislation would also require the government and the board to adequately finance public pension funds that are perilously close to empty. And it would temporarily stay, or pause, lawsuits by creditors against the island’s government while the board is established and begins its work. The island desperately needs to restructure its debt, which is about 100 percent of its gross national product. Given its shrinking economy and population, Puerto Rico cannot possibly repay bondholders every dollar it owes them.

Puerto Rico could seek to invalidate over $4 billion in debt - Gov. Alejandro Garcia Padilla says he would rather pay the Puerto Rican people than Wall Street. Some outstanding debt could be declared invalid, according to a government report that says it may have been issued illegally. ByFrancineMcKenna Reporter An audit report published on Thursday suggests that debt-laden Puerto Rico may be able to void some of its borrowing because politicians exceeded constitutional debt limits and their own authority. The report, shared with MarketWatch, states that some of Puerto Rico’s debt may have been issued illegally, allowing the government to potentially declare the bonds invalid and courts to then decide that creditors’ claims are unenforceable. The scope of the audit report, issued by the island’s Public Credit Comprehensive Audit Commission, covers the two most recent full-faith-and-credit debt issues of the commonwealth: Puerto Rico’s 2014 $3.5 billion general-obligation bond offering and a $900 million issuance in 2015 of Tax Refund Anticipation Notes to a syndicate of banks led by J.P Morgan. Money for those debt payments is not in the commonwealth’s proposed budget, either. On Tuesday Puerto Rico’s governor, Alejandro García Padilla, sent a proposed 2016-17 budget to the island’s legislature that provides for only $209 million of the $ 1.4 billion of current debt-service cost. As García Padilla told reporters at a news conference: “This is simple: either we pay Wall Street or we pay Puerto Ricans. If the legislature decides we pay Wall Street more, well, each has his responsibility. I will continue defending Puerto Ricans. Money I send to Wall Street, I do not have to provide services here.”

Bondholders Stunned As Puerto Rico Finds $4.4 Billion In Outstanding Debt "Unconstitutional" - After Puerto Rico defaulted on its $422 million debt payment in May, governor Padilla begged congress to step in and help out, which happened shortly thereafter when a House committee cleared legislation that provided Puerto Rico with a way forward on restructuring its debt.  As it turns out, on the day the House announced that it planned on taking up the Puerto Rico bill next week, a 17 member audit commission found that two debt issues worth $4.4 billion of the $72 billion in debt outstanding were unconstitutional.  Said otherwise, the government may now just declare the bonds invalid.  It's a handy development for governor Padilla, since the two debt issues were expected to default on July 1. Also helpful is the fact that it would be one less item for Padilla to worry about since he proposed a budget for 2016-2017 that provides for only $209 million of the $1.4 billion in current debt service cost. As MarketWatch explains: An audit report published on Thursday suggests that debt-laden Puerto Rico may be able to void some of its borrowing because politicians exceeded constitutional debt limits and their own authority.The report, shared with MarketWatch, states that some of Puerto Rico’s debt may have been issued illegally, allowing the government to potentially declare the bonds invalid and courts to then decide that creditors’ claims are unenforceable. The scope of the audit report, issued by the island’s Public Credit Comprehensive Audit Commission, covers the two most recent full-faith-and-credit debt issues of the commonwealth: Puerto Rico’s 2014 $3.5 billion general-obligation bond offering and a $900 million issuance in 2015 of Tax Refund Anticipation Notes to a syndicate of banks led by J.P Morgan.Money for those debt payments is not in the commonwealth’s proposed budget, either.

One New York Prisoner Approaches Six Years Without Trial -  In October 2010, Anna’s son Jairo Pastoressa was arrested for stabbing and killing a young man during a dispute. He was charged with murder and denied bail and has been sitting in jail for 67 months, waiting for a trial that keeps being postponed. Eighty-five percent of Rikers’s nearly 10,000 detainees have not yet been tried. Although many are released within a week, some remain in the jail for years as their cases drag through New York’s chronically slow court system. As of March 2016, 75 percent of Rikers detainees had been awaiting trial for less than a year, but there were 109 whose cases had been pending for more than three years and another 209 who had been waiting for more than two years, according to a spokesperson with the Mayor’s Office of Criminal Justice. Jairo believes he is the longest-serving detainee currently on the island. “This system keeps those that have been accused of committing crimes out of sight and out of mind,” City Council Speaker Melissa Mark-Viverito said in her 2016 State of the City address, in which she announced an independent commission to review whether the population at Rikers can be reduced enough to make its closure possible. “Rikers Island has come to represent our worst tendencies and our biggest failures.”

Portland District Failed to Disclose Excessive Lead Levels at 47 School Buildings - Last week, Portlanders learned the Portland Public Public Schools had found elevated levels of lead in water at two schools in March, but failed to disclose this information for nearly two months. In the past few days, WW has learned and confirmed that PPS did tests across the district from 2010 to 2012—at 90 buildings—finding elevated levels of lead in the water at 47 of them, including Jefferson and Cleveland high schools and Ainsworth Elementary School. In some cases, the levels were higher than those found at Creston and Rose City Park, the schools that were named last week.This highly charged finding comes from a printout WW received from a district database of all water testing from 2001 through February 2015. The printout shows that 47 structures—schools, office buildings and others—tested for levels of lead from 2010 to 2012 that were above the federal standard of 15 parts per billion.As extraordinary as these findings are, WW could not find anyone at PPS who says they knew of the testing, or the results, prior to learning of them from WW last Friday. Nor is it clear what was done in response to the tests. Superintendent Carole Smith (who has led the school district since 2007), PPS chief operating officer Tony Magliano, and five members of the School Board all told WW that the 2010-2012 tests were news to them. Andy Fridley, the district's environmental director, declined to answer questions.  On Friday, May 27, WW emailed the test results to district officials at 3:47 pm. Smith did not respond until Tuesday morning. But that evening, four hours after they received the test results from WW, the district abruptly announced it was shutting off drinking water at all PPS schools for the rest of the school year and providing bottled water instead. At the time, local media assumed it was just a precautionary measure stemming from the findings at Creston and Rose City Park, not because of test results showing problems at other schools.

Professor: If You Read To Your Kids, You’re ‘Unfairly Disadvantaging’ Others - According to a professor at the University of Warwick in England, parents who read to their kids should be thinking about how they’re “unfairly disadvantaging other people’s children” by doing so. In an interview with ABC Radio last week, philosopher and professor Adam Swift said that since “bedtime stories activities . . . do indeed foster and produce . . . [desired] familial relationship goods,” he wouldn’t want to ban them, but that parents who “engage in bedtime-stories activities” should definitely at least feel kinda bad about it sometimes: “I don’t think parents reading their children bedtime stories should constantly have in their minds the way that they are unfairly disadvantaging other people’s children, but I think they should have that thought occasionally,” he said. But Swift also added that some other things parents do to give their kids the best education possible — like sending them to “an elite private school” — “cannot be justified” in this way. “Private schooling cannot be justified by appeal to these familial relationship goods,” he said. At one point, Swift even flirted with the idea of “simply abolishing the family” as a way of “solving the social justice problem” because “there would be a more level playing field” if we did, but ultimately concluded that “it is in the child’s interest to be parented” and that “parenting a child makes for what we call a distinctive and special contribution to the flourishing and well-being of adults.”

How To Pay Teachers More -— State lawmakers in Raleigh are about to release their budget plans for the 2016-17 fiscal year. Although they may not recommend the 5 percent average pay raise for public schoolteachers that Gov. Pat McCrory proposed a few weeks ago, there will be a substantial raise in their budget. Most fiscal conservatives favor such a raise. That’s not because we’ve lost interest in restraining state spending growth, or are trying to ingratiate ourselves with the North Carolina Association of Educators, the state affiliate of the nation’s largest teacher union, the National Education Association. Rather, fiscal conservatives favor an increase in compensation for teachers — and for other public employees in critical jobs — because it is the right priority to set given current fiscal and economic conditions.  Furthermore, the General Assembly and the McCrory administration are led by politicians who properly recognize the limits of “average teacher pay” as a guide for good policy. If they were simply offering to raise the compensation of all teachers by an equivalent percentage — regardless of performance, duties, or the needs of hard-to-staff positions and schools — then fiscal conservatives would be skeptical. But that’s not how the current leadership in Raleigh has been approaching the issue. They’ve junked forms of compensation that didn’t produce better instruction, such as the foolish practice of paying teachers to get largely irrelevant graduate degrees, while focusing legislative attention on starting salaries and pay raises for teachers in their early careers, which is when most improvement in teacher effectiveness occurs. There will be more raises and bonuses for experienced teachers as part of this year’s package, which is understandable. Still, policymakers seem inclined to continue reforming the way teachers are compensated, including differentiation by demonstrable need and pilot programs for performance pay. Given the petty politics and irresponsible rhetoric employed by their left-wing critics, this qualifies as courageous leadership deserving of conservative support.

Teenage brain on social media: Findings shed light on influence of peers, much more: The same brain circuits that are activated by eating chocolate and winning money are activated when teenagers see large numbers of "likes" on their own photos or the photos of peers in a social network, according to a first-of-its-kind UCLA study that scanned teens' brains while using social media. The 32 teenagers, ages 13-18, were told they were participating in a small social network similar to the popular photo-sharing app, Instagram. In an experiment at UCLA's Ahmanson-Lovelace Brain Mapping Center, the researchers showed them 148 photographs on a computer screen for 12 minutes, including 40 photos that each teenager submitted, and analyzed their brain activity using functional magnetic resonance imaging, or fMRI. Each photo also displayed the number of likes it had supposedly received from other teenage participants—in reality, the number of likes was assigned by the researchers. (At the end of the procedure, the participants were told that the researchers decided on the number of likes a photo received.) "When the teens saw their own photos with a large number of likes, we saw activity across a wide variety of regions in the brain," said lead author Lauren Sherman, a researcher in the brain mapping center and the UCLA branch of the Children's Digital Media Center, Los Angeles.  A region that was especially active is a part of the striatum called the nucleus accumbens, which is part of the brain's reward circuitry, she said. This reward circuitry is thought to be particularly sensitive during adolescence. When the teenagers saw their photos with a large number of likes, the researchers also observed activation in regions that are known as the social brain and regions linked to visual attention. In deciding whether to click that they liked a photo, the teenagers were highly influenced by the number of likes the photo had.

"Jesus, Marx, & Darwin Would Be Banned From Today's Universities" - Oxford Professor Slams 'Safe-Space' Politics - : The impact of US-style "safe space" politics, in which causing offense is held to be a grave sin, is also limiting freedom of speech abroad. As Oxford Professor of European Studies Timothy Garton Ash exclaimed, figures like Jesus, Charles Darwin and Karl Marx would all be banned from British universities today due to the rise of social justice warrior pressure groups and correspondingly populist counter-extremism legislation. This is "a double-pronged attack on free speech," Ash told an audience at the Hay literary festival on Monday. As RT reports, as well as Marx, Darwin and Jesus, he warned that philosophers like Rousseau and Hegel would today be banned from campuses. Referring to the UK government-led Prevent scheme, intended to keep extremism out of educational institutions, Garton Ash warned that: “securocrats in the Home Office” are imposing bans which would “prevent even non-violent extremists speaking on campus.” “Now non-violent extremists? That’s Karl Marx, Rousseau, Charles Darwin, Hegel, and most clearly Jesus Christ, who was definitely a non-violent extremist,” the academic said. The Home Office “wouldn’t want him preaching on campus,” he added. But state intervention is only one side of the coin, Garton Ash said, arguing that the impact of US-style “safe space” politics, in which causing offense is held to be a grave sin, were also limiting freedom of speech. He said there is a “certain push from below from our own students demanding so-called safe spaces” which involved “no platforming” people simply on the basis that particular students disagreed with them. “It’s one group of students censoring another,” he said, warning this resulted in free speech being “salami sliced” away. Garton Ash said the UK, “which in a way invented the modern version of free speech in the 17th century, is in my view much too feeble when it comes to standing up for free speech.”

UC paid billions in fees to hedge funds that only mirrored stock market -- The University of California paid around $1 billion in fees to hedge fund managers in the last dozen years, the university system’s largest employees union said this week, shedding new light on a round of pension cuts being considered. The UC systems wasted money for hedge fund "returns that largely mirrored the stock market," AFSCME Local 3299 said in a white paper titled " Missing the Mark: How Hedge Fund Investments at the University of California Shortchange Students, Staff and California Taxpayers ." The study found that the Oakland-based UC system paid $1 in fees for every $2 in net returns it received. It looked at the $6 billion in hedge fund investments that UC currently holds via its $8.9 billion "general endowment pool" and $55 billion University of California Retirement Plan. The study shows the investments have "provided almost no hedging in bad times and below-market returns in good times," Thomas Gilbert, assistant professor of finance and business economics at the University of Washington’s Foster School of Business, said in a statement. "Moreover, this complete lack of promised hedging performance is compounded by enormous fees which come at the expense of the UC’s stakeholders,” Gilbert said. Those revelations now have unions pushing the UC system for more transparency and better fiscal responsibility as the Board of Regents considers sweeping pension cuts. “Before any such actions are considered, UC has a responsibility to its students, staff and taxpayers to provide more transparency around its investment holdings, and more stakeholder engagement in the way these assets are managed,” said Joe Kiskis, vice president of the Council of UC Faculty Associations, in a statement.

Looking backward or looking forward? Exploring the private student loan market - AEI - Key Points:

  • The existing private student loan market is largely “backward-looking”: lenders make loans based on credit scores and the availability of a cosigner rather than the student’s potential and/or the expected value of a program or institution.
  • Students with high potential who lack a credit history or a creditworthy cosigner are likely excluded from the current market. More than 90 percent of undergraduate loans are cosigned, and low-income borrowers are less likely to rely on private loans than higher-income peers, even when they face similarly high net prices.
  • An emerging subset of innovative lenders use underwriting models with “forward-looking” criteria: completion rates, program quality, graduate earnings, and return on investment. These lenders extend credit based on a student’s potential, not their past, which could inject much-needed market discipline into the sector.
  • Policymakers who wish to promote forward-looking loan underwriting models should clarify how fair lending laws may relate to these models, collect and report additional data on program-level student outcomes, cap federal PLUS loans, and avoid using federal loan guarantees to entice private involvement.

Read the PDF.

Is America Committing Slow-Motion Suicide? A Look at the Decline of CUNY -  Lehman and other City University of New York colleges were profiled in an article titled “Dreams Stall as CUNY, New York City’s Engine of Mobility, Sputters” that like so many in the newspaper recently depicts an American in deep if not irreversible decline. Lehman’s library was a case in point:  At Lehman College in the Bronx, Robert Farrell, an associate professor in the library department, said the library’s entire book budget this academic year was $13,000, down from about $60,000 a decade ago. Because the roof has been chronically leaky, about 200 books were damaged during a rainstorm three years ago; a tarp still covers some volumes. Mr. Farrell also said that the library has had to reduce its spending on academic journals and database subscriptions. “We can’t be a serious institution of higher learning without providing our faculty and students with access to these kinds of things,” he said. It was just one more reminder that the ruling class of the USA has no intention of funding the public good. With respect to private enterprise, unless the same kinds of profits can be generated on American soil that can be made overseas in an epoch when capital takes wings and flies around the globe in search of higher profits, you will wait in vain for the post-WWII prosperity that both the Trump and Sanders campaign evoke. After all, capitalism does not exist to create middle-class jobs. It exists to allow men and some women to be able to buy $15 million condominiums in New York and vacation in St. Bart’s just like Gaddafi’s sons did.

The Average Student at a For-Profit College Was Worse Off After Attending -  - WSJ - Millions of Americans enrolled in for-profit colleges in recent years to learn a trade and find decent-paying work. A new study found devastating results for many of their careers. The working paper, published this week by the National Bureau of Economic Research, tracks 1.4 million students who left a for-profit school from 2006 through 2008. Because students at these schools tend to be older than recent high-school graduates, they’ve spent time in the workforce. The researchers used Education Department and Internal Revenue Service data to track their earnings before and after they left school. The result: Students on average were worse off after attending for-profit schools. Undergraduates were less likely to be employed, and earned smaller paychecks–about $600 to $700 per year less–after leaving school compared to their lives before. Those who enrolled in certificate programs made roughly $920 less per year in the six years after school compared to before they enrolled. The key factor is that most of these students never earned a degree–they dropped out early. Excluding them, the minority of students who earned degrees saw an earnings bump after graduating. “Certificate, associate’s, and bachelor’s degree students generally experience declines in earnings in the 5 to 6 years after attendance relative to their own earnings in the years before attendance,”

For-Profit Colleges’ Students Wind Up Earning Less Than If They Had Never Enrolled - The for-profit-college industry appears to be facing its moment of reckoning. The closing of Corinthian Colleges in April of last year, once a big player in the industry, left thousands of students in debt and without degrees. In the months since, the Department of Education has forgiven more than $27 million in debt for nearly 3,500 students—many of them former Corinthian students—on the grounds that they were deceived. The Department of Education has also set up an initiative to take action against for-profit colleges engaged in deceptive marketing and recruitment practices. According to statistics from the National Center for Education Statistics, for-profit-college enrollment surged between 2000 and 2010. The initial boom has been attributed to the growing number of students—particularly non-traditional students seeking college credentials—as well as the availability of federal student aid and the low cost, on the business side, of providing degrees through a website. The bust that followed—between 2010 and 2014, enrollment decreased by 26 percent—can fairly be chalked up to the hard-to-ignore failings of these institutions: There are countless stories of debt, default, and the empty promises of a better financial future. And worse, for-profit schools are failing the students who can least afford it—students who attend for-profit colleges are disproportionately older, female, and black, with 51 percent of students coming from low-income families. For those who don’t complete their degrees at for-profit colleges—and over 60 percent of the students who attend for-profit colleges don’t—the financial consequences are dire.

Get To College, Get A Job, Get Poorer: Students Are Worse Off After Attending For-Profit Colleges --Go to college, study hard, get a good paying job - that's the mantra heard by most students across America as they wind down their high school careers. Intuitively taking out loans just to go to college because everyone says so isn't a good idea, and a new study by the NBER finds that in fact, students who left for-profit schools during the 2006-2008 timeframe were worse off after attending. A key factor, as the WSJ reports, is that most of these students never earned a degree, they dropped out. Making matters worse, and certainly contributing to the fact that over 40% of student borrowers don't make payments, is the fact that these students borrowed to attend the colleges. From the WSJThe working paper, published this week by the National Bureau of Economic Research, tracks 1.4 million students who left a for-profit school from 2006 through 2008. Because students at these schools tend to be older than recent high-school graduates, they’ve spent time in the workforce. The researchers used Education Department and Internal Revenue Service data to track their earnings before and after they left school.The result: Students on average were worse off after attending for-profit schools. Undergraduates were less likely to be employed, and earned smaller paychecks–about $600 to $700 per year less–after leaving school compared to their lives before. Those who enrolled in certificate programs made roughly $920 less per year in the six years after school compared to before they enrolled.The key factor is that most of these students never earned a degree–they dropped out early. Excluding them, the minority of students who earned degrees saw an earnings bump after gradu ating.

Tuition-Free or Debt-Free College: Elizabeth Warren, Hillary Clinton, and Bernie Sanders Put Band-Aids on the Cancer - naked capitalism by Lambert Strether - We’ll get to the flaws in the Sanders and Clinton proposals — they have to do both with future college debt, and past or legacy debt — but first I’ll give a brief overview of the college debt market. And in the course of the exposition, I’ll explain the differences between “tuition-free” (Sanders) and “debt-free” (Warren, and then Clinton). I’m working from the candidate’s websites, not the news, so if I get any details wrong, readers please correct me! Fix firmly in your mind the fact that college has been tuition-free in the United States in the past, and is tuition-free today, in other civilized countries, if “other” is the word I want. For example, California. From the Daily CalifornianAt the [University of California] system’s inception, tuition was free for California residents. Over the years, student fees increased, and by the 1970s, the university moved away from free tuition for residents.  Hence, Senator Sanders is correct to claim that tuition was free in the United States, and is still free elsewhere:  Sanders said, “Making public colleges and universities tuition free, that exists in countries all over the world, used to exist in the United States.” There are at least nine advanced countries that offer free college, including the recent addition of Germany. There was a time in the United States when some public colleges and universities charged no tuition. However, tuition has never been set as a national policy — it is a decision for each school or state government officials. And some colleges charged tuition dating back to the 1800s. So you can also fix a corollary in your mind: The entire college debt system is useless, parasitical, and could (should?[3]) be done away with. (The parallel between our tapeworm-like college debt system and our tapeworm-like health insurance system is exact.)  Be that as it may, the college debt tapeworm has swollen to enormous size. MarketWatch: The total outstanding student loan debt in the U.S. is $1.2 trillion, that’s the second-highest level of consumer debt behind only mortgages. Most of that is loans held by the federal government.  And about those delinquencies and defaults: Student loans surpassed credit cards in 2012 as having the worst delinquency rates in consumer credit. More than one in 10 student loans were more than 90 days overdue as of November, according to credit analysts Equifax Inc.  Remind you of anything? That’s right! Subprime!

This industry helps Chinese cheat their way into & through US colleges: – The advertisements were tailored for Chinese college students far from home, struggling with the English language and an unfamiliar culture. Coaching services peppered the students with emails and chat messages in Chinese, offering to help foreign students at U.S. colleges do much of the work necessary for a university degree. The companies would author essays for clients. Handle their homework. Even take their exams. All for about a $1,000 a course. For dozens of Chinese nationals at the University of Iowa, the offers proved irresistible. “Test-taking services. Paper-writing. Take Online Courses for you,” says the social-messaging profile of one Chinese coaching outfit used by Iowa students, UI International Student Services. A pitch emailed by another business ended with this reassuring claim: “Your friends are all using us.” Today, the University of Iowa, one of the largest state universities in the American Midwest, says it is investigating at least 30 students suspected of cheating. Three sources familiar with the inquiry say the number under investigation may be two or three times higher. University spokespeople declined to name the students or comment on their nationality, citing academic privacy laws. But those familiar with the investigation said that most, perhaps all, of the cheating suspects are Chinese nationals. They stand accused of cheating in online versions of at least three courses, including law and economics. Three of the Chinese suspects admitted to Reuters that they hired Chinese-run outfits to take exams for them.

S&P warns Chicago about potential rating cut over pensions | Reuters: Chicago remains vulnerable to bond rating downgrades unless the city makes comprehensive changes to its municipal and laborers' retirement systems, Standard & Poor's said on Thursday. "The city's credit quality could weaken unless it gains both union and legislative support for any changes to its municipal and laborers' plans, and identifies a solid funding mechanism to address the unfunded liabilities and prevent further destabilization of its budget," the credit rating agency said in a report. The Illinois Supreme Court in March threw out a 2014 Illinois law aimed at saving the two systems from insolvency by reducing retirement benefits and increasing pension contributions by the city and affected workers. Chicago Mayor Rahm Emanuel last month announced an agreement in principal with unions to increase funding for the laborers' system, the smallest of the city's retirement funds. The municipal fund, the city's largest system, is projected to run out of money within 10 years. New accounting changes and other factors doubled its unfunded liability to $18.6 billion at the end of 2015 from $7.13 billion in 2014. S&P, which rates Chicago's general obligation bonds BBB-plus with a negative outlook, said any deal for the municipal fund would require an identified revenue source.

CalPERS Uses Unqualified “Expert” to Validate Its London-Whale-Style Deficient Risk Management -  Yves Smith - The more we’ve looked at CalPERS, the more it has become clear that it suffers from deep-seated governance deficiencies. As we’ll show in this post, they include a board whose members, save JJ Jelincic, apparently view their positions as largely ceremonial and don’t even go through the motions of oversight. Worse, CalPERS’ staff regularly engages in obfuscation and outright lying, and even has taken the unheard step of blowing off requests made by board members, secure in the knowledge that the board is too disengaged to follow up.  In this case, CalPERS’ staff used an “educational workshop,” a setting that puts the board at a disadvantage in challenging problematic practices, to validate a clearly deficient risk management and compliance structure. As we’ll explain at greater length, CalPERS has the foxes running the henhouse. It has the unit that is tasked with “overseeing” compliance and risk management for investments, which is clearly the biggest area of risk for CalPERS, in fact supervised by the parties it nominally oversees. What this means is that the joint investment risk management/compliance function (already an irregular arrangement; they are generally kept separate since the expertise required is different) reports to the Chief Investment Officer. Worse, the CIO also sets the compensation, including bonuses, of the managers in this unit.

Obama Wanted to Cut Social Security. Then Bernie Sanders Happened. - President Barack Obama endorsed an expansion of Social Security for the first time on Wednesday. “We can’t afford to weaken Social Security,” he said during a speech on economic policy in Elkhart, Indiana. “We should be strengthening Social Security. And not only do we need to strengthen its long-term health, it’s time we finally made Social Security more generous, and increased its benefits so that today’s retirees and future generations get the dignified retirement that they’ve earned.” The increased benefits, he said, could be paid for “by asking the wealthiest Americans to contribute a little bit more. They can afford it. I can afford it.” This was a far cry from Obama’s position on the program in late 2012, when his administration argued for reducing Social Security benefits by recalculating the way cost of living adjustments are made. “President Obama’s evolution on Social Security, from at one time being open to cuts to calling for an expansion of benefits … is certainly welcome news, but not at all surprising,” said Alex Lawson, the executive director of Social Security Works, a nonprofit group that advocates for protecting and expanding the program.Lawson’s organization has worked with lawmakers and other nonprofit organizations to oppose Obama’s proposed Social Security cuts and shift the conversation towards expansion. By the summer of 2014, a small group of Democratic caucus senators, led by Sen. Bernie Sanders, started advocating for lifting Social Security’s payroll tax cap so wealthier people paid more into the system, and then increasing benefits to seniors. Polling by advocacy groups found broad support for expansion. This idea became a central theme in Sanders’s presidential campaign. In the speech announcing his candidacy, the senator said that “instead of cutting Social Security, we’re going to expand Social Security benefits.”

Half of parents of uninsured minority children unaware they are Medicaid eligible -  Study also reveals substantial heath and healthcare issues for uninsured children and financial burden on families. Half of parents of uninsured minority children are unaware that their children are Medicaid/CHIP-eligible, according to a new study. These uninsured children have suboptimal health, impaired access to care, and major unmet needs. The child's health issues can cause considerable financial burden for the family. "Our findings indicate an urgent need for better parental education about Medicaid and the Children's Health Insurance Program (CHIP)," says Glenn Flores, MD, Distinguished Chair of Health Policy Research for the Medica Research Institute and study author. "The findings also indicate a need to improve Medicaid/CHIP outreach and enrollment." Minority children in the United States have the highest uninsurance rates. Latino and African-American children account for 53 percent of uninsured American children (2.4 million), despite comprising only 48 percent of the total U.S. child population. Key findings:
Only 49% of parents were aware that their uninsured child was Medicaid/CHIP eligible.
The most common reason for insurance loss was expired and never reapplied (30%).
The most common reason for never being insured was high insurance costs.
38% of children had suboptimal health, and 66% had special healthcare needs.
64% had no primary-care provider.
The mean uninsured time for the participants was 14 months.
5% had never been insured.

Medicaid programs can’t withhold a Hep C cure. -- It was only a matter of time. Last Friday, a federal judge in Washington State entered a preliminary injunction ordering the state’s Medicaid program to pay for direct-acting antivirals—think Harvoni or Sovaldi—for any beneficiary diagnosed with Hepatitis C. Like many states, Washington has a policy of refusing to supply the drugs until the disease has progressed far enough to seriously scar the patient’s liver. The reason is money: state Medicaid programs all over the country are buckling under the cost of paying for the new Hep C drugs. Limiting their availability is a rough-and-ready way to spread the costs of the new drugs over a number of years. But it’s not good medical care. Prominent clinical guidelines say that the new direct-acting antivirals should be offered to anyone with Hep C—no matter what their stage of disease. Why should your liver have to start turning into a raisin before you’re cured? In a clash between financial and medical necessity, the Medicaid statute sides with medical necessity. Under §1927(d), a state Medicaid program can decline to cover a drug if “the prescribed use is not for a medically accepted indication” or if the drug doesn’t have a “clinically meaningful therapeutic advantage” over alternatives. You can’t withhold cures just because they’re expensive.

Largest US Health Insurer Exits California, Illinois Obamacare Markets -  Just over a month ago, we reported that in addition to Georgie, Arkansas, Michigan and Oklahoma, the largest US health insurer UnitedHealthcare announced it would also depart the following "Affordable" Care Act state exchanges: Connecticut, North Carolina; Nebraska, Pennsylvania and Texas. That, however, was just a preview of what's to come, because on April 19, UnitedHealthcare made its divorce with Obamacare complete when it announced plans to exit most of the Affordable Care Act state exchanges where it currently operates by 2017. And earlier today, United continued executing on this warning, when it first announced that it would stop offering Affordable Care Act plans in Illinois in 2017 followed promptly by news UnitedHealthcare was abandoning California at the end of the year as well. As PBS reports, while United announced in April it was dropping out of all but a handful of 34 health insurance marketplaces it participated in, the company had not discussed its plans in California. UnitedHealth’s pullout also affects individual policies sold outside the Covered California exchange, which will remain in effect until the end of December.“United is pulling out of California’s individual market including Covered California in 2017,” said Amy Palmer, a spokeswoman for the state exchange. It’s expected that UnitedHealth will continue offering coverage to employers in California and to government workers and their families through the California Public Employees’ Retirement System.Amy Palmer, a spokeswoman for the state exchange said UnitedHealthcare policyholders will know their options for 2017 coverage when health plans and rates for next year are announced in July. It is safe to say  any "options" will not be cheap. Concurrently, the company also announced it will stop offering Affordable Care Act plans in Illinois in 2017. According to the Tribune, the departure of the insurance company will reduce the number of coverage options for consumers in 27 counties. Like in California, Illinois members will have access to their benefits through the end of the year. The change does not affect the company's group insurance business or Medicare plans.

New evidence that even not-for-profit Obamacare plans are failing -- The not-for-profit insurers that are planned to form the backbone of the Obamacare exchanges, including the Blues health plans, reported yesterday that they lost a lot of money in the first quarter of 2016. It was the same day that United Healthcare announced that it was pulling out entirely from the California exchanges–a state that many Obamacare acolytes held up as a model for the law’s successful execution. Obamacare was always burdened by the technocratic intrigues of its architects. Their highly regulated, centralized vision for the oversight of insurance markets and medical care saddled the private health plans with a very costly business model. It deliberately left insurers with a narrow margin for profits. It left them with even less leeway for making mistakes–like a bad risk pool or underpriced premiums. This wasn’t just an artifact of the policy aspirations pursued the scheme’s architects. It was a central expression of their political values. The law’s draftsmen were fine if the Obamacare health plans made a little money administering the law–but only as much as the political class would allow. The explicit caps placed on the operating margins of health plans are the clearest manifestation of these principles.But it turns out that this left the for- and not-for-profit plans with only a slim margin for economic error. So when Obamacare’s planners committed other business sins, there was no cushion.Among these offenses were attempts to goose enrollment in ways that deliberately made the risk pool older and more costly. In statutory filings that they posted this month, the not-for-profit health plans showed an average negative net margin of -2.5% during the first quarter of 2016. AIS Health Plan Week revealed the data on 41 not-for-profit plans. Credit Suisse reported on those results in a report issued yesterday. The total net losses among the 41 health plans approached a whopping $1.5 billion for the quarter.

Nonprofit Hospital Stops Suing So Many Poor Patients: Will Others Follow? -- For years, Heartland Regional Medical Center, a nonprofit hospital in the small city of St. Joseph, Missouri, had quietly sued thousands of its low-income patients over their unpaid bills. But after an investigation by ProPublica and NPR prompted further scrutiny by Sen. Charles Grassley, the hospital overhauled its financial assistance policy late last year and forgave the debts of thousands of former patients.  The hospital “deserves credit for doing the right thing after its practices were scrutinized,” Grassley, R-Iowa, wrote last week in a letter to his Senate colleagues, “but it should not take Congressional and press attention to ensure that tax-exempt, charitable organizations are focused on their mission of helping those in need.” While the changes at Heartland, which now goes by Mosaic Life Care, are a boon to its poorest patients, ProPublica has found numerous cases across the country of nonprofit hospitals, which pay no income tax, filing suits by the thousands.  Some have filed more suits than Mosaic ever did. In Evansville, Indiana, for example, Deaconess Hospital filed more than 20,000 lawsuits from 2010 through 2015. Like Mosaic, Deaconess reconsidered its financial assistance policies after questions from ProPublica last week and said it would be making changes. Grassley, in a floor speech announcing the results of his investigation, said litigious nonprofits should take it upon themselves to change their ways. “Let me be clear, nonprofit hospitals should not be in the business of aggressively suing their patients,” he said. “In essence, because of the favorable tax treatment these hospitals receive, they have a duty to help our nation’s most vulnerable.”

Violence sans frontières: Acts of war against health care workers  -- The international humanitarian law of war requires that Medical personnel exclusively assigned to medical duties must be respected and protected in all circumstances. Article 19 of the 1949 Geneva Convention states that Fixed establishments and mobile medical units of the Medical Service may in no circumstances be attacked, but shall at all times be respected and protected by the Parties to the conflict.  These norms could not be clearer. Yet the World Health Organization (WHO) reports that health care workers and health care facilities are being targeted in war: Over the two-year period from January 2014 to December 2015, there were 594 reported attacks on health care that resulted in 959 deaths and 1561 injuries in 19 countries with emergencies. More than half of the attacks were against health care facilities and another quarter of the attacks were against health care workers. Sixty-two percent of the attacks were reported to have intentionally targeted health care.Medicins Sans Frontières reports that: Last year, 75 hospitals managed or supported by international medical organization Doctors Without Borders/Médecins Sans Frontières (MSF) were bombed. This was in violation of the most fundamental rules of war which gives protected status to medical facilities and its patients, regardless if the patients are civilians or wounded combatants.  I naively expected that most of the attackers would have been terrorists, where ‘terrorist’ means an irregular, non-state militant. Not so, according to WHO: Of the 594 attacks reported over the two-year period, 53% were reportedly perpetrated by State actors, 30% by non-State actors, and 17% of the perpetrators remained unknown, unreported or undetermined. Syria is the worst offender. But are only ‘pariah’ states to blame? Joanne Liu [the Canadian pediatrician who is President of MSF] said four of the council’s five permanent members — Britain, France, Russia, and the United States — “have, to varying degrees, been associated with coalitions responsible for attacks on health structures over the last year.”

UK health IT ‘glitch’: Hundreds of thousands of patients have potentially been given an incorrect cardiovascular risk estimation after a major IT system error --This in the UK.  What is euphemistically referred to as an "IT system error" is, in reality, the mass delivery of a grossly defective medical device adversely affecting hundreds of thousands of patients.  I'm surprised not to see that other kindly euphemism, "glitch" ( Hundreds of thousands of patients have potentially been given an incorrect cardiovascular risk estimation after a major IT system error, Pulse can reveal. The MHRA has told GPs they will have to contact patients who have been affected by a bug in the SystmOne clinical IT software since 2009. Of course, this refrain appeared, a corollary of "Patient care has not been compromised" ( when health IT crashes and outages occur: The regulator says that means that ‘a limited number’ of patients may be affected, and the risk to patients is ‘low’. At best, it's good that only a "limited number" of patients were "affected."  I guess they feel they can justify a "limited number" of patient harms for the glory of a medical Cybernetic Utopia. At worst, how do "the regulators" know exactly who was affected?  Answer: they don't and this is boilerplate BS meant to CYA.

Why a drug that lowers cholesterol doesn’t save lives -- Five years ago, a new class of cholesterol-lowering drugs was drawing lots of praise, even being called potential “holy grails” in a prominent medical journal. Those drugs, called cholesteryl ester transfer protein (CETP) inhibitors, have failed in various trials since then. And that disconnect is instructive: It’s what can happen when researchers base claims of effectiveness on outcomes that might not necessarily translate into meaningful gains for patients.  Back in November 2011, Eli Lilly announced promising results in an early trial of its CETP inhibitor, evacetrapib, reporting that it lowered LDL, the harmful form of cholesterol, and raised HDL, its beneficial cousin. Lilly kicked off more studies with the goal of applying for FDA approval. Well, the company got its findings, but the results, announced in October 2015, were not good. Although evacetrapib does raise HDL cholesterol, it doesn’t seem to reduce the risk of heart attacks, strokes, and other cardiovascular problems — the ultimate reason that patients are advised to lower their cholesterol. Lilly halted the trial early and has since shelved the drug.Other companies have had similarly catastrophic failures. Pfizer dropped roughly $1 billion trying to bring its CETP inhibitor, torcetrapib, to market, before abandoning it in 2006. Roche bowed out of the race in 2012 after a massive trial of its entry, dalcetrapib, proved a failure. Cannon, who is executive director of cardiometabolic trials at the Harvard Clinical Research Institute said emerging evidence suggests that “mechanism matters” for LDL — in other words, it’s not how much the blood fat drops but why that’s important for reducing cardiovascular risk. And that’s at the heart of these drugs’ failures. The CETP story reveals the frequent — and often disappointing — lack of agreement between so-called surrogate markers — changes in cholesterol — and real-life benefits such as fewer heart attacks and strokes. The problem is that, for the purposes of press releases and eye-catching headlines, surrogacy sells.

Why Is Martin Shkreli Still Talking? -- Before last fall, Shkreli was no one in particular. Sure, he had the highs and lows you'd expect from a finance wunderkind: some failed hedge funds, a misadventure ending in lawsuit at the helm of a biotech company called Retrophin, more money than he knew what to do with. But those things are common enough in the circles he spun through. Then, last summer, his latest company, Turing Pharmaceuticals, bought and jacked up the price of Daraprim, an obscure drug used to treat a parasitic disease called toxoplasmosis that sometimes afflicts AIDS and cancer patients and pregnant women, by more than 5,000 percent. That got seemingly the entire country—up to and including the Democratic candidates for president—mad as hell. By the time news leaked that Shkreli was the mystery buyer of the lone copy of an unreleased Wu-Tang Clan album, he was already public enemy number one; when he said he hadn't even bothered listening to the record, for which he paid $2 million, you got the sense that he was trolling on the scale of a supervillain. So there were plenty who rejoiced when the hip-hop–hoarding mogul wasaccused by the feds of essentially being a con man. Prosecutors claim Shkreli lied to his hedge fund investors about their returns after losing a disastrous bet, then paid them back in Retrophin stock by hiring them as "consultants," cooking his books.  Echoing comments he made to the Wall Street Journal, Shkreli tells me he regrets playing a "character" on TV and Twitter. He also says that raising drug prices hurts insurance companies rather than patients, and that his public persona led to his being targeted by the authorities.  And attention is something he desperately, achingly craves."A great bad guy is your best act," he says. Check out our interview with Martin Shkreli, where we talk drugs and Wu-Tang over a game of chess at his apartment.

America’s opioid addiction: ‘I ended up selling all my valuable stuff to buy pills’ - On the outskirts of Kingsport, Tennessee, Kim, a therapist, faces a small group of people sitting in folding chairs. She’s helping them rid their life of illegal drugs.  The attendees are all white and working class, self-described “dirt poor”, and none with college degrees. They have come to spend hours talking of past and present pains, offer each other support, and pee in a cup. If they pass the test, they will get their weekly prescription of Suboxone, an FDA-approved narcotic for opioid addiction treatment. Or as it is called on the streets, “fake heroin”. Kingsport is where the Appalachians cross into eastern Tennessee. It’s a factory town cut in two by train lines and surrounded by hills. The few parts that are flat are stuffed with shopping malls, themselves filled with franchises. On maps, the area is mostly colored green for national forest, or brown for the hills. But on maps showing drug overdoses in the US it is dark red, the color used for the most deaths. Fifteen years ago, the map of the US was all blue, with few deaths reported. Since then, deaths from drugs have doubled, and what was once a small isolated red spot in Kentucky has grown larger and darker, overtaking Kingsport and the rest of central Appalachia. The area has been overrun with a demand for illegal drugs, opioids and tranquilizers. As a consequence, it has also been overrun with the pain, upturned lives and death that follow addiction.  The reasons behind the surge in demand are unclear and everyone asked has a different explanation – some are repeated so often in the press they have become street mythology. There is the pain pill story: “They prescribed so many pain pills so easily back in the 1990s, we all got addicted.” There is also the gang from big city story: “The heroin highway runs straight through them hills, right up to Detroit. When demand up there dried up, the gangs needed a new market and came here.”

Big Pharma in the Crosshairs: Senator Seeks Fed Investigation of OxyContin Long-Term Pain Relief Claims -- A U.S. senator has called for a federal investigation of Purdue Pharma, the manufacturer of OxyContin, in the wake of reports that the money-making pain reliever wears off early in many patients, leaving them exposed to pain and increased risk of addiction.  Sen. Edward Markey (D-MA) Friday sent letters to the Justice Department, the Food and Drug Administration, and the Federal Trade Commission urging them to begin probes of the Connecticut-based drug maker.  The move comes in the wake of a Los Angeles Times investigation into Purdue Pharma's claim that OxyContin relieves pain for 12 hours, which was one of the drug's main selling points. But the Times found that the effects often wore off before that, leaving patients cycling between relief and intense pain and suffering from opiate withdrawals before their next scheduled pill. The Times also found that Purdue knew about the problem since OxyContin first appeared in1996, but continued to claim that it worked for the full 12 hours in part to protect its revenues. The newspaper reported that when faced with the problem, Purdue instructed doctors to prescribe stronger doses, not more frequent ones. Stronger doses of opioid pain relievers are more likely to implicated in overdose deaths.

First Rise in U.S. Death Rate in Years Surprises Experts - — The death rate in the United States rose last year for the first time in a decade, preliminary federal data show,  a rare increase that was driven in part by more people dying from drug overdoses, suicide and Alzheimer’s disease. The death rate from heart disease, long in decline, edged up slightly. Death rates — measured as the number of deaths per 100,000 people — have been declining for years, an effect of improvements in health, disease management and medical technology. While recent research has documented sharp rises in death rates among certain groups — in particular less educated whites, who have been hardest hit by the prescription drug epidemic — increases for the entire population are relatively rare. Federal researchers cautioned that it was too early to tell whether the rising mortality among whites had pushed up the overall national death rate. (Preliminary data is not broken down by race, and final data will not be out until later this year.) But they said the rise was real, and while it is premature to ring an alarm now, if it continues, it could be a signal of distress in the health of the nation. The death rate rose to 729.5 deaths per 100,000 people in 2015, up from 723.2 in 2014, according to the National Center for Health Statistics. It was one of the few times in the past 25 years that the rate has increased. A bad flu season pushed it up in 2005, and AIDS and the flu contributed to a sharp increase in 1993. In 1999, there was a tiny increase.“We are not accustomed to seeing death rates increase on a national scale,”

Superbugs have finally built resistance to our 'drug of last resort' - It was all but inevitable, but the emergence of a “truly pan-drug resistant bacteria” in the US has researchers deeply concerned. MCR-1 is a gene found in some bacteria which is resistant to the drug colistin. Colistin has been around since the 1950s, but not widely used, as it can cause kidney damage. Because it hasn’t been widely used – in humans – it has retained its antibiotic properties better than any other drug. For that reason, it is known as the human “drug of last resort”. Where colistin has been used widely is in China. It’s added to animal food because it helps them put muscle mass on quickly and protects against health risks associated with mass farming.  Eight of the top producers of colistin for animals are based in China. It was Chinese researchers who first noted a strain of colistin-resistant E. coli in 2013, and at the end of last year, they released a report showing the resistance was spreading. From several years of testing samples of retail meat and from patients in two hospitals, they found the MCR-1 gene present in 15% of raw chicken and pork, 21% of slaughterhouse pigs… and 1% of 1322 samples from hospital patients. The authors also noted that as colistin resistance looked like it was transmissable, the spread of Enterobacteriaceae (the family that includes E. coli and salmonella) “from extensive drug resistance to pan-drug resistance is inevitable and will ultimately become global”. US Department of Defense researchers yesterday reported that a 49-year-old woman sought medical care at a military-associated clinic in Pennsylvania last month for a urinary tract infection. She was instead found to be carrying a strain of E. coli, which in turn was found to carry 15 different antibiotic-resistant genes grouped on two “mobile elements”. On one of those elements was the gene MCR-1.

The Superbug Doctors Have Been Dreading Is Now in the U.S. - A team of scientists at the Walter Reed National Military Medical Center and Army Institute of Research in Washington, DC has discovered the first instance of a person living in the U.S. infected with a feared antibiotic-resistant microbe, according to a research report published Thursday in the journal Antimicrobial Agents and Chemotherapy. An E. coli bacterium taken from a Pennsylvania woman suffering from a urinary tract infection contained the mcr-1 gene that conveys resistance to colistin, which physicians consider the antibiotic of last resort. “We risk living in a post-antibiotic world,” The continued over-use of antibiotics may lead to infections that no drugs can cure. Until very recently, no bacterial strains had evolved resistance to colistin. But this medically essential drug is used in Chinese and European livestock production. China is one of the world’s top consumers of colistin for veterinary use. Late last year, an international team of scientists working in China found the mcr-1 gene in colistin-resistant bacteria in people and animals.  About 70 percent of the antibiotics used in the U.S. are deployed in livestock production. But most of these animals aren’t sick. In fact, most veterinary antibiotics go to animals to encourage faster growth or to prevent illnesses associated with confined living conditions.A 2013 Environmental Working Group (EWG) analysis of U.S. government reports showed that antibiotic resistant bacteria had been detected in 81 percent of raw turkey meat and 69 percent of raw pork tested by federal scientists.

Superbugs Have Reached The U.S. For The First Time — Again - Last week, an NBC News headline reported, “‘Nightmare bacteria’ superbug found for the first time in U.S.” But wait, wasn’t it already here? In 2012, headlines announced that antibiotic-resistant “superbugs” had been found in 37 U.S. states. In 2013, the Centers for Disease Control and Prevention sounded “the alarm on deadly, untreatable superbugs.” In 2014, we learned that superbugs “could eventually kill more people than cancer.” That same year, superbugs were found in our food. In 2015, we were warned that travelers were bringing superbugs into the U.S. The steady drumbeat of headlines heralding the rise of the superbugs might seem a bit sensationalistic. But it’s not just puff and fear-mongering — superbugs are here, and they are a real risk. They’re also deeply confusing. That’s because superbugs are more than one thing. The word can mean a specific microorganism that has developed resistance to antibiotics — that’s what was happening when media warned of the growing threat of antibiotic-resistant gonorrhea in 2011. It can also mean a specific mechanism that creates antibiotic resistance and that might be shared by several different microorganisms — as in the most recent news. There are many microorganisms, many antimicrobials and many kinds of mechanisms that confer resistance. And so there are plenty of times that superbugs can arrive in the U.S. for the first time. The news from last week was about a mechanism of resistance, MCR-1, that was discovered in a sample of E. coli bacteria taken from a Pennsylvania woman’s urinary tract infection. It was the first time MCR-1 has been found in the United States. MCR-1 is a plasmid, which is basically a second batch of DNA, distinct from a bacterium’s own chromosomal DNA, that can replicate independently. “This means that resistance spreads because the plasmid can move from one bacteria to another,”. So you have plasmids spreading from bacteria to bacteria, almost like their own little epidemic, and jumping species as they go.

Why Is a Hospital Machine Tied to Superbugs Still in Use? - Six months ago, the U.S. Food and Drug Administration said a machine tied to a deadly superbug outbreak should be taken off the market “as soon as possible” to protect public health. Twice. But the machine, which uses water, disinfectant, and sound waves to clean certain surgical instruments, remains in use for some of those instruments after FDA officials backed down. And no one is saying precisely why. The FDA ordered Custom Ultrasonics Inc. to take its 2,800 System 83 Plus machines out of service. The automated washing machines are used across the U.S. to clean endoscopes, devices with a light and camera on one end for probing inside your body. A specialized type of endoscope known as a duodenoscope, used to look in tiny crevices of the small intestine, has proven particularly hard to clean and was linked to antibiotic-resistant infections at hospitals over the last few years. The use of Custom Ultrasonics equipment was one of several factors that "likely contributed" to dangerous infections spread by inadequately cleaned duodenoscopes, according to a report issued this year by Senate Democratic staff investigating the incidents. Up to 350 patients may have been infected at dozens of hospitals since 2010, according to separate documents released in April by the House Committee on Oversight and Government Reform. The exact number is difficult to ascertain because reporting has been spotty, though more than a dozen patients who were infected later died. In its November 2015 correspondence with the company demanding a recall, the FDA raised concerns about the device's compatibility with disinfectants, whether it works with duodenoscopes, and whether it properly eliminates microorganisms from water. In pulling back that recall demand, the regulator now says it’s working with the company to ensure that the machines "are validated in a timely manner,"

An old disease has reared its ugly head, and it's spreading: Cutaneous leishmaniasis, a disease once contained to areas around Aleppo and Damascus in Syria, has now been given new life thanks to the ongoing conflict in the region, reaching catastrophic proportions.  Look up cutaneous leishmaniasis on YouTube and you will find hundreds of videos, most of them showing the disfiguring damage this disease causes people in areas where it is endemic. There are lots of videos of Syrian refugees with the disease. In Syria, the disease had been confined to areas around Aleppo and Damascus, and in better times, was controlled to a great extent with proper health care. But today it is quite different, and health authorities are fearful the disease, which has already spread to Turkey, Lebanon, and Jordan, may end up in Europe, reports Cutaneous leishmaniasis is caused by the bite of a female Phlebotomus sand fly. Cutaneous leishmaniasis in Syria and its environs is usually caused by L.L. major and L.L. tropica, although at least 20 species have been identified as causing cutaneous leishmaniasis. There are no vaccines or drugs available to prevent infection.  According to scientists who have been gathering information and collating data on the disease from refugee camps and conflict zones, hundreds of thousands of people across the Middle East region are now affected by cutaneous leishmaniasis. The figures, which have spiked with the advent of war, were published May 26 in a PLOS editorial.  “The numbers are looking very bad and there’s no access to intra-lesional antimony compounds. We're seeing lots of diseases, including leishmaniasi in these conflict zones and we need to ring-fence them or risk another situation like Ebola out of the conflict zones in West Africa in 2014,”

Financing Health and Education for All - Jeffrey D. Sachs   In 2015, around 5.9 million children under the age of five, almost all in developing countries, died from easily preventable or treatable causes. And up to 200 million young children and adolescents do not attend primary or secondary school, owing to poverty, including 110 million through the lower-secondary level, according to a recent estimate. In both cases, massive suffering could be ended with a modest amount of global funding.  Children in poor countries die from causes – such as unsafe childbirth, vaccine-preventable diseases, infections such as malaria for which low-cost treatments exist, and nutritional deficiencies – that have been almost totally eliminated in the rich countries. In a moral world, we would devote our utmost effort to end such deaths.  Deaths of young children have fallen to slightly under half the 12.7 million recorded in 1990, thanks to new institutions such as the Global Fund to Fight AIDS, Tuberculosis, and Malaria.  When I first recommended such a fund in 2000, skeptics said that more money would not save lives. Yet the Global Fund proved the doubters wrong: More money prevented millions of deaths from AIDS, TB, and malaria. It was well used. The reason that child deaths fell to 5.9 million, rather to near zero, is that the world gave only about half the funding necessary. While most countries can cover their health needs with their own budgets, the poorest countries cannot. They need about $50 billion per year of global help to close the financing gap. Current global aid for health runs at about $25 billion per year. While these numbers are only approximate, we need roughly an additional $25 billion per year to help prevent up to six million deaths per year. It’s hard to imagine a better bargain.

Baby Born With Microcephaly in US to Woman Who Contracted Zika Elsewhere - ABC News: A woman visiting the U.S. has given birth to a baby with microcephaly after contracting Zika elsewhere, officials said. The woman gave birth to the baby at the Donna A. Sanzari Women’s Hospital in Hackensack, New Jersey today, according to Hackensack University Medical Center. The mother is receiving "exceptional" care, according to the hospital. Microcephaly is a condition where a baby is born with an abnormally small head and brain. This is the first baby born with microcephaly from Zika in the continental U.S. In January, a baby in Hawaii was born with microcephaly related to the virus. The 31-year-old woman is from Honduras, according to a source briefed on the case. The mother learned of the baby's diagnosis recently, while she was still pregnant, according to the source. The baby is also suffering from intestinal and visual issues, according to ABC-owned station WABC.

Landmark Federal Study Links Cell Phone Radiation to Brain Cancer  -- The radiation emitted from wireless devices could cause brain cancer, according to a multi-year study from the federal National Toxicology Program (NTP).  The results appear to confirm human evidence used by the World Health Organization that declared cell phone radiation a possible carcinogen.   The research found that male rats exposed to radio-frequency (RF) radiation had a greater chance of being diagnosed with a brain cancer called malignant glioma, as well as developing a tumor found on the heart. The radiation levels the rats were exposed to included power levels that current cell phones are allowed to emit.This study from the National Toxicology Program, part of the National Institute for Health, was conducted on laboratory animals to help determine what the potential risks might be for people, noted Environmental Working Group (EWG) President Ken Cook.“The federal government isn’t exposing rats to cell phone radiation because we’re concerned about rats getting cancer from cell phone use,” Cook said. “These studies are done because of their relevance to people and this particular study raises serious concerns.”“By confirming the connection between cell phone radiation and malignant tumors in male rats, the NTP’s study raises concerns for risks to people to a new level,”  David Carpenter, director of the School of Public Health at State University of New York at Albany, who has followed the issue closely said the study “won’t end the debate, but I can’t imagine anything with more credibility than an NTP report.”

News Media Nix NTP Phone Cancer Study; “Don’t Believe the Hype” - Senior managers at the National Toxicology Program (NTP) released the preliminary results of their cell phone radiation study late last week. They were so concerned about the elevated rates of two types of cancer among exposed rats that they felt an immediate public alert was warranted. They considered it unwise to wait for the results to wend their way into a journal sometime next year. Not surprisingly, the NTP report generated worldwide media attention. There were some startling reactions. Both the American Cancer Society (ACS) and Consumers Reports immediately shelved their long-held, wait-and-see positions. In a statement issued soon after the NTP’s press conference, Otis Brawley, ACS’ chief medical officer, said the NTP results mark a “paradigm shift in our understanding of radiation and cancer risk.” He called the NTP report “good science.” Consumer Reports said that the new study was “groundbreaking” and encouraged people to take simple precautions to limit their exposures. However, much of the mainstream media saw it very differently.  The Washington Post ran its story under the headline, “Do Cell Phones Cause Cancer? Don’t Believe the Hype.” One question on many people’s minds was why, if cell phones cause cancer, there hasn’t been an uptick in the incidence of brain tumors in the American population. The histogram below helps tell the story. It’s based on brain tumor data from The Netherlands. The black segment of each column tracks the incidence of glioblastoma multiforme (GBM), the most aggressive and deadly type of brain tumors. While the total incidence of all types of brain tumors in The Netherlands rose at the rate of only about 0.7% per year, the increase in GBM was about 3.1% per year —that is, the incidence more than doubled over the period 1989-2010. (Follow the thin red line we superimposed on the histogram to track the trend.) The higher incidence of GBMs is being masked by the lower rates of the other types of brain cancer. 

Glyphosate Found in Urine of 93 percent of Americans Tested -- Glyphosate, the most used herbicide in the world, has been found in the urine of 93 percent of the American public during a unique testing project that started in 2015. Glyphosate, labeled a “probable human carcinogen” by the World Health Organization’s cancer agency IARC in 2015, has now been revealed to be ubiquitous in the first ever comprehensive and validated LC/MS/MS testing project to be carried out across America.  Glyphosate-containing herbicides are sold under trademarks such as Monsanto’s Roundup.In a unique public testing project carried out by a laboratory at the University of California San Francisco (UCSF), glyphosate was discovered in 93 percent of urine samples during the early phase of the testing in 2015. The urine and water testing was organized by The Detox Project and commissioned by the Organic Consumers Association. The unique project, which has already provided more urine samples for testing than any other glyphosate bio-monitoring urine study ever in America, was supported by members of the public, who themselves paid for their urine and water samples to be analyzed for glyphosate residues by the UCSF lab.The data released in a presentation by the UCSF lab only covers the first 131 people tested. Further data from this public bio-monitoring study, which is now completed, will be released later in 2016. The Detox Project will be working alongside a new larger lab later this year to enable the public to once again test their urine for glyphosate residues.

War of words: spat over agriculture reveals EU willing to concede more than it publicly states - When it comes to agriculture and food safety issues, TTIP negotiations are rapidly running into the ground. We have known for some time about the huge disparity in negotiating positions and the complete incompatibility of the "red lines" of the United States and the EU: from the EU's determination to protect its Geographical Indication labels such as feta cheese in the US, to the American interest in the EU eliminating defensive tariffs for sensitive products in which the US has an enormous economic competitive advantage, such as beef.  Now it appears that the negotiators themselves are beginning to realise this. Agriculture Commissioner Phil Hogan has made several recent public remarks about his frustration at the lack of reciprocity from the US in their offers on tariffs and Sanitary and Phyto-Sanitary issues, and the lack of progress in negotiations. He obviously touched a nerve, as the US Ambassador to the EU Anthony Gardner launched a stinging private rebuke to Hogan through a letter to EU ambassadors, criticising Hogan for making "a series of misleading statements in the press." The EU's response, leaked to the EU online newsmagazine Politico, contains a point-by-point rebuttal of Gardner's accusations. It seems that the two sides are more interested at this stage at winning the public relations war over who is negotiating more honestly and fairly than actually negotiating. For those of us who believe that a TTIP agreement on agriculture and SPS rules would spell disaster for the future of the European agricultural model, the precautionary principle and our ability to keep Europe GMO-free, this is good news!

EPA Finds Widely-Used Weed Killer Could Threaten Animals --Atrazine is the second-most widely used herbicide in the United States. Manufactured by the chemical giant Syngenta, farmers have sprayed, on average, 70 million pounds of the weed killer on cropland across the country for the last twenty years. Half of the corn grown in the United States — some tens of millions of acres — is treated with atrazine. The sheer volume of atrazine applied to United States cropland has made it an easy target for the scientific and environmental communities, who have long worried that atrazine could be linked to birth defects in humans and contamination of groundwater. Now, a new EPA draft assessment released Thursday, looking at ecological risked posed by atrazine, backs up those claims. The assessment found that heavy use of the herbicide could be dangerous to fish, mammals, birds, reptiles, and plants. “Anyone who cares about wildlife, people and the environment should be deeply troubled by this finding,” Nathan Donley, a scientist with the Center for Biological Diversity, said in a press statement. “When the government’s own scientists say there’s enough atrazine in streams and rivers right now to kill frogs and other imperiled wildlife, we should be worried.”

Left uncontrolled, weeds would cost billions in economic losses every year - Imagine that weeds were left to grow uncontrolled in corn and soybean fields across North America. That scenario would cut U.S. and Canadian yields by about 50 percent, resulting in $43 billion in annual economic losses to those two crops alone, according to a new study. The research, conducted by the Weed Science Society of America and led by Kansas State University professor Anita Dille, spanned seven years from 2007 to 2013. Details about the study are available at . "We were interested in trying to understand just how much impact weeds still have on our crops. Despite the great improvements we have in crop genetics and fertility, we're still having to manage weeds," Dille said, noting that weeds compete with crops for everything from sunlight to moisture to nutrients in the soil. The WSSA is a professional organization of scientists from universities, industry and government agencies across the United States and Canada who are interested in weed science. Dille chairs the WSSA's weed loss committee. "What we saw in corn is that we'd lose over half of our yield if we didn't manage those weeds -- a 52 percent yield loss," Dille said. "And in soybeans, almost the same -- 49.5 percent total yield loss on average.

Organic Farmers Are Not Anti-Science but Genetic Engineers Often Are -- As co-chair of the Policy Committee for the Northeast Organic Farming Association of New York (NOFA-NY), I have been an active participant in the coalition that is campaigning to pass GMO labeling legislation in New York. In this capacity, I have spoken at public meetings, to the press and on radio interviews. The question that I hear from proponents of biotechnology is: “Why do you organic farmers oppose science, like the climate deniers?” The first time I heard this, I was startled and felt defensive. Had I ever opposed science? I searched back through things I had written and reviewed all the policy resolutions the members of NOFA-NY had passed over the years.  My farm has cooperated in any number of research projects with Cornell University scientists. We have tested cover crops, held a field day with the Cornell soil health group to allow them to demonstrate the ways a farm can test for biological activity, use a penetrometer and a rain simulator that shows how much aggregate stability the soils have. We spent seven years working with Molly Jahns and her team on breeding a variety of sweet pepper. The pepper ripens earlier, is open-pollinated and cucumber mosaic virus resistant (and now it bears the name of our farm—Peacework!). I served for four years on the Sustainable Agriculture Research and Education program's technical committee and three years on the administrative council. Unlikely activities for someone who is against science. So, what does this question about independent science really mean? I have come to understand that by “science” the biotech folks mean genetic engineering. They are deliberately conflating these two terms. And that seems to be how the farmer at our meeting was using the words too.

Eastern Monarch butterflies at risk of extinction unless numbers increase  --  Long-term declines in the overwintering Eastern population of North American monarch butterflies are significantly increasing their likelihood of becoming extinct over the next two decades, according to Scripps Institution of Oceanography at UC San Diego and U.S. Geological Survey research published today. The new study, available in the journal Scientific Reports, found that the Eastern migratory monarch population declined by 84 percent from the winter of 1996-1997 to the winter of 2014-2015. Using this information, the study demonstrated that there is a substantial chance -- 11 to 57 percent -- of quasi-extinction over the next 20 years. A quasi-extinct population is one with so few remaining individuals left that recovery is impossible. While the remaining individuals may survive for a short time, the population as a whole will inevitably go extinct. "Because monarch numbers vary dramatically from year to year depending on weather and other factors, increasing the average population size is the single-most important way to provide these iconic butterflies with a much-needed buffer against extinction,""Previously published research suggested that the most effective way to increase monarch numbers is to focus on the restoration of their breeding habitat," said USGS scientist Darius Semmens, a coauthor of the report. "Over the previous two winters, Eastern monarch populations were very low, indicating a higher risk of losing the species. If their numbers continue to grow, as they did this year, the risk will decrease."

Can Planting More Milkweed Save Monarch Butterflies? It's Complicated - Monarch butterflies are disappearing.Populations of these distinctive black and orange migratory insects have been in precipitous decline for the past 20 years, but scientists aren't exactly sure what's causing them to vanish.So far, potential culprits include disease, climate change, drought and deforestation. Everyone from loggers to suburban developers has been implicated. But much of the blame has been placed on farmers and the pesticides they rely on — pesticides that have reduced the milkweed that monarch caterpillars feast on. Now, however, scientists say that may not be the full story. Every spring, hundreds of thousands of monarchs sweep across the Great Plains from Mexico to Canada, and then back again in the fall. . The insects breed while traveling north, expending four generations to make it to Canada. The final generation then flies all the way back to Mexico to spend the winter there.   Since the late 1990s, scientists have been trying to find the pinch point for monarchs: the spot along their migration where they run into trouble. "Monarch caterpillars feed exclusively on milkweed plants, so people always thought that the decline in milkweed is causing the decline in monarch butterflies,"  Milkweed is actually a class of more than 100 varieties of leafy green plants, so named for the milky sap that oozes from its stem when snapped. It's literal lifeblood for the monarch caterpillars, serving as the insect's sole food source early in its life cycle. But since the plant serves no utility for Midwest farmers, it is often plowed under, pulled out or blasted with herbicides. However, so far, according to a recent National Academy of Sciences report on genetically engineered crops, scientists haven't been able to prove that disappearing milkweed is causing the caterpillars to starve.

Parasites of endangered animals should be conserved --Conservation managers who try to keep members of endangered animal species parasite-free are well-intentioned but this approach is misguided, according to a new research paper co-authored by a zoologist at New Zealand's University of Otago.  In a paper appearing in the journal Trends in Ecology and Evolution, Otago's Professor Hamish Spencer and US evolutionary biologist Professor Marlene Zuk argue that there are good reasons why parasites should be conserved along with their endangered hosts. The pair writes that "captive rearing programmes, as well as zoos and other facilities, take for granted that keeping their animals healthy and parasite-free is essential, since by definition parasites reduce their host's fitness. But the elimination of a natural complement of parasites might have unintended consequences. "Because parasites have been co-evolving with their hosts for so long, they have become part of the external environment, and removing parasites, even if it has some positive effects on an individual host's health, has the potential to wreak havoc with ecological systems." Professor Spencer says that for example, exposure to parasites might be crucial to the host animal's development of a fully functional immune system and hence to its survival. "Exposure to parasites in early life can confer improved resistance to the same parasites later on, and recent research shows that such exposure may enhance the overall development and efficacy of the immune system in defending against a wide variety of infections."

EPA Does About-Face Once the Cat is Let Out of BagThe Story Behind the E.P.A’s Contaminated Water Revelation - Last week 5.2 million Americans learned that their drinking water is contaminated with man-made chemicals linked to cancer. The Environmental Protection Agency issued a health advisory for two compounds: perfluorooctanoic acid (PFOA), which is used in the manufacture of Teflon and other nonstick substances, and the related perfluorooctane sulfonic acid (PFOS). An E.P.A. health advisory is not a regulation; it is nonbinding and nonenforceable. It does, however, require a public water system to notify its customers of the presence of the chemical and the dangers it poses. As a result, the E.P.A.’s announcement had immediate effects. Within hours, public wells were shut down in Horsham, Pa., and Maricopa County, Ariz. West Virginia’s Bureau for Public Health ordered a “do not drink” advisory for the water in three communities: Parkersburg, the site of a Teflon factory that until recently was operated by DuPont; the adjacent town of Vienna; and Martinsburg, four hours east, near the Maryland border. The West Virginia National Guard sent convoys of tankers containing drinking water to Vienna. Rob Bilott, a lawyer at the Cincinnati firm of Taft, Stettinius and Hollister, has demanded that the E.P.A. take action on PFOA since 2001. (See “The Lawyer Who Became DuPont’s Worst Nightmare.”) By that point, Bilott had read more than 110,000 pages of internal corporate documents related to PFOA. He had learned that DuPont, despite knowledge that the chemical was linked to increased rates of cancer and other horrific health conditions in animals and human beings, had dumped mountains of the stuff into the local water supply for decades. It was even known in 2001 that perfluorinated chemicals had been detected nationwide in nearly every sample tested at blood banks.

Flint and America’s Corroded Trust -- It's been the subject of protests and debates, but if anything is improving in Flint, Michigan, it's hard for any of us on the ground to see. One of the city's lead pipes has been replaced for the benefit of the press, but more than 8,000 additional service lines are likely corroded and still leaching toxic lead. It took a mom, a pediatrician, and a professor in Virginia to discover Flint's children were being poisoned. It took cable television to get the nation to give a damn.  And that's not all. An outbreak of Legionnaires' disease has killed at least 9 people and infected 87 others over the last two years. The state knew. The city knew. The county knew. The federal government knew. But the public was never told. Legionella bacteria may still be in pipes and hot-water heaters, waiting for warm weather to spawn. People are frightened in this hardscrabble town of 99,000 about an hour's drive north of Detroit. And still, the government tells them nothing. The city's pipe inspector at the water plant won't return calls. The county health director won't come to his door. The mayor is busy in a meeting with Jada Pinkett Smith.  Republican Gov. Rick Snyder gives interviews assuring citizens that the water is now safe for washing and tells me he would bathe his own grandchildren in it. The governor has no grandchildren.

These Four People Were Sued for $30 Million After Speaking Out Against a Hazardous Waste Dump - After being sued for $30 million by a corporate landfill owner for “speaking their truth in order to protect their community,” four residents of Uniontown, Alabama—a poor, predominantly Black town with a median per capita income of around $8,000—are fighting back.  On Thursday, the American Civil Liberties Union (ACLU) asked a federal court to dismiss the defamation lawsuit against Esther Calhoun, Benjamin Eaton, Ellis B. Long and Mary B. Schaeffer—all members of the community group Black Belt Citizens Fighting for Health and Justice.  The defendants are being sued by Georgia-based Green Group Holdings for speaking out against the polluting, hazardous coal ash that the company keeps in a landfill in a residential area—a “sprawling dump” that stands as a symbol of racial and environmental injustice. According to The lawsuit alleges that the Black Belt group used its web site and Facebook page “in a false and malicious manner,” and that the group’s president Esther Calhoun and vice president Benjamin Eaton made “knowingly false” statements to the media.nAmong the comments the lawsuit calls “false and defamatory” are these remarks by the group’s president, Calhoun (the bold text is the Green Group Holdings’ own, showing what the company objects to): Its a landfill, its a tall mountain of coal ash and it has affected us. It affected our everyday life. It really has done a lot to our freedom. Its another impact of slavery. … Cause we are in a black residence, things change? And you can’t walk outside. And you can not breathe. I mean, you are in like prison. I mean, its like all your freedom is gone. As a black woman, our voices are not heard. EPA [Environmental Protection Agency] hasn’t listened and [Alabama Department of Environmental Management] has not listened. Whether you are white or black, rich or poor, it should still matter and we all should have the right to clean air and clean water. I want to see EPA do their job.

A Toxic Gold Rush Is Poisoning The Peruvian Amazon With Mercury -- Alluvial mining, in which small gold flecks are sifted out of sandy sediments deposited by runoff from the Andes over centuries, has now also caused a wide range of environmental harms that have reached catastrophic levels in one of the most biodiverse regions on the planet. Most miners in Madre de Dios use liquid mercury to extract gold from soils they explore with suction hoses, and during the purifying process, the mercury is burned off and at best recovered in water if miners have the equipment available. Mercury pollution contaminates soil, water, and air — and when it enters the human body, it can harm the brain, heart, kidneys, lungs, and immune system. Now some four decades after mining moved into Madre de Dios, rivers are polluted, fish are toxic, people have elevated levels of mercury running through their blood, and deforestation is rampant, according to authorities and studies. Between 1999 to 2012, illegal mining in Madre de Dios went from less than 25,000 acres to more than 123,000. For perspective, one acre is roughly the size of a football field, which means large forests that served as biodiverse carbon sinks are instead greenhouse gas emitters thanks to mining machinery, all while soaking up toxic waste.  All reached for this story agree that a state of emergency issued last week for Madre de Dios is unlikely to alleviate a problem that’s been years in the making. The country is also poised for presidential elections in less than a week, and experts said any emergency plan will suffer from the uncertain policies of a new administration. Experts also agree that balancing the livelihood of informal miners versus the pressing need to end illegal mining will be a lengthy, cumbersome process as regional and national agendas often conflict with each other.

Microplastics Are Killing Baby Fish, New Study Finds --Researchers from Uppsala University in Sweden have found that young fish basically like eating microplastics as much as teenagers like eating fast food. For the study, published this week the journal Science, European perch embryos and larvae from the Baltic Sea were placed into lab aquariums with varying levels of polystyrene microplastics, including concentrations currently seen in nature.  Alarmingly, the researchers discovered that larval perch living in high concentrations of microplastic particles preferred to eat plastic over plankton, which are their natural food sources.  “This is the first time an animal has been found to preferentially feed on plastic particles, and is cause for concern,” Peter Eklöv, co-author of the study, told the Guardian. Lead author Dr. Oona Lonnstedt described that the fish were drawn to the plastic over real food. “They all had access to zooplankton and yet they decided to just eat plastic in that treatment. It seems to be a chemical or physical cue that the plastic has, that triggers a feeding response in fish,” Lonnstedt told BBC News. “They are basically fooled into thinking it’s a high-energy resource that they need to eat a lot of. I think of it as unhealthy fast food for teenagers, and they are just stuffing themselves.”

Over 17 million women and girls collect water in Africa, at risk of rape and disease | Reuters: - At least 17 million women and girls in Africa collect water every day, which increases their risk of sexual abuse, disease and dropping out of school, a study published on Wednesday has found. It is one of the first studies to calculate how many women and children were responsible for water collection in Africa, the researchers said. Using datasets from the World Bank, the U.N. children's agency UNICEF, and the U.S. Agency for International Development, researchers found that around 3 million children and 14 million women collect water in sub-Saharan Africa. "The absolute number of adult females affected by this practice was a shock to me," Jay Graham, lead author of the study, told the Thomson Reuters Foundation. "I knew it would be large... but I didn't realize it would be that high," added Graham, who is professor at the Milken Institute School of Public Health at The George Washington University. The daily practice causes musculoskeletal damage, soft tissue damage and can lead to early arthritis, Graham said. People also have to contend with water-borne diseases like schistosomiasis, an infection caused by parasitic worms living in fresh water, he said. Across all 24 countries examined, including Sierra Leone, Malawi and Niger, more girls were tasked with water collection than boys. Women were also the primary water collector in all countries. Children are pulled out of school for the daily task, and many women cannot earn an income because of the time and energy it takes to collect water, Graham said.

San Diego taps a bottomless well: the Pacific Ocean: In Southern California, fresh water is constantly in short supply. But the San Diego area can now tap into a resource that’s not dependent on rain — a new $1 billion desalination plant that is the largest in the Western Hemisphere. In Carlsbad, California, intake pumps pull water from the Pacific Ocean. “We bring 100 million gallons of water through our intake pump system and up the hill to the desalination plant," said Jessica Jones, spokesperson for Poseidon Water. "We get a 55 percent recovery. We turn half of it into fresh drinking water." Poseidon built and operates the desalination plant, which supplies San Diego County with about 10 percent of its drinking water. “San Diego County imports almost 85 percent of its water," Jones said. "This is the only water supply in the county that is truly drought-proof. We are not dependent on rainfall or snowpack.” In the process of reverse osmosis, the facility uses 16,000 membranes to remove salt and other impurities from the water. All of that state-of-the-art equipment comes at a cost. “The water coming out of the desalination plant is approximately $2,000 an acre foot,” Jones said. “Imported water right now is about $1,000 an acre foot. So, right now, it’s about twice as expensive.” But Jones said the desalinated water gets less expensive over time. “The water from the desalination plant is a fixed price for 30 years," she said. "Whereas imported water rates continue to rise each year at a variable rate. And so, very shortly here, desalinated water will be less expensive than imported water rates.”

Fight over California drought heats up in Congress | TheHill: Efforts in Congress are heating up to bring some relief to California’s historic drought, just as the dry summer season is starting. The Golden State is in its fifth year facing exceptional drought conditions. And while its congressional delegation is eager to find ways to better save water, and redirect it where needed, longstanding partisan and regional fights that fueled water wars since before California was a state are paralyzing efforts to help.   The House twice in recent days has debated GOP-backed measures to increase the water pumped through federal infrastructure from the Sacramento-San Joaquin River Delta — a massive delta that acts largely as the hub of the federal and state water canals — to Central Valley farms and Southern California. Democrats have tried to stop the efforts, arguing that the water losses would hurt endangered fish and the delta’s ecosystem. They say conservation and technology development are key to solving a drought exacerbated by climate change. Meanwhile, the Senate is debating Sen. Dianne Feinstein’s (D-Calif.) bill to give more flexibility to federal authorities in water pumping decisions.

El Nino bows out after driving year of record heat as La Nina lurks in the wings: After a year of driving global temperatures to unprecedented warmth, the giant El Nino weather event in the Pacific is officially over, raising hopes that drought-hit regions may be in for some relief in Australia and elsewhere. The Bureau of Meteorology, which was the first to declare the event had begun a year ago, on Tuesday said sea-surface temperatures in the tropical Pacific had dropped back to neutral conditions. Other indicators, such as the resumption of the typically westward-blowing tradewinds, also supported proof of the event's demise. "Outlooks suggest little chance of returning to El Nino levels, in which case mid-May will mark the end of the 2015-16 El Nino," the bureau said in its fortnightly update. As predicted, the stalling of the Pacific trade winds had led to a massive build up of warmth in Pacific waters. During El Nino years the ocean takes in less heat from the atmosphere, providing a natural spurt to temperatures that built on the background warming from climate change. Globally, the past 12 months have each set a record for that month, with four of the past five months smashing records for how much temperatures have departed from the long-term norms. The El Nino was one of the three biggest on record, similar in size to the 1997-98 and 1982-83 events, Karl Braganza, head of climate monitoring at the bureau, said."The last 12 months to April have been the warmest on record for Australia," Dr Braganza said. "And this month's been pretty warm too."

NOAA: Near-Normal Hurricane Season Expected -- The Atlantic hurricane season officially begins on June 1, but is off to an early start this year. Not only is a storm poised to form off the coast of the Southeast, but the first named storm of the season actually occurred way back in January. Forecasters put the greatest odds on this hurricane season being a near-average one, with smaller chances it will over- or under-perform, the National Oceanic and Atmospheric Administration announced Friday. The outlook predicts 10 to 16 named storms, with four to eight becoming hurricanes and one to four of those becoming major ones. A major hurricane (defined as Category 3 or stronger) hasn’t hit the U.S. coast since Hurricane Wilma in 2005, though storms like Hurricane Sandy make clear that it’s not only the strongest storms that cause major damage. NOAA authorities have urged coastal residents, particularly those along the Southeast coast this weekend, to make sure they have their hurricane plans in place. “A near-normal season does not mean that we’re off the hook or that there won’t be hurricane impacts,” NOAA director Kathy Sullivan said during a press briefing. “So now is the time for you to prepare for the upcoming season.”

Record floods hit US state of Texas again - Days of heavy rain have brought another round of severe floods to parts of the US state of Texas.Residents across the southeast of the state are braced for yet more flooding, with the rain set to continue for a few more days.Large areas across many communities to the southwest of Houston are under water. Mandatory evacuations have been put in place and at least nine people have died in the worst floods in more than 100 years.According to the National Weather Service (NWS), the swollen Brazos River reached its highest level on record on Tuesday when it touched 16.5 metres in Richmond, Fort Bend County, Texas. This is almost 1.2 metres above the previous record set in 1994, when the region suffered major flood damage. Only two years ago, the river had run dry in places because of a severe drought.Charles Roeseler, NWS meteorologist, said the river was yet to crest and was expected to slowly rise even more.

France sees worst flooding since records began | euronews - Scenes in parts of France looked like something straight out of a Jules Verne novel, with cars and houses under water after a deluge of rain. Parts of Central and Northern France have been drenched by the downpour with water levels rising to over one and a half metres in some areas, in what is reported as the most rainfall for this time of year since records began. A total of seven departments across the country had issued severe weather warnings, with the Loiret, one of the worst affected areas, being placed under red alert, an extremely rare event. Firefighters and rescue services were only able to make patrols by boat, looking out for those stranded by the muddy water. In other parts of the country, traffic was disrupted, coming to a complete standstill in some areas and large stretches of motorway have been closed in others. The capital, Paris, saw the River Seine rise by almost three and a half metres – its highest since 2001 – forcing the closure of some of its banks in the eastern part of the city.

Seine continues to rise in Paris amid deadly European flooding - At least 17 people have been killed in floods that have wrought havoc in parts of Europe after days of pounding rain, trapping people in their homes and forcing rescuers to row lifeboats down streets turned into rivers. Parisians were urged to stay away from the Seine, which has spilled over its banks in places and at 3:00 am (0100 GMT) Saturday was at 6.09 metres (just under 20 feet) above normal levels. French President Francois Hollande made a late night visit to the Louvre, where dozens of volunteers worked through the night to save some of the 38,000 artworks thought to be at risk. The Seine's famous tree-lined riverside walkways, usually the evening haunt of strolling couples, were inundated with several feet of eddying water. France's environment ministry said the river is expected to peak at between 6.10-6.40 metres during the night -- potentially higher than the floods of 1982. The record remains the 8.62 metres reached in 1910.

India’s roads melt as record-breaking heat wave continues -- India’s on-going heat wave, which set a new record for the country’s highest-ever recorded temperature last week, is melting tarmac on the roads of some of India's busiest cities. Residents in the city of Valsad, Gujarat, had to fight melting tar while crossing the road as temperatures rose to 36C. Video footage from NDTV shows people becoming trapped on a melting road surface as their shoes stick in the softening tarmac.  Abandoned sandals are seen strewn across the sticky roadway and a woman falls over as she attempts to carry a heavy bag over the road. Temperatures in parts of western India exceeded 50C on Friday. The record – a scorching 51C – was set in the city of Phalodi, in the western state of Rajasthan. The previous high was 50.6C in 1956 in the city of Alwar, also in Rajasthan. Indian weather officials have warned of more frequent heat waves as the scorching temperatures cause an increase in dehydration and heatstroke cases, as well as triggering widespread power cuts as surging demand overwhelms supply grids. Hundreds of people have died as crops have withered in the fields in more than 13 states, forcing tens of thousands of small farmers to abandon their land and move into the cities. Others have killed themselves rather than go to live in urban shanty towns. The heat wave has struck as India contends with a major drought and worsening water shortages that have affected around 330 million people. May and June are typically India’s hottest months and temperatures regularly exceed 40C in the run-up to the monsoon rains, but the severity of this year’s heat had been unprecedented.

Half of Thailand's Weather Sites Break All-time Heat Records in 42 Days --All-time national heat records have been set this past April and May in India, Thailand, Laos, Cambodia, and the Republic of Maldives. The unprecedented heat has killed hundreds in India and dozens in Thailand so far. But nothing in the record books can compare to what has recently occurred in Thailand: a large country with over 120 meteorological sites that has seen half of its official weather stations break their all-time heat records. Here are the details.  We knew the ‘super’ El Nino this past year would have a big affect on the world’s climate. It did not produce the hoped for big rains in California but it did produce the heat and drought in Southeast Asia as forecast. Of all the countries effected the most by this event Thailand has proven to see something exceptional weather-wise: more than half of all the country’s official weather sites reported their all-time heat records during the months of April and May. Thailand’s meteorological service only dates back to 1951 but it is a large country with over 120 official observation sites and a sophisticated observation network. Thus it is truly amazing that at least 66 of these 120 sites measured their hottest temperature on record during the brief period of April 10-May 22.

Africa’s Most Vulnerable Face an Even Hotter Future -- Already home to some of the most environmentally vulnerable populations on the planet, Africa looks to increasingly feel the sting of climate change through more frequent, widespread and intense heat waves. Extreme heat that would be considered unusual today could become a yearly occurrence there by mid-century, one new study suggests, and the trend will emerge earlier there — and in the rest of the tropics — before it does in more temperate areas, another finds. The studies, both detailed this month in the journal Environmental Research Letters, emphasize the undue burden that some of the poorest populations on the planet — often those that have contributed least to global warming — will face from climate change, the authors say. “They don’t have the capacity to respond to such heat waves,” lacking the kind of warning systems and regular access to health care that help those in wealthier countries cope, said Jana Sillman, a co-author of the first study, and a climate researcher at the Center for International Climate and Environmental Research in Norway. An increase in extreme heat is one of the clearest implications of the overall warming that has resulted from decades of unabated emissions of carbon dioxide and other heat-trapping greenhouse gases. Warming has been shown to increase the odds of such extreme events already today, and heat waves are expected to become increasingly intense and frequent at all regions across the planet as temperatures continue to rise.

Bleaching May Have Killed Half the Coral on the Northern Great Barrier Reef, Scientists Say - Mass bleaching on the Great Barrier Reef in the past three months has killed as much as half of the coral in the north but left large parts of the southern reaches with only minor damage, scientists in Australia said on Sunday.The current bleaching is the third to strike the roughly 1,400-mile-long reef in 18 years and the most extreme scientists have recorded. “In the north, the mortality rates are off the scale,” said Prof. Terry Hughes, the director of the ARC Center of Excellence for Coral Reef Studies, based at James Cook University in Townsville, Queensland. “There, the coral mortality rates are approaching 50 percent, and the impact of the bleaching is still unfolding.” But from Cairns, in tropical north Queensland, southward down the east coast of the state, about 95 percent of the coral has survived, Professor Hughes said. Mildly bleached coral should regain its color over the next few months, although the stress from bleaching is likely to slow the area’s reproduction and growth, he said. Bleaching occurs when water temperatures rise as little as 1 degree Celsius, or 1.8 degrees Fahrenheit. The coral then expels tiny, colorful algae, causing it to turn white. The coral can recover if the water temperature drops and the algae, known as zooxanthellae, recolonize it. Otherwise, it may die.

Great Barrier Reef Suffers Worst-Ever Bleaching Event  - The worst bleaching event ever seen on the Great Barrier Reef has killed more than a third of corals across wide swaths of the region, scientists announced on Sunday. Those numbers continue a streak of horrifically bad news for the largest living structure on the planet. Just a month ago, researchers said 93 percent of the reef had been affected by the mass bleaching event. The latest statistics apply specifically to the northern and central parts of the Great Barrier Reef, where scientists said they had "never seen anything like this scale of bleaching before." Terry Hughes, convenor of the National Coral Bleaching Taskforce and the scientist responsible for the latest aerial surveys of the reef, said in a press release this was the "third time in 18 years that the Great Barrier Reef has experienced mass bleaching due to global warming, and the current event is much more extreme than we’ve measured before," spurred by an unusually strong El Nino weather event. This repetitive cycle of bleaching, he warned, would only make it more difficult for the already fragile structure to recover in the future. Perhaps the only good news to come from the latest research points to regions along the southern Great Barrier, where just 5 percent of coral has died. Scientists said they expect the "mildly bleached" coral along that part of the reef to recover in a few months. Coral becomes bleached most frequently when water becomes too warm. During such times, the colorful algae that live in the coral leave it, causing it to turn bright white. Reefs are able to recover from bleaching if temperatures drop again, but if water remains warm for too long, the coral can die in droves. This is the case with the latest bleaching event.

'Huge wake up call': Third of central, northern Great Barrier Reef corals dead: More than one-third of the coral reefs of the central and northern regions of the Great Barrier Reef have died in the huge bleaching event earlier this year, Queensland researchers said. Corals to the north of Cairns – covering about two-thirds of the Great Barrier Reef – were found to have an average mortality rate of 35 per cent, rising to more than half in areas around Cooktown.The study, of 84 reefs along the reef, found corals south of Cairns had escaped the worst of the bleaching and were now largely recovering any colour that had been lost. Professor Terry Hughes, director of the ARC Centre of Excellence for Coral Reef Studies at James Cook University, said he was "gobsmacked" by the scale of the coral bleaching which far exceeded the two previous events in 1998 and 2002. "It is fair to say we were all caught by surprise," Professor Hughes said. "It's a huge wake up call because we all thought that coral bleaching was something that happened in the Pacific or the Caribbean which are closer to the epicentre of El Nino events." The El Nino of 2015-16 was among the three strongest on record but the starting point was about 0.5 degrees warmer than the previous monster of 1997-98 as rising greenhouse gas emissions lifted background temperatures. Reefs in many regions, such as Fiji and the Maldives, have also been hit hard.

Coral bleaching spreads to Maldives, devastating spectacular reefs -  The longest global coral bleaching event in history is now devastating reefs in the crystal clear waters of the Maldives, with images released exclusively to the Guardian powerfully illustrating the extent of the damage there. Photographed by the XL Catlin Seaview Survey, the images captured the event in May as it moved beyond the now devastated Great Barrier Reef and into waters further west. “The bleaching we just witnessed in the Maldives was truly haunting,” said Richard Vevers, founder of the Ocean Agency.“It’s rare to see reefs bleach quite so spectacularly. These were healthy reefs in crystal clear water at the height of an intense bleaching event. The flesh of the corals had turned clear and we were seeing the skeletons of the animals glowing white for as far as the eye could see – it was a beautiful, yet deeply disturbing sight.” The Maldives is series of coral atolls, built from the remains of coral. The livelihoods of people there depend on the reefs through tourism, fisheries and as a wave-break that helps prevent inundation on low-lying islands. The photographs were part of an ongoing project, in partnership with Google, the University of Queensland and the US National Oceanic and Atmospheric Agency to capture the global bleaching event as it moves around the world. “We’ve been following this third global bleaching event since the start nearly two years ago and just when you think you’ve seen the saddest sight you’ll ever see, you see something even worse,” Vevers said. The event started in mid 2014 in the Pacific Ocean around Hawaii, which then got hit again in 2015. In early 2016 it spread to the Great Barrier Reef where 93% of its nearly 3,000 reefs were hit by bleaching.

Scientists: Vibrant US marine reserve now a coral graveyard (AP) — El Nino's super warm water has turned what had been one of the world's most lush and isolated tropical marine reserve into a coral graveyard, federal scientists said Wednesday. Researchers finishing an emergency undersea expedition found 95 percent of the coral dead around Jarvis Island in the Pacific Remote Island Marine National Monument. In November, much of the coral had bleached white but was alive. "There's hardly anything left on the bottom in terms of the coral. It basically looks like a graveyard," said the expedition chief scientist Bernardo Vargas-Angel of the National Oceanic and Atmospheric Administration. "The skeletons are still there but they are covered with algae." The algae was red, the color of blood or wine, and below it was a sea of dead coral, he said, returning from a 10-day diving expedition to the region along the equator, 1,400 miles southwest of Hawaii. Scientists say the area around Jarvis Island is a special place that normally looks like something out of a technicolor movie, vibrant with coral, plankton, fish and sharks. A unique ocean current normally brings cold water up from the deep, making it teem with life, said Woods Hole Oceanographic Institution scientist Anne Cohen, who is involved in the research but wasn't on this trip. "It's like the Super Bowl of coral reefs, this place," Cohen said. "The coral cover is astronomical. The amount of life that it supports is just sky high: fish, turtle, dolphins, sharks. You name it, you find it there in large numbers." The coral can normally survive short bouts of warm water but the water just got too warm for too long, scientists said. The water was about 7 degrees warmer than normal (4 degrees Celsius), Cohen said. Scientists measure how warm the water is for coral in something called degree weeks. The record had been 18 degree Celsius weeks in 2014. This maxed out at 31.3, said NOAA coral reef coordinator Mark Eakin. . It has been over 20 degree Celsius weeks for almost eight months, worse than anywhere else, Eakin said.

Coral Bleaching - The Canary We’re All Ignoring – Emma Seddon - The world at large is currently in very real danger from carbon dioxide and other greenhouse gases. We’ve got a form of canary which is currently warning us strongly that things are imminently about to get deadly for us. Unlike the miners of old, however, we’re completely ignoring it. I speak of coral bleaching [4]. Hundreds of kilometers of coral are dying, and it’s undoubtedly due to human action. We’ve had, in all fairness, multitudes of natural warnings about the danger we’re putting the planet in through our actions - but coral bleaching is one of the clearest (and deadliest) signs yet.  Yet we’re turning a blind eye. Our coral canary is lifeless in the cage, and we’re continuing to mine. Coral bleaching is essentially the death of a coral reef. It occurs when corals are stressed, and jettison the symbiotic algae within their tissues. In human terms, this is akin to them sloughing off their skins, leaving them skeletally vulnerable. Unsurprisingly, they die swiftly thereafter, leaving behind only their white, bone-like structures. Coral stress is caused by many things, including changes in light levels and the availability of food - but scientists are 99% certain that the recent, wholescale coral bleaching phenomenon is caused by rising water temperatures [5]. Coral bleaching is not just the death of the poor corals. It also spells disaster for the many, many species which live in and around coral reefs. Coral reefs are complex habitats [6], providing sustenance and shelter for an astonishing 25% of marine life. Thousands upon thousands of kilometers of the Great Barrier Reef are now bleached - an estimated (and horrific) 93% [7]. Many entire colonies have been obliterated [8], leaving the species which rely upon them extremely vulnerable [9]. Marine biologists - openly devastated by and angry about the phenomenon [10] - state that the coral are unlikely to recover even if action is taken on climate change, and if no action is taken, we could see the complete extinction of coral within our lifetimes. And this would not only mean the extinction of coral, but the extinction of an incomprehensibly enormous swathe of marine life.

Scientists puzzled by slowing of Atlantic conveyor belt, warn of abrupt climate change --Scientists in the Labrador Sea recently made the first retrieval of data from one of 53 lines moored to the sea floor and studded with instruments that have been monitoring the ocean’s circulatory system since 2014. The instrument array, known as the Overturning in the Subpolar North Atlantic Program (OSNAP), measures salinity, temperature, and current velocity of the surrounding water, data that is vital to understanding a set of powerful currents with far-reaching effects on the global climate. These currents are known as the Atlantic Meridional Overturning Circulation (AMOC) — or, more popularly, “the Atlantic conveyor belt” — and they have “mysteriously” slowed down over the past decade, according to Eric Hand, author of a Science article published this month.  Scientists are increasingly warning of the potential that a shutdown, or even significant slowdown, of the Atlantic conveyor belt could lead to abrupt climate change, a shift in Earth’s climate that can occur within as short a timeframe as a decade but persist for decades or centuries. North Atlantic waters, such as the Greenland, Irminger, and Labrador Seas, are especially salty when compared with water in other parts of the world’s oceans. When AMOC currents, like the Gulf Stream, bring warmer waters from the south to the North Atlantic, the water cools down, releases its heat to the atmosphere, becomes colder, and sinks, since saltier water is denser than fresher water and cold water is denser than warm water. . At the same time, warm, salty tropical surface waters are drawn northward, where they replace the sinking cold water.  “Models suggest that climate change should weaken the AMOC as warmer Arctic temperatures, combined with buoyant freshwater from Greenland’s melting ice cap, impede the formation of deep currents,” Hand wrote in the Science article. “But so far, limited ocean measurements show the AMOC to be far more capricious than the models have been able to capture.”

Arctic Sea Ice Goes Far Beyond Record Low Extent for May - The sea ice that coats the Arctic Ocean each winter and erodes each summer is going through its most depleted spring since modern observing began. The Danish Meteorological Institute reported the lowest sea ice extent of any April in the Arctic’s 38-year-long satellite record. As luck would have it, the primary satellite sensor used by the National Snow and Ice Data Center (NSIDC) for extent measurement began producing spurious data in April. A similar microwave imager from another satellite is now in the process of being intercalibrated to ensure consistency of the long-term record. Even with that caveat, it’s clear that the unusually rapid ice loss from April is steaming ahead. NSIDC’s Mark Serreze confirmed in an email that the 2016 Arctic sea ice extent is indeed at record-low levels for May, as implied by Figures 1 and 2. Different agencies use different algorithms to measure sea ice extent, but the slight variations that result do not affect the big picture. This year’s hasty ice retreat has been fueled by incredibly mild temperatures across the Arctic during much of the winter and spring--a byproduct of El Niño atop longer-term warming from human-produced greenhouse gases. At Barrow, Alaska, every day since January 1 has been above average except for January 22, February 6, and a stretch from March 28 to April 3. Alaska’s Climate Division 1, which covers the North Slope, is having its warmest year to date by far (see Figure 3), with the January-to-April average of 2.7°F beating the previous record (–1.4°F, from 2014) by an eye-popping 4.1°F. Another red-letter data point: snow cover disappeared from the open tundra at the NOAA Barrow Observatory on May 13. 

Arctic sea ice set a record low every single day in May - After Arctic sea ice set a record low annual maximum in March, it was widely expected that this summer melt season would rank among the top 5 or 10 lowest melt seasons on record since the dawn of satellite observations there in 1979.  However, even the most pessimistic projections have turned out to be too conservative so far, as pulses of unusually mild air and milder-than-average ocean temperatures have eroded the unusually thin sea ice cover from above and below.  Unusually thin and even totally absent sea ice cover is emerging on both the Atlantic and Pacific sides of the Arctic, raising the possibility of a new sea ice record low and possibly a hastening of when the first ice-free Arctic summer takes place. During every day in May, for example, sea ice extent — which measures how much ocean is at least 15% ice-covered — was lower than ever observed since 1979. This means the 2016 sea ice extent is melting faster than at the same time of the year in 2012, when sea ice set a record low. And unless a major weather pattern change happens soon, it is becoming more likely that a new record low could be set this year.  Near-surface temperature departures from the median in terms of degree days above/below freezing. The red line shows that the period from February onward has been off the charts warm.  "Yes, from what I can see, since early May we have been at record daily lows as assessed over the period of satellite observations," said Mark Serreze, the director of the National Snow and Ice Data Center (NSIDC) in Boulder, Colorado.  A satellite sensor used for measuring sea ice extent failed in April, adding some uncertainty to the data, but that has been resolved, Serreze told Mashable in an email. "This is not a calibration issue," he said. Satellite images show that sea ice is poised to break up between the Beaufort and Chukchi Seas, about two months ahead of schedule. 

Flying space junk is about to beat us to destroying the Arctic -- We’re surely not the first to remind you that it’s a hard-knock life for creatures in the Arctic, which is warming twice as fast as the rest of the world.  But there’s still Baffin Bay, a vast stretch of open water in a Canadian-controlled zone, which remains a diverse refuge for charismatic megafauna like seals, polar bears, seabirds, and whales (including the especially cute beluga). Sadly, Baffin Bay can’t catch a break: This time from space intruders. Toxic debris from a Russian satellite is expected to come crashing into this pristine environment this Saturday. The debris is a stage from a rocket from Russia’s Rokot program, which launches commercial satellites. The Rokot program uses Cold War-era missiles, according to The Star’s reporting, which rely on a toxic chemical called hydrazine to fuel their launch. Baffin Bay is an important subsistence hunting territory for the area’s Inuit tribes. Naturally, people are pissed about the debris’ impact on the area. “Dumping these chemicals from a ship would be a clear violation of international and Canadian law, and it is no more acceptable when it is dumped from the air,” Greenpeace Arctic campaigner Alex Speers-Roesch told Canada outlet The Star. If climate change, Arctic drilling, nuclear apocalypse, or a Trump presidency weren’t enough for these fragile ecosystems to deal with, you can now add space debris to that list.

Antarctic seas defy global warming thanks to chill from the deep | Reuters: A persistent chill in the ocean off Antarctica that defies the global warming blamed for melting Arctic ice at the other end of the planet is caused by cold waters welling up from the depths after hundreds of years, scientists said on Monday. The Southern Ocean off Antarctica may be among the last places on Earth to feel the impact of man-made climate change, with a lag of centuries to affect waters emerging from up to 5,000 meters (16,000 ft) deep, the U.S. study said. Many people who doubt mainstream scientific findings that human use of fossil fuels is warming the planet often point to the paradox of expanding winter sea ice off Antarctica in recent decades and a rapid shrinking of ice in the Arctic. "Our findings are a step toward resolving the mystery," lead author Kyle Armour of the University of Washington, Seattle, told Reuters of the study in the journal Nature Geoscience. He noted the upwelling of cold water helped to explain the persistence of sea ice but not its expansion, a trend other studies have linked to shifts in winds off the vast frozen continent. Monday's report found that warm waters in the Gulf Stream cool as they flow north into the North Atlantic, then sink and loop south towards Antarctica as part of an aquatic conveyor belt that takes centuries to complete. Eventually, gale force winds in the Southern Ocean around Antarctica blow surface waters northwards and draw the chill, ancient waters from the depths.

The second coming of the Dirty Thirties? Climate change will bring drought and depression -  Some experts believe the wildfires at Fort McMurray suggest we should become accustomed to major disasters that may be linked to the long-term effects of climate change. But the stakes are different in the Prairies. According to a recent study from the University of Winnipeg, the Prairie region represents a unique case around the world. The study reports that the Canadian Prairies could be the most affected area in the world over the next few decades. Jeopardizing our breadbasket makes climate change the most serious threat to our food security. Learning that climate change will affect agriculture is not overly surprising, but the expected pace is jaw-dropping. The Manitoba-based report suggests that summers in the Prairies will become hotter and longer. Using a Prairie Climate Atlas, a group of scientists predicted that over the next 50 to 60 years the climate picture is not pretty. For example, the atlas predicts Winnipeg could see 46 days a year of temperatures over 30 C, a frequency which is four times what the city experiences now. Currently, Winnipeg experiences 11 days of 30 C weather on average a year. For Edmonton, Calgary, Regina and Saskatoon the number could grow up to seven times current averages. These are desert-like temperatures, similar to what one finds in Texas, or even in Mexico. And yes, fire-stricken Fort McMurray is likely to experience warmer and dryer weather in the future. These are staggering statistics. More heat and less moisture will compromise our ability to grow our agrifood economy. But also, other than farmers, reports on climate change suggest that the most vulnerable to climate change include people and families with less means and indigenous communities. Food will likely become less affordable and the ability for some remote regions to grow food will be negatively affected.

Climate change: waiting for catastrophe means we will be too late to act: Why is nobody in authority talking about the issues which are really defining the future of this country? Politicians and corporations create much sound and fury around tax reform, industrial relations and, ad nauseam, the election – all important but essentially second-order issues. Beyond the Australian goldfish bowl, the greatest structural change in human history is rapidly unfolding bringing unprecedented risks and opportunities. Yet our leaders are oblivious, intent upon minimising our opportunities and maximising our risks. In the 1970s, the combined effect of population growth and consumption began to exceed the capacity of planetary ecosystems to meet human demands. To the point where today we need the annual biophysical capacity of 1.6 planets to survive. This unsustainable pressure is now hitting global limits which we can no longer circumvent, manifesting itself in two immediate pressure points. First, increasing energy costs. Economic growth and wealth created since the Industrial Revolution totally depended on the availability of cheap energy in the shape of fossil fuels, first coal, then oil, then gas. But cheap fossil fuels have dried up. Their cost has increased steadily as we used up the "low-hanging fruit" and now rely on more expensive sources such as deepwater oil, tar sands, shale and coal seam fracking. . Except this is happening around a declining energy surplus trend in that the surplus available to run society net of the increasing energy needed to extract these sources, is dropping rapidly, making it impossible to maintain conventional economic growth, which has already slowed.

Exclusive: Effect of CO2 on warming is worse than we thought  -- WE MAY be in for more global warming than we hoped, New Scientist can reveal. Over the past few years, a number of studies have concluded that a given level of carbon dioxide in the atmosphere produces less warming than previously thought. This rare good news on climate made headlines around the world.But these studies were carried out towards the end of a period of little warming. Do the results still stand given the record warming in 2014, 2015 and 2016? To find out, New Scientist asked those behind the studies what would happen if the latest global temperature data was plugged into their models.One headline-making 2013 study had concluded that the immediate warming that would result from a doubling of CO2 in the atmosphere would be around 1.3 °C – significantly less than most previous estimates. If correct, this would mean we still have a chance of limiting warming to below the “dangerous” point of 2 °C despite soaring CO2 levels.But this was before global temperatures shot past 1 °C above pre-industrial levels last year, as predicted by New Scientist in July 2015. If the 2013 study was repeated using that value, it would give an estimate for the immediate warming of 1.6 °C, says Piers Forster, one of the study’s authors based at the University of Leeds, UK. If we assume that the average global surface temperature in 2016 will be a record-breaking 1.3 °C above the pre-industrial level, as expected, the estimate would be closer to 2.1 °C, Forster says.

Spike in Alaska wildfires is worsening global warming, US says - The devastating rise in Alaska’s wildfires is making global warming even worse than scientists expected, US government researchers said on Wednesday. The sharp spike in Alaska’s wildfires, where more than 5 million acres burned last year, are destroying a main buffer against climate change: the carbon-rich boreal forests, tundra and permafrost that have served as an enormous carbon sink. Northern wildfires must now be recognised as a significant driver of climate change – and not just a side-effect, according to the report from the US Geological Survey. “This is one of the surprises that we haven’t talked about much,” said Virginia Burkett, chief climate scientist at the USGS. “It has tremendous implications for the carbon that is locked up in Alaska soils and vegetation.” A record wildfire year – such as 2015 which was the worst in Alaska for a decade – had a measurable effect on the release of carbon dioxide and methane, which are the main drivers of climate change. “Our scientists found that the balance of carbon storage versus release in Alaska was strongly linked with wildfires,” Burkett said. “In years where there was high wildfire activity the net carbon balance declined dramatically, and then it would rebuild in the absence of fire.” Alaska is a far bigger storehouse for carbon than the lower 48 states, according to the USGS. The state’s boreal forests, peat-rich tundra, and permafrost hold about 53% of US carbon. Alaska accounts for about 18% of US land mass. Alaska currently absorbs about 3.7m tonnes of carbon a year, the USGS assessment found. But that vast storehouse of carbon has been breached by warming temperatures, thawing permafrost – and wildfire.The USGS warned last year that Alaska could lose about a quarter of its permafrost by 2100, accelerating climate change.

Scientists compare climate change impacts at 1.5C and 2C -  Half a degree makes a very big difference when judging how different parts of the world will feel the effects of climate change. This is the conclusion from the first study to compare and contrast the consequences of 1.5C world compared to a 2C world, published today in Earth System Dynamics.  Both 2C and 1.5C are explicitly mentioned in the Paris agreement as potential upper limits for global warming since the preindustrial era, but details from scientists on how the temperature thresholds compare have been sparse. For example, an extra 0.5C could see global sea levels rise 10cm more by 2100, water shortages in the Mediterranean double and tropical heatwaves last up to a month longer. The difference between 2C and 1.5C is also “likely to be decisive for the future of coral reefs”, with virtually all coral reefs at high risk of bleaching with 2C warming. The authors presented their research today at the European Geosciences Union, an annual major gathering of geoscientists taking place this week in Vienna. The Paris agreement – adopted in December 2015 and due to be officially signed by more than 150 countries on Friday – codified what the authors of today’s study call a “two-headed” temperature goal. It pledged to keep the average global surface temperature “well below 2C” and “pursue efforts” to limit the increase since preindustrial times to 1.5C.The nod to 1.5C recognised that many low lying island nations are already feeling the impacts of climate change and that coral reef and Arctic ecosystems face high risks well below 2C. But the specific reference to 1.5C as well as 2C caught the scientific community somewhat off-guard.  A recent commentary in Nature by Prof Simon Lewis, professor of global change at University College London, is a little stronger on this point. As he puts it: “The emergence of 1.5 C as a serious policy position comes with important lessons for scientists. The global research community has shockingly little to say on the probable impacts of a 1.5 C rise.”

Scientists debate experimenting with climate hacking to prevent catastrophe: On his late-night talk show, Jimmy Kimmel recently invited climate scientists to explain that they’re not just messing with us about global warming.  In fact, climate scientists are so worried that we’re going to fail to prevent catastrophic consequences that some are studying how we can hack the climate, also known as “geoengineering.” This approach is essentially viewed as a last-ditch, “break glass in case of emergency” desperation option in the event of such a failure. Some climate scientists view this as a potentially reasonable way to deal with climate change, but others disagree. It’s a controversial topic.Scientists have proposed various ways that we might use geoengineering to stave off a climate emergency, but one of the most popular involves pumping particles into the atmosphere. Volcanic eruptions spew tiny sulfur dioxide particles (aerosols) into the atmosphere, which reflect sunlight and act to temporarily cool the planet. If humans were to similarly pump aerosols into the atmosphere, in theory we could offset some global warming. This is known as albedo (whiteness) modification, because we would be modifying the Earth’s reflectivity.  If the idea of mimicking a continuous volcanic eruption makes you nervous, you’re not alone. A National Academies of Science (NAS) report warned that the potential side-effects of this type of climate hacking are not well understood or quantified. Moreover, it would not solve the problem of ocean acidification – sometimes referred to as “global warming’s evil twin” – a major threat to marine ecosystems that only 20% of the British public has ever heard of. Hotter and more acidic oceans form a one-two punch that’s killing off coral reefs, for example with the mass bleaching event that’s currently ongoing. Coral reefs are home to 25% of marine fish species, so this is a critical concern. It’s carbon that’s causing the world’s oceans to become more acidic, so we can only solve the problem by cutting carbon pollution or by removing it from the atmosphere. Recently the US Senate appropriations committee passed a spending bill that mysteriously included funding for the computational study of albedo hacking.

Washington limits carbon pollution from largest sources - (AP) — Washington state regulators on Wednesday unveiled an updated plan to limit greenhouse gas emissions from large polluters, the latest attempt by Gov. Jay Inslee to push ahead with a binding cap on carbon emissions after struggling to win approval from legislators. Washington would join nearly a dozen states including California that have capped carbon pollution from industrial sources. The proposed rule requires large industrial emitters to gradually reduce carbon emissions over time. The rule would cover many industries, including power plants, oil refineries, fuel distributors, pulp and paper mills and others.Under Washington’s proposed rule, expected to be finalized in late summer, large emitters would be required to reduce carbon emissions by an average of 1.7 percent annually. The rule would initially apply to about two dozen oil refineries, power plants and others that release at least 100,000 metric tons of carbon a year. Many more facilities would likely be covered by the rule as the threshold is lowered over the next decades. Kris Johnson, president of the Association of Washington Business, said his group is still concerned about the potential economic damage from this new regulation. He said in a statement that the cap “sends the wrong signal to businesses of all sizes, both those that are here already and those hoping to relocate here, by driving up energy costs for employers and families.” According to the state’s preliminary economic analysis, the rule would cost businesses between $1.4 billion and $2.8 billion over 20 years to comply. But it’s also estimated to provide about $14.5 billion in benefits over 20 years, such as improved environmental and health conditions, according to a state analysis.

Senators Slam Loretta Lynch: End The Climate Change Witch Hunt -- Exxon Mobile filed court papers in Texas last month seeking to block a subpoena issued in March by the attorney general of the U.S. Virgin Islands which alleges that Exxon is deceiving the public and shareholders about the effects of climate change. Exxon has said that the subpoena is an unwarranted fishing expedition into Exxon's internal records and violates its constitutional rights; "The chilling effect of this inquiry, which discriminates based on viewpoint to target one side of an ongoing policy debate, strikes at the protected speech at the core of the First Amendment" the court filing said according to theWSJ. As we reported last year, Exxon found itself on the shocking receiving end of an administration with a clear agenda for payback. Exxon signed an agreement which deepened ties with Russia's state-owned oil company Rosneft just as the Obama administration was trying to isolate Russia and its economy. That payback, which had the added bonuses of cementing Obama's liberal global warming climate change crackdown (which incidentally benefits none other than carbon credit powerhouse Goldman Sachs the most) came when the New York Attorney General launching a sweeping investigation of Exxon mobile to determine whether the company lied to the public about the risks of climate change, or to investors about how that risk might hurt the oil business. In light of the continued push by state AGs to go after Exxon on climate change, five senators have sent a letter to U.S. Attorney General Loretta Lynch demanding that in two weeks, the Department of Justice "immediately cease its ongoing use of law enforcement resources to stifle private debate on one of the most controversial public issues of our time - climate change." Or, said otherwise, to end the government witch hunt against political opponents of president Obama's energy agenda.

There Is No Moving Exxon From Its Climate Change Position -- A nun from an influential interfaith coalition with U.S. $100 billion in assets that include a stake in ExxonMobil is pushing for change, but the supermajor isn’t bowing to anyone on climate change - even, apparently, ‘divine’ forces. ExxonMobil’s annual meeting saw its shareholders pass a resolution that could see a climate expert join the company’s board, a move that could force the company to face the climate change-related problems that many of its peers have already acknowledged. The resolution, which will allow shareholders holding a combined 3 percent of Exxon’s stock to nominate new board members, is one of nine climate-change related resolutions that were put up for a vote at the meeting. The other eight were rejected by the majority. Among the rejected resolutions was one from Sister Patricia Daley, member of the Interfaith Center on Corporate Responsibility (ICCR), who urged Exxon’s management to start acting on climate change by changing its policies for the future. This one got just 18.5 percent of the votes. This rejection has become the latest example of Exxon’s notorious resistance to even acknowledging climate change, claiming that environmental activists basically overblew things. The New York Attorney General, however, doesn’t seem to think so. Exxon is currently under investigation for covering up information about the effects of the oil industry on the climate, and even before the lawsuit, it surfaced that the oil giant has known of the link between fossil fuel use and climate change for decades, and failed to share evidence of this link with its shareholders. Exxon has denied all claims.

The world is about to install 700 million air conditioners. Here’s what that means for the climate --  Americans use 5 percent of all of their electricity cooling homes and buildings. In many other countries, however — including countries in much hotter climates — air conditioning is still a relative rarity. But as these countries boom in wealth and population, and extend electricity to more people even as the climate warms, the projections are clear: They are going to install mind-boggling amounts of air conditioning, not just for comfort but as a health necessity.   In just 15 years, urban areas of China went from just a few percentage points of air conditioning penetration to exceeding 100 percent — “i.e. more than one room air conditioner (AC) per urban household,” according to a recent report on the global AC boom by researchers at Lawrence Berkeley National Laboratory. And air conditioner sales are now increasing in India, Indonesia and Brazil by between 10 and 15 percent per year, the research noted. India, a nation of 1.25 billion people, had just 5 percent air conditioning penetration in the year 2011. A study last year similarly found “a close relationship between household income and air conditioner adoption, with ownership increasing 2.7 percentage points per $1,000 of annual household income.” “We expect that the demand for cooling as economies improve, particularly in hot climates, is going to be an incredible driver of electricity requirements,” U.S. Energy Secretary Ernest Moniz said in an interview. Overall, the Berkeley report projects that the world is poised to install 700 million air conditioners by 2030, and 1.6 billion of them by 2050. In terms of electricity use and greenhouse gas emissions, that’s like adding several new countries to the world.

Chile Has So Much Solar Energy It’s Giving It Away for Free -  Chile’s solar industry has expanded so quickly that it’s giving electricity away for free. Spot prices reached zero in parts of the country on 113 days through April, a number that’s on track to beat last year’s total of 192 days, according to Chile’s central grid operator. While that may be good for consumers, it’s bad news for companies that own power plants struggling to generate revenue and developers seeking financing for new facilities. Chile’s increasing energy demand, pushed by booming mining production and economic growth, has helped spur development of 29 solar farms supplying the central grid, with another 15 planned. Further north, in the heart of the mining district, even more have been built. Now, economic growth is slowing as copper output stagnates amid a global glut, energy prices are slumping and those power plants are oversupplying regions that lack transmission lines to distribute the electricity elsewhere. “Investors are losing money,” said Rafael Mateo, chief executive officer of Acciona SA’s energy unit, which is investing $343 million in a 247-megawatt project in the region that will be one of Latin America’s largest. “Growth was disordered. You can’t have so many developers in the same place.”A key issue is that Chile has two main power networks, the central grid and the northern grid, which aren’t connected to each other. There are also areas within the grids that lack adequate transmission capacity. That means one region can have too much power, driving down prices because the surplus can’t be delivered to other parts of the country, according to Carlos Barria, former chief of the government’s renewable-energy division and a professor at Pontifical Catholic University of Chile, in Santiago.

North Carolina’s Coal Ash Problem Is So Bad That Democrats And Republicans Are Working Together - North Carolina’s biggest utility has 14 different coal ash storage sites in the state, and none of them are safe. That means the chemicals and heavy metals — including mercury and arsenic — in coal ash, a byproduct of burning coal for power generation, can leach into local water supplies. The safety issue was demonstrated in dramatic fashion a few years ago, when a coal ash storage pond ruptured, sending millions of gallons of poisonous sludge into North Carolina’s Dan River. Environmentalists have long been trying to force Duke Energy, the state’s massive utility, to clean up its coal ash sites, but after the Dan River disaster, more legislators got on board, passing the Coal Ash Management Act. It hasn’t exactly gone well. Among other things, the act set up a commission to oversee Duke’s coal ash clean-up efforts, but last year, Gov. Pat McCrory (R), a former Duke executive, sued to dismantle the commission — and won. The judge found that the way the commissioners were appointed did not meet the state’s constitutional requirements, because it bypassed the governor’s office. Now, North Carolina legislators are trying to set up the commission again — as well as force Duke to provide water for people who live within a half mile of the coal ash ponds. The state Senate on Tuesday passed the new bill, which will now go to McCrory for his signature. McCrory is expected to veto the bill — which he said was “not good for our environment or for the rule of law in North Carolina.” It might seem like the legislature is fighting for the people and McCrory is fighting for Duke, but that's not exactly the case, said Frank Holleman, a senior attorney with the Southern Environmental Law Center who has been fighting coal ash in court. Under the new bill, DEQ would have a chance to re-examine the sites, and Duke would get a chance to press the government to be more lenient. In addition, the matter would likely be pushed to after the election, meaning potentially less accountability for elected officials.

Fossil Fuel Investments Growing Riskier for Insurers, Report Warns - The 40 largest insurance companies in the United States have $237 billion invested in electric and gas utilities, $221 billion tied to oil and gas companies and nearly $2 billion locked into coal, a new report reveals. With nearly a half-trillion dollars in bonds, equity and other holdings tied to the fossil fuel industry, an analysis published Tuesday by the sustainability group Ceres says insurers should be evaluating their investment exposure to climate change risks. Insurers "cannot afford to overlook this," warned Cynthia McHale, director of the insurance program at Ceres. According to McHale, insurers face a lot of uncertainty in damage payouts to customers, because they don't know when, how often or how large those payouts will be. To ensure they have enough money to respond, insurers have historically been very conservative in their investments—and that's usually meant a lot of investments in fossil fuel companies and utilities.But these "carbon assets" are increasingly viewed as risky, she said. In the short term, major fluctuations in energy markets could put the value of these investments at risk. In the long term, these assets could become obsolete if the world pivots away from fossil fuels in a bid to halt catastrophic climate change. According to a study published in Nature last year, about a third of oil reserves, half of natural gas reserves and more than 80 percent of coal reserves need to stay in the ground in order for the world to keep global warming to no more than 2 degrees Celsius above preindustrial levels, the goal of the Paris climate agreement. And if these resources are never extracted, they will be worthless.

What happens if we burn all the fossil fuels? | Ars Technica: It has been decades since we recognized the threat of climate change, yet very few governments have instituted policies that address the threat. The first strong international agreement was only established very recently. Meanwhile, the companies that supply fossil fuels continue to push exploration for new supplies. Under those circumstances, it's fair to consider what would happen if the burning of fossil fuel continued unabated. The Intergovernmental Panel on Climate Change typically considers a scenario in which fossil fuel use continues along its current trends until the end of the century. But a new study examines what would happen if the burning of fossil fuels continues for centuries and we gobble up a conservative estimate of everything that's left to extract. That study suggests that the future is going to be significantly warmer than we might have expected.So, the researchers behind the new work, all based in British Columbia, set up some whole-Earth climate models to explore how the planet would respond to lots of additional carbon—5,000 gigatonnes, roughly equal to the amount currently in conservative estimates of our fossil fuel reserves. The models were run out to the year 2300. Things got complicated once the researchers started looking into how much of the ensuing emissions end up in the atmosphere. Right now, the ocean and land ecosystems absorb a lot of our emissions. Because carbon dioxide promotes plant growth, researchers expect the land will soak up carbon until about the year 2100, at which point the land will become saturated. Extreme temperatures in the tropics will limit the amount of plant growth. The oceans will not stop absorbing our emissions between now and 2300, but their rate of absorption will slow a bit after 2100. So, in the future, more of the carbon dioxide we emit will stay in the atmosphere. And what ends up in the atmosphere does more warming than we might have expected. "The ratio of warming to cumulative emissions continues to behave approximately linearly even up to cumulative emissions of [5,000 gigatonnes]," they write.

Indian Point Nuke Plant + Natural Gas Pipeline = INSANITY - (interview & transcript)  WATCH FULL SHOW - In Peekskill, New York, just about an hour north of New York City, residents have launched a blockade in efforts to stop the construction of a gas pipeline slated to run only hundreds of feet from the aging Indian Point nuclear power plant. The proposed project has sparked concerns from residents and nuclear experts that a pipeline break could cause a catastrophic nuclear disaster that would threaten the entirety of New York City. The pipeline is being built by Spectra Energy and is officially known as the Algonquin Incremental Market Project, or AIM pipeline. Well, only hours ago, Peekskill residents and activists escalated the campaign to stop this pipeline’s construction by installing a fully sustainable shipping container at the entrance of Spectra’s work yard—complete with two activists living inside. Democracy Now! was there as the blockade was launched.

In Hiroshima Obama Calls for World Without Nukes, Contradicting New $1 Trillion Weapon Upgrade Plan - Democracy Now! interview & transcript- President Obama has become the first sitting U.S. president to visit the Japanese city of Hiroshima since U.S. warplanes dropped the first atomic bomb on August 6, 1945. The bombing killed 140,000 people and seriously injured another 100,000. Three days later, the U.S. dropped a second atomic bomb on Nagasaki, killing another 74,000 people. Speaking at the Hiroshima Peace Memorial Park, Obama offered no apology for the bombings but called for a world without nuclear weapons. "Among those nations like my own that own nuclear stockpiles, we must have the courage to escape the logic of fear and pursue a world without them," Obama said. Despite his call for an end to nuclear weapons, the United States has been quietly upgrading its nuclear arsenal to create smaller, more precise nuclear bombs as part of a massive effort that will cost up to $1 trillion over three decades. We speak to Pulitzer Prize-winning historian Kai Bird, co-author of "American Prometheus: The Triumph and Tragedy of J. Robert Oppenheimer."

FEMA Preparing For Magnitude 9.0 Cascadia Subduction Zone Earthquake, Tsunami --  Starting on June 7th, FEMA will be conducting a large scale drill that has been named “Cascadia Rising” that will simulate the effects of a magnitude 9.0 earthquake along the Cascadia Subduction Zone and an accompanying west coast tsunami dozens of feet tall. According to the official flyer for the event, more than “50 counties, plus major cities, tribal nations, state and federal agencies, private sector businesses, and non-governmental organizations across three states – Washington, Oregon, and Idaho – will be participating”.  In addition to “Cascadia Rising”, U.S. Northern Command will be holding five other exercises simultaneously.  According to the final draft of the Cascadia Rising drill plan, the primary scenario that of all of these participants will be focusing on will be one that involves a magnitude 9.0 earthquake along the Cascadia Subduction Zone followed by a giant tsunami that could displace up to a million people from northern California to southern Canada.We have never seen such a disaster before in all of U.S. history. Do they know something that the rest of us do not? The San Andreas Fault in southern California gets more headlines, but the Cascadia Subduction Zone is a much larger threat by far. This fault zone is where the Juan de Fuca plate meets the North American plate, and it stretches approximately 700 miles from northern Vancouver Island all the way down to northern California. If a magnitude 9.0 earthquake were to strike, the immense shaking and subsequent tsunami would cause damage on a scale that is hard to even imagine right now.  Perhaps this is why FEMA feels such a need to get prepared for this type of disaster, because the experts assure us that it is most definitely coming someday.  The following comes from the official website of the “Cascadia Rising” exercise…

Ban Sought on New Fossil Fuel Leasing in Ohio's Wayne National Forest -  Environmental groups today called on the Bureau of Land Management to halt all new fossil fuel leasing in Ohio’s Wayne National Forest over concerns about the harmful impact of fracking.  The Sierra Club, the Center for Biological Diversity, Ohio Environmental Council and Friends of the Earth are also challenging BLM’s plans to lease up to 40,000 acres of the Athens Ranger District, Marietta Unit of the Wayne National Forest, which would open it up to new oil and gas drilling and hydraulic fracturing (fracking) in the Marcellus and Utica shales. In its environmental assessment, BLM proposed a “finding of no significant impact,” failing to take into account the impacts fracking would have on air quality, water quality, wildlife, and climate change. The Wayne National Forest is home to rare and endangered species including bobcats, Indiana bats, timber rattlesnakes and cerulean warblers. “It’s unconscionable that we could ever permit drilling in Ohio’s only national forest,” said Jen Miller, director of Sierra Club Ohio. “This forest is owned by the people for their enjoyment — not for the oil and gas industry to destroy. Permitting fracking will disrupt wildlife, threaten clean water resources and reduce recreation and tourism. It should and must be preserved for this generation and those to come.” In the letter submitted, the groups called for BLM to cease all new leasing of fossil fuels in Wayne National Forest, or, at minimum, defer the proposed leasing pending a programmatic review of the federal fossil fuel leasing program.  “The science is clear: avoiding the worst impacts of climate change requires keeping untapped fossil fuels in the ground,” said Taylor McKinnon with the Center for Biological Diversity. “Opening new areas to development — let alone our public lands — directly conflicts with that science and delays a transition to clean, renewable energy.” 

Ohio State University to sell 28 acres of mineral rights in Doddridge County, West Virginia land for oil and gas fracking -  Columbus Business First (paywalled) Ohio State University wants to sell mineral rights it owns in the heart of West Virginia's shale oil and gas region. The university plans to sell rights to about 28 acres in Doddridge County, near the eastern Ohio border and 130 miles from Columbus. An unidentified estate willed the real estate to Ohio State.

Judge again dismisses lawsuit against fracking opponents: (AP) — A judge has again dismissed a lawsuit that landowners filed against people and groups who oppose fracking in a western Pennsylvania township. Natural gas drilling has been delayed in Middlesex, Butler County while some of the rural community’s 800 residents challenge a zoning ordinance that would allow drilling in 90 percent of the rural township. Dewey Homes and Investment Properties and 12 landowners sued the drilling opponents, seeking damages for royalties they’ve been unable to collect from gas drilling companies who have leases to drill on their land. A Butler County judge dismissed the lawsuit in September, but allowed the landowners to file an amended complaint, which he struck down Tuesday. The fracking foes claimed the litigation was a strategic lawsuit against public participation, or SLAPP suit, meant to silence their opposition and free-speech rights. The judge agreed.

When Gas Wells Leak…Deals Get Cut! -- There are a few really BAD players in the gas industry, and these guys are at the top of the list of companies you hope NEVER come to your town to drill!  State drops nearly $9 million fine against Range Resources - Pennsylvania environmental regulators have, for now, dropped their pursuit of a nearly $9 million fine against Range Resources-Appalachia LLC after the two sides reached an agreement over a Lycoming County gas well that regulators said leaked methane into drinking water supplies and streams. The Fort Worth, Texas-based oil and gas production company is still likely to face a penalty at a later stage in the gas migration case, which is ongoing.“We are currently investigating the source and the remedy and then will take appropriate enforcement action,” Department of Environmental Protection spokesman Neil Shader said.Range Resources withdrew its appeal of the proposed penalty on May 13 after DEP “fully rescinded” the proposed $8.95 million fine, the company said in a filing with the Pennsylvania Environmental Hearing Board. The withdrawal of the proposed fine was first reported by PennLive on Saturday.The proposed penalty assessment was dropped in keeping with an agreement DEP and Range finalized on May 5, but that document was not included in the filing, and DEP has not released it. In its withdrawal, Range reserved its rights to challenge future civil penalty actions by the DEP, Mr. Shader said.

New Federal Report Shows Dimock Water Was Unsafe to Drink After All -- Back in 2012, the U.S. Environmental Protection Agency (EPA) made a startling announcement, shaking up the battle over fracking in one of the nation’s highest-profile cases where drillers were suspected to have caused water contamination.  Water testing results were in for homeowners along Carter Road in Dimock, Pennsylvania, where for years, homeowners reported their water had turned brown, became flammable or started clogging their well with “black greasy feeling sediment” after Cabot Oil and Gas began drilling in the area. The EPA seemed to conclude the water wasn’t so bad after all. "The sampling and an evaluation of the particular circumstances at each home did not indicate levels of contaminants that would give EPA reason to take further action,” EPA Regional Administrator Shawn M. Garvin said in a press release. The drilling industry crowed. “The data released today once again confirms the EPA’s and DEP’s [Department of Environmental Protection] findings that levels of contaminants found do not possess a threat to human health and the environment,” Cabot said in a statement. Now, a newly published report by the Agency for Toxic Substances and Disease Registry (ATSDR), part of the Centers for Disease Control (CDC), puts EPA’s testing results into an entirely new light.  The water was not safe to drink after all, the ATSDR concluded, after a lengthy review of the same water testing results that EPA used back in 2012.“ATSDR found some of the chemicals in the private water wells at this site at levels high enough to affect health (27 private water wells), pose a physical hazard (17 private water wells) or affect general water quality so that it may be unsuitable for drinking,” the ATSDR’s health consultation—launched in 2011 and published May 24—concludes.

Pennsylvania group challenges fracking permit process - : PennFuture has filed a legal challenge to the zoning ordinance in Mount Pleasant Township, Washington County arguing that it is constitutionally invalid because it allows industrial gas drilling across all zoned districts. Representing members who reside and own property in the township, live near proposed well sites, and have been harmed by the ordinance, PennFuture sent legal notice to the zoning hearing board dated May 27, 2016. “Our members have twice fought applications for well pads to be located within a mile of the Fort Cherry K-12 school complex,” said George Jugovic Jr., chief counsel for PennFuture. “The state Supreme Court has made clear that townships have a duty and responsibility to protect the public health of its residents, particularly its most vulnerable populations, and allowing industrial activities throughout the township fails to fulfill that duty” The ordinance in question provides for the following with no differentiation in conditions to account for the varying purposes, population density, and other uses allowed in each district:

  • Oil and gas wells as a conditional use in all zoned districts;
  • Compressor stations as conditional use in agriculture, rural and suburban residential, highway commercial, and light industrial districts;
  • Oil and gas processing facilities as conditional use in agricultural and light industrial districts; and
  • Oil and gas metering stations as permitted uses in agriculture, rural, neighborhood and suburban residential, and highway commercial districts.

    Inside the Movement to Stop the Oil Industry's 'Bomb Trains' - If you're one of the approximately 180 families who live in the Ezra Prentice Homes, in the poor, industrial southern section of Albany, New York, oil trains are a daily fact of life.  These trains rumble through as they move crude oil from North Dakota and elsewhere to the northeastern US. Sometimes, the trains pass 15 feet from people's homes. South Albany isn't unusual among poor communities throughout the country—many are located near train tracks and highways, oil refineries, and other sources of environmental danger—but what makes it notable is that residents seem fed up and ready to do something about it. Earlier this month, as part of a series of protests against the fossil fuel industry called Break Free, thousands marched through the streets of Albany to protest residents' environmental concerns. Some activists blocked the railway as part of a action calling for an end to the transportation of oil by rail in Albany and elsewhere.  Activists have argued that carrying flammable oil on trains, which they sometimes call "bomb trains," is inherently dangerous: Not only do the trains emit diesel fumes in the poor neighborhoods they pass through, the trains have in the past tipped over or crashed, leaked, exploded, polluted rivers and wetlands, and in some cases killed those who live nearby. Albany residents say the tracks are a part of a long history of "environmental racism," meaning if they were located in a white community the oil trains would be shut down by now. And they say the railway behind the Ezra Prentice Homes needs to be shut down for the sake of South Albany's current residents—to do otherwise is to be waiting for disaster to strike. "People thought you could put whatever you wanted here because it was a poor black community, and now things are coming to a head because of that,"

    Kinder Morgan receives FERC approval for Elba Liquefaction Project - Houston-based Kinder Morgan Inc. announced June 2 that it has received approval from the the Federal Energy Regulatory Commission for its new $2 billion liquefied natural gas project in Georgia. The development, dubbed the Elba Liquefaction Project, will be at Kinder Morgan's existing Elba Island LNG Terminal near Savannah, Georgia. It is expected to have a total capacity of 2.5 million tonnes per year of LNG for export, which is equivalent to about 350 million cubic feet per day of natural gas. The first 10 units of the project are slated to be completed in the second half of 2018, with nine more units expected to come online by the end of that year. FERC also approved $306 million in projects by Kinder Morgan's subsidiaries, Elba Express Company LLC and Southern Natural Gas Company LLC, to expand the capacity of the pipeline. The expansion is expected to be completed in the fourth quarter of 2016. Earlier this year, Kinder Morgan awarded Houston-based IHI E&C International Corp. a contract for the engineering, procurement, construction, commissioning and startup of the project, according to a statement. The Elba project began as a joint venture between Kinder Morgan and Royal Dutch Shell, in which Kinder Morgan owned 51 percent and Shell owned the remaining 49 percent. In July 2015, Kinder Morgan announced that it had agreed to buy Shell's interest in Elba Liquefaction Company LLC, which owns the project. The Hague-based Shell, which has its U.S. arm headquartered in Houston, still retains its 20-year contract to subscribe to 100 percent of the terminal’s export capacity.

    The Sand Mines That Ruin Farmland - — Many of the environmental hazards of the gas extraction process, called hydraulic fracturing or fracking, are by now familiar: contaminated drinking water, oil spills and methane gas leaks, exploding rail cars and earthquakes. A less well-known effect is the destruction of large areas of Midwestern farmland resulting from one of fracking’s key ingredients: sand. Fracking involves pumping vast quantities of water and chemicals into rock formations under high pressure, but the mix injected into wells also includes huge amounts of “frac sand.” The sand is used to keep the fissures in the rock open — acting as what drilling engineers call a “proppant” — so that the locked-in oil and gas can escape.Illinois, Wisconsin and Minnesota are home to some of the richest agricultural land anywhere in the world. But this fertile, naturally irrigated farmland sits atop another resource that has become more highly prized: a deposit of fine silica sand known as St. Peter sandstone. This particular sand is valued by the fracking industry for its high silica content, round grains, uniform grain size and strength.  .In the Upper Midwest, this sandstone deposit lies just below the surface. It runs wide but not deep. This makes the sand easy to reach, but it also means that to extract large quantities, mines have to be dug across hundreds of acres. At the end of 2015, there were 129 industrial sand facilities — including mines, processing plants and rail heads — operating in Wisconsin, up from just five mines and five processing plants in 2010. At the center of Illinois’s sand rush, in LaSalle County, the Chicago Tribune found that mining companies had acquired at least 3,100 acres of prime farmland from 2005 to 2014. In the jargon of the fracking industry, the farmland above the sand is “overburden.” Instead of growing crops that feed people, it becomes berms, walls of subsoil and topsoil piled up to 30 feet high to hide the mines.

    Texas firm cancels application to build $3.3B natural gas pipeline (AP) — Houston-based Kinder Morgan has withdrawn its application for a federal permit to build a $3.3 billion natural gas pipeline and a network of compressor stations. The 420-mile Northeast Energy Direct pipeline was intended to send natural gas from Pennsylvania’s shale gas fields across upstate New York to New England. The company announced last month that it was suspending work on the project, citing a lack of contracts with gas distribution companies. It formally withdrew its application with the Federal Energy Regulatory Commission on Monday. New York regulators last month denied a water quality permit for the Constitution Pipeline, which would have followed much of the same route. That pipeline’s developers are challenging the state’s action in court.

    Corruption is How The O&G Industry Gets It Done -- The O&G Industry spend millions of dollars each year influencing elected officials to turn a blinds eye and create an unlevel playing field for Industry to enable them to go about their business unencumbered by state and local environmental regulations. America is a Banana Republic by any other name and most of our elected officials are whores…Oil industry has captured California’s regulatory apparatus.  Underneath California’s veneer as a “green leader” is a dark and oily reality — the state is the third largest petroleum producer in the nation and the oil industry is California’s largest and most powerful political lobby.  In fact, last year’s oil industry “gusher” of lobbying expenses ensured that no environmental bill opposed by Big Oil was able to make it out of the Legislature unless it was amended, as in the case of SB 350, the green energy bill. The oil lobby broke its prior spending record, spending $22 million over the past year.  The oil industry’s chief lobbying group, the Western States Petroleum Association (WSPA), headed by Association President Catherine Reheis-Boyd, spent around $11 million alone during this period. (   The lobbying figures for the first quarter of 2016 are now in, revealing that lobbying expenses by the oil industry have continued to soar in the 2015-2016 Legislative Session.   The Big Oil heavy hitters – WSPA, Chevron, Phillips 66, AERA Energy, Exxon and Shell – have spent more than $25 million so far in the 2015-16 legislative session, according to the latest report on oil industry lobbying by the American Lung Association in California. The oil industry has been spending an average of $55,000 per day since January 1, 2015, So far in 2016, Big Oil has reported $3.5 million in lobbying expenses.( WSPA has spent $12.8 million so far in the session, ‘making them, as usual, the top California lobbying spenders of the session,”

    Oil’s “Slick” Cover-up…The “See No Evil” Approach  The Oil & Gas Industry have relied on lies, corruption and and cover-ups in order to operate since first created, and Americans are now learning first-hand what indigenous people around the globe have been dealing with for almost 100 years. Hiding bad news from Texans. An El Paso Times story last month revealed the existence of numerous aerial photos of flood-related oil spills on a state-run website. The response from the state of Texas was predictable, yet still disappointing: State officials ordered the photos removed from a website operated by the University of Texas at Austin.  State officials ordered the photos removed from a website operated by the University of Texas at Austin. The photos, which weren’t generally known to the public until the Times’ story, showed potential environmental damage caused by flooding in oil drilling areas, including fracking sites. The photos provided useful information, particularly to people who live in or near the affected watersheds. But a state official said the photos were meant to be used by emergency management personnel in real-time settings. “In consultation with UT staff, the photos have been removed from the public domain, as they are not vetted for privacy concerns or related issues in real-time when uploaded during an emergency,” Ken Kramer, water resources chairman of the Lone Star Chapter of the Sierra Club, said the photos are of interest to the public. He was skeptical about the unspecified privacy concerns raised by state officials. “The public has a right to know about flooding events that could pose a threat to their health and their environment,” Kramer said. “Removing air surveillance photos of floods of oil and gas facilities from public access is a blow to transparency and accountability. It’s ridiculous to say that this was done for privacy concerns.”

    Possibility of Indian burial site stalls Dakota Access pipeline (AP) — The possibility of an American Indian burial site in northwest Iowa may require relocation of a crude oil pipeline route and delay the beginning of construction in Iowa, the only one of four states where work hasn’t begun. The Dakota Access pipeline passes through the Big Sioux Wildlife Management area in Lyon County, traditional homeland for the Dakota Sioux where Standing Rock Sioux Tribal leaders say there is a burial site. “The site has been identified by the tribe as of historical and cultural significance with associated burial activity,” said State Archaeologist John Doershuk. Under Iowa law, Doershuk must now study the area to determine whether it is more than 150 years old. If so, it is considered ancient burial grounds and he is obligated under Iowa law to protect it from disturbance. The Sioux ceded land in the region to the U.S. government by treaty in 1851, according to a history of Lyon County, Iowa, posted on the county’s website. The wildlife area is managed by the Iowa Department of Natural Resources but the U.S. Fish and Wildlife Service owns the property. The federal agency in March granted Iowa permission to issue a permit for the pipeline to run through the area but on Wednesday informed the state agency the permit was revoked due to the discovery. “We did send a letter to the DNR stating to please stop all clearing and ground disturbing activities within that pipeline corridor on the Big Sioux pending further investigation,” said Mara Koenig, a spokeswoman for the agency’s Midwest region. “We’ll work with state archaeologist to review evidence that is collected from that site so we can determine the next course of action.”

    Iowa Utility Board Delays Decision on Bakken Pipeline Timeline -- There was no decision made Wednesday on when the Bakken pipeline will go in the ground. The Iowa Utilities Board met Wednesday morning to consider whether or not to give Dakota Access the go-ahead to start building. The decision would only apply to areas where it already has approval, which means everything but the 37-mile stretch the U.S. Army Corps of Engineers is still considering as well as three parcels currently under litigation. The pipeline company argues that starting now will help farmers. They say it will prevent construction from going into a second growing season. The Iowa Utilities Board could make a decision on Dakota Access moving forward by the end of the week.

    Green light likely for Bakken pipeline construction in Iowa: (AP) State utility regulators signaled Wednesday they are ready to give a green light to begin digging to construct the Bakken oil pipeline through most of a 346-mile route that will slice diagonally through 18 Iowa counties. Two of three members of the Iowa Utilities Board said they are prepared to approve a request by Dakota Access, LLC, a unit of Dallas-based Energy Transfer Partners, to begin work on the pipeline. However, Dakota Access would not immediately be allowed to proceed with pipeline construction on water crossings overseen by the U.S. Army Corps of Engineers, which has jurisdiction over about 2.5 percent of the land along the Iowa route. Construction also could not immediately proceed where the company has not obtained an easement either voluntarily or through use of eminent domain. Board members Libby Jacobs and Nick Wagner said they believe that allowing work to begin on certain sections of the route would comply with an order they issued in March to grant a state permit for the pipeline project. Authorizing construction "would seem to be the next logical step," Jacobs said. However, Chairwoman Geri Huser had questions, expressing concerns the board was modifying conditions it established in March which included a requirement that all state and federal permits be obtained before construction could begin. But Wagner downplayed Huser's reservations about the board's pending actions, saying, "I view it as more of a clarification." The board directed its staff to develop an order for pipeline project that at least a majority of the board is expected to sign later this week.

    Colorado Home to Best-Value Frac Wells -- The Denver-Julesburg basin in Colorado hosts the most commercial, or low-cost, fraclog in the United States, according to a study by Rystad Energy. The costs per barrel of oil extracted after the wells are fracked equal US$4.70 and the basin holds almost 600 unfracked wells that await crews to complete the process. A large number of incomplete wells have piled up due to delays by Anadarko Petroleum - the Texas-based company that operates half of Weld County’s fraclog. Three other companies--PDC Energy, Noble Energy and Whiting Petroleum--each preside over 10 percent of the uncompleted wells. Rystad’s report says the drilled but uncompleted (DUC) wells become economical when the West Texas Intermediate (WTI) barrel price reaches just $30 a barrel. NASDAQ says WTI traded at $49.54 on Friday. Reeves County in the Permian Delaware ($4.80 in costs per barrel) and McKenzie County in the Bakken ($5.10 in costs per barrel) also exhibited favorable economics. The study implies that a major part of the US’ DUC inventory is profitable even as prices are low and recover only slowly. The Wall Street Daily reported when oil solidly hits $50 dollars a barrel – which it briefly did earlier this week – a portion of 4,000 fraclogged wells could go online in a matter of months. On average, it takes around 80 days to bring a fraclogged well back into production, according to Bloomberg. If 170 wells a month began producing oil, a fresh supply of 500,000 barrels a day would enter international markets – potentially causing another price drop.

    What happens to hydraulic fracturing wastewater on cropland - The use of hydraulic fracturing, or "fracking," has grown rapidly in the U.S. over the past 15 years -- but concerns persist that the oil and gas extraction method could harm the environment and people's health. To better understand its potential effects, scientists simulated what would happen to the wastewater produced by the technique after a spill. They published their findings in the ACS journal Environmental Science & Technology.  This spring, the U.S. Energy Information Administration estimated that hydraulic fracturing accounts for two-thirds of the country's natural gas production.  The Colorado Oil and Gas Conservation Commission received reports of 838 spills that released a total of more than 660,000 gallons of fluids associated with fracking in 2014. Since hydraulic fracturing and, potentially, any associated spills often occur near agricultural land, Jens Blotevogel, Thomas Borch and colleagues wanted to find out whether compounds in the wastewater biodegrade or stick around in the soil where they might be taken up by crops.  The researchers tested the fates of three common hydraulic fracturing additives in agricultural topsoil. The surfactant polyethylene glycol completely degraded within 42 to 71 days. But the surfactant did not break down when combined with another hydraulic fracturing additive called a biocide at a salt concentration typical for wastewater produced during oil and gas extraction. The researchers say their findings highlight the need for further testing to better understand spills' potential effects on crops and the environment.

    Hydraulic Fracturing Chemical Spills On Agricultural Land Need Scrutiny Say CSU Researchers -- Hydraulic fracturing involves not only underground injections composed mostly of water, but also a mixture of chemical additives. These chemicals range from toxic biocides and surfactants, to corrosion inhibitors and slicking agents, and many are also used by other industries. A Colorado State University research team desired a deeper understanding of the fate of these chemicals when they are spilled accidentally during either transportation or production in oil and gas operations. These spills, especially in Colorado, often take place on or near agricultural lands. The researchers cite 838 total hydraulic fracturing fluid spills in Colorado, reported to the Colorado Oil and Gas Conservation Commission in 2014. They tested three well-known organic chemicals: polyethylene glycol (PEG), a commonly used surfactant; glutaraldehyde, a biocide that prevents pipe corrosion from microbial activity; and polyacrylamide, a slicking agent that allows hydraulic fracturing fluid to better penetrate shale. They looked at how these chemicals interact both with each other, and with naturally occurring salts underground. They found that the PEG (surfactant) by itself completely biodegrades within about 70 days, but that in combination with glutaraldehyde (biocide), the PEG stayed in the soil much longer. That biodegradation was fully inhibited by salt concentrations typical for oil and gas extraction activities. “Our motivation for doing this is because the chemicals often come up as mixtures,” Borch said. “While you may see biodegradation of a surfactant under normal circumstances, if you spill that together with a biocide that kills bacteria, maybe you don’t break that surfactant down as quickly. And that’s exactly what we see. If chemicals don’t degrade as quickly, it gives them more time to be transported to groundwater or sensitive surface water.”

    Hidden, Abandoned, Dangerous: Old Gas And Oil Wells In Neighborhoods - In 2007, Rick Kinder was working for a contractor, building a house in southern Colorado.   “And we just heard this big roar and then a big boom and it threw us against the walls, and it just blew the whole top of the roof off,” Kinder says. He and his colleagues didn’t know it but they were building on top of an abandoned gas well that was leaking methane — an odorless and highly explosive gas. No one was killed in the explosion, but the blast sent Kinder into cardiac arrest. He ended up having a quadruple bypass. In many parts of the country, areas that are now full of houses and schools and shopping centers were once oil and gas fields. You wouldn’t know it by looking, but hidden underground, there are millions of abandoned wells. New development happening on top of those old wells can create a dangerous situation. In most states, there is no requirement for homeowners to be notified about abandoned oil and gas wells on their properties.   The trouble is that it might be hard to know if the wells were emitting something. When a well stops producing commercial quantities of oil and gas, companies “abandon” it, usually by filling the well with cement to stop the flow of gas and fluids. The industry considers that the end of a well’s life.  The belief that a well is dead once it’s plugged means there is no systematic monitoring for leaks. We simply don’t know what percent of abandoned wells are leaking — but we do know that at least in a handful of cases, it’s happened, as it did to Kinder.

    Colorado's new, higher oil and gas fines are biting industry: (AP) — Colorado is imposing heftier fines on energy companies as the state struggles to resolve conflicts between growing cities and big oilfields at their doorstep, an Associated Press analysis shows. Regulators say the tougher penalties for breaking health, safety and environmental rules are prompting energy companies to be more careful. Others say it’s too early to call them a success. The higher fines kicked in a year ago after lawmakers said Colorado’s existing penalties were too light. The AP reviewed records for the first 12 months under the new system, from April 2015 through March 2016, and found regulators levied 74 fines totaling $5.3 million — both higher than any calendar year for the previous 20 years. Regulators also handed out Colorado’s largest single oil and gas fine in at least 21 years, $1.3 million for a series of leaks at facilities owned by Benchmark Energy in a remote part of the state. That fine probably would have been around $500,000 under the old system, said Matt Lepore, director of the Colorado Oil and Gas Conservation Commission, which regulates the industry. Lepore said he doubts Benchmark will be able to pay the fine because it’s a small operation. Companies that don’t pay can lose permits they need to do business in the state. Benchmark officials didn’t return phone messages seeking comment. The new penalty system raised the maximum daily fine from $1,000 to $15,000 and eliminated a fine cap of $10,000 per violation. Although there is no ceiling now, fines must be commensurate to the infraction, Lepore said.

    North Dakota oilfield cleanup project scrubbed due to funding (AP) — Scientists have halted a project aimed at finding a new way to restore North Dakota land ruined by briny oilfield wastewater, determining there wasn’t enough money allocated to complete the research. The scientists, at the University of North Dakota’s Energy and Environmental Research Center, have found that the site in Renville County is double the size of what had been thought and isn’t feasible now because of additional costs involved, said John Harju, an EERC vice president.Harju said the researchers will use the money now to monitor — but not clean — some additional sites affected by oil development. The North Dakota Industrial Commission, a three-member panel that includes Republican Gov. Jack Dalrymple, approved the change in plans Monday. The Legislature last year set aside $1.5 million from portion of a tax on North Dakota oil production to restore land impacted from oil booms past and where companies no longer are legally responsible for land ruined by saltwater, a byproduct of oil production that can be many times saltier than seawater. Part of the effort was aimed at allowing North Dakota’s two biggest universities to develop a method of restoring such sites without the use of expensive mechanized excavation and hauling in new dirt to re-cover the land. UND’s research center got a $500,000 grant to use pumps and drainage tiles to flush and recover salt from sites, instead of digging it up. Harju said the affected site in Renville County was estimated at 7 acres, up from 3 ½ acres estimated earlier. The depth of the affected site also is about 14 feet, or triple initial estimates, he said.

    Hamm seeks new home for Bakken crude — Continental Resources chief executive Harold Hamm told a North Dakota audience that he had just returned from South Korea where he was negotiating a deal to sell Bakken crude — a move that would have been unfathomable before last December when Congress and President Barack Obama ended four decades of oil export restrictions. "I just got back from South Korea to arrange a deal to deliver oil from the Bakken to South Korea," Hamm said."And we are going to be able to do that. We are going to have Bakken oil going to South Korea." While it is not clear if a deal has been finalized, Hamm's statement appeared to be news to his own public relations team. A company spokeswoman yesterday said she had not spoken with Hamm since his return from Asia and would not have anything to add until next week. Continental is not new to Asia, as it already partners with South Korea's SK Group on gas production in Oklahoma. SK operates the 870,000 b/d refinery in its home country, although it is not immediately clear if it is the trade partner Hamm mentioned at the Trump speech. Logistics are a hurdle. There are no plans to span the Rocky Mountains with a westbound crude pipeline, so the only two options are rail to the Pacific coast or transport to the US Gulf coast paired with a long voyage. While most of the Pacific northwest crude-by-rail unloading terminals are run by refiners that do not offer merchant services, Global Partners' facility at Clatskanie, Oregon, does and has ready access to the Pacific.

    Oil train derails near Mosier in Oregon's Columbia River Gorge -- An oil train derailment Friday in the Columbia River Gorge near Mosier sent up a massive plume of black smoke and stoked long-standing fears about the risks of hauling crude oil through one of the Pacific Northwest's most renowned landscapes. Eleven cars from a 96-car Union Pacific train jumped the tracks west of the small city about 12:20 p.m., next to Rock Creek that feeds the Columbia River. Several rail cars caught on fire and at least one released oil, but it's not known how much, railroad officials said. No oil reached the river or its tributaries, authorities said late Friday. Railroad crews placed booms across the creek to prevent contamination. Workers plan to cool off the derailed cars and then will use foam on the burning cars, but cautioned that the risk of fire and possible explosion remains. The train originated in New Town, North Dakota, and was moving crude extracted from the Bakken formation to the U.S. Oil & Refining Co. refinery in Tacoma, said company spokeswoman Marcia Nielsen. The accident closed a 23-mile stretch of Interstate 84 in both directions as a precaution and caused the evacuation of a community school and people in a quarter-mile radius. The cars derailed within about 20 feet from the city's sewage plant, said Arlene Burns, mayor of the city of 440 people, east of Hood River. Residents have been asked not to use bathrooms and other drains into the city's sewage lines.  "We've been saying for a long time that it's not fair for trains with toxic loads to come into our towns near our Gorge," Burns said. "We don't have the capacity to fight these fires."

    Oregon train derailment spills oil, sparks fire: (AP) — A train towing cars full of oil derailed Friday in Oregon’s scenic Columbia River Gorge, sparking a fire that sent a plume of black smoke high into the sky. The accident happened around noon near the town of Mosier, about 70 miles east of Portland. It involved eight cars filled with oil, and one was burning, said Ken Armstrong, state Forestry Department spokesman. Highway 84 was closed for a 23-mile stretch between The Dalles and Mosier and the radius for evacuations was a half-mile. About 200 students were evacuated from an elementary and middle school near the scene. The train was operated by Union Pacific. Railroad spokesman Justin Jacobs didn’t return calls. Silas Bleakley was working at his restaurant in Mosier when the train derailed. “You could feel it through the ground. It was more of a feeling than a noise,” he told The Associated Press as smoke billowed from the tankers. Bleakley said he went outside, saw the smoke and got in his truck and drove about 2,000 feet to a bridge that crosses the railroad tracks. There, he said he saw tanker cars “accordioned” across the tracks. Another witness, Brian Shurton, was driving in Mosier and watching the train as it passed by the town when he heard a tremendous noise. “All of a sudden, I heard ‘Bang! Bang! Bang!’ like dominoes,” he said. He, too, drove to the bridge overpass to look down and saw the cars flipped over before a fire started in one of the cars and he called 911, he said. “The train wasn’t going very fast. It would have been worse if it had been faster,”

    Huge Fire Erupts After At Least 8 Oil Cars Derail Near Oregon - Live Feed --A train towing cars full of oil derailed on Friday in Oregon's scenic Columbia River Gorge,sparking a fire that sent a plume of black smoke high into the sky. According to witnesses, multiple cars derailed and smoke and flames can be seen in downtown Mosier near the Rock Creek overpass. The train is operated by Union Pacific, who had not returned calls at the time. From KSL The accident happened just after noon near the town of Mosier, about 70 miles east of Portland. It involved eight cars filled with oil, and one was burning, said Ken Armstrong, state Forestry Department spokesman. Highway 84 was closed for a quarter-mile near the site, and the radius for evacuations was a half-mile.The train was operated by Union Pacific. A spokesman for the railroad didn't immediately return calls. Silas Bleakley was working at his restaurant in Mosier when the train derailed. "You could feel it through the ground. It was more of a feeling than a noise," he told The Associated Press as smoke continued to billow from the tankers. Bleakley said he went outside, saw the smoke and got in his truck and drove about 2,000 feet to a bridge that crosses the railroad tracks. There, he said he saw tanker cars "accordioned" across the tracks.

    I-84 closed due to oil train derailment in the Gorge -- An oil train passing through the Columbia River Gorge near Mosier derailed Friday afternoon, igniting a fire and sending out large plumes of smoke.  The train derailed at about 12:20 p.m. Interstate 84 is closed from The Dalles to Hood River. The closure was from Cascade Locks to The Dalles earlier in the afternoon.  ODOT recommends using the Hood River Bridge as a detour and the toll will be waived during the closure. Traffic on Highway 14, across from the Columbia River, is backed up.  Residents were immediately evacuated within a quarter-mile of the crash. KGW's Pat Dooris reports Mosier residents have been warned that a mandatory one-mile evacuation could be put in place at anytime.  The city is also worried about a sewage treatment plant near the fire. A boil water notice has been sent to Mosier residents. A Red Cross shelter was opened in The Dalles for evacuees. The shelter is located at the Dry Hollow Elementary School at 1314 E. 19th St.  Union Pacific says 11 rail cars from the 96-car crude oil train derailed. The train was on its way to Tacoma, Washington, from Eastport, Idaho.The cause of the crash is under investigation.  Oil was released from at least one rail car and multiple cars caught on fire. It wasn't immediately clear how much oil was released. Union Pacific sent a hazardous response team to contain the oil.  There was an explosion and the fire intensified at about 5 p.m. A cooling operation began knocking down flames at about 6:30 p.m. Crews were focusing on cars that weren't on fire before going after the engulfed rail cars.

    Oil train derails and catches fire, forcing Oregon town to evacuate - An Oregon river town was evacuated Friday afternoon after an oil train derailed and two cars caught fire and sent thick smoke into the air, the sort of accident that communities along the rail route have long feared and said they were not prepared to handle. The town of Mosier, population 440, was evacuated after the 12:30 p.m. derailment. No one was hurt when the 96-car train derailed, authorities said, and no oil was believed to have reached the Columbia River. The cause of the derailment remains under investigation.   Each month, milelong Union Pacific trains carry 3 million gallons of Bakken crude oil on the Oregon side of the Columbia River Gorge to refineries in Washington state. The gorge is dotted with small, rural towns that are ill-equipped to fight fires involving volatile crude oil. In a survey last year of 80 Oregon fire agencies along the gorge, the state fire marshal found that 90% were unprepared to fight a fire resulting from a spill. The state relies on 13 regional hazardous materials teams to fight oil train fires. But given the geography, the teams have a “goal response time” of 2 ½ hours. It’s unclear how long the hazardous materials team took to reach Friday’s fire. And though the state fire marshal requested $2.7 million last year for training and equipment, the Legislature provided just $365,000. Columbia Riverkeeper, an environmental advocacy group that opposes oil trains in the Columbia Gorge, concluded this year that “neither Oregon’s local fire departments nor Oregon’s Regional HazMat Teams are equipped to respond to and extinguish an oil train fire.” . The derailment occurred on the edge of Mosier, next to its sewage treatment plant, said Columbia Riverkeeper’s executive director, Brett VandenHeuvel, who surveyed the overturned oil cars from an airplane. “We’ve been saying, it’s not a matter of if, it’s a matter of when,” he said. “Now they’re scrambling to get foam from different places.” One of the cars derailed into Rock Creek, a dry riverbed that occasionally floods into the Columbia. The accident has raised worries among the Yakama Nation tribe, which has a fishing site downriver from where the train derailed.

    Exporting Fracked Oil to China Via Oregon Bomb Trains All in accordance with $hillary’s plan . . Oil Train Derails, Catches Fire In Oregon (CBS / AP) –A train towing a highly volatile type of oil derailed Friday in Oregon’s scenic Columbia River Gorge, igniting a fire that sent a plume of black smoke high into the sky and spurring evacuations and road closures.Eleven cars derailed in the 96-car Union Pacific train and at least one ignited, releasing oil alongside tracks that parallel the region’s treasured Columbia River, said Aaron Hunt, a spokesman for the railroad. All the cars were carrying Bakken oil, a type of oil that is more flammable because it has a higher gas content and vapor pressure and lower flash point than other varieties.The accident immediately drew reaction from environmentalists who said oil should not be transported by rail, particularly along a river that is a hub of recreation and commerce. “Moving oil by rail constantly puts our communities and environment at risk,” said Jared Margolis, an attorney at the Center for Biological Diversity in Eugene, Oregon. It wasn’t immediately clear if oil had seeped into the river or what had caused the derailment. Hunt did not know how fast the train was traveling at the time, but witnesses said it was going slowly as it passed the town of Mosier, Oregon, about 70 miles east of Portland.

    Feds give thumbs-up to fracking off California coast --  An environmental assessment from two federal agencies released Friday determined that fracking off the coast of California causes no significant impact, thus lifting a moratorium on hydraulic fracturing that was instituted earlier this year.An environmental assessment from two federal agencies released Friday determined that fracking off the coast of California causes no significant impact, thus lifting a moratorium on hydraulic fracturing that was instituted earlier this year. "The comprehensive analysis shows that these practices, conducted according to permit requirements, have minimal impact," Abigail Ross Hopper, director of the Bureau of Ocean Energy Management, said in a statement. The Bureau of Safety and Environmental Enforcement joined in the assessment, which analyzed well stimulation treatments on 23 oil and gas platforms off California's coast between 1982 and 2014, and came back with a "Finding of No Significant Impact." The Center for Biological Diversity, the environmental group that filed a lawsuit that resulted in the moratorium, said Friday it is considering filing another suit in light of the agencies' decision. Companies still need to go through the federal application and permitting processes to frack at individual sites. Industry officials welcomed the Friday's announcement.

    Federal Agencies Find That Fracking In The Pacific Would Have No ‘Significant’ Environmental Impacts - The debate over fracking in California is about to get even more heated, following a report from two federal agencies that found that fracking for oil and gas in the ocean — known as offshore fracking — is unlikely to have a “significant” impact on the environment. On Friday, both the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE) jointly released an environmental study that looked at the impact of hydraulic fracturing — or fracking — on marine ecosystems. The report analyzed 23 offshore fracking operations that operated in California between 1982 and 2014, and found that the operations have a minimal impact on the quality of water and ocean health. To the fossil fuel industry, this signals a return to normalcy, as both the BOEM and BSEE will resume approval of offshore fracking permits that they had temporarily suspended while the environmental study was being conducted. But for environmental groups, the report is a troubling development. According to the Center for Biological Diversity, oil companies have fracked at least 200 wells off the coast of California — and opponents of fracking worry that these operations could be putting both California wildlife, and California residents, at risk.Fracking is a really dirty and dangerous practice that has no place in our ocean  “I think it’s just absurd that the agency could look at the environmental of offshore fracking and make a finding that there is no significant environmental impact,” Miyoko Sakashita, oceans director for the Center for Biological Diversity, told ThinkProgress.  According to Sakashita, fracking companies are currently allowed to discharge 9 billion gallons of wastewater into the ocean each year — and that waste water can include toxic chemicals. There is no limit for the amount of chemicals that companies can discharge into the ocean, and companies are not required to disclose which chemicals they use in their operations.

    Hercules Offshore strikes deal with lenders (AP) — Oilfield services company Hercules Offshore has worked out an agreement with lenders before it seeks Chapter 11 bankruptcy protection, the second time will have done so in less than year. This time, however, the company is selling assets to pay off investors. Hercules transferred the right to acquire the rig, formerly named Hercules Highlander, to a subsidiary of Maersk Drilling. Maersk Highlander UK Ltd. succeeds to the right to take delivery of the rig and will settle the final payment of approximately $196 million with Jurong. In August of 2015, the company filed for bankruptcy and emerged in November after restructuring with a new $450 million credit facility. That filing showed that the Houston company had $1.3 billion in debt and $546.3 million in assets, at the time. Hercules completed its first restructuring in early November. On November 6, 2015, Hercules completed its initial financial restructuring under Chapter 11 of the U.S. Bankruptcy Code with a new $450 million senior secured credit facility in place. While there has been a slight recovery in crude prices, a barrel broke $50 for the first time this year, there has been tremendous damage in the energy industry. “Since this time, the ongoing decline in oil prices, the consolidation of its U.S. customer base and the addition of new capacity have negatively impacted dayrates and demand for Hercules’s services,” the company said Friday. The company had wanted to sell more of its assets as part of a recovery but that, “did not yield results that would have been better for stakeholders.”

    Oil Company Warren Resources Files for Chapter 11 Bankruptcy Protection -- Warren Resources Inc, an oil and gas producer that operates in California, Pennsylvania and southwestern Wyoming, filed for bankruptcy protection Thursday after reaching a deal on the terms of a debt-for-equity swap with Blackstone Group’s GSO Capital Partners.  In court papers filed in U.S. Bankruptcy Court in Houston, Denver-based Warren said lenders led by GSO Capital will swap $248 million they are owed for an 82.5% stake in the reorganized company. The investment firm has also agreed to provide it with a $130 million bankruptcy-exit loan and an additional $20 million to fund the chapter 11 case. Junior lender Claren Road Asset Management LLC, a struggling hedge fund owned by Carlyle Group, bondholders and Citrus Energy will divide among themselves the remaining 17.5% stake in the reorganized company. The restructuring pact, which requires court approval, will form the basis of Warren Energy’s chapter 11 plan. Warren, with about $230 million in assets and $545 million in debts, joins more than 80 North American oil and gas companies that have filed for bankruptcy protection since last year, according to law firm Haynes & Boones.  It failed to make a $7.5 million interest payment on Feb. 1.

    Condensates after Lifting of the Crude Export Ban - Still Being Whipsawed -- “Condensates are long and you can’t give them away … No, things have changed – condensate supply is tight and prices are running up relative to WTI … But wait wait, the oversupply is back and prices are down again.” No wonder the market’s love for condensates has faded. It’s a liquid hydrocarbon that is being buffeted by every force the market can bring to bear: declining production, lots of new committed infrastructure (stabilizers, pipelines, and splitters), wide-open export markets, volatile crack spread splitter economics -- the list goes on. Adding to this whirlwind is the fact that historically there has been limited analytical data to work with, with most condensate information buried deep inside crude production numbers from producer investor presentations and less-than-revealing Energy Information Administration (EIA) crude oil reports. But we have some new tools to help understand what’s going on, including the EIA’s new 914 crude quality data and condensate export numbers from ClipperData. Today, we continue our exploration of rapidly evolving condensate markets.

    Mackenzie gas project in Canada's Northwest Territories gets extended deadline - The long-planned and frequently delayed Mackenzie Gas Project, a C$16 billion ($21.21 billion) pipeline that would carry 1.2 Bcf/d from the gas-rich Mackenzie Delta in Canada's Northwest Territories to pipelines in northern Alberta, was given a life extension Thursday. In an announcement, Canada's National Energy Board said it would extend the sunset clauses for the project developers until December 31, 2022. The project developers, led by Imperial Oil, last summer had asked for an extension of a December 2015 deadline for a project investment decision. In a letter to the developers, the NEB said the project "is still in the public interest" and that the original conditions attached to the project will require that it be designed, constructed and operated in a way that is safe and protects the environment.The project is a joint venture of Imperial, Shell, ConocoPhillips, ExxonMobil and the Aboriginal Pipeline Group. The proposed 1,842-km (1,144-mile) pipeline is designed to carry 1.2 Bcf/d from the gas-rich Mackenzie Delta near the Beaufort Sea south through the Northwest Territories to link with pipelines in northern Alberta. Proponents of the project still face many challenges, not the least of which is building a major gas pipeline to bring gas into markets already awash with the output of shale plays. Imperial asked the NEB to extend the sunset clauses on August 20, 2015. On November 9, NEB extended the sunset clauses to September 30, 2016 so it could consider the application.

    Why The Arctic Oil Dream Is Not Over Yet -- The race to discover oil and gas in virgin Arctic waters is now on, as Norway offered oil majors a lifeline on Wednesday by opening up what experts say could be home to 15 percent of the world’s undiscovered oil and 33 percent of the world’s undiscovered natural gas. Norway officials on Wednesday awarded 10 new oil and gas licenses to explore the untapped area of the Arctic Barents Sea, an area that until 2011, was disputed for almost 40 years with Russia.  The drilling licenses consist of 40 blocks that were awarded to 13 oil companies. Of the licenses granted, 13 companies were offered participating interests, and five were offered operating licenses.  Norway has not offered exploration licenses for new acreage in over twenty years, and this new acreage is particularly appealing to oil explorers.  “The big prizes in Norwegian oil are still in the Barents Sea—it is very under-explored.”  Companies gaining licenses include Centrica, Tullow Oil, Statoil, Chevron, and Lukoil. Statoil, Norway’s largest oil explorer and producer, has been awarded five of the coveted Arctic licenses. It expects to drill the first well in 2017. Statoil had previously been forced to cut its Norway drilling activity in 2015 after oil prices slumped, drilling only 16 wells in the area in 2015, down from 21 in 2014. By the end of 2015, Statoil’s 2016 outlook for its Arctic activities seemed bleak, and more cuts were expected. But Wednesday’s new licenses for unexplored areas bring new optimism for Statoil.

    Scotland Bans Fracking, Forever | The Scottish Parliament voted to ban fracking countrywide on Wednesday, making a moratorium on the controversial technique a permanent affair. The narrow vote can after the legislative body temporary outlawed fracking in January 2015 while it conducted a public health impact assessment and consulted environmental experts. The Scottish Greens, the Liberal Democrats, and the Labour Party joined together to hand a 32-29 defeat to the Conservatives, who vehemently opposed the permanent measure, The Guardian reported.  Legislators affiliated with the Scottish National Party chose to abstain from the vote, which prompted its fellow liberal parties to call on the group's leaders to clarify its position on fracking and its energy platform. The Scottish National Party’s energy minister, Paul Wheelhouse, said he and his government remained “deeply skeptical” on the merits of fracking and confirmed that the practice would not be allowed in Scotland until there is clear evidence that it does not cause health-related or environmental harm. Maurice Golden, a newly elected member of parliament for the Conservative party, argued in favor of fracking, and said the “leftwing cabal” of the three united liberal parties had been “ignoring” scientific evidence regarding the practice, which, if allowed, would add jobs and boost the economy.

    The Crude Crash Has Created Oil’s Technological Superpowers | Falling oil prices which started in late 2014 have highlighted an increased emphasis on the cost of producing oil, particularly from shale oil formations in the U.S. With 50 percent of U.S. oil production coming from U.S. shale, analysts initially estimated breakeven prices for shale oil operations to be at $75 per barrel, then lowering those estimates to $50 per barrel, and now, in some core regions, breakeven prices are as low as $30-$35 per barrel. The reason U.S. shale continues to see lower breakeven prices is because companies in the U.S. continue to innovate shale drilling techniques and technology. Similarly, Canadian shale drilling continues to improve alongside that of the U.S., and Canada has implemented similar technological progress towards the extraction and refining of oil from its oil sands. This continued U.S. improvement in oil and gas drilling, extraction, and refining technology provides for the hypothesis that such cutting-edge and unrivaled capability has the effect of anointing a qualification to those within the industry as “the technological superpowers of oil.” For some time, oil & gas producing countries as well as those countries that depend on energy imports have been experiencing a decline in domestic production, forcing these countries to increasingly turn to technology for oil & gas drilling, extraction, and production. The technology they turn to has principally been developed by experts in the U.S. and Canadian oil & gas markets, and is now being earnestly adopted by countries around the world.

    The Age of Cheap Oil and Natural Gas Is Just Beginning - Scientific American  Oil price rises over the past 40 years have been truly spectacular. In constant money, the price of oil rose by almost 900% between 1970 and 2013. This can be compared with a 68% increase for a metals and minerals price index, comprising a commodity group that, like oil, is exhaustible. In our view, it is political rather than economic forces that have shaped the inadequate growth of upstream oil production capacity, the dominant factor behind the sustained upward price push. But we believe the period of excessively high oil prices has come to an end. The international spread of two revolutions will assure much ampler oil supplies, and will deliver prices far below the highs that reigned between the end of 2010 and mid-2014. Beginning less than a decade ago, the shale revolution – a result of technological breakthroughs in horizontal drilling and fracking – has turned the long run declining oil production trends in the US into rises of 88% from 2008 to 2015. Despite current low prices and the damage done to profits, an exceedingly high rate of productivity improvements in this relatively new industry promises to strengthen the competitiveness of shale output even further. A series of environmental problems related to shale exploitation have been identified, most of which are likely to be successfully handled as the infant, “wild west” industry matures and as environmental regulation is introduced and sharpened. Geologically, the US does not stand out in terms of shale resources. A very incomplete global mapping suggests a US shale oil share of no more than 17% of a huge geological wealth, widely geographically spread. Given the mainly non-proprietary shale technology and the many advantages accruing to the producing nations, it is inevitable that the revolution will spread beyond the US.

    Trends in oil supply and demand – Jim Hamilton -- World oil production barely increased between 2005 and 2013. Yet this was a period when oil consumption from the emerging economies was growing rapidly. For example, Chinese imports of crude oil grew by a million barrels a day between 2005 and 2008 and increased by another two million barrels a day between 2008 and 2013.  How could China realize such a big increase in consumption when very little additional oil was being produced worldwide? The answer is that consumption in places like the United States, Europe, and Japan had to fall. The primary factor that persuaded people in those countries to use less was the high average price of oil over 2007-2013.  But in the last few years global oil production broke away dramatically from that decade-long plateau. In 2013-2014 the key factor was surging production from U.S. shale formations. That peaked and began to decline in 2015. But world production continued to grow during 2015 thanks to tremendous increases from Iraq. And increases in 2016 may come from new Iranian production now that sanctions have been lifted.The new supplies from the U.S., Iraq, and Iran brought prices down dramatically. And in response, demand has been climbing back up. U.S. consumption over the last 12 months was 800,000 b/d higher than in 2013, a 4% increase. Vehicle miles traveled in the U.S. are up 6% over the last two years. Average fuel economy of new vehicles sold in the United States is no longer improving. Low prices are increasing demand and will also dramatically reduce supply. The EIA is estimating that U.S. production from shale formations is down almost a million barrels a day from last year. These factors all contributed to a rebound in the price of oil, which traded below $30/barrel at the start of this year but is now back close to $50.Nevertheless, I doubt that $50 is high enough to reverse the decline in U.S. shale production.

    3 Years Of Painful Cuts Sets Markets Up For Serious Supply Crunch -- Total global oil production could decline for the next several years in a row as scarce new sources of supply come online. According to data from Rystad Energy, overall global oil output will fall this year as natural depletion overwhelms all new sources of supply. But the deficit will only widen in the years ahead due to the dramatic scaling back in spending on new exploration and development. Statoil says that global capex is set to fall for two years in a row, and is on track to fall for a third year in 2017 as more spending cuts are likely. “For the first time in history, we’ve seen cutting of capex two years in a row and potentially we risk a third year as well for 2017,” Statoil’s Chief Financial Officer Hans Jakob Hegge told Bloomberg in a recent interview. “It might be that we see quite a dramatic reduction in replacing the capacity and of course that will have an impact, eventually, on price.” Oil companies are making painful cuts to spending, which will translate into much lower production than expected in the years ahead. Although markets have dealt with the supply overhang for the better part of two years, the surplus could flip to a deficit as early as this year, as declines exceed new sources of production by a few hundred thousand barrels per day. That widens to more than a million barrels per day in both 2017 and 2018. To be sure, there are extremely large volumes of oil sitting in storage, which will take a few years to work through. That will prevent any short-term price spike even if depletion surpasses new production. But Statoil’s CFO said the world could start to see supply problems by 2020.

    Natural Gas Shoots up on Technical Trade - WSJ: Natural-gas prices surged to a new four-month high after futures broke through an important technical level and forecasts warmed for one of the country’s biggest markets for demand. Futures for July delivery settled up 11.9 cents, or 5.5%, at $2.28 a million British thermal units. It was the largest daily percentage gain since April 19 and the highest settlement since Jan. 29. The last two trading sessions broke a gradual, but steady, decline for the month, single-handedly pushing May to gains of 11 cents, or 5.1%. It is the third-straight month of gains and gas is up 40% from a 17-year low it hit in early March. Front-month prices are now up 17% since the June contract expired Thursday at just $1.963/mmBtu. July’s contract hasn’t traded below $2/mmBtu since early March, and summer prices are often higher because of increasing demand for gas-fired power to run air conditioners. Weather updates for mid-June are showing warmer temperatures in the southeast than Friday’s updates ahead of the three-day weekend, and that strengthens demand expectations in the biggest region for gas-fired power, according to analysts. But gas may be getting a bigger boost from technical traders who move on price momentum, brokers and trader said. Prices moved above their 200-day moving average Tuesday for the first time since November 2014, which appeared to trigger a lot of buy orders, they said. About a third of the gains came just at 9 a.m. ET, the traditional start of U.S. trading hours when volume usually increases dramatically. That 200-day moving average is a widely-watched trigger for technical traders to close out bearish positions or add to bullish positions. It covers a broad period, so if prices can stay above it, technical traders see it as a major indicator the market sentiment has changed.

    European Natural Gas Prices Collapse --Oil and natural gas producers cannot catch a break of late it seems. A few years after the onset of the natural gas glut, Europe is experiencing a similar phenomenon with Russia and Norway using tactics akin to those used by the Saudis with oil. The result is rock bottom prices on natural gas that are benefiting utility companies across the continent. The effective result of these actions is also hitting LNG terminal development economics in the U.S. and minimizing growth of imports from Qatar. In a remarkable development, gas in the UK has fallen 37 percent in the last year just as Cheniere Energy has started offering exports of U.S. LNG to Europe. While Russia and Norway both deny specifically targeting market share through their business approach, it is clear that national firms in both countries are low cost producers that are proving to be the last men standing as prices continue to tumble. Neither country’s producers need to take specific actions to drive market share – all they have to do is be willing to sell at the market’s defined prices and as those prices fall, natural volume declines from other producers leads to increased share.

    Fightin' Words; Fight's On -- Earlier we updated the LNG / Poland story. Today, Bloomberg has more: Poland will struggle to replace all the natural gas it gets from Russia’s Gazprom PJSC, including with U.S. supplies, as it bids to lower dependence on its eastern neighbor, according to the Moscow-based company.  “Of course, everybody is free to choose how to purchase his gas and to ensure the competitiveness of his economy," Gazprom Deputy Chief Executive Officer Alexander Medvedev told reporters in Moscow Tuesday. “There is a well-known fairy-tale about an old woman who asked a golden fish to turn her into a Sea Empress but in the end she found herself back with her broken washtub in front of her," he said, referring to a story by Alexander Pushkin. Poland, which relies on Russian gas for two-thirds of its needs, has sought lower prices from Gazprom amid political tensions between the nations over President Vladimir Putin’s policies in eastern Europe. The European Union nation will get its first shipments of liquefied natural gas from Qatar and Norway into a new terminal next month, and has proposed doubling its capacity and building a pipeline to Norway to completely cut its reliance on Russia. Poland was Gazprom’s fifth-biggest EU customer last year, buying about 9 billion cubic meters (320 billion cubic feet) worth more than $2 billion. It is one of the most vocal opponents of a push by Putin to expand a natural gas link to Europe that circumvents Ukraine.

    Exxon CEO Says Argentine Shale Project May Top $10 Billion - Exxon Mobil Corp. may invest more than $10 billion as it transplants the U.S. shale-drilling model to Argentina’s Vaca Muerta region in the next few decades, Chairman and Chief Executive Officer Rex Tillerson said Thursday. The oil giant has so far invested $200 million in the world’s second-largest shale gas deposit and plans to invest another $250 million in coming months on a pilot project, Tillerson said after meeting with Argentine President Mauricio Macri in Buenos Aires. Unlike the mega-projects that have been Exxon’s hallmark for more than half a century, the shale developments the company began pursuing in 2010 have involved drilling hundreds of individual wells and installing thousands of miles of pipes to squeeze crude and natural gas from deep, dense, onshore fields. If the pilot project is successful, the company will start full development during a period of 20 to 30 years that could involve additional investment “that would be well in excess of $10 billion,” he said. For Tillerson, Argentina’s vast Vaca Muerta shale region represents an opportunity to reverse production losses and add reserves after a $35 billion wrong-way bet on U.S. natural gas and a Russian exploration venture that was derailed by international sanctions. Exxon, the world’s largest oil explorer by market value, has designated Vaca Muerta as one of nine “key activity” areas in the Western Hemisphere and one of just four in South America, according to company data.

    Oil tankers in limbo as Venezuela's PDVSA fails to pay BP - sources - (Reuters) - Four tankers carrying over 2 million barrels of U.S. crude are stuck at sea and cannot discharge at a Caribbean terminal because Venezuela's PDVSA has not yet paid supplier BP, according to two sources and Thomson Reuters vessel tracking data. The cargoes are part of a tender Petroleos de Venezuela, known as PDVSA, awarded in March to BP and China Oil. The deal was to import some 8 million barrels of West Texas Intermediate (WTI) crude so Venezuela could dilute its extra heavy crudes and feed its Caribbean refineries. While three cargoes for this tender were delivered in April, seven other vessels, including BP's four hired ones, are waiting to discharge, leaving up to 3.85 million barrels of WTI in limbo. PDVSA did not immediately respond to a request for comment.The company's cash crunch, which also affected its oil imports late last year, have added to a backlog of tankers since March due to malfunctioning loading arms at Jose, Venezuela's main crude port. PDVSA initially offered to pay for the imports with Venezuelan oil, but negotiations for those swaps failed as the proposed loading windows and crude grades did not work for BP, a source close to the talks said. Amid low crude prices, declining exports and a brutal recession at home, PDVSA has since 2015 delayed payments to suppliers. As a result, service firms including Schlumberger, Halliburton and Petrex have curtailed operations in the OPEC country. The payment delays are also raising questions about who will pay for demurrage, or the daily costs for delays. Three of the BP tankers have been anchored for over 30 days.

    BP Oil Cargoes in Limbo at Terminal as Venezuela Can’t Pay its Bills - As Venezuela drowns in debt and takes its state-run oil company, PDVSA, down with it,  Reuters is reporting that BP has over 2 million barrels of oil stuck at a terminal in the Caribbean over unpaid bills. The cargo of 2 million barrels of U.S. light sweet crude sold by BP cannot be discharged at the PDVSA terminal in Curacao until it’s paid for, according to the news agency, which is relying on unnamed sources and Thomson Reuters vessel tracking data. China Oil and BP reportedly have a tender from PDVSA for the shipment of 8 million barrels of WTI crude for the second quarter of 2016.  PDVSA is struggling to pay its bill as the Venezuelan economy crumbles and unrest becomes riotous. Last week, reports emerged that PDVSA was offering service providers a debt-swap deal in exchange for payments. A subsidiary of PDVSA has reportedly offered service contractors a deal in which US$2.5 billion in debt would be swapped for dollar bonds, according to the Wall Street Journal. Venezuela is running out of most basic consumer items as the crisis worsens.

    French refineries, ports continue to face disruptions, strike spreads - French refineries and ports continued to face disruptions Wednesday as the strike called by the CGT union against changes in labor legislation entered its second week and is also spreading into other sectors, including the railways, metro and air traffic control. Of France's eight refineries, four remain at a complete standstill, including Total's refineries at Donges, Feyzin, Gonfreville and Grandpuits. Total's La Mede, however, is now running at 80% of capacity and has resumed pipeline deliveries of products. But the labor union on the site does not rule out a complete halt of production and has demanded that the refinery does not supply products to the French market, according to media reports. ExxonMobil's Gravenchon Port Jerome and Fos-sur-Mer are operating normally and loading products, the company said. Runs at Petroineos' Lavera refinery have been reduced due to maintenance, but also as a result of the strike, according to sources. But with discharges halted at nearby Mediterranean oil terminals at Fos and Lavera at the port of Marseille, crude deliveries to the Lavera refinery as well as to the Cressier refinery in Switzerland, which receives crude via a pipeline, are threatened, according to reports. Tugboats at Marseille are also planning a strike June 2. Meanwhile, the French railway SNCF is starting an unlimited industrial action Wednesday, which is likely to threaten rail deliveries of oil products, according to reports.

    Nigeria’s Oil Production In Free Fall After More Attacks - The resurgence of Niger Delta militancy has reached the level of an all-out renewal of conflict that Nigeria’s security forces appear incapable of stopping, and force majeure on oil deliveries is being declared almost across the board.  Attacks are now coming on a weekly basis, and each time, they succeed in taking more oil offline, forcing the government to admit that half of the country’s oil production is now effectively halted.  As of Monday, oil and condensate production in Nigeria is down to 1.1 million barrels per day, according to Nigerian petroleum officials, with 50 percent of output offline. Over one million barrels per day of production has been lost. Four major crude export grades—Qua Iboe, Bonny Light, Brass River and Forcados—are now under force majeure. Exxon’s is Qua Iboe, and this is said to be a mechanical failure, but the rest are confirmed as the direct result of militant attacks.  On Saturday, the Niger Delta Avengers (NDA) made another strategic move by blowing up oil and gas pipelines belonging to Shell and Eni-owned AGIP. The attacks targeted Shell’s Bonny terminal trunkline and AGIP’s Brass export terminal. The deadline for the supermajor oil companies to leave the Niger Delta is tomorrow—May 31.  And as militants threaten that more is to come and “something big is about to happen and it will shock the whole world,” no one is second-guessing them.

    Nigerian militants threaten 'bloody' attack on oil industry - Rebels in Nigeria's main oil producing Niger Delta region Tuesday threatened more attacks on oil installations as well as oil workers in reprisal for a military raid on a militant hideout. Government troops engaged militants belonging to the self-styled Niger Delta Avengers in a fierce gun battle on Sunday near an oil pipeline operated by Italy-based Eni, with several of the militants killed, according to Army spokesman Sani Usman. Local media Tuesday reported the deployment of jet fighters and gunboats by the military in the creeks of the Niger Delta in the continued hunt for militants. "To the international oil companies and indigenous oil companies, it's going to be bloody this time around. Your facilities and personnel will bear the brunt of our fury," the group said in a tweet from their usual Twitter account. The group claimed responsibility for last Saturday's attacks on the Nembe 1, 2 and 3 Brass to Bonny trunk line belonging to Eni and indigenous company Aiteo. It came barely 24 hours after the bombing of state-owned Nigerian National Petroleum Corp. crude and gas pipeline in the western division of the Niger Delta. Industry officials said was a well scripted plan by the self styled Niger Delta Avengers group to completely shut down oil production in Nigeria, already down to 1.1 million b/d, according to official statistics. Renewed militancy in the Niger Delta which resurfaced after years of relative calm, has caused Nigeria's crude oil and condensate production to drop by almost 50% since the start of the year. Most of the production cuts came from outages at facilities attacked by the militants in the western division of the Niger Delta. Currently, four Nigerian crude export grades -- Qua Iboe, Bonny Light, Brass River and Forcados -- are under force majeure. The Qua Iboe outage is not militant related. The sharp drop in oil production has severely hurt Nigeria's economy, already reeling from the slump in global oil prices.

    Nigeria’s Massive Oil Cleanup Could Take Decades And A Billion Dollars - Oil is seen on the creek water's surface near an illegal oil refinery in Ogoniland, outside Port Harcourt, in Nigeria's Delta region. A region of Nigeria's oil-rich southern delta suffers widespread ecological damage as spilled oil seeps into its drinking water, destroys plants and remains in the ground for decades at a time. What’s been described as the most wide-ranging and long-term oil clean-up plan in history was launched in Nigeria Thursday to restore hundreds of square miles of Delta swamps ravaged by nearly sixty years of oil extraction and spills.  The move to restore Ogoniland, located in southern Nigeria and home to more than 800,000 people, comes a year and a half after Shell agreed to an $84 million settlement with residents for two massive oil spills in 2008 and 2009. By then Nigeria had asked the United Nations Environmental Program (UNEP) to study the area. UNEP released a report in 2011 noting oil impacts on Ogoniland are ongoing, widespread, and severe. In turn, Nigeria, Africa’s largest oil producer, started a $1 billion restoration plan this week to clean up decades of spills by Shell and other companies, including the state-owned company.  It will be at least 18 months before full remedial work starts, the Guardian reports. Some $200 million will be spent annually for five years to clean up 1,000 square miles — an area about the size of Arkansas — though more money may be needed to fully restore the ecosystem. “The people of Ogoniland have paid a high price for the success of Nigeria’s oil industry, enduring a toxic and polluted environment for decades,” said Achim Steiner, UNEP’s executive director, in a statement. “Today marks a historic step toward improving the situation of the Ogoni people, who have paid this high price for too long.” Ogoniland is situated in the Niger Delta region, the third largest mangrove ecosystem in the world.  While oil has not been produced in Ogoniland for more than two decades, spills from illegal, aging, and poorly maintained refining infrastructure continue.

    Nigerian militants claim fresh attacks on Shell, Eni oil facilities - - The self-styled Niger Delta Avengers said Friday it had bombed oil production facilities operated by Eni and Shell in the Niger Delta region, the latest in a series of attacks on infrastructure this year that has seen Nigeria's crude output nearly halved. The group said in a tweet it had bombed the Ogboinbiri to Tebidaba and Clough Creek to Tebidaba crude oil pipelines operated by Eni in southern Bayelsa state at about 0100 GMT and about an hour later blew up the 48-inch Forcados export line operated by Shell. A Shell spokesman said: "We are investigating the reported attack on our pipelines in the Western Niger Delta area". A spokesman for the ethnic Ijay Youths Council, Udengs Eradiri confirmed the attacks. "It is unfortunate," he said.  Renewed militancy in the oil-rich Niger Delta, which resurfaced after years of relative calm, has seen Nigeria's crude oil and condensate production fall almost 50% since the start of the year to around 1.1 million b/d, state-owned oil company Nigerian National Petroleum Corp. said last week. Independent producer Eland Oil and Gas, which uses the Forcados pipeline to transport around 5,000 b/d of crude produced from its Opuama field, said Friday there was no breach on any of its facilities in the area. "The company confirms that it is not aware of any incidents on its properties and confirms that the company's continuing maintenance and operational activity remains unaffected," Eland said. The Niger Delta Avengers said its latest attacks were "in line with our promise to all international oil companies and indigenous oil companies that Nigeria oil production will be zero". It said it had "been able to drop Nigeria oil production from 2 million barrels [per day] to just 800,000 barrels without killing a soul".

    OPEC Oil Output Falls from Near-record in May on Nigeria Outages - OPEC's oil output fell in May from near a record high, a Reuters survey found on Tuesday, as attacks on Nigeria's oil industry and other outages outweighed increases in Iran and Gulf members. A rise in supply from Saudi Arabia plus Iran suggests the group's top producers remain focused on market share, following the failure of an initiative in April between OPEC and non-OPEC producers to support prices by freezing output. With OPEC meeting in Vienna on Thursday, outages are effectively achieving the supply restraint on which producers could not agree. Those disruptions are supporting oil prices , which are close to 2016 highs, and the rally has reduced the urgency of any new attempt at deliberate supply curtailment. Supply from the Organization of the Petroleum Exporting Countries fell to 32.52 million barrels per day (bpd) this month, from 32.64 million bpd in April, according to the survey, based on shipping data and information from sources at oil companies, OPEC and consultants. OPEC output has surged since the group abandoned in 2014 its historic role of cutting supply to prop up prices, in a shift led by Saudi Arabia. There are more indications, however, that some producers are struggling to maintain supply.May's biggest decline occurred in Nigeria due to militant attacks on the country's oil industry. The disruption has pushed output to its lowest in more than 20 years.Libyan output declined further due to a blockage of shipments from the port of Hariga. Loading difficulties and other problems made a further dent in Venezuela's supply, sources in the survey said. Iraq, the fastest source of OPEC production growth in 2015, also pumped less as power outages limited southern exports, which in April were at a near-record.

    Oil Pessimists Exit Market as Supplies Seen Closer to Balance -- The oil market doomsayers are beginning to capitulate. Speculators reduced bets on falling prices to the lowest level in 11 months as oil briefly breached $50 a barrel on signs supplies are coming into balance. Crude climbed 7.4 percent this month in New York amid lower U.S. production and unplanned disruptions in Canada and Nigeria. Prices are up almost 90 percent since February. Money managers’ short position in U.S. benchmark crude reached the least since June, according to data from the Commodity Futures Trading Commission. "If you’ve been short since February this has been a very painful ride,"  "There are always a few die-hards but otherwise you’d want to get out. This is indicative of the improving fundamentals."  West Texas Intermediate rose 0.6 percent on the New York Mercantile Exchange during the CFTC report week. Futures rose 0.3 percent to $49.50 a barrel at 11:43 a.m. on Monday. Oil has surged amid a spate of disruptions. Nigerian crude output has dropped to the lowest level in 27 years as militants increased attacks on pipelines in the Niger River delta. Fires that began early May in Fort McMurray shut about 1.2 million barrels a day of production in Canada’s oil-sands region. Analysts from the International Energy Agency to Goldman Sachs Group Inc. say the crude glut is dissipating as supply and demand move back into balance. Goldman increased its 2016 forecast for WTI to $44.60 a barrel, from $38.40 in a report dated May 15.

    Oil dips but notches fourth straight monthly gain | Reuters: Oil prices dipped on Tuesday as a stronger dollar and slide in equity prices sparked profit-taking, but crude futures posted a fourth straight monthly gain as investors bet that the global glut was slowly easing. Crude futures had gained early in the session, with investors expecting higher U.S. fuel demand as peak driving season arrived in the No. 1 oil consumer. Caution ahead of weekly U.S. crude inventory data kept investors from pushing prices toward seven-month highs above $50 a barrel. The dollar's rise and slide in Wall Street stocks in afternoon trade eventually tipped oil into the negative zone. Brent crude futures for July LCON6 settled down 7 cents at $49.69 a barrel before expiring as the spot contract. August Brent LCOQ6, the market's spot contract from Wednesday, finished down 47 cents, or nearly 1 percent, at $49.89. U.S. crude's West Texas Intermediate (WTI) futures for July CLc1 settled at $49.10, down 23 cents, or 0.5 percent, from Friday's settlement. U.S. financial markets were closed on Monday for the Memorial Day holiday. For the month, Brent rose 3 percent and WTI gained 7 percent.

    Oil Speculators No Longer Confident In Price Crash -- If the whims of oil speculators are anything to go by, then another oil price downturn looks increasingly unlikely. Oil prices have gained more than 80 percent over the past three months, bouncing off of $27 lows in February to hit $50 last week. Those sharp gains raised the possibility of another crash in prices because the fundamentals still appeared to be bearish in the near term. By early May, oil speculators had built up strong net-long positions on oil futures, extraordinary bullish positions that left the market exposed to a reversal. Speculators had seemingly bid up oil prices faster than was justified in the physical market. But the physical market got some help. The massive supply outages in Canada (over 1 million barrels per day) and Nigeria (over 800,000 barrels per day) provided some support to prices, erasing some of the global surplus. Now speculators who had started to short oil in May have retreated, pushing short bets down to an 11-month low.   “There are always a few die-hards but otherwise you’d want to get out. This is indicative of the improving fundamentals.”  With the supply outages, along with some early signs that the record levels of crude oil inventories are starting to come down, prices are on firmer footing than they were a few weeks ago. The next big catalyst is the OPEC meeting that begins on June 2, although there is a general consensus that very little will be agreed on at the meeting. Saudi Arabia has shifted course over the past two years, downgrading its faith in the oil cartel as a vehicle for its oil policy.

    $50 Oil Doesn’t Work --  Gail Tverberg - $50 per barrel oil is clearly less impossible to live with than $30 per barrel oil, because most businesses cannot make a profit with $30 per barrel oil. But is $50 per barrel oil helpful? I would argue that it really is not. When oil was over $100 per barrel, human beings in many countries were getting the benefit of most of that high oil price:

    • Some of the $100 per barrel goes as wages to the employees of the oil company who extracted the oil.
    • Often, the oil company contracts with another company to do part of the oil extraction. Part of the $100 per barrel is paid as wages to employees of the subcontracting companies.
    • An oil company buys many goods, such as steel pipe, which are made by others. Part of the $100 per barrel goes to employees of the companies making the goods that the oil company buys.
    • An oil company pays taxes. These taxes are used to fund many programs, including new roads, schools, and transfer payments to the elderly and unemployed. Again, these funds go to actual people, as wages, or as transfer payments to people who cannot work.
    • An oil company pays dividends to stockholders. Some of the stockholders are individuals; others are pension funds, insurance companies, and other companies. Pension funds use the dividends to make pension payments to individuals. Insurance companies use the dividends to make insurance premiums affordable. One way or another, these dividends act to create benefits for individuals.
    • Interest payments on debt go to bondholders or to the bank making the loan. Pension plans and insurance companies often own the bonds. These interest payments go to pay pension payments of individuals or to help make insurance premiums more affordable.
    • A company may have accumulated profits that are not paid out in dividends and taxes. Typically, they are reinvested in the company, allowing more people to have jobs. In some cases, the value of the stock may rise as well.

    When the price falls from $100 per barrel to $50 per barrel, the incomes of many people are adversely affected. This is a huge negative with respect to world economic growth. If the price of oil drops from $100 per barrel to $50 per barrel, this change adversely affects the income of a large share of people who formerly benefited from the high price. Thus, the drop in oil prices affects the incomes of many of the people listed in the previous section. Furthermore, this drop in income tends to radiate outward to the rest of the economy because each worker who is laid off is forced to purchase fewer discretionary items. These workers are also less able to take on new debt, such as to buy a new car or house. In some cases, they may even default on existing debt.

    Is $60 the Next Stop for Oil? - Oil prices were hit with some bearish news to start off the week, as Canada is set to bring much of the more than 1 million barrels per day of oil production that was disrupted from wildfires back online. But optimism is rising in the oil markets.  Even with that crude coming back online, there is a growing bullishness pervading the markets as of late, as forecasters raise their price projections and speculators gamble on steadily higher prices. Bloomberg reports that speculators shorting crude oil have been squeezed out of the market, and short bets have fallen to their lowest levels in almost a year. The shift in trades reflects more and more confidence that oil will not fall back down, at least not to the depths seen earlier this year. Also, several banks, including Standard Chartered Plc and SEB Bank have come out and said that oil will hit $60 before the end of the year. UAE’s economic minister, Sultan Bin Saeed Al Mansoori, said on Monday that he could see oil hitting that threshold by summertime. A survey conducted by The Wall Street Journal found that the array of investment banks polled raised their price targets for Brent crude in 2016 by $2 on average in May compared to the previous month’s forecasts. Not everyone is so bullish, however. Some analysts attribute the recent price gains simply to the supply disruptions in Canada and Nigeria, outages that were always going to be temporary (at least in the case of Canada). "The output disruptions are a key factor supporting prices at the minute. We don't think prices will go much further from here," Thomas Pugh of Capital Economics told Reuters. "In fact, we think prices are vulnerable to a downturn in the short term if some of the disrupted supply returns, or there is evidence that higher prices are stimulating more production." Even with the upward revisions, many are still cautious – the average projections polled by the WSJ expect oil to trade at only $48 per barrel in the fourth quarter. 

    Ahead of meeting, OPEC seems close to riding out price slump — OPEC is not yet in safe harbor. But ahead of a top-level meeting, the 13-nation oil cartel appears close to weathering the storm of slumping crude prices that threatened to bankrupt some members and called into question its relevance. After touching a 13-year low early this year, the price of oil has moved steadily upward to its present level of around $50 a barrel. While that’s still only half of what crude fetched as late as two years ago, it’s a gain of almost 90 percent since January. That is easing some of the pain for poorer members such as Algeria, Venezuela and Nigeria that depend on crude as their main income. And there are promises of further increases. U.S. shale production is in decline as it needs higher prices to be economical. At the same time, the world economy is showing signs of some improvement, meaning that the appetite for petroleum may increase. Oil ministers of the Organization of the Petroleum Exporting Countries convening in Vienna Thursday will thus likely opt for the status quo. Total production is now well over 32 million barrels a day, and in a note ahead of the meeting, analysts at Commerzbank Commodity Research said expectations are for the “meeting to end without reaching any agreement on production targets or production caps.” Ironically, part of the credit for OPEC’s improving fortunes is due to its inability to act in unity in recent years. Instead, many individual members produced what they could, driving down prices to the point where shale producers are increasingly unable to compete. Some have gone out of business, reducing the glut of global supply. At the height of its power decades ago, OPEC essentially was able to set world prices and supplies. Although it is still responsible for more than a third of world production, that clout has eroded since the 1980s, as outside output increased and members looking to maximize income increasingly ignored OPEC production ceilings.

    Oil Spikes On Yet Another OPEC "Oil Freeze" Headline ---Just when you thought the February through April recurring headline nightmare is over, in which an "unnamed source" repeatedly promised that an OPEC oil output freeze is imminent, it has come back to life just hours ahead of the OPEC meeting.


    The "sources" no longer even bother including Russia as being part of the deliberations for one simple reason: Russia will not only not be present in Vienna, but is no longer seeking a freeze in global output because prices have risen close to $50 a barrel without one. So while there is nothing new here at all, the algos love it and bid WTI back up to $49.

    WTI Slides Back To $48 Handle After Surprise Build In Crude Inventories --With oil traders playing headline-hockey ahead of tomorrow's OPEC meeting, tonight's API data may not be quite as consequential as usual. With sizable draws expected overall and at Cushing, API reported a shocking 2.35mm build (2.5mm draw expected) which, despite a bigger than expected 1.1mm draw at Cushing (twice the expected) sent WTI Crude prices tumbling. Gasoline and Distillates both saw draws with the latter's 7th consecutive week - the longest streak since oct 2015. API:

    • Crude +2.35mm (-2.5mm exp)
    • Cushing -1.1mm (-500k exp)
    • Gasoline -1.48mm
    • Distillates -1.15mm

    Following last week's bigger than expected draw in crude, this week's build was a big surprise (2nd biggest build in 2 months) and we see 7th consecutive draw in distillates

    Opec leaders meet in Vienna as Iran rejects oil output cap - Iran’s oil minister has rejected suggestions Opec will agree a production cap at a meeting due to take place in Vienna, saying his country backs a return to a national quota system. Tehran, which only recently returned to world oil markets after western sanctions were lifted, has opposed any attempt to limit output to support weak crude prices. Iran stayed away from a disastrous meeting in Doha on 4 April between Opec and other major producers, including Russia, that failed to agree a coordinated output freeze. The Iranian minister, Bijan Zanganeh, said on the eve of Thursday’s meeting that a production cap would have “no benefit” for Iran – or for the other members of the cartel, which pumps around a third of the world’s oil. “One of our main ideas is to have country quotas, but I don’t think we can reach an agreement on this subject at this meeting,” the minister said as he arrived in the Austrian capital. Iran exported more than 2m barrels of oil every day in May and Zanganeh predicted that would soon double as the country is currently producing some 3.8m barrels a day. He said the meeting would focus on choosing a new Opec secretary general to replace Abdalla El-Badri of Libya.

    OPEC Fails to Reach Deal: Members of the Organization of Petroleum Exporting Countries failed to reach a deal to curb oil production in an effort to boost prices Thursday. The OPEC meeting in Vienna came after a couple of years of falling oil prices have hurt energy companies and oil exporting nations. Prices plunged from well over $100 a barrel to around $26 because oil production has been greater than demand for petroleum products. The cartel controls more than one-third of the world's oil, and previously was able to keep prices high by agreeing to limit production. Oil prices had recently rebounded to around $50 a barrel, but fell somewhat after OPEC's failure to make an agreement. Analysts say friction between two key oil producers, Saudi Arabia and Iran complicated efforts to reach a deal. Saudi Arabia is a Sunni Muslim nation while Iran is overwhelmingly Shi'ite Muslim. OPEC member nations did agree to appoint Nigeria's Mohammed Barkindo as its new secretary-general.

    OPEC states fail to reach deal on production | (AP) — OPEC countries failed Thursday to agree on measures to influence crude supplies and prices, in a missed opportunity to show the resolve that for decades let them set how much consumers and industries worldwide would pay for gasoline, heating and related necessities. At the same time, OPEC officials argued the cartel was alive and well, scoffing at suggestions that its authority was eroding to the point where it will soon be negligible. “Don’t take that (to mean) that OPEC is dead,” said Secretary General Abdulla al-Badri. “OPEC will be powerful, will be strong. OPEC is alive.” But the decision to take no decision appeared more an illustration of lack of unity, particularly between OPEC rivals Saudi Arabia and Iran, whose deepening struggle for Mideast supremacy has for years been mirrored at oil meetings. Iran was second only to the Saudis inside the Organization of the Petroleum Exporting Countries in terms of production before international sanctions over its nuclear program crippled sales. Now with a deal in place limiting its atomic prowess, sanctions have been lifted — and Tehran served notice even before the Vienna meeting that it intends to reach or surpass previous levels. Mehdi Hosseini, the head of the oil contracts revision committee at Iran’s Petroleum Ministry, puts pre-sanctions levels at around 4.2 million barrels per day. Accepting anything less than that, Hosseini said in April, would amount to “another sanction against ourselves. It is something we cannot accept.”   One idea at the Vienna meeting that could have allowed for more Iranian production was to abandon a firm production target. OPEC countries had been considering a sliding ceiling that could shift between two benchmarks, both well above 30 million barrels a day.  But Iran already put its foot down against quotas of any kind in April. It did not even show up at a meeting between OPEC members and outside producers attempting to agree on a joint output freeze to push prices higher. The Saudis subsequently aid they would not cap output if Iran didn’t do the same, dooming the gathering to failure.

    Oil Drops After OPEC Fails To Reach Oil Freeze Agreement -- The anticlimatic conclusion to today's OPEC meeting came earlier courtesy of Bloomberg which moments ago reported that OPEC has failed to reach a new oil supply agreement, but that it has agreed to appoint a Nigerian candidate for new OPEC secretary general. While we would take such preliminary rumors with a grain of salt, the oil market is not happy and has dropped by 0.8%, even if it is still above the levels from yesterday when the rumors of an oil deal emerged.  As noted earlier, we would not be surprised if the algos, after taking out the low stops, end up ramping WTI to new highs.

    Oil Jumps After DOE Reports Bigger Than Expected Inventory Draws, 19th Weekly Production Cut -- Following last night's surprise build of 2.35mm barrels reported by API (against expectations of a 2.5mm draw), DOE reported inventory draws across the board. While the headline crude draw of 1.36mm barrels was below expectations of -2.5mm, it was way better than API. Cushing saw a bigger than expected draw of 704k and both gasoline and distillates draws were bigger than expected. This is the seventh week in a row of Distillate draws. Crude production fell for the 19th wek in a row to its lowest since Sept 2014. DOE:

    • Crude -1.36mm (-2.5mm exp - range from -6.42mm to 0)
    • Cushing -704k (-500k exp)
    • Gasoline -1.49mm (-350k exp)
    • Distillates -1.25mm (1mm exp)

    The 7th weekly distillate draw in a row and the entire complex saw inventory draws...

    We Better Start Getting Some 10 Million Barrel Drawdowns in Oil Inventories (Video) -  Gasoline demand is good, but Distillate demand not so much on a year over year basis, and per-well costs are down 25% to 30% from 2012 high levels for upstream costs for onshore plays. The Real Question is when do the Sharks start front running the end of the Summer Driving Season?

    OilPrice Intelligence Report: Why OPEC’s Inaction Didn’t Harm Oil Markets: The OPEC meeting in Vienna ended with no agreement on production targets, despite some rumors ahead of time that Saudi Arabia had floated a reinstatement of those limits. Iran still has no use for OPEC’s coordinated action, and Iran’s oil minister says that it still has some lost ground to regain. Iran won’t consider any possibility of limiting its production until it reaches 4 million barrels per day (mb/d) of production; its output currently stands at about 3.8 mb/d. As a result, OPEC couldn’t agree on anything, but such an outcome was largely expected by oil analysts. Still, prices plunged by more than 1 percent on the news from Vienna. . But the losses were quickly regained on June 2 as the fundamentals continue to provide some reassurance. Storage levels in the U.S. fell by another 1.4 million barrels, the first time that the U.S. has posted consecutive weeks of declines in a long time. Also, U.S. oil production fell by yet another 32,000 barrels per day last week – the losses continue to mount and output is down by more than 900,000 barrels per day from last year’s peak at nearly 9.7 mb/d. The oil markets were buoyed by these figures, pushing WTI and Brent back towards $50 per barrel following the disappointment from Vienna.. On the other hand, the Labor Department released the worst monthly jobs report in years on June 3, revealing that the U.S. added only 38,000 jobs in the month of May. The unemployment rate fell to just 4.7 percent, but largely because of people dropping out of the labor force. The dismal report could put downward pressure on crude oil, but it could also cause the Fed to delay a rate hike, which would be seen as a positive for oil prices.

    US rig count sees first significant jump of 2016: (AP) — The number of rigs exploring for oil and natural gas in the U.S. rose by four this week to 408, the first rig count gain in months and halting a slide that pushed the count to record-low levels amid collapsed energy prices. A year ago, 868 rigs were active. Houston oilfield services company Baker Hughes Inc. said Friday 325 rigs sought oil and 82 explored for natural gas. One was listed as miscellaneous. Among major oil- and gas-producing states, Texas and Alaska each gained three rigs. New Mexico was up two. Oklahoma and Pennsylvania declined by two and Louisiana was down one. Arkansas, California, Colorado, Kansas, North Dakota, Ohio, Utah, West Virginia and Wyoming were unchanged. The U.S. rig count peaked at 4,530 in 1981.

    U.S. Oil Rig Count Rose by Nine in Latest Week - WSJ: The U.S. oil-rig count rose by nine to 325 in the latest reporting week, according to oil-field services company Baker Hughes Inc., an uptick that comes amid a broader trend of declines. The number of U.S. oil-drilling rigs, viewed as a proxy for activity in the sector, has fallen sharply since oil prices began to tumble in 2014. The number of oil rigs in the U.S. peaked at 1,609 in October 2014. According to Baker Hughes, the number of U.S. gas rigs fell by five in the latest week to 82. The U.S. offshore-rig count was 21 in the latest week, down three from last week and down six from a year earlier. Oil prices fell further below the key $50 threshold Friday, as weaker-than-expected U.S. jobs data lowered expectations for gasoline demand and weighed on the dollar. U.S. crude was recently down 1.6% to $48.40 a barrel.

    Oil rig count makes first big jump of 2016 - The number of rigs actively drilling for oil in the U.S. made its first sizable increase of the year this week now that the price of oil has increased for more than three months, according to weekly data collected by Baker Hughes. The U.S. oil rig count grew by nine this week, bringing the overall tally up to 325 rigs. Texas’ more resilient Permian Basin led the way with five rigs added to its count, while Alaska brought on three more rigs. The change shows some signs of life returning to the gloomy oil patch with the U.S. benchmark for oil hovering just below $50 a barrel — a price that could bring small profits for many wells. The overall rig count though only grew by four rigs because the amount of rigs seeking natural gas dipped by five. The total count now stands at 408 rigs. The previous tally of 404 rigs of the past two weeks represented the lowest total count since the oil field services company first began compiling the data in 1944. There are only 82 rigs actively looking for gas. Despite this week’s jump, the oil rig count is down 80 percent from its peak of 1,609 in October 2014 before oil prices began plummeting. This is the first time the oil rig count has grown since just one rig was added in mid-March. The last time the oil count saw a bigger jump than this week was in December. The price of U.S. oil may have bottomed out in February at a settled low point of $26.21 on Feb. 11. The price was dancing around $48.50 early Friday afternoon, down almost 70 cents for the day.

    US oil closes 1.1 pct lower on US rig count rise, economy concerns: U.S. oil prices tumbled more than 1 percent on Friday, after weekly data showed U.S. drillers added rigs for only the second time this year. Drillers added nine oil rigs in the week to June 3, Baker Hughes said. The closely followed report rekindled fears that U.S. shale drillers would turn the spigots back on as prices flirted with $50 a barrel. Prices had already dipped in early trade on worries about the U.S. economy, but losses were limited by a weakening dollar, which makes oil less expensive for buyers using other currencies. The Baker Hughes report sent prices sharply lower. "The increase in the rig count as prices near the $50/bbl range is clearly indicative of the elasticity of U.S. production and speaks to the tremendous efficiency gains reaped by the U.S. producer community over recent years," said Michael Tran, director of energy strategy at RBC Capital Markets in New York. Oil traders view falling U.S. output as key to reducing a global glut of crude that has pressured prices during a steep two-year slump. Brent crude futures fell 30 cents to $49.74 per barrel, but were still almost double January lows and on track for an eighth weekly gain in nine weeks. U.S. West Texas Intermediate (WTI) crude futures settled 55 cents lower, or 1.1 percent, at $48.62 a barrel. Oil prices have rallied from this winter's lows due largely to supply disruptions, particularly in Nigeria, Venezuela, Libya and Canada. On Friday, militants in the restive Niger Delta region that produces more than half of Nigeria's oil claimed three new attacks on oil infrastructure, promising to bring the country's oil production to "zero."

    Indonesia producing on target at 830,000 b/d: minister -  OPEC's newest member Indonesia is producing 830,000 b/d of oil, in line with its target for this year, energy minister Sudirman Said said as he arrived at Thursday's OPEC meeting, the first since Indonesia's readmission. Indonesia, OPEC's only Asia-Pacific member, was re-admitted at the start of this year after a suspension of its membership in 2008. "Current production is 830,000 b/d. We will maintain this level because it is our optimum production level," the minister told journalists. In 2015, Indonesia produced 786,000 b/d of oil and 8.078 Bcf/d of gas, according to the country's official statistics.In the first quarter of this year it pumped 835,000 b/d of crude oil, above its full-year target of 830,000 b/d, a senior government official said in early April. It steadily increased output over the three months, pumping 819,000 b/d in January, 840,000 b/d in February and 847,000 b/d in March, he added. On Thursday the minister said one contributer to the increase had been the ExxonMobil-operated Cepu oil and gas block, which is currently producing 165,000 b/d, slightly below the 185,000 b/d peak production estimate for the block. Some Indonesian officials have said Cepu could reach 200,000 b/d. The block straddles the border between Central Java and East Java and is estimated to contain about 600 million barrels of oil.

    Venezuela Targets 3 Million B/d Output If Prices Favorable - Venezuelan oil minister Eulogio Del Pino voiced optimism Thursday about his crisis-hit country’s ability to increase its oil production to 3 million b/d, depending on a hoped-for price recovery. Speaking to reporters ahead of an OPEC meeting, Del Pino said Venezuela had produced 2.8 million b/d in May — well above some independent estimates. He played down the significance of Venezuela having to import crude oil amid an economic and political crisis that has seen parts of the domestic industry shut down, partly because power cuts have affected facilities such as refineries, and the lifting of heavy oil. On oil markets, Venezuela has long sought a more interventionist approach by OPEC to support prices, an ambition that has largely gone ignored by key members of the group. Going into Thursday’s meeting, Del Pino said: “We are fighting to have an equilibrium price that justifies investment and that we can have a rate of return that is fair for everyone. We hope that is going to be in the range of $60-70/b by the end of the year.” On Venezuela’s own oil production levels, he said that following 2.8 million b/d of output in May, “our target is to try to increase next year, depending on the recovery of the prices, to recover to about 3 million b/d.” Del Pino said it was to be expected that a company such as state-owned PDVSA, with overseas refining assets on the island of Curacao and a US subsidiary, Citgo, would need to import crude, anrily rebutting suggestions to the contrary from reporters.

    Stunning Satellite Images Of The Global Tanker "Traffic Jams" --One week ago, we showed the latest MarineTraffic update of the unprecedented congestion of crude oil tankers located off the coast of Singapore, together with an extended analysis of what is causing this and what are the implications. Today, we'll spare readers the ongoing analysis - which hasn't changed - and instead present the following dramatic satellite images just released from Reuters, showing "huge traffic jams of tankers which have formed around the world with some 200 million barrels of oil either waiting to be loaded or delivered as ports struggle to cope with record volumes in perhaps the most visible sign of the global oil glut." Almost all of the over 660 Very Large Crude Carriers (VLCCs), the largest tankers in use to transport seaborne oil, are used to ship crude between the Middle East and Asia’s consumption hubs around India and the Far East. The map above shows all of these super tankers in operation on April 11.

    Saudi Arabia Said to Weigh Bond Sale of as Much as $15 Billion --Saudi Arabia is considering selling as much as $15 billion of bonds this year in what would be the country’s first foray into international capital markets, people with knowledge of a matter said.  Encouraged by Qatar’s record issue last week, Saudi Arabia is weighing a sale of at least $10 billion in five-, 10- and 30-year bonds after Ramadan ends in July, the people said. No final decision has been made and the discussions are still at a preliminary stage, the people said, asking not to be identified as the talks are private.  Qatar last week attracted $23 billion in orders for its $9 billion sale, the biggest-ever from the Middle East. Abu Dhabi raised $5 billion from the sale of five- and 10-year securities in April, while Dubai is also said to be preparing an international bond sale this year. One of the government’s biggest challenges will be navigating the worst economic slowdown since the global financial crisis. Authorities are cutting spending to plug a budget deficit that reached about 15 percent of gross domestic product in 2015. Saudi Arabia’s credit rating was reduced to A1 from Aa3 early this month in the second cut this year by Moody’s Investors Service. The kingdom’s rating was also lowered by Fitch Ratings and S&P Global Ratings earlier in 2016. The country has been financing its budget deficit by selling local debt and drawing down foreign reserves.  In April, the kingdom sealed its first loan in at least 15 years as it seeks to cover a shortfall estimated at about $100 billion this year. Saudi Arabia secured a $10 billion facility, people said at the time.

    Saudi oil output capacity 12.5 million b/d, but investment needed: Falih -  Saudi Arabia's total oil production capacity stands at 12.5 million b/d, energy minister Khalid al-Falih said on Thursday, but he warned that the country would need to continue investing to maintain it. "If you do not invest, it will start to decline," he told reporters in Vienna just before OPEC began its ministerial meeting. Saudi Arabia pumped 10.18 million b/d in April, according to the latest Platts OPEC production survey, which would mean the kingdom has maintained about 2.3 million b/d of spare capacity. But Falih did not elaborate on how quickly Saudi Arabia could get its maximum production capacity online, nor how long it could be maintained. He also did not say how much investment would be necessary to keep that capacity.In an interview with Argus Media published Thursday, Falih said some of Saudi Arabia's non-core projects had been "stretched and deferred," but state-owned Saudi Aramco was maintaining drilling. Domestic price reforms and gas investments gave the country more flexibility in "periods of market imbalance and/or unforeseen circumstances," he said. "We want to keep a cushion. We think in fact that cushion will be needed pretty soon, because markets will tighten, as supply expansion lags demand growth," he said."We have not abandoned our policy of keeping spare capacity."

    Analysis: Saudi Arabia reinforces strategy with 10-year high Japan crude sales - Oil - The sharp upsurge in Saudi Arabia's crude exports to Japan to 10-year highs in April clearly signals one thing -- that the Middle East supplier is intensifying efforts to grab any incremental demand opportunity that comes from its key customers. And it seems to be in no mood to deviate from its aggressive policy of doing all it can to boost market share, industry sources and analysts said, adding that its strategy was unlikely to change over the course of the year. "The Saudi response [for incremental supplies] has improved in recent months," a Japanese refiner source said. "We feel that they are actively responding to requests for incremental supplies in a prompt manner." Japan's crude imports from Saudi Arabia averaged 1.42 million b/d in April, the highest for the month since it imported 1.5 million b/d in April 2006, according to preliminary data released Tuesday by the Ministry of Economy, Trade and Industry.Saudi Arabia's crude supplies to Japan in April surged 37.2% from 1.037 million b/d a year earlier, according to S&P Global Platts calculations based on METI data. It includes 50% of imports from the Partitioned Neutral Zone, which lies between Saudi Arabia and Kuwait. METI lists it as a separate supply source. Saudi Arabia's market share rose to 41% of Japan's total crude imports of 3.47 million b/d in April, from 31% a year ago.

    Uber Just Raised $3.5 Billion in Funding From Saudi Arabia - Ride-hailing giant Uber has just closed one of the largest funding rounds by a tech company in recent history.  The company said on Wednesday that it had closed $3.5 billion in new funding from Saudi Arabia’s Public Investment Fund, at an unchanged valuation of $62.5 billion. As part of the deal, Public Investment Fund (PIF) managing director Yasir Al Rumayyan will join Uber’s board, the company said. Rumors of Uber’s latest fundraising efforts first surfaced last fall, and the round has now fully closed, the company confirmed.Last week, Uber revealed it has pocketed an undisclosed amount of funding from Toyota, with which it will also partner to provide its drivers with more affordable car purchase and lease terms. PIF’s investment in Uber is part of Saudi Arabia’s plan to shift by 2030 from its reliance on oil revenue.Uber, one of the most highly capitalized private companies with billions in previous funding, has been raising money from a wide variety of investors including traditional venture capitalists, the wealthy clients of Goldman Sachs, other sovereign funds like Qatar’s, and Russian businessmen via the LetterOne investment fund.

    Russia's Long Road to the Middle East -  “Now they’ve achieved their historical dream of having bases in the warm waters of the region, and they will make sure no gas pipelines will come from Central Asia or Qatar without their approval. They have gained a foothold in the region.” Mr. Putin’s ambition to re-establish Russia as a major power in the Middle East (and the rest of the world) has been constrained by his country’s declining economy, now roughly the size of Italy’s and still shrinking. Already suffering from sanctions imposed by the West after Mr. Putin’s 2014 invasion of Ukraine, Russia has been hit hard by the low prices of oil and gas, the country’s main exports. But such limits are familiar to Russia, which has never been particularly prosperous but has frequently sought a leading role in global affairs.  “Putin understands that Russia, based on its economic weight today, can’t be a great power, but he refuses to act in accordance with this weight,” explained Dmitri Trenin, head of the Carnegie Center in Moscow and a former Soviet military officer whose career included a stint as an adviser in Iraq. “He aims to punch well above Russia’s economic might. The worldview is: We are either a great power, or we disintegrate and are nothing.” Nor is it just a lackluster economy that limits the reach of Russian influence. Russia also lacks the kind of soft power that the U.S. has long exercised world-wide. Young Arabs and Iranians are not particularly eager to watch Russian movies, listen to Russian pop music or study in Russia. “No one in this part of the world loves or hates Russia today. Russia in the Arab mind is just political strategy and weapons. These are its only commodities,” If anything, there is a stronger social and cultural influence spreading in the other direction. Today’s Russian population is about 15% Muslim—a proportion that has grown with the influx of millions of migrant workers from Central Asia.

    Dozens killed in bombing of national hospital in Idlib -  At least two dozen people including several children have been killed in northern Syria in the latest apparent attack by forces loyal to the Bashar al-Assad regime on medical facilities in opposition-held areas, UN officials and activists have said. The bombing of the national hospital and its surroundings in Idlib city, a provincial capital wrested from regime control last year, was the latest incident in a systematic aerial campaign against medical personnel and facilities that has gone unpunished despite its intensification over the last year and a half.“There is no use to all of this. The bombing of hospitals will continue and cannot be stopped – that much is clear,” said Zedoun al-Zoabi, head of the Union of Syrian Medical Relief Organisations, which operates a number of hospitals in northern Syria. “We have lost hope, and all we can do is build hospitals underground because there is no international decision to prevent the bombing of hospitals.” The office of the UN high commissioner for human rights said the attack happened at 10pm on Monday, with multiple airstrikes by pro-government forces targeting the national hospital. According to first responders, at least 30 people were killed and dozens of civilians wounded, and the death toll was likely to rise as rescue operations continued, the statement said. The Syrian Observatory for Human Rights said several children were among the dead. It was unclear whether the attack was conducted by Russian or Syrian fighter jets.

    Air strikes on Isis in Iraq and Syria are reducing their cities to ruins -  Some 20,000 Iraqi soldiers, special forces, federal police and Shia paramilitaries are advancing on Fallujah, a Sunni Arab city held by Isis since early 2014. They are backed by the destructive might of the US-led coalition of air forces that have carried out 8,503 air strikes in Iraq and 3,450 in Syria over the last two years. Without such close air support, the anti-Isis forces in Iraq and Syria would not have had their recent successes. “I think they [government forces] will take Fallujah but the city will be destroyed in the process,” said Najmaldin Karim, the governor of Kirkuk to the north east of Fallujah in an interview with The Independent. “If they don’t have air strikes they probably won’t be able to take the city.” The precedents are ominous. The Iraqi army backed by Coalition airpower recaptured the city of Ramadi from Isis last December, but more than 70 per cent of its buildings are in ruins and the great majority of its 400,000 people are still displaced.  “The destruction the team has found in Ramadi is worse than any other part of Iraq. It is staggering,”  said Lise Grande, the UN's humanitarian coordinator in Iraq.  “all water, electricity, sewage and other infrastructure – such as bridges, government facilities, hospitals and schools – have suffered some degree of damage.”  This included no less than 64 bridges destroyed.  US air commanders congratulate themselves on the pinpoint accuracy of their bombardment (so unlike Vietnam or earlier wars) but, if this is so, why was it necessary to destroy Ramadi? The same is true of other victories over Isis in Iraq and Syria. Last year I was in the Syrian Kurdish city of Kobani that Isis tried to capture in a siege lasting four-and-a-half months until they were driven out by Syrian Kurdish fighters and 700 US airstrikes that pulverised three-quarters of the buildings. Everywhere I looked there was a jumble of smashed concrete and broken metal reinforcement bars sticking out of the heaps of rubble. Only in the enclave the Syrian Kurds had clung onto were buildings still standing.

    Exclusive: White House Blocks Transfer of Cluster Bombs to Saudi Arabia - Frustrated by a growing death toll, the White House has quietly placed a hold on the transfer ofcluster bombs to Saudi Arabia as the Sunni ally continues its bloody war on Shiite rebels in Yemen, U.S. officials tell Foreign Policy. It’s the first concrete step the United States has taken to demonstrate its unease with the Saudi bombing campaign that human rights activists say has killed and injured hundreds of Yemeni civilians, many of them children.  The move follows rising criticism by U.S. lawmakers of America’s support for the oil-rich monarchy in the year-long conflict. Washington has sold weapons and provided training, targeting information, and aerial refueling support to the Saudi-led coalition fighting in Yemen. It has also sold Riyadh millions of dollars’ worth of cluster bombs in recent years. Asked about the hold on the shipments, a senior U.S. official cited reports that the Saudi-led coalition used cluster bombs “in areas in which civilians are alleged to have been present or in the vicinity.”  “We take such concerns seriously and are seeking additional information,” The hold applies to CBU-105 cluster bombs manufactured by the U.S.-based firm Textron Systems. According to Amnesty International and Human Rights Watch, Saudi-led forces have dropped CBU-105 munitions in multiple locations around Yemen, including Al-Amar, Sanhan, Amran, and the Al-Hayma port. Cluster bombs contain bomblets that scatter widely and kill or injure indiscriminately. Sometimes bomblets fail to detonate immediately and can kill civilians months or even years later. The weapons were banned in a 2008 international treaty that the United States refused to sign.

    U.N. adds Saudi coalition to blacklist for killing children in Yemen: (Reuters) – United Nations Secretary-General Ban Ki-moon slammed the Saudi Arabia-led coalition fighting in Yemen for killing and maiming children by adding it to an annual blacklist of states and armed groups that violate children’s rights during conflict. The coalition was responsible for 60 percent of child deaths and injuries last year, killing 510 and wounding 667, according to Ban’s report released on Thursday, which also said the coalition carried out half the attacks on schools and hospitals. The Saudi-led coalition began a military campaign in Yemen in March last year with the aim of preventing Iran-allied Houthi rebels and forces loyal to Yemen’s ex-President Ali Abdullah Saleh from taking control of the country. “Grave violations against children increased dramatically as a result of the escalating conflict,” Ban said in the report. “In Yemen, owing to the very large number of violations attributed to the two parties, the Houthis/Ansar Allah and the Saudi Arabia-led coalition are listed for killing and maiming and attacks on schools and hospitals,” he said. The Houthis, Yemen government forces and pro-government militia have been on the U.N. blacklist for at least five years and are considered “persistent perpetrators.” Also appearing again on the list is al Qaeda in the Arabian Peninsula.

    The US in the Middle East – “There Is No Strategy”  - Andrew Bacevich - We have it on highest authority: the recent killing of Taliban leader Mullah Akhtar Muhammad Mansour by a U.S. drone strike in Pakistan marks “an important milestone.” So the president of the United States has declared, with that claim duly echoed and implicitly endorsed by media commentary — the New York Times reporting, for example, that Mansour’s death leaves the Taliban leadership “shocked” and “shaken.” But a question remains: A milestone toward what exactly? Toward victory? Peace? Reconciliation? At the very least, toward the prospect of the violence abating? Merely posing the question is to imply that U.S. military efforts in Afghanistan and elsewhere in the Islamic world serve some larger purpose. Yet for years now that has not been the case. The assassination of Mansour instead joins a long list of previous milestones, turning points, and landmarks briefly heralded as significant achievements only to prove much less than advertised. One imagines that Obama himself understands this perfectly well. Just shy of five years ago, he was urging Americans to “take comfort in knowing that the tide of war is receding.” In Iraq and Afghanistan, the president insisted, “the light of a secure peace can be seen in the distance.”  “These long wars,” he promised, were finally coming to a “responsible end.” We were, that is, finding a way out of Washington’s dead-end conflicts in the Greater Middle East.

    Uncertain Real Estate Lease Lengths in China and Time Consistent Housing Policy -- When you buy a home in the U.S, you purchase a bundle of the physical housing unit and the land under it.  In China, the "Communists" have passed rules that an apartment buyer owns the home but not the land the apartment sits on.  As the NY Times reports today, the land lease contracts are typically written for 70 or 90 years.    Apartment buyers in China implicitly have assumed that the government has privatized the land and given it to the apartment buyer.  But, as cities face increasing debts and in a nation that doesn't have a property tax, different cities are now announcing new capital gains taxes to compensate the government for the land transfer.   What is going on here?  Suppose that in the year 2010 I buy an apartment and rent the land it sits on for 50 years.  Up until the year 2060, I can either live in my apartment or rent it out to someone else.  When the year 2060 comes about, the government now reclaims its land asset and can tear down the building and use the land for a new purpose.  This differs from the U.S case where the apartment owner would have some say with regards to the future use of the asset. If the Chinese home owners now expect to face a future capital gains tax, then the permanent income hypothesis posts that they will now consume less and save more. This will lead to less aggregate consumption and this slowdown the CCP's plan that China's growth be fueled by domestic consumption.

    60,000 Chinese factory workers replaced by robots - Foxconn, a major manufacturer of devices for Apple and Samsung, has reportedly sacked 60,000 workers in one of its factories in China and replaced them with robots.  The factory in China's Kunshan region has reduced the number of employees from 110,000 to 50,000 thanks to the introduction of robots, reports the South China Morning Post. “More companies are likely to follow suit,” according to the head of publicity for the region Xu Yulian. The producer confirmed that most of the manufacturing tasks were currently being automated, but stressed it would not necessary mean long-term job losses. Foxconn intends to increase automation and at the same time maintain a significant manufacturing workforce in the country.  We are applying robotics engineering and other innovative manufacturing technologies to replace repetitive tasks, and through training also enable our employees to focus on higher value-added elements in the manufacturing process,” Foxconn said in a statement to the BBC.

    China's factories steadying but weak, hopes for quick recovery fade | Reuters: China's manufacturing activity showed signs of steadying in May but remained weak amid soft demand at home and abroad, suggesting the world's second-largest economy is still struggling to regain traction. A rebound in March had raised hopes that China's economy was reviving, breathing life into global financial and commodity markets, but analysts said the soggy activity readings and weak April data suggest no quick recovery is in sight. China's official factory activity gauge expanded for the third straight month in May, but only marginally, while a private survey showed conditions deteriorated for a 15th straight month. Both showed factories continued to cut staff. "The question was whether the March rebound was a one-month story, or whether weakening in April was the outlier. Our expectation is May and June will fall somewhere in-between." said Zhu Haibin, chief China economist at JPMorgan. "The real estate market recovery has maintained momentum, the number of new investment projects is strong, and corporate earnings have also improved. The modest recovery will continue."

    As in US, Trump draws strong reactions in China: (AP) — China features prominently in the rhetoric of presumed Republican presidential candidate Donald Trump, who accuses the country of stealing American jobs and cheating at global trade. In China itself, though, he's only now emerging as a public figure, despite fame elsewhere for his voluble utterances, high-profile businesses and reality TV show. And although Chinese officials and state media have denounced Trump's threats of economic retaliation, many Chinese observers see a silver lining in his focus on economic issues to the near-total exclusion of human rights and political freedoms. That appears to make him an attractive alternative to his likely rival, Democrat Hillary Clinton, who is regarded as far more critical of China's communist system. Trump "could in fact be the best president for China," Hong Kong Phoenix Television political commentator Wu Jun said during a recent on-air discussion. "That's because the Republican Party is more practical and Trump is a businessman who puts his commercial interests above everything else," Wu said. Clinton, on the other hand, "might be the least friendly president toward China."

    China's "Wildly Imbalanced" Economy Is Heading For "Severe, Protracted" Slump -- Having previously explained how China's hard landing has begun, former ABN AMRO chief investment stratgist Richard Duncan warns of a "severe and protracted" slump is ahead as"this enormous gap between investment and consumption means China’s economy is now wildly unbalanced." Duncan has published a series of videos explaining why, in his opinion, China’s economic development model of export-led and investment-driven growth is now in crisis.“Perhaps not since the Pharaohs built the pyramids with slave labour has investment made up such a large share of a country’s economy and household consumption made up so little,” Duncan said. “This enormous gap between investment and consumption means China’s economy is now wildly unbalanced.”Underscoring the scale of China’s reliance on investment as an engine of growth, consider how much it has ramped up spending in this area in just a few short years, compared to that of the US, the world’s largest economy. In 2014, investment in the US was US$177 billion higher than 2007, a growth rate of 6%. In 2014, the level of investment in China was US$3.2 trillion more than it was in 2007, representing growth of 236 per cent.The South China Morning Post brings you the second video in that series (part 1 here).A former Hong Kong-based banking analyst, Duncan has also worked as an analyst at the World Bank, and as global head of investment strategy at ABN AMRO Asset Management in London. He has authored three books on the global economic crisis, including The Dollar Crisis: Causes, Consequences, Cures. He is now chief economist at the Singapore-based hedge fund Blackhorse Asset Management. Duncan was also a speaker at last week’s Asian Leadership Forum in Seoul, South Korea. The South China Morning Post was a media partner to the event.He runs the blog Macro Watch, a subscription-based website providing analysis on global economic trends.

    Michael Pettis: China – How Much Investment is Optimal? - A few years ago I wrote an essay on my blog that received a lot of attention and in which I tried to explain what the underlying assumption was for analysts who considered that China’s low level of investment relative to that of, say, the US proved that China could not possibly have reached the point of investment saturation. I then argued that there were two very different models that explained what made advanced economies advanced. One model assumed that there is an optimal capital frontier appropriate to all countries, and that the further a country is from that frontier, the more profitable and productive would be any increase in investment. The other model assumes that each country has a different optimal capital frontier based on its level of what I called “social capital”. Poor countries are usually countries with low levels of social capital and, therefore, a low optimal capital frontier, and any investment past that frontier is likely to be non-productive. I have found myself discussing this essay a lot recently, both with analysts who had read it back then and wanted to discuss it and with analysts who hadn’t read it and wanted to know why I assumed that investment in China had long ago reached its saturation point. I am working on a new essay on trade for my blog, but I thought it might be worthwhile to some of my readers, especially new readers, to re-post the essay. I made a few changes, mainly because I was not able to reproduce two graphs and a table that come in the original.

    What Drove China’s Large Reserve Sales?-- China never was going to transition from one of the most heavily managed currencies in the world to a free float overnight. The key question always has been how China is going to manage its currency, not whether China will manage its currency. The “market” in China has effectively been a bet on where the PBOC—and its various masters—wanted the currency to go. The reform last August did not change that. And China made its task more difficult last August by trying to get rid of one of its tools for managing market expectations—the daily fix of the level for renminbi against the dollar, which in theory, though rarely in practice, sets the renminbi’s daily trading band—precisely when it moved to destabilize market expectations. Both the spot (the “market” price for China’s currency) and the fix (the PBOC’s reference rate) had been remarkably stable in the three to four months prior to China’s August currency reform. Depreciating the fix to the weaker spot price sent a signal, even if the actual initial move was rather small.  Last weeks’ well-sourced Wall Street story was interesting to me for its information on the domestic politics of China currency, not for the news that China’s currency is “back under tight government control.” For those who like stories on China’s internal currency politics, I suspect is up there with the Reuters story from last August highlighting the political pressures on the PBoC. And it raises one of the most critical ongoing questions in the global economy: what has driven large scale Chinese reserve sales? There are two theories. One is that money is leaving China because of losses in the Chinese banking system. According to this argument, it is rational for Chinese savers to flee hidden losses in Chinese banks, even as China is running a record merchandise trade surplus. The other is that money is leaving China because Chinese savers—and more importantly, Chinese firms who can use China’s large cross border trade to move funds in and out of China more easily than most and, began to expect that Chinese policy makers wanted China’s currency to weaken.

    China could be about to plunge us all into a world of pain -- The trade of the year has come back to haunt markets. The Chinese yuan has weakened against the dollar at its most rapid rate since last August, when Chinese officials devalued the currency. This move is also a throwback to a scary recent time — the turmoil at the beginning of this year after the Fed's first rate hike since going to zero in December 2008. In January and February, the Yuan's erosion against a strong dollar prompted Chinese people to move money out of the country, which spooked its stock market, which in turn spooked markets around the world. And now, that recent history is repeating itself. Along with more rate-hike talk, a swiftly plunging yuan is back. What's more, the messaging out of China is just as confusing and aggressive as it was before. Again, the government is maintaining that the yuan is floating freely against a basket of currencies, as it has insisted since the end of last year. Again, the government is throwing a tantrum anytime the foreign media talks about this issue. And for the first time since the disaster during the winter, the Chinese stock market experienced an almost instant, eye-popping drop on Tuesday.

    The Trade Slowdown, China, and the Rest of the World - “China and Asia in Global Trade Slowdown” That’s the title of a just released IMF Working Paper: Asia and China made disproportionate contributions to the slowdown of global trade growth in 2015. China’s import growth slowed starkly, driven by both external and domestic factors, including a rebalancing of demand. Econometric results point to weak investment and rebalancing as the main causes of the import slowdown. Spillover effects from China’s rebalancing are estimated for some 60 countries using value-added trade data, and are found to be more negative on Asia and commodity exporters than others. As noted in the abstract, rebalancing toward consumption is proceeding apace, albeit perhaps not as fast as might be desired. This is shown in Figure 7 (Box 3) from the paper. The slowdown in international trade is not a phenomenon specific; this point was highlighted in a recent FRB Richmond Focus by Jessie Romero, which asks the question “Why trade growth has slowed down — and what it might mean for the global economy?”. The concerns about the slowdown in trade are not new. Back in October, Bank Underground noted the slowdown, and through a different prism concluded: Going forward, these results suggest world trade growth will remain subdued relative to pre-crisis averages. And the trade elasticity of global growth should not be expected to return to its pre-crisis level over the next few years for two reasons: Global growth is expected to remain weaker than prior to the crisis, due to weaker global potential supply growth (see the recent IMF WEO chapter for more information). Given the higher variance of trade growth relative to GDP growth, that will continue to weigh on the trade growth to GDP ratio. The weight on EMEs, which have low trade elasticities, is expected to continue rising (albeit at a slower pace than the past given the slowdown in potential growth expected over the next few years), further depressing the global trade elasticity. That will continue to weigh on world trade growth.

    South China Sea: US warns Beijing against building ‘great wall of self-isolation’ - China risks further alienating regional neighbours and building a “great wall of self-isolation” as it pursues its military expansion across the South China Sea, US defense secretary Ashton Carter warned on Saturday. Speaking at a security summit in Singapore, Carter said countries across the Asia-Pacific region continue to fret over China’s sweeping claims of sovereignty in the South China Sea, and its attempts to bolster these by creating military bases on reclaimed islets and increasing maritime patrols.  “China’s actions in the South China Sea are isolating it, at a time when the entire region is coming together and networking,” Carter said in a speech at an annual forum known as the Shangri-La Dialogue. “Unfortunately, if these actions continue, China could end up erecting a great wall of self-isolation.” Beijing’s claim to nearly the entire South China Sea has angered Southeast Asian neighbours and pitted it against the United States, which has conducted patrols near Chinese-held islands to press for freedom of navigation. The contested waters encompass key global shipping lanes. The Philippines, Brunei, Malaysia and Vietnam have competing claims in the area, which is believed to have significant oil and gas deposits.  The Philippines has filed a case against China before the Permanent Court of Arbitration in The Hague and a decision is expected in the coming weeks but China has said it will not recognise any ruling.

    Steve Keen: Zombie-to-Be Economies and the Walking Dead of Debt Include China, South Korea, Canada, Finland - video - Yves Smith --  Steve Keen, one of the short list of economists to warn of the coming of the financial crisis, gives a very fast paced and informative talk. He explains the workings of his economic model, which contrary to prevailing macroeconomic models, includes the role of banking and credit. He then identifies the conditions that lead to zombification: a rapid expansion of credit in an economy that already has a high debt load. He shows how merely stabilizing the level of debt to GDP leads to a serious economic contraction. Using new BIS data, he then identifies a surprisingly long list of countries that are destined to become zombies. It’s not pretty.

    Hong Kong Retail Sales Plunge 7.5% YoY, Fall For 14th Consecutive Month -- Hong Kong's retail sales fell for the 14th consecutive month in April, plunging 7.5 percent from a year ago. April was slightly less severe than a revised estimate of a 9.8 percent YoY contraction in March. April sales of jewellery, watches, clocks and valuable gifts fell 16.6 percent in value terms, a 20th consecutive month of decline, while durable consumer goods fell the most at 31.6 percent, followed by electronics and photographic equipment which fell 23 percent. Consumers seem to be drinking more alcohol and buying more groceries however, as supermarket sales and alcoholic drinks and tobacco were up 2.4 percent and 5 percent respectively. The slowing economy in mainland China continues to have a significant impact, as tourists from mainland China, which make up 73.8 percent of the total, fell 4 percent from the prior year. From Reuters: "Many types of retail outlet still recorded notable falls in sales, reflecting the continued drag from the slowdown in inbound tourism as well as the more cautious local consumer sentiment amid subpar economic conditions," the government said in a statement.Hong Kong is struggling with mounting economic challenges from the prospect of rising U.S. interest rates, which has stepped up capital outflows, and from China's economic slowdown.Mainland tourists are avoiding the city amid political tensions with China and growing calls from radical activists for greater autonomy from Beijing. "The near-term outlook for retail sales will continue to depend on the performance of inbound tourism," the government added.

    Japan delays sales tax rise to 2019 - BBC News: Japan has delayed plans to raise the country's sales tax to 10% from the current 8%. The tax increase was supposed to take place next year, but now Prime Minister Shinzo Abe wants to delay it to late 2019. Mr Abe says he wants to speed up his "Abenomics" policy, which aims to reverse more than a decade of deflation and stimulate economic growth. The sales tax was first introduced in 1989 at a rate of 3%. "I want to fulfil my responsibility by accelerating Abenomics more and more," Mr Abe told MPs in his ruling Liberal Democratic Party on Wednesday. The rise in the sales tax from 8% to 10% was initially meant to take place in October 2015, but it was then moved to April 2017 and has now been pushed back even further. Japan relies heavily on domestic consumption, but its population is ageing and shrinking so fewer people are contributing to the economy. The Bank of Japan (BOJ) introduced a negative interest rate policy of -0.1% in January, a move which surprised many economists. The introduction of negative rates - a first for Japan - aimed to increase spending and investment, which should in turn boost economic growth.

    Tax hike delay signals Japan giving up on fiscal reform (Reuters) - Prime Minister Shinzo Abe is essentially giving up on fiscal reform by postponing a sales tax hike for two and a half years, putting Japan's credibility on the line and heightening the risk of a credit downgrade that could lift corporate borrowing costs.With the central bank's massive bond buying hammering yields near zero, few in the market expect the tax delay to trigger an immediate bond sell-off and a dangerous spike in the cost of financing Japan's massive public debt.But a second delay in less than two years - expected to be announced by Abe at a Wednesday news briefing - is a major setback for Japan's drive to get its fiscal house in order, and makes it nearly impossible to achieve a target of turning its budget deficit into a surplus by the 2020 fiscal year, analysts say.The world's third-biggest economy barely averted recession in the first quarter, and analysts expect only feeble growth, if any, this quarter as weak emerging market demand and slow wage growth weigh on exports and consumption."It's become clear Abe is not so serious about fiscal discipline," said Masamichi Adachi, senior economist at JPMorgan Securities Japan. "The budget balance target was considered ambitious to begin with and now looks to be given up or pushed back until a few years later."Some analysts say Abe is effectively abandoning the tax hike by delaying it to October 2019 as he's unlikely to still be in office then. His term as head of the ruling party, and thus premier, expires in September of that year."It's essentially a freezing of the tax hike plan," said Katsutoshi Inadome, fixed income strategist at Mitsubishi UFJ Morgan Stanley. "It might be interpreted as a message that Abe won't implement fiscal reform during his tenure."

    Japan’s First Consumption Tax Hike Was a Demand Disaster: Abe’s rhetoric has not been German. Especially not recently. But his policies over the last two years have been. At least until recently. The International Monetary Fund’s fiscal department estimates that Japan did a consolidation of over 2 percentage points in 2014 and another half point or so of fiscal consolidation in 2015, net of any gains from lower interest payments.* Japan has a history of passing lots of highly hyped stimulus packages. But in many cases those stimulus packages just offset the roll-off of past stimulus packages, without generating much net fiscal impulse to the economy. Postponing the consumption tax hike consequently makes a great deal of sense. Japan’s economy—the domestic side at least—never recovered from the last hike.Private consumption demand fell around 1.5 percentage points of GDP immediately after the consumption tax hike, and hasn’t recovered. Annualizing quarter-over-quarter changes in the level of consumption produces noisy headlines every quarter—but the basic trend is clear by now. Even in Japan with its demographics there should be an upward slope to consumption over time in a normally performing economy. Japan’s 2014 consumption tax hike consequently should rank a bit higher in the various cases used to examine the impact of fiscal austerity. There was a clear swing toward austerity, and thus a clear contrast. Fiscal policy was modestly expansionary by any measure in 2013. The tax hike came at the zero bound, so there was limited capacity to offset using conventional monetary policy tools.

    Japan’s dependency ratio worsening -  Some 45 per cent of Japan’s households now include one person aged 65 years or more, government figures show, underlining how swiftly the country is moving towards a costly demographic inflection point. The quickening advance towards a crossover point that will change the country’s economic landscape and the companies serving it comes with a shrinking dependency ratio. By 2060, there will be 1.3 Japanese of working age (15-64) for every person aged over 65, according to a Government White Paper on ageing. Japan is at the forefront of a rich-world trend in which fewer workers support more seniors. Germany, for example, faces a dependency ratio of 1.5-1.6 by 2060, according to its Federal Statistical Office, as fertility rates decline and people live longer. But the near absence of immigration makes Japan’s case more stark. The combined pressures of fewer workers and the ballooning demands of elderly care pose a further threat to the growth stimulus policies championed by Prime Minister Shinzo Abe, who is aiming to put 1.17 million more people into the workforce by 2020. Demographics are already frustrating this ambition. About 100,000 people a year quit their jobs to care for an elderly or sick relative, according to government data. The figure is set to expand dramatically as the 1946-1964 Baby Boomers move into the ranks of the elderly. But for millions, the would-be recipients of their care are already close at hand. Of Japan’s 50.1 million households, 44.7 per cent include at least one person over the age of 65. Most are homes with one elderly couple, but the fastest growing group is households with one elderly inhabitant and an unmarried child.

    ‘Demographic dividend’ is under way with collapse in fertility - ET Blogs: Latest survey data suggest that Indian fertility has fallen sharply in recent years and is already at the ‘replacement level’ needed to keep the population stable. Urban fertility is now at levels seen in developed countries and in some places among the lowest in the world.These readings suggest a big change in India’s demographic trajectory. It also adds to the likelihood that world population will peak a lot sooner than is widely believed.According to recently released Sample Registration System data, the country’s total fertility rate (TFR) stood at 2.3 in 2013. TFR is the average number of children per woman if she lives to the end of her child-bearing years. In developed countries, a TFR of 2.1is required in order to keep the population stable (ignoring migration). In India, this is around 2.3 due to higher infant mortality and a skewed gender ratio. In other words, the country’s TFR is already at the ‘replacement rate’.The TFR for rural areas stands at 2.5, but that for urban India is down at 1.8 — marginally below the readings for Britain and the US. An important implication of this is that India’s overall TFR will almost certainly fall below replacement as it rapidly urbanises over the next 20 years. There continue to be wide variations in the fertility rates across the country. Readings for the southern states have been low for some time, but are now dropping sharply in many northern states. Tamil Nadu has a TFR of 1.7 but so do Punjab, Himachal Pradesh and Delhi. Uttar Pradesh and Bihar continue to have the country’s highest TFR at 3.1 and 3.5 respectively, but these are also falling steadily. Interestingly, West Bengal has the lowest fertility in the country with a TFR reading of 1.6. The level for rural Bengal is 1.8 but is a shockingly low 1.2 for the cities. This is one of the lowest levels in the world and is at par with Singapore and South Korea.

    Discrepancies and Indian GDP data -  “India’s economic growth accelerated to 7.9 per cent in the first quarter, widening its lead over China and confirming the country’s status as the world’s fastest expanding large economy and the most dynamic emerging market.”  Well, qualified, confusing good news, as Goldman notes: Data from the expenditure side shows that the improvement in GDP growth in Q1 was largely driven by higher private consumption and relatively lower drag from net exports. Fixed investment declined for the first time since March 2014. However, a significant fraction of headline GDP growth is unexplained as ‘discrepancies ‘ amount to 4ppt of GDP vs 2.1ppt in the previous quarter (the discrepancy is the difference with the industry GDP data, which are used as the control). Or from SocGen: India released its Q4 FY16 GDP data yesterday. At 7.9% yoy, it was the strongest growth rate recorded in the past six quarters. Unfortunately, discrepancy was the other major growth driver, raising questions about the continued poor quality of data. Discrepancy was as high as 4.8% of GDP, the highest ever in the history of the new data series, and accounted for virtually 50% of the increase in real GDP. We’re not saying that India isn’t growing strongly, or at least growing steadily, it’s just that the new GDP series is still not trusted by many and the headline figure doesn’t inspire confidence. The level of discrepancies alone is, let’s say, unusual, while there have been concerns about dissonance with other — macro, high-frequency — indicators for a while now. Here’s CapEcon’s Shilan Shah with what seems a fair summary:…. these figures are hard to align with other evidence on the economy’s health. For instance, today’s data show manufacturing expanding 9.3% y/y last quarter. By contrast, the monthly data on industrial production show output rising just 0.2% y/y in Q1, from growth of 1.8% y/y in Q4. Meanwhile, growth in bank lending remains close to its slowest rate in over a decade. Survey data also point to slack with firms reporting low rates of capacity utilisation.

    Comparing Iran's Chabahar and Pakistan's Gwadar Ports -- Chabahar port in Iran is only about 100 miles from Gwadar port in Pakistan. Both are natural deep sea ports in the Arabian sea.Gwadar port's planned capacity when it is completed will be 300 to 400 million tons of cargo annually.  It is comparable to the capacity of all of India's ports combined annual capacity of 500 million tons of cargo today.   It is far larger than the 10-12 million tons cargo handling capacity planned for Chabahar.  To put Gwadar's scale in perspective, let's compare it with the largest US port of Long Beach which handles 80 million tons of cargo, about a quarter of what Gwadar will handle upon completion of the project. Gawadar port will be capable of handling the world's largest container ships and massive oil tankers. Gawadar port is being built in Pakistan by the Chinese as part of the ambitious $46 billion China-Pakistan Economic Corridor (CPEC) that will eventually serve as Hong Kong West for  growing Chinese trade with the Middle East and Europe.  CPEC will also enable Pakistan to bypass Afghanistan to trade with Central Asia through China across China's borders with Tajikistan, Kyrgyzstan and Kazakhstan.  Chabahar is ostensibly an Indian effort to build a port in Iran to bypass Pakistan for India's trade with landlocked Afghanistan and other Central Asian states.  Prime Minister Modi has committed $500 million investment in Chabahar, a tiny fraction of the Chinese commitment for Gwadar. A trilateral agreement was recently signed in Tehran by Indian Prime Minister Modi, Iranian President Rouhani and Afghan President Ghani.  Trade with Afghanistan through Afghan-Iran border in the West will probably remain a pipe dream given that 1) most of Afghan population lives in east and south close to the border with Pakistan and 2) Afghanistan has very poor infrastructure making it very difficult to move cargo across land from west to east and south of the country. Pakistan suspects that India's real objective in Iran is to locate its intelligence agents under the cover of Chabahar port construction workers to sabotage China-Pakistan Economic Economic Corridor (CPEC) and support Baloch insurgency to destabilize Pakistan. These suspicions were strengthened when Indian spy Kulbhushan Yadav, operating under the fake name Husain Mubarak Patel, was arrested in Balochistan in March this year.

    Outrage In Pakistan Over Bid To Allow 'Light Beating' Of Wives: A suggestion that men should be allowed to "lightly beat" their wives from an Islamic religious body was met with outrage in Pakistan on May 27. The proposal was included in a draft bill released by the Council of Islamic Ideology on May 26, which was posed as an alternative to a law giving women greater rights and protection that was enacted in the province of Punjab in February. The Islamic bill says: "A husband should be allowed to lightly beat his wife if she defies his commands and refuses to dress up as per his desires; turns down demand for intercourse without any religious excuse; or does not take a bath after intercourse or menstrual periods." Leading the outraged response to the proposal, the country's biggest and most influential newspaper, the English-language daily Dawn, published a satirical article with a list of things people could beat other than their wives -- including eggs, the bottom of ketchup bottles, and the Michael Jackson hit Beat It. The article was a rare example of media satire on matters laid down by Pakistan's conservative Islamic authorities.

    The incredible miracle in poor country development: The amazing improvement in the quality of life of the world's poor people should be common knowledge by now. For example, you have the now-famous "elephant graph", by Branko Milanovic, showing recent income growth at various levels of the global income distribution: This graph shows that over the last three decades or so, the global poor and middle class reaped huge gains, the rich-country middle-class stagnated, and the rich-country rich also did quite well for themselves. You also have  the poverty data from Max Roser, showing how absolute poverty has absolutely collapsed in the last couple of decades, both in percentage terms and in raw numbers of humans suffering under its lash: This is incredible - nothing short of a miracle. Nothing like this has ever happened before in recorded history. With the plunge in global poverty has come a precipitous drop in global child mortality and hunger. The gains have not been even - China has been a stellar outperformer in poverty reduction - but they have been happening worldwide: The fall in poverty has been so spectacular and swift that you'd think it would be a stylized fact - the kind of thing that everyone knows is happening, and everyone tries to explain. But on Twitter, David Rosnick strongly challenged the very existence of a rapid recent drop in poverty outside of China. At first he declared that the poor-country boom was purely a China phenomenon. That is, of course, false, as the graphs above clearly show.  But Rosnick insisted that poor-country development has slowed in recent years, rather than accelerated, and insisted that I read a paper he co-authored for the think tank CEPR, purporting to show this. Unfortunately this paper is from 2006, and hence is now a decade out of date. Fortunately, Rosnick also pointed me to a second CEPR paper from 2011, by Mark Weisbrot and Rebecca Ray, that acknowledges how good the 21st century has been for poor countries:

    Where the World’s Slaves Live - This year, researchers surveyed residents of 15 states in India and asked them what it is like to live in conditions of contemporary slavery—the term used to describe human trafficking, forced labor, sexual exploitation, and other forms of illegal enslavement in the 21st century.   “I was physically and sexually assaulted when I was working in the field. I had also threat on my life and on my family,” said one unnamed person who was in bonded labor, a type of exploitation in which people are forced to work to repay debt, real or assumed. Another person, who was made a street beggar, said: “Though I am begging I am not paid a single amount. I have to deposit all to them. I am deprived of food and good sleep.”  These individuals are two of an estimated 18.4 million Indians who live in contemporary slavery, according to a new report from the Walk Free Foundation, an Australia-based organization. The group’s Global Slavery Index, released Tuesday, estimates a total of 45.8 million people are in some form of contemporary slavery in 167 countries. Nearly 60 percent of those live in just five nations: India, the country with the highest number of slaves, followed by China (3.4 million), Pakistan (2.1 million), Bangladesh (1.5 million), and Uzbekistan (1.2 million).

    OECD Warns of Faltering Economic Growth, Cuts Forecasts - WSJ: The world’s economy is ensnared in weak growth and vulnerable to falling into another deep downturn unless governments take urgent action, the Organization for Economic Cooperation and Development said Wednesday. Releasing its semiannual economic outlook, the Paris-based organization amplified its call for governments to stimulate their economies by expanding investment and implementing policies that fuel competition, increase labor mobility and strengthen financial stability. “The need is urgent,” OECD chief economist Catherine Mann said. “The longer the global economy remains in the low-growth trap, the more difficult it will be to break the negative feedback loops,” she added. The OECD called on governments in February to head off risks to the global economy by ramping up investment spending. The starker warning in the May economic outlook indicates little effective action has been taken and highlights the further dwindling of prospects for more sturdy growth.In the most recent sign of reluctance among major economies to embark on fiscal stimulus, the Group of Seven leading industrialized nations stopped short of announcing coordinated action at a meeting last week.  The OECD said global economic forecasts have fallen by around 0.3 percentage points in six months. The organization lowered its growth forecast for the combined economy of the 34 OECD countries to 1.8% this year and 2.1% in 2017 from 2.2% and 2.3% respectively in November.The OECD now expects the U.S. economy to grow 1.8% this year and 2.2% in 2017, instead of 2% and 2.2% as it forecast in February and 2.5% and 2.4% in November. The OECD increased its growth forecast for the eurozone this year to 1.6% from 1.3% in February after a stronger than expected first quarter. But it kept its 2017 eurozone forecast at 1.7% and trimmed its Japan growth forecast to 0.7% this year and 0.4% in 2017 from 0.8% and 0.6% in February.

    Governments must boost spending to escape 'low-growth trap': OECD | Reuters: Ensnared in a "low-growth trap", the world economy will meander along at its slowest pace since the financial crisis for a second year in a row in 2016, the OECD forecast on Wednesday, urging governments to boost spending. With businesses wary of investing and consumers cautious about spending, the global economy will grow only 3.0 percent this year, the Organisation for Economic Cooperation and Development estimated. That would be no better than last year, which was already the worst since 2009, although growth would pick up modestly to 3.3 percent next year, the OECD forecast in its biannual Economic Outlook. Growth at those levels deprives youths of job opportunities and means old people will not get the healthcare and pension benefits they expect, OECD Chief Economist Catherine Mann told Reuters. "We are breaking promises to young people and old people. Therefore policymakers have to act to break us out of the low growth trap," Mann said in an interview. With OECD countries growing on average at half their estimated potential, it would take 70 years to double living standards, twice the rate of two decades ago. Mann warned against counting on central banks alone to lead the return to higher growth rates, with the benefit-to-risk balance of their exceptionally loose monetary policies tipping to the latter. Therefore, governments should not hesitate to plough money into growth-boosting initiatives like education and infrastructure, financing higher spending thanks to rock-bottom interest rates in many countries.

    Globalization’s True Believers Are Having Second Thoughts -- Early this month, the International Monetary Fund seemed to proclaim that neoliberalism, an economic philosophy that advocates allowing capital to flow where it will (and usually where labor is cheapest), may have been “oversold.” This was rather like hearing the Pope say that catechism may have been “oversold.” The IMF, after all, has been the primary vehicle for spreading Western, neoliberal economics to emerging markets over the last 40 years. Such policies have helped pull billions of people out of poverty, mainly by opening global trade. But it’s also the reason that financial crises around the world have grown bigger and more damaging. When capital can flow in and out of countries at will, bubbles grow large enough to imperil entire economies. (Russia, a number of Latin American nations and, to a lesser extent, China have struggled to contain hot money flows in recent months.) Three IMF researchers released a paper arguing that there was substantial evidence that free flows of global capital, and other neoliberal policies like the push for indebted nations to cut deficits quickly, may be hindering economic development. As the researchers put it “the benefits [of such policies] seem fairly difficult to establish when looking at a broad group of countries.” Meanwhile, the costs–most notably higher inequality within countries–“hurt the level and sustainability of growth.” The brief noted that since 1980 (which is when neoliberal economics started to really take off) there have been about 150 episodes of massive capital inflows to countries, and that 20% of the time these resulted in major financial crises and recessions. That’s because a lot of the money isn’t useful investment, but rather speculative inflows from big global banks and portfolio funds. Not surprisingly, the paper raised eyebrows. On June 2, the IMF’s chief economist Maury Obstfeld said the paper had been “widely misinterpreted.” Obstfeld framed the issue less as a rejection of neoliberal economics and more of a re-examination in the wake of the financial crisis. “I would describe the process as evolution, not revolution,” he said.

    Negative yielding sovereign debt swells to $10.4tn The negative yield club just keeps growing. With central banks in Europe and Japan adopting negative interest rates, $10.4tn of sovereign debt carried negative yield in May, ratings agency Fitch said on Thursday. That is up 5 per cent from the $9.9tn the ratings agency calculated as of April 25.  A breakdown showed that $7.3tn of that was long term debt, while the remainder was short term and that Japan remained the largest source of negative-yielding debt, writes Mamta Badkar in New York. “Unconventional monetary policies, regulatory risk mitigation by banks and a flight to safety in global financial markets have all contributed to the ongoing rise in the amount of sovereign debt trading with a negative yield,” Fitch said. Japan and Italy were the biggest drivers of monthly change with yields on some Italian securities between 1.5 and 3 years turned negative, while long-dated Japanese debt fell deeper into negative territory since last month. The growing pool of negative debt is dour news for investors as those who buy at present and hold the debt until maturity will end up receiving less than they paid for the security (when coupon payments and repayment of principal are taken into account). Moreover, there is some concern that investors are being pushed into riskier bonds with lower ratings as result of low and negative yielding sovereign debt

    Historic Milestone: Negative Yielding Debt Surpasses $10 Trillion For The First Time - The world passed a historic milestone in the past week when according to Fitch negative-yielding government debt rose above $10 trillion for the first time, which as the FT addsenvelops an increasingly large part of the financial markets "after being fuelled by central bank stimulus and a voracious investor appetite for sovereign paper." It also means that almost a third of all global government debt now has a negative yield. The amount of sovereign debt trading with a sub-zero yield climbed 5% in May from a month earlier to $10.4 trillion, pushed higher - or lower in yield as the case may be - by rising bond prices in Italy, Japan, Germany and France. Japan and Italy fuelled the increase in negative-yielding debt in May, with three-year bonds issued by the latter sliding below the zero mark.The ascent of the negative yield, which first affected only the shortest maturing notes from highly rated sovereigns, has encompassed seven-year German Bunds and 10-year Japanese government bonds as both the European Central Bank and Bank of Japan have cut benchmark interest rates and launched bond-buying programmes. The source of this historical capital misallocation is clear: global central banks who are desperate to push all yield-seeking investors, and key among them pension funds, into risky assets in hope of preserving asset price inflation. “Central bank actions are certainly a part of it, but the global search for yield, the desire to find high-quality securities is part of what is going on here,” said Robert Grossman, an analyst with Fitch." He added that regulations requiring banks to increase capital buffers were intensifying the flight into these securities. Portfolio managers, pension funds and insurers have struggled with negative-yielding notes, which when held to maturity will lose an investor money. Fund managers have nonetheless dived in, as central bank buying increases prices on the debt.

    Panama Papers May Inspire More Big Leaks, if Not Reform - In recent days, Sri Lanka, Zimbabwe and South Africa joined the growing list of countries hunting down tax evaders among citizens who own offshore accounts. The French bank BNP Paribas said it would shut its Cayman Islands branch. In Pakistan, a cricketer turned politician who had attacked the prime minister over his family’s offshore accounts admitted that he, too, had used a shell company. And the Group of 7 nations, meeting in Japan, agreed to crack down on illicit finance. It was the latest fallout from the Panama Papers, the largest leak of secret documents to journalists in history. In the eight weeks since the publication of the first articles by some 370 reporters in 76 countries, an effort organized by the International Consortium of Investigative Journalists, the impact of the revelations on the shadowy world of offshore finance has been striking — even as prospects for long-term reform remain uncertain.Investigations are underway in dozens of countries, including the United States. Proposed laws requiring disclosure of the true owners of offshore companies to tax collectors or to the public have new momentum. Cartoonists have had a field day, reflecting the widespread anger and disgust pressuring governments to act.“The reaction around the world has been pretty spectacular,” said Gabriel Zucman, an economist at the University of California, Berkeley, who has estimated that 8 percent of the world’s personal wealth is hidden in tax havens. “The demand for financial transparency and tax reform is really growing. It’s the first time there’s been public outrage at the global level on these issues.”

    Brazil's New Anti-Corruption Minister Quits After Leak Exposes His Involvement In Corruption - Our prediction that the cabinet of Brazil's new president Michel Temer would not last long received its first validation just 10 days after the impeachment of Dilma Rousseff, when a recording was leaked in which Brazil's new Planning Minister under Temer, Romero Juca, was overheard explaining how the removal of Rousseff would "prevent the wide corruption probe dubbed Carwash from proceeding." This prompted many to wonder if Rousseff was indeed correct all along claiming a silent, US-sponsored coup had taken place in Brazil, one in which the cost of sweeping the Carwash scandal under the rug was her own scalp.   Incidentally, Juca quit shortly thereafter to preserve the new president's reputation as corruption-free as possible.  Then earlier today, things for the new, just as corrupt as his predecessor president, Michel Temer got particularly awkward, not to mention painfully ironic, when none other than Brazil's Transparency and Anti-Corruption Minister, Fabiano Silveira resigned on Monday after leaked recordings suggested he tried to derail a sprawling corruption probe, the latest cabinet casualty impacting interim President Michel Temer's administration.  No amount of commentary can do justice to the gruesome farce that Brazilian economics is quickly devolving into. That said, it was perfectly predictable. On May 12, the day Rousseff was removed from power, we asked if Temer "can he avoid ouster himself"? Among his documented transgressions, he signed off on some of the allegedly illegal budget measures that led to the impeachment drive against Rousseff and has been implicated, though never charged, in several corruption investigations. 

    Still Selling Neoliberal Unicorns: The US Applauds the Coup in Brazil, Calls It Democracy -- Dilma Rousseff, Brazil’s recently deposed president, calls it a coup. Many, perhaps most, of the countries in the Organization of American States call it is a coup. Even the men who helped carry out the coup admit, in a secretly recorded conversation, that what they were doing was effectively a coup, staged to provide them immunity from a corruption investigation. But the United States doesn’t think that the blatantly naked power grab that just took place in Brazil—which ended the Workers’ Party’s 13-year control of the presidency, installed an all-white, all-male cabinet, diluted the definition of slavery, lest it tarnish the image of Brazil’s plantation sector (which relies on coerced, unfree labor), and began a draconian austerity program—is a coup. It’s democracy at work, according to various Obama officials.

    Venezuela: Pro-Govt Supporters Being Killed in Record Numbers | Analysis | teleSUR English: Venezuelan authorities are conducting an internal investigation into the assassination of retired Army Major General Felix Velasquez, which is the latest case in a surge of killings targeting pro-government public officials and activists.  In recent months, Western mainstream media outlets have remained silent regarding the violence waged against government supporters, left-wing activists and public servants, which many believe is an attempt to undermine the future of the Chavista movement in the country. 

    • May 2016: Retired Venezuelan Army Major General Felix Velasquez was shot dead while driving his car in Caracas.. According to Interior Minister Gustavo Gonzalez Lopez, the two suspects are policemen from the opposition-held Caracas borough of Chacao.
    • March 2016: Marco Tulio Carrillo was “shot repeatedly” outside his home in Trujillo. Carrillo was the mayor of the La Ceiba municipality, and a member of President Nicolas Maduro's United Socialist Party of Venezuela (PSUV). Two suspects have been arrested to due their involvement with the murder.
    • March 2016: Socialist legislator Cesar Vera was shot in Tachira state. Vera was a member of the Great Patriotic Pole, a political coalition of parties aligned with the PSUV. A member of a Colombian paramilitary group was arrested in connection to the murder.
    • March 2016: Two Venezuelan police personnel were killed after a protest in a Tachira university turned deadly.
    • March 2016: Haitian-Venezuelan political leader and solidarity activist Fritz Saint Louis, 54, was shot dead in his home by masked gunman on Saturday evening.
    • January 2016: The well-respected journalist and prominent Chavista Ricardo Duran was murdered outside his home in Caracas. One suspect was arrested in connection to his murder.

    Venezuela Drifts Into New Territory: Hunger, Blackouts and Government Shutdown — The courts? Closed most days. The bureau to start a business? Same thing. The public defender’s office? That’s been converted into a food bank for government employees.  Step by step, Venezuela has been shutting down. This country has long been accustomed to painful shortages, even of basic foods. But Venezuela keeps drifting further into uncharted territory. In recent weeks, the government has taken what may be one of the most desperate measures ever by a country to save electricity: A shutdown of many of its offices for all but two half-days each week. But that is only the start of the country’s woes. Electricity and water are being rationed, and huge areas of the country have spent months with little of either. Many people cannot make international calls from their phones because of a dispute between the government and phone companies over currency regulations and rates. Coca-Cola Femsa, the Mexican company that bottles Coke in the country, has even said it was halting production of sugary soft drinks because it was running out of sugar. Last week, protests turned violent in parts of the country where demonstrators demanded empty supermarkets be resupplied. And on Friday, the government said it would continue its truncated workweek for an additional 15 days. “There’s been plenty of problems, but one thing I haven’t seen until now is protests simply to get food,” said David Smilde, a Caracas-based analyst for the Washington Office on Latin America, a human rights group, referring to the demonstrations last week.

    Bartenders are winning Cuba's embrace of capitalism — and doctors are losing - Cuban state employees are abandoning their jobs for high-paying, private-sector gigs—in Cuba. As bartenders, bellhops, and taxi drivers. The growth of the Cuban private sector over the past two decades has created some serious imbalances between skills and pay: A bartender with some generous foreign customers could make more in tips in a weekend than a doctor, each of whom is employed by the Cuban government, does in a month. A new reform could exacerbate that issue. Cuba will soon legalize small- and medium-size private businesses, according to an economic development plan approved by the Cuban Communist Party Congress last month. The 32-page document hit newsstands in Havana on Tuesday,  according to the Associated Press, and offers the first glimpse of the reforms approved at April’s five-year CCP meeting. It comes on the heels of President Obama’s historic trip to Cuba in March, and the relaxing of the U.S. embargo.  The CCP hasn’t released many details, but the plans have been the works for some time, says Richard Feinberg, a professor at the University of California–San Diego and the author of Open for Business: Building the New Cuban Economy. It will soon be possible for Cuba’s self-employed, known as cuentapropistas, to incorporate their operations, easing the way toward working with Cuban banks, foreign investors, and state-owned companies. Small businesses will be the vanguard of the market economy in Cuba, while bigger industries remain under state control.  Some private enterprise—including small restaurants, guesthouses, construction trades, and taxis—is already legal in Cuba; a good deal more occurs on the margins of the law. About half a million Cubans have self-employment licenses; as many as a million Cubans may have some illegal or informal involvement in the private sector.

    Canada’s energy superpower status threatened as world shifts off fossil fuel, federal think-tank warns -- Canada's status as an "energy superpower" is under threat because the global dominance of fossil fuels could wane faster than previously believed, according to a draft report from a federal government think-tank obtained by CBC News. "It is increasingly plausible to foresee a future in which cheap renewable electricity becomes the world's primary power source and fossil fuels are relegated to a minority status," reads the conclusion of the 32-page document, produced by Policy Horizons Canada. Read the full report here: PDF link.  The little-known government organization provides medium-term policy advice to the federal bureaucracy, specializing in forecasts that peer a decade or two into the future. The document was obtained by CBC News under an access to information request and shared with two experts — one in Alberta, one in British Columbia — who study the energy industry. Both experts described its forecasts for global energy markets as more or less in line with what a growing number of analysts believe."It's absolutely not pie in the sky," said Michal Moore from the University of Calgary's School of Public Policy. "These folks are being realistic — they may not be popular, but they're being realistic."Marty Reed, CEO of Evok Innovations — a Vancouver-based cleantech fund created through a $100-million partnership with Cenovus and Suncor — had a similar take after reading the draft report. "You could nit-pick a couple of items," he said. "But at a high level, I would say the vast, vast majority of what they wrote is not even controversial, it's very well accepted."

    Putin Vows Retaliation Over US Missile Shield; Warns Poland, Romania Now In The "Cross Hairs" | Zero Hedge: Recall that on May 12, in a dramatic development for the global nuclear balance of power, the United States launched its European missile defense system dubbed Aegis Ashore at a remote airbase in the town of Deveselu, Romania, almost a decade after Washington proposed protecting NATO from Iranian rockets and despite repeated Russian warnings that the West is threatening the peace in central Europe. As we noted at the time, the US move was a clear defection from the carefully established Game Theory equilibrium in the aftermath of the nuclear arms race, one which explicitly removed a Russian "first strike threat", thereby pressuring Russia to implement further nuclear offensive and defensive measures: "the precarious nuclear balance of power in Europe has suddenly shifted, and quite dramatically: despite U.S. assurances, the Kremlin says the missile shield's real aim is to neutralize Moscow's nuclear arsenal long enough for the United States to make a first strike on Russia in the event of war." And sure enough, making it very clear that this biggest yet provocation by the US and NATO is not forgotten, during a joint press conference with Tsipras in Greece, Putin warned Romania and Poland they could find themselves in the sights of Russian rockets because they are hosting elements of a U.S. missile shield that Moscow considers a threat to its security. Putin, cited by Reuters,  issued his starkest warning yet over the missile shield, saying that Moscow had stated repeatedly that it would have to take retaliatory steps but that Washington and its allies had ignored the warnings. "If yesterday in those areas of Romania people simply did not know what it means to be in the cross-hairs, then today we will be forced to carry out certain measures to ensure our security," Putin told a joint news conference in Athens with Greek Prime Minister Alexis Tsipras. "It will be the same case with Poland," he said.

    Over 1 Million Russians Are Modern Slaves — Report  - More than one million people in Russia today are living as modern-day slaves, Australian-based human rights group the Walk Free Foundation reported Tuesday. They are part of an estimated 45.8 million people globally enslaved, according to the organization's 2016 Global Slavery Index. The estimate is a 28 percent increase on the 2015 figure. The number of estimated slaves in Russia has remained consistent remaining at approximately 1.05 million people. Russia appeared in 16th place on the index, ahead of Malawi, Madagascar, Sierra Leone, Eritrea, Namibia, Lesotho and Swaziland in joint 17th place. North Korea was ranked in top position, with an estimated 4 percent of the population thought to be enslaved. It was followed by Uzbekistan, Cambodia and India. The survey also ranks governments on their response to human trafficking problems. Russia received a CC rating, which indicates that “the government has a limited response to modern slavery, with largely basic victim support services,” the report says. Modern-day slavery comprises of human trafficking, forced labour, debt bondage, forced marriage and commercial sexual exploitation.

    ‘Disaster in the Making’: The Many Failures of the EU-Turkey Refugee Deal  --The internment of Syrian refugees raises new doubts over the controversial refugee agreement between Europe and Turkey. Indeed, it appears that the deal is on the verge of falling apart, only two months after the program began. The EU had promised Turkish President Recep Tayyip Erdogan €6 billion ($6.7 billion) and political concessions if his government would take back migrants who reach Greece via Turkey. One of the commitments Ankara made in a letter to the European Commission was to provide temporary protection to Syrian returnees.  German Chancellor Angela Merkel has praised the deal with Turkey as a humane alternative to sealing off Europe's internal borders. But the fact that the first Syrians who were brought to Turkey from Greece as part of the new agreement were taken directly to a detention center is not only a violation of international refugee law, but also an affront to Merkel.  As in the dispute over the promise of visa-free travel in the EU for Turkish citizens, Erdogan's message is clear: We may have signed a pact, but I determine the rules of the game. This also applies to the selection of refugees Turkey sends to the European Union, which includes a conspicuously large number of "serious medical cases." Hundreds of refugees are confined in Düziçi. Unlike Nour, many of them didn't make it to Greece. Some were arbitrarily arrested in Turkey, while others were detained for begging on the streets or selling tissues, reports the Turkish human rights organization Mülteci-Der.

    Turkey’s Erdogan Warns Muslims Against Birth Control - Turkish President Recep Tayyip Erdogan has called on Muslims to reject contraception and have more children. In a speech broadcast live on TV, he said “no Muslim family” should consider birth control or family planning. “We will multiply our descendants,” said Mr Erdogan, who became president in August 2014 after serving as prime minister for 12 years. In Monday’s speech in Istanbul, the Turkish leader placed the onus on women, particularly on “well-educated future mothers”, to not use birth control and to ensure the continued growth of Turkey’s population. Mr Erdogan himself is a father of four. He has previously spoken out against contraception, describing it as “treason” when speaking at a wedding ceremony in 2014. He has also urged women to have at least three children, and has said women cannot be treated as equal to men. Turkey’s fertility rate is one of the highest in Europe and the country’s relatively young population (compared with other European countries) is still growing. The population is just under 80 million.

    Protests Intensify, Spread Across France as Workers Refuse Submission -  Amid ongoing blockades and intensifying clashes with police, protests against President François Hollande's controversial set of labor reforms deepened on Thursday as workers in France's nuclear plants joined the hundreds of thousands of people taking part in a nationwide strike.  Fueled by "a groundswell of public anger," as the Associated Press put it, the strikes have already shut down France's gas stations forced the country to dip into reserve petrol supplies. "After oil refinery shutdowns, " Euronews reports, "Thursday's strikes at nuclear sites have taken the stand-off one stage further. Power cuts are not expected but tension is growing as France prepares to host the Euro 2016 football tournament in two weeks time." Sixteen out of the countries 19 nuclear plants voted to join the strike, AP reports. In addition to clashes in Paris, where police fired tear gas at demonstrators, the Guardian reports "that sreet marches took place in towns and cities across France, including Toulouse, Bordeaux and Nantes." Scores of people were arrested.  As Common Dreams previously reported: Hollande's severely unpopular proposals allow employers to more easily fire workers and create precarious, poorly paid positions in place of permanent contracts. Critics also charge that the reforms are designed to make it easier for corporations to move jobs offshore and increase workers' hours without overtime pay. The reforms provoked the nation's Nuit Debout ("Up All Night") protest movement to form in March, and the country has seen widespread demonstrations and mass rallies since then.

    French government scrambles to stem fuel shortages as protests continue - French junior transport minister Alain Vidalies on Saturday said fuel shortages sparked by nationwide strikes and blockades were easing, but warned the crisis was not over. Vidalies tried to reassure the public after a week in which French motorists rushed to the petrol pump, forming long queues and draining many stations dry. “The situation this morning is improving. In certain regions the situation is almost back to normal and in others, we will remain very vigilant,” Vidalies said. “We cannot say the crisis is over yet.” The junior minister spoke to reporters after an emergency meeting with Prime Minister Manuel Valls, as well as energy and transport executives. Panic at the pump has been among the most serious effects of weeks of strikes and demonstrations by angry student groups and workers.Unions have staged walk outs at refineries, blocked fuel depots and disrupted travel across the country. The powerful CGT and other French unions are fighting the government's attempt to reform the French labor market, saying the new measures will only increase unemployment and weaken job security. France’s Socialist government has sent riot police to break up picket lines at fuel depots, but unions have promised to return and even extend actions.

    Clashes, oil blockades over France's economic future: (AP) — Volley after volley of tear gas poisoned the Paris air Thursday, as authorities struggled against nationwide strikes and a groundswell of public anger at a high-stakes government attempt to change the way France views work. Oil refineries shuttered. Nuclear were plants on hold. Dock workers hurled firecrackers. Union activists cranked up the tensions to try to force President Francois Hollande to abandon a labor bill that gives employers more flexibility and weakens the power of unions. The big question is whether Thursday's burst of labor action fizzles out after the one-day strikes end, or inspires lasting unrest. Prime Minister Manuel Valls opened the door to possible changes in the labor bill that's triggering all the anger — but said the government wouldn't abandon it. Union activists said it's too late to compromise. Posters at a protest in the port of Le Havre bore a blood red tombstone representing the bill reading: "Not amendable, not negotiable: Withdraw the El Khomri Law" — referring to Labor Minister Myriam El Khomri. The draft law, aimed at boosting hiring after a decade of nearly 10-percent unemployment and slow but corrosive economic decline, relaxes rules around the 35-hour work week and leaves workers less protected from layoffs. Determined to defend worker protections, union activists have staged months of protests and targeted the strategic fuel industry in recent days, causing gasoline shortages. The country's two main oil ports were blocked Thursday and only two of the France's eight refineries were working.

    France industrial unrest: Open-ended strike brings rail misery - BBC News: An open-ended rail strike is under way in France just nine days before the country hosts the Euro 2016 football tournament. Only 60% of high-speed trains and between a third and a half of other services are expected to run, according to the state rail company (the SNCF). Trade unions are protesting against work time changes but the strike comes amid general labour unrest. The wider protests are over a bill to shake up the labour market. The bill comes before the Senate this month, having passed through the lower house without a vote. France's Socialist President, Francois Hollande, insists it will not be withdrawn despite months of unrest which erupted into street clashes between protesters and police at marches last Thursday. Leading conservative opposition politician Nicolas Sarkozy has accused him of getting "everything wrong from the start" in his handling of the crisis. "Pushing [the bill] through by force cuts out debate," the former president said in an interview with magazine Valeurs Actuelles, due to be published on Thursday. "If you don't accept the debate of ideas in parliament, then it moves to the streets."

    Rising anti-Semitism forces Jews out of Paris suburbs - The Local: Jews who have lived peacefully in the suburbs of Paris are now having to move to other parts of the country or head for Israel to escape anti-Semtism.  When Alain Benhamou walked into his apartment near Paris in July 2015 and saw the words "dirty Jew" scrawled on the wall, he knew it was time to leave. It was his second such break-in in less than three months and the 71-year-old no longer felt welcome in Bondy, a Parisian suburb he had called home for more than 40 years. "Until the years 2000-2005, the town was nice and quiet, with 250 to 300 Jewish families and synagogues full on the Sabbath," Benhamou says. "Now, only about a hundred Jewish families remain." Benhamou is part of a growing number of French Jews who have effectively become internal refugees, fleeing insecurity and seeking protection in numbers in an atmosphere they say is increasingly hostile, and often expressed in relation to conflict in the Middle East. He moved a few miles south to Villemomble, where there is a larger and more established Jewish community. But others have fled France altogether. A record 8,000 or so French Jews moved to Israel in 2015 alone, according to Israeli figures, in the year that a jihadist gunman linked to the Charlie Hebdo newspaper attackers killed four Jews in a kosher supermarket.

    European Freedom Of Speech Threatened As Social Networks Vow To Combat Self-Determined "Hate Speech" -- Social media giants Facebook Inc., Twitter Inc., Google and Microsoft Corp. have vowed to tackle online hate speech in less than 24 hours as part of a joint commitment with the European Union to combat the use of social media by terrorists, reports Bloomberg Technology. Beyond national laws that criminalize hate speech, there is a need to ensure such activity by Internet users is “expeditiously reviewed by online intermediaries and social media platforms, upon receipt of a valid notification, in an appropriate time-frame,” the companies and the European Commission said in a joint statement on Tuesday. The companies claim that it remains a “challenge” to strike a balance between protecting freedom of expression and eliminating hate speech because of the user generated content on their platforms. Romain Dillet of Tech Crunch speculates that the Social Networks are trying to tackle hate speech to avoid responsibility. Tech companies probably don’t want to be held responsible for hate speech and are now taking a strong stance against hate speech. This is surprising as many social networks have promoted free expression and have refused to delete content or accounts in the past (except when it comes to copyrighted material). But it’s been a slow and steady change. Twitter has already suspended 125,000 accounts related to ISIS since mid-2015. Facebook already agreed to work with the German government against hateful speech back in September 2015. Google and Twitter later joined Facebook and the German government in December 2015. Within the EU there has been numerous cases of individuals being arrested for “hate speech” and “offensive” language, which sparks concern over social networks becoming an arm of the political correctness police that now patrol the EU.

    Belgium disrupted by widespread transport and public sector strikes - Large parts of Belgium have come to a standstill as transport strikes caused serious disruption in Brussels and the French-speaking region and exposed the political fault lines of the divided country. Train drivers were on strike on Tuesday for the sixth consecutive day, bringing to a halt most services in French-speaking Wallonia and delaying journeys in Brussels and Dutch-speaking Flanders. Some trains to Paris and German cities were delayed or cancelled, although Eurostar said it was sticking to its scheduled timetable.Public transport in Brussels was also disrupted for the second time in a week, with metro trains running every 15-20 minutes, according to transport authority STIB. In some French-speaking cities disruption was greater, with unions vowing that no trains, buses or trams would run in the city of Charleroi. Some postal workers were on strike and rubbish was not collected in Brussels. While trains ground to a halt in Francophone parts of the country in a dispute over a reduction in overtime pay, 50-65% of trains were running in Flanders, exposing the differences between the north and the less affluent, French-speaking south, where the unions are more powerful. The different approach to industrial action was reflected by the decision of two Francophone unions to reject a deal with the justice ministry to end a five-week prison-officers’ strike. Belgium’s justice minister, Koen Geens, promised on Monday to hire more prison officers, a concession that allowed him to reach an agreement with four out of six of the country’s prison-officers’ unions – the three Flemish unions and one liberal Francophone group. Meanwhile, several thousand workers, including teachers, train drivers and firefighters, marched in Brussels, to protest against cuts to public services. Some were waving placards that read “fighting for our rights”.

    Hush, the Greeks are Asleep - by Costas Efimeros: Just a few days after the latest Eurogroup which would have put an end to uncertainty, it seems that we are faced with even more. The most reputable credit ratings agencies speak of a short rain check on the Greek drama while the IMF states that it will not be contributing with more funds towards the Greek bailout program. The Greek government is trying to find ways to legislate on the new requested measures without having to take the bills through the parliament. So why did we have to watch this sequel to the Greek drama? Well...the reason is always the same. The financial crisis of Greece is called "public debt crisis". This means that, according to various European financial institutions, and the IMF, the Greek state produces more debt than it can repay. As a result, the financial structure of the country is in danger of collapsing. Faced with danger, Europe created several consecutive "rescue" institutions. The last one is the European Stability Mechanism (ESM). At the time, the "3rd rescue program"  for the Greek economy is running. Therefore we now have enough experience to make some educated judgments on the effectiveness of those bailout programs. I would like to begin by stating that I think that all programs have achieved complete success. This is why.

    Thessaloniki: Thousands of needy flock to food distribution funded by the EU: Thousands of impoverished Greeks flocked to the premises of Thessaloniki Fair to receive a bag of food donated by the European Union. Vegetables, olive oil, chicken, cheese but also basic items like washing powder and dish detergents.  Since 8 o’ clock in the morning, men and women, young and old, formed long queues waiting for the food distribution to start. They were holding their ID in one hand and a stamped paper confirming they were beneficiaries. A total of 9,196 people. However, the distribution did not take place in a calm atmosphere, the beneficiaries broke again and again through the barriers set by police. At the end of the day, the beneficiaries went home with some food for a couple of days, food and detergents generously donated by the EU as part of the implementation of the Operational Program “Food and Basic material Assistance for the European Support Fund for the Needy (TEBA / FEAD)»

    Greek detention centre burns in riot between Afghans and Pakistanis -- More than 70 refugees have been injured and hundreds left without shelter after a huge fire and clashes broke out at a detention centre in Greece between Pakistani and Afghan migrants. Conditions for migrants and asylum seekers in Greece have been criticised as “sub-standard” by the UNHCR, and are contributing to rising tension, but reports from this incident in Lesbos, following a similar one on Samos, suggest each party had specific grievances. The Afghans were accused of acting like a “mafia” to try and control the centre, while the Afghans accused the Pakistanis of theft and sexual harassment. The centre, formerly a refugee camp, is for migrants who have been refused entry to Europe and are awaiting passage back to Turkey as part of the EU deal struck with Ankara.

    Greece, lenders at odds over loose ends in reform programme | Reuters: Greece and its international lenders are inching towards an accord over a set of extra measures demanded from Athens to qualify for vital rescue funds, officials with knowledge of the negotiations said on Tuesday. The two sides wrapped up the bulk of reforms needed for badly needed bailout cash last week, but left some loose ends which must be tied up before Athens gets 10.3 billion euros ($11.48 billion) of sub-tranches by September. To qualify for the funds, Greek lawmakers grudgingly approved tax hikes and pension reforms, freed up the sale of bad loans weighing on banks' balance sheets and promised to expedite privatisations. But Greece must also legislate a series of extra actions which the left-led government resists due to growing dissent at home after six years of belt-tightening. One of the measures is phasing out a top-up benefit to pensioners. "It's a matter of parliamentary dignity. We cannot ask lawmakers to vote over the same issues again and again," a government official told Reuters. "Some of the actions demanded are also worsening the impact of the measures already adopted and hurt sensitive groups further." To break the deadlock, some of the pending issues would be postponed to September, the official said, adding: "We are close to reaching a deal."

    German unemployment rate falls to record low in May | Reuters: German unemployment fell more than expected in May and the jobless rate sank to its lowest level in more than 25 years, boosting expectations that private consumption will continue to drive growth in Europe's biggest economy this year. The seasonally adjusted jobless total fell by 11,000 to 2.695 million, the Labour Office said, more than double the Reuters consensus forecast for a fall of 5,000. "The labour market continues its overall positive development," Frank-Juergen Weise, head of the Federal Labour Office, said in a statement. "Unemployment fell in the course of spring. Employment rose sharply and the demand for labour also increased significantly." The adjusted unemployment rate fell to 6.1 percent, its lowest level since German reunification in 1990. The rate had held at 6.2 percent for four consecutive months. Separate data from the Federal Statistics Office showed that seasonally adjusted employment, as measured by the International Labour Organisation, rose by 41,000 to more than 43.4 million in April.  The government expects employment to reach a record 43.5 million this year and nearly 44 million in 2017. That should further propel domestic demand and push up tax revenue, enabling the government to increase state spending.

    Italy’s broken banks show the dangers behind the euro: I was in Milan last week, giving a talk on Brexit, when news broke that Italy’s biggest bank had lost its chief executive. UniCredit is close to crisis, its share price having plunged 40pc during 2016. The entire Italian banking sector is looking extremely fragile, in fact, with bank share prices down, on average, by a third since the start of the year. You don’t think that matters to the UK? Well, think again. We’ve heard a lot of blood-curdling statements about “the dangers of Brexit” over recent weeks from the Treasury and the Bank of England, vital institutions which, regrettably, now seem to be entirely politicized. But we hear much less from officialdom about the considerable dangers of staying in the European Union. One concern looming large in the British public’s consciousness, of course, is immigration, which rose to a net 333,000 last year, including a record 184,000 from the EU. I’m not anti-immigration – not for one moment – but I do believe vast wage differentials across the EU, combined with the more general mass movement of people from Africa and the Middle East to Europe, mean “freedom of movement” is not only naive but increasingly dangerous. Intra-EU migration is now tearing badly at the social fabric, radicalising European politics at an alarming pace. Anyone who fails to acknowledge this and think through the implications is showing an astonishing lack of awareness

    Euro zone factory growth remained tepid in May - PMI -- Euro zone manufacturing activity growth remained lacklustre last month, a survey showed on Wednesday, supporting the view that strong economic growth in the first quarter did not carry through to the second. Markit's final manufacturing Purchasing Managers' Index (PMI) for the euro zone dipped to a three-month low of 51.5 from April's 51.7, unchanged from an earlier flash reading. "Manufacturing in the euro area remained stuck in a state of near-stagnation in May, failing to break out of the slow growth phase that has plagued producers since February," said Chris Williamson, chief economist at survey compiler Markit. "The disappointing performance of manufacturing adds to suspicions that the pace of euro zone economic growth in the second quarter has cooled after a surprisingly brisk start to the year based on the latest estimate of GDP." Gross domestic product grew 0.5 percent in the first quarter, figures showed last month, and is expected to expand just 0.3 percent this quarter, according to a May Reuters poll. In the Markit survey a subindex measuring manufacturing output, which feeds into Friday's composite PMI, confirmed the preliminary estimate of a fall from April's 52.6 to 52.4. A reading above 50 indicates growth.

    The only continent with weaker economic growth than Europe is Antarctica : The EU is destroying European economies, and anger is spreading Yes indeed, let us talk about economics. Let’s look at the real economic impact of the European Union on Britain and Europe. We can dismiss most of the claims for the “single market” – too often an excuse for a morass of politically driven legislation that costs UK business about £600 million a week. In the 20 years since the dawn of the 1992 Single Market programme, there were many countries that did far better than the UK at exporting to the EU; 27 non-EU countries did better at increasing their exports of goods, and 21 did better at ramping up their exports of services. Of course they did: American and other non-EU businesses have excellent “access” to the EU, but aren’t wrapped in EU red tape, whereas we have only 6 per cent of companies trading with the rest of the EU – yet 100 per cent of them have to comply with EU law. And is the EU booming, thanks to the “single market”? Of course not. Since 2008 the US has seen gross domestic product go up by about 13 per cent; the EU’s has gone up by 3 per cent. The EU is a graveyard of low growth; the only continent with lower growth is currently Antarctica. That is partly because of the sclerotic one-size-fits-all Brussels approach to regulation; but, worse, in the last decade the EU has been suffering from a self-inflicted economic disaster – the euro. We get inured to some of the figures – the 50 per cent youth unemployment in Greece and Spain – without stopping to think of the individual tragedies; the suicide rates; the inability to get medical treatments; the blighting of young lives. It is a moral outrage; and the search for a safety valve is continuous.

    Stronger Economy Lets ECB Kick Back, Let Stimulus Work - — Europe's economy is finally showing signs of increasing strength, after years of sluggishness and false starts.And that means the European Central Bank likely won't have to step up its ongoing 1.74 trillion-euro ($1.93 trillion) stimulus program when it meets this week.Fear not — the chief monetary authority for the countries that use the euro will go on pumping newly printed money into the European economy in an effort to raise inflation. But that's only due to measures that were decided at previous meetings, and which are either still running or just now being implemented.So analysts don't expect any new stimulus jolts to be announced at Thursday's meeting of the bank's 25-member governing council in Vienna. There's little sign that President Mario Draghi and Co. are ready to drop more stimulus news. Some economists are saying don't expect anything more for the rest of this year, if at all.The ECB is holding steady just as the U.S. Federal Reserve seems to be moving close to a rate increase at its June meeting. It hiked its key rate in December from near zero to a range between 0.25 percent and 0.5 percent, but then held off any more increases amid unsettling swings in stock markets. Global jitters seem to have eased since then. The U.S. recovery is more advanced, so Fed chief Janet Yellen can contemplate withdrawing some stimulus.AdvertisementContinue reading the main story Inflation is still way too low, at minus 0.2 percent, and unemployment is painfully high at 10.2 percent. But there are two big factors that should let the ECB kick back for a few months at least.

    The ECB’s Illusory Independence - Yanis Varoufakis – A commitment to the independence of central banks is a vital part of the creed that “serious” policymakers are expected to uphold (privatization, labor-market “flexibility,” and so on). But what are central banks meant to be independent of? The answer seems obvious: governments. In this sense, the European Central Bank is the quintessentially independent central bank: No single government stands behind it, and it is expressly prohibited from standing behind any of the national governments whose central bank it is. And yet the ECB is the least independent central bank in the developed world.The key difficulty is the ECB’s “no bailout” clause – the ban on aiding an insolvent member-state government. Because commercial banks are an essential source of funding for member governments, the ECB is forced to refuse liquidity to banks domiciled in insolvent members. Thus, the ECB is founded on rules that prevent it from serving as lender of last resort. The Achilles heel of this arrangement is the lack of insolvency procedures for euro members. When, for example, Greece became insolvent in 2010, the German and French governments denied its government the right to default on debt held by German and French banks. Greece’s first “bailout” was used to make French and German banks whole. But doing so deepened Greece’s insolvency. It was at this point that the ECB’s lack of independence was fully exposed. Since 2010, the Greek government has been relying on a sequence of loans that it can never repay to maintain a façade of solvency. A truly independent ECB, adhering to its own rules, should have refused to accept as collateral all debt liabilities guaranteed by the Greek state – government bonds, treasury bills, and the more than €50 billion ($56 billion) of IOUs that Greece’s banks have issued to remain afloat.

    Corporate bonds join negative yield club --More than $36bn of corporate bonds with a short-term maturity currently trade with a sub-zero yield as the European Central Bank starts buying debt sold by companies next week. In the wake of the ECB announcing this policy shift back in March, eurozone corporate bond yields have fallen while debt sales from companies have accelerated. The yield on a host of short-term paper sold by groups including Johnson & Johnson, General Electric, LVMH Moët Hennessy Louis Vuitton and Philip Morris now trade below zero in the secondary market. While no corporate bond has yet been sold with a negative yield, recent debt offerings from French pharmaceuticals maker Sanofi and consumer goods conglomerate Unilever were issued as zero coupon securities. In a world where $10tn of debt — mostly Japanese and European sovereign bonds — trades with a negative yield, corporate bonds have begun joining the club, according to data from Barclays. Separate data tracked by Tradeweb put the value of negative yielding corporate bonds at $380bn — a figure that includes euro denominated bonds maturing in the next year that are not captured by some of the main index providers. The total sum could be greater when counting bonds issued in Swiss franc or Japanese yen, data provider Markit noted. “As bonds get to a shorter and shorter maturity, you’ll see more trade with a negative yield,” said Iain Stealey, a portfolio manager with JPMorgan Asset Management. “Everything is relative and zero is not the lower bound any more.” Negative yields have not deterred investors from purchasing the bonds as they brace for added buying pressure from the ECB, seen pushing prices even higher. Some have already positioned for the buying that officially starts on June 8. “As a dealer, you are happy to bid through zero because you know the ECB will keep buying,” 

    EU’s Politically Biased Tax Haven Blacklist Excludes US and Switzerland naked capitalism - Yves here. Only small fry get whacked for being tax havens. Remember Cyprus? From Eurodad: This week, European Union finance ministers agreed to establish a common EU blacklist of so-called “non-cooperative jurisdictions” – in other words, tax havens. With one tax scandal unfolding after the other, listing and sanctioning tax havens may seem like a good solution. However, as tempting as it may sound, this EU exercise is doomed to fail – and here’s why. . . . Tax havens are not an external matter to the EU, quite the contrary – some of the world’s most powerful tax havens are to be found in Europe.For example, a new report from Oxfam uses European Commission (EC) data to analyse the role of the Netherlands as a corporate tax haven. It shows how the Netherlands is making large-scale tax avoidance possible and how Dutch regulations are an integral part of the international tax system that enables multinationals to avoid at least US$100 billion in taxes in developing countries every year. Several other EU Member States – such as Luxembourg, Ireland, Malta and the UK – have also been criticised for helping multinational corporations to avoid taxes. Yet you will not find any of these countries on a blacklist produced by the EU. And try putting the United States on a blacklist. These are points we’ve made before, and why we’ve argued that lists based on verifiable objective criteria are the way forwards. Take a look, now, at this comparison we’ve done, of our (objectively verifiable) Financial Secrecy, versus the OECD’s heavily politicised Global Forum (GF), looking how each treats the various shenanigans offered by various countries.

    Diamond Geysers: Rule-Breaking Iceland Completes Its Miracle Economic Escape -- Disgruntled Icelanders recently forced their prime minister to quit, and are threatening to hand power to self-styled pirates at an early election. But whereas other European voters are culling traditional parties out of weakness, Reykjavik’s are rebelling out of strength. In contrast to eurozone countries (core as well as periphery) that remain deeply constrained by excessive external debt, Iceland has just paid down its foreign obligations by a cool $61 billion, returning them to the safe 2006 level. The country that suffered proportionally the world’s biggest financial collapse in 2008 is now set to boom again as it diversifies from fish, tourism, and aluminum into renewable energy and information technology. Its GDP, already among the highest in the world per capita, is back above the pre-crisis level and set to rise (on central bank forecasts) by 4 percent in 2016 and 2017—twice the eurozone and U.K. rates. Although its overgrown banks were one of the causes of the global financial crisis, Iceland responded to their meltdown in the opposite way from the rest of Europe—and against the received wisdom of most economists. It allowed its currency to fall in value—an option unavailable to eurozone members, which had to ratchet down wages and prices through “internal devaluation.” It nationalized the big banks that had run up unsustainable debt, rescuing only the fraction that served the domestic economy. It imposed capital controls so that the banks’ creditors and other foreign investors couldn’t withdraw their money. Locals, including pension funds, couldn’t invest abroad.

    UK voters shift toward 'Out' as EU referendum nears | Reuters: British voters have moved toward voting to leave the European Union in next month's referendum according to two surveys by polling firm ICM, surprising investors and sending sterling sharply lower. The "Out" campaign stood three points ahead of "In" in each of the two surveys for the Guardian newspaper, one of which was conducted online and the other by telephone. They were conducted over three days to Sunday after official figures showed on Thursday that British net migration hit the second highest level on record last year. Last week, leaders of the Out camp turned their focus back on migration. Britons will vote on June 23 on whether to remain in the 28-member EU, a choice with far-reaching consequences for politics, the economy, defense and diplomacy in Britain and far beyond. From U.S. President Barack Obama to the International Monetary Fund, a host of world leaders and international organizations have cautioned British voters about the risks of leaving the bloc it joined in 1973. The Bank of England has said a British exit, or Brexit, could tip the economy into recession. Despite the warnings, Out has appeared to gain traction by focusing on the issue of migration. Many voters are concerned about the strains placed on schools, hospitals and housing from people moving to live in Britain. ICM said the polls published on Tuesday gave Out its first lead in one of its telephone surveys.

    Brexit could spread shockwaves through global economy, says OECD -- Britain’s departure from the EU poses as big a threat to the global economy as a “hard landing” in China, the Organisation for Economic Cooperation and Development has said.  The Paris-based thinktank said Brexit would have significant costs not just for the UK and Europe, but for the rest of the world. Catherine Mann, the chief economist at the OECD, said the uncertainty caused by the referendum came at a time when the global economy was caught in a low-growth trap.  “Spillovers could be significant to other countries,” Mann said, as she predicted that the world economy would grow by 3% in 2016 and by 3.3% in 2017 – forecasts that have remained unchanged since its last health check three months ago.  “We have done a lot of work on what a hard landing in China would mean. It is in the same ball park as Brexit.”  Analysis by the OECD found that the UK economy would be just under 1.5 percentage points smaller in 2018 after Brexit than it would be if the country voted to stay in the EU on 23 June.  But other countries would also face considerable knock-on consequences. The Irish economy – due to its close trade and financial links – would be about 1.25 points smaller, the eurozone economy 1 percentage point smaller and growth for the OECD – a group of 34 rich countries – would be reduced by just over half a point.

    Why banks won’t leave if we vote for Brexit - You can cry wolf once, twice or perhaps even three times. At some point, however, your bluff will be called, and everybody will ignore you. That, tragically, is the City’s fate. The reason I’m sad about this is that I genuinely like the City and its financial institutions; they are a bedrock of the modern British economy.  But warnings such as those by JP Morgan’s Jamie Dimon that large numbers of staff will move to the eurozone if we were to leave the EU will fall on deaf ears, and rightly so. We’ve heard this sort of stuff far too frequently in the past, and none of the warnings has ever turned out to be true.   All the banks said that the City would be toast if we kept the pound. Then the euro was launched and activity migrated here in astonishing numbers, finishing off most of continental Europe as a centre for wholesale finance. Not only were the banks wrong, their claims were the very opposite of the truth. It was a spectacularly wrong call from so-called financial experts.   We were also told, repeatedly, that several large banks would quit London as a result of the post credit-crunch regulatory and tax backlash. HSBC spent a long time and a lot of money considering its HQ location, and there was talk that Standard Chartered and even Barclays might leave. Nothing happened – in fact, HSBC’s high-profile decision to stay was the final nail in the coffin of that bank exodus idea.   London is far stickier than I realised, and the alternatives worse. That remains true even though the City has been deluged by regulations, some sensible and others counterproductive, some from the EU and some from the UK.

    Jeremy Corbyn: I Would Kill TTIP -- Labour party leader Jeremy Corbyn took aim at the TransAtlantic Trade and Investment Partnership (TTIP) on Thursday, saying he would kill the controversial U.S. and EU trade deal should he become prime minister. His comments came during a speech in London campaigning to remain in the EU just three weeks ahead of the Brexit referendum, which Corbyn has framed as an "era-defining moment" for workers' rights. "Many thousands of people have written to me, with their concerns about the Transatlantic Trade and Investment Partnership (or TTIP) the deal being negotiated, largely in secret, between the U.S. and the EU," he said in his speech in London."Many people are concerned rightly that it could open up public services to further privatization—and make privatization effectively irreversible," he added. "Others are concerned about any potential watering down of consumer rights, food safety standards, rights at work or environmental protections, and the facility for corporations to sue national governments if regulations impinged on their profits," he said, referring to ISDS tribunals. He also referenced French President François Hollande's signaling his opposition to the deal last month, adding, "So today we give this pledge, as it stands, we too would reject TTIP—and veto it in Government." Corbyn's promise to reject the TTIP comes amidst plummeting support for the deal in Germany and the U.S. as well, and follows a leak by Greenpeace of the deal's negotiating text showing that it amounts to "a huge transfer of power from people to big business."

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